Marsh & McLennan Companies(US:MMC)2025-05-23 05:55Investment Rating - The report emphasizes the necessity for banks to modernize their core banking systems, indicating a positive investment outlook for next-generation core platforms due to their scalability, flexibility, and ability to meet evolving financial ecosystem demands [2][60]. Core Insights - The modernization of core banking systems is no longer a question of "if" but "when," as banks face immense pressure to upgrade their technology infrastructure to remain competitive [2][60]. - A comprehensive approach is required for core system transformation, addressing complex needs such as product innovation, regulatory compliance, cost reduction, and operational efficiency [3][5]. - The report outlines ten critical considerations for effective modernization, emphasizing the importance of governance, risk management, and stakeholder engagement throughout the process [5][60]. Summary by Sections 1. Project Establishment, Governance, and Risk Management - Establishing a robust governance structure, such as a Control Tower, is essential for reducing overall delivery risks by fostering cross-functional team alignment on key issues [6][15]. - Regular "pulse checks" are necessary to ensure ongoing support among teams during the lengthy transformation process [15][16]. 2. Business and Cost Strategy - A compelling business case is crucial for securing funding for core modernization projects, focusing on total cost of ownership (TCO) and managing stakeholder value narratives [8][20]. - Evaluating the long-term operational savings from transitioning to a streamlined, cloud-based framework is vital [23]. 3. Customer Experience - Ensuring minimal impact on customer experience during system upgrades is a prerequisite for stakeholder engagement in technology transformations [24][25]. - Establishing positive feedback channels between banks and users can optimize post-deployment adjustments [26]. 4. Vendor Selection and Contracting - Choosing the right next-generation core platform is foundational for successful transformation, with a focus on performance, scalability, and alignment with future product roadmaps [29][30]. - Assessing the required level of customization against initial vendor offerings is critical for achieving customer experience parity [31]. 5. Technology and System Abstraction - Core transformation provides an opportunity to restructure the technology stack towards a modern, modular architecture [34]. - Understanding existing core system functionalities is essential to avoid gaps post-migration [35]. 6. Migration Strategy and Execution - A phased approach to migration, such as a "dual-core" strategy, is generally preferred over high-risk "big bang" cutovers [40][41]. - Pilot testing new systems with a limited user base can effectively assess stability before full-scale migration [42]. 7. Operating Model Update - Aligning operational processes with evolving technology stacks is necessary for successful core modernization [44][45]. - Standardizing processes and establishing new workflows within business and product teams can enhance operational efficiency [46]. 8. People and Talent - Upskilling existing teams to manage new platforms is crucial for successful transformation, with external partnerships facilitating knowledge transfer [49][50]. 9. Data Management and Security - Modernizing core systems presents an opportunity to improve data quality and integrity, with a focus on secure data migration practices [51][52]. 10. Observability and Real-Time Monitoring - Implementing observability dashboards to track key performance indicators is essential for ensuring the resilience and stability of new platforms [55][58].