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By Robert Turner
Banks compete on customer experience.
Since the iPhone debuted in 2007, industry leaders have doubled downed on technology investments to make financial services more personalized, convenient, secure, and accessible for customers.
Front-office initiatives, such as digital customer onboarding and servicing, have received the lion's share of attention and investment. But findings from our survey with American Banker suggest banking leaders are shifting how and where they invest. When asked which legacy technologies banks are prioritizing for modernization over the next two years:
- 36% of respondents are prioritizing internal IT systems
- 32% are prioritizing digital channels and data analytics stacks
- 28% are focusing on processing
The findings speak to a trend we see in the banking sector: building a next-gen back office to continue the evolution of customer-centric experiences.
Below are some factors I encourage customers to keep in mind for back-office modernization efforts. North America-based Comerica Bank is already applying some of the ideas to become a cloud-first bank. I share a bit of their story, as well.
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The findings speak to a trend we see in the banking sector: building a next-gen back office to continue the evolution of customer-centric experiences.
Defining the purpose of your modernization
Every back-office modernization effort must have clarity of purpose – organized around the specific value you want to deliver to satisfy customer needs. With purpose defined, you’ll need to ensure target-state technology solutions and operating model transformations will drive better risk-weighted business outcomes. You’ll want:
- An actionable roadmap that brings business and technology together.
- Internal alignment, ensuring the right people are doing the right things at the right time, and in the right sequence.
- An ecosystem of curated partners that bring domain specificity, best-of-breed thinking, and speed to market.
Taking a fit-for-purpose approach
To modernize back-office technology, build a strategy and solution that is fit-for-purpose.
Mainframes have remained relevant in many banks because they provide unparalleled reliability, speed, and performance for high-volume transactions. It is not an easy task to move off mainframes. Architecting a target state that can meet business needs requires high skill, experience, determination, and persistence.
While there are many pathways to modernize mainframe-based back-office applications, including cookie-cutter approaches, a fit-for-purpose approach enables banks to tailor their modernization efforts to their specific needs.
Standardizing back-office operations
The back-office often comprises fragmented, aging systems and millions of lines of convoluted code with embedded logic, which can be intimidating to those looking to modernize.
Central to back-office modernization is organizing around a set of architectural standards and guiding principles. Standardization allows banks to get to a level of industrialization with different markets, segments, and product sets.
Kyndryl's own transformation journey mirrors what many banks face. Many of the disparate systems that Kyndryl inherited were developed over the course of more than 40 years. We’ve learned firsthand how a streamlined portfolio of standardized processes enables business agility and innovation.
Using APIs to improve employee and customer experiences
Employees and customers expect seamless, personalized, and effective digital experiences.
Improving the experiences can come from fully utilizing back-office data to drive insights for contextual personalization of services and products.
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Mainframes handle 90% of all credit card transactions , host critical core IT for 92 of the world's top 100 banks and top 10 insurers, and are counted on for 29 billion annual ATM transactions .
Mainframes handle 90% of all credit card transactions 1, host critical core IT for 92 of the world's top 100 banks 2 and top 10 insurers, and are counted on for 29 billion annual ATM transactions 3. Yet most banks have not unlocked the true value of their mainframe data, especially related to employee and customer experiences.
APIzation can unlock the data.
By using AI-based tools, back-office data can be aggregated across multiple customer touchpoints and new insights can be generated, leading to a complete behavior analysis for the bank’s customers. This can enable a true understanding of customer preferences and the
