To be future-ready and to deliver the customer experience people expect, banks and financial institutions must not only transform their front-end but also their core systems. While this is relatively easy for many industries, it is not that simple for the financial world. Customer information and banking functions are tied too tightly to core processes and security and compliance demands make it even more difficult. The main question is: How can you rethink your architecture to better serve customers with more innovative applications, through more agile and faster development? We believe standardization, configuration, and automation is the answer to this question. In this blog, we will explain why.
From saturated layers of functionality to becoming legacy-free
It's a universal truth that, in general, banks are struggling with legacy systems. These systems aren't built for the digital age. Many banks struggle to serve fast-moving customers with rapidly changing expectations because they are hampered by layers of monolithic, legacy systems across their front, middle, and back offices.
Traditional core banking systems have been continuously modified by hardcoded updates to cope with changes in business practices and technological evolution. As a result, these legacy systems have become saturated with extra layers of functionality, making them even more complicated and harder to manage. Systems residing in silos are impractical, and the lack of system interconnectivity inhibits business growth.
For many banks, too much built-in customization is the reason they can’t meet customer expectations. We believe core systems renewal is a necessity to become legacy-free. In fact, we can safely say that switching to a digital core banking platform that is based on standardization, configuration, and automation will help you to become agile, flexible, and scalable.
Build your foundation with standardization
Standardization through best-practice building blocks enables you to spin-up a new bank from scratch. It reduces customization and in most cases, custom code is the reason why you are facing the described legacy challenges. It makes it difficult or even impossible to adjust the software to new demands. With standardization, you minimize custom development and enable flexibility.
Add a certain degree of customization with configuration
However, there is no such thing as a ‘standard’ bank. A certain degree of customization will always be necessary to optimally serve your customers and to tailor your business and processes to it. A core banking platform that enables customization by using configuration editors ensures the flexibility and agility you need, without possible legacy challenges coming your way again. You won’t end up with the same legacy problems, despite setting up something new. Configurability lets you set up your own products and processes without being dependent on IT professionals.
Reduce human interaction with automation
Standardization and configuration enable you to spin up a complete end-to-end bank, but you also want to keep human interaction to the point where decisions need to be made. Operations done manually take up a lot of time and effort, leading to loss of productivity. Automation reduces the redundancies in their operations. Furthermore, automation reduces costs, improves customer experiences, and improves compliance.
We believe that picking the standard building blocks you need for your bank, adapting your processes to it and using configuration editors to tailor it to your business is the way to go. The key is to minimize the degree of customization to create core banking systems that support your needs and meet rapidly changing customer demand and allow you to work on customer experience, operational excellence, and compliance at the same time. Now and in the future.
To help you to take the first step to fulfil customer needs and become legacy-free, we have written an architect’s guide about digital core banking in the cloud. We discuss the key features of a future-proof core banking platform, tell you all about the benefits of cloud computing in core banking, and share why using standard building blocks and configuration editors not only ensure viability but also a smooth implementation.