Like every other technology, core banking solution must be updated and modernized. In fact, McKinsey research shows that legacy solutions cost banks ten times more to run than modern core banking systems. Legacy core banking solutions are past their prime, making it hard for banks to offer new features and keep up with the latest technology.
This blog delves into why legacy systems are falling behind and how modern core banking solutions can help banks become more effective and innovative to make their customers happy.
Fall of Legacy Core Banking Solutions
Created decades ago, legacy core banking systems are no longer fit to handle the demands of today’s financial ecosystem. Such core banking solutions operate in silos and struggle to integrate with newer technologies. Here’s how they can hold banks back:
Limited Agility
Legacy core banking solutions are quite rigid and cannot adapt to newer technologies like mobile banking, cloud computing, and APIs. Banks cannot keep pace with fintech startups and the evolving demands of mobile-first customers. Since legacy core banking solutions are challenging to integrate with modern ones, they disrupt the digital experience for customers and banks alike.
Data Silos
Legacy systems store data in isolation, making data silos. Customer information is separated across different databases, making it hard to get a holistic view. Disparate data hinders innovation and makes personalized product recommendations and data-driven marketing strategies an uphill battle.
Costly Upkeep
Managing legacy core banking solutions is expensive. Gitnux research says banks spend nearly 78% of their IT budgets maintaining them. On the other hand, the same research says that with modern core banking solutions, banks can save up to 25% on their costs. Overall, legacy systems can strain operational budgets and leave less innovative scope.
Fintech Friction
Legacy core banking systems hold back banks in the combative FinTech space. Modern core banking solutions are built for speed and scale, which is essential for banks to compete with FinTech, agile startups, and neobanks. Legacy solutions also prevent banks from offering newer financial services and experiences, leaving customers unhappy and limiting the bank’s innovativeness.
Rise of Modern Core Banking Systems
Modern core banking solutions can be deployed on the cloud, on-premise, or hybrid, each catering to specific needs. Regardless of the model chosen, they offer a strong foundation for building future-proof banks – some of the very reasons why modern core banking systems are on the rise:
Open Innovation
APIs in core banking systems act as digital bridges, enabling integration with innovative fintech solutions. For instance, a bank could integrate a budgeting app into its core system, helping customers manage finances directly within their mobile banking platform.
Flexibility
Modern core banking solutions allow you to integrate new functionalities or upgrade existing ones without overtaking the entire system. This encourages faster time to market for new products and services, giving banks the much-needed edge in the competitive environment.
Regulatory Compliance
The finance industry needs to keep pace with timely regular updates. Modern core banking solutions make it easy for banks to comply with new regulatory requirements without disturbing operations.
Security First
Modern core banking solutions offer robust security features, such as encryption and multi-factor authentication, to keep financial data safe and provide peace of mind for banks and customers.
(Must Read – Are Digital Core Banking Solutions Game Changers? )
User Expectations from Core Banking Systems
Beyond Banking
Users expect a multitude of financial services, including budgeting tools, investment opportunities, or third-party integrations with financial apps from banks. The good news? Core banking systems can easily integrate with all such services.
Personalization Matters
Users appreciate a personalized touch, regardless of the service. Modern core banking systems can help banks offer customized financial products and services based on user needs and preferences.
Speed is Key
Nobody likes to wait days, or even hours, for transaction updates. Users now expect real-time processing, prompt notifications, and quick updates, and the core banking solutions must be able to handle them effectively.
AI-powered Assistance
Integrating AI chatbots or virtual assistants within the core system can enhance the user experience. These tools can answer basic questions, resolve simple issues, and offer personalized recommendations – in real-time.
How Modern Core Banking Solutions Help Future-Proof Banks?
Personalized Banking Experiences
Modern core banking solutions offer banks a high level of personalization. Through advanced data analytics, these solutions examine customer behavior, financial goals, and spending patterns in depth. This aids banks in offering custom recommendations to their customers. For example, banks can give investment suggestions and credit card offers depending on an individual profile.
Faster Financial Services
Modern core banking solutions empower real-time transaction processing, faster loan approvals, and quick account updates. Users can access accounts, send or receive money, and pay bills anytime through user-friendly applications or online portals. It’s fair to say that faster services directly relate to higher customer satisfaction.
Omnichannel Banking
The ever-changing customer demands encourage extensive use of the omnichannel banking experience. Luckily, modern core banking solutions pave the way. Customers can begin transactions on their phones, complete them on laptops, and get further account information at the branch, ensuring a unified experience. This banking caters to today’s consumers who require consistent financial access across various channels. Modern core banking solutions easily integrate with mobile apps, enabling customers to deposit checks remotely.
Enhanced Efficiency
Modern core banking solutions have automation at the core. Tasks like account reconciliation, loan processing, etc., are automated. Their streamlined workflows and real-time data management enhance efficiency and ensure cost savings. Moreover, cloud-based core banking solutions bring further benefits, such as removing the need for on-prem hardware or IT infrastructure and their capex and opex costs. Cloud-based solutions also have inherent scalability, which enables banks to adapt resources to meet fluctuating customer demands.
Innovation on Demand
With their open APIs, modern core banking solutions act as a launchpad for innovation. These APIs allow banks to integrate with modern fintech solutions and develop new products and services much faster than ever before. This empowers a collaborative ecosystem where banks can leverage the expertise of fintech companies to expand their offerings and address evolving customer needs.
Make Your Bank Resilient and Future-Fit with MobiFin!
You now understand that legacy solutions are a roadblock to banking progress. Banks need to adopt modern core banking solutions to ensure a future of personalized experience, fast transactions, and seamless omnichannel banking.
Modern core banking solutions are not just your regular solution update but foundational shifts that encourage banks to thrive in the digital age. Embracing a future-proof core banking solution supports banks in being innovative, enhancing customer experience, and ensuring long-term success.
Let MobiFin Core Banking Solution be your secure, solid, and future-fit platform that caters to ever-changing banking needs. With real-time processing, open APIs, push notifications, cloud support, and more, MobiFin can eliminate silos and make your bank ready for the future.
Experience it for yourself – schedule a demo today.
