Banking’s digital future: Legacy system modernisation

Money is on the move in the developing world. Transactions that once took days now take seconds as new technology fuels a digital revolution that is fundamentally changing how people work and live.  

Whether it’s in Bangkok or Bogota, consumers are abandoning the slow service and high fees of traditional 9-to-5 banking — and opting instead for digital solutions that are available 24 hours a day, 7 days a week.

For these increasingly wealthy consumers, it’s a digital golden age of speed and convenience. But for many financial institutions, it’s now time to evaluate legacy system modernisation.

Do they decide to keep investing in ageing technology? Or do they finally switch to cloud-native applications that attract customers, boost revenue and ensure they remain competitive in the years to come? Are they prepared to transition to an open banking API platform for composable solutions?

These decisions take time, but the clock is ticking. A recent study by IDC Financial Insights reveals that global banks spent almost US$37 billion on legacy payments technology in 2022, and that this cost will jump to over US$57 billion in 2028.Another study, this time by Nasdaq, discovered that 44% of the investment in Financial Market Infrastructure is focused on maintaining legacy tech or, as they put it, “simply keeping the lights on.”

5 ways legacy system modernisation optimises resources and budget

  • Lower Maintenance Costs: Modern systems require fewer resources and expertise for maintenance, saving money in the long run.
  • Decreased Downtime: Modern infrastructure reduces the likelihood of system failures and downtime, minimising business disruptions.
  • Faster Issue Resolution: Modern systems come with better tools for identifying and fixing problems quickly.
  • Easier Upgrades: Upgrades and adding new features are simpler with composable solutions and an open banking API platform.
  • Reliable Vendor Support: Modernisation ensures ongoing support from vendors, avoiding the costs and risks of unsupported technologies.

The burden of maintaining legacy tech is becoming increasingly expensive. So why are so many institutions hesitant to embrace modernisation? 

Modernisation costs money, too, of course. It’s also complicated, clouded with uncertainty, and comes with the risk of downtime and failure. 

These concerns are particularly important for financial organisations in Asia and South America. Sometimes lacking the deep pockets of their richer peers in North America and Europe, they may struggle to find the resources and talent to begin their own transformation journeys. But this is changing. Thanks to new companies focused on digital transformation in emerging markets, financial organisations can now migrate to modern, digital solutions with unprecedented speed and convenience.

In Colombia, for example, a bank partnered with Sirius Technologies, whose composable application platform reduced the usual time-to-market of delivering a new technology by up to 60%.

Elsewhere, in Thailand, a credit card company was able to create a cloud-based platform that reached over three million consumers. Sirius Technologies modernised its IT system in less than six months when such projects typically take up to two years.

These are just two examples of the ease and speed of digital transformation today. And it couldn’t come at a more important time because it’s not just tech-savvy customers who are getting impatient with legacy technology. 

Government regulators are turning up the pressure, too, demanding ever better security, privacy and uptime for financial services. Even notable names like DBS Bank in Singapore aren’t immune to the increased scrutiny from regulators. 

After DBS suffered their third service disruption in 18 months last year, the Monetary Authority of Singapore ordered the bank to set aside another S$670 million in regulatory capital as a buffer against future losses.

It’s a sobering reminder that even leading financial institutions have some work to do when it comes to addressing the costs and complexity of digital transformation. Let’s take a closer look at how a transformation partner can help reduce some of those costs.

Comparing costs

It’s not easy weighing the cost of adopting new technology against the cost of maintaining the status quo. Every organisation has unique needs and challenges that will tip the scales one way or another.

But some things are very clear. Every day of delay is another day that a dissatisfied customer can take their business elsewhere. It’s another day for a talented employee to accept an offer from a cutting-edge competitor. 

Every new disruption, regulation, and failure to offer a digital solution adds up to more costs while an organisation fiddles with the decision to update its ageing infrastructure.

Many of these costs may be difficult to quantify, but they are real and growing. Meanwhile, the savings generated by modernisation today can be significant.

When Sirius Technologies helped one of Colombia’s top three banks develop a suite of new digital solutions, the traditional cost for this type of project was cut in half. 

A key reason was Sirius Technologies’ Multiverse platform, which allows organisations to launch a specific digital solution without getting entangled in a company-wide, big-bang transformation. Using a ‘wrapping’ solution to safeguard existing IT infrastructure during a transformation, Sirius Technologies can plug the gap between old and new technology in a way that satisfies their client’s need for both scalability and flexibility.

Cost reductions are apparent elsewhere as well. The previously cited IDC study that saw the cost of legacy payments technology soaring to over $57 billion, also discovered that modernising this technology could cut these costs by as much as 21% a year.

A study by Citi found that replacing physical branches and staff with digitisation could reduce a bank’s operational costs by up to 50%. Another study by McKinsey said digital banks are acquiring new customers for just 10% of the cost incurred by traditional banks. 

These are some compelling cost reductions. But it’s also true that the cost of transforming — or not transforming — legacy technology will vary across organisations, each with its unique profile of risks and uncertainty. This is why an experienced partner is essential for ensuring that a transformation is both cost-effective and clear.

Modernising legacy systems for evolving business needs

  • Enhanced Efficiency: Modernising legacy IT systems allows for streamlined processes and automation, reducing manual effort and increasing productivity across various operations within financial institutions.
  • Improved Customer Experience (CX): By leveraging modern IT systems, banks can offer real-time transaction processing, personalised recommendations, and seamless omnichannel experiences, resulting in higher customer satisfaction and loyalty.
  • Risk Mitigation and Compliance: Upgrading legacy systems ensures compliance with evolving regulatory requirements such as GDPR and PCI DSS, as well as enhancing security measures, thereby minimising the risk of penalties and data breaches.
  • Scalability and Flexibility: Modern IT infrastructure offers greater scalability and adaptability to accommodate business growth, introduce new products, and integrate emerging technologies, enabling financial institutions to stay agile in a rapidly changing market landscape.
  • Leveraging Data Analytics and Insights: By harnessing modern IT capabilities, banks can efficiently collect, store, and analyse vast amounts of data, empowering them to make data-driven decisions, improve risk management strategies, and deliver personalised customer experiences based on actionable insights.

Overcoming complications

With more than 80% of banks in Southeast Asia still failing to hit their legacy system modernisation goals, it’s never been more important to secure that missing piece of the puzzle that ensures a successful transition to a digital future.

The first step of any journey is usually the hardest, especially in an industry as complex as finance. Business leaders face hard questions about uncertain costs, complex technology, and the lack of skilled talent to shepherd their migration from old technology to new digital opportunities. 

Fortunately, many of these questions are now being answered by firms that specialise in these transitions, making it easier than ever for financial organisations to protect their existing technology while embarking on a flexible and scalable adoption of the new solutions sought by consumers and regulators alike.

About Sirius Technologies

Sirius Technologies enables intelligent digital transformation for banks and financial institutions. Its proprietary composable application platform, Multiverse, empowers financial institutions to scale and introduce innovative digital products to their customers and partners, while safeguarding legacy IT investments. 

Since its inception in 2021, Bangkok-based Sirius Technologies has empowered more than 50 million users, from Southeast Asia to Latin America, across diverse financial services applications.

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