Navigating the Complexities of Core Banking System Upgrades in East and West Africa
In Dar es Salaam, banks and financial institutions are experiencing significant transformation as many migrate to new versions of their Core Banking Systems (CBS). Notably, “one major bank has ambitiously chosen to build its CBS entirely from scratch—a project undertaken by Tanzanian developers, sparking excitement across the industry”. said by a software developer involved in a project . Project participants reveal that the bank has garnered widespread support from other institutions and industry players, all eagerly awaiting its launch.
Meanwhile, other banks in Tanzania and the broader region are also upgrading to the latest versions of established core banking applications. According to Exim Group’s 2023 report, the bank had planned a migration project expected to play a pivotal role in modernizing its banking infrastructure. It will be interesting to see Exim’s forthcoming report on the current status and success of the migration.
Looking back at similar efforts, KCB Bank successfully migrated to a new CBS on August 12, 2016, a milestone proudly shared on its website. CRDB Bank similarly demonstrated its commitment to modernization by issuing a tender on September 27, 2019, for the supply, implementation, migration, and support of a new CBS.
The motivations behind these migrations are clear: banks seek new features, better security, and to retire outdated systems that vendors no longer support. Yet, despite the benefits of CBS upgrades, core systems often don’t meet every institution’s specialized needs, necessitating additional solutions to support specific functions.
However, migrating to a new CBS is not without its challenges. Common issues banks may face during migration include:
System Compatibility: Ensuring seamless integration with existing platforms.
Data Migration Accuracy: Maintaining data integrity when transferring records.
Training and Change Management: Preparing staff for the new system’s features and workflows.
Downtime and Service Disruption: Managing potential service interruptions during the transition.
These challenges highlight the need for comprehensive planning and support structures to ensure a smooth transition and unlock the full potential of a modernized CBS.
Elsewhere, in Nigeria, Guaranty Trust Bank (GTBank), a leader in cost efficiency within the commercial banking sector, recently began transitioning its core banking application. The bank informed customers of delays and extended branch closures to complete the upgrade. Since September 2024, four Nigerian commercial banks have undertaken similar migrations, driven by cost considerations and the need for customization as it is documented by TechCabal
The migration process, however, has been fraught with frustration. Many customers were unable to access their accounts during the transition, underscoring the disruptive nature and financial impact of such changes. For instance, in September 2024, Sterling Bank, a tier-2 Nigerian bank, transitioned to SEABaaS, a newly built core banking system. With a market cap of ₦115.16 billion, Sterling hopes to offset the system's high development costs by selling SEABaaS to other banks in the future as documented by TechCabal
In Kenya, similar changes are underway. Last month, a Kenyan bank notified over 266,000 customers of service disruptions from October 19 to October 21 due to its CBS upgrade. By October 23, some customers reported ongoing access issues post-upgrade. Kenya Commercial Bank (KCB) is one of over 950 global banks using Temenos 24, a CBS designed for retail, corporate, and wealth management, and recently upgraded in collaboration with Orion Innovation. as reported by Techcabal
The high cost of these core banking systems further underscores their significance. Nigerian commercial banks reportedly spend at least $10 million annually on their CBS. For top-tier Nigerian banks—First Bank, UBA, GTBank, Access Bank, and Zenith—collectively known as FUGAZ, these costs represent about 1% of their mid-2024 revenues, reflecting the substantial investment required to remain competitive and efficient in the industry.