1. The objectives are agility and ease of integration.
Today, the rationale for standardizing technology has evolved and pivoted horizontally. That is to say that the main concern is no longer at the level of business applications, but rather on cross-functional platforms that preserve a consistent experience across all points on the customer journey. Common integration standards are a critical aspect to support this strategy. Such standards are important because they make it faster and easier to “snap on” new tools that can benefit customers or “plug in” to external data sources or marketplaces.
Such an approach gives banks smoother and faster access to a wide range of new technologies and valuable data sources. It also promotes business agility by increasing the speed to deliver new products or channels and deliver new services to customers based on new technology and data.
2. Competition has always counted, but the competitors have changed.
Competitive factors used to play a secondary role in core platform modernization as geographic boundaries, economies of scale and regulatory moats provided banks with protection from competition. Those protections reduced the urgency of IT projects.
Today, those competitive barriers are quickly eroding. New and nontraditional competitors — ranging from FinTech startups to tech giants — are encroaching on banks’ established lines of business and attracting key segments of their customer bases. Convergence across financial services sectors has also raised the competitive stakes.
As a result, the need to differentiate is now a primary driver of tech innovation — and, therefore, of core platform modernization. Because the competition is different, banks must take a different approach and rethink the role of the core.
3. Goodbye monolithic platforms and “big-dig” implementations. Hello open platforms and smart integrations.
Yesterday, banks wanted the biggest and most fully featured software packages they could get. They were typically configured and customized to meet the internal needs of the business, aligning to existing product sets, functional processes and organizational boundaries whether that made sense from customers’ viewpoints. Big-dig implementations and rip-and-replace upgrades were the rule.
Today, banks should define their IT needs, including the optimal design of core structures, based on their product and customer growth strategies. They should avoid the trap of letting their existing cores determine which products can be developed and launched. That will give banks a range of options, from several cores within the same product line to multiple adjacent cores to offer unique product attributes, and in a way that eliminates the traditional silos within financial services.
The ideas should be to design core platforms to enable operational agility across the business and eliminate the constraints of legacy architectures centered on monolithic platforms. Smart integrations hold the key, no matter whether banks have individual cores supporting multiple products or individual products supported by multiple cores.
4. Flexibility is critical because new technologies typically need updated cores.
Today’s most powerful enabling technologies didn’t exist when most banks implemented their last core platforms. Many banks have been deploying artificial intelligence (AI) and cognitive services, and managing them in an ad hoc fashion or via targeted pilot programs. The use of native cloud technology has largely been pushed to lower-priority applications, traditional web applications and data platforms.
To generate maximum value from investments in these and other disruptive technologies, banks must learn to embed them across more parts of the business more efficiently. Deploying powerful technologies successfully requires thinking beyond boundaries to enable accessibility and scalability. They must also manage them more robustly as part of everyday IT operations and not as standalone science projects. A modernized core platform must be able to orchestrate all of these multiple powerful technologies, even as they become more powerful in the future.