New Core Banking System

In an attempt to keep up with the rapidly evolving banking sector, most Nigerian banks have updated their core banking software. On September 10, Sterling Bank started this trend by switching to SeaBaaS, a new core banking system. Customers of the bank encountered various difficulties and were unable to access their money for weeks as a result of the relocation.

Other financial institutions, including Zenith Bank, Guaranty Trust Bank (GTB), and First Bank, followed suit once the bank made the transition to a new core banking system. In the end, the banks’ actions caused a number of service interruptions, unsuccessful business transactions, stranded clients, and the inability of customers to pay for goods or services.

WHAT IS A CORE BANKING APPLICATION?

A core banking application is a piece of software that banks employ to manage important operations including risk management, transaction management, and customer account management.

It posts updates to accounts and other financial information and handles daily transactions.

WHERE DID THE BANKS GET IT WRONG?

Regarding the mistakes the banks made throughout the migration process, FIJ found that they did not sufficiently inform their clients about the upcoming migration and the ensuing inconveniences. Additionally, the banks did not sufficiently educate and inform their senior, non-technologically savvy clients of the upcoming software upgrade action before implementing it.

Several banks also decided to carry out the relocation procedure at the same time. The banks’ action was not customer-focused or measured.

Additionally, the financial institutions in this group did not devise any stopgap solutions that would have prevented consumers with high-performing accounts from suffering significant losses throughout the relocation process. The banks were unable to offer a short-term fix that would have allowed for a smooth, gradual changeover without interfering with regular business operations.

WHY IS THE MIGRATION EXERCISE NECESSARY?

Due to the continuous devaluation of the Naira, many Nigerian banks are now forced to transition to less expensive core banking apps that can perform the same function as more costly programs once could.

Banks have decided that switching to more secure and fraud-resistant software is essential due to security concerns such frequent cyberattacks and account hijacking by scammers. The main focus of the migration trend is protecting bank accounts from the dangers of account hacking and cyber-criminals stealing money.

Modern core banking systems give banks more scalability and flexibility to meet changing market demands and plans for future growth. These platforms and systems also easily integrate with other suppliers, enabling banks to expand their ecosystem and supply their clients with fresh, cutting-edge offerings.

The exercise also allows for routine maintenance and upgrade of core banking applications.

DOES THE MIGRATION PROCESS REQUIRE CBN’S APPROVAL OR DIRECTIVE?

Core banking upgrades or migration exercises do not require the Central Bank of Nigeria (CBN)’s authorisation, approval or directive. Banks may, however, out of courtesy inform the CBN about their plans whenever such exercises are to be carried out.

More importantly, customers’ funds are always safe during system upgrades and migration exercises.

Frequently Asked Questions (FAQs) on Core Banking System Migration

1. What is a core banking application? A core banking application is a software used by banks to manage essential operations like customer accounts, transactions, and risk management.

2. Why did Nigerian banks migrate to new core banking systems? Banks migrated to new core banking systems to keep up with the evolving banking sector, improve security, and enhance efficiency.

3. What were the challenges faced by customers during the migration process? Customers faced various difficulties, including service interruptions, unsuccessful transactions, and inability to access their funds.

4. Did the banks adequately inform their customers about the migration? No, many banks did not provide sufficient information to their customers about the upcoming migration and its potential inconveniences.

5. Why were multiple banks migrating to new core banking systems at the same time? The decision to migrate simultaneously was not customer-focused and caused further disruptions.

6. Were there any alternative solutions to minimize customer inconvenience during the migration? The banks could have implemented temporary solutions to prevent significant losses for customers with high-performing accounts.

7. Why is the migration to new core banking systems necessary? The migration is necessary for banks to stay competitive, improve security, and offer better services to customers.

8. Does the migration process require the CBN’s approval? No, the CBN’s approval is not required for core banking system migration. However, banks may inform the CBN about their plans.

9. Are customers’ funds safe during migration? Yes, customers’ funds are generally safe during migration processes.

10. What can banks do to improve the migration process in the future? Banks can provide better communication to customers, plan migrations more strategically, and implement temporary solutions to minimize disruptions.