Digitally Reframing Legacy Transformation: The Six Factors Necessary to Ensure Successful Digital Transformation-By Ben Snowman, VP Partnerships & Advisory at Mambu

The banking industry is currently undergoing a massive shift towards digitalisation. However, not all banks can fully embrace this change due to the limitations posed by their legacy core banking platforms.

Legacy core banking platforms often find it difficult to adopt the flexibility, agility, and cost effectiveness found in fintech platforms. This can put a financial strain on banks and make it difficult for them to keep up with the ever-evolving digital landscape.

By exploring the best approach to assisting legacy core banking platforms, we can help banks overcome the challenges posed by their outdated systems and fully embrace the digital future. But what do we need to bear in mind for this to happen successfully?

Pain Points in Financial Services and Legacy Core Banking

The financial services industry faces significant pain points regarding legacy core banking platforms. These outdated systems are afflicted by limited scalability and inadequate security measures.

As the systems are also often built on old technology, it makes it difficult to integrate with new digital tools and services that are emerging in the financial industry. Not only does this limit the ability of financial institutions to innovate but it also makes them vulnerable to cyber threats, which can lead to significant financial losses.

The World Retail Banking Report 2022, found that 95% of executives believe their current outdated legacy systems and technological capabilities are unable to fully optimise their data for customer-centric growth strategies. Therefore, it’s no surprise that many financial institutions are considering a move to modern, cloud-based solutions that offer several benefits.

Six Factors to Approach Managing Legacy Transformation Successfully

Mambu and PwC have identified six ways banks can optimise the chances of success in their digital transformation efforts:

Connect digital strategy with business-led legacy transformation

Banks need to prioritise their business strategy and use technology updates as a tool to achieve it, instead of the other way around. Business leaders should take charge and ensure the project is specifically focused on delivering customer benefits and improving business flexibility from the start.

Shape programmes around what new technologies can do – do not just try to replicate legacy capabilities

Banks need to approach their requirements with a fresh perspective. Old systems with many functions make it hard to change the way processes work. By breaking down these functions into smaller components, the traditional approach can be improved. There are tools available that can do all of what the old systems can do along with the new technology offering both flexibility and efficiency.

Drive customer movement to the new platform through business-led incentives

Try to avoid complicated and dangerous data transfers whenever possible. The business should think of ways to attract customers to the new platform. To get rid of archaic technology, move customer accounts away from outdated systems.

Take advantage of fintech innovators to jumpstart the transformation

It’s important to have the speed to ensure customers utilise the technology and take advantage of it. That’s why it’s crucial to start with a SaaS digital product system as part of the target design. Attempting to change existing technologies or add new features to an old system may take a long time and add additional risk.

Next-generation banking platforms are designed to launch rapidly. It can be ready to use in just a few months, which is typically 65% faster than traditional systems.

Focus on delivering rapid and regular business and customer value

It’s vital to focus on getting practical business benefits regularly to show the progress made from the investments and keep the momentum going. This will also help secure future funding.

Adopt a new solution mindset and ways of working

The way things are done in traditional institutions is limited by the technology they use. In today’s world with more data and greater controls, new approaches to product management are needed to create new products quickly, rather than waiting for months.

Legacy infrastructures must make technical changes and thoroughly rethink the bank’s operating model to take advantage of new opportunities.

The Future of Transforming the Legacy Estate

The future of transforming the legacy estate holds enormous potential for companies to prevent significant financial loss. By adopting new technologies, modernising outdated systems, and streamlining processes, organisations can ensure that their operations remain efficient and cost effective.

This will not only help them to stay ahead of the competition but allow them to respond quickly to market changes and secure financial stability.

With the right strategy and approach, the transformation of the legacy estate can be a significant step towards a brighter and more prosperous future for any business keen to make the transition.