Survey by Accenture and SAP Highlights the Limitations of Out-Dated IT Systems in the Banking Sector and the Negative Impact on Customer Service and Cost Competitiveness
Sydney, Australia — Banks in Asia Pacific are growing increasingly dissatisfied with their ageing core banking systems and plan to update their core technology architecture to remain competitive. Accenture and SAP today announced the results of a major research initiative, which found that out-dated banking systems in Australia and the Asia Pacific region are having a negative impact on branch efficiency and service levels.
Bank executives surveyed in Asia Pacific said flexibility and integration were the two biggest problems hindering the success of their core banking systems. As a result, 35 percent of banks in Asia Pacific are planning to replace their core banking systems within the next five years. The Asia Pacific region has a greater desire for replacement than other areas of the world, just 30 percent of European banks and 20 percent of banks in North America are planning to replace core banking systems in the same timeframe.
“There is a discrepancy between what the banks want to achieve from a business and customer service perspective and what the core banking systems are able to deliver. For this reason, there are many banks today that are unable to become the “high performers” in the industry because of the constraints in their core systems,” said Trevor Gruzin, global managing partner, Accenture Financial Services. “The limitations of complex, costly and inflexible systems can be an issue both for the customer in terms of their experience as well as for bank employees in understanding customer needs, cross selling new products and maintaining high customer service levels.”
Core system issues resonate with branch employees in Australia, the primary users of core banking systems. Forty percent of Australian branch employees said that more time with customers is the key to increasing business levels or increasing wallet share. Thirty three percent cited the need to understand customer needs better. The survey identified the day-to-day issues they face using old systems to support customer interactions. These include:
• Australian branch employees said they spend 48 percent of their days working on customer-related back-office activities rather than on customer-facing activities. In North American and European banks, employees also spend a significant amount of time on back-office activities: 36 percent and 34 percent, respectively.
• Australian branch employees agreed that response time (53 percent) and usability of applications (47 percent) ranked highest on the list of areas needing improvement. Integration of different applications was the primary concern in Asia Pacific, as a whole, (41 percent) and North America (38 percent).
• Sixty one percent of Australian branch employees said that unnecessary delays was the main processing error that had a negative effect on daily business and needed to be addressed with high priority. The need to re-type the same information many times was highlighted as the main issue with the integration of banking applications. Other processing issues included inconsistent customer data and not understanding customer needs.
• Twenty five percent of requests cannot be processed immediately by Australian branch employees. These requests could not be processed because they needed to be managed by another area of the bank (71 percent) and 25 percent of requests could not be processed fast enough.
Ongoing Maintenance Cost Absorbing IT Budgets
Not surprisingly, virtually half of the executive respondents cited cost as a major concern with their core banking systems. The expense of maintaining core banking systems has risen steadily. In the Asia-Pacific region, banks typically spend 70 percent of core systems budgets on systems maintenance.
“Banks in Asia Pacific need to ‘future proof’ their core systems with a flexible environment that can help them adapt and respond to unseen future changes and advancements in the industry,” said Geraldine McBride, CEO and managing director, SAP Australia and New Zealand. “We believe that a wholesale renewal of core banking systems is required to reduce the ongoing cost of systems maintenance, which will free budgetary and human resources for projects that can help the banks save money, re-focus their employees on their customers needs and offer products that are tailored to individual customer requirements.”
SAP and Accenture entered into an alliance in the Financial Services industry in 2003. The two companies sponsored the study, titled “Redefining Core Banking,” to examine the current status, impact and plans for transformation of core banking systems. The comprehensive global study is one of the first to gather the views of high-level bank business and information technology (IT) executives, as well as branch-level employees, who are the primary users of core banking systems.
The survey was conducted by Celent, a research and consulting firm focusing on the financial services industry, for executive interviews in North America and Asia Pacific (Australia, China, Japan and South Korea), and Novametrie, a European a research company specializing in financial services surveys, which conducted the executive interviews in Europe and the branch interviews in all regions. Accenture and SAP co-sponsored these two parallel worldwide surveys between March and July 2005 that examined the current status, impact and transformation of core banking systems in 17 countries. The European Financial Management and Marketing Association (EFMA) also served as an operating sponsor.
The executive survey targeted 147 senior bank executives from 70 banks, including 35 executives in Asia-Pacific. Of the 147, 45 percent were information technology executives and 55 percent were line-of-business executives. The branch survey polled 1,300 branch managers and employees, 400 branch employees were surveyed in Asia Pacific. The majority of the survey responses came from the top 100 banks worldwide.
Accenture and SAP Alliance
In September 2003, SAP and Accenture entered into an alliance for the Financial Services industry, offering banks and insurance providers a more effective and lower risk way to help them transform and grow their business, through a dedicated joint development team and sales channel, integrated solutions and services, innovative delivery, and highly efficient implementation. With a 30-year history and experience delivering innovative business solutions for more than 1000 leading financial services institutions, Accenture and SAP work together to help insurers and banks achieve the vision of an open standards-based architecture.
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 115,000 people in 48 countries, the company generated net revenues of US$13.67 billion for the fiscal year ended Aug. 31, 2004. Its home page is www.accenture.com.
SAP for Banking
SAP for Banking provides an integrated solution set to manage every aspect of the front- and back-office banking environment—from core banking processes, high-volume transaction banking processes and customer relationship management to financial accounting, cost controlling and profitability and risk analysis. With more than 550 customers in 60 countries worldwide, SAP for Banking helps financial institutions expertly manage transactions and relationships, quickly exploit market opportunities and easily tailor new products to the specific needs of individual customers. (Additional information at )