BUSINESS TECHNOLOGY DIVISION

Business Case for a New Core Banking Solution

Release:
Date:
Author:

Final
July 2012
Core Banking Department

Executive Sponsor:
Document Number:

Fabian Kasi Managing Director

CRDB-CBS-BT-001

Business Case

Date: 25 October 2016

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Business Case

Date: 25 October 2016

Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.

Purpose of Document...................................................................................... 4
Background..................................................................................................... 4
Work Performed.............................................................................................. 4
Reasons for the Project................................................................................... 4
Objectives....................................................................................................... 6
Scope.............................................................................................................. 7
Stakeholders................................................................................................... 7
Benefits........................................................................................................... 7
8.1. Benefits.................................................................................................... 7
8.2. Adverse Effects........................................................................................ 8
9. Options........................................................................................................... 8
10.
Costs and timescales of recommended option............................................8
10.1. Recommended Option.............................................................................. 8
10.2. Project Implementation Costs Recommended Option............................8
10.3. Summary of ongoing costs against benefits Recommended Option......9
10.4. Core staff resources required on an ongoing basis................................11
10.5. Timescales............................................................................................. 11
11.
Risks.......................................................................................................... 12
11.1. Risks of not going ahead with the project..............................................12
11.2. Risks that will need to be addressed if the recommended option goes
ahead 12
12.
Issues........................................................................................................ 12
13.
Dependencies............................................................................................ 12
13.1. Initiatives which this project depend on are:..........................................12
13.2. Other initiatives which depend on this project are:................................12
13.3. Key resource dependencies:..................................................................12

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Business Case

Date: 25 October 2016

Business Case
Purpose of Document
The purpose of this document is to set out the justification for the undertaking of
a Core Banking replacement project based on the estimated cost of development
and the anticipated benefits to be gained.
The on-going viability of the project will be monitored by the Project Steering
Committee against the benefits identified in this business case.

Background
Centenary Bank is looking to build upon its success to extend its dominance in
Microfinance in the Ugandan market. Specifically, it wants to grow the
microfinance and retail banking business across the network, attract new
customers with customized products, and strengthen the micro lending offering.
Its other goals included simplifying business functions and operations for
operational efficiency, customer centricity and growth / innovation by creating a
business model underpinned by access, convenience and flexibility.
Equinox the core banking platform currently in use was implemented in 2002.
This system is rigid and unresponsive, impede the banks ability to pursue
growth opportunities, enhance the customer experience, and mitigate operating
risks.
The Bank will have to modernize its existing core banking platform to fulfil these
ambitious objectives. It should embark upon replacing its existing Core Banking
application with an integrated and robust IT platform.

Work Performed
The Bank has just concluded the Business Process Mapping exercise which
resulted in formulation of new processes. A number of these new recommended
processes cannot be configured in our current Core Banking system Equinox
and therefore calls for its replacement.

Reasons for the Project

This core banking replacement business cases is not built on financial benefits
(i.e. ROI). The benefits are tied in to the Bank's overall business strategy.
Technical drivers for change including technology, currency, system
availability, etc. are compelling to support the overarching business need.
To sustain our dominant position especially in microfinance, the Bank requires a
technology platform that would enable the following:

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Key business drivers:

Its getting harder for the bank to swiftly respond to the increasing complexity
of the business and regulatory requirements. For example, with a modern core
system, it might take a few hours to implement a new interest-bearing deposit
product incorporating relationship-driven fee structures whereas currently the
bank suffers through months of delays figuring out how to do it using the
current system.
Operational efficiency Replacing a set of existing, disparate modules with an
integrated core banking solution will improve operational efficiencies through
improved STP (straight-through processing) and business process alignment.
Simplification of the technology environment improves business agility and
long-term sustainability
Improved sales and service capacity An integrated core banking platform,
combined with improved analytics, optimized processes and supporting HR
models, will improve cross-sell/up-sell opportunities and increase the ability to
acquire new customers. More agile core banking solutions allow for faster time
to market with new and innovative products or services.
Burning platforms:
The Equinox system has a complex patchwork of technologies that break down
frequently and are expensive to maintain. The systems limitations have forced
the bank to use manual processes that contribute to massive inefficiencies and
affect accuracy. The bank spends more resources in the long run as a result.
A modern core platform will make it easier for the Bank to increase automation,
support new operating models, and reduce the complexity of performing many
tasks and functions. A new platform will also help staff focus on more important
tasks by freeing up their time from burdensome manual workarounds. With all
these advantages, the Bank will most likely achieve cost and efficiency benefits
within the first few quarters of implementing a new core platform.
Strengthened controls Opportunity to strengthen business process controls
and general system controls by replacing stand-alone applications and
spreadsheets. This reduces the need for manual controls with multiple inputs
across different sources (which regulators typically frown upon). Todays core
banking solutions enable enhanced, centralized security controls (via single
sign-on, access controls, etc.).
Enhanced financial audit capabilities Modern core banking solutions offer full
audit trails for every transaction via online inquiry and on-demand reports,
improving transparency and traceability.
Compliance requirements, legislative/statutory changes:
Enhanced regulatory and risk management A robust, well-designed solution
will help to avoid business disruptions caused by system downtime. A solution

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Business Case

Date: 25 October 2016

that has been localized for the geographies that the organization operates in
will address regulatory changes in a timely manner.

Objectives
1. Operational Efficiency:

Reduces transaction processing costs related to cost-intensive areas

including branch operations, loan originations and servicing, branch
operations and payment operations
Increases ability to push basic and some complex transactions to
lower-cost channels (e.g. branch to call centre and call centre to
web/mobile).
Reduces new product development cycle time from definition of
requirements to simplification of system and production support
analysis
Increased sales from ability to support a rich product feature set
Higher revenue from a broader customer base at better margins due
to lower cost of operations. ultimately delivering
More product launches per period serving the needs of both the mass
and niche markets and enables up-selling and cross-selling at the
branch level across a wider footprint

2. Customer Centricity:

Increases ability to identify customer preferences and acquisition

patterns due to a unified view of the customer and all relationships
with the bank.
Increases customer satisfaction through a consistent experience
across multiple channel driven by flexible processes.
Provide a 360 view of customer across existing product silos and
multiple channels.
more customer-tailored products to be developed and offered through
the web, ATMs, Mobile devices, and call centres

3. Growth and Innovation:

Simplifies and accelerates the operations and technical integration

with new acquisitions
Allows the seamless replication and integration of the product and
service offerings offered by the acquired company to its existing
customer, and prevents attrition of the newly acquired customer
base.
Product Innovation: In the industry where products are intangible
attributes such as simplicity, easy to operate, differentiated customer

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experience and quick to market gives the competitive edge, increase

market share and improve revenues. In choosing the vendor the
Bank will assess the core banking innovation capability.
Business Innovation: The distribution and sale of products in a way
that is different from what it is currently. For example, Multichannel
strategy. A core banking vendor on selection will be viewed as a
business partner. The Banks business strategy henceforth will be
defined in conjunction with the new business partner. It will be the
responsibility of this business partner to guide the bank in business
innovation.

Scope

Core Banking Systems

Internet Banking System
Treasury
Loan Origination system
Leasing System
Integration with Third party Systems
Customer Relationship Management
Biometrics System
Fraud and Money laundering
Shared services such as credit bureaus

Not included in the Scope:

The Postilion ATM switch
Third Party Systems
Non-Core Banking systems including Enterprise Resource Planning, Human
Resource, Audit, Risk etc.

Stakeholders
The key stakeholders of the project include:

Operations
Credit
Finance
Business Development and Marketing
Business Technology
The Executive

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Business Case

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Benefits
Benefits
The Core Banking replacement will provide a seamless platform that helps
operational efficiency, supports business growth and enables the Bank to adapt
to the dynamic environment.
Customer benefits
The enhanced solution now allows over 1.4 million Centenary Bank
customers to transact seamlessly across the country
Transactions, such as cash deposit will be seamlessly carried out across all
Centenary Bank branches online and in real-time
A unified view of customers will enable the Bank to offer personalized
products and services
Data clean-up during migration will improve data quality and helped bank
users service customers faster
Biometric authentication of customers for transactions and users for login
will reduce the possibility of look-alikes conducting transactional frauds
Also, auto delivery of password will reduced the risk of misuse by
administrators
Operational benefits
There will be a reduction in the time spent by tellers for reconciliation and
an increase in branch uptime resulting from the systems 24X7 operation
functionality
Bank users will be able to send online referrals to supervisors/managers
and have them approved online, thereby reducing the turnaround time for
processing customer transactions and improving efficiency
Seamless integration across multiple channels and third party systems will
facilitate productivity improvements across the Bank.
Business Benefits
Customers will transact freely across branches, they add to the Banks
revenues by way of transaction fees
The Bank will roll out innovative offerings faster in response to market
demands, explore new lines of business and deliver a superior banking
experience to its customers

Adverse Effects
The following adverse effects are expected should the project not be approved:

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Date: 25 October 2016

Options

Upgrading the current Equinox Banking System

Do Nothing

Costs and timescales of recommended option

Recommended Option
Explain the reasons for the recommended option.

Project Implementation Costs Recommended Option

The table below shows a summary of the (new and additional) costs of
implementing the recommended option.
Total project implementation costs

1+2

2013/4

2014/5

2015/6

2016/7

2017/18

Total

000

000

000

000

000

000

Project implementation costs - Revenue

Project implementation costs - Capital

TOTAL FUNDING REQUEST TO SPIB

HARDWARE FUNDING REQUIREMENT (ICT CAPITAL)

TOTAL NEW PROJECT IMPLEMENTATION COSTS

Summary of ongoing costs against benefits Recommended

Option
The table below provides outlines the viability of the project. It includes a
summary of ongoing costs to support the recommended option against
anticipated benefits.

PROJECT - POST IMPLEMENTATION FINANCIAL IMPLICATIONS

Gross identifiable benefits

10
11

Additional core salary (permanent staff on-going)

Additional Core Non-Salary (on-going requirement)

12

Total additional ongoing costs

2013/4

2014/5

2015/6

2016/7

2017/8

Total

000

000

000

000

000

000

Net Spend Inflow/ (Outflow)

Cumulative Net Spend Inflow/ (Outflow)

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Net Present Value

2013/4
000
6
13

Total new project implementation costs

Net post implementation financial implications
Net Cash Inflow/ (Outflow)
Discounted Cash Flow - Rate
Discounted Cash Flow
Cumulative Discounted Cash Flow

2014/5
000

2015/6
000

2016/7
000

2017/8
000

2018/9
000

2019/20
000

2020/1
000

2021/2
000

2022/3
000

Note - Contingency: It used to be the case that there was a separate cost line for
Contingency in the Cost v Benefit Analysis. This practice has been discontinued.
However Business Analysts may add an element of contingency on top of
individual cost elements where there is a significant level of doubt about the
future costs (the level of contingency would be influenced by the extent of the
doubt). The most likely example is an estimate of software and consultancy
costs for a new system prior to a procurement and tendering exercise.
If contingency has been applied it may be helpful to list below the Costs and
Benefit affected (in any of the tables above):

the areas where contingency has been applied

the level of the contingency in each case

the reason for the contingency in each case

e.g. A level of contingency has been included in the following costs above:
Cost

Continge
ncy

Reason for uncertainty

Capital Hardware
support

&

5%

To be finalised when preferred solution is

procured.

Capital
support

&

15%

The cost quoted is based on market

research but the full cost will not become
clear until the preferred solution is
procured.

Software

Bespoke development 10%

To be finalised when preferred solution is
& support
procured.
These details should certainly be included in the detailed Cost Analysis in the
Appendices.

Core staff resources required on an ongoing basis

Details of any core staff resources that have been identified as needed to
support the ongoing operation of the service/process established by the project
can be listed here, including:

Role and Grade

Supplying department

Nature of work

These should only be listed if it has been agreed that the work can be covered
by existing staff.
The costing of these staff appears in a memorandum table (Table 13) in the
Financial Template.

Timescales
The project can be broken into n stages.

Stage 1

Stage 2

An early indicative timetable for these stages is shown in Appendix 9

This early planning would indicate the following timescales could be achievable:
Milestone

Dates

Risks
Risks are potential threats to the University that may occur but have not yet
happened. Risk management will monitor the identified risks and take any
remedial action should the risk happen. The risks associated with the project are
set out in detail in the risk log in Appendix 6, identified as the risks to the
University if the project does not go ahead, and the risks if it goes ahead with the
recommended option. In summary the main risks are as follows.

Risks of not going ahead with the project

Risks that will need to be addressed if the recommended option
goes ahead

Include any Change Management risks e.g. impact for staff and cultural
change.

Issues
There is a significant number of important issues which need to be resolved and
decisions which need to be made to achieve the successful delivery of the
benefits of the project.

Identify any key issues which need to be resolved to achieve the benefits
of the project

Obstacles to completing the project e.g. staff changes, skills gaps.

Dependencies
Initiatives which this project depend on are:
Other initiatives which depend on this project are:
Key resource dependencies: