Banking technology can continue to grow and evolve, but the pillars of success remain the same. Successful banking modernization programs and Flexcube implementation, regardless of size or scope, must be well-planned and consistently executed. You must provide value for your organization, your customers, and your partners. You also need to be able to adapt and adjust as trends in technology and customer expectations evolve.
This article talks about the principles of successful banking technology modernization programs and how banks around the world are successfully building their technology capabilities.
Leave data at the edge, and build a flexible data platform over time rather than starting from scratch
Does your bank have a defined set of data standards? Are your data standards consistent and established with a single source of data for each entity?
In many banks, the answers to these questions dictate the success of their technology modernization initiatives. Successful bank modernization programs take advantage of the wealth of data available to them but don’t make the mistake of trying to build everything from scratch.
Hollow out the core, and migrate customization to microservices
There is debate about whether a bank should migrate to a core banking system as a single monolithic system or as a set of microservices.
Designing a bank’s core system as monolithic at the outset may make sense in some situations, but in many environments, there will be a better short-term and long-term approach to creating the core banking system as a set of loosely coupled services that has a clearly defined interface.
Do not perform an arbitrary system modernization, but clearly categorize and modernize capabilities required for customer journeys
The most successful modernizations move away from the waterfall approach to one in which capabilities are categorized by the specific customer journeys they need to support. The project team then works iteratively to modernize each step of the journey.
A systematic approach to this process would include considering all the activities required to perform a customer journey, identifying the technology platform capabilities required to support each activity, and then categorizing the activities into journey groups that can be addressed within a single cycle.
Prioritize integration over simplifying systems
Porting legacy applications from a mainframe to an open systems platform, like Flexcube increases the number of interfaces that must be managed. Many organizations believe they can avoid this by simplifying the application environment by reducing platforms and consolidating database engines. However, such simplification is rarely possible because of the cost of redeveloping applications.
Instead, organizations should focus on improving integration between platforms and applications, including:
Move all non-differentiating functions to SaaS
When deploying a new system, organizations need to change more than just the software. If they are successful, they will experience growth, which will change the way their organization needs to work. If they can consolidate all non-differentiating functions onto a Software-as-a-Service (SaaS) solution, they can reduce the amount of change that has to occur in their environment.
Build global platforms, but allow local customization
As the world becomes increasingly interconnected, many organizations will need to deploy multiple platforms in multiple geographies. Building global platforms that meet the needs of individual regions can increase the organization’s flexibility but can also lead to cost and complexity.
Instead, organizations should make global platforms available but allow local organizations to customize their platforms. This will allow them to optimize their platforms while limiting the cost of development and management.
The new cost paradigm in banking legacy modernization
Globalization, financial innovation, and customer expectations are forcing banks to evaluate their legacy systems to improve speed and efficiency and to improve and extend their functionality. Banks will have to create a common platform to combine efficiency with flexibility.
Such a platform will have to address three key technical challenges:
Engineering excellence with the proper mix of talent
This capability is key to defining the requirements of the new platform and will be the most difficult to get right. The new engineering talent will need to understand the business, have a good understanding of the bank’s current and future needs, and be able to integrate operations, data, and business processes.
A true platform-oriented operation model for all teams
It is important that the new development organization be properly structured to ensure effective project execution. The organization will need to be able to effectively manage the complexity of each project, and its team must include representation from each of the key business areas, such as IT and operations.
Cloud-native architecture with automated infrastructure and public cloud at scale
The new platform should leverage “cloud-native architecture” and be supported by an automated infrastructure management platform to help ensure greater speed and flexibility in delivering solutions. One of the key drivers for this is the trend for more digital transformation, underpinned by an expansion in the use of cloud-based applications, which are relatively easy to deploy and maintain.
Common Pitfalls of Banking Legacy Modernization
Legacy modernization projects are also often plagued by several key challenges. These challenges can be addressed through a new platform that is designed to simplify workload migration, reduce risk, and ensure a successful transformation.
The key challenges that organizations face from legacy modernization projects include:
Lack of transparency in digital transformation processes
The IT department does not have a clear understanding of how to plan and manage a digital transformation initiative. Often, IT leaders may not even be aware of the nuances of the initiative, leading to an inefficient and ineffective transformation.
Misunderstanding of the goals of modernization
Most legacy modernization projects are conducted without a clear understanding of why the project is being performed. The lack of clarity in the objectives of the project leads to an ineffective transformation.
Implementation challenges and unintended consequences
IT failures often stem from the inability to understand underlying business processes and problems. This is due to difficulties in understanding the gaps between the old and new systems.
Resistance to change by employees and customers
When employees are forced to use new technology that is not user-friendly, they often become less productive or even absent from work. When customers are forced to use new systems, they often become frustrated and may stop using the new systems.
Lack of communication and collaboration
A lack of communication can lead to a lack of collaboration among employees. For example, employees who do not know why they are using a new system or what the new system is being used for may not be motivated to use the new system and will often avoid using it.
It is found that timely modernization of banking enterprise architecture to Oracle Flexcube makes business processes more efficient, provides a competitive advantage, and allows for the extension of existing capabilities while adopting new technology. Without a doubt, prioritizing core banking systems modernization can make your business stable, improve customer retention, and stay competitive in the market.