Data Migration: The Art of Changing Core Banking Systems in the Australian Mutual Bank Sector
In recent years, Australian mutual banks and financial providers have been undergoing a significant transformation, driven by the need to stay competitive in an increasingly digital and fast-paced financial environment.
When it comes to mergers and acquisitions (M&A) in the Australian mutual bank sector, the focus often falls on the big picture—operational efficiency, financial strength, and scaling up. However, an equally important, yet often overlooked, part of the process is migrating data between core banking systems. If not managed properly, it can lead to significant challenges in integrating two banks' systems and very angry customers.
Migrating data from one core banking system to another isn’t as simple as copying and pasting files. This is no ordinary transfer.
We're dealing with the movement of sensitive customer information, transaction records, account balances, and much more from one platform to the next. All of this needs to happen while ensuring the new system operates seamlessly, with customers continuing to process transactions without disruption. That’s no small feat.
Given the size and limited resources of mutual banks, a ‘big bang’ migration is often the chosen approach. While this method carries high risk, it’s typically necessary because maintaining two core systems in parallel is not feasible for smaller banks. To mitigate these risks, careful planning and risk management are crucial, as any issues during migration could disrupt the bank's entire operations.
So, what does it take to make this transition as smooth as possible? Here’s a quick overview of the key steps involved in migrating data between core banking systems.
- Planning: The Blueprint for Success
Before any data migration takes place, banks typically start by identifying which core banking system will be used post-merger, whether it's an existing system from one of the merging banks or a completely new solution. Once that's decided, a comprehensive plan is created, outlining a roadmap for how data will be migrated from the old system to the new one.
This includes determining which data needs to move, how it will be extracted, mapped, and transformed to fit the new system, and ensuring that the right data is transferred at the right time. Additionally, an audit process is put in place to ensure that balances and records are accurately accounted for both pre and post-migration. All these steps must be carefully planned before any data is migrated.
Additionally, a fallback position must be established in case something goes wrong during the final migration. This includes having a rollback plan in place to revert to the old system if critical issues arise, ensuring minimal disruption to operations and customer experience.
Fallback should outline the steps needed to restore data.
The fallback plan should outline the steps needed to restore data, address potential system failures, and reinitiate the migration process without compromising data integrity.
- Data Extraction and Mapping: The Nitty-Gritty Work
Once the planning stage is complete, it’s time to get down to the real work—data extraction. This is where the actual migration begins. Data from the old core system is extracted, transformed, cleansed, and mapped into the format required by the new system.
But there’s a catch: the data doesn’t always fit into the new system. No two core systems store data in the same way, so the structure and format of information will differ between the old and new systems. Think of it like trying to squeeze a square peg into a round hole. The data has to be mapped and massaged properly to ensure it aligns correctly with the new system’s structure. This is a critical step, as any mistakes here could lead to data discrepancies, missing information, or even system failures down the road.
In addition to mapping, careful attention must be given to data cleansing to remove any obsolete or redundant information, ensuring that only relevant and clean data is transferred.
- Testing and Mock Conversions: The Dress Rehearsal
After the data extraction and mapping, mock conversions are conducted using a sample of the bank’s data to make sure everything behaves the way it should.
These mock runs are critical for spotting any problems.
Whether it's data formatting issues, incompatibility between the old and new systems, missing information or duplicate data. Essentially, this is the time to uncover any surprises before the real migration takes place. After each trial, the team identifies any issues, makes adjustments, and runs another mock conversion to ensure the process is as smooth as possible.
Depending on the migration environment, consideration needs to be given to securing sensitive data through encryption or obfuscation during the trials and possibly during the data transfer, to prevent unauthorised access and ensure that privacy and compliance requirements are met throughout the process.
During this phase, thorough auditing and balance checks are also performed to ensure the integrity of the data and that all records are accurately aligned between the systems before proceeding with the full migration.
- Data Migration: The Big Move
With the mock conversions completed and any issues resolved, the migration process is now ready to be set in motion. This phase involves transferring the bulk of the data from the old system to the new one.
Consideration must be given to ensuring that customer-facing applications and transaction platforms operate offline from the core while the migration occurs. Managing this offline operation requires significant preparation and planning, which is a substantial task in itself to ensure that services remain uninterrupted during the migration, where possible.
- Post-Migration Validation: Is Everything in Its Right Place?
Once the data is in the new system, it's time to validate everything. This means making sure that all the accounts, transactions, balances, and other critical data appear correctly in the new system. Customers shouldn’t notice any difference in their banking experience (other than perhaps a better system).
Validate the integrity of the data and ensure the new system can handle it.
In this stage, the team runs various checks to validate the integrity of the data and ensure the new system can handle it. These checks help identify any discrepancies that may have slipped through the cracks during the migration. In addition to validating the core banking data, post-migration checks should also ensure that integrations with third-party systems, such as payment processors, are fully functional.
- Go Live: The Grand Finale
Once everything is validated, the new system goes live. This marks the moment when the bank fully transitions to the new core system. While continuous monitoring is in place to ensure stability, the major work is complete. The bank has successfully migrated its data, integrated its systems, and is ready to serve customers with minimal disruptions.
Wrapping It Up
Migrations are complex, especially when you’re dealing with something as critical as a core banking system.
However with proper planning, careful data mapping, several mock conversions, and constant validation, the process can be executed efficiently and effectively.
Core banking migrations occur more often than most people are aware and should not be feared, as long as they are managed properly.
As part of the migration process, careful attention should also be paid to change management. This includes training staff on the new system, updating internal processes, and communicating with customers about any potential changes to their banking experience.
Managing a Core banking data migration is complex and predisposed to potential high-impact risks. This complexity ultimately leads to significant challenges that can be mitigated if planned and managed correctly. If you are considering a Core banking data migration (or a non-banking data migration). Let’s talk.
