Since September 2024, at least four major Nigerian banks have upgraded their core banking systems, a costly move driven by the need for customization and improved technology. However, these changes have also caused disruptions, leaving millions of customers unable to access banking services. What has received less attention is the staggering financial cost of these upgrades.
Guaranty Trust Bank (GTBank) recently completed its switch to the Finacle core banking platform, which could cost the bank up to ₦25 billion ($15.3 million) annually in licensing fees, according to sources familiar with the matter. On average, Nigerian banks spend about $10 million per year on core banking software, meaning that the country’s top banks— are expected to collectively spend around ₦82 billion annually.
These expenses account for 1% of the combined half-year revenue of the FUGAZ banks, which reported ₦8.52 trillion in gross earnings for 2024. With large customer bases and numerous banking channels to support, banks must invest in advanced technology to maintain operations. The need for these technological upgrades is clear, with three of Nigeria’s largest banks planning to invest a total of ₦224.22 billion ($136 million) in tech infrastructure improvements.
Nuances in core banking software switch
GTCO, Access Holdings, and Zenith Bank have all outlined significant tech spending in their capital raise presentations, with these investments covering a range of systems, including customer relationship management (CRM), risk management, cloud storage, digital banking, and fraud detection systems. While tier-1 banks can handle these expenses, smaller tier-2 banks like Sterling Bank must manage costs more carefully. Sterling Bank recently switched to SEABaaS, a custom-built core banking platform, as part of its effort to reduce costs and eventually sell the software to other banks.
Upgrading core banking software is no easy task. It requires months of planning, testing, extensive internal approvals, and a thorough data migration process. Data migration, in particular, is critical as it involves transferring millions of customer records and transaction details to the new platform—a process that can lead to extended downtimes, frustrating customers. Despite these challenges, the switch is essential for banks to stay competitive in a rapidly evolving financial landscape.
