Almost all traditional banks and credit unions have been hampered by legacy technology that has made it difficult for them to compete with new tech-driven competitors. But options are now available — and being used, in a few cases — that free up institutions to compete in a far more agile, consumer-focused manner.
The change could be liberating — but only if banks and credit unions embrace it and make the necessary staff and cultural adjustments to take advantage of more modern technology platforms.
Other than the largest financial institutions, to date very few banks and credit unions have deployed advanced technologies such as artificial intelligence, according to Cornerstone Advisors research.
Although the numbers are beginning to move, particularly among credit unions, modernized core platform technology now available should speed adoption.
Retail banking in particular will benefit from this trend as that discipline has been impacted most to date by fintech and big tech competition. But all parts of banking are under siege and so the significance of new technology options is very broad.
“To a large extent, the main job of a core system today is to get out of the way.”
As EY points out in a new report, consumer banks have long recognized the need to upgrade their core technology platforms in order to keep up with ever-rising consumer expectations. The problem has been that core system replacements are complex and expensive jobs Often it is difficult to justify the investment, states Ryan Battles, EY’s Banking and Capital Markets Lead for the Americas. But modern technology options are much easier to deploy and maintain, he states. As a result, “banking is finally starting to catch the wave that began with Apple and Amazon raising consumer expectations,” Battles tells The Financial Brand.
The consulting firm believes that the concept of the core banking platform has significantly changed. The current systems that power most banks and credit unions won’t disappear, but will play a much different, and more limited role. Among middle-tier banks especially, Battles states, institutions are stripping away as much functionality from the core as possible, so that at the end of the day it becomes more of a transaction accounting engine.
“To a large extent,” the EY report states, “the main job of a core today is to get out of the way.”
3 Modern IT Platform Approaches
Traditionally banks and credit unions relied on in-house or outsourced “bank-in-a-box” core platforms. Among the retail banking functions these monolithic systems supported and serviced are: Transaction processing and accounting; Products, pricing and fee configuration; Channel and point-of-sale applications.
Even now the very largest banks rely on decades-old — although…