19 October 2017
Ahmed Michla

Financial Services Technology

Ahmed Michla - Sopra Banking Software

4Posts 11,683Views 0Comments

Banks’ Legacy Systems Holding Back Omni-Channel

11 February 2016  |  4165 views  |  1
On my smartphone, I have access to the entire knowledge of the world – or at least the parts that have been digitised.

The question is can your cobbled-together, patched up legacy systems meet the demands of the modern world – and keep up with the smart technology on my phone?

The brutal truth is that banking has done a great job of keeping up with digital, despite the patchwork of mainframe databases, bespoke applications, and third party external packages in place, all kept in check with some middleware. And, it has to; as jettisoning it all and starting over is simply too expensive and disruptive.

That’s in core banking. It’s the same situation in marketing. Different digital channels are operating as separate, silos of information and incompatible customer data sources are made to look as if they all cohere and interoperate. That’s at both the systems and operational level; one team looks after social, another after mobile, another is tasked with monitoring online.

Stop thinking silo

Clearly, the omni and cross-channel delivery banks want to achieve is being constantly undermined by this legacy.

Integration platforms such as Axway can work well, but without the flexibility that a core modern digital platform can provide, banks are still restricted in what they can achieve. No wonder 48% of bankers contacted by integration firm Talend in September 2015 report that the legacy issue is their biggest challenge – one preventing them from realising the potential benefits of big data (http://www.itproportal.com/2015/10/21/legacy-it-systems-holding-back-uk-banks/), let alone omni-channel.

Banks face a real risk of omni-channel meltdown.

There are good reasons why this has happened, of course. Financial products are normally ‘long tailed’, with terms and conditions that mean they tend to require their own dedicated systems, and are not easily incorporated in to general systems. As a result, system consolidation is harder to achieve than in manufacturing or logistics, say. Those firms can solve their siloed systems problems by consolidating onto a SAP or an Oracle ERP – a move made far easier by not having to cater for products that are both complex and have lots of heritage to be managed.

But at least, can we not start to unpick the culture that’s built up as a result of this division at the back end – the silo culture? It’s critical banks grasp the mettle and make the technology and systems changes necessary.

One day, those legacy systems will have to go

To meet that challenge, banks need to focus on the customer experience. Why? Because working backwards from there will help them plan for the legacy IT issue.

Next, they need to think incremental change, not Big Bang! They should implement a promising technology in a small way, modify it and extend it using agile techniques for rapid iteration.

Exploit the Cloud to its limit, using its inherent flexibility to pilot good ideas to see if they work and expanding on them where they look helpful. If you haven’t got a digital front end, build one as quickly as you can as the business case for that is a no-brainer, cutting customer service cost by encouraging self-service being the biggest payback.

These are all things good bank IT departments can and should be doing now. And it will help.

But there is a showdown coming. There will come a tipping point where the cost of papering over the cracks and creating workarounds will create risk greater than the cost of a rebuild. Risk will eventually mean your core systems break down and you get a €100 million fine from the regulator.

Keep iterating and moving forward at your own pace until that day.

But do keep moving forward – as an omni-channel banking proposition that doesn’t work as well as the customer’s iPhone is not an app they’re going to want to download from your ‘store’.

TagsRetail bankingInnovation

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 12 February, 2016, 11:28

Open systems cognoscenti made the same doomsday predictions when Internet Banking emerged 15-20 years ago, Mobile Banking emerged 5 years ago and Faster Payments emerged 8 years ago. But legacy systems have held up so far. Meanwhile, the leading open core banking systems in the world have themselves become 20 years old and themselves risk becoming a part of the legacy landscape very soon:( I know banks that found it quite difficult and costly to enhance their open system CBS to support modern services like instant account opening and social media banking and had to get them developed as addons by third party providers of modern technologies. The patchwork that has been happening on top of mainframe applications has started happening over open system applications also.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from Ahmed

Banks’ Legacy Systems Holding Back Omni-Channel

11 February 2016  |  4165 views  |  1 comments | recomends Recommends 0 TagsRetail bankingInnovation

Instant Payments And The Overlay Service Opportunity

04 January 2016  |  2610 views  |  0 comments | recomends Recommends 0 TagsPaymentsRetail banking

Improving Financial Services Through Cognitive Technologies

24 November 2015  |  2250 views  |  0 comments | recomends Recommends 0 TagsRetail bankingInnovation

The Payment Model In Banking: From Stasis To Dynamic Change

04 November 2015  |  2659 views  |  0 comments | recomends Recommends 0 TagsPaymentsRetail banking

Ahmed's profile

job title Head of Content Strategy
location Leeds
member since 2015
Summary profile See full profile »
As Global Head of Content Strategy at Sopra Banking Software, Ahmed looks at brand harmonisation, business and market development, market research and planning

Ahmed's expertise

Member since 2015
4 posts0 comments
What Ahmed reads
Ahmed's blog archive
2016 (2)2015 (2)

Who's commenting on Ahmed's posts