Nigerian Banks Face Challenges During Core Banking System Upgrades
In a bid to adapt to the rapidly changing banking landscape, several Nigerian banks have recently upgraded their core banking applications. The trend was kickstarted by Sterling Bank, which transitioned to a new core banking system, SeaBaaS, on September 10. However, this shift led to significant challenges for customers, with some experiencing difficulty accessing their funds for weeks.
Following Sterling Bank’s switch, other financial institutions—including Zenith Bank, Guaranty Trust Bank (GTB), and First Bank—also pursued similar upgrades. This collective migration resulted in widespread service disruptions, failed transactions, and difficulties for customers attempting to make purchases or pay for services.
Understanding Core Banking Applications
Core banking applications are essential software tools that manage critical banking processes, including customer account management, transaction processing, and risk management. These platforms handle daily transactions and update account and financial records accordingly.
Where Banks Missed the Mark
An investigation by FIJ revealed that the banks encountered several pitfalls during the migration process. Notably, they failed to sufficiently inform customers about the impending upgrades and the potential disruptions that would follow. There was also a lack of training and communication aimed at elderly customers, many of whom struggle with technology, leaving them unprepared for the upcoming software changes.
Additionally, many banks implemented their migration initiatives simultaneously, which was poorly timed and lacked a customer-centric focus.
Critically, the banks did not develop stop-gap measures to protect customers with high-performing accounts from incurring major losses during the transitional period. The absence of a temporary solution to facilitate a seamless, phased transition meant that day-to-day operations were often disrupted.
The Rationale Behind the Upgrades
Due to the ongoing devaluation of the naira, many Nigerian banks have felt compelled to move to more cost-effective core banking applications that deliver similar services to their previous, pricier systems. Furthermore, persistent security threats from cyberattacks and account hacking have made the need for more secure and fraud-resistant applications pressing.
Modern core banking systems offer enhanced flexibility and scalability, enabling banks to meet changing market demands and future growth aspirations. These updated systems also facilitate connections with third-party providers, allowing banks to broaden their service offerings and introduce innovative features for their clients.
Routine maintenance and upgrades of core banking applications are also essential components of this migration trend.
Do Migrations Require CBN Approval?
Banks are not required to seek authorization or directives from the Central Bank of Nigeria (CBN) for core banking migrations or upgrades. However, they may choose to inform the CBN of their plans out of courtesy. Importantly, customer funds remain secure throughout system upgrades and migration processes.
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