As banking technology evolves, institutions must assess their business technology stack.
Key takeaways
A full conversion may not be necessary; there are many ways to strengthen the core’s viability.
A third-party advisor can be a helpful asset along this journey.
As banking technology continues its rapid evolution, every financial institution is going to need to assess its business technology stack. Harnessing the transformative power of artificial intelligence, establishing embedded finance and open banking engagements, and delivering real-time payments are just a few of the opportunities institutions have in front of them. But lacking the right technology and partners can restrict potential advancement.
A full assessment of a tech stack should begin at its center—the core. While the core is not the only solution to consider, for many institutions it is the hub of their business technology, so ensuring they have the right foundation to build on is a critical first step. Financial institutions will need to evaluate or establish their core system strategy and determine how the current solution either enables them to take advantage of the technology evolution and support strategic goals—or how it is getting in the way of those opportunities. With five-, seven- and 10-year contracts being the norm for many core systems, and conversions taking 18 to 24 months in many cases, organizations need to make thoughtful decisions in this area.
A full-scale conversion may not be necessary, as there are a multitude of options to strengthen the core’s viability. Taking a proactive and informed approach to understanding the core’s impact on the institution's present and future is a critical first step in establishing a forward-focused technology strategy.
Below we highlight some considerations that can help financial institutions evaluate their core and establish a more complete tech strategy. A third-party advisor can be another helpful asset along this journey.
Strategic alignment
- How is your current technology affecting your strategic goals, customer engagement and service delivery?
- Are you entering new markets or lines of business that require specialty technology?
- Are your current agreements and terms in line with the market?
- How quickly do you expect to grow, and will that growth be organic or inorganic?
Processing and functionality gaps
- Where are the pain points that might be impacting service and efficiency?
- What can’t the core do that it should be able to do?
- Which functions require work-arounds because they are inefficient in the core?
- Which processes are more manual than they should be due to current core functionality?
Core-centric focus
- Bundling vs. best-in-breed has been the ongoing debate, but what is the right path for you to build a best-fit solution set?
- Has the current core had negative impacts on vendor management, risk, budget, integrations or customer engagement?
- Does the current core work for most needs, but fall short for certain business lines or programs? Are there alternative solutions that might address these issues?
- What is the current vendor’s strategy to deliver a next-gen solution?
Business application tech stack
- Are there weak links or gaps in your technologies outside of the core?
- Can existing systems support processing that enables dynamic workflows, automation and artificial intelligence capabilities?
- Is the customer experience impacted by the current tech stack?
Data governance and delivery
- Is the core system at the center of the organization’s data systems and processes, or a primary contributor?
- How is the organization managing its data sources to enable more uniform decision making?
- Does the organization have the specialized knowledge or resources to effectively manage and deliver data?
Core alignment approaches
- Rip and replace (traditional conversion)
- Progressive migration (new systems and a migration of services over time)
- Greenfield (new product/service launches with new core to support)
Resource management and drain
- If the institution needs to consider a core replacement, do you have the resources or bandwidth to evaluate options and manage a conversion?
- Do you have the talent required to see the big picture for the strategy and processes of moving to a new core system?
The journey toward a technology infrastructure that truly supports customers, business lines and strategic goals won't be instantaneous. Challenges will likely arise along the way. But by taking a thoughtful and strategic approach, financial institutions can build a cohesive suite of applications that empowers them to achieve their goals and deliver exceptional service, solutions and engagement well into the future.
RSM contributors
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Josh ParkerManager
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