There is an industry-wide trend that is not at all surprising; banks ditching legacy core vendors is the tipping point in what is actually a fundamental shift in how banking has worked in the past and how it will work in the future driven by – like most other similar shifts – technology.
Banking systems were originally built in silos with complicated systems created for isolated functions that were difficult to change. They were built for batch processing; not the real-time consumption of data. At the time, that was really the wisest choice; when technology evolved at a slow pace, when there were few – if any – systems of value in the tech ecosystem outside the walls of the bank and when the customer experience in which how they could interact with the bank was highly limited, why do it any other way?
Today, the way customers engage with any business has changed dramatically, and financial services is no different. New technology from both established vendors and tech-savvy startups now allows for banks to create additional value for customers, reduce risks or lower costs.
Neobanks and fintechs leapt on these seismic shifts in the industry and have been growing incredibly rapidly as a reward. But established banks have also started to realize that to be competitive they have to break the silos of both its thought process and technology, and have a customer-centric mindset when developing products and services. They should be looking at how they can combine any and all technologies to create the best experience imaginable. Banking is a commodity. Money is a commodity. As a result, experience will win.
No one can predict the future with any degree of confidence, but few doubt that the pace of change will only increase. Businesses have to be designed, at the core, to be able to deal with this pace of change. This applies most obviously to the core banking technology, but much less obviously, though of greater importance – to the internal culture, processes and operations which enable that technology to thrive.
This is why the shift we’re seeing is not just simply about switching from old vendors to new vendors but more broadly from switching from an old way of working all together to a new one. It may be a massive change and even an uncomfortable one for some organizations, but it must be done to remain relevant now and in the years ahead. Traditional financial services firms should be freeing themselves from the shackles of their legacy infrastructure and embarking on their future journeys unencumbered. That means brand new technology, cloud, entirely new organizations, and complete customer-centricity in decision-making processes.
Legacy core technology wasn’t built for change, but it’s important to note that simply changing current technology solutions won’t be enough either. That’s only the first part of a journey that involves evolving the very notion and core of what banks do, how they operate, and how they serve their customers.
– Eugene Danilkis, Founder & CEO, Mambu
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