ISSN: 1391 - 0531
Sunday, April 22, 2007
Vol. 41 - No 47
Financial Times  

IT perspective in proposed ComBank-NDB merger

If the Commercial Bank and NDB merger happens, they will have to operate their IT systems separately for a long time, after they are merged, according to a top IT expert. “Mergers are arguably an order of magnitude more difficult in banking than in other industries and this is because the technology associated with day-to-day operations in a bank is far more complex than managing a retail operation,” Jayantha de Silva, Vice President IFS Asia Pacific said.

“Mergers are playing a useful role in reshaping the banking industry but it is difficult to immediately integrate the organizations, processes and technology necessary to deliver success as and when the merger happens,” he pointed out. “Today, consumer banking drives a significant portion of bank revenues," he pointed out, adding that 95 percent of interactions between a bank and a customer are service-related. “If you don't do a good job there, all the cross-sell capability you might gain will be for nil, because the customer simply will not buy,” he said.

Commenting on Commercial and NDB banks, De Silva said that both have overlapping infrastructure with a large number of branches in the same areas, and a merger should allow them to reduce costs by reducing the number of branches. He also said that it is critical to note the potential negative effect on customers.

"Banks often forget to factor in the impact of integration on customers," De Silva said, adding that if they are integrating an online banking application, they will look at the complexity of the technology. “But you also need a careful analysis of how customers will interact with the application,” he said, adding that by focusing on integration during due diligence, merging banks can gain a competitive advantage.

He said that mergers can also enable banks to offer new products and to reach new customers. Such mergers reach across geographies or industry segments. “But many of the mergers we are seeing today are for expansion rather than cost reduction," he said. He also noted that while mergers will certainly reduce the number of banks nationwide, the very forces of technological and regulatory change that are spurring mergers are also bringing new sources of competition to local banking markets.

Top to the page

Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.