Modernising legacy core banking systems

Legacy banking systems were designed with stability and security in mind. They’re now a major obstacle to efficient business: complex and expensive to run, slow to respond to change and reliant on a rapidly shrinking pool of specialists to maintain them.

Times are changing, and the harsh reality is that financial institutions that fail to transform their legacy core banking system will not be able to compete with new competitors such as neobanks and big tech players entering the banking market – especially in an environment of increasingly tight regulatory and compliance requirements. Existing platforms are simply too complex, inflexible, slow and expensive.

Benefits outweigh the risks and challenges

Admittedly, the process of transformation is complex and challenging. But at this point in the history of banking, the benefits far outweigh the effort involved. A modern core system gives banks a competitive edge in a rapidly changing landscape, speeding up time to market and mitigating operational risks, particularly in relation to people, stability and security. From a strategic point of view, the benefits of a core banking system transformation significantly outweigh the risks and challenges of a failure to act.

The bottom line is that a core transformation increases the level of process automation, reducing manual tasks and allowing resources to be redeployed to value-added activities. There’s scope for automating processes along the entire value chain, including account opening processes, cash disbursement, validating KYC data, fraud detection systems and investments. Increased automation ultimately improves the customer experience. And because the IT platform and related services can be sourced from an external service provider, it can also increase efficiency, reduce costs and enable you to enjoy the benefits of external expertise.

Improvements across the business

The advantages of core transformation are manifold, bringing improvements in everything from operational efficiency, digital competitiveness, regulation and compliance, business capabilities, time to market, employer attractiveness and the client advisory journey to sourcing and utilisation of the cloud.

Choosing the right approach

Besides the choice of platform, the key is to adopt the right approach for your organisation. Apart from doing nothing, which entails its own challenges, there are three major transformational strategies: disrupt and transform, replace, and redesign. Complementary to these three is the fourth: source.

Summary

Reliance on legacy core platforms is becoming increasingly untenable. Increasing costs, new competitors, evolving customer demands for digital services and the challenges involved in recruiting and maintaining talent can no longer be ignored. Now’s the time to act. Sticking to the existing platform may well cost you more than modernising and transforming it.

As we explain in our new white paper Modernising legacy core banking systems, PwC can help you select and execute the most suitable core transformation strategy based on your situation, challenges and business requirements. We can help you align your business with your IT strategy and thus take a major step towards success in the digital future of banking.