ABN Amro plans to implement the Temenos WealthSuite integrated wealth management platform for its international private banking business.

The bank has been using the Temenos T24 core banking platform as the hub for its corporate banking activities since 2009. With the implementation of the Wealth Suite platform it will also be able to extend the use of T24 to its private banking and diamond & jewellery business, meaning it has one operational core banking platform with one operating model across multiple business lines.

Temenos’ WealthSuite is an integrated suite of front to back applications that covers the full private banking value chain including multi-channel client access and services, portfolio management, MiFID compliant advisory and relationship management support, full STP order execution and transactions settlement as well as an integrated business intelligence solution for management information requirements. By consolidating applications on the Temenos platform, the bank anticipates significant operational efficiencies that will help it better respond to market demands.

David Arnott is chief executive of Temenos

Cloud-based technologies are spreading rapidly through the business world: the research firm IDC expects the cloud software market to be worth more than $100 billion by 2018, implying compound annual growth of more than 21%, roughly five times faster than traditional packaged software.

It is clear that cloud computing is on course to become an everyday part of the way that companies operate in the digital economy, writes David Arnott.

The benefits that this model brings are well known: an enhanced customer experience, higher availability of critical systems, reduced up-front investment in IT systems and resources, and the potential for lower running costs.

In a world where, as John Schlesinger, chief enterprise architect at Temenos, argues, servers are about to stop getting cheaper, the advantages of cloud computing in terms of cost and customer experience look more compelling than ever. In the banking market, however, the spread of cloud systems has been slower than elsewhere due to factors including concern about data security, uncertainty about the position regulators will take on cloud technologies and the challenge of managing migration from the in-house, legacy IT systems that currently run banks’ critical functions.

So just how hot is cloud banking right now? A quick temperature check of the financial services industry’s attitude to cloud banking in April triggered a warm response.

There are two sides to every story and never more so than when discussing with banks the shift from in-house technology to on-demand cloud-based services. So in Temenos’ recent survey Cloud-banking heat map, we asked two key questions: what are the benefits you seek from cloud services; and what, if any, are the barriers to adoption you face?

Echoing the results of a similar Ovum survey The Critical Role for Cloud in the Transformation of Retail Banks, last year, our results show that cloud is no longer just about cost reduction, as 50% of respondents see cloud as a means to adopt new technology, and 34% reported the ability to add new business functionality more quickly as a top benefit. This is a very encouraging sign that banks are seeing the adoption of cloud technology as a means to support the delivery of new products and services.

That is not to say that the long term cost benefits of cloud services are any less important. In fact the highest scoring benefit sought from the cloud, at 58% of respondents, is to reduce overall IT costs. Not at all surprising given the profitability hit banks have taken post financial crisis, cost-savings are an obvious driver of a cloud-based IT strategy.

The top reported barriers to adopting cloud services are concerns over data security (55%) and reliability and availability (47%), which are common challenges for financial institutions that are used to managing and maintaining their own IT. This highlights the need for cloud providers to do more to demonstrate to the industry the robustness of their security controls and availability metrics, as paradoxically we may find that security and reliability is a benefit rather than a barrier to cloud.

Concern over regulatory compliance is another top factor against cloud banking, cited by 45% of respondents. This is no surprise in such a heavily regulated sector, and there is no quick fix, but when talking to lawyers in this space, the feeling is that with a high level of due diligence on the on the banks’ part, and a transparent and collaborative approach on the cloud provider’s part, a solution could be found that meets all parties’ needs, including those of the regulator.

In response to this, we see cloud software vendors, their platform partners and industry organisations are working closely to address security concerns. Co-ordinated efforts such as the Cloud Security Alliance and its Cloud Controls Matrix have set out security principles for cloud vendors and assist prospective customers in assessing security risk at individual cloud providers. Cloud providers themselves are investing heavily in compliance and security expertise to the extent that many observers argue that a well-implemented migration to the cloud can result in higher levels of security than an in-house system, as well as access to real-time reporting mechanisms that are often superior, too.

As the industry continues to warm up to cloud banking, we will see the same issues raised and discussed again and again. And rightly so: the only way to support the banking industry in any leap in technology and faith is by addressing issues and challenges openly until all parties are convinced of its viability.

However, while clear challenges remain to more rapid adoption of cloud-based technology in banking, it is clear that change is happening. Already, analysts at Gartner predict that by 2016, more than 60% of global banks will process the majority of their transactions in the cloud. Many are already moving less sensitive functions there and developing strategies to enable them to capture the benefit of cloud-based systems for their core operations.

Mark Gunning is global business solutions director at Temenos

Let’s be clear: banks do a very difficult job – they store the value of society expressed as money. We trust them and they can’t get it wrong, but they are nothing but people and IT. Everything they own is on computer and they don’t like to take risks with this.

Consequently, IT change for banks has been slow and safe. It has been incremental: bit by bit, byte by byte. Banks’ systems, at the cutting edge in the 1960s and 1970s, have been upgraded, patched and reworked to their very limit, leaving their owners with IT architectures, kit and procedures that are complex, expensive, inefficient and vulnerable, writes Mark Gunning.

In everything that banks do, they seek to minimise risk, and IT change has always involved risk. Basically, banks hate change because the risk/reward calculation is hardwired into their code.

The problem is that the systems themselves now pose a risk to service, reputation, profitability and even survival. They need to be replaced to make banks fit for banking in the 21^st century. In a recent Temenos poll, a startling 80 per cent of respondents agreed that “Ageing IT is the biggest threat to banks today”.

Here’s a great example – I have heard that one UK bank is still using a system based in pounds, shillings and pence, with the front end doing lots of conversion. Even if this is not exactly true, certainly most of the UK major high street banks have their core banking systems dating back to the 1970s.

This can mean that when a customer looks at her bank balance on her phone she is going through layer upon layer of IT to get to that number – a complexity that is leaving banks open to outages, inefficiencies and making it much harder and more expensive to comply with regulation.

When I first started at Temenos in the 1990s our systems had to interface with an average of 20 other systems; now they have to interface on average with more than 60. And the situation is becoming more complex every day. Indeed, some 15 years ago, when JP Morgan was doing its Y2K audit it found it had more than 3,000 applications. This would not have been unusual, so it is easy to imagine the massive increase in the number of systems and interfaces banks are dealing with today.

Strategically, this is interfering with progress. Maintaining existing legacy systems, which most developed market banks still run, consumes three-quarters of IT budgets, crowding-out investment in IT enhancements.

Sometimes these legacy systems are managed by staff about to retire. After an IT audit, one Asian bank found that a significant portion of its IT estate was entirely maintained by people over 60. It had a choice – try to find a younger team who were willing to train in outdated technology or replace everything with a system fit for purpose. It went for the replacement.

There is also the issue of outages – both in terms of reputation and cost. A City analyst once said that if a bank suffered a major outage it would take a year for its share price and investor confidence to recover. If it suffered a second, confidence would degrade to the point where the bank would need to be sold. If RBS were not owned by the government, I wonder what could have happened to it. (Update: the UK government began to sell its stake in RBS in July 2015 – earlier than most forecasters predicted.)

Finally, there is the question of new products and profitability. Some years ago one country changed its tax regulation overnight. Of the five banks in the market, three had archaic software and took three months to get a new, relevant product to market; two others had modern modular software, including one with a Temenos system. They both got their new products launched within two days of the regulation change, capturing 90% of the market.

Banks’ aging IT environment is inappropriate to today’s banking challenges. They need real time operations and they are still insufficiently customer oriented – their systems are still based around accounts and products, not people.

For example, most major high street banks don’t have a single customer view. They can’t tell which customers are in credit in their savings account and running an overdraft in their current account, or see those customers’ insurance or credit card situation at the same time. They have been blindsided by new entrants such as Apple, Google, PayPal and even Tesco, which know exactly what each customer buys from them across a whole range of areas.

Banks really struggle to see who is high risk, who is profitable. And they have no transparency within their operations. Take buying a light bulb on Amazon. It’s a £2 purchase but you can track it from the warehouse to your door – if you buy a mortgage you’ve no idea where the application is in the process unless you ring someone who puts you in touch with someone who might be able to tell you when you’ll get a decision.

Banks are also facing a hugely increased regulatory burden in the wake of the financial crisis. The post-2008 era requires banks to slice and dice information and data in a myriad of ways to help to analyse risk – and their systems can only do this with a lot of extremely costly input from staff.

Banks can see this and they are alive to how these changes are affecting profitability. When all the traditional banks were in the same boat, there was no real pressure to change: everyone had occasional system outages that stopped customers seeing their bank balance from an ATM; the banks were profitable enough to cope with IT eating up 15% of their total costs; and they were able to adapt their systems to deliver some new services.

But with forward-thinking banks already moving to new systems, growing demands from regulators and consumers, and intense competition from new entrants, there is a brewing fight for survival.

Once a critical mass of banks has transformed its IT, the rest will have to follow, or die.

Mark Gunning is business solutions director at Temenos

It has been suggested that banks are becoming IT companies that happen to take deposits and make loans. Whilst this is an obvious exaggeration there is no doubt for banks IT and IT projects are becoming increasingly critical to their success, yet a recent survey by Accenture found that only 6% of the directors of the world’s largest banks have any IT experience, writes Mark Gunning.

IT and IT transformation projects are no longer confined to the IT department, but have a profound effect across an entire organisation. Given the potential impact on revenue, customer satisfaction and regulatory compliance, it’s essential that banks conduct thorough planning and preparation in advance. According to Cognizant, 50% of core banking transformation projects only partially achieve their objectives; 25% achieve nothing. Before you start any major IT transformation, you need to carefully consider what you want to achieve and what your requirements are to ensure the greatest chance of success.

1. Define your goals

Before starting a large IT transformation it’s essential to understand and agree what you want to accomplish – the business objectives, financial goals, and the requirements for users, customer experience, marketing, and data.  What are you trying to achieve and what do your senior stakeholders in each of these departments need to gain? Knowing this will not only make sure you know where you are heading but will also give you a benchmark of what success means across the organisation.

If you are putting in new software then we strongly recommend that you consider dividing your goals into two categories – short and long term. Short term is for the initial implementation and should be of a restricted scope; just enough to implement the solution and to turn off the legacy software. Long term should be your long term goals that can be implemented post-live.

2. Consider your product requirements

Once you have your objectives mapped out you can then think about the functions you require from the software you are going to buy. If you were replacing a core banking system, for instance, it will have to replace some or all of your current functionality as well as be compliant to your regulatory environment, but in the future it needs to be able to support the bank you want to become in the digital and mobile age. Thinking long term now might seem like extra hassle but remember that you will live with the new system for a long time. In our experience channel technology is replaced at most every 5 years, front office every 10 years and core banking every 20 years.

Of course you will not be able to predict everything your bank will need over these long periods so you will also need a software and a supplier that offers flexibility.

3. Consider your implementation and deployment options

Your current IT landscape and the urgency of your requirements will help dictate the approach you take to migration. Experienced banking software suppliers will have seen many different approaches, everything from big bang to progressive renovation. For larger banks a “build and migrate” approach often offers the best balance between early benefits and long term certainty.

Whatever option you choose, it is best to consider an initial implementation phase that that addresses only your short term goals. Once you are live and are getting benefit from the new software you can begin to address your long term goals. We have seen too many projects struggle due to having too large a scope for the initial phases.

Modern technology also offers new deployment options but with a general move towards cloud and, in particularly, software as a service. As regulated institutions where a basic business value is trust, banks will rightly be cautious about SaaS. You should consider this for any major software migration but if you decide the time is not yet right, you ensure that your chosen software and supplier will enable you to migrate to this option in the future. Remember that you will probably have a new core banking software for the at least the next 20 years during which time cloud will almost certainly have replaced traditional on-premise deployment everywhere.

4. Identifying suppliers and inviting bids

Creating a clear set of objectives, functionality requests and deployment options will put you in an excellent position to begin identifying your potential suppliers. If you are replacing your core system then you need to have a longer term view and to ensure that your suppliers both share your long term vision for our industry and, following many years of consolidation, be in a position to support you into the future. Longevity is less important for suppliers of front office and channel technology.

Once you have settled on your shortlist of suppliers you need to decide if the traditional RFI/RFP approach is required. An increasing number of banks are bypassing this and simply laying out their requirements, inviting bids based on those requirements and deciding on the supplier through demonstrations and, most importantly, proof of concept workshops.

Whatever you choose, it is important that you look for a vendor that understands and shares your objectives and vision. You must take customer references seriously; not just to decide which vendor to choose but also to understand how best to work with your chosen vendor, both during the initial implementation and in the long term.

5. Selecting a vendor

Once you have your shortlisted vendors, meet the team you would work with. See demos of their functionality, get a feel for how you would work with them; you want a partner who matches your objectives in the short and long term. You may want a vendor that helps you focus – bringing their experience of successful implementations with other banks to your project and, where necessary, standing up to the stronger characters on your team so the project remains focused on your objectives.

Visit the reference customers, carry out a site visit and speak to users; make sure they are happy and address any concerns you might have with the vendor after the visit. When undertaking such a time consuming, expensive and high-profile project it is essential to ensure that the vendor has other satisfied customers.

6. Decide whether to use a third party system integrator

Research shows that using a third party in core banking renovations to help with the implementation and other aspects of a project will contribute heavily to its success. Top considerations for choosing a third party include:

• Governance – will your vendor own the quality assurance of the project?
• Expertise – will the third party be certified in your preferred solution? Have they done projects like yours before? Successfully?
• Resource locations – does the third party have offshore/onshore teams? How will these be governed, managed and will they provide the scale you need for your project?

Improved efficiency, higher customer satisfaction, minimised costs as well as a competitive advantage are all achievable goals if approached in the right way – there is no reason to fear an IT transformation, provided the project is scoped and planned appropriately from the outset.

Banks are still reluctant to use the cloud for core banking applications

Despite predictions over the last few years that banks were just a heartbeat away from adopting cloud technology, only 1% of banks are actually running core processing in the cloud today, according to a new report by Temenos.

In its eighth annual report, Shifting Sands: banking in the digital era, Temenos and Capgemini report a mixed picture. On one hand, the 2015 survey reveals that 89% of institutions are now running at least one application in the cloud, which compares against just 57% back in 2009 when the question was asked for the first time. However, the report notes a continued reluctance to run core banking applications in the cloud. Reasons cited included reticence about putting the bank’s most sensitive data in the cloud, with 34% citing concerns around data security.

“It is increasing more slowly than expected, we’d have thought it would increase more by now,” said Chris McGinnis, head of strategy at Temenos and co-author of the report. “It’s still very minimal for core banking software. But we continue to expect change.”

The reasons highlighted for future change include continued low profitability at financial institutions, a need to redirect IT budgets from maintenance to innovation, and the capability to scale to meet an explosion in enquiries brought on by the move to mobile channels and the internet of things, according to the report. So far, the applications that are most likely to be running in the cloud are email (67%), CRM (52%) and data storage (35%).

Further surprises emerged from the results. Notably, the number of respondents citing regulation as the industry’s biggest challenged actually declined markedly compared to last year, from 25% to 17%. Regulation had previously been one of the top two factors for the last two years, and the number one factor before that, said McGinnis. At a briefing hosted to discuss the results, Craig Donaldson, chief executive at Metro Bank, commented that the regional results were particularly worrying for Europe, where 21% reported regulation as their key concern, versus just 12% in Asia Pacific and the Middle east and Africa and 17% in the Americas.

“That’s a standout result for Europe,” he said. “Looking at this from a competitive standpoint, if you’re thinking of what impact that’s going to have on your business, Europe is in danger of damaging itself.”

Other factors respondents were increasingly interested in include their ability to hire top talent (14%), their capacity to capitalise on their data assets (15%) and their ability to achieve profit. The biggest competitive threats identified by respondents were the entry of non-financial companies such as Google and Apple into the sector (52%) as well as new banks (22%); these numbers mean that only 26% of respondents think the established banks are their biggest competitive threat.

“The biggest reason for data becoming an issue is that I it’s locked into silos,” said McGinnis. “The other two main factors are difficulty finding the right people or technology or lack of strategic focus. In terms of restoring profitability, banks have done a lot of the easier stuff like offshoring and outsourcing already. The low-hanging fruit has been taken but profitability still needs work, leading banks to focus on investment in IT.”

The figures from the survey indicate that IT budgets will increase in 2016. Overall, 64% of respondents anticipate higher spending over the next 12 months. The 58% difference between the banks expecting their budget to increase versus those who expect theirs to fall is the largest since the survey started in 2008. Temenos notes that in general, a wider gap between these measures represents rising investment. Core banking systems (23%), digital channels (21%) and analytics (14%) are set to receive the three largest chunks of investment respectively.

“The big priority in terms of corporate investment this year is IT modernisation,” added McGinnis. “That’s a big jump compared to a year ago. A lot of investing has been on the front end to make it look sexy, but they are still limited by the legacy systems. It was number four concern before, now it is number one.”

BACB modernises core software

British Arab Commercial Bank (BACB) is looking to modernise its core software. It is believed the bank has settled for a new platform – Temenos’ T24.

BACB is a London-based wholesale bank that specialises in trade finance and treasury services to Africa and the Middle East.

The bank has been in the system selection mode for around a year or so. It is a long-standing customer of Temenos’ rival, Misys, and its Midas core banking system.

BACB is now recruiting staff knowledgeable in T24, it is understood.

No comment was available from either party.

It is also understood that a number of UK-based Misys users are looking for alternatives to their legacy core systems. Misys has a number of core banking systems in its portfolio that are well-established in the UK. These are Equation, Midas and Bankmaster (the latter is no longer sold).

Another UK-based bank, Arbuthnot Latham, has recently opted for the Flexcube system from Oracle FSS, to replace Misys’ Bankmaster. Temenos lost out in the final round.

Arbuthnot Latham focuses on private banking and wealth management services.

Temenos on the rise

Temenos has reported a rise in earnings, namely 23% for the full year 2015 on the back of 52% growth in total software licensing.

It has also recently secured a $500 million refinancing facility from a conglomerate of major banks, including Barclays, HSBC and Credit Suisse.

AnaCap plans digital bank in the UK

AnaCap Financial Partners, a private equity firm based in the UK, has acquired non-performing loans (NPLs) of Royal Bank of Scotland (RBS) and GE Capital Real Estate in Italy. It is also understood to be crystallising a strategy to launch a new digital bank in the UK.

The acquisitive PE firm has gained over €2 billion worth of NPLs with the latest Italian deal. This adds to AnaCap’s existing NPL portfolios in the country (acquired from UniCredit). All in all, AnaCap holds around €8 billion of Italian NPLs, accumulated over the past four years.

In the UK, meanwhile, AnaCap is keen to join the digital banking rush, it would seem. The project is known as “Abacus” (a somewhat unconventional choice of name for a digital project). Two vendors are known to be vying for the deal, Temenos and Misys.

Temenos is pitching its T24 core banking system and Temenos Connect for digital channels, whilst Misys is offering its FusionBanking Essence front-to-back office system.

AnaCap is already familiar with T24: the system is in use at one of AnaCap’s subsidiaries, Aldemore Bank (a UK-based banking player focused on SMEs).

AnaCap: European tour

AnaCap owns a number of financial institutions across Europe.

In Poland it has FM Bank PBP, which is a new addition to the portfolio. AnaCap received the green light for the acquisition from the country’s regulator, KNF, last autumn.

For its technology, FM Bank PBP is a broad user of Oracle. It runs Oracle FSS’s Flexcube (version 11) for its core and Flexcube Direct for online banking, plus Oracle’s business intelligence and middleware products. There are still some components of the legacy solution, def3000, supplied by domestic vendor Asseco.

In the Czech Republic, AnaCap owns Equa Bank, which is also an Oracle user. Flexcube replaced the legacy Quaestor core system, which stemmed from the Netherlands-based vendor, Allshare, but was maintained by the bank internally. The project was carried out five or so years ago.

And finally, in Malta, AnaCap owns Mediterranean Bank. The bank runs Infosys’ Finacle as its core banking system. The core banking implementation project there took place in 2010.

David Arnott, CEO at Temeno

Almost 50% of retail banks worldwide believe the rise of digital will bring an end to branch-based banking, according to a study by Temenos.

“Retail Banking: In Tech We Trust”, the third annual study of retail banks produced in association with the Economist Intelligence Unit, reveals that banks perceive the threat from tech companies operating in the financial services sector as much bigger today than a year ago.

The majority also predict that retail banking will become fully automated within five years.

Among their concerns is a predicted “dramatic” decline in the use of cash on the high street by 2020, with fintechs providing the majority of payments, as well as freely available peer-to-peer lending through banking platforms.

David Arnott, CEO at Temenos, says: “Banks have clearly woken up to the threat fintechs pose to their business. Last year we found that regulation and compliance were receding as threats. This year we can see that that trend has accelerated. The banks’ response is to look at ways of beating the fintechs at their own game. This may be partnering or co-operating with service providers, or investing in their own digital platforms.”

Threats to banking are coming “thick and fast” from companies such as Google with its Android Pay, and by Apple Pay, and from peer-to-peer lenders and fintechs operating in the wealth management sector.

Temenos says banks are gearing their responses to help them to acquire and retain customers, offer better value, cross sell products and services and improve cyber security. However, there remain significant problems, with recruitment, integrating different systems and processes and legacy systems.

In a media briefing in London, Monica Woodley, editorial director, EMEA content solutions, at the Economist Intelligence Unit, says banks recognise digital as a “higher value area” and there is an “emergence of robo advisors”.

Woodley adds that banks are being “realistic” about the current scenario and are prepared to meet the challenge – such as the use of sandbox environments, where they can experiment with freedom.

Also present at the briefing, Ben Robinson, Temenos chief marketing and strategy officer, who is “reasonably optimistic” about the future of branches and thinks they will “not disappear”.

Robinson will discuss the study’s findings at the Economist Future of Banking summit in Paris today (10 March).

The study was based on a survey of more than 200 global, retail banking executives, more than half of whom were at C-level. The executives were asked about the challenges they face over the next five years and how they are responding.

The study’s key findings show:

The threats will change the way the banking sector operates, killing the traditional branch/transaction based model (49%) and giving rise to fully automated branches (64%).

Banks see new entrants (26%), changing customer behaviour (22%) and new technology (24%) as significant threats.

Banks still face problems, with recruitment (35%), system integration and compliance (34%), legacy systems (31%) and client adoption of digital services (30%) seen as the biggest priorities.

Woodley says: “The digital revolution has moved from existential threat to potential survival strategy for the world’s retail banks and strategically banks have a number of responses. The correct path is not yet clear-cut.”

Aktia Bank busy with IT revamp

Finland-based Aktia Bank is implementing Accuity’s Global WatchList to provide regulatory sanctions and other compliance data. The solution covers politically exposed persons (PEPs), companies, vessels, goods, countries and payment information.

Accuity says that Aktia’s decision to sign for the Global WatchList was driven by the compliance needs and the need to improve the efficiency of the bank’s core banking software – to be able to provide a faster service to online/mobile customers. Niklas Lemberg, director of payment services at Aktia, comments that the bank decided to be “proactive” in addressing these requirements.

“Aktia Bank needed a data provider that could deliver reliable information into its new core banking system in the correct format, providing easy to manage updates, whilst reducing the bank’s risk exposure,” the vendor states.

New core banking system
Aktia’s new core banking platform is Temenos’ T24 – but it is still in the implementation mode. The go-live is provisioned for H2 2016. On the way out is a legacy development by a local vendor, Samlink.

The bank embarked on this major IT revamp in 2013. The original budget was estimated at €30 million, with the go-live scheduled for late 2015.

However, the project budget has nearly doubled since then – and now stands at €55 million – and the launch of T24 has been pushed back.

The bank’s CEO, Jussi Laitinen, concedes that the substantial shift in the date for the switchover means more expenditure for Aktia Bank, but points out that the delay is necessary “to ensure the smoothest possible transition”.

In parallel, the bank is in the process of merging with its subsidiary, Aktia Real Estate Mortgage Bank.

Mohammad Aftab Manzoor, Soneri Bank

Pakistan-based Soneri Bank has chosen Temenos’ T24 core banking system to replace FIS Allprofits. National Data Consultants (NDC), Temenos’ regional partner and integrator, will deliver the project.

Soneri Bank president and CEO Mohammad Aftab Manzoor, says: “With this technological transformation and our mission to provide innovative and efficient financial solutions, we aim to uplift our customer experience to international standards.”

The bank operates 266 domestic branches, including 16 Islamic branches.

Temenos’ MD for Middle East and Africa, Jean-Paul Mergeai, says this is the vendor’s tenth signing in Pakistan.

Other users of T24 in the country include long-standing customers Allied Bank, Meezan Bank, Bank Alfalah, JS Bank and NIB Bank.

A more recent addition is Samba Bank, a subsidiary of a Saudi financial services group, which signed for T24 last year. Its parent has been working on its own T24 project in Saudi Arabia for a number of years already.

However, the vendor has recently lost out on a contract with Summit Bank in Pakistan to rival Path Solutions.

Gopi Krishnan, CIO at QIB

Qatar Islamic Bank (QIB) has finally gone live with a new core banking system, Temenos’ T24, nearly six years after signing the original contract.

Gopi Krishnan, CIO at QIB, describes the implementation as the “fastest and most complex transformation programme in the Middle East region in the recent past”.

Despite this, it actually was a difficult project with a failed first attempt.

The go-live is part of a five-year transformation programme with the core banking replacement project as the first phase.

The intended go-live date had been September 2015 with middleware and all related applications also being overhauled. (Once this is all in place, the bank will look to fully exploit its data management in the second phase.)

Back in 2015, the former CIO of QIB, Ghazi Qarout, said: “We are building the future of the bank.”

(Qarout left QIB in April 2015 after two years in the role. He is now the founder and CEO of Sensteq DMCC, a business consultancy firm, in Dubai.)

The bank had originally chosen T24 in 2010, but “all attempts to implement the system failed,” Qarout said, adding that this was before he joined the bank.

Qarout had been head of IT at another Temenos customer, Al Hilal Bank in Saudi Arabia, from 2010 to 2013, so he had experience of implementing T24.

When Qarout joined QIB in 2013, “I had the chance to keep T24, replace it or upgrade the legacy system”, he explained.

What allowed QIB to stick with T24 was Qarout’s belief that the system had improved since QIB first took it.

Between release 8 of T24 and release 14, “the quality of Islamic products in particular has improved”, he said, adding “all gaps we had to address at my previous bank are now in the core”.

To cut a long story short, Qarout is long gone.

Back in 2015, a new round of negotiations with the supplier took place, and decisions about module selection were taken again.

One notable decision at that stage was for QIB to work directly with Temenos rather than a third party integrator.

The supplier was keen to push projects towards its partner network but QIB stood firm on this point, although Deloitte and banking IT services provider Sofgen were involved in smaller roles.

Along with those two companies, others were mentioned and thanked by QIB for their work on the go-live.

These include software testing firm Maveric, GBM, consultants Tyconz, India-based IT services provider Fintellix (formerly iCreate) and Cognizant Technology Solutions.

Ammara Masood, NDC

Pakistan-based NIB Bank is the first to upgrade to the latest release of Temenos’ T24 core banking system – making a big leap from R7 to R15.

National Data Consultants (NDC), Temenos’ regional partner and integrator, worked on the project.

Ammara Masood, president and CEO at NDC, says the bank is the “first client” to go live on R15.

Adnan Siddiqui, head of PMO and product support at NIB Bank, says the upgrade was “successful”.

NIB Bank is one of the largest foreign banks in Pakistan. It was formed in 2003 after the merger of National Development Leasing Corporation (NDLC) and IFIC Bank. It has a presence in 52 cities in Pakistan, and has over 170 branches which are connected online.

A week ago, Pakistan’s MCB Bank expressed an interest in buying NIB’s operations, according to a filing with the Pakistan Stock Exchange.

No formal merger or purchase has been announced yet.

Take ten

Temenos has had a number of takers in Pakistan for T24.

Recently, Soneri Bank chose the system to replace FIS’s Allprofits. NDC will deliver the project.

Soneri Bank president and CEO Mohammad Aftab Manzoor, says: “With this technological transformation and our mission to provide innovative and efficient financial solutions, we aim to uplift our customer experience to international standards.”

Temenos’ MD for Middle East and Africa, Jean-Paul Mergeai, says this is the vendor’s tenth signing in Pakistan.

Other users of T24 in the country include long-standing customers Allied Bank, Meezan Bank, Bank Alfalah and JS Bank.

A more recent addition is Samba Bank, a subsidiary of a Saudi financial services group, which signed for T24 last year. Its parent has been working on its own T24 project in Saudi Arabia for a number of years already.

However, the vendor has recently lost out on a contract with Summit Bank in Pakistan to rival Path Solutions.

Andreas Andreades, Temenos

Temenos has reported a total software licensing growth of 45% for 2015 on the back of new deals and acquisitions.

In its 152-page “Annual Report and Accounts 2015”, the Swiss software vendor also revealed a rise in non-IFRS (International Financial Reporting Standards) revenue of 19.2% – moving from $468.7 million in 2014 to $559 million.

Andreas Andreades, executive chairman, Temenos, says 2015 was a “record year” in terms of revenues, cash flows and profitability.

He adds: “In North America we started making inroads by beginning to work with some of the largest banks on their progressive renovation efforts.” Banking Technology understands that these include Ally Financial and Comerica.

Last year, Temenos moved into the fund administration business with the acquisition of Multifonds, which counts a number of Tier 1 institutions as users of its fund administration platform.

Temenos paid €235 million in a mixture of cash and debt to acquire Multifonds from a shareholder group led by growth equity investor Summit Partners.

In February 2015, it also acquired US-based loan origination and collection software provider Akcelerant – and with it more than 600 credit union clients. It is understood that the aforementioned Comerica signed for Akcelerant’s products.

Deals revealed

There were a variety of deals in 2015 for Temenos.

The largest by far – and the largest core banking system deal in post-crisis Europe – has been with Nordea. The bank is investing €1 billion in its software overhaul, with T24 at the heart of it. Accenture is the delivery partner.

ABN Amro extended its contract with Temenos to roll out T24 and a range of front-end applications (branded as WealthSuite) for its private banking activities across the globe. On the way out is the Olympic solution from Temenos’ rival in the private banking space, ERI.

Julius Baer was another high-profile signing of 2015. The bank took the “progressive renovation” route, with T24 to be first installed in its Asian operations in Hong Kong and Singapore. Again, ERI’s Olympic will be replaced.

In Luxembourg, Advanzia Bank (an online bank focused on retail) signed to replace its legacy solution with a Microsoft-based version of T24. A local IT integrator and Temenos’ partner, Syncordis, is managing the project delivery.

In Israel, Bank Leumi is planning to launch a new digital-only bank, with Temenos’ products underpinning the operations.

And in Pakistan, a 2015 signing was Samba Bank, a subsidiary of a Saudi financial services group, Samba. Its parent has been working on its own T24 project in Saudi Arabia for a number of years already. According to Temenos, the contract was preceded by a competitive selection process.

New partner

Nordics’ largest IT group, Tieto, joined Temenos’ extensive list of service partners.

Tieto now offers delivery services for the T24 core system as well as auxiliary products across the Nordic and Baltic regions. In particular, it will specialise in the T24 Model Bank (a preconfigured, “out of the box” version of T24) delivery.

There is a lot of activity going on in the UK’s credit union space, as the participants realise they have no choice but to modernise. So who is doing what? Which technology providers are set to gain and who might be a loser?

UK credit unions: modernise or bust?

London Mutual Credit Union and TCS Financial Solutions
London Mutual credit union has recently embarked on a major tech overhaul – it is implementing TCS Financial Solutions’ Bancs core system.

London Mutual offers a range of savings accounts, loans (including payday loans) and current accounts.

It follows in the footsteps of Birmingham-based Citysave Credit Union and two Scottish entities, Capital Credit Union and Scotwest. The latter two were the first amongst UK credit unions to sign for the Bancs platform (this was back in 2010). Citysave embarked on its Bancs roll-out in 2012.

Abcul and Fiserv Agiliti
Meanwhile, the Association of British Credit Unions (Abcul), is implementing a shared platform for its members. Around 40 entities have already signed up for it.

At its heart, this shared Software-as-a-Service offering has Fiserv’s Signature core banking system. It is delivered as part of the broader Fiserv’s Agiliti solution. Agiliti is a combination of around 18 Fiserv and partner applications, hosted by Blue Chip. Together, they create a front-to-back office proposition for UK banks and credit unions.

The Abcul project is supported by the UK government, as part of the Department of Work and Pensions’ Credit Union Expansion Programme. The overall programme is valued at £38 million, with the technology portion believed to be around £8 million.

Abcul signed for Fiserv’s Agiliti in mid-2014. AT Kearney advised on the selection. It is understood that other bidders for the contract were TCS, Kesho Systems, and Temenos (in partnership with HP).

The first deliverables were in place at Abcul by the end of 2016.

My Community Bank and Mambu
My Community Bank (despite its name, it is a credit union) was launched in late 2013 on the cloud-based back office system supplied by Mambu. My Community Bank is an online entity that grew out of a small London-based entity, Brent Shrine Credit Union. It positions itself as a viable alternative to payday lenders.

Finding the right core banking system was “the key part of the process”, Mohsin Mehdi, CEO of My Community Bank, said at the time of the launch.

The credit union scoured the market and looked at the traditional suppliers in this space, but felt that it needed a system that would have more banking specifications.

When it discovered Mambu, “it was love at first sight”. The team liked the cloud-based set-up Mambu offered (as unlike other vendors that also claimed a cloud offering, it didn’t require My Community Bank to have any servers on its premises).

The cost proposition was favourable too, as well as the fact that Mambu did not require a multi-year agreement. Instead, it offered a deal on a 30-day notice basis.

By comparison, another vendor (a major international supplier) wanted the payment upfront and a 15-year contract (which was then negotiated down to a five-year one).

Also, Mambu offered flexibility and fast response in terms of implementing any changes or new functionality. Other vendors “were very rigid”, Mehdi observed. It was “the attitude and the service” that proved a winner for Mambu, he felt.

6Towns Credit Union and Temenos
6Towns Credit Union signed for Temenos’ T24 core system a couple of years ago.

The project was going to be delivered by a small Ireland-based IT firm, but it went bust before the implementation was completed. It was then picked up by Temenos.

The system is delivered on a Software-as-a-Service (SaaS) basis. Sofgen, a partner of Temenos, is providing support.

The credit union offers current accounts and loans, including payday ones, and as far as Banking Technology knows, it is the only T24 user in the UK credit union segment to date.

So who might lose out?
A potential loser looks to be the aforementioned Kesho Systems, a long-standing supplier to the UK credit unions. It currently claims to have around 60% of the sector as users of its flagship Curtains system. That translates into around 220 credit unions on the user list.

Ireland-based e-Channel Financial Systems (e-CFS)/Conaccess has 30% of the market (110 credit unions on its user list). Customers include Penny Post Credit Union, which provides financial services to Post Office workers and their families, and community-based credit unions like Kingdom Credit Union in Scotland. The vendor also has projects in the Channel Islands, Ireland and further afield in Africa.

John Nugent, CEO of e-CFS/Conaccess, feels that the biggest challenge for the providers in this space will be the overall contraction of the market in terms of customer numbers, due to the merging and rationalisation of credit unions in the UK.

There is also another well-established vendor, Progress Credit Union Centre. This Ireland-based company has a number of users in the UK, including Kent Savers Credit Union.

Mark Lyonette, CEO of Abcul, commented that the current IT projects have finally “woken up some suppliers” in a sector that had traditionally seen little innovation from a technology perspective.

Rikard Josefson, CEO, Länsförsäkringar Bank

Sweden’s Länsförsäkringar Bank has become the first bank in the country to take TCS Financial Services’ Bancs core banking system. Meanwhile, Temenos and SAP are also busy with core renovation projects in the region (see below for more details).

TCS will provide system integration and support services to Länsförsäkringar, the fifth largest retail bank in Sweden.

Rikard Josefson, CEO, Länsförsäkringar Bank, says TCS has a “strong track record” and the Bancs system is “very well capable of supporting our ambition of being a digital market leader”.

He adds that TCS’s “long term commitment” to Länsförsäkringar Bank and to the Nordic market was an “important factor behind our decision to partner with them”.

TCS has been present in the Nordic region since 1991. It has around 9,000 people working in Sweden, Finland, Norway, Denmark, Iceland, and across TCS’s Global Network Delivery Model (GNDM), which services Nordic companies. It has had, however, no core banking software takers until now.

Last year, Euroclear Finland, the central securities depository (CSD) for the Finnish capital markets, launched a new transaction processing platform, Infinity. This is powered by TCS Bancs’ Market Infrastructure platform.

The project at Euroclear is ongoing – the central register as well as equity processing capabilities will be introduced before the end of 2016.

Battle for the Nordics

TCS’s rivals in the core banking space are also eyeing the Nordics. Temenos has recently joined forces with the region’s largest IT group, Tieto, to push its flagship T24 core system in the Nordics and Baltics. Tieto will offer a preconfigured, “out of the box” version of T24, known as Model Bank.

According to Steen Jensen, head of Northern Europe at Temenos, the vendor has seen “enormous momentum” in the Nordic market.

Indeed, last year it secured the largest core banking software deal in post-crisis Europe, with Sweden’s Nordea Bank. The bank is prepared to invest €1 billion in its “root and branch” banking and payments software overhaul. T24 will replace a host of homegrown and third party products, including Misys’ Midas and Tieto’s Core Banking Suite. Accenture was picked as the integration partner.

Temenos is also implementing its T24 solution at Finland’s Aktia Bank. The project has been a couple of years in the making and is running late and over budget.

Meanwhile, another software provider, SAP, is also keen: it has a partnership with CGI to bring to market a Software-as-a-Service (SaaS) core banking offering for the mid-tier Swedish market. The platform is underpinned by SAP’s SAP for Banking system.

The hope is to build on the back of a first live customer for SAP for Banking in Sweden, Landshypotek Bank, which went live in 2013.

This tie-up is yet to produce results, but last year SAP managed to gain a new core banking deal in Sweden with another partner, Applicon. This is at a start-up subsidiary of Libya’s Aman Bank. The bank is not open for business yet. The project is ongoing – the Islamic version of SAP’s core system will be delivered onsite.

Amsterdam Trade Bank is looking for a new core system

Amsterdam Trade Bank (ATB), a European subsidiary of Russia’s Alfa Group, is looking for a new core banking system, Banking Technology understands.

The bank is a long-standing user of Misys’ software, including Equation for core processing, Trade Innovation (TI) for trade finance, and Opics for treasury and capital markets.

In 2010, Misys announced ATB’s successful upgrade to a newer version of Equation, BankFusion Equation (now branded as FusionBanking Equation).

A couple of years later the bank was known to be looking at a local provider, Five Degrees, and its Matrix banking platform. No deal materialised, however.

ATB is now scouring the market for a new core banking system. The shortlisted vendors, Banking Technology understands, include Temenos with its T24 offering and a small Norwegian player, Commercial Banking Applications (CBA) with its IBAS GBF product.

Misys with its FusionBanking Equation and TI products are also on the shortlist, it is believed.

ATB specialises in trade and project finance, corporate banking and international money transfers. It is positioned as a financial gateway between Russia, CIS and Western European markets.

Its HQ is in Amsterdam, with around 200 people on the payroll.

Specialist lender PCFG selects core and digital banking software ahead of its launch

UK-based specialist financing company, Private & Commercial Finance Group (PCFG), has concluded its software selection, Banking Technology understands.

The company applied for a banking licence in 2013/14 and was known to be in system selection mode in mid-2014. The selection process was run by consultancy firm Sofgen.

Banking Technology understands that it has now finalised its technology choice: Temenos’ T24 for core banking and Sandstone Technology for digital banking and customer onboarding.

PCFG rejected Temenos’ digital banking offering, Temenos Connect, in favour of Sandstone’s product which is more proven in the UK.

Sandstone – an Australian company – has been working in the UK for many years and is used by many small players here. Customers include Shawbrook Bank, Cumberland Building Society and Secure Trust Bank.

PCFG has been around since the early 1990s offering loans to individuals and companies for vehicles, plant and equipment. Today, it has 14,000 customers and a finance portfolio of over £100 million. The company is London-based and employs 45 people.

David Anthony, chairman of PCFG, said back in 2014 that the company’s “key objective” was to obtain a banking licence by the end of that financial year (ended March 2015). This, however, did not materialise and PCFG is still in waiting mode.

“It is a complex and time-consuming project but a successful conclusion will transform our business by increasing the availability and reducing the cost of the funds we need to grow the business,” Anthony said.

It’s not just sun and sea in Bermuda… Fintech projects too!

Bermuda Commercial Bank (BCB) has gone live with Temenos’ T24 core banking system (R13). The bank has also implemented Temenos’ business intelligence and analytics tool, Insight, and an AML solution.

Sofgen, a Switzerland-based specialist IT consultancy and integration firm (now part of Tech Mahindra), carried out the implementation. The project was 18 months in the making.

Earlier, Sofgen also helped BCB to implement a new omnichannel banking system, NETteller, supplied by NETinfo. The new digital banking platform went live in late 2015. It interfaces to the T24 core banking system.

“The challenge was to implement simultaneously a number of different products to replace all incumbent systems in a big-bang approach,” says Ashok Sharma, director, Sofgen Americas.

Peter Horton, CEO at BCB, adds that the implementation was “a huge collaborative effort” between BCB and its partners. “It resulted in a very successful go-live weekend,” he states.

BCB is one of Bermuda’s four licensed banks and the only one to focus corporate and private wealth clients.

BCB’s technology overhaul: the long and winding road

BCB has been on the tech modernisation path since 2010. However, the first attempt to replace the legacy core system ended in failure.

BCB had been using Misys’ Bankmaster for nearly 20 years. It was then convinced by Misys to move onto a newer product, Bankfusion (now known as FusionBanking). It was hoping to go live with the new system by the end of 2010, but two years later the project was still underway with no end in sight.

The bank was experiencing major problems – and Misys did not deny it. The vendor’s CEO at the time, Bret Bolin, commented that “ups and downs” were typical for any core banking implementation, BCB no exception. However, he assured that “a good plan forward” was in place and the BCB venture would become “a success story”.

But by 2013, the Misys project was scrapped. There were also a number of management changes at BCB, including on the IT and operations side. BCB went to market for a new core banking system and this time, it evaluated Temenos with its T24 offering and ERI with Olympic.

The contract with Temenos was signed in Q1 2014.

Temenos CEO David Arnott

Temenos has revealed IFRS (international financial reporting standards) total software licensing revenue of $38.9 million in Q1 2016; and non-IFRS total software licensing revenue of $39.2 million – up 51% from Q1 2015 on a reported basis and 53% in constant currencies.

Temenos CEO David Arnott says this shows financial institutions “continue to embark on transformational IT renovation”.

He adds that the “digitisation trend and focus on costs are putting ever more pressure on banks to upgrade their IT platforms”.

Temenos CFO and COO Max Chuard says the refinancing it carried out in Q1 2016 has increased its “balance sheet flexibility for future growth opportunities”.

The vendor’s IFRS revenue for the quarter was $129.1 million, up from $102 million in Q1 2015. Non-IFRS revenue was $129.4 million for Q1 2016 up from $104.3 million in Q1 2015, representing an absolute increase of 24% and 26% in constant currencies.

For the rest of 2016, Temenos predicts non-IFRS total software licensing growth at constant currencies of 10% to 15% (“implying” non-IFRS total software licensing revenue of $234 million to $245 million).

For non-IFRS revenue, it anticipates growth at constant currencies of 7.5% to 11.0% (“implying” non-IFRS revenue of $594 million to $614 million).

T24 and more

In terms of activity, there have been several deals and go-lives this year for Temenos.

Bermuda Commercial Bank went live with its T24 core banking system (R13). The bank has also implemented Temenos’ business intelligence and analytics tool, Insight, and an AML solution.

Sudan-based Export Development Bank also went live with T24. The Islamic bank implemented R13 of T24 and received Temenos’ Insight Financials tool.

Soneri Bank in Pakistan signed for T24 to replace its legacy platform, FIS’s Allprofits; and Qatar Islamic Bank finally went live on T24, nearly six years after signing the original contract.

Two banks in Malawi unite on Temenos’ T24 core banking system

Malawi Savings Bank (MSB) and FDH Bank will unite, resulting in 250 job cuts and a major core system upgrade.

Sobhuza Ngwenya, group head of marketing at FDH, says that the core business strategy of the merged entity “towards achieving the top bank status” will be technology-driven. However, no branches are expected to close.

FDH bank has been using Temenos’ T24 core banking system for around five years. The plan is to upgrade from the current R10 version to R14.

Meanwhile, MSB is a user of Neptune Software’s Rubikon core banking system. It will be fully replaced by T24.

The expectation is that by mid-May 2016, both banks will be on T24 R14.

The merged bank hopes to be floated on the Malawi Stock Exchange within three years. To make it attractive for investors, the bank’s cost to income ratio must be reduced, says Ngwenya, from the current 89% to 60% within the first year.

Job cuts

Ngwenya says that the redundancy initiative has been undertaken in consultation with the regulators and other relevant authorities. There is a consensus that it is required as part of the business optimisation process, he adds.

FDH Financial Holdings’ CEO Thom Mpinganjira comments that “in matters of employment a job can never be guaranteed. It depends on performance.”

MSB was state-owned until last July, when Malawi’s government sold its 75% stake to FDH Financial Holdings. The deal attracted criticism from a number of politicians and civil society organisations.