IDC Financial Insights’ latest study reveals that banks are exploring how service-oriented architecture (SOA) platforms can be adopted to align with their vision of a modern core system. The trend of packaged, complete banking systems and capabilities to core banking renewals has shifted; financial institutions today moving toward modular, component-based approaches to core banking. More insights are revealed in the report, ‘Vendor Assessment: Core Banking in Asia/Pacific – 2009 Deals’, which discusses the evolving core banking market in Asia-Pacific in 2009.
Michael Araneta, associate research director for IDC Financial Insights Asia-Pacific, said: “Core banking projects will become increasingly similar to business re-engineering programmes. A real selling point of the approach is that it brings the business transformation agenda to a broader array of stakeholders, making the core banking initiative more than just a ‘high-risk project for the technology folks’, a stigma typically attached to core banking projects in the past.”
Based on the report’s qualification criteria of what constitutes a core banking project, IDC Financial Insights notes that there has been no material change in the number of new whole-of-core deals signed in 2009 versus 2008. The number of such deals decreased slightly from 56 in 2008 to 52 in 2009.
The number of single-product or module-specific sales also decreased in the same period. The decline can be attributed to the high number of module or single product projects that were signed or implemented in 2008, which filled the gaps in banks’ then-existing core systems. As such, investments in other ‘non-crucial’ modules were put on hold last year.
Keith Lam, associate market analyst for IDC Financial Insights Asia-Pacific, said: “For 2010, we are expecting a slight uptick in the number of core banking deals. The demand is particularly coming from new banking players entering the industry, mid-tier banks that want to pursue opportunities in the upturn, and institutions that are quickly regionalising. Overall, the healthy economy today will see the return of frenetic deal-making in the core banking space.”
The total deals signed in 2009 were noticeably more geographically spread, with more deals coming from outside the high-growth core banking markets, namely China, India, Indonesia, Vietnam and Singapore. Core banking deals in China saw a decline, underscoring a pause in aggressive decision-making observed in previous years. However, several deals remain in the pipeline in the mainland, and a larger share of core banking deals is expected in China this year.
This report also discusses vendor strategies to respond to new core banking strategies of their clients. Lam said: “Core banking vendors have announced new versions of their offerings, with much richer solution portfolios and modules. Vendors are also moving to a platform approach with clear enhancements around SOA. A number of vendors, meanwhile, are highlighting software-as-a-service [SaaS] as an alternative way to deliver their core banking solutions, although we believe that core banking on a full SaaS mode will take a much longer time to gain acceptance in the region.”
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