In recent months, many Nigerian banks have undertaken significant upgrades to their core banking systems to stay aligned with the rapidly changing financial landscape. The trend began with Sterling Bank on September 10, when it migrated to a new core banking system called SeaBaaS. This move sparked a wave of similar migrations by other banks, including Zenith Bank, Guaranty Trust Bank (GTB), and First Bank. However, these changes have not come without challenges, including service disruptions and customer frustrations.
The Challenges of Core Banking System Migrations
The decision by Sterling Bank to migrate to a new core banking system led to significant service interruptions. Many customers were unable to access their funds for weeks, resulting in widespread inconvenience and dissatisfaction. Following Sterling Bank’s migration, other major financial institutions like GTB, Zenith Bank, and First Bank also transitioned to new core banking systems, causing similar issues. Customers experienced failed transactions, an inability to make purchases, and challenges with accessing their accounts, which left many feeling stranded and frustrated.
What is a Core Banking Application?
A core banking application is essential software that banks use to manage their critical processes, including account management, transactions, and risk management. These applications handle daily transactions and ensure that updates are accurately posted to customer accounts and other financial records. Core banking systems are the backbone of banking operations, making any upgrade or change a delicate process that must be handled with care.
Where Did the Banks Get It Wrong?
Despite the necessity of upgrading their systems, Nigerian banks made several missteps during the migration process. Investigations by FIJ revealed key issues:
- Inadequate Customer Notification: Many banks did not properly inform their customers about the impending migrations and the potential service disruptions that would occur. This lack of communication caught many customers off guard.
- Limited Support for Elderly Customers: Banks failed to adequately train and support elderly customers, many of whom are not as familiar with technology, to prepare them for the software changes.
- Simultaneous Migrations: Several banks opted to conduct their migrations at the same time, leading to widespread service disruptions. This uncoordinated approach resulted in a lack of customer-centric planning.
- Absence of Stop-Gap Measures: During the migration, banks did not implement temporary solutions that could help high-performing accounts avoid significant disruptions. A phased approach could have minimized the impact on customers’ daily operations.
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Why is the Migration Necessary?
The migration to new core banking systems is driven by multiple factors:
- Cost Efficiency: With the ongoing devaluation of the naira, Nigerian banks are turning to more cost-effective core banking applications that can perform the same functions as their previous, more expensive systems.
- Enhanced Security: The rising threat of cyberattacks and account hacking has made it crucial for banks to adopt more secure and fraud-resistant systems. Upgrading to modern core banking platforms is essential for protecting customers’ funds against cybercriminals.
- Improved Flexibility and Scalability: Modern core banking systems provide greater flexibility, allowing banks to meet evolving market demands and future expansion plans. They also offer easier integration with third-party services, enabling banks to offer innovative services to their customers.
- Routine Maintenance: The migration allows banks to perform routine maintenance and ensure their systems are updated, providing better service and reliability in the long run.
Does the Migration Require CBN’s Approval?
Core banking system upgrades or migrations do not require direct approval or directives from the Central Bank of Nigeria (CBN). However, banks typically inform the CBN about such changes as a matter of courtesy. Importantly, customers’ funds remain safe during these upgrades, despite any temporary access issues they may encounter.
FAQs
1. What is a core banking system?
A core banking system is a software platform that banks use to manage essential functions such as account management, transaction processing, and risk management. It supports daily banking operations and ensures that customer accounts are accurately updated.
2. Why are Nigerian banks migrating to new core banking systems?
Nigerian banks are migrating to new systems to cut costs, enhance security, improve scalability, and integrate with new technologies. The upgrades help banks protect against cyber threats and meet the evolving needs of their customers.
3. What issues did customers face during the migration?
During the migration, customers faced issues such as service disruptions, failed transactions, and an inability to access their accounts. Some were unable to withdraw funds or make purchases, leading to frustration.
4. Does the Central Bank of Nigeria (CBN) need to approve core banking migrations?
No, core banking system migrations do not require CBN approval. However, banks usually inform the CBN of such changes as a professional courtesy.
