New banking systems are coming up with great features and unique ways to help customers. However, legacy banking systems still exist. While 83% of bankers understand the importance of digital transformation, only 43% of them actively try to make a change. That’s why it’s crucial to not only understand the threats of legacy banking, but also figure out the right means to implement those solutions.
Why do banks still use legacy systems?
One of the reasons why legacy systems still exist in banking is because it can take a lot of change and effort to shift to a new system. The costs of digital transformation are not cheap, especially when it comes to the financial sector. That truly means you have to adapt and adjust to everything so it will work exactly as expected. Plus, while you recover some of the investment pretty quickly, it’s still expensive to focus on digital transformation.
The same thing can be said about resistance to change. Many banks continue to use those legacy systems because they work. Granted, new systems could do it better, but that also means they have to spend quite a bit. The same thing can be said about customer inertia. Digital transformation comes with high entry barriers, and customer inertia as well can also be a factor.
Also, banks are afraid of disruption and a variety of problems that can sometimes arise. The risks that come from making changes can be very prevalent. However, we also have to realize that more risks arise from simply not knowing how to adapt to those systems and implement them the right way. It’s a double-edged sword and one of those things that we truly need to focus on and understand.
Treats of legacy banking systems
When it comes to modernization, many banks will try to add a multitude of challenges into the mix. But the truth is that a legacy system will always be risky since you don’t have the best security. A legacy system will be prone to more attacks than a regular system, and that alone becomes a huge issue. Not only that, but employees are considering leaving companies if they use outdated systems.
The costs of maintaining, upgrading and patching legacy systems can also be high, sometimes higher than the newer systems. Scalability is also affected because you are limited by the technology and those older systems in the first place. A similar thing can be said about fragmenting the data architecture. You either stick with the old stuff, or try to add something new.
One thing is certain, legacy systems are not suitable for modern banking. While some banks still use those, the truth is that it can be difficult to access all those opportunities and enhance them in a clever manner. Improving the technology and using the latest resources is a great way for banks to evolve. Sure, it’s less expensive to keep the old stuff, but legacy systems will cost you more and more to maintain. And there are also security concerns as well!
