Banks need to do more than just run the bank if they want to outpace their challengers. Over the last decade, after the world financial crash and new regulations, agile new rivals have sprung up to challenge banking tradition. Legacy and outdated technology threaten to hold financial institutions back from the future if they do not consider legacy system transformation now.
Once the sheer power of banks and their financial services intimidated new rivals from entering the market. But not anymore. Challengers have found new ways to enter the game to bring their own brand of financial services to a technologically driven market. These are agile, fast moving organisations typically offering a better, faster customer experience at a much lower cost. They are tech savvy and use technology to deliver all sorts of financial services.
Challengers are hitting some of the most profitable parts of a bank’s services with the highest threats to the payments and personal finance management areas. Major technology players Google and Apple have entered the financial foray with offerings such as Google Wallet and ApplePay. Banks and financial institutions need to fight back now to remain viable in the long term.
2018 is already set to be a game-changing year for retail banking with the introduction of PSD2 (Revised Payment Service Directive). PSD2, in a nutshell, means that a banks’ monopoly on customer’s account information and payment services will disappear, enabling customers, both consumers and businesses, to use third-party providers to manage their finances and have an aggregated view of all of their finances in one place meaning traditional banks will come under huge pressure in order to compete with this agile entrants.
PSD2 means that you will be using challenger companies and technology to pay bills, make P2P transfers and analyse spending across all of your finances, while still having your money safely placed in your current bank account.
This really is opening up the market and letting those challenger businesses in… perhaps sooner than we initially thought.
Today’s decisions affect tomorrow’s growth
It is crucial that bank leaders make the right decisions today. They need to recognise the limitations aging and legacy IT systems put on the business. Banks have a long IT history. The financial services industry one of the first to recognise its value and incorporate it into to the business. Most have aging IT systems, that date back to the dark ages. Banks have a huge investment in old technology. Mix that with legacy systems from mergers over the years, and they have trouble competing with more agile rivals.
To grow the business, drive profit, and survive well into the future, they must reconsider the legacy system transformation of IT technology to build a competitive future.
Legacy system transformation delivers options
Transform legacy systems, with high operational costs, into one flexible, reconfigurable system with the capacity to respond to changing requirements. Most applications work in a heterogeneous environment, consisting of solutions that are custom built, and part of legacy systems that operate on different operating systems and across different types of networks.
Modernising IT infrastructure needs planning and implementing across the whole business for success. You can use checks and balances to ensure the system continuously aligns with the bank’s vision, processes and procedures.
How an organisation modernises its IT infrastructure depends on what it requires. But, what it most needs is the ability to accommodate flexible options for any one customer, and tailor them to meet the needs of the next. The first step to consider when updating IT infrastructure is an open architectural framework.
Consider an open architectural framework
Creating an open architectural framework is a fundamental step to updating legacy systems. This can enable banks to open up to new opportunities such as creating new products and service delivery. An open architecture allows the underlying system elements to work while the system remains reconfigurable. Legacy systems are integrated within a service oriented architecture, along with data integration, to give the bank flexibility:
- Service oriented architecture contains a collection of the organisation’s services. This creates a component-based, agile framework that allows different services to link to each other when needed. The outcome is the existing system operates better with the capacity for future transformation.
- Data integration is a flexible platform that allows easy data manipulation and management.
By combining these approaches, banks can integrate and access data as real-time information from a single source. It allows them to quickly produce new web-enabled products.
Time for change
For financial institutions to stay ahead of agile challengers, consider the following priorities to help stay competitive:
- Consider legacy system transformation to prepare for the future
- Reduce costs by consolidating and standardising legacy systems
- Ensure IT architecture has the capability to connect to anything anywhere in system
- Be security conscious as cyber-security attempted breaches escalate
- Have the people and skills required to execute system integration so you are ready for the future
The last place banks and financial institutions want to find themselves in is trying to play catch up to agile competitors. Now is the time to plan for the future before your business sees you lose the competitive edge.
NashTech helps businesses implement the right tools, methodologies and systems. Our specialists offer your business complete system integration to provide increased flexibility, reduced costs and competitive advantage.