Traditional banks face a number of challenges when it comes to serving customers in this current digital era, but arguably none more so than those caused by legacy tech.
As part of our Better Business Banking whitepaper, we surveyed 300 senior decision makers at banks across Europe. Our research found the biggest underlying issue to be maintaining outdated legacy systems, with 42% of respondents citing existing legacy IT infrastructure as one of their three biggest internal challenges, with this number rising to 45% in the UK.
The cost of maintaining these systems, alongside the cost structure inherent in correspondent banking, is holding banks back from developing and delivering the services that their corporate customers now desire.
Meeting corporate expectations
All organisations within the payments sector are encountering increased demand for instant access service options, as digitalisation becomes more widespread and consumers become increasingly comfortable with online transactions. The pandemic only accelerated this trend further.
These demands are shaping the payments landscape at present. Consumers want a frictionless payment experience and, therefore, the merchants and financial institutions they work with need to provide it in order to keep up. Fast, low cost cross border payments are becoming a standard expectation, as are a variety of additional services, such as Virtual IBANs, multi-currency accounts and FX.
A business needs to not only consider its own legacy tech, but that of its suppliers too – including financial providers, which is where banks risk falling by the wayside. More and more frequently, merchants are choosing to work with Payment Service Providers (PSPs) and payment technology companies instead.
Issues around legacy tech
The technology that banks rely on is, naturally, different from that used by the disruptors and challenger banks they are struggling to keep up with. Not only were they built generations ago in a very different landscape, but the available technology has also advanced significantly since then.
Those banks which still use the monolithic systems and in-house servers on which they were originally built, face substantial time and costs when needing to implement updates or introduce new offerings.
One way around this situation is for banks to work with a third party.
Collaboration can help banks overcome the challenges arising from outdated systems
Working with FinTechs and other external providers that are less tied down by regulation and legacy technology can help banks make significant time savings, relieve them of the need to overhaul their own infrastructure, and most importantly, respond rapidly and effectively to changing customer expectations.
Working with cloud-based tech partners in particular, is an ideal way for banks to gain the flexibility and scalability they need. It also gives them the additional capacity and functionality precisely where they need it most, as well as access to more development options and continuous upgrades.
If banks wish to keep up with the competition, it’s clear they will need to overcome the barriers posed by legacy technology, and as soon as possible. Making use of the expertise of an external provider can be a practical way for them to meet customer demands and expectations – not just now, but in the future too.