6 Reasons Why Banks Can't Transform Legacy Applications

Hi Ketharaman

I read your blog with attention , and have now a twofold kind of feeling about it. 

First of all let me say that it is very interesting, rich of references (either pat 1 and 2) and providing a snapshot of what might be the reality in the Financial Banking community...BUT only somewhere...and here we are on the second part of my thoughts..

From what I read though, it does not look like we are discussing Global Transaction Banking here...let's see

Impractical open standards ? it is not all about Payment Service Hubs resolving this issue ? I mean the solution is exactly the reason to transform legacy applications, not its stopping point, isn't it ? 

Low Uptime ? I believe, at 74% uptime (but even close to 80%) no mission critical bank application system can operate at all, not to discuss the CTO maintaining his seats for more then a week...am I wrong ? 

Sudden loss of functionalities ? but are we discussing of GTB or consumer software runnig on android ? 

All in all I believe all the issues described in the blogs - real ones of course - are for sure just confirming the mandatory requirements for Banks to RUSH away from legacy applications TODAY, and move toward a solid Payment Hub without further delays. Thanks and regards

@DanieleA:

TY for your comment. My post covers retail and corporate banking in general. But, given my payments background, what I've said is equally well applicable to GTB in general and payment hubs in specific. 

This is not the forum to shame anyone in particular but, if you contact me privately,

• I'll tell you the names of not one, but many banks, whose online payments have low uptimes and, when I last checked, their CTOs hadn't changed for years. 
• I'll also tell you about a bank which was hoping to replace all its legacy applications with a spanking new open systems payments hub. Over time, it found out that it needed one hub for FPS, another one for TARGET2, a third one for emerging market payments, and so on. Not to blame the bank or the vendor concerned (not ACI) but, for whatever reason, the bank today has a "legacy of payment hubs" and has barely managed to sunset 20% of its legacy landscape.

In this day and age, mobile apps are as relevant to banking as backend core banking systems and payments hubs, so I'd be remiss if I'd ignored Android apps. 

IMHO, if solution providers looked at end-to-end business processes in a holistic manner instead of just thinking about their own point solutions, they might achieve greater success in persuading top management of banks to ditch their legacy applications and embrace open systems.

Great piece, Ketharaman and some good insight. Look forward to hearing more.

Is the prohibitive cost of replacing the system and end-2-end processes holding banks back from embarking on such programmes. Is it the rapidly evolvig trends, technologies and standards (by the time you have done the transition, the industry has moved on) 

@SunilP:

TY for your kind words. Part 2 of this blog is already live:

Why Banks Can't Transform Legacy Applications - Part 2

Cost of replacing legacy systems is not prohibitive. It's actually the opposite. However, as I've mentioned in Part 2, cost reduction doesn't work as the GTM message. Packaging this in a different manner to appeal to customer C-Suites has helped a tech vendor succeed in legacy transformation.   

Technology and trends can keep moving on. But the underlying business processes have remained virtually unchanged in retail and corporate banking for ages. Which is part of the reason why legacy transformation for the sake of embracing latest technology hasn't happened.

Among others, the 6 factors I've described in my two part blog post are holding banks back from ditching their legacy applications.