The Eight Stages of Core Banking Transformations

Commonalities in core banking transformations are what I look for. The common issues, mistakes, and roadblocks that I have seen across a number of large banking transformations are the things I like to solve for.  Recently while speaking with a client they asked me if they were any different then other banks going through the same type of transformation? Sadly I had to say no. In fact I had to tell them that they were going through almost an identical process as other banks. What are the stages that most banks undertaking a core banking transformation will go through? For simplicity sake I have distilled my view on the common processes down to a list of eight stages of core banking transformations:

Stage One – The Excitement of Something New

Most banks go through an extremely detailed, time consuming, and costly RFP process when assessing core banking solutions, integrators, and other peripherals required for their transformation project. The elation at the end of the RFP process with the selection of a solution (Vendor), integration partner (Integrator), and the other required hardware components normally generates an amazing amount of excitement. The bank is over optimistic at this point and the new project kicks off, all parties land on the ground… it’s the excitement of taking on the new!

Stage Two – Why is this so hard? It’s the integrator!

The excitement only last so long until the bank realizes that this is harder then they assumed. Gaining traction and momentum on the implementation takes longer than expected. All of the parties don’t seem to play well together. The bank assumes that the problem has to be the integrator they hired to help them implement the system. They rethink the strategy, they look back at the contract the bank and the Integrator descend into a renegotiation, the Bank looks for alternatives, time and money are wasted sorting out the blame game. In the end there is normally a replacement of the integrators senior management on the project some sort of concessions made and the project continues.

Stage Three- The Vendor’s product is defective and full of gaps!

Ill-defined processes start to come out of the woodwork. The capabilities and standards of the purchased solution start to be understood by the bank. Enhancements, extensions, and configurations start to be identified, effort and duration start to increase. “The solution was oversold, “ says the Bank! “You have asked for non-standard processes or functionality that was identified to you in the RFP” responds the vendor.  This creates noise and uncertainty within the project as suddenly scope is in question, the Bank and Vendor relationship is in question. Again the Bank looks for alternatives, time and money are wasted sorting out the blame game. In the end there is normally a replacement of the Vendors senior management on the project some sort of concessions made and the project continues.

Stage Four – Maybe we should cancel the project and sue!

The Bank is still upset! They feel cheated and betrayed. Pride takes over and leads a Bank right to the edge of canceling the project and letting the lawyers sort it out. Thankfully extreme actions normally also lead to extreme introspection. The healthy self inspection normally takes the bank back to the strategic decisions made related to the selection of the solution, the understanding that the need to transform is still in front of them. This normally pulls them back from the edge and the project continues.

Stage Five – Maybe we don’t know our processes?

Stage four’s introspection normally leads the Bank to question their own understanding of their processes. The understanding that a complete view of processes is missing within the organization allows them to question their status quo and opens their process up to true transformation

Stage Six – Maybe it’s our organization?

The natural progression to question the status quo of the processes normally leads to an epiphany related to the banks overall organization structure and questioning their management by silo mentality. Internally a power struggle over the definition and ownership of the business processes starts as the business realizes this isn’t an IT project it is a dramatic transformation of the business with the core banking transformation acting as a catalyst.

Stage Seven – All Hands on Deck!

The organization wakes up. The executive sponsor realizes that they actually need to do something other than sitting in status meetings. An all hands on deck mentality manifests as the Bank realizes internal infighting will not solve their problems. Normally there are some drastic changes in the Bank’s senior management structure at this point.

Stage Eight – Successful go live all is forgiven

Two or three years have passed, with multiple releases, and the final transformation is ready to go live. There will always be issues to resolve but for the most part the go-lives are successful. The core-banking platform has been replaces, processes redesigned, and the organization transformed for the better. The Bank has forgotten the trials and tribulations and normally becomes a supporter of the Vendor and their solution, and considers the Integrator a trusted business partner going forward.

Banks concerned with saving time and money in transformations will do the work required early on to address their own processes and organization issues (moving steps five and six ahead of step number one). They will also diligently work to remove steps two through four from their transformational journey. I would be interested to hear from others that have seen this pattern.