On Wednesday, April 14, Federal Deposit Insurance Corp. (FDIC) Chair Jelena McWilliams stated her top concern for the sector is banks’ reliance on outdated legacy systems.
During a virtual conference hosted by the Consumer Bankers Association, McWilliams was asked – if given a “magic wand” – what about the banking system she would change. Her response pointed to the possibility of banks’ outdated internal processes and legacy software that “frankly are impeding their ability to move forward” and threatening the resiliency of the sector.
“There are several things I would like to see done differently within the banking system,” McWilliams said, “but I will say No. 1 is something that concerns me on a longstanding basis, which is the legacy systems.”
Pam Kelly, president of Financial Institution Products Corporation (FIPCO), agreed that banks’ reliance on legacy systems is a significant hurdle in a digital transformation.
“Part of the challenge in leaving legacy behind is legacy systems contain a significant amount of data banks need to drive insights and make decisions today,” Kelly said. “Careful planning and development of a road map can help determine what systems to replace or where a wrapper or API could play a role in the modernization plan.”
Creating a modernization plan is an important step in promoting new technologies and, as McWilliams stated, can lead to greater concerns within your organization down the road.
“It becomes very complicated when you're bogged down by legacy systems and an ongoing contract that you have, whether it's with your core processor or other entities, or simply the legacy computer systems you have within your organization,” McWilliams continued. “It becomes really difficult to manage all that in a safe and sound manner and not have any issues.”
Kelly further noted that the improvement of a technology ecosystem, digital or not, should help transform a business and help them “achieve new and improved services and experiences.” It is a plan that should be well thought out and a process that should be carefully considered.
“Often, we see a new technology and think – ‘we need that,’” said Kelly. “Yet, instead of focusing upfront on the technology, focus on the what the bank wants to accomplish with their business and then determine the how.”
Click here to learn more about FIPCO, a wholly-owned WBA subsidiary, and its services.
By, Alex Paniagua