The landscape for core banking systems in Europe, the Middle East, and Africa is changing. Factors such as cloud-native SaaS systems, new technology, and customer expectations significantly impact how banks choose to modernize their core banking systems.

According to a report by consulting firm Gartner, core system renewals and “greenfield” projects are increasing in volume across all banking segments in the EMEA region, driven by the proliferation of agile digital banks leveraging the cloud.

Already, Western Europe has the world’s highest percentage of digital financial institutions that deliver banking services via alternative channels rather than traditional branches. At the same time, the top five core banking system vendors are also headquartered in the EMEA.

The research found that the EMEA market has also embraced the public cloud trend, with 44% of core banking system migrations moving into the cloud in 2021 – the highest percentage across all regions globally.

Picture: the EMEA market has embraced the public cloud trend, with 44% of core banking system migrations moving into the cloud in 2021 – the highest percentage across all regions globally.

Benefits of the cloud

Cloud computing is an attractive option for banks because it allows them to scale up and down quickly and pay only for what they use. Banks can also benefit from the economies of scale that cloud providers offer.

Indeed, core banking systems that have been migrated to the cloud are more flexible, scalable, extensible, and adaptive, allowing banks to support multiple services while maintaining high performance and availability at all times.

At the same time, banks are being challenged to transform their customer experience – and this is also driving core system renewals to the cloud. This is not only about creating an engaging and compelling digital experience for customers but also ensuring that it’s consistent across channels and devices.

Evolving customer expectations

Banks must be able to support digital transformation and innovation initiatives to meet this challenge, which includes providing a modern customer experience that offers personalization at scale, real-time decision-making capabilities, automated processes, and more seamless integration with third parties such as fintechs.

Customers’ expectations have evolved rapidly, with many expecting their bank’s website or mobile app to provide an intuitive and consistent experience regardless of where they are accessing it.

Banks must ensure that their cloud-based core banking solution provides this level of flexibility to remain competitive in the marketplace.

Not only does the digital transformation to the cloud enables banks to deliver tailored services more efficiently, but it also improves customer experiences and reduces costs by creating new revenue streams through innovative products.

Surge in greenfield solutions

The surge in greenfield projects in the region is also a promising trend: with no legacy to maintain, they can be built from scratch or on top of existing systems.

This gives greenfield projects several advantages over their legacy counterparts: they are often more agile, flexible, and innovative than older solutions; they can use new technologies that weren’t available when the core banking system was first developed; and they don’t have to worry about maintaining old software code as it ages (or being forced into expensive upgrades).

Greenfield solutions are growing in popularity among banks in EMEA for these reasons — but there’s another reason why many banks are jumping headfirst into greenfield territory: customers expect it now more than ever before.

Platform renewal and consolidation are essential for banks to consider when selecting a new cloud-based core banking system. Banks increasingly seek to reduce costs and increase agility by consolidating their platforms while meeting regulatory compliance requirements.

This strategy can help banks achieve all three of these objectives:

  1. It drives down costs because it reduces the number of systems they need to maintain;
  2. It increases agility by allowing them to use one platform across multiple countries;
  3. It helps to meet regulatory requirements by having fewer interfaces between back-office systems.

Another critical consideration is APIs – the glue that connects core banking systems to other systems and service providers and allows them to integrate with third-party products and services. For example, APIs can also transform the customer experience by enabling new interactions via mobile devices or chatbots.

Data sharing is crucial for new opportunities

For banks utilizing cloud-based systems, data sharing is also a crucial element to consider as it offers easy access to storage, shared resources, and applications. It enables banks to analyze data in remote servers with faster processing speeds and enhances security.

It can also lead to new opportunities for innovation and collaboration among banks, fintechs, and other service providers by allowing them to offer consumers a more comprehensive range of financial services, including finance management tools and tailored lending options.

To close the gap with new digital banks proliferating in the EMEA, traditional banks should consider a new core banking system product that has “composable architecture” and adopts standards for the likes of APIs and exposes microservices, the Gartner research recommends.

It’s also essential to consider vendors that offer public cloud options and operate in the EMEA market, as localizing a core banking system is crucial to its successful implementation.

Here at Sopra Banking Software, we have developed an ultra-flexible cloud-native SaaS system built according to a bank’s needs. Based on a composable platform, our core banking solution offers a range of APIs that ensures full banking functionalities and a smooth migration to the cloud.

Éric Pogu

Senior Vice-President SaaS & Cloud Services

Sopra Banking Software