Legacy Modernization in the Japanese Banking Industry, Part 1: Industry Overview and Survey Results

by Eiichiro Yanagawa, March 17, 2017
Industry Trends
Asia-Pacific

Abstract

Celent has released a new report titled Legacy Modernization in the Japanese Banking Industry Part 1.The report was written by Eiichiro Yanagawa, a Senior Analyst with Celent's Asian Financial Services practice.

This report examines the current status and a future direction of legacy modernization in Japan’s banking industry. It is based on a legacy modernization survey Celent conducted in 2015. The survey targeted mega banks, regional banks, entrants, and other financial institutions.

This new two-part report is an extension of this work that narrows the focus to the banking sector. Part 1 offers an overview of the state of modernization in the industry. Part 2 builds on this to offer policy prescriptions and suggestions for industry players.

“Mergers in Japan’s banking industry have driven a shift in resources to major banks, and spurred consolidation among small and medium-size financial institutions. The importance of strategy in finding the appropriate scale and range is only increasing, and this is true across the board: in marketing, customer service, development of new products and services, risk and cost management, and across all IT use,” Yanagawa commented.

“Financial institutions will not be able to survive by following past approaches. If regional and local financial institutions that cater to small and medium-size businesses are to remain going it alone on a small to mid-tier level in sectors dominated by major banks, then a unique strategy will be crucial," he added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

 

Definitions

1

Introduction

2

 

Japan’s Banking Industry

2

 

Japan’s Banking Systems

14

 

Banking IT Services

22

Legacy Modernization Survey 2015 Overview

23

 

Survey Items

23

 

Overview of Survey Participants

23

The State of Modernization

25

 

System Replacement Goals and Strategies

25

 

Replacement Project Consideration

26

 

Challenges and Vendor Expectations

31

Business Case Perspectives

33

 

Legacy System Impacts and Merits of Modernization

33

 

Role of Business Cases

34

 

Changes in Cost Allocation

36

New Technology Adoption and Its Impact on Modernization

39

 

Changes in the IT Arena

39

 

IT Unit Assessment

40

 

Changes in Division of Labor Between IT and Business Units

41

State of the Industry

42

 

Legacy System Modernization at Japan’s Banking Firms

42

Toward Part 2

43

Appendix

44

 

Respondent Profile

44

Leveraging Celent’s Expertise

47

 

Support for Financial Institutions

47

 

Support for Vendors

47

Related Celent Research

48

Sign in to download reports and access personalized information