Nigerian Banks Gear Up for Major System Upgrades, Warn Customers of Potential Service Disruptions

Nigerian bank customers are bracing for increased service disruptions in the coming weeks and months as many financial institutions embark on critical system upgrades aimed at enhancing operational efficiency and improving customer experience.

These disruptions, while temporary, are the result of a comprehensive effort by banks to migrate to more advanced core banking systems that can better handle the demands of modern financial services.

A few banks have already transitioned to new systems, resulting in temporary issues that prevented some customers from accessing their funds or completing transactions.

According to sources within the banking industry, more banks are preparing to initiate their migrations as part of a broader effort to strengthen their technology infrastructure and improve the services they offer to customers.

While one source within the banking sector indicated that these upgrades are being carried out in response to a directive from the Central Bank of Nigeria (CBN), other sources could not verify this claim.

Instead, they emphasized that banks are making these changes to ensure better service delivery and to stay competitive in the increasingly digital banking landscape.

Early Disruptions in Banking Services
Sterling Bank customers were among the first to feel the impact of these system upgrades. The tier-2 bank experienced service disruptions lasting several days in early September, following its migration from the T24 banking system to SEABaaS, a new custom-built core banking application developed locally.

The switch caused significant inconvenience for customers, who were unable to perform routine transactions during the transition period.
Similarly, GTBank, one of Nigeria’s largest banks, recently transitioned from the Basis/Banks software developed by ICS Financial Services, a Jordanian/UK software company, to the Finacle banking technology developed in India.

GTBank’s migration also led to temporary service interruptions as the bank adjusted to the new system.

Customers of Zenith Bank faced a particularly challenging situation on October 1, when they experienced a service outage that disrupted their access to banking services.

While the bank initially described the outage as a result of “routine IT maintenance,” many customers continued to experience issues even days after the upgrade was supposedly completed.

Zenith Bank is currently migrating its core banking system from Phoenix, a software developed by London-based Finastra, to Oracle’s Flexcube platform.

As of the time of this report, many customers were still unable to access the bank’s mobile app, despite the bank’s announcement that its services had been restored following “significant progress” in the IT upgrade.

An anonymous source with knowledge of the banking sector revealed that another major tier-1 bank is also in the process of migrating from its current core banking system to a new one.

This migration, once initiated, is expected to affect millions of customers, potentially causing service disruptions similar to those experienced by other banks.

The source emphasized that the disruptions, while frustrating for customers, are necessary for the long-term improvement of banking services.

“The service disruptions are a bitter pill that the customers would have to swallow. Every bank wants its customers to carry out more transactions daily because that is where we make money from. But we must do what we have to do to improve the experience for the customers,” he said.

The Challenge of Core Banking System Migration;

Migrating to a new core banking system is a complex and time-consuming process, according to a backend developer at one of Nigeria’s tier-1 banks, who spoke on condition of anonymity. He explained that the transition is far from a simple switch and can take several weeks to fully implement.

“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,” the developer explained.

He added that while some banks may not need to transfer customer transaction data, the integration of various banking channels such as ATMs, USSD codes, and Internet banking platforms can significantly prolong the process.

The developer noted that banks must synchronize these channels with the new system to ensure seamless service once the migration is complete, which is why the stabilization period takes time.
Why Banks Are Upgrading
The decision by Nigerian banks to upgrade their core banking systems is driven by several key factors, including the need for improved security, greater flexibility, and cost efficiency.

With the rising threat of cyberattacks, particularly in the financial sector, banks are under pressure to adopt systems that offer better protection against hacking and other forms of digital crime.

A core IT personnel from one of Nigeria’s top banks confirmed that security concerns were a major driver behind the decision to switch to more advanced systems.

“With the increase in the incidence of hacking of financial institutions, Nigerians are looking for systems that have better security, hence the move to new systems,” he said.

In addition to security, the cost of maintaining existing systems is also a significant factor. Many Nigerian banks currently rely on foreign-developed core banking applications, particularly from Indian software companies.

These systems require substantial financial investment, as banks are often required to pay for yearly licenses, support, and user fees, all of which are denominated in foreign currencies.

“Most of these core banking applications, after you buy, they implement for you, you pay yearly license per user most times, or you pay a global license. If you don’t pay a global license, you also pay support. So, banks are also looking for a way to cut these costs,” the IT expert explained.

The Inconvenience of Data Migration
For customers experiencing disruptions, the process of migrating data from one system to another can seem confusing. However, the complexity involved makes it difficult for banks to avoid temporary service issues during the transition.

The IT expert likened the process to transferring data from an old phone to a new one, noting that such transfers take time to complete.

“Let me break it down a little bit so you understand why it is impossible. Let’s say, for example, you buy a new phone that is better than your old phone, you will have to move your stuff to the new phone and you can’t do that with a snap of your fingers,” he said. Even with cloud backup options, the process requires time and effort to ensure all necessary data is successfully transferred.

What You Should Know
Nigerian banks have been significantly increasing their investments in IT infrastructure as the volume of electronic transactions continues to rise.

This surge in e-business has also led to a corresponding increase in cybersecurity threats, prompting banks to fortify their digital defenses.

Experts point out that while physical armed robberies have become less of a concern, the shift toward digital crimes poses a greater risk to financial institutions.

In light of these developments, the current service disruptions experienced by customers should be viewed as part of a necessary overhaul of Nigeria’s banking infrastructure.

Though inconvenient, these upgrades will ultimately lead to improved banking services and enhanced security for both customers and financial institutions alike.