FinTechTalk: The blueprint on transforming your legacy systems to unlock greater efficiency

On 21 May 2024, FinTechTalk host Charles Orton-Jones was joined by Steven Cochran, Transformation Director, AIB; Hans Tesselaar, Executive Director, Banking Industry Architecture Network; and Tom Byrne, Head of Product and Innovation EMEA, nCino.

Can modernisation solve the pain points for financial institutions?
Banks usually don’t have a blueprint for digital transformation but upgrade different components of their system separately. However, banks with sporadic improvements sooner or later reach a point where they need some end-to-end transformation to move on.

Fintechs give today much more choice for banks on how they can upgrade than what they had in the past. While commercial, business and other units were managed separately in the past, now the direction of travel is towards the unification of siloed systems. Typically, there are a lot of automated processes in commercial banks and much less in corporate banks.  Coreless banking is an approach developed by the Banking Industry Architecture Network.

It means that functionalities in the core are kept to a minimum – you don’t need customer profiles or collection and disbursement in the core. Once you have removed them from the core, you wrap the core with an API layer through which functionalities that sit outside the core can be integrated. 

How to set out on a digital transformation journey
The first step is to understand what metrics you want to improve on. At AIB, the top roadblock was that loan approval processes weren’t transparent. This was the issue that had to be addressed. As a result of the tech upgrade, loans up to Euro 100, 000 are now settled in 17 minutes. Every unit has its own priority – cost, efficiency, customer experience, etc that need to be addressed in line with what is the North star of the transformation. You must ensure at the very start of the transformation that everybody speaks the same language.

The average time a transformation takes is shrinking with cloud-based systems. Another main endeavour of banks focuses on getting their data to a place where AI systems and users can access it. Banks are now probably the biggest analytics companies regarding the huge amounts of data they are sitting on. AI offers functionalities that weren’t possible only two years ago. 

The change is so fast that a discussion about the same topic next year will be completely different from the one we are having now. Personalized services versus operation efficiency is a trade-off that financial institutions must navigate. The problem is that banks often don’t have a clear idea of what their customers want. In a survey where CEOs of banks shared their ideas of what their customers need, answers didn’t really coincide with customers real priorities. Banks are now also trying to be proactive about serving their customers and offer them services based on their profile and behaviour. The banks that can crack proactive offering of services will be the winners in 5-10 years time. 

The panellists’ insights

• The cost of non-action gets ever bigger as you kick transformation down the road.
• There should be a paradigm shift where banks identify what their customers want and work out ways in which they can offer those services, rather than offering customers what they think they will like and then finding out later if that really is the case.