Despite the considerable risk involved in removing legacy systems, not all big banks are hesitant to attempt to combat the problem, including NAB. Yet NAB’s implementation of a new core banking platform has been accused as the reason for the multiple online
and mobile systems failures the bank has encountered this month. Though NAB are actively attempting to rid their system of the cumbersome legacy issues, the process of the change has presented new difficulties that are likely to affect the trust customers
have in the bank, and their quality of service. Similar incidents seem likely to increase for banks with large systems requiring a complex overhaul, due to the size, scope and timescale of this change. The reputational damage system failure can incur works
in the favourite of smaller fintechs and incumbent banks, who are unlikely to suffer such outages due to operating on far more reliable architecture. With the risk of upgrading been proven by such incidents, the notoriously cautious established big banks may
become even less likely to consider addressing their core system issues, limiting the extent to which they can take advantage of digital products and transaction increases.
Yet system failures are far from exclusive to banks attempting to combat the issue, with big banks RBS and HSBC facing similar technical difficulties this year due to the weakness and strain on their legacy systems. Both types of system failures, whether
from upgrading or refusal to upgrade, are likely to impact customer loyalty, particularly that of Millennials who are content to change their bank more frequently than older generations. Paired with the increasing competition in the market from digital banks
free from the limitations of legacy systems and able to innovate in-line with the changing customer demands, the immense difficulty faced by banks “too big to scale” could lead to a declining customer base and inability to offer competitive products.
Big banks’ architecture is already struggling under the pressure of changing banking habits, and the growing preference for digital options renders change imperative. Yet the risk involved for banks of such scale is of considerable consequence, but waiting
too long to upgrade will only aggravate the problem. Big Banks appear to be facing a Catch-22 – upgrade as soon as they can in order to remain competitive and encounter issues like that of NAB, or allow caution to win out and not attempt to rectify their scaling
issue until it becomes impossible to ignore, by which point they may have fallen too far behind competitors for upgrading to be of use. For either option, both face the threat of not having enough time to overhaul their system to compete with new digital banks,
falling too far behind to catch up.
Clearly, scalability has far reaching consequences and is crucial to a bank’s continued success in an increasingly digital world, where technology is advancing faster than ever before. The multitude of possibilities new innovation brings create new problems
for large banks; where size was once an advantage it is now an obstacle. Being “too big to scale” is as great a threat to a bank’s survival as new competitors saturate the market, and the inability to scale could severely alter the banking landscape.