U.S. banks and credit unions will spend more than US$4.2 billion over the next three years on new core banking systems; fear and cost is causing the majority of the market to maintain the status quo, however.

Boston, MA, August 7, 2006 – In a new report, Trends in Core System Replacement: The Necessary Evil, Aite Group examines how factors such as sunsetted vendor solutions, outdated technologies, changing bank strategies and a more stringent regulatory environment are driving U.S. bank and credit union core system replacements. The study concludes that while the total number of replacements increases about 3% annually, and approximately US$1.4 billion will be spent this year on new systems, a far greater number of institutions will do partial replacements or, more likely, will make due with legacy systems. Banks' fears are currently overshadowing the need for new systems. These factors have resulted in technology providers adjusting their strategies to better meet the growing demands of today's marketplace.

Aite Group estimates that approximately 12% of U.S. banks and the top 500 credit unions have reached a critical point for core system replacement. They are paying high maintenance costs, and they suffer from slow product launches and an inability to easily integrate third-party applications or access information for compliance to new regulations. Despite the need for new systems, only 4% of U.S. banks and top 500 credit unions will deploy a new system this year. Of these deployments, 90% of will be by small U.S. banks and credit unions.

"Large U.S. banks are not moving as quickly as they should with core system replacements and are, instead, looking to identify a 'quick fix,'" notes Christine Barry, Research Director with Aite Group and author of the report. "This strategy only prolongs the inevitable and is likely to create further challenges in the future, especially as European and Asian banks are deploying replacement strategies at a much greater pace."

To purchase this report or
for additional information,
please contact:
Aite Group Sales
Tel: +1.617.338.6050
sales@aitegroup.com