Legacy system migration to a modern core banking platform involves the process of moving from an outdated banking system to a newer, more advanced one. This process is crucial for financial institutions that want to remain competitive and meet the demands of the digital age.
A modern core banking platform is a cloud-based system providing an integrated and automated approach to banking operations. Highly scalable and secure, it uses the latest cloud technologies to provide banks with a comprehensive view of their operations, reduce costs, and improve customer service.
Transitioning to a modern core banking platform is necessary for financial institutions that want to remain competitive and provide the best possible customer service experience. Due to rapid technological advancements, traditional banking systems can no longer keep up with the demands of digital consumers. Customers now expect seamless and convenient banking experiences, which can only be achieved through a modern core banking system.
Modern Core Banking Platform: Features
A modern core banking platform is a cloud-based system providing an integrated and automated approach to banking operations. This comprehensive system can handle all banking operations, including deposits, loans, payments, and account management.
Modern core banking platforms use the latest technologies, such as artificial intelligence, machine learning, and big data analytics, to provide banks with a holistic view of their operations, enabling banks to streamline processes, reduce operational costs, and improve customer service.
Highly scalable, modern core banking platforms can easily adapt to the market’s changing needs. Banks utilizing these platforms can quickly launch new products, expand their operations, and integrate with third-party applications.
Security is another critical feature of modern core banking platforms. They feature robust security measures, such as multi-factor authentication, encryption, and fraud detection, to protect customer data and prevent security breaches.
The Migration Process
Migrating from a legacy system to a modern core banking platform involves several steps, including planning, assessment, and implementation. The first step is to assess the current system’s capabilities and identify any gaps or limitations hindering operational efficiency or customer experience. Once these gaps have been identified, the next step is to plan the migration process. This involves determining the scope of the migration, defining the project timeline, and identifying the resources required to complete the migration successfully.
The implementation phase involves the actual migration of data, applications, and infrastructure to the modern core banking platform. This process requires careful planning and execution to ensure that data integrity is maintained, and that the new system is fully functional and integrated with other systems and third-party applications.
During the migration process, it is important to keep stakeholders informed and engaged to minimize disruptions and ensure a smooth transition. This involves providing regular updates, addressing any concerns or issues promptly, and providing training and support to users to ensure that they can effectively use the new system.
Common Issues to Avoid During Migration to a Modern Core Banking Platform
Transitioning to a modern core banking platform is a complex and challenging undertaking, but it can also be extremely rewarding for banks and financial institutions. However, there are several common issues that banks should watch out for during the transition process, including:
Lack of stakeholder alignment
All key stakeholders must be aligned to the core banking transformation program’s goals and objectives. This includes understanding the business benefits the new platform is expected to deliver and the risks and challenges involved. Without clear and concise alignment, the program is more likely to experience delays, cost overruns, and other problems.
Poor scope management
The scope of a core banking transformation program can be vast and complex, so it is important to carefully define and manage it. Identify the business processes and systems impacted by the transition and the resources and timelines required. Poor scope management can lead to unforeseen delays, costs, and risks.
Underestimating the complexity of data migration
Migrating data from a legacy banking system to a new platform is a complex and challenging task. It’s important to carefully plan and execute the migration process to ensure that all data is transferred accurately and completely. Underestimating the complexity of data migration can lead to serious problems, like data loss or corruption.
Inadequate testing
Thorough testing is essential to ensure that the new core banking platform is working properly before it is deployed to production. This includes testing all business processes and systems and the performance and security of the platform. Inadequate testing can lead to system outages or security breaches.
Lack of change management
A core banking transformation program can have a significant impact on the bank’s employees, customers, and other stakeholders. It is important to have a comprehensive change management plan in place to communicate the changes and help everyone adapt. Lack of change management can lead to resistance to change, employee turnover, and other problems.
Potential risks & challenges
In addition to the common issues mentioned above, banks should also be aware of the following potential risks and challenges when transitioning to a modern core banking platform:
Cost
Core banking transformation programs can be expensive, so it is important to carefully budget for the project and ensure that the benefits justify the costs.
Timeframe
Core banking transformation programs can take several years to complete, so it is important to be patient and realistic about the expected timeline.
Business disruption
Core banking transformation programs can disrupt the bank’s business operations, so it is important to carefully plan and manage the transition process to minimize disruption.
System downtime
There is a risk of system downtime during the core banking transformation process. It is important to have a contingency plan in place to minimize the impact on customers and other stakeholders.
How will customers benefit from the transition?
Modern core banking platforms offer several benefits to customers, including improved accessibility, convenience, and security. Here are some of the major benefits:
1. Accessibility: With modern core banking platforms, customers can access banking services and perform transactions from anywhere, anytime using their mobile devices or computers. This increased accessibility makes banking more convenient and efficient for customers.
2. Convenience: Modern core banking platforms enable customers to perform a wide range of banking services, including deposits, withdrawals, payments, and transfers, without having to visit a physical bank branch. This saves customers time and effort and allows them to manage their finances more easily.
3. Security: Modern core banking platforms use advanced security technologies, such as multi-factor authentication, encryption, and fraud detection, to protect customer data and prevent security breaches. This increased security helps customers feel more confident and secure when using online or mobile banking services.
4. Personalization: Modern core banking platforms use customer data and analytics to provide personalized banking services and product recommendations. This helps customers make more informed decisions and allows banks to offer tailored services to meet their customers’ needs.
5. Transparency: Modern core banking platforms provide customers with real-time access to their account information, balances, and transaction history. This increased transparency helps customers stay informed about their finances and enables them to track their spending and savings more effectively.
How will banks benefit from the transition?
Improved operational efficiency
One of the primary reasons why banks are transitioning to modern core banking platforms is to enhance their operational efficiency. A modern core banking system offers a streamlined, automated, and integrated approach to banking operations. This saves time and resources, allowing banks to focus on providing better customer experiences and innovative products.
Greater scalability
Another significant advantage of modern core banking platforms is their scalability. A cloud-based core banking system can quickly and easily scale up or down to meet the changing demands of the market. This means that banks can quickly respond to market changes, launch new products, and expand their operations with ease.
Increased security
Modern core banking systems also offer enhanced security features, which are critical with cyber threats on the rise. A modern core banking system provides robust security features, including multi-factor authentication, encryption, and fraud detection, to protect customer data and prevent security breaches.
1. Multi-factor authentication
MFA adds an extra layer of security to user login by requiring users to provide two or more factors of authentication, such as a password and a one-time code generated by a mobile app. A modern core banking platform might use MFA to require bank employees to enter their password and a one-time code from their mobile app when logging in to the system. This helps to protect the bank’s systems and customer data from unauthorized access, even if an attacker were able to obtain an employee’s password.
2. Encryption
Encryption scrambles data so that it can only be read by authorized individuals. For example, a modern core banking platform might encrypt all customer data at rest and in transit. Customer data would be encrypted when stored on the bank’s servers and also when being transmitted between the bank’s servers and customers’ devices.
3. Fraud detection
Fraud detection systems use advanced analytics to identify and prevent fraudulent transactions. A modern core banking platform should have a fraud detection system that monitors customer transactions for suspicious activity, such as large or unusual transactions. If the system detects suspicious activity, it can flag the transaction for review by a bank employee, preventing fraudulent transactions from being completed.
4. RBAC, IDS, & security training
In addition to MFA, encryption, and fraud detection, other important security features for core banking platforms include role-based access control (RBAC) and intrusion detection systems (IDS). RBAC helps to
ensure that users only have access to the resources and data that they need. IDS monitors network traffic for suspicious activity and can alert bank administrators to potential attacks. It is also important for banks to provide security awareness training to their employees. This training can help employees to identify and avoid phishing attacks and other social engineering scams.
A new role for banks
A bank is no longer a stuffy Wall Street institution but rather an application on consumer phones that they interact with daily. Banking customers are looking for seamless interactions between their physical and digital banking experiences. Creating growth requires banks to rapidly adjust to this business model.
Offering many benefits to customers, improved operational efficiency, scalability, and enhanced security features, migration to a modern core banking platform can help banks provide seamless customer experiences, launch innovative products, and maintain a competitive advantage. Migration is a critical process requiring careful planning, assessment, and implementation to ensure a successful transition and maximize the benefits of the new system.
Stefanini offers solutions to address this transformation, allowing banks to embrace new business models and define a modern business architecture. Our digital banking and finance experts will make your roadmap a reality, designing and implementing end-to-end solutions to digitally transform your operations, manage risk, and drive profitability. Talk to an expert today!
