An investigation by The Banking Commission has revealed that investment is needed to improve the “patchy and outdated in-house IT systems” within banks. In particular, the Commission argues the case for inclusion of an expert IT panel to investigate processes which will make it easier for consumers to switch banks. If action isn’t taken now to replace legacy systems that are decades old, banks are unlikely to meet expectations of consumers who increasingly want twenty four seven, multichannel banking. Andreas Seidl, Chief Financial Officer, Automic, outlines the impact of the Banking Commission’s findings.
Are banks ready to get rid of their current infrastructure?
Bank legacy systems have been around for decades, and banks are currently having to work around them, putting in place web based services for mobile banking to meet customer demand. Whilst current legislation doesn’t determine whether an IT legacy system is outdated, it’s ultimately down to the banks to arrive at the conclusion of whether IT legacy systems are weighing them down.
In the current economic climate it’s unlikely that banks feel they have the ability to remove the legacy systems they’re reliant on. For a variety of reasons a legacy system may still continue to be used, these systems may carry out their expected functions relatively well or be integrated into new systems, and it’s an understandably daunting task to improve these processes.
It has been revealed in Computer Weekly that due to the number of acquisitions and mergers in the banking industry, there is one bank with over 40 legacy systems in place. The short shelf life of IT managers also prevents the take on of complex multiyear projects in order to replace the legacy systems, therefore prohibiting the likelihood of an IT manager to take on such a task.
Is legislation helping?
A lack of legislation is currently preventing the ‘knee jerk’ change that The Banking Commission has outlined for the financial industry.
Whilst The Banking Commission calls for change to current legacy systems upheld by banks, it overlooks the issue of banks being able to defeat their reliance overnight. Much needs to be done in regards to legislation; current legislation limits the ability for banks to change to the new model of hybrid cloud models, thus seizing the opportunity to kick-start the changes called for.
So why remove legacy systems?
Banks weren’t built to operate on the type of shared utility platform that the Commission is proposing. They were built in the ‘old world’, where everything was done on-premise. To transform these processes requires an overhaul in the structure of operations. Moving to a mobilised cloud model may be deemed costly and a time-consuming exercise by many senior executives. The appropriate solution can help to eradicate the shackles held by current legacy systems by utilising the proficient cloud model. This would enable banks to focus further on providing excellent customer service, while on the flip side creating opportunities to cross sell products and services.
Being able to automate these legacy systems ultimately improves efficiency. The benefit of these new models bridges the gap between the complexity of on-premise and hybrid cloud models, ensuring maximum uptime and helping to make economies of scale more of a reality. By automating these processes complexity is reduced – consequently allowing the platform to be easily managed and enabling support staff to be trained effectively. This would enable a reduction in costs related to running these outdated processes.
Banks need to ensure they continue to innovate by utilising the necessary technology that customers require in this highly competitive industry. Before the financial crisis, the burden of legacy systems were certainly not a key concern for management, banks could afford the specialist staff required to extend the life cycle of their legacy systems and avoid any mishaps. By moving away from outdated systems, banks can position themselves as innovative, proactive and customer centric organisations, and get away from simply sweating the small stuff.