Renovate in Winter: Taking Advantage of the Downturn to Modernize Core Systems in Banking

Renovate in Winter: Taking Advantage of the Downturn to Modernize Core Systems in Banking

          
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Renovate in Winter

Taking Advantage of the Downturn to Modernize Core Systems in Banking
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    Core banking systems are the technology workhorses that process virtually everything that banks do. These systems are, for the most part, reliable—but the underlying design of many systems, some commissioned four decades ago, reflects a time when banking revolved around cash and checks and was done almost exclusively in a branch during business hours.

    Much has changed since those days. Customers now use a wide array of banking channels (and institutions) and expect banking services to be available all day, every day. They want their requests to be fulfilled immediately. The banking experience should be seamless. Requiring customers to provide the same information—or, worse yet, to input it again and again—is unacceptable.

    To keep legacy technology from impeding the business, most banks have kept their core IT systems in a state of perpetual motion. But after years of updates, add-ons, and fixes—some more artful than others—many systems have become unwieldy. Each new wrinkle makes the technology more cumbersome, and the next change becomes harder and more expensive to make.

    The growing complexity of these core systems threatens banks’ ability to launch new products and services, acquire other institutions, and streamline operations. With the problem growing worse each year, most banks realize that it is a question of when, not whether, to modernize their core IT systems. They also recognize that they have a once-in-a-generation opportunity to reshape not just the technology environment but also the operating model and organization. What’s more, the economic downturn has created a chance to “renovate in winter”—to undertake a renewal program when resources are relatively available and easier to marshal for a major transformation, and to build or reinforce capabilities that will make the bank a stronger competitor once the markets recover.

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