According to research released a few months ago by Infosys and Ovum, around three quarters of European banks are using outdated core systems.  Given the great costs associated with core system renewal, this will come as no surprise to banking IT professionals.

We should, however, be concerned at the survey's findings that suggest these systems are affecting the ability of European banks to innovate and accelerate growth.

80% of respondents see these outdated systems as barriers to bringing new products to market, whilst 75% say these systems hinder, rather than enable, process change.

At a time when European banks need more than ever to be focusing on achieving growth, these findings make for difficult reading. For as long as out-of-date legacy systems continue to hinder speed to market, European banking will also remain out-of-date, slow to respond and inefficient.

This problem is not limited to European banks.  Our American counterparts suffer the same problems, caused by antiquated IT systems.

Yet to wax lyrical about the importance of system renewal is to overlook one great problem – cost. Core system renewals cost huge amounts of money, time and effort, representing a risky and expensive undertaking.

The role open standards can play in reducing the cost and risk associated with system renewal is already gaining momentum. It is imperative that more banks get on board – ABN AMRO, UBS and Banco Galicia have all now taken the plunge to adopt IT open standards – in order to reduce banking IT costs, strengthening the business case for core system renewals. Alongside the cost savings benefits, from dramatically reduced integration times, banks’ competitive innovation and growth processes will be reignited.

Celent recently predicted that global core banking spend will grow to $5.1 billion by the end of 2013, with growth expected from Asia and Latin America. These less mature markets now have the opportunity to really take control – their new systems will support and drive both innovation and efficiency levels, whilst their European counterparts, shackled to legacy technology, will continue to struggle with inadequate and archaic structures. Now is the time to start working together, both banks and software vendors, to create a standardised model that we can all benefit from.