It is imperative that banks perceive digital as an opportunity to undertake change, rethink their business and IT architecture, and embark on embracing modular design.

This report proposes the creation of a new banking model by digital transformation in the Japanese banking industry.

In considering core system modernization plans, the unique characteristics of Japan’s banking industry need to be understood. These include elements such as the one-sided core system mergers that have proliferated among city banks and the shared system approach that is common among regional banks. Digital has weighty implications and will exert a major impact going forward. Indeed, digital will trump economic environment-related factors — such as the four key areas of demographic changes, disposable income changes, deterioration of the operating environment, and deregulation — in the jarring shock it portends for banks’ business models and the IT architecture that underpins it.