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U.S. banks changing out core systems for real-time processing

They're spending more than $100M to replace aging systems

July 14, 2011 06:05 AM ET

Computerworld - It has been years since the banking industry made any large investments in core IT systems, but some of the largest financial services firms in the U.S. are now in the midst of rolling out multi-million dollar projects, according to industry experts.

Ten years ago, top-tier banks moved to replace decades-old Cobol-based core systems, with open, Web-enabled applications.

Now, some of those same top-tier banks are in the midst of another major initiative to convert to real-time mobile applications for retail services such as savings and checking accounts and lending systems. The idea is to grab more business -- and money -- from customers.

According to consultancy and research firm Celent, Citi bank is now moving to FIS Systematics from an older, internally developed system. Similarly, Union Bank in California is moving away from a brittle internal system to Infosys Finacle. And BBVA Compass is moving to Accenture's Alnova core banking software.

"Five of the top 20 banks are engaged in some sort of core banking replacement and we expect to see another three or four in next 12 months," said Fiaz Sindhu, who leads Accenture's North American core banking practice. "They're looking at those upgrades as a path to growth."

The best predictor of a core migration is far and away a merger or acquisition within the same country. Acquiring a bank in another country does not necessarily drive a core migration, according to a Celent report released earlier this year.

When Associated Bank in Green Bay acquired State Financial Bank in 2006 and First National Bank of Hudson in 2007, it set about consolidating its storage resources and brought all of its core transaction processing systems in-house.

Dan Marbes, a systems engineer at Associated Bank, said his company is migrating to IBM iSeries servers and has virtualized 75% of its 800 core data center servers and increased its storage arrays from one to eight with 900TB capacity. The bank, which has 300 branches throughout Illinois, Minnesota, and Wisconsin, had been using Fiserv to host its applications.

"With our online banking portal, we now have the ability to do instant file transfers and we continue to upgrade things like our automated teller system," Marbes said. For example, check image transfers at ATMs are much faster than they were on the bank's old centralized image-capture system.

The bank's storage systems have grown by 200TB in the last year alone, mostly due to new production systems coming on board. Those new systems increased data retention demands in order to meet regulatory requirements.

"I'm always surprised that people don't talk about the significant effect of virtualization on the I/O characteristics of storage. When you're putting production SQL, Exchange and Web workloads on them..., those types of workloads have a much different demand on the back-end storage than a some archive volumes," he said.

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