It is time for rigorous measures in the IT landscape of banks
"The banking industry has entered a period of unprecedented innovation," is the beginning of Forrester's report 'The State of Digital Banking 2018'. This statement is striking and shows that the banking sector is lagging far behind.
Everyone is now familiar with the sky-high expectations and high demands of modern customers. They want a seamless user experience across multiple channels. They want to create a payment order on a desktop and approve it on the go via the app. They want to be able to complete a mortgage application on the way to work on the train. And if you as a service provider do not facilitate this multichannel need, you can be sure your customer is already looking around. Fintech companies circle around them like hungry wolves, so as a financial services provider you have to keep up with the times and be able to serve the customer at his beck and call. But before banks can fully embrace unprecedented innovation, there is one major obstacle they have to overcome: legacy.
Legacy through reactive operation
For banks, customer needs have changed rapidly. Customers want more insight into money matters and better means to communicate with 'their' bank. Fintechs are better able to respond to this because of the manoeuvrability of these (usually still small) organisations. Around the turn of the century, paper was replaced by digital; from that moment on, banks were no longer able to keep up with developments. A little later, the advent of the smartphone made it possible for consumers to manage their money affairs via applications.
In order to keep up with developments, banks operated too reactively and created silos in their IT infrastructure by developing ad hoc functionalities that quickly and fundamentally met expectations. For example, there are banks that have built a digital customer portal using .NET technology, but are unable to make the functionality work on the latest generation of iPhones. Over the years, this approach has resulted in a fragmented IT landscape, full of expensive solutions of which one no longer understands the underlying code or that no longer communicates with the rest. These are legacy debts, which ensure that the lion's share of the budgets is spent on keeping the lights on. Meanwhile, fintech organizations are filling the customer-focused gaping gap that is allowing the sector itself to grow.
What will the bank of the future look like?
The problem is quite clear, but simply naming a problem does not help anyone. Banks must look for a solution that makes them more agile. And they do so by developing a long-term strategy in which clear choices are made about how they deal with legacy. There are roughly three possibilities: replace, rearchitect or rebuild.
In the case of replace, a core system is replaced by a ready-made solution. This will eliminate problems for a short period of time, but in the longer term it will cause the same problems. With rearchitect, the (well-functioning) core is retained, on which a flexible layer is built, allowing customers and employees, for example, to retrieve and process their data in a modernised way. This saves organizations the time and effort of completely rebuilding systems. The last option, rebuild, is a good choice if you want to become future-proof and if you have very specific requirements.
The last two options make an organization more agile, leaving more time and space for responding to customer needs and offering a new, innovative customer experience. Rearchitecting and rebuilding are both possible with a Low-Code development platform. Many people have the perception that Low-Code is only meant to 'build some apps', but nothing could be further from the truth. This is proven by the insurer Scildon among others, that rebuilt its core pension systems completely, faultlessly and with high quality, within twelve months. GarantiBank also shows that digitisation improves the customer experience by moving the core systems to the cloud.
To move from a silo-based approach to an omni-channel customer experience, a bank must make far-reaching choices. Replacing core applications with Low-Code is a decision that is better not taken lightly, but it does enable the organization to realize a shorter time-to-market and improve the customer experience. But also opting for a flexible layer on top of the core can lead to innovation in the banking world. Rigorous is necessary anyway!