Amid the fast-paced evolution of technology, banks have managed to stay current with the ongoing innovations in their field. Transitioning from the era of safes and account books to leveraging data and cloud technology, banks have significantly transformed in terms of their capabilities, assets and services provided to their clients.
In light of this progression, Antony Jenkins, CEO of 10x Banking’s comments referring to banks as ‘museums of technology’ back in June were somewhat surprising. For one thing, his statement does not seem to completely capture the full extent of the digital transformation that banks have undergone despite the challenges of regulation and security concerns. Furthermore, modernising legacy financial systems that have been configured for specific use cases often requires more intricate and meticulous effort than a straightforward or cursory implementation.
If we draw comparisons between banks, especially traditional bricks-and-mortar financial establishments and the systems used by Transport for London (TfL), we can find common ground. The infrastructure of TfL, with its Victorian-era tunnels and inherited rolling stock, could be seen as a ‘transportation museum.’
However, TfL has been consistently modernising, incorporating advanced technology such as tap-in / tap-out ticketing, the development of the Elizabeth Line, and the ongoing renewal and replacement of rolling stock – all of which have helped TfL prepare for today’s commuters and travellers. Much like banks, TfL is merging old and new technology, enabling the organisation to adapt and evolve to effectively cater to the changing demands of its contemporary customers.
In the case of banks, especially those with large legacy IT systems, the question of whether all systems need a technology update is equally as complex as updating transport systems. This is due to the banking sector’s frequent changes in products and services, along with the need to comply with constantly evolving regulations. Consequently, enhancing the IT infrastructure in the banking sector is a continuous process, driven by changing needs but perhaps bolstered by a new wave of fintech that can evolve both business and customer experiences.
Nonetheless, the transformation of banks in the past decade or so has demonstrated that traditional IT systems can exist alongside state-of-the-art cloud technology, delivering sturdy and adaptable solutions for digital and mobile banking as well as data analysis.
Ready for an upgrade
Banks aiming to modernise digitally should take a measured approach, focusing on business needs, cost-efficiency, and new revenue opportunities. The primary focus of digital modernisation should be to address the business needs of the bank. This could include improving customer service, streamlining operations or enhancing security measures. While addressing these things is important, so is the fact that updating legacy systems is a costly endeavour. Banks need to ensure that works are necessary and there will be a significant return on investment when integrating new technologies into their systems. Some examples of these returns could be increased savings from more efficient processes or the ability to offer new services that generate additional revenue.
Retiring legacy systems and migrating to more modern platforms, such as the cloud, can provide numerous benefits for businesses. These benefits extend beyond simply upgrading technology; they can also lead to significant improvements in efficiency, cost savings and customer service.
However, the process of assessing and migrating thousands of systems is not a trivial task. Adopting technology for its own sake is rarely advised. It should be carefully considered and may only become strictly necessary when the cost of maintaining legacy systems outweighs the benefits of keeping them. This requires time and resources to understand the impact of outdated technology on business operations. Without this thorough evaluation, businesses risk increasing costs due to potential inefficiencies or compatibility issues that may arise during the migration process.
Moreover, a direct ‘lift-and-shift’ migration to the cloud without re-architecting or optimising the applications can result in missed opportunities. Re-architecting involves modifying the application to better suit the cloud environment, which can lead to major efficiency gains and improved customer service. Similarly, optimisations during the migration process can help businesses take full advantage of cloud-native capabilities, such as scalability and elasticity.
While retiring legacy systems and migrating to the cloud can offer substantial benefits, it’s crucial for businesses to conduct a comprehensive assessment of their existing systems and plan their migration strategy carefully. This will help them avoid potential pitfalls and ensure they fully leverage the advantages of modern cloud technology. Banks can, and will, tap into new innovations and technologies. However, digital transformation in banking needs a well-considered strategy accounting for regulations, business priorities and customer needs.
The metaphor of banks as ‘museums of technology’ tends to downplay the complexity and restrictiveness of legacy systems that banks must navigate daily. Upgrading these systems presents complications that require due consideration to overcome, and which guarantee that the final result will be appreciated.