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To stay current with the rapidly changing banking landscape, many Nigerian banks have recently upgraded their core banking systems. This trend was initiated by Sterling Bank, which migrated to a new core banking solution known as SeaBaaS on September 10. Unfortunately, this transition caused significant issues for customers, who were unable to access their funds for several weeks.
Following Sterling Bank’s lead, other financial institutions, including Zenith Bank, Guaranty Trust Bank (GTB), and First Bank, have also undertaken similar migrations. These actions have led to numerous service disruptions, failed transactions, and difficulties for customers trying to pay for services or make purchases.
What is a Core Banking Application?
A core banking application is software that banks use to manage essential processes, including customer account management, transaction processing, and risk management. It is responsible for handling daily transactions and updating financial records accordingly.
Where Did the Banks Go Wrong?
Investigations revealed several missteps by the banks during the migration process. Many banks did not adequately inform customers about the upcoming changes and potential disruptions. Additionally, there was a lack of training and preparation for elderly customers who may struggle with technology, leaving them ill-equipped for the software updates.
Furthermore, several banks chose to execute their migrations simultaneously, a decision that was neither strategic nor customer-centered. They also failed to implement stop-gap measures to protect customers with high-performing accounts from significant financial losses during the transition. Consequently, no temporary solutions were offered to facilitate a smooth, phased migration without interrupting everyday banking activities.
Why Is the Migration Necessary?
Due to the ongoing devaluation of the naira, Nigerian banks are increasingly compelled to adopt more affordable core banking solutions that can deliver the same services as their previous, more expensive systems. Additionally, the rise in cyberattacks and account hacking incidents has underscored the necessity for banks to transition to more secure, fraud-resistant applications. This trend is primarily focused on protecting customer accounts from cyber threats.
Modern core banking systems offer enhanced flexibility and scalability, enabling banks to adapt to shifting market demands and plan for future growth. These systems also allow for seamless integration with third-party providers, expanding banks’ ecosystems to offer new and innovative services to their customers. Moreover, the migration process facilitates routine maintenance and updates to core banking applications.
Does the Migration Process Require CBN’s Approval or Directive?
Core banking upgrades or migration initiatives do not require authorization, approval, or directives from the Central Bank of Nigeria (CBN). However, banks may choose to inform the CBN about their plans as a courtesy. Importantly, customers’ funds remain secure during system upgrades and migration processes.
