The banking transformation has concluded, paving the way for progressive modernization.
Progressive modernization is crucial for banks to achieve a balance between their legacy systems and operational agility.
The banking and financial services industry has entered a new phase marked by a transformation towards an era of agility and flexibility. This transformation has been driven by constant technological advancements, fierce competition, and the demands of an increasingly digital customer base. Traditional banking entities face a dilemma: balancing the reliability of their legacy systems with the need for greater agility. The rise of fintechs, the entrance of large tech companies into the financial sector, and the growing demand for integrated financial solutions have revolutionized this field, requiring rapid adaptation.
Legacy technologies, which have been the backbone of banking operations, are becoming a burden rather than an advantage. These outdated infrastructures are insufficient to meet current demands, which require real-time transactions, data analysis, and seamless integration with modern SaaS solutions. Additionally, the operational cost of maintaining these obsolete systems can be 20% to 30% higher compared to entities that have modernized their infrastructure, resulting in product launch times that are 50% slower and a greater risk of security vulnerabilities.
Finding specialized personnel to maintain these old systems has become increasingly complicated, as the number of experts in legacy technologies, such as COBOL programmers, is rapidly dwindling. As these professionals retire, the lack of knowledge to operate and repair archaic systems becomes a costly issue.
In the face of these challenges, many banks are adopting a strategy of progressive modernization, which involves gradually updating their IT infrastructure. This approach allows institutions to benefit from their existing core systems while integrating flexibility through modern platforms that effectively collaborate with their current infrastructure.
This entails significant benefits, such as:
- Accelerated time to market: Decoupling product development from legacy systems allows financial entities to launch new offerings more quickly.
- Enhanced customer experience: It becomes possible to provide personalized and seamless experiences, contributing to customer satisfaction and fostering loyalty.
- Cost efficiency: Progressive modernization is more economical and suitable for the needs and scale of each institution, freeing up budget resources for innovation.
- New revenue streams: The ability to launch products quickly opens up new market opportunities.
- Improved security: Modern platforms include robust features that protect sensitive information, allowing companies to manage risks more effectively.
Progressive modernization enables banks to innovate and adapt without the limitations of legacy technology. This allows them to focus on innovation and continuous improvement, accelerating their time to market.
Another important aspect is the growing trend of "embedded finance," where non-financial companies amalgamate financial services into their offerings. It is estimated that by 2030, up to 15% of banking revenues and 25% of loans to retail and small to medium-sized businesses could come from this approach.
In this highly competitive environment, user experience (UX) has become a critical differentiator, essential for attracting and retaining customers. Modern card processing platforms have evolved to provide an exceptional user experience, including real-time transaction processing and personalized rewards.
The future of banking will be shaped by those who dare to challenge the status quo and embrace advanced technologies, moving towards a more agile, flexible, and customer-centric model. Those who remain anchored in obsolete systems will struggle to maintain their competitiveness.
