Unlocking the Benefits of Going from Legacy Banking to a Digital Core
Author: Fraser Wilkie
Digitalisation has shifted from just being a buzzword to a real concept that needs realisation – quickly. Most traditional banks have realised that legacy IT infrastructures restrict not only innovation but also the speed and scale of new product and feature launches. How then do banks with behemoth existing tech infrastructure pivot quickly and with agility?
The answer is to move to cloud-native core banking, which is essentially like strapping a turbo-charged Formula One race car engine onto a bank’s IT stack. However, much like how a Formula One team has an army of designers and engineers dedicated to building, refining and maintaining the car at its best potential, the banks will need designers and engineers who can innovate monthly, weekly, or even daily.
One frequently asked question from banks that we get at Synpulse8 is: do we go greenfield and create an entirely new proposition for new customers and leave existing customers on the legacy solution? Or do we go for a complete migration, moving all customers to the new solution in one go.
While both approaches have their pros and cons, we are seeing an increasing number of traditional banks adopting a co-existence model.
This can be done by retaining the existing technology stack while launching a new customer proposition or product. Gradually, the bank will then migrate all customers and products on the new core until the old technology stack becomes obsolete.
What are the benefits?
With a new core, traditional banks will unlock a whole host of new features and technologies:
Real-time data
Al & Machine Learning built into the core
Location-based products and design
Social banking
Hyper-personalisation
Multiple experience layers
Journey switching
Improving the way customers are onboarded
Once these features are unlocked, the bank can implement innovative and seamless ways to onboard new customers. For example, identifying the location of the customer can be easily done through location services. The customer journey can then be switched to the correct onboarding process of the region that the customer is in, or even for a specific customer segment. This particular feature will be key to banks located in Hong Kong to allow for a smooth onboarding process across the Greater Bay Area.
Without having to visit a physical branch, the bank’s customer can also be onboarded through smart KYC technology. And when we understand who the customer is at the onboarding stage, we can create a unique profile, and begin tailoring their experience.
Start the digital journey with one product
When launching a digital banking service, banks need to adopt one key lesson - launch one product to market quickly, and then innovate the same product in monthly cycles. This allows for a quicker time to market, while allowing the bank to test and learn what works without going through a larger full-scale migration.
The obvious products for retail-based banks would be deposit and chequering accounts linked to one card. By having just one product, we can create the “Swiss Army Knife” of cards - an all-in-one solution that can encompass debit, credit, savings, line of credit and loyalty cards all into a single card.
We can then innovate further with AI and Machine Learning. Through these two features, we can understand at a deeper level a user’s likes and dislikes, gain personalised insights around their financial choice and lifestyle, and provide location-based suggestions and spending insights to help customers save and spend better.
Introducing behavioural-based design into the mix
With the basics in place, behavioural design elements such as incentivising the onboarding process can be introduced to the solution. These elements can help build engagement and stickiness. It can allow your existing customers to explore and utilise your bank’s offerings, while helping you attract new customers, converting them into active-funded customers.
The state of hyper-personalisation
Through digital core banking solutions, content tailored to the customers can be offered, enhancing their banking experience. It is not a secret that banks have access to the most amount of customer data in any industry. However, more often than not, they fail to capitalise on this treasure trove of data due to old and outdated technology stacks, thus missing out on billions of dollars in opportunities.
Vast amounts of data are consolidated to create a hyper-personalised customer journey, where AI and Machine Learning, together with data analytics can be utilised to provide tailored content to the customer at every stage of their user journey.
Bring it all together
The process of moving from a legacy platform to a new one is tedious, time-consuming, and riddled with many challenges. However, migrating to a new platform offers a wide spectrum of digital features that can keep your bank competitive in a highly digital world, where new market entrants offer innovative journeys that are attracting customers away from traditional banks.
When done right, bringing all the features that a digital core banking platform offers together will create an attractive proposition to existing and new customers. By adopting a co-existence model, your bank can migrate customers seamlessly without disruption while unlocking new and innovative features for customers. And when the legacy IT infrastructure becomes redundant, you would have paved way for the next generation of banking.
