A majority of Chinese banks will require either a
new business system or an overhaul of the old system to maintain a
competitive edge.
The banking industry in China is relatively young.
Its core business systems have been gradually established along with the
growth of banking operations and therefore lack overall planning and
design. With increasing market competition, the requirements of banks in
relation to their business processing systems are no longer limited to
their ability to handle operations or keep accurate business records.
A new report, Core Banking System Trends in China,
examines how banks can better address their customers’ needs and provide
a flexible configuration of products, effective management of risk, and
more analytical and management functions through the establishment of new
core banking systems.
Globally, many banks are no longer satisfied with
outdated core systems developed decades ago. They observed the following:
- The old systems lack flexibility and can no
longer support banks’ rapid innovations, preventing them from
maintaining their competitiveness.
- The maintenance costs of old systems are very
high.
- The risk management and controls of old systems
are not strong enough.
- The support of management decisions by old
systems is relatively weak.
- Global banks are unable to properly integrate
their systems in the various countries and regions.
Many banks have chosen to renew their core systems.
This trend can be observed in North America, Europe, and the Asia-Pacific
region and is now emerging in China.
The entry of foreign vendors has significantly
reduced domestic vendors’ chances of winning bids for the
next-generation core system projects of joint-stock commercial banks. As a
result, domestic vendors are turning their attention to new markets such
as urban commercial banks, rural commercial banks, and rural credit
cooperatives. Some domestic vendors have also established partnerships
with foreign vendors in the development of core business systems, with the
hope of maintaining a market share of joint stock commercial banks and
large urban commercial banks through localization of these systems.
“Urban commercial banks will be next in line to
overhaul their core banking systems. Very few of these banks have
introduced the next generation of customer-centered core business systems.
Currently, most medium-size and large urban commercial banks are using the
integrated operation systems provided by domestic vendors, but there is a
need to upgrade,” says Wenli Yuan,
analyst with Celent’s Asia Research Group and author of the report.
“Domestic and international vendors, as well as
other financial institutions, have set their sights on this particular
market,” she adds.
The report looks at the status of core business
systems in banks, examining the four developmental stages of core banking
systems as they relate to the four tiers of banks. It also explores banks’
core systems models, explaining independent product development and
customization after purchase.
This report is 26 pages and includes 13 tables and
one figure. A table of contents is
available online.
