Core banking migration is a necessary effort for banks that strive to maintain their relevance and level of demand among both existing and potential customers. Let’s discuss the particular problems software modernization solves as well as the main core banking migration risks. Diceus has experience helping banks migrate their legacy core banking systems such as Oracle FLEXCUBE. In this article, you will learn about the best core banking data migration strategy, risks, and challenges associated with migration, and some useful tips.
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Why migrate systems?
With the global digitalization of all existing business niches, clients strive to get the highest quality of offered services, especially when it comes to payments, lending, and money transactions. The standard banking software, which has existed almost since the advent of personal computers, has long failed to satisfy the needs of both bank customers and employees who use it directly.
That is why banks are gradually abandoning their usual software solutions in favor of more modern and fault-tolerant ones. For example, corporations prefer products based on such tech innovations as cloud databases, real-time Big Data-processing mechanisms, artificial intelligence powers, and so on. Thus, with core banking transformation, they get an opportunity to eliminate the following typical issues.
- Increasing consumer demands. Bank customers become more demanding in terms of service quality. They don’t want to wait in queues, visit offline branches without a sharp necessity, and worry about data security. Modern software helps render all these moments optional.
- Rising customer expectations. Modern banks hardly manage to maintain their market competitiveness. To attract new customers, attractive promo videos on TV are not enough — you have to offer something more than others do. Full workflow automation will help you achieve maximum operational productivity without neglecting the overall quality of work.
- Widespread dissatisfaction with aging systems. Outdated systems are poorly or not adapted for mobile users at all. They do not contain touch control elements and are accessible to users only through push-button displays.
- Existing technical limitations. The aging banking software is poorly adapted for scaling. In the case of system breakdowns, it often stands idle, and the organizations lose transactions and customers. This is a fair reason to change for a more modern software solution that quickly processes big data and is distinguished by increased fault tolerance.
Read more about our experience in Oracle FLEXCUBE
What are the benefits of a core banking migration?
Based on the above problems and our experience in Oracle FLEXCUBE upgrade, banks gradually implement new software to achieve the following goals of core banking modernization:
- Reducing operational and technical costs
- Creating innovative financial services to keep pace with customer expectations
- Boosting customer engagement through better products and services
- Improving agility and time to market
- Accelerating revenue growth
- Managing end-to-end operational risk and costs
- Achieving more flexibility and agility to minimize the response times
- Offering new products in emerging geographies
- Establishing a schedule of continuous improvement to put the focus on increasing workflow efficiency
The top 3 challenges of core banking transformation
Along with the definite benefits of core banking system implementation, there are three main issues that accompany the migration process.
Data loss risks. Migration must be executed carefully to negate any inherent risks. Sometimes, when the legacy software is replaced with a new one, important data may be lost, and new security holes may arise. To prevent this, banks should hire proven IT specialists to implement new software as well as involve experienced pentesters that provide end-to-end system testing in the working environment.
High costs. The services of experienced IT specialists, especially those who will ensure your system’s security, cannot be cheap. Adding the cost of software suites on top of that, be prepared to spend a good penny on the data migration project.
Substantial time and human resources. It is necessary to ensure sufficient training after the new core platform deployment. Sometimes, such training turns into a partial staff replacement since not every employee accustomed to working with one system for decades can perfectly cope with an updated interface.
3 migration strategies: Advantages and disadvantages
There are three generally accepted strategies to consider for your core banking migration plan. Let’s explore in detail their features, pros and cons.
Big Bang migration strategy
Big Bang is the common and most radical core banking data migration strategy. It is usually implemented in just a couple of days and implies a global replacement of an outdated system with a new one. Because everything happens quickly, you do not need to spend extra money on middleware and the services of IT specialists that install it. On the other hand, you face a variety of risks.
The first risk is a possible data loss. Unfortunately, not all databases can be accurately backed up and copied in such a short time. Therefore, this method is not suitable for large companies with dispersed data storage.
The second risk is the inability to ensure business continuity during the migration period. Therefore, you will either have to announce the forced downtime to your customers or offer them some alternative service options.
The last but not the least risk is that there are no guarantees that your employees, faced with a new interface, will be able to understand it on the fly and still serve customers properly.
Which financial organizations is this approach most suitable for? First of all, for banks that store all their data centrally and have the opportunity to stall customer service for a couple of days (possible force majeure delays must also be taken into account).
Classic migration strategy
The classic core banking migration strategy implies that the new system is implemented gradually. Simultaneously, the old one continues to work until the migration is complete (including several weeks of new project testing in a real production environment).
In this case, you minimize the risks associated with data leakage and emerging vulnerabilities in program code that hackers can exploit. Also, this approach eliminates downtime, which is unacceptable for some banking organizations.
And now – one big con. Classic migration is costly. You will need to use middleware to synchronize the operation of the two systems and regularly pay IT specialists for weeks or even several months of work.
Agile migration strategy
The Agile migration strategy can be considered the best of both worlds, i.e., of the above two strategies. In this case, migration is carried out iteratively, in short stages, each of them ending in thorough testing. Besides, the staff is trained at every stage of implementation to avoid wide knowledge gaps when dealing with clients.
The Agile approach usually starts with the migration of stand-alone or partially stand-alone applications and ends with the migration of systems with a large number of related modules. This ensures exceptionally correct data transfer and makes it easier to work with the new system.
Typically, with agile migration, IT professionals create data backups so that in case of an issue, they could instantly restore the previous database structure. As soon as the test results show that the system works correctly, the data is synchronized with the updated elements, and the old software is uninstalled.
Unlike the classic strategy, this type of migration is suitable for large banks, with tens or even hundreds of applications and decentralized data storage structure.
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Migration pro tips from DICEUS Oracle FLEXCUBE experts
A seamless core banking transformation can be achieved by using proven data migration methodology services. Successful migration adheres to the following principles:
- Banks undergoing transformation should have clear business directions and goals. A company looking to migrate data should know precisely where it’s going and what it expects to see in the long run.
- The program roadmap must be jointly developed by the business and IT leadership. Unless a banking provider has a high-level IT department, the migration roadmap must be thoroughly discussed and settled with reliable software experts.
- Deploy a proven methodology (one of those mentioned above) to minimize disruption and mitigate risk. It’s no use reinventing the wheel in such business-defining efforts.
- Embrace effective change management. The migration process should be closely monitored and managed at each stage, with all the required staff training and education conducted timely.
- Facilitate product rationalization and process restructuring for optimal utilization of the new system. Preparation is everything. Make sure that specialists responsible for the technical part of migration can point the whole process in the most cost- and time-efficient direction.
Today, to occupy a stable position in a harsh market environment such as banking and finance, it is important to keep up with the most advanced IT systems. They ultimately improve customer experience, optimize employee workloads, reduce costs, and provide perfect scaling conditions.
All this is possible due to the modern tech capabilities of data synchronization and fault tolerance improvement. We are ready and willing to carry out even the most challenging core migration for your banking organization to present new opportunities for your business development.