A new white paper from global payments technology provider RS2 explains how banks can finally overcome their legacy systems, tech challenges and deliver modern, efficient systems – plus the smooth, fast and secure experiences customers expect.
How to solve banks’ legacy systems
RS2’s new study notes that banks have held on to legacy technologies for too long, with one estimate from McKinsey & Co suggesting banks now spend 70 cents in every dollar of IT investment on legacy systems maintenance, leaving little room for investment in innovation.
RS2 argue that the cost of legacy systems isn’t just financial – but also includes poor efficiency and the lack of a comprehensive overview of systems performance as data cannot be shared between different platforms.
These problems come on top of a growing innovation gap between banks stuck with their legacy systems, and more nimble fintech and big tech competitors with more efficient digital stacks.
If “patching” legacy systems piecemeal has been proven to not be the answer for banks as it exposes them to significant operational risk, the RS2 paper claims that banks have also focused on the wrong question when it comes to resolving legacy technology debts.
For some time, banks have debated the merits of building systems themselves, buying in new systems or partnering with third party providers for new banking systems: the so-called “build/buy/partner” debate.
However, RS2 say this debate fails to address two critical factors.
The first is the issue of managing business continuity and mitigating risk.
If a bank chooses to completely overhaul its systems using the “rip and replace” method, it will find itself managing significant levels of operational risk given the need to test and prove their new system not just at the level of individual products or interfaces, but the capacity of these elements to interact with each other.
By contrast, banks that enhance their systems using a phased implementation strategy are able to ensure a smooth transition for their ongoing operations while modernising systems for maximum business benefit.
RS2’s new paper says that even if banks make the right decision and opt for the gradual modernisation of their systems, this must be closely focused on priority areas that deliver maximum value for the lowest cost.
Without precise targeting, incremental improvements will not achieve optimal results.
Instead of asking whether they should be building systems themselves, buying in new services or partnering with third parties, RS2’s new white paper says banks should harness the power of AI to retain their core transaction authorization systems while strategically implementing powerful enhancements.
Download RS2’s new white paper, “How to solve banks’ legacy systems challenges while controlling risk” now.
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