• Cognizant 20-20 Insights

Business Process Management for

Successful Core Banking Implementations
To successfully apply BPM when implementing core banking systems,
banks must think through and conquer four major challenges: human
processes, systems processes, business rules engines and business
activity monitoring.

Executive Summary Business Drivers for Core Banking

The discipline of business process management Core banking systems are implemented to
(BPM) leverages digital tools to create models address one or more of the following business
that enable organizations to optimize key requirements:
business processes. While this approach may be
adequate to cover many IT requirements, it is
• Mergers or acquisitions by a bank.
insufficient for the complexities of implement- • Need for greater flexibility in an increasingly
ing a core banking system. For core banking, it competitive market.
is therefore necessary to apply a much wider • Regulatory changes that cannot be adequately
definition of BPM. handled by legacy systems.

This white paper examines the business drivers Enhanced Customer Experience
for a successful core banking system implementa-
Mergers or acquisitions tend to complicate
tion. It then addresses four relevant dimensions
the bank’s business portfolio, adding a slew of
of BPM:
products and services — many of which overlap
• Human Processes: The business processes with one another. The same goes for IT infrastruc-
performed by the bank’s users, customers and ture, where multiple core-banking systems collide
other human stakeholders. by offering redundant systems and processes.
Without a rationalization and harmonization of
• System Processes: System workflows, system the product portfolio and IT systems, it is difficult
interconnections and human/system interac-
tions. to achieve any cost efficiencies or a proper inte-
gration between the two blended entities. In
• Business Rule Engines: Business rules that this situation, it is common to choose a “to-be”
can be automated in a system. core system, which may emerge from selecting
• Business Activity Monitoring: Visibility of the one of the two legacy systems or creating a new
system processes currently in use. advanced system. The success of such an imple-

cognizant 20-20 insights | june 2012

mentation can usually be measured in post-merg- of business process — human processes, system
er cost savings in IT and business operations. processes, business rules engines and business
activity monitoring.
Many legacy core systems were built in an age
when a new product launch could take years Considering the millennial culture and its
and inevitably cause business disruption. With increased reliance on mobile and Web tools,
increasing sophistication in the front office, bank banks have to rely heavily on effective core
IT departments have supported these operations banking solutions that include multiple sources of
by using a ”surround” strategy where additional accessing customer information — including IVRs,
systems like customer relationship management Internet banking, ATM access, etc. These and
systems, loan origination systems, channel other such means enhance the overall customer
systems, etc. envelop the core system and require experience and help banks compete in the market
minimal changes to application logic. and deliver an enriched experience to customers.
With enhanced core banking solutions, banks
With the advent of entrants from outside the typically provide greater analytics. This leads
banking industry, traditional banks are finding banks to better understand their customers, thus
it difficult to compete in an environment where helping them provide what the customers want
a new product is launched within days rather rather than what the bank has to sell.
than weeks or months. Core systems are being
replaced to bring added flexibility. One provider Human Processes
of core banking systems, Temenos, recently Over the last decade, core banking systems have
launched a highly modular architecture in its T24 grown in complexity and features. Today, a core
environment that supports rapid deployment of banking system not only has traditional back-
product variants without costly development office functions but also extends to cover inter-
efforts.1 Similar features are increasingly available actions between the front office and back office.
in other core banking systems. The success of Core system implementations that continue to
these implementations depends on the agility of focus only on back-office functions tend to face
business post-implementation. challenges in integrating front-office systems.

Regulators are increasingly requiring banks to Core Banking Beyond Back Office
use modern technology to ensure that regulatory As a leader in core banking, Temenos has
compliance requirements are effectively met. attempted to circumvent this challenge by
Upgrading legacy systems often leads to pro- enhancing its product catalog and introducing
hibitively expensive coding corrections that can the acquire-retain-cross-sell (ARC) framework.
be more effectively resolved using core banking This framework brings together a suite of front-
systems which are built from the ground up to office functionality that can be delivered from its
address regulatory compliance issues. Moreover, core banking system, T24.
many compliance mandates are at odds with
legacy systems. Examples of new regulations Another leading quadrant player, Oracle Financial
that require additional IT investments are: RDR Services, has created the Flexcube Connect
compliance in the UK; FATCA compliance in the framework, which allows easy interconnectiv-
U.S.; mandatory chip cards in Canada; etc. The ity of legacy front-office systems to Flexcube,
cost of implementing these regulatory changes Oracle’s core banking system. This integration
in legacy systems can be as expensive as imple- feature is extremely valuable to banks that have
menting a new core system that already has already invested in a surround strategy around
the technology to support these regulations. their legacy core banking system. Migrating from
The success of such implementations is usually a legacy system to Flexcube can be accomplished
measured by a reduced risk of compliance failures. without disturbing the entire IT landscape,
thereby significantly reducing risks in a core
Many of these business drivers cannot be banking implementation program.2
addressed by studying only the systems that are
being replaced or by analyzing the new and old Over the last decade, international standards
system differences. To succeed, the implemen- have started focusing more on process rather
tation process must cover multiple dimensions than procedure. ISO 9000:2000 saw a far more

cognizant 20-20 insights 2

 liberal use of the concept of “process” rather than small group to allow the free flow of thoughts.
“procedure,” which was more prevalent in ISO In our experience, a group with more than 10
9000:1994. persons in a room leads to inordinate cross-talk
and minimal output. Break up large complex
With increased coverage of
With increased core banking, it is necessary
processes involving multiple departments into
smaller processes to keep the team small.
coverage of core for banks to have a view of
banking, it is how their human stakeholders • Send invitations to workshops early and
share pre-reads to familiarize everyone with
perform their tasks – not only
necessary for in the systems but even on the methodology and terminology to be used
banks to have a manual processes outside the in the workshops. It is also useful to have
pre-workshop sessions to help participants
view of how their systems.
understand workshop objectives and terminol-
human stakeholders Human Processes ogy. Encourage participants to reach out to
perform their tasks Vs. Procedures other team members and become familiar with
all aspects of the as-is process.
– not only in the Most medium-size and large

systems but even on

banks have fairly detailed docu- • Use the workshop to define the to-be human
mentation around their policies process. The as-is process continues to remain
manual processes and procedures. But there is in focus during discussions, but the final output
outside the systems. very little in the form of human should revolve around the to-be process. This
process documentation. One of cuts down the cost of human process docu-
the common challenges in doc- mentation by at least 50% (sometimes more,
umentation and analysis of human processes is if there has been a recent merger).
the risk of losing track of the distinction between
human process and procedure. A practical way to • Have visual representation of the to-be
process created during the workshop. (Sticky
differentiate between the two is as follows:
notes work; white-boards and computer slides
are effective as well.) This allows the partici-
• “Human process” describes what the human
pants to become familiar with the eventual
stakeholders in an organization do.
output, reducing challenges during sign-offs.
• “Procedure” describes how the human stake- This also reduces dissonance during the
holders accomplish these processes. eventual implementation of business change
management during implementation.
Documenting Human Processes
The first step in analyzing and improving human • Ensure that all stakeholders understand
processes is to document them. Based on our that the documentation of to-be human
experience, a core banking implementation in processes is an iterative exercise and may
a mid-sized bank typically impacts 400-plus need two to three iterations before it is
processes. It is therefore extremely expensive to finalized. Encourage them to attend multiple
create “as-is” process documentation, followed by workshops, if needed, on the same subject.
“to-be” documentation for all 400 processes. A • Get early feedback on the visual models for
pragmatic approach is to use the following steps: to-be processes as they are built rather than
waiting for them to be completed. Use appro-
• Select a tool and terminology that is easy priate tools to ensure success of this feedback
for banking operations staff and front-office
phase. As an example, Software AG has the
sales staff to understand. As an example, event-
ARIS Publisher, which allows the model design
driven process chains (EPC) have terminology
team to publish its models to a wider team for
that is easier to understand than the business
feedback.
process model and notation (BPMN) standards.
Software AG’s ARIS is an excellent tool, in our Optimizing Human Processes
experience, to capture the human processes The eventual aim of documentation of the human
in EPC format. processes is to optimize these processes and
• Invitestakeholders from all departments reduce the number of hand-offs across depart-
involved in a process to the business process ments. This kind of optimization should be done
workshop. It is also important to keep the by a team that has adequate experience in both
number of people in a workshop to a reasonably the banking domain and the core banking system

cognizant 20-20 insights 3

that will eventually be implemented. This will reduce costly physical document transfers across
ensure that they will recommend changes with organizations.
higher benefits than costs.
Processes Contained Within a Single System
Given this synergy, most of the leading core Once a system is selected, it is useful to look at
banking vendors have their own framework and the processes supported by the system to depict
team to model human processes. Temenos uses these processes rather than trying to define the
its proprietary TOPS methodology using ARIS. system processes. This approach reduces costly
Oracle has its Process Framework for Banking, changes to the system. However, it is useful to
which uses Oracle Business Process Architect make some changes for better management of
(derived from ARIS). the system:

However, a product vendor on its own is usually • Link the human processes with the system
not the best choice to handle overall optimization processes (e.g., depict each system process by
as it is unlikely to address challenges outside its a function box in the human process, showing
product. It is recommended that the bank should the human-system interactions). Ensure a
engage a system integration partner to conduct common terminology (i.e., follow the bank’s
the optimization process, with active involvement terminology rather than the system vendor’s
of the product vendor. This will allow the bank terminology in the system process).
to learn from worldwide best practices of the
SI partner while keeping in mind cost consider- • Use a tool that will allow ease of maintenance
(e.g., Software AG’s ARIS, or the core banking
ations that can be addressed by the core banking
system vendor’s chosen toolset).
product vendor.
Processes for Interface Across
System Processes
Two or More Internal Systems
From our perspective, system processes fall under
A core banking system implementation project
four types:
usually involves significant changes to other
• Processes that involve interaction of humans systems within the bank and multiple applica-
with systems. tion interfaces from the core banking system
to these other systems. It is useful to define a
• Processes that are contained within a single
system. standard manner of interfacing across all the
systems instead of trying to design point-to-point
• Processes that involve interfaces between two interfaces. Standard techniques can be used like
or more systems. service-oriented architecture and/or middleware
• Processes that require interfaces with external to connect all systems together. It is common
systems. to use BPMN notation to depict the system
processes, especially workflows, which can be
Processes for Human-System Interaction implemented in standard BPM tools.
The optimized human processes can be used as
an initial guide to identify the interaction points Most core banking systems support native
between humans and systems. Using ARIS (or a workflow tools. While these are not as powerful as
similar tool), it is easy to depict system interac- standard BPM products, they are quite useful for
tions with humans in the same EPC models by medium to small banks which may not have the
attaching the systems to the functions being need or the experience to support a BPM product.
performed by a human within a process. Reports It is important to remember the trade-offs
can be pulled to provide a clear indication of the between the two approaches and arrive at a
number of touch points where user interfaces are decision that is useful to the bank in the long run.
required. The reports also depict which systems
Process modeling for the bank’s system processes
will require direct usage by customers and
will be helpful in either situation, and therefore
which systems are used only by the bank’s own
can be started in parallel to the selection process
employees. It is also possible to identify systems
for workflow tools. The process models can be
that can be opened up to business partners of
used effectively as starting points for proof of
the bank (e.g., credit bureaus, title search agents,
concepts that can be requested as part of the tool
advocates, etc.) to improve turnaround times and
selection process.

cognizant 20-20 insights 4

Processes for External Interfaces is extremely important to look at frameworks for
A core system implementation requires devel- rules engines as part of the core banking system
opment of interfaces with several third-party implementation. Standard toolsets are recom-
systems. The most common external systems are mended for large implementa-
tions. But for smaller banks, it is
payment systems and check clearance systems.
extremely important to evalu-
It is extremely
Interfaces with these systems require careful
analysis of interface specifications provided by ate the proposed benefits that important to look
these external entities and developing interface are expected to be achieved by at frameworks for
purchasing separate systems for
adapters for the core systems.
these activities. In many situa-
rules engines as
Core banking vendors increasingly prepackage tions, it is more cost-effective to part of the core
these adapters with their system for easier inte- use tools provided by the core banking system
gration. Temenos has standard adapters for banking system vendor rather
SWIFT messages. It also has country-specific than purchasing additional tools.
implementation.
adapters in the form of country model banks that
support interfaces with the common third-party Business Activity Monitoring
systems. As an example, its Canada model bank Business activity monitoring (BAM) is a combina-
makes it extremely easy to interface with credit tion of business processes with operational intelli-
union centrals, Interac and other Canada-specific gence (see Figure 1) that can help in three distinct
entities. ways:

Business Rule Engines • Comparing activities in the day-to-day

Business rule engines are at the heart of any processing with established standards and
calculus associated with banking operations providing alerts in case of variances and
and form a core element for most back-office deviations.
systems in a typical banking environment.
Rule engines involve calculations, which are
• Providing online help in the form of trend
analysis and operational intelligence by
sometimes extremely complex. It is one area performing data mining that can enable a user
where there is much sensitivity, as well as lots to respond to the alerts during day-to-day
of cross-departmental interests. For example, a operations.
rules engine may scan a loan lifecycle trying to
first evaluate if an application needs to be filtered • Gathering information during daily operations
or can be processed, if qualified, for the eligible and feeding it back for trend analysis and data
loan amount, tenure, rate of interest, etc. In a mining to enable stakeholders with data that
typical banking scenario there could be different can aid strategies and plans for the future.
departments handling this. While the evaluation
BAM is complementary to data warehousing
may be done at the front end, the actual loan
(DW) and business intelligence (BI) solutions and
amount, tenure and rate may be decided by the
is not meant to replace them. Most DW and BI
back office. Hence, there are cross-departmental
solutions help create data points based on past
interests involved, making this process extremely
experiences that can help prevent errors in the
delicate from an implementation perspective.
future; however, BAM helps create data points in
More often, rules engines are black boxes for real time, thereby enabling error-free processing
users since there is little to no documentation in real time.
available. One of the most common experiences
Simply put: a BI and DW engine helps provide
is to expect reverse engineering of the code and
periodic alerts, while BAM helps to deliver them
documentation by bank SMEs before evaluating
in real time.
whether the rules should be used as is from the
previous system. A significant amount of time Most core banking systems run a large number
will likely be consumed before all stakeholders of batch jobs during their end-of-day processing.
agree to any changes/deletions/additions to the With increased competition, it is necessary
business rules. to reduce the time window available for such
processing. Planning for an effective BAM
Business rules engines are normally not associat-
solution early in a core banking implementation
ed with BPM in a conventional sense. However, it

cognizant 20-20 insights 5

BAM at a Glance

BAM Provide Real-time

Alerts to Users
Analyze Real-time Data
Users Standard
Real Time Compare
Data from
Data
BAM DB
Banking Operations

Generate Alerts for Deviations

Loan Processing

Payment Process Receive Real-time Bank Data as Input

BAM Database
Account Opening

Capture Statistical Data from DB

Stakeholders
Display Data to Stakeholders

Figure 1

allows for an efficient run-time management of Most standard core banking product vendors
the system (see Figure 2). Once again, there are allow banks to purchase additional modules
choices available between standard BAM software so that the core banking system can continue
packages such as Systar and the core banking to process financial transactions even during
vendor’s built-in mechanisms for monitoring batch runs. This is a powerful feature that
business performance. For any bank with an allows banks to run their ATMs, mobile banking
ambition to operate in more than one time zone, systems and Internet banking systems 24 hours
it is useful to deploy a solution that includes both a day, seven days a week. But this increases the
the core vendor’s internal monitoring tools and complexity of the IT infrastructure and dependen-
standard BAM software. cies on end-of-day processing significantly. It is
imperative to use independent software for BAM
in such a complex situation.

BAM to the Core

Core Banking System

BAM Database DW

Business
BAM
Intelligence Tools

Conventional BI Model
BAM provides Real-time Generates Periodic
Alerts to the User End User
Reports for User

Figure 2

cognizant 20-20 insights 6

Conclusion more than the traditional feature-driven
approach. The approach will help banks signifi-
We have seen how critical the processes are for
cantly reduce key challenges that are faced during
implementing a core banking solution. Increas-
implementation.
ingly, banks and product companies are moving
towards a process-led implementation approach

Footnotes
1
http://www.temenos.com/Documents/Temenos%20Investor%20Day%20Product%20Presenta-
tion%20December%202011.pdf (slides 8 through 11)
2
http://www.oracle.com/us/industries/financial-services/046056.pdf

About the Authors

Anirvan Saha leads the Core Banking Solutions Practice at Cognizant Business Consulting. He has more
than 13 years of experience across the banking spectrum including retail and corporate banking as well
as leading the execution of complex consulting engagements on core banking. Anirvan holds a bachelor’s
degree from IIT Kharagpur and is a management graduate from the Indian Institute of Management,
Calcutta. He can be reached at Anirvan.Saha@cognizant.com.

Rohan Kudav is a Manager within Cognizant Business Consulting. He has more than 11 years of experience
in the area of retail and corporate banking. Rohan has led numerous core banking consulting engage-
ments over that time period. He is a commerce graduate from the University of Mumbai and holds
an associate membership with the Institute of Chartered Accountants of India. He can be reached at
Rohan.Kudav@cognizant.com.

About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
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