In a bid to keep up with the ever-evolving banking system, most Nigerian banks recently conducted upgrades to their core banking applications.
This trend began with Sterling Bank on September 10, when it migrated to a new core banking system called SeaBaaS.
As a result of its migration, the bank’s customers experienced some challenges and were unable to have access to their funds for weeks.
Following the bank’s switch to a new core banking system, fellow financial institutions like Zenith Bank, Guaranty Trust Bank (GTB) and First Bank also took similar steps.
The banks’ actions ultimately led to several service disruptions, failed business transactions, customers getting stranded and customers’ inability to pay for services or make purchases.
WHAT IS A CORE BANKING APPLICATION?
A core banking application is a software banks use in managing their critical processes such as customers’ accounts management, transactions and risk management.
It processes daily transactions and posts updates to accounts and other financial records.
WHERE DID THE BANKS GET IT WRONG?
In terms of the errors made by the banks during the migration process, it was discovered that they failed to adequately notify their customers about the impending migration and subsequent disruptions.
The banks also failed to train and adequately sensitise elderly customers, who are not technology-compliant to prepare them for the impending software update action before carrying it out.
Many of the banks also chose to implement the migration exercise during the same period. The move by the banks was not measured and customer-focused.
The financial institutions in this category also failed to come up with various stop-gap measures that could help customers with high-performing accounts from losing huge sums of money during the migration exercise. In this regard, the banks failed to provide a temporary solution that could enable a seamless, phased transition without disrupting day-to-day operations.
WHY IS THE MIGRATION EXERCISE NECESSARY?
Given the ongoing devaluation of the naira, many Nigerian banks are now compelled to switch to cheaper core banking applications that are capable of rendering the same service formerly rendered by expensive applications.
Security issues such as constant cyberattacks and hacking of accounts by fraudsters have also made the banks to deem migrating to more secure and fraud-resistant applications necessary. The migration trend is largely about safeguarding bank accounts against threats of account hacking and money swiping by cybercriminals.
Modern core banking systems provide banks with increased flexibility and scalability to address ever-evolving market demands and future expansion plans. These systems and platforms also connect seamlessly with third-party providers, allowing banks to open up their ecosystem to offer new and innovative services to their customers.
The exercise also allows for routine maintenance and upgrade of core banking applications.
DOES THE MIGRATION PROCESS REQUIRE CBN’S APPROVAL OR DIRECTIVE?
Core banking upgrades or migration exercises do not require the Central Bank of Nigeria (CBN)’s authorisation, approval or directive.
Banks may, however, out of courtesy inform the CBN about their plans whenever such exercises are to be carried out.
More importantly, customers’ funds are always safe during system upgrades and migration exercises.
