Many conventional banks that are still in operation today continue to rely on legacy digital banking solutions to handle essential customer and bank staff services such as account opening, transaction processing, loan approval, and other similar activities. These networks have been in existence for decades, and billions of dollars travel through them on a daily basis, even though they are still relatively new. Due to these considerations, many financial institutions have taken a cautious approach to digital adoption, concerned about the possible faults and vulnerabilities that substantial system modifications may introduce into what they assume to be a current working system.
However, changing client expectations, as well as the emergence of new rivals such as fintech and non-traditional banks, are pressuring incumbent banks to consider updating their technology infrastructure. Numerous organizations have found that their legacy systems are insufficiently adaptable to keep up with changing industrial and technical advances and to create new experiences, products, and services in response to client demand. A strategic emphasis should be given to the development of a new core banking system that is optimized for digital services.
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Reasons why traditional legacy systems are falling behind
Banks have generally been hesitant to accept change, yet they must do so if they are to stay relevant in a technologically advancing age, as is the case with other industries. Banks that continue to rely on conventional legacy systems lose out on a number of key benefits, including the following:
- Best possible business performance
One of the most critical customer needs of the digital era is for service that is quick, efficient, and available around the clock. The legacy core banking systems, on the other hand, were developed in a different age and are often based on previous methods of working that were characterized by much lengthier development and release cycles for new goods and services. Because of the nature of these systems, customer and company performance information is typically dispersed across fragmented data silos, and bank employees are required to execute many fundamental procedures by hand.
Modern core banking solutions (such as the Oracle digital banking experience), on the other hand, are designed to increase the agility and efficiency of banks by moving activities to the cloud and automating business processes. The ability to access their entire data repository quickly, run sophisticated analyses, and make strategic choices to increase profitability while reducing company risk is enabled by this technology.
Improved automation capabilities, as well as artificial intelligence technologies, assist in shortening and simplifying client onboarding durations, transaction processing, and other fundamental activities. As a result, there is no longer any need for physical labor or paper-based procedures. As a result, employees are now free to devote their time to more value-adding activities, such as the creation and implementation of innovative new products, services, and offerings.
- Superior maintainability and security
As time passes, legacy systems become more complex and costly to maintain. This is especially true for mission-critical systems. Due to the fact that technology providers prefer to discontinue support for their older products over time, it becomes more difficult to locate professionals who still possess the technical expertise required to maintain and run obsolete core systems as time goes on. In this way, banks’ operations are put at risk since they may be left with no clear answers if out-of-date equipment suddenly ceases to function correctly.
One of the most significant benefits of current systems is that they are often supported by enormous and well-qualified pools of personnel that are readily available. These developers are continually working to enhance and maintain the software, and they provide essential updates on a regular basis in response to any problems that are reported or other advancements in the industry.
In particular, developers usually place a high priority on the improvement of security features for current core banking systems since the chance of facing personal and institutional security risks in digital environments is quite significant. Banks and their clients are protected by the software, which makes use of high-end features such as sophisticated encryption and password security, permissions management protocols, and other tools to keep information safe.
- Open and interconnected banking experiences
Clients expect to be able to interact with and engage with their bank on a number of platforms, which means that banks must provide superior connectivity and openness to their customers. Customers are gradually losing interest in visiting physical branches at predetermined hours, with many preferring the ease of internet and mobile banking over the traditional branch experience.
Following these developments, financial institutions must now try to make their services available via digital channels such as mobile applications, social media networks, e-mail, and SMS messaging. Today’s core banking systems provide comprehensive support for all of these channels and more, allowing financial institutions to develop multimodal experiences that can be tailored to the specific requirements of the individual client.
Another possibility for banks to pursue as part of their quest to become more transparent is expediting integration with third-party systems. Customers nowadays are increasingly inclined to consider their financial institutions to be part of a bigger digital ecosystem that may include parties such as online retailers, digital wallets and money-sharing platforms, social media platforms, and others, as well as financial institutions. Establishing excellent working partnerships with trustworthy third-party suppliers may assist any bank in providing a more comfortable user experience and increasing customer satisfaction through increased consumer happiness.
- Additional sources of revenue
Modern core banking systems give banks the flexibility and connectivity required to offer new experiences, making it easy for them to both acquire new customers and secure the loyalty of their older clients. Productive partnerships also enable banks to acquire their partners’ customers and vice versa, leading to increased profits for all parties involved.
Apart from the natural revenue growth that accompanies a rapidly growing customer base, banks can also capitalize on their core system’s capabilities to earn more revenue.
Modernizing banks’ fundamental systems has become a need after decades of underinvestment. To stay relevant in the eyes of a constantly-evolving customer base, banks must abandon antiquated technologies and embrace new alternatives, like the OBDX. Adaptable banks, on the other hand, will be better positioned to compete on an equal footing with newcomers in the financial sector.