In recent months, several Nigerian commercial banks have migrated to new core banking applications, driven by a need for customization, efficiency, and cost management. However, these transitions have not been without challenges, including significant disruptions for millions of customers and soaring financial outlays.
Why the Change?
Technology costs have become a strategic priority for Nigerian banks, with systems like Finacle, SEABaaS, and others forming the backbone of digital banking operations. These core applications handle everything from account management to fraud detection. Banks are investing heavily—up to $10 million annually per institution—on core banking software alone, with leading banks such as GTBank, Zenith, and Access spending even more on broader technology upgrades.
The need for modernization has also been fueled by customer expectations and regulatory requirements. For instance, Guaranty Trust Bank recently switched to Finacle, a move estimated to cost around ₦25 billion ($15.3 million) annually in license fees, according to industry sources.
Financial Impact and Tier-2 Strategy
The combined annual expenditure on core systems for the largest Nigerian banks (First Bank, UBA, Access, Zenith, and GTBank) is estimated to reach $50 million. While Tier-1 banks can absorb these costs, smaller Tier-2 banks are pursuing innovative strategies to balance cost and growth. Sterling Bank, for example, developed and launched SEABaaS—a proprietary core banking application—to reduce dependency on expensive foreign systems. The bank also plans to monetize this platform by offering it to other financial institutions in Africa, aiming to create new revenue streams.
Sterling’s switch from the T24 platform, previously provided by Temenos, highlights the focus on lowering costs and improving operational efficiency. The development process for SEABaaS took about seven months, involving extensive internal reviews, data migration, and the establishment of a robust change management framework.
Challenges of Core Banking Migration
Switching core banking systems is a delicate operation. Banks need to transfer billions of data points, ensuring compatibility between old and new platforms. The disruptions experienced by customers during these transitions illustrate the complexity of such projects. For instance, system downtime often results in widespread service outages, eroding customer trust and forcing banks to issue public apologies and reassurance statements.
GTBank’s migration process, which began in late 2023, and Sterling’s SEABaaS deployment are examples of the painstaking planning required to ensure successful implementation. These projects demand buy-in from multiple departments, rigorous testing across different environments, and a fallback strategy in case of failure.
Future Implications
The trend toward customized core banking solutions like SEABaaS reflects a broader push by African financial institutions to develop indigenous technology, reducing foreign dependency and enhancing financial inclusion. Sterling’s CEO, Abubakar Suleiman, emphasized that this shift marks a new era for African banking, highlighting the importance of intellectual property ownership for long-term competitiveness.
This wave of technological change not only redefines the competitive landscape but also signals a new level of ambition within the Nigerian banking sector. With major investments planned—GTCO (₦98.5 billion), Access Holdings (₦68.62 billion), and Zenith Bank (₦57 billion)—banks are positioning themselves for a more digitally integrated future.
These developments underscore the evolving role of technology in banking. As Nigerian banks enhance their systems, the challenges they face offer valuable lessons for financial institutions across the continent. The long-term success of these migrations will hinge on customer experience improvements, regulatory compliance, and the ability to innovate beyond infrastructure investments.
This wave of transformation is not just about technology; it reflects a strategic shift toward self-sufficiency and operational resilience for the entire African financial ecosystem.