Introduction
It’s time for banks to leave legacy architecture behind and embrace a more competitive, responsive, and agile future – and here’s how to get started.
The traditional high street bank is seen by many as the first port of call for private and public financial services, but behind the scenes, many banks are struggling to modernise their IT estate.
In many cases, it’s due to their legacy architectures. For decades, traditional banks have relied on mainframe computers running programmes with the types of user interfaces that many of us last saw decades ago.
Their architectures are often disconnected, housing disparate data across the organisation that hinders decision making and prevents many banks from achieving a single view of their customers.
Trying to connect new systems into these architectures can cause even greater challenges, too. A lot of the time, the APIs needed to connect new systems with legacy architectures don’t exist. Also, the skills needed to manage the legacy architectures present in many banks are becoming increasingly difficult to find in today’s talent pool.
While many banks’ legacy architectures still remain reliable, they’re often holding them back from keeping pace with rapid market changes. And there are new pressures in the market forcing them to transform their existing estates.
CONNECTED, DATA-DRIVEN EXPERIENCES HAVE SHIFTED EXPECTATIONS
Major online platforms delivered by brands across sectors such as retail and entertainment have quickly normalised personalised, connected, and data-driven experiences. These experiences often offer frictionless service, limit customer waiting times, and prevent the need for repetitive manual interactions to perform a transaction.
Naturally, customers – both consumer and corporate – have begun to expect these kinds of connected service experiences from all brands, including banks. And the pandemic only accelerated this demand as we shifted to digital-first service out of necessity.
Fail to deliver on these expectations, and you risk losing them to a competitor – in fact, in the US, 70% of under 55s say they’d switch banks just to get a superior experience.
And as new mobile payment methods make it easier than ever to spend money, cloud-native fintechs are beginning to capitalise on emerging consumer habits.
Many fintechs are employing cloud-native and AI-powered services to speed up loan decisions, empower customers with seamless self-service tools, and bring new products to market faster that accurately reflect current trends such as rising interest rates. In many cases, the shifting expectations and growing pressures from innovative competitors are prompting traditional banks to start addressing the legacy architecture that’s held them back from competing in recent years. In fact, 85% of global banking decision makers are pursuing or plan to pursue digital transformation.
If you’re in the position of addressing your legacy architecture, it can be difficult to know how to get started. But below, I’ve captured a few of key things to consider that can make it a little easier.
HOW TO RALLY SUPPORT FOR MODERNISATION
One of the key points to remember when addressing your legacy architecture is that it’s not an easy task – and you’ll likely need support during the process.
Crucially, you’ll need to have a clear vision of your modernisation objectives. Saving money, improving customer experiences, and keeping pace with the competition are all credible drivers, but they need to make sense for your organisation.
For example, you may find that increasing customer satisfaction and reducing costs are at odds with each other, so you’ll want to think hard about what you want to achieve. You also need to set a vision that everyone can rally around – such as financial growth – to encourage engagement throughout your organisation.
With that said, digital transformation takes time and money. So, be prepared to receive pushback from senior decision-makers, many of whom will see IT as a cost-centre – not a value driver. To help change their perception, you could to start simple with an initial proof of concept that demonstrates immediate, measurable value.
I recommend choosing a low-risk, back-end process to modernise. This could include automating parts of the claims process to make it more efficient, ID matching across multiple systems to build a holistic customer view, and integrating payments into claims to speed up claims processing. All of these changes will have an impact on efficiency, and ultimately provide a better customer experience. On the other hand, if you try to modernise a front-end platform, it’ll still be running on the same legacy systems underneath, negating the benefits of a customer-facing makeover.
Importantly, when approaching this task, you’ll want to base your proof of concept on a simple product that won’t require a huge amount of time or effort to get up and running.
IDENTIFY THE RIGHT PARTNER FOR YOUR JOURNEY
In my experience, many financial services organisations that attempt wide-scale transformations alone end up spending more time and money than those who find the right delivery partner. They also risk spending a considerable amount only to realise they lack the in-house skills and resources to realise their ambitions.
It’s crucial to find a partner who can help with ideation of your transformation project and support your strategic planning. Importantly, they need to understand your industry and its granular systems and processes. They also need to work closely with IT to identify quick wins and implement new, evergreen cloud solutions without disrupting day-to-day operations.
There’s no doubt that tackling legacy architecture is a challenging process. But with the right partner, you can connect and unlock your siloed data and empower everyone in your organisation with a single view of your customers, modernise your legacy backend processes, and position your bank as a digital-first competitor.
GET IN TOUCH TO SEE HOW WE CAN HELP
At Endava, we have consultants with decades of experience helping banks connect and modernise their legacy architectures.
Get in touch with us today to unpack your legacy challenges and kickstart your journey towards a more efficient digital future.