In a new report, Aite says that, while factors such as sunsetted vendor solutions, outdated technologies, changing bank strategies and a more stringent regulatory environment are driving US banks and credit unions to replace core systems, spending more than $4.2 billion over the next three years in the process, fear and cost is causing the majority of the market to maintain the status quo.
The study claims that the number of replacements increases 3% annually, and approximately $1.4 billion will be spent this year on new systems. However, a far greater number of institutions will do partial replacements or make do with legacy systems.
Aite estimates that approximately 12% of US banks and the top 500 credit unions have reached a critical point for core system replacement. According to the firm, they are paying high maintenance costs, suffer from slow product launches and an inability to easily integrate third-party applications or access information for compliance to new regulations. Despite the need for new systems, only 4% are planning on upgrading this year. Of these deployments, 90% of will be by small US banks and credit unions.
Large US banks are not moving as quickly as they should with core system replacements and are, instead, looking to identify a ‘quick fix,’ notes Christine Barry, research director with Aite. This strategy only prolongs the inevitable and is likely to create further challenges in the future, especially as European and Asian banks are deploying replacement strategies at a much greater pace.
