When you picture a bank in your mind, what do you see? It’s most likely the traditional brick and mortar branch. There’s nothing inherently wrong with this picture, but it obscures the fact that a bank’s core product is digital. When you apply for a mortgage or open a checking account, you don't get a physical good, you’re getting a digital product, and the driving force behind that digital product is millions of lines of code and processes layered onto each other that enable banks to offer the products and services that customers want.
These legacy codes, written in the 1970s, ‘80s and ‘90s, can often be clunky and represent the business processes and products of its time. However, today’s customers are looking for quick and easy access to modern financial products. Hence this technology legacy and monolithic processes make it very difficult for banks to quickly scale their businesses to match the digital transformation happening across banking and other industries. Sure, banks know they need to overhaul their systems at some point, but transformation can be expensive and complex, and many banks decide to put off change to some point in the future.
As we saw the pandemic disrupt consumer behavior and the way consumers interact with banks, it demonstrated that being able to quickly adopt and drive change and scale on-demand, whenever and wherever needed, is a huge advantage. It became clear that the banks less impacted by the pandemic were those that had a model in place allowing them to adapt very quickly to customers ever-changing banking expectations for on-demand, instant and digital-first services. That model is rooted in nimble cloud-native technology and constantly updated code in so called CI/CD pipelines enabling customers to access their financial products and services quicker and easier, and allowing banks to be “always on”- in the most cost-effective manner.
True digital transformation can be expensive as it means stripping away the tried-and-true processes that banks have been relying on for some time. As a result, instead of simplifying through digital transformation, banks have been essentially “gluing” new fixes onto the existing code, and with every new glued-on update, the code becomes more complex and therefore harder to change or adapt. adding to the technology debt of a bank. Given the cost and effort associated with making the change (not to mention the risk if it fails), digital transformation can be very difficult to champion internally. Ultimately this is what leads many to stick with the old code and therefore old business processes.
While banks know that they can no longer afford to operate on the old code, transforming into an agile IT organization is extremely difficult when they are hindered by internal silos, disconnected channels, and legacy operating IT systems. To move past these obstacles, banks should leverage API driven micro-services architectures that enable eco-systems of connected technology and business partnerships that can help them leap-frog legacy infrastructure, bringing together existing systems with future-ready options. These types of eco-system partnerships on common, cloud-native architectures allow critical operational components to be modernized in parallel with advancing a bank’s technology roadmap and more cost efficient.
Part of building a more agile bank is understanding and anticipating the needs of customers. Future-focused transformation requires cross channel and silo data analysis together with the mentioned cloud-native technology foundation that allows banks to quickly offer an enhanced consumer experience that can scale on demand. Finding a
partner who can offer the right mix of these services allows banks to focus on the financial products themselves without having to worry about the impact on legacy codes or algorithms. It makes operations management more agile and efficient since they won’t be burdened by having to build resources or a new infrastructure from scratch.
Once banks break from the traditional, channel-centric approach that often stifles innovation, they’ll be able to offer dynamic digital ecosystems that match customers' need for the “always on” solution. In a post-pandemic world where financial technology companies have disrupted the expectations that customers have for their financial products, having an infrastructure that is future-ready and will serve integrated commerce consumer journeys will determine who wins the war for the financial services generations of the future. The question shouldn’t be “how much will it cost us to become a smarter, more agile bank,” but rather “how much will it cost us not to become one?”
BANKEN
