Nigerian bank customers are set to witness more service disruptions in the coming weeks and months as the financial institutions embark on system upgrades to improve their operational efficiency and enhance customer experience.
While a few of the banks have already made the switch with the attendant issues of customers not being able to transact or access their funds, sources from the banking industry said more banks are in the process of migrating in the process of starting their core banking system migration as they all race to strengthen their technology infrastructure.
Although one of the sources said the upgrades being done by the banks were in response to a directive from the Central Bank of Nigeria (CBN), other sources could not confirm this as they noted that the banks were only trying to get better at their services.
Banking service disruptions
Customers of tier-2 Sterling Bank were the first to experience the disruptions that lasted for days earlier in September as the lender commenced the migration of its systems from T24 to SEABaaS, a new custom-built core banking application developed in Kenya.
In the same breadth, GTBank also recently migrated from Basis/Banks software from ICS Financial Services, a Jordanian/UK software company, to Indian banking technology, Finacle.
Similarly, customers of Zenith Bank woke to a harrowing experience of service outage on October 1. The Bank would later announce it was carrying out a 'routine IT maintenance' the results of which the customers are yet to recover from as of the time of filling this report.
Zenith is migrating its system from Phoenix, a software developed by London-based Finastra, to Oracle's Flexcube.
As of Monday, many customers of the bank were still unable to open the bank's app, even though the Bank earlier announced its services had been restored after making "significant progress" in its IT upgrade
Speaking with Nairametrics, a source familiar with the developments in the banking industry, who pleaded anonymity, disclosed that another tier-1 bank is in the process of migrating from its current core banking software to a new one, which would also affect millions of the bank's customers
"The service disruptions are a bitter pill that the customers would have to swallow. Every bank wants its customers to carry out more transactions daily because that is where we make money from. But we must do what we have to do to improve the experience for the customers," he said.
Not a quick fix
A backend developer in one of the tier-1 banks, who would not want to be named because he was not authorized to speak, said the process of migrating to a new core banking application is tedious and may take a while for any bank to stabilize after the migration.
"Migrating to a new core banking system is not a switch off/switch on thing, it may take two weeks to one month because it involves the movement of customer biodata.
"In some cases, a bank may not need to move customer transaction data. However, for every change, the banks will need to integrate with their various channels such as ATM, USSD, internet banking, and so on and this is why it takes time for them to stabilize," he said.
Why banks are migrating to new technology
A core IT personnel of one of the top banks said the migration by banks is necessitated by multiple factors including security, flexibility, and cost.
According to him, with the increase in the incidence of hacking of financial institutions, Nigerians are looking for systems that have better security, hence the move to new systems.
On cost, he noted that the banks are also trying to cut down their spending on core banking applications on which they spend a lot of dollars.
He noted that most top banks in Nigeria use a particular software from India and it costs them a lot of forex annually.
"Most of these core banking applications, after you buy, they implement for you, you pay yearly license per user most times, or you pay a global license. If you don't pay global license, you also pay support. So, banks are also looking for a way to cut these costs," he said.
On why customers are experiencing service disruptions in the process, he noted that it is impossible for banks to switch platforms without impacting their services.
"Let me break it down a little bit so you understand why it is impossible. Let's say, for example, you buy a new phone that is better than your old phone, you will have to move your stuff to the new phone and you can't do that with a snap of your fingers.
"I remember when I bought a new phone recently, it took me close to two weeks because after a while, I remembered something I needed and I had to go move it again from the old phone.
"Even if you're using an iPhone and you have everything backed up on iCloud, it will still take a while for you to move it to your other new iPhone. So, moving data is a very critical part of the migration and it takes a lot of time before the banks can achieve stability," he explained.
What you should know
Nigerian banks have, in recent times been increasing their spending on IT infrastructure as more Nigerians embrace electronic transactions, which requires them to expand their capacity to accommodate the surge.
The growing e-business transactions have also led to a surge in cybersecurity threats on the banking systems, hence the need to strengthen their cybersecurity architecture.
According to industry experts, banks are no longer facing the threat of armed robberies as criminals have also shifted to the digital space, through which they can wreak more havoc on financial institutions than physical robberies.
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