Banking’s digital metamorphosis: navigating innovation in a legacy landscape

Richard Kalas, Client Solutions Director for Retail Banking at GFT

 

In the ever-changing landscape of technological progress in society, banks have done well to keep pace with the constant innovation happening across their sector. From the days of vaults and ledgers to harnessing the power of data and cloud technology, banks have come a long way in terms of functionality, resources, and their offering to customers.

Amidst this impressive evolution, it was therefore disappointing to hear Antony Jenkins, CEO of 10x Banking’s remarks about banks being ‘museums of technology’, which failed to capture the full reality of financial institutions’ digital transformation progress.

It is useful to draw a parallel between the banks, particularly traditional high street financial institutions, and a complex infrastructure of system, for example Transport for London (TfL), since both entities share certain similarities. TfL’s infrastructure, with its Victorian tunnels and legacy rolling stock, can be likened to a ‘museum of transportation’. Yet, TfL has undertaken ongoing modernisation, integrating highly sophisticated technology such as tap in/tap out ticketing, the development of the newest Elizabeth Line, and the continuous renewal and replacement of rolling stock – all of which have made TfL fit for purpose for today’s commuters and travellers. TfL, much like banks, is combining both legacy and modern technology, allowing the organisation to maintain existing operations and continually evolve to effectively meet the needs of its modern-day customers.

For banks, particularly those with an extensive legacy IT estate, the challenge of whether all systems require a technology refresh is considerably more intricate compared to that of a transportation network. The banking sector frequently changes its products and services, and faces emerging competitors, whilst needing to adhere to ever-changing regulations. As a result, optimising IT infrastructure is an ongoing process, driven by evolving requirements but constrained by budgetary considerations.

However, the modernisation of banks over the last decade has shown that legacy IT estates can coexist with cutting-edge cloud-based technology, providing robust and scalable solutions for online and mobile banking as well as data analytics.

Effective digital transformation in banking

Banks seeking to modernise their digital estate should adopt a prudent approach, prioritising overarching business requirements, cost efficiency, and the exploration of new revenue-generating avenues. The pursuit of technology purely for the sake of the technology is seldom a good idea. Every implementation should be carefully evaluated for its cost and benefits, unless it is being introduced to replace a creaking legacy situation, or the costs of maintaining the out-of-date tech overtakes its benefit.

Businesses often benefit more from the retirement of older legacy systems than solely through refreshing technology. In itself, analysing the thousands of systems and the impact that outdated technology is having can take time and resources. However, without this assessment, the process of moving an inefficient estate entirely from an ‘owned’ datacentre to the cloud can result in increased consumption costs. Businesses will also miss out on the benefits arising from the optimisation and re-architecture of applications that would normally be part of the migration process, and which can create large improvements in efficiency and customer service.

It is also important to recognise that banks operate in a highly regulated environment, and keeping pace with new innovations emerging in the industry requires a considered approach to their adoption.

Final thoughts 

Banks will always have access to new innovations and technologies. But any digital transformation project in the banking sector requires a carefully thought-out plan that takes into consideration wider regulation, the bank’s own business priorities and the evolving needs of its customers.

Perhaps, when contemplating banks as ‘museums of technology’, we should reflect on the intricate and constrained tunnels that millions of passengers traverse daily, whilst also using the latest smart technology, and how the two can co-exist for the benefit of all.

spot_img
Ad Slider
Ad 1
Ad 2
Ad 3
Ad 4
Ad 5

Subscribe to our Newsletter