Modernising banking despite legacy
Eli Rosner, chief product & technology officer, Finastra on how banks can implement change while protecting their businesses and core processing systems
How can banks implement change without putting at risk the stable operation of services and core systems? In the world we live in, banks are required to innovate to keep their customers happy, but they are held back by layers of legacy technology which inhibit their strategy to evolve and transform. This question, and many more, have been tackled in a whitepaper we commissioned called: “The Innovation Game: Escaping Legacy with new technology.”
We interviewed global finance and technology leaders and C-level executives from some of the world’s largest banks to discuss their latest tactics and approaches to applying innovation, while also protecting their businesses and core processing systems.
After exploring new technologies and systems, we summarised the key findings to provide IT professionals with a clear understanding of the strategies conducted by their peers to sustain their business in this ever-changing world.
Customers are at the heart of every organisation. Right now, people witness innovation on a daily basis from digitally-enabled providers. However, they are not seeing the same speed and agility in the services and solutions provided by their banks. The standards have been raised by Fintechs, and banks are required to follow suit or else they risk becoming obsolete.
If you look at successful companies today, from Google to Apple, you will see that all of them have created open, digital cloud-based ecosystems to interact with their clients and add value. In contrast, banks have operated with huge internal closed systems run by legacy technology.
Banks need to apply technology that can help their customers in their day-to-day lives. The use of open APIs and cloud platforms will be essential for banks in their quest to develop new systems and escape the status quo.
Replacing legacy systems is clearly a risk, as migrating old core banking systems to new platforms could lead to public meltdowns – as we’ve seen in recent years. The idea of mixing legacy systems and agile technology together in the future will complement the banks’ offering while they continue their migration strategies and move to new modular technologies.
Speed versus safety
When adopting new technology and launching new innovative services, speed to market is vital. Challenger banks have an advantage over other banks because they are starting with a clean slate. This competition creates tension for incumbent banks as they’re required to integrate technology, while at the same time ensuring no disruption to their existing operations.
This calls for an evolutionary approach rather than a revolutionary one, to avoid the risks associated with wholesale migrations. By protecting their production environment, banks will be able to move swiftly from an idea into production in a safe and timely manner.
Banks cannot afford to lose customers by introducing risk, and that’s why they are unwilling to compromise by allowing technology to be the cause of future crisis. All practices should go through a chain of robust testing and risk evaluation processes.
The idea of ‘Platformification’ is considered an increasingly viable business model to address the limitations of legacy infrastructure through the application of a platform-based strategy. By using APIs and cloud-based systems and services to design new applications and tools outside of the legacy systems, banks will be able to utilise new technologies to cater to customer demands for innovation and cut costs.
Over the past few years, banks’ attitude to the cloud has changed from a ‘no go’ to ‘why not’, albeit with specific conditions. Moving forward – and with the maturity of technology – banks can adopt a more cost-effective hybrid approach which, in turn, creates huge cost saving in hardware and minimises security concerns.
One more advance that is increasingly popular with banks is low code/no code development. Low code could enable people with limited technical knowledge to access data easily to build new products and services within a controlled environment.
The human touch
The human and cultural elements involved in processes that require innovation or the implementation of new techniques are a commonly held concern amongst bankers. However, all banks realise that there will be some practical consideration in terms of the transition from legacy to digital.
Amongst all this change, recruiting the right staff will be a must. Banks will need to look at how they will nurture their existing workforce and motivate them to transition to a new environment. That way, employees will be able to contribute and deliver in a dynamic, fast-changing environment. The culture of the organisation cannot be underestimated. Never has it been more important for innovation to be taken seriously and driven from the top down, to ensure everyone is on board to better serve the next generation of financial services.