Three simple steps to modernize legacy banking systems

The introduction of technologies such as artificial intelligence (AI), machine learning, and the internet of things (IoT) has altered the way the world runs. Customers today expect personalized experiences, and organizations that have not yet digitized must alter in order to compete in this new reality. Banking is one industry that has found it more difficult to change since many institutions are burdened with rigid and f traditional application systems. Large banks and financial institutions continue to be hesitant to adopt innovative technology, limiting them from providing an ideal client experience, creating growth, and remaining relevant in a volatile market.

To compete in this changing industry, banks must modernize their legacy banking systems and adopt a modular approach to digital transformation. While there are several ways to modernize core banking systems, success will be difficult to achieve until the current infrastructure is broken down into smaller manageable logical elements. This three-step method simplifies the core from the outside in:

Step one: Investigate and document high-speed consumer journeys: Banks should begin by compiling a list of all customer journeys that have high-speed contacts with consumers. Describe the journey from beginning to end using all relevant programs. They should next assess the journey in terms of the value it provides to clients, the money it creates for the bank, the amount of complexity in the middle and back offices, and the risk associated. This aids in the definition and rating of the scope depending on the dimensions.

Step Two: Determine whether aspects of these selected trips may be shifted from the back-office to the new "middle-" (digital) office: Identify the business logic that has to be moved from the back office to the new enterprise middle layer; the digital core, for each journey. 

Analyze and evaluate the change in the legacy core for the business logic simplification/hollow out. As a final stage, deliver the scope backlog by looking at the journey, the risk, and revenue.

Step Three: Pilot these middle-office activities on a subset of journeys before rolling them out to a larger group: The trial can be sent out to internal bank users or a select group of consumers to fine-tune the launch. By discovering workarounds, certain complicated back-office logic that may be way too closely connected can be de-risked.

This modular strategy enables banks to carry out the key phases of core architecture modernization in a smooth manner, with no surprises along the way. It scales successfully to interconnect systems and applications throughout the company using current core platforms by using an intermediate layer to offer the requisite connectivity. As a result, procedures may be simplified and modernized by enabling quick, continuous change without disrupting ordinary operations.

One advantage of a modular strategy is the ability to segment apps to enable customization since banks require greater insights into the effect of multiple applications mapped to different stakeholders to modernize their core systems and become completely digital. In reality, the response from top banks that have implemented an intelligent intermediate layer, such as Xelerate Digital core, has been overwhelmingly favorable, with the bank able to decouple the customer engagement layer from the system of records.

It operates by assisting banks in segmenting their application landscape and serving as an intelligent middle office, integrating key back-office systems with customer interfaces and external partner ecosystems. As a result, information on products, services, and pricing is centralized across segments and business lines. When combined with real-time analytical capabilities, the middle layer enables banks to rapidly analyze each client by synchronizing previous customer data with current patterns to generate completely personalized products.

Another advantage is the reduction of risk and the management of change. The middle layer enables banks to progressively replace the legacy core system in a phased fashion. This maintains critical information secure and central, resulting in enhanced business agility and reduced risks associated with core technology transition.

Redesigning key back-office systems needs intelligence to connect with cutting-edge front-end apps. The digital middle layer orchestrates business logic, workflows, and procedures across different systems to deliver greater value through increasing consumer wallet share and to help phase out legacy core systems.

Deploying a modular and flexible middle layer that serves as the digital core contributes to the creation of an open ecosystem that stimulates collaboration and creativity without the difficulty of totally modernizing the core. As a result, banks may simply move from 'financial services providers' to actual customer-owners for long-term development and success.