As we look to positively bounce back in 2021, in a post-Covid era, our Accenture team are predicting significant disruption is on the horizon for Retail Banking.

Banking in 2021: Top 10 trends to watch

Our Accenture thought leadership indicate 10 striking trends to watch out for in Banking in 20216.

In 2020 Banks were forced to make years' worth of technology and business model changes in a matter of months. Demand for both digital solutions and secure work-from-home systems exploded. The Covid pandemic has stretched the entire banking industry like an elastic band, where large scale transformational change has become the ‘new norm’.

Public cloud, data, new technologies and the emerging open-ecosystem for cloud-native, Independent Software Vendors (ISVs), is now at a tipping point to exponentially accelerate market disruption in banking. For banks that embrace this dynamic, it creates opportunity to achieve ‘competitive edge’ to remain relevant by meeting increasingly demanding customer expectations in a crowded, digital banking marketplace. This brings the future direction of core banking systems into the spotlight, as a strategic imperative, for retail banks.

Core Banking in the Cloud: ‘the gloves are off’ in the post-Covid era

The historical reluctance to adopt public cloud for core banking systems for tier 1 and tier 2 banks is now crumbling. Leading banks are openly challenging the ‘old school’ arguments from in-house IT-security-compliance teams who seek to justify ‘do nothing’ to continue rigid, inflexible operating models with on-prem, legacy IT systems which fail to meet business needs, whilst consuming heavy IT budgets and driving ever-increasing IT technical debt. There is now an irreversible market ‘mindset change’, as leading banks such as HSBC, Deutsche Bank, Lloyds Bank, ABN Amro and BBVA commit to large public cloud, regulatory compliant workloads in the cloud.

Banking CEOs, COOs and Business Leaders are ‘hungry’ for cloud enabled, data-driven solutions to kick start highly personal, digital customer growth campaigns and experiences, improved customer lifetime value initiatives and profitable revenue growth outcomes. Speed, scale and reduced risk is the ‘common mantra’. C-Suite tolerance, for large-scale core banking transformation projects beyond a 2-year implementation timeline, has gone.

Gartner’s research supports our view that Core Banking in the cloud will be main stream in the near future1. Core Banking and Payment Processing are seen as prime targets for cloud adoption in the near future2.

Core Banking in the Cloud: Offprem or SaaS?

We see other industries, such as Insurance and Retail, leap-frogging from old, legacy on-prem systems direct to large scale adoption of Software as a Service (SaaS) solutions where the ISV vendor has complete responsibility for migration and operate scope of the cloud solution.

Whilst this may look tempting and ISVs may seek to ‘over-sell’ the ease of adoption, it is not the recommended approach for tier 1 and tier 2 retail banks, due to their complex legacy core banking systems, data silos and surrounding ecosystem of applications with dependencies to the core banking solution. In general, ISVs lack the system integration and operate expertise to manage this transformation roadmap and operate scope for the large banks.

Instead, our clear recommendation for tier 1 and tier 2 banks is to partner with Accenture, Google Cloud and Temenos to deliver the complex migration to target state and future IT operations in the cloud. Temenos continues to lead in the Gartner Magic Quadrant for Core Banking software solutions3.

The compelling case to act

Typically, banks have a complex current state of old, proprietary core banking applications, often with highly customized, local code to meet historical, local market needs.

Key drivers for migration to the latest version of the Temenos solution on Google Cloud Platform (GCP) are:

  • New products being introduced in the market (Instant payments, P27, SEPA changes, virtual accounts).
  • Increasingly complex regulatory demands that banks must comply with drives the requirement for ‘out of the box’, modular banking solutions from ISVs such as Temenos. Trying to meet these regulatory requirements with highly tailored, in-house customized solutions is unsustainable from a cost, speed-to-market, talent pool and risk perspective.
  • Speed to market demands from the business for more sophisticated, differentiated products, payments and customer experiences, continues to increase.
  • Legacy interface-based architecture is driving high development + maintenance costs and often preventing banks keeping up to date with the latest ISV software release. This creates both regulatory compliance and IT stability risks.
  • Talent gaps to maintain in-house core banking solution including payments.

Target State: Temenos Core Banking on Google Cloud with Anthos

The Temenos Core Banking solution is already certified on Google Cloud Platform (GCP). Target state advantages include:

  • Onprem hardware footprint removed. Instead a consumption based, cloud-native, managed open-source orchestration with GCP Anthos (onprem / offprem / hybrid cloud) is available.
  • Application footprint migrated to Serverless Container Services & Microservices.
  • Onprem legacy databases migrated to a distributed database solution based on CloudSQL or NuoBD, providing major cost savings and enabling all the benefits of Google Anthos (onprem + offprem workloads).
  • Typical legacy ESB integrations replaced by open APIs.
  • Agile, effective DevSecOps to ensure rapid agility and time to market for new business requirements is the new standard.
“Together, we enable banks to reduce their time to market and operational complexity and deliver outstanding digital customer experiences. With Google Anthos, we give banks freedom to reap the true benefits of multi-cloud.”4

— M. Chuard, CEO – Temenos

Data, data, data: it’s all about ‘data at scale’ from Accenture and Google

Not all clouds are equal. The Google Cloud solution has unique data differentiators compared to Azure or AWS clouds. Google Big Query and cloud agnostic Big Query Omni provide data management toolsets and data architecture outcomes to support improved data governance and data operating model advantages to remove the legacy ‘data silos’ across the bank.

When bank’s first party data is combined with Accenture’s Applied Intelligence AI/ML assets and Accenture owned third party ‘data at scale’5, with Google Audiences data and Google mobile device unique IDs, this creates data rich 360 customer insights. It enables a much more sophisticated, personalized propensity modelling and decision-making capability for banks’ customer acquisition and customer lifetime value agenda. This is based on geo-specific, life stage-style-moment demographic attributes, purchase intent, credit card spend, social media personas and affinities profiling, mobile device data and much more.

The compute power, to support AI/ML algorithm data consumption of banks’ first party data + vast amounts of Accenture / Google third party data and synthetic data volumes is always available on Google Cloud.

Temenos Core Banking on GCP as an IT Managed Service with Accenture

Many banks continue to seek to build up in-house capability to maintain their onprem core banking application solution or seek to have an application maintenance agreement in place with their chosen ISV. Question marks remain on whether these are cost efficient, sustainable operating models in the medium term.

ISVs will continue to pivot towards cloud native solution business models. Focusing on direct application maintenance support is unlikely to be the ISV future core business. Similarly, banks are experiencing in-house, talent gap issues to maintain their existing legacy applications and recruit the needed skills to effectively deliver application maintenance for core banking solutions whilst achieving demanding cost saving targets.

Accenture seeks to address these ‘pain-points’ in the market by delivering application maintenance (AM) and infrastructure operate (IO) as an IT Managed Service option for Temenos R24 solutions on GCP. Our SLA outcome-based offering includes maintaining latest version of the Temenos R24 solution, a committed number of change requests per year and Continuous Integration – Continuous Deployments (CI-CD) to ensure IT agility, consumption predictability and speed to market targets are reached.

Achieving Project Scale: Core Banking Utility or Multi-country deployments

Single country or regional banks continue to question whether they have the scale to justify the necessary investment to migrate to best practice, cloud native core banking solutions. This is often based on painful experiences from previous core banking implementations which have failed to meet business expectations and ROI.

The Accenture delivered Temenos Core Banking solution on GCP can be deployed and scaled incrementally as a Core Banking Utility for multiple banks within a geo-specific region such as Nordics or Benelux, so that economies of scale benefits are realized for the migration and in operations.

Similarly, large global banks are now recognizing that project scale and operate benefits can be achieved and risks mitigated with a multi-country implementation to a standardized core banking solution on Google Cloud Platform (GCP) with Accenture.

Conclusion: cloud + data will change the game for core banking

The combination of Accenture delivered cloud native, ‘out of the box’ core banking solutions from Temenos T24 on Google Cloud Platform (GCP), with Accenture and Google unique data assets deployed ‘at scale’, is a strategic ‘game- changer’ for Retail Banks seeking to achieve ‘competitive edge’, whilst also reducing costs in their Operating Model.

1, Hype Cycle for Digital Banking Transformation 2019, August 1, 2019

2, Use Gartner’s Cloud Heart Map for Banking and investment Services to Adapt Your Banking Roadmap, January 21, 2020

3, Global Retail Core Banking Systems (CBS) Reviews and Ratings

4, Temenos and Google Cloud Announce Global Strategic Partnership to Accelerate Banks’ Digital Transformation in the Cloud, January 28, 2020

5, Applied Intelligence

6, Banking in 2021: Top 10 trends to watch

David Andrew

Managing Director – Accenture Google Business Group (AGBG)

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