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Banks Will Replace Legacy Core In Stages, Says SAP

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SAP, which has struggled for years to get a U.S. customer for a new core banking system, is taking a new approach, said Falk Rieker, global head of banking at SAP.

“We are seeing a bit of a change from pure replacement to renewal enhancements. We see banks adopt certain functionality — API is the key term.” APIs, or application programming interfaces, can let banks connect new modules to existing legacy cores to provide updated, real-time services, or to replace older technology one piece at a time rather than undertake a complete changeover.

For several years SAP sales people were looking at the aging Hogan systems, used by some of the country’s largest banks, as targets for replacement.

“There just wasn’t the appetite to replace Hogan,” Rieker said. “Banks have to make up their mind about the next generation of technology.”

Perhaps it will take the next generation of bankers, another expert in the U.S. marketplace said recently. Some of the big changes in American banking came from bankers who were all in their forties when they made their big moves— bankers like John Reed at Citi, or Richard Kovacevich, CEO of Norwest Corporation which eventually acquired Wells Fargo and took its name.

Or the banks might just change their strategy and provide state of the art technology with APIs, Rieker said. He sees demand in commercial banking where corporate treasurers are looking for better cash management and commercial lending and systems that let them manage their corporate treasury across accounts, ideally including a mobile front end to their business banking. In retail, he sees an interest in replacement, with a mobile front end, which SAP offers.

“A lot of functionality will be consumed in the cloud, which makes the path to new core services much easier.” A cloud implementation can also support integrated data analytics innovation and digital channels to provide an improved customer experience. JPMorgan Chase, PayPal and ATB Financial have already implemented some SAP  banking applications.

Like many experts in fintech and banking, he sees competition, existing or potential, from some of the leading nonbank technology players.

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