MATTERS ARISING: Why are banks having system upgrades simultaneously?

What began as a routine digital system upgrade exercise by Sterling Bank in September swiftly morphed into an industry-wide activity, as financial institutions conducted upgrades to their core banking applications to keep up with the evolving banking system.

The core banking application is a backend system that processes daily transactions and posts updates to accounts and other financial records.

According to Rasheed Bolarinwa, head of the Association of Corporate and Marketing Communication Professionals in Nigerian Banks (ACAMB), some financial institutions migrate their entire system from one core banking application to another — owned by the same software company — while some switch to an entirely different technology outfit.

In the latest migration, TheCable learnt that Sterling Bank switched from Switzerland-based Temenos T24 to SeaBaaS by Peerless, an indigenous core banking solution, and GTB migrated from ICS Financial Services, situated in the United Kingdom, to EdgeVerve Systems’ Finacle, based in India.

During the exercise, there are usually glitches — a problem many Nigerian bank customers have been facing since last month.

At the start of September, Sterling Bank customers took to X to lament their inability to access the lender’s mobile banking app for transactions — this lasted for about two weeks.

Zenith Bank joined the list, with its customers taking to X on October 1 to complain about the difficulty in accessing the financial institution’s mobile app.

The bank informed its customers via text, email, and social media platforms that its app would be automatically updated to a new version on October 1.

Although the firm said the process would last for only three hours, customers reported experiencing login issues for about 72 hours.

While Zenith Bank’s issue lasted for three days, First Bank customers were unable to transact on the company’s digital service for six days — also due to a system upgrade.

On October 9, Guaranty Trust Bank (GTB) and Access Bank notified their customers of impending system upgrades.

However, while Access Bank postponed its system upgrade slated for October 12, GTB said its digital banking channels will experience service disruptions for 11 hours, starting October 13.

WHY ARE BANKS UPGRADING THEIR SYSTEMS?

TheCable understands that before the third quarter (Q3) of 2024, all Nigerian banks were using foreign-based core banking application systems, which cost millions of dollars in maintenance, said Abubakar Suleiman, the chief executive officer (CEO) of Sterling Bank, in a statement addressing the system upgrade.

Suleiman had said Sterling Bank’s migration to SeaBaaS would allow the lender to domesticate its technology cost and reduce the cost of financial inclusion.

“African banks spend hundreds of millions of dollars annually on foreign core banking applications, further putting pressure on the continent’s balance of trade,” he said.

“With what our amazing partners at Peerless have done and the successful deployment of this new core banking system, we are not only setting a new standard for Nigerian financial services but paving the way for a future where African institutions can domesticate their technology cost, thereby reducing the cost of financial inclusion.”

However, Bolarinwa said the system upgrade is not because of cost, as banks are happy to spend the required amount to offer quality service to their customers.

He said the exercise could be part of routine system maintenance or a major upgrade of core banking applications.

“It could even be an interruption at the colocation sites by three parties or damage to cables that provide technology services to banks as it happened recently with the cut in the undersea cables that served businesses across Africa,” Bolarinwa said.

“Where it involves routine maintenance for core banking application update, the objective is to deliver seamless and optimal banking services (to all classes of bank customers).”

A colocation facility (colo) is a data centre or telecommunications facility operated by a third party, in which a business can rent space for servers, storage devices and other computing and networking hardware.

Disruption at a colocation storage is usually caused by power, people, disaster, and connectivity.

IS THE SYSTEM UPGRADE A CBN DIRECTIVE?

An official of a bank who asked to be anonymous said the Central Bank of Nigeria (CBN) does not have to mandate banks to upgrade systems.

“When the bank feels the need to upgrade their systems, they do. The banks may inform CBN about this activity but the apex bank does not have to give authorisation. CBN wants every bank to be successful, ” the bank official said.

He said the upgrades are usually done at night when transactions are not heavy and people are not using the platform.

Stressing that the CBN has no involvement in the exercise, Bolarinwa said it is “in the character of Nigeria banks to carry out such exercises on a continuous basis despite the humongous cost involved... as they operate at the cutting edge of best in technology globally”.

He said the banks’ system upgrades are often coincidental as the financial institutions try to innovate and improve their services.

“It is purely coincidental. No one bank informs other banks about their platform or system upgrade or maintenance,” he said.

“It runs in the DNA of Nigerian banks to do so as a beacon of innovation and progressiveness which is why Nigerian banks are the toast in the sub-Sahara and African continent and beyond.”

ARE FUNDS SAFE DURING SYSTEM UPGRADES?

The bank official assured that customers’ funds are safe during system upgrades.

“Your funds can never disappear in a bank. Your funds can never, ever disappear in a bank. You know why? Because banking is heavily regulated,” he said.

He said the industry is regulated by the CBN, the Securities and Exchange Commission (SEC), and the Nigeria Deposit Insurance Corporation (NDIC), adding that “there are different layers and they are professionals”.