OPPORTUNITIES AND CHALLENGES OF CORE BANKING SYSTEM ADOPTION IN THE CASE OF DASHEN BANK

Abstract

Financial service companies around the world are seeking to upgrade their core banking systems to improve competitiveness, operational efficiency, and regulatory compliance. However, such initiatives are especially challenging for most institutions. The purpose of this study was to determine factors leading to replacement of core banking systems in Ethiopian banking system in the case of Dashen Bank; establish the challenges that Dashen Bank encounter in the process of core banking systems replacement; and determine the effect of core banking systems replacement on bank performance. This research was carried out using a descriptive research design. The target population of this study was all Dashen Bank IS and Ebanking staffs. No sampling was done since the population was small (N<80). The research instrument for this study was a questionnaire. Data was collected from all information system and E-Banking staffs found in Dashen Bank. This data was manipulated through descriptive statistics such as percentages, range and mean scores and regression analysis. Presentation of data was through tables. Study results indicate that there are various factors that lead Dashen Bank to replace its core banking. These include their technologies being out dated, to reduce cost and improve efficiency, to enable adoption of new customer centric strategies, to enhance business banking and personalized service and to incorporate new and increased business. Challenges faced in the process of core banking system replacement include agreeing on what are actually necessary, security issues, empowering employees to use the new system, vendor capabilities and credentials, risk of the software capability to meet requirements and expectations, unavailability of the diverse skills required and data migration. Findings also indicated that replacing core systems has a significant positive effect on financial performance.The following recommendations were made. First, Dashen Bank need to be mindful of the challenges associated with core banking deployment. These challenges, once understood should be mitigated properly and perfectly managed. Secondly, Dashen Bank must appreciate that technology is an enabler and should adapt to change that make the technology transformation. Lastly, Dashen Bank Must have a strategic road map for future core banking upgrade or replacement.