Digital transformation should be key initiative for banks

Banks can no longer put off, piecemeal, or underfund digital transformation initiatives.

It is now a clear business directive and essential for bringing new products and services to this digital-first world. At the heart of any digital transformation is the revitalization or replacement of legacy core systems. All other emerging technologies and IT priorities—analytics, digital, the cloud—are dependent on the underlying data and processes of the banking core.

But with some 60% of core banking projects taking as long as four years to complete, according to an American Banker survey, banks must be realistic about the project’s requirements and create a structured, detailed roadmap to ensure the best outcome.

Wholesale transformation must be on the table for banks with decades-old core systems. Incremental improvements will likely not position the bank for the rapid-fire pace of change that’s on the horizon.

Options for Core Projects

• Upgrade – Strengthen your operating platform via technical upgrades, software updates, code porting, or migration to a modern environment (such as the cloud).
• Renovate – Make the most of stable core processes and layer on new functionality, such as digital interfaces for customers and employers or data visualization tool kits for analytics.
• Simplify – Reduce complexities of your existing core implementations and simplify business processes. One possibility is to introduce APIs than can be used by outside partners and vendors.
• Replace – Introduce new vendor solutions for parts of the entire core, which may involve some tough build-versus-buy decisions considering the influx of new technology packages and providers.

It all starts with building and acknowledging a business case for digital transformation and, by extension, modernizing core banking. While business case analysis often focuses on avoiding or reducing costs, the loss of current or potential banking customers coupled with organizational paralysis should outweigh the pain of technical investments.

Tags: Digital Innovation, Investments, Technology