Transforming Technology – Legacy or Limitation?
- Some banks are struggling to modernize outdated systems.
- Customer expectations demand that banks keep up.
- Many financial institutions are able to modernize through various partnerships
According to a recent Samsung Business Insights article, banks are struggling to modernize their outdated legacy technology systems, which are holding them back from delivering the seamless, personalized customer experiences that today's consumers expect and demand. In fact, a survey found that over 53% of bank executives are concerned about their reliance on legacy infrastructure and the growing "technology debt" it creates.
As the article reports, legacy systems are expensive, labor-intensive, and difficult to secure, making it challenging for banks to integrate new AI technologies that could streamline workflows and improve the customer experience. The Capgemini World Retail Banking Report 2024 found that legacy systems often prevent banks from taking advantage of AI to automate back-office tasks and allow employees to focus on higher-value strategic work.
Different Approaches
The article goes on to note that banks are tackling this challenge in various ways, with the most popular approach being "incremental change" - making gradual updates to existing legacy systems. Others are pursuing "progressive modernization" by using digital wrappers and APIs to update legacy infrastructure. The most ambitious banks are opting for a "total replacement" of their core systems, which enables faster realization of modernization benefits but is also the most complex and disruptive path.
Traditional systems are expensive, labor-intensive and challenging to keep secure amidst the current IT talent shortage. According to the Capgemini World Retail Banking Report 2024, legacy systems create complexities with integrating new AI technologies, which are often incompatible with outdated processes. Banks that have not addressed their technical debt may miss out on valuable opportunities to use AI to streamline employee workflows and improve the customer experience.
Whichever approach banks take, the imperative is clear: they must address their technical debt and transform their legacy technology to stay competitive in an era of rising customer expectations and rapidly evolving banking needs. Banks that succeed in this effort will be well-positioned to deliver exceptional customer experiences, empower their employees, and drive sustainable growth.
Legacy systems can also hold banks back from delivering a modern customer experience. According to an IDC survey sponsored by Samsung, Bridging the Digital–Human Gap in Banking, 83% of customers expect seamless information across mobile, online and in-person interactions. Banks that still struggle with legacy systems may have difficulty enabling the kind of omnichannel integration required to effectively engage customers on all the channels they use today.
Platform Modernization Through Partnerships
Fortunately, many financial institutions are able to modernize through different partnerships. For larger financial institutions -- which possess a wealth of internal resources, these financial institutions are able to work directly with fintechs like OrboGraph to upgrade their systems from legacy technology (i.e. OCR for check recognition) to AI-powered technologies that achieve read rates exceeding 99% with 99.5% accuracy on checks.
For mid-size, regional, and smaller community banks that lack those internal resources, their service bureaus and core processors have already done the integration work. Fintechs partner directly with them to integrate their technologies, enabling bank customers to leverage them through their platforms -- the way many banks are enabling OrboGraph's Anywhere Recognition with OrbNet AI without draining internal resources to deploy directly.
While it may seem daunting to phase out legacy systems, banks of all sizes can be assured that these fintech partners, service bureaus, and core processors have done much of the leg work for them, allowing banks to seamlessly deploy the technologies by upgrading their systems to the latest and greatest.