New financial services realities demand enhanced core functionality around risk, regulatory compliance and customer retention. To meet these demands while coping with continuing global financial crisis and to maximise the return on their technology investments, many banks are taking a phased approach to enhancing and implementing new core capabilities.

Caught between the need to upgrade core systems in order to cope with a hyper regulated risk averse environment and the reality of a severe recession, banks, with few exceptions, are looking to extend the capabilities of their legacy core systems.

According to Margaret Sherick, CSC Financial Services consultant, banks are altering their spending plans around their cores. "Most know they have to do something to fix their cores" she says. "But now you have to look at how well you can manage risk and how fast, whilst still meeting changing customer service requirements. It comes back to the technology - plans have been scaled back to deal with the financial crisis and banks are doing things on an as-needed basis".

And right now what is needed is stronger risk management, greater transparency and more aggressive customer retention. As a result, banks are upgrading their core capabilities in these areas and making do with legacy functionality elsewhere.

Sherick suggests that introducing new functionality in stages reduces a lot of the implementation risk. CSC has many years experience in helping customers deliver Service Oriented Architectures as a means for minimising such risks. Underlying technologies such as Web Services, Business Process Management and different elements of middleware need to be aligned with the business, and coupled with effective governance.

While a phased implementation of core technology can help ease the pain related to resources and risk, the success of a core transformation largely hinges on which systems a bank chooses to replace. And like the rest of financial services, many banks are placing the customer at the centre of their strategy and re engineering systems with a customer data perspective.

Many banks purchased legacy systems at a time when it was normal to customise all development in-house and not retain a connection to the base product. It is worthwhile for banks to reconnect with their legacy system providers to see what development has happened in the meantime. CSC in Australia is working with all its customers of CSC's Hogan banking platform to demonstrate the current functionality and component upgrade paths. Many of the features that banks require have been developed as software providers maintain their development roadmaps and keep updating the products.

CSC is finding considerable interest in the new features such as Web Based Services and SOA compatibility that provide extension capabilities to provide rapid SOA enablement of Hogan applications, as well as its Automated Upgrade Program (AUP). Web Services will provide the capability to rapidly integrate with a variety of delivery channels with a ‘once and done' approach whilst expediting the release of new services to all sales, service and self-service channels. AUP enables the customised application components to be upgraded to the latest versions, whilst maintaining the custom functionality. This gives cost effective and fast implementation times with much reduced design and development efforts. The results from projects in Australia and globally have helped validate the benefits.

Given the present state of banking and the economy as a whole, as well as the inevitable rush of new regulation facing the industry, requirements around reporting and transparency will factor greatly into every bank's technology decisions.

Sherick believes it is not all gloom and doom. "There is going to be investment, it's not a ‘Do nothing' scenario. You have to do something, but with intent. Be smart about it".