7 Key Factors for Successful Banking Platform Modernization
- Outdated back-end systems drive up costs
- New tech must take into account legacy systems
- 91% of businesses still use checks regularly
We've said it before, and we'll say it again: Platform modernization is a critical priority for banks, driven by competitive pressures and the need for greater efficiency. However, these transformative programs are fraught with challenges that even the most cautious leadership teams often underestimate.
As we noted last week, outdated back-end systems drive up costs, as manual, labor-intensive systems rely on humans. Additionally, many developers who are familiar with the systems are retiring, making it difficult to find talent to maintain the systems.
“Most companies don’t realize the full cost of their legacy payments back-office systems,” says Jared Drieling, Chief Innovation Officer at TSG. “It’s not just the ongoing maintenance and labor costs—it’s the missed opportunities to grow and adapt.”
And this applies to not just business, but financial institutions as well.
Soraya Menai, EY EMEIA Financial Services Banking Transformation Leader, and Andy Charman, EY EMEIA Financial Services Banking Technology Leader; Partner, Technology Consulting, Ernst & Young Chartered Accountants, address pitfalls to avoid when modernizing banking systems.
Common pitfalls, they explain, include an overemphasis on new technology without considering legacy system integration; under-appreciating the complexities of legacy system; underestimating the need for ongoing strategic vision, and; adopting a "box-ticking" mentality rather than embracing cultural change.
Considerations for Successful Platform Modernization
With all these challenges, there are several things that leaders need to assess before modernization. Menai and Charman advise that driving successful transformation means considering seven key factors:
- Determine the right strategy - total replacement, component-based upgrades, or building a parallel core system.
- Select appropriate technology platforms that align with the organization's needs.
- Balance business and IT perspectives to ensure collaboration and agility.
- Invest in a strategic project management office to coordinate the transformation.
- Prioritize legacy system decommissioning, which is often overlooked.
- Emphasize continuous improvement through retrospective reviews and research.
- Adapt to a data-driven, customer-centric approach.
With the pace of change accelerating and digital-first competitors gaining ground,,banking platform modernization is essential in order to remain relevant and resilient. By avoiding these common pitfalls and adopting a holistic, strategic approach, banks can unlock the benefits of modernization, including enhanced resilience, sustainable IT cost reductions, and competitive advantages.
This is especially true for banks looking to modernize check processing, as AI technologies are automating the process and achieving over 99% accuracy and read rates. With AFP noting that 91% of business checks continue to use checks and 75% with no plans to discontinue their usage in the next two years, it's more important than ever to leverage the latest technologies.
