Independent research and advisory firm Financial Insights, an IDC company, has announced the release of a new report examining shifts in core banking investment trends for the Asia/Pacific excluding Japan (APEJ) region. The report entitled, 'Core Banking in Asia/Pacific: 2007 Deals' states that while core banking system implementations and upgrades remain of utmost strategic importance to financial institutions, 2007 saw a marked decrease in the number of core banking deals in the APEJ region. Based on Financial Insights' qualification criteria of what constitutes a core banking project, the number of deals has gone down.

Abhishek Kumar, senior research analyst of Financial Insights' Asia/Pacific IT Benchmarking Service, states, "Though we acknowledge the number of core banking deals provides only one perspective of the overall picture of core banking investments in the region, the decrease in the number of deals is still indicative on the evolution and maturation of the core banking landscape. With more and more financial institutions completing their core banking implementations, we see the focus now shifting to the next stage of bank architecture modernisation. These financial institutions are now looking to augment core solutions with front office-based modules and solutions."

The question arises whether this maturity will result in a move away from 'big bang' core banking implementations to other deployment methodologies, such as SOA-enabled core banking migrations. The Commonwealth Bank of Australia deal in 2008 is a possible game changer in these terms. Other Australian banks are now quickly establishing their core banking strategies in response to CBA's relatively well-received core banking approach. It is expected that in 2008 and beyond, SOA-enabled core migrations will grow.

Financial Insights sees countries with emerging economies taking up larger shares of the number of core banking deals in the region. Vietnam, in particular, held an 18 percent share of the core banking deals in the region in 2007. On the other hand, countries, whose financial institutions started their core banking implementations several years ago, such as India, have seen an expected decline in the number of core banking deals in 2007.

China is developing into quite an enigma for the core banking space. For a number of years now, China's financial sector was expected to eventually embrace core banking. With the Bank of China deal in late 2006, many were expecting the core banking floodgates to open in 2007. Since then, international core banking players have not quite signed up the number of deals as expected. It is more likely now that we will instead see a more even spread of core banking deals over a number of years rather than a rush to implement core solutions.

Kumar continues, "Banks are no longer rushing the vendor selection and solution deployment process. The modern Asian financial institution now takes a more long-term IT strategy perspective, taking into account business goals and how the technology can support these goals."

The report points out that core banking projects to support Islamic banking and international expansion continue to show exceptional growth, providing opportunities to select vendors in these areas. Furthermore, vendors are now able to provide a much wider breadth of services with improved implementation skills, thanks to consolidation and establishment of numerous strategic partnerships.

Kumar concludes, "Both financial institutions and core banking vendors now have a much deeper understanding of the requirements of core banking implementations. The question now is whether this trend of decline is going to be sustained in 2008".