Much has been written about the pitfalls of banking technology slipping into legacy category, and today, even neobanks and fintechs are not immune to outdated, overly complicated tech stacks. Maintaining modernity is difficult, it requires a proactive approach by the entire company that goes beyond simply updating the core technology. With the right strategy, companies will find that their technology naturally evolves with them.
Tuum has recently partnered with a leading fintech industry expert to publish a whitepaper How to avoid building another legacy bank. This whitepaper is an exploration on the cultural and technological changes any financial institution must make to ensure their business becomes and remains future-proof.
Facing a challenging and rapidly developing market, financial services providers must be proactive to remain relevant. Our whitepaper explores how to avoid the pitfalls and how to truly gain a platform for future growth and prosperity. A platform that provides:
- The flexibility to respond to market and customer needs;
- The ability to deliver a much better customer experience;
- Support for innovation, including embedding products and services in third-party ecosystems.
Below we have highlighted three of the key findings from our piece.
1. Updating banking technology is only half the battle
Replacing legacy core banking systems with modern ones requires more than just a technological update in order to achieve true transformative change. The move away from legacy technologies also requires a departure from legacy mindsets, starting with the company leadership and permeating throughout the business.
Innovative initiatives cannot be compartmentalised within the business – there must be consensus and buy-in from all stakeholders from the beginning. Appointing a Chief Innovation Officer or establishing an innovation lab will not have the desired effect if the work of these people is not coordinated with the wider organisation. Additionally, work should be done to identify and resolve any pockets of resistance (most often found in the internal IT teams).
Innovation needs to be done with the business, not to the business.
A change in systems also requires a change in processes. Old ways of working become obsolete, and the replacement project should be seen as a chance to reengineer and improve efficiency. The following areas in particular are subject to a buildup of processes and duplication of effort over time, and thus would benefit from a more streamlined approach:
- KYC & AML
In addition to processes, products should also be examined for areas of unnecessary duplication.
2. There’s a better way to do tech procurement in banking
The RFI and RFP processes that dominate tech procurement in banking need a rethink. The selection process is typically long and drawn-out, with particular emphasis given to the RFP – which often does not give buyers the full picture. In the modern, digital age, a more flexible, hands-on approach is needed.
Presentations, workshops, proof of concepts and cultural fit analysis tend to come later in the process, but these interactions tend to produce the most pertinent information. Suppliers should be able to give prospective clients early hands-on access to their systems via a cloud-based sandbox. By doing so, the system can be thoroughly assessed in a more streamlined manner, and the purchasing decision can be made with more clarity.
3. Technology should evolve with your business
For a bank’s tech stack to be truly future-proof, it must be able to evolve with the business. For those with legacy systems, the existing one may have been in place for several decades and the new one, ideally, will also have a long lifespan. There must be flexibility to extend the functionality of the platform as and when it is required.
To ensure the new system (and its supplier) is truly future-proof, the following must be considered:
- Does the supplier’s vision align with that of the bank;
- Do they have strong banking domain knowledge;
- Can the senior management articulate their core values and direction;
- How committed will the supplier be to make a success of the implementation and build a long-lasting relationship?
By asking the right questions, banks can ensure they select a system that is robust, long-lasting, and flexible enough to enable a ‘plug-and-play’ approach. Ultimately, this will allow them to grow, innovate and prosper.
Want to get all the insights? Download the whitepaper