Explainer: Why banks need to do system upgrade and how long it actually takes

• Some Nigerian banks have been involved in routine system upgrades
• Due to huge capital involvement, Nigerian banks are migrating to indigenous banking IT platforms
• TheRadar explains what bank system upgrade is and why it has to be done

In recent weeks, some Nigerian banks have announced upgrades to their systems to allow for seamless and easy banking.

The trend started with Sterling Bank, which notified customers of a planned upgrade in September. The upgrade followed the bank’s migration of its Information Technology (IT) services from a Switzerland-based core banking application, Temenos T24, to SeaBaaS by Peerless, an indigenous core banking solution, in September 2024.

The upgrade led to glitches with the bank’s services, with customers lamenting their inability to carry out banking operations, especially using mobile platforms.

The exercise soon snowballed into an industry-wide trend as some banks announced system upgrades.

Zenith Bank informed its customers through text, email and social media platforms that its app would be automatically updated to a new version on October 1 and that the process would last for three hours only. However, the process lasted for about 72 hours, with customers complaining of their inability to carry out banking services on the bank’s mobile app.

First Bank would later follow the trend leaving customers unable to transact on the bank’s platform for six days.

Also, Guaranty Trust Bank (GTB) said its digital banking channels will experience service disruptions for 11 hours, starting October 13, while Access Bank, on October 9, notified customers of a scheduled system upgrade but later postponed the exercise that was slated for October 12.

What is a bank system upgrade?

Bank system upgrade involves routine maintenance for core banking applications to keep up with the evolving banking system and to deliver seamless and optimal banking services.

A core banking application is a backend system that processes daily transactions and posts updates to accounts and other financial records of financial institutions. It is a software used by banks to manage critical processes like customers’ accounts management, transactions and risk management.

System upgrades are usually carried out at night when there is a lesser number of transactions and when customers do not make use of the platform.

With innovations and developments in the financial services sector, system upgrades have become an integral part of players in the industry.

How long do system upgrades take?

A backend developer in one of the tier-1 banks, who pleaded anonymity, said the process of migrating to a new core banking application is tedious and may take a while for any bank to stabilise after the migration.

The developer said, “Migrating to a new core banking system is not a switch off/switch on thing, it may take two weeks to one month because it involves the movement of customer biodata. 

“In some cases, a bank may not need to move customer transaction data. However, for every change, the banks will need to integrate with their various channels such as ATM, USSD, internet banking, and so on and this is why it takes time for them to stabilise.”

Also, stakeholders in the technology sector say Nigerian banks will require up to one year to successfully migrate customers’ data.

They said the migration process involves transferring a large bulk of customers’ data from outdated systems to new platforms, thus requiring meticulous planning and execution.

A technology expert and Head of Marketing at MIM Finance, Bobola Ojo-Ami, said banks can never be totally prepared for the outcomes of customers’ data migration process.

He said, “The migration process is inherently complex and daunting. Banks can never be 100 per cent prepared; initial planning only equips them for what lies ahead. The real challenges emerge during the actual migration.”

Enakirrerhi Truthful, an Artificial Intelligence (AI) researcher at RealSearch and Partners Inc., said banks didn’t anticipate potential negative outcomes of customer data migration during the recent system upgrades.

Truthful said, “This outage also revealed a lack of contingency planning. What happens if things go south during an upgrade? Do we have a backup plan? For many of the banks, the answer appears to be no.

“We saw firsthand how much we depend on our banking system for our daily lives. People couldn’t pay for groceries, businesses couldn’t settle payments and even international transactions were affected. This wasn’t just about a technical glitch; it impacted commerce, security and even our confidence in the financial system.”

Why do banks upgrade their systems?

System upgrades have become necessary given the recent wave of hacking, fraud, cyber theft and missing funds from customers’ accounts.  Between 2019 and 2023, Nigerian bank customers lost N59.33 billion to fraud as N10 billion was lost in 2023 alone. In 2023, over 80,658 customers were scammed, a marginal decrease from the 84,130 recorded in 2022. To stay up-to-date and protect depositor’s funds, banks have to regularly upgrade their systems.

Also, system upgrades are essential for the adoption of the cashless wave, flexibility and efficiency, to stay in tune with evolving demands of the banking ecosystem and to ensure better customer experience and satisfaction.

The Executive Director at Financial Services Innovators, a non-profit organisation, Aituaz Kola-Oladejo, said upgrades are necessary for optimising resources, enhancing efficiency and reducing vulnerability to attacks and fraud.

“I believe the upgrade is essential as digital technologies evolve and the volume of digital financial transactions grows exponentially.

“Financial institutions must conduct stress and capacity tests on the resilience of their systems,” Kola-Oladejo said.

Using foreign-based IT platforms expensive for Nigerian banks

Many Nigerian banks have had to switch to indigenous IT platforms due to the huge capital involved in maintaining these platforms.

While Sterling Bank switched from Switzerland-based core banking software, Temenos T24 to SeaBaaS, developed by an indigenous firm, Peerless, GTB migrated from the United Kingdom-based ICS Financial Service to Indian-based Finacle by EdgeVerve Systems, Zenith Bank migrated from Phoenix to Flexcube and FirstBank switched from BankMaster to Finacle.

Temenos T24 is also used by Keystone Bank and the Central Bank of Nigeria (CBN), while Finacle is used by Stanbic IBTC, UBA and FCMB.

Chief Executive Officer of Sterling Bank, Abubakar Suleiman, while announcing the bank’s migration to SeaBaaS, said the switch is to save cost and support the growth of indigenous IT talents.

He also said the newly deployed system leverages advanced data analytics and Artificial Intelligence that will enable smarter, faster financial services, enhancing both customer experience and operational efficiency.

Suleiman said, “African banks spend hundreds of millions of dollars annually on foreign core banking applications, further putting pressure on the continent’s balance of trade.

“With what our amazing partners at Peerless have done and the successful deployment of this new core banking system, we are not only setting a new standard for Nigerian financial services but paving the way for a future where African institutions can domesticate their technology cost, thereby reducing the cost of financial inclusion.”

Bank customers call for urgent intervention in consistent network failures

Meanwhile, TheRadar reported that customers of various banks in the country have decried the consistent failure in the online network of financial institutions.

Some of the customers who spoke to the News Agency of Nigeria in Abuja on Thursday, October 10, said the situation was becoming recurring, frustrating and worrisome.