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10 March, 2022
For more than half a century, banks have been at the frontier in embracing automation and introducing digital systems to gain operational excellence. Today, their demands have grown and banks now look beyond their legacy core banking systems that have been, to date, leveraged for conventional services such as opening up new accounts, processing deposits and transactions, and initializing loans.
Digital innovations are disrupting the marketplace and the continuous evolvement and spurt of technologies have now radically put these legacy systems back in the race. New players are beginning to enter the market without the burden of outdated technologies.
The rise of Fintech startups, teeth-gritting competition, and the fast-paced digital momentum have exponentially elevated consumer expectations and have forced banks to modernize their digital assets.
What is Core Banking Modernization?
Core banking modernization is the replacement, upgrade or outsourcing of a banks’ existing core banking systems and IT environment, which can be scaled and sustained to perform mission-critical operations for the bank, empowering it to harness the power of advancements in technology and design.
Banking Yesterday, Banking Today, and Banking Tomorrow
The core banking solutions of the future shall accommodate global perspectives so that it gets easier for the banks to deploy systems across multiple geographies. In comparison with the legacy systems, these new systems shall be more lean, scalable, process-centric, economical, and deployed over the cloud which shall empower banks to be agile and meet the changing business requirements.
Evolution of Core Banking Systems by Decade
In pursuit of embracing innovative features and scaling customer experience, the banks are at a disposition where they seem to be keen on accepting data-driven and cutting-edge technologies, and lean and agile processes. This transformation is disruptive and banks need to strike the right balance between revitalizing their core systems vis-à-vis creating new products and services to thrive in a digital society.
To address the challenges of the near future and the next normal, it is necessary to conduct a thorough assessment of the current core banking platform and external environments. Modernizing legacy applications is a critical process and it requires a disciplined and well-thought approach. Banks will need to understand whether a full replacement or a systematic upgrade will offer a better value-to-risk ratio.
Modernization Objectives and Drivers
Core banking modernization is driven by the need to respond to internal business imperatives such as growth and efficiency as well as the external ones such as regulations, competition, and customer experience expectations.
As new banking products, channels, and technologies enter the marketplace, the complexity and the necessity to modernize old legacy core banking systems becomes more crucial. The internal and the external drivers pushing the banks to transform are worth consideration.
Internal Drivers:
External Drivers:
Objectives of Core Systems Transformation
Best Practices in Core Banking Modernization
Legacy modernization will empower traditional banks in performing a wide range of modern banking services which shall be robust and scalable. Moreover, the digitalization of traditional banks shall address the changing needs of customers through seamless digital services and drive excellent customer experience.
Legacy Modernization Benefits
Impact Areas of Legacy Modernization
The Way Forward
As the world tunes in to the new normal, the solution to legacy systems is the modernization of core banking systems. Banks looking to enhance their IT efficiency are sorting to innovative technologies of AI/ML, IoT, Cloud Computing, Blockchain, and RPA. The integration of new technologies shall help in unlocking the growth and revenue potentials of banks whilst building a loyal and satisfied customer base. It also enables real-time systems that are agile, scalable, flexible, and cost-effective.
Now is not the time to mull over the prospect of banking legacy software modernization. It is only the survival of the fittest, and to stay fit, banks and financial institutions must weather the storm and adapt to the new rapid evolution of Fintech. This however can’t be a solitary journey!
Get in touch with NeoSOFT's Application Modernization Experts to get a free consultation towards your first step in the modernization journey.