HML. Homeloan Management Ltd

Today, there are billions of bank accounts generating trillions of transactions across the world. If that sounds like a management challenge, consider the fact that hundreds of different banking systems have been developed to process all those accounts and transactions.

 

Last November, Chartered Banker reported that when HSBC instigated a project to migrate all of its legacy systems onto a single ‘gold suite’ technology platform, it involved replacing 55 separate core banking systems, 24 credit card systems, 41 internet banking systems and 40 desktop standards as part of the process.

 

HSBC is not exceptional; in fact it’s very typical of most large financial institutions, which are fighting a constant battle to ensure legacy computer systems remain fit for purpose.

 

Consolidating data onto a single platform is complicated. Different systems use different programming languages and when some were built, modern products, such as offset mortgages were not even envisaged. Furthermore, banks operate under a demanding regulatory regime, and are expected to implement new rules and regulations quickly, so they need systems that can accommodate changes easily.

 

But things were like this for years, what has changed?

 

The last few years have seen an unprecedented number of mergers and acquisitions, some of which have been hastily executed in very short timeframes. These have left banks with a disparate range of mortgage and loan books, with some core to their business strategy and others peripheral. Spending time, money and effort integrating peripheral loan books onto a core system can take valuable resources away from mainstream activities.

 

The large number of securitisation and whole loan sale transactions, which took place prior to the credit crunch, also resulted in loans being transferred to and from a range of platforms. The cost of developing a securitisation capability for the future is one thing, but the real issue is how long this will take. Every month that passes has serious balance sheet implications.

 

Additionally, the customer is undisputedly number one now.  Financial institutions are focusing on their customers’ experience, from first contact and then throughout the lifetime of their accounts, trying to exceed their expectations. You need cash to make this happen and buying a new platform can siphon off much-needed capital.

 

So what can you do?

 

Banks could develop a single operating platform and then migrate customer data from existing systems onto that platform. The concept is easy enough to understand but the devil lies in the detail, which is why many financial organisations decide to outsource this task to specialist companies.

 

IT directors may want to manage data migration projects in-house, but the resources required to do so, both in terms of budgets and skilled staff, often exceed those available. What’s more, IT directors understandably want to retain valuable resources to manage other critical projects which are often time-sensitive and core to their business strategy.

 

So how does it all work?

 

Data migration usually has three stages:

 

1.       Mapping existing processes to understand where differences and gaps exists on the multiple platforms in use.

2.       Analysing the way an organisation intends to deliver services to its clients, so that appropriate administrative processes can be accommodated on the new platform. This is the phase when data migration exercises inevitably involve organisational and operational design input, as it’s an ideal time to review and revise existing procedures.

3.       Migrating data from old to new systems. If phases one and two have been completed correctly, then phase three should be trouble-free!

 

For some banks and building societies, keeping multiple systems under their own roof and their own control is no longer a practical option, because it’s too expensive and requires retention of a broader IT skill set.

 

Once a decision has been taken not to move some customers onto a core platform, then organisations have two options: firstly, they can outsource their back office or, alternatively, get someone else to run their IT, which enables them to retain control of all those processes which involve client interaction, but which removes the cost of maintaining an IT infrastructure – a bureau service.

 

This latter option is becoming increasingly popular, as companies recognise that their core skills lie in product marketing and client relationship management, rather than maintaining ageing IT systems.

 

Data is a core component on which every bank depends; it’s a fundamental part of their DNA. Managing data and successfully migrating it between platforms is, arguably, the greatest challenge currently facing any financial institution.