What can you expect to learn from this article?
Why banks have to consider modernizing their legacy systems.
The main benefits of legacy modernization.
The main differences between full system replacement and systemic upgrade - from the perspective of banks.
It is not a surprise to many that banks love mainframes. The Big Iron has been particularly popular with banks and financial institutions over the past few decades because it has been the tool to fit all needs; a tool with unmatchable processing speeds.
COBOL (Common Business Oriented Language), as its abbreviation states, made writing business logic convenient with its simple and straightforward rules. Only a COBOL developer who has dwelled in newer technologies and other DevOps stacks can admire the simplicity of this very expressive language.
While the mainframe continues to be the robust and reliable soldier of the banking industry, supporting some of its core processes, the world is changing faster than ever, forcing many financial institutions to transform the way they offer their services.
The influx of new technologies, such as cloud, digitalization, and open banking, has forced traditional banks to rethink and realign their way of operating.
Modern core banking systems require better flexibility and scalability to respond to ever-evolving customer demands while remaining cost-effective at the same time.
The high costs of transformation and the risk of breaking critical functions of today have left most organizations in two minds. However, the benefits of legacy modernization outweigh them.
Some of the key motivations for legacy modernization are:
Flexibility and scalability
Modernizing requirements of each financial institution vary vastly. Banks and financial institutions must thoroughly understand their need to modernize. Modernizing requires a disciplined and well-thought approach of either a full replacement or systemic upgrade.
Immediate replacement is not only risky but can be quite expensive and time-consuming and should be opted-in in situations of sudden regulatory enforcement or obsolescence. The biggest risk in full replacement is that the benefits or any internal issues can only be realized or tracked when the migration is complete, and the legacy system software is de-commissioned.
The most popular strategy amongst banks, also known as phased migration, undertakes a systematic and steady migration approach. It allows the banks to keep working with legacy systems for a considerable amount of time while simultaneously introducing a modernized architecture and transitioning into it.
There is already a plethora of players in the market providing competitive modernizing solutions for core banking systems as well as success stories from organizations that have already gone down this path. The 'New' is happening, and financial service providers have powerful tools to be more strongly positioned for the future.
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