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How Symbiosis unlocks the true potential of banking technology

Technology transforms. This is clear. Consider the device you are reading this article on. The chances are high that you are reading it on a mobile device. In fact, as of January 2024, 59% of all website traffic comes from mobile, up from 6% in 2011. And while the first mobile phone call was made way back in 1973, by 2007 access to good quality 3G coverage was still limited to less than 10% of the worldwide subscriber base. The pace of change is accelerating. While it took 75 years for fixed line phones to reach 100 million people, and 16 years for mobile phones to do it, it took only 2 years for Apple’s App Store and 9 months for TikTok to achieve this penetration.

Clearly not all technologies are equal – the adoption of phones depended on the rollout of a lot of physical equipment that wasn’t already in place, whereas later technologies built on existing infrastructure – electricity, IT, internet, mobile and so on. While the rates of change and adoption may be accelerating that doesn’t necessarily mean that older technologies are being completely phased out. Much has been written about the impact of “cord-cutting” on US cable TV companies – 4.9 million people cut the cord in 2023, bringing the total to 39.3 million. But does this mean that one technology will completely replace another technology? Mobiles have not (yet) killed the landline. There are 43 million fax machines in use around the world, sending an estimated 9 billion faxes each year. Therein lies the challenge – new technologies are coming faster and faster, but they are not completely replacing the old technologies.

Cash is king?

Consider the impact on financial services. ATMs and phone banking did not kill branches. Digital payments did not kill cheques. Cash may no longer be “king”, but the king is not dead. What does it all mean? First, we need to recognize that new technologies / new demands will emerge. Next, that they are unlikely to be complete replacements. Thirdly, that the pace of change will continue to increase. Little wonder then that in an era where technology promises boundless possibilities, many established retail banks find themselves inhibited, not enabled, by their colossal technology investments. Despite pouring billions into digital transformation initiatives, these institutions often grapple with complex, unwieldy systems, hindering rather than propelling progress. The result? A fertile ground for nimble challenger banks to gain unprecedented traction in the market.

The costly dilemma of traditional approaches

Historically, retail banks have employed what's known as the "rip & replace" strategy—a high-profile, high-stakes digital transformation approach. This involves replacing existing core banking systems with new, cutting-edge solutions. On paper, it seems like the logical path to embracing the promises of technology. However, the reality often falls short, and the risks associated with such massive overhauls are frequently underestimated.

While the intent behind these initiatives is to enable innovation and enhance customer experiences, the execution proves to be a risky venture. The "rip & replace" strategy is known for its high costs, prolonged timelines, and the potential to disrupt critical banking operations. It's an all-or-nothing gamble that can leave established banks with extensive downtime, heightened vulnerability, and, ironically, inhibitions rather than enhancements in their technological landscape. It has its place, it can and does work, especially when executed by experts, but it is risky. There must be a better way.

Symbiosis: A better way forward

Amidst this tech-induced dilemma, a beacon of hope arises—Symbiosis. In this strategy, a next-generation core banking system is deployed alongside the existing infrastructure. With this approach banks can retain the benefits of their established systems while strategically embracing the future. It is not about discarding the past but rather about orchestrating a harmonious dance between tradition and innovation. It is not about replacing like with like but rather adding new capabilities fast, leaving what is working in place.

Unlocking the true potential of banking technology

Symbiosis promises to enable, rather than inhibit, retail banks’ ambitions. While minimizing disruption, banks can rapidly introduce new capabilities without disturbing the intricate web of legacy systems. This approach aligns with the ethos of being agile, responsive, and adaptive—an imperative in the dynamic landscape of modern banking.

Furthermore, symbiosis addresses the challenges associated with traditional strategies by reducing the risks, costs, and downtime typically associated with large-scale transformations. It is a controlled (re)evolution, offering a middle ground between the stagnant or at best, slowly-creep forward offered by legacy systems and the all-or-nothing, risk offered by bank-wide transformations.

Wait: Have we been here before?

Detractors might argue that the technology industry held out this tantalizing vision of the future before. A future where banks can move away from their costly, inflexible, impossible to upgrade legacy infrastructures quickly, easily and in a phased manner. There is some truth in this – promises like this were made in the past. However, in the past, the gap between what the technology was truly capable of and what the banks needed, meant that phased migration projects were complex, time consuming and prone to scope creep. Indeed, the core banking systems themselves often weren’t up to the task – lacking either functional or architectural sophistication. Put simply they either didn’t cover enough of the banking business or their integration methods were not advanced enough to deliver what customers needed.

The purveyors of a new breed of next-gen core banking systems claim to have solved these challenges. They say that their systems can rapidly deliver banking products and services and seamlessly integrate into the existing IT landscape. As is always the case, the devil is in the detail. How they do, what they claim to do is vitally important for success. While it is true that new technologies make it faster than ever before to create new banking products – low code / no code solutions are intrinsically faster than arcane, legacy programming languages – creating new banking products requires a deep understanding of and experience in banking. Put simply they need to know what to build. The ideal solution is one that combines rich, broad and deep banking functionality with advanced technology. A solution that has the banking capabilities built-in, ready to deploy immediately and has the architecture needed for a digital world. A solution that can rapidly plug, and unplug, apps from ecosystem partners, bringing new capabilities online fast. But crucially, a solution that does not depend on a plethora of 3rd parties to deliver standard banking products and services. A solution that does not replicate, using today’s technologies, the site-specific, impossible to upgrade, problems from the past.

A call to embrace Symbiosis

As the banking industry grapples with the paradox of technology, it is time for established banks to break free from the chains of the past. Symbiosis offers a better way—a strategic, nuanced, and controlled evolution that unlocks the true promise of banking technology.

The challenge is not in abandoning technology but in redefining our relationship with it. By embracing Symbiosis, retail banks can position themselves as innovators rather than inhibitors, ensuring they not only catch up with the challengers but also lead the charge in delivering the promises that technology holds. The future of banking does not rely on heart transplants or radical overhauls; it is in the delicate dance between tradition and innovation that Symbiosis affords.

 

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Siobhan Byron

Siobhan Byron

EVP, Universal Banking

Finastra

Member since

22 Jan

Location

Mississauga

Blog posts

3

This post is from a series of posts in the group:

Banking Strategy, Digital and Transformation

Latest thinking in respect to Banking Strategy, Digital and Transformation. Harnessing our collective wisdom to make banking better. Ambrish Parmar


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