How KCB, NBK Will Benefit From A Core Banking System

Four years after KCB Group acquired the National Bank of Kenya (NBK), the two entities are now set to run on the same back-end system. This is expected to bring up to Sh 5 billion cost-reduction and allowing customers to transact in any of the group’s branches.

KCB acquired NBK in September 2019 but the two have been running on separate core banking systems that costs billions of shillings given the technology, hardware, and licenses involved.

According to KCB Group CEO Paul Russo, NBK operations will be migrated to the KCB core banking system as the current software contract for the subsidiary expires, helping the group to realise a cost saving.

“We had not put them in the same core banking system because of the long-term contracts with the party they (NBK) had before and exiting would have cost us money,” said Mr Russo as quoted by Business Daily.

“We decided to run down the contract. That is coming to an end. This year NBK and KCB will start running on the same core banking system. I expect to see Sh4 billion to Sh5 billion cost reduction,” he added.

Core banking is a back-end system that connects multiple branches of the same bank together to deliver operations like loan management, withdrawals, deposits, and payments in real time.

In this case, a joint core banking system will allow customers of either entities to transact in any of the branches, unlike now. This will help to increase convenience and relieve some branches of pressure, without having to open new ones.

“Our competitors have opened more branches in Nairobi. We will have a solution once we migrate to the same system which for instance will open a Moi Avenue branch for NBK customers or Kenyatta Avenue for KCB customers,” said Mr Russo.

About Sh2.5 billion of the savings will come from IT and shared service centralisation. KCB Group has 498 branches. Some 214 branches are for KCB Bank Kenya while those of NBK are 83.

KCB had initially wanted to drop the NBK brand after fully acquiring the over-50-year-old lender but made a U-turn, saying the two brands had built their own value in the market.

A single core banking system will also give KCB an opportunity to harmonise its data centres unlike currently where KCB and NBK run separate primary and secondary data centres.