Co-op bank problems hit Infosys

Amidst the stream of bad news and continuing problems reported by the Co-operative Bank yesterday came the decision to announce a further write down of £148m of IT investment and to discontinue its Banking Transformation Programme and associated contract with Infosys.

In 2009 the Cooperative bank announced its Banking Transformation Programme (bTp), a wide ranging programme with several suppliers, a major part of which was a migration to Infosys’ core banking platform, Finacle. The Cooperative Bank has now backed away from acquiring part of the Lloyds retail banking business which had put the core platform change on hold, but in light of the other problems, requiring a thorough review of the bank’s strategy, the project has been terminated. However, according to an Infosys spokesman, “This decision to discontinue the bTp project has nothing to do with any performance issues relating to Finacle. In fact, even today, the bank is running successfully on our Finacle Internet banking solution.”

Nonetheless, this is an obvious blow to Infosys. TechMarketView estimates that Infosys UK generated revenues over £500m in 2012. Though Infosys derived less than 4% of its worldwide $7.4bn revenues from Finacle license fees last year, on some deals it can earn several times that in associated implementation and support services fees.

Infosys management told us that they are confident that their long history of working for several of the major UK banks still places them in a strong position to participate in the increasingly necessary re-vamp of core systems. But the hole left by the abandoned Cooperative deal will take some time to fill.