Best Practices in Implementing Core Banking Systems

Submitted in partial fulfillment of the requirements for the Degree of Master of Science in Information TechnologyMajority of Kenyan Banks are increasingly capitalizing on avant-garde core banking systems (CBS) for automating their transactions in order to compete amongst themselves, cater for ever growing customer needs and to comply with complex regulatory requirements (e.g. Basel II) imposed by the Central bank of Kenya. Core banking systems acquired by Kenyan banks are supplied by foreign vendors at an enormous cost. Therefore, it is vital for the individual banks that they succeed in their Core Banking System (CBS) implementations, to achieve the desired organizational objectives and CBS project outcomes. The purpose of this study was to develop core banking system implementation best practices which could be used by local banks in Kenya to make their Core Banking System projects successful. It uses a case study methodology; National Bank of Kenya (NBK) to provide answers to the research questions. Data was collected by administering questionnaires, conducting interviews and reviewing existing literature on Core Banking System projects. The survey questionnaire was distributed among 100 persons identified as sample population. Out of the 100 respondents only 82 responded, which represented a response rate of 82%. Most of the respondents were of the opinion that replacing the legacy Core Banking System (Bank master) and a number of the surrounding sub-systems with an integrated Universal Core Banking System, was the main CBS renewal driver and project goal to achieve. The study has demonstrated that user resistance to change was identified as the most encountered challenge. Further, an improved level of customer service was identified as the biggest achievement by the Bank. There were five CSFs common to all the three implementation phases. Out of the CSFs related to pre-implementation, setting project objectives and expectations has been identified as the most critical success factor. In relation to the implementation phase, vendor support and commitment has been identified as the key success factor and in relation to the post-implementation phase, excellent issue resolving mechanisms was identified as the key success factor. Based on the identified CSFs, the study develops best practices for implementing CBS projects which could be useful for local banks in their future CBS Projects in order to avoid making critical, but often underrated, mistakes that negatively affect CBS implementation and upgrading, to secure CBS implementation projects as successful and to reduce IT project failure rates