Never has the idea of “legacy” taken such a pasting as during the pandemic’s digital shift, but banking is a legacy business.
Or rather, it was. That’s changing at the speed of digital as platforms enable legacy banking systems to become digital product innovation engines.
That’s been a costly and heavy lift until recently, where core banking systems dating back to the ’70s and ’80s in some cases are now needed to surface data that assists in digital product innovation in areas like mobile, and these older cores aren’t up to the technological task.
Taking its time to seize this moment in the evolution of financial services, digital delivery platform Savana, formed in 2009, just announced its $45 million Series A fundraise, with the firm bringing its legacy core banking infrastructure platform upgrade to the wider market.
Asked by PYMNTS’ Karen Webster why they waited 13 years to do a Series A, Savana Chairman and CEO Michael Sanchez said, “The ‘why now’ is that we’ve been working somewhat under the radar building applications that we’re now going to market with, and we really want to accelerate our growth. To do that, we need to get in front of the demand, and demand is pretty high for us. This year we’re almost doubling in size. It was the time to do it.”
With numerous FinTechs also going after the legacy banking issue — suggesting possibly fierce competition — Sanchez said Savana is looking at legacy upgrades differently than most.
Pointing to the work going into mobile experience, automated account opening and remote onboarding, he said, “There really hasn’t been a lot of focus on the legacy infrastructure and how to expose that in a digital world. We’re taking a little bit more of an industrial view towards things, where we’ve built an application that orchestrates a bank’s technology, be it a next generation technology or a legacy technology.”
Likening Savana’s library of banking application programming interfaces (APIs) to Amazon retail fulfillment — but for banking — Sanchez said, “When you hit the ‘click to buy’ button, it’s already telling you when it’s going to be there, it knows how to pick it out of the warehouse, send it to the right shippers.
“It does all that stuff behind the scenes, and that’s process orchestration. That’s what we do for banks.”
See also: Savana Raises $45M to Drive Digital Capabilities for Banks, FinTechs
Fragmentation Versus Integration
After years of furious app development, the sense that consumer finance is now too fragmented and app-happy is driving the move to simplify and create connections.
Noting the proliferation of banking and finance apps, he called this “many, many apps doing different little point solutions that weren’t connected end to end.”
Savana’s answer is a suite of APIs that create end-to-end processes within retail banking, payments and commercial banking.
“We call that a digital delivery platform for banks. You can connect it to multiple legacy systems,” he said. “If I’m a customer of a bank and I have a mortgage, a credit card and a retail account on my mobile device, we can expose them all at the same time in real time.”
Some legacy banks are dealing with this by forming neobanks and challenger banks of their own, which captures digital banking share but doesn’t fix the limitations of core systems, among other roadblocks that neobank concepts run into.
Savana’s go-to-market strategy begins with regional banks and FinTechs, from the oldest systems up to current Gen3 banking cores, unlocking digital delivery across the spectrum. In this way, Savana intends to help clients leapfrog legacy issues and go straight to digital.
With digital erasing the old borders where large banks dominated regionally, “They’re now on an equal playing field with everybody, all banks, and they need to innovate again,” he said. “Innovation starts at the core, and we go from the core to the customer.
“We help a bank really think about that transformation process. Once we’ve connected to even an old core, it’s a lot easier to swap in a new core because your channels are consistent.”
Until recently, such projects were major undertakings, but platforming and APIs have shortened development times and streamlined integrations to unify what are still disparate functions.
“We take a lot of the variables out of that whole legacy transformation process and also create value right away, even against an old core or multiple old cores,” Sanchez said. “Somebody’s got a commercial lending core and retail banking core, a mortgage or a credit card core, we can connect them all simultaneously and deliver them to digital channels.”
See also: The Top 3 Digital Solutions Corporate Clients Demand From Banks
Digital Is a Mentality
Some clients working with Savana are taking more of a stepped approach to digital transformation, platforming mortgages or commercial lending first. Sanchez called that “a way for them to get their feet wet, understand the processes around these new technologies, that the whole balancing is different, the whole way you service customers is different. They get some experience and then they can migrate over time in stages.”
Bigger banks try to “boil the ocean” and do digital conversions in one go, which he said is leading some bankers to leave and form FinTechs “because they just want to get out there fast.”
Having called the tune for so long, big banks especially aren’t conversant in targeting the segmentation that FinTechs have mastered with data.
“It’s new for banks to think about product innovation,” Sanchez said. “They’ve really all been selling the same thing and differentiating by location. That’s a new mindset in banks is to think about innovation, create product innovation groups and find a way to win and break through in a particular market.”
In the process, some myth busting is happening as banks discover that digital fans hail from virtually every demographic group and not just the millennials associated with mobile.
“It is not an age thing. It is a mentality,” he said. “That’s part of finding a target that is not only addressable but will adapt. You really need to go dig pretty deep to figure out how to segment that target, understand that it’s going to be a buyer and then build something really awesome.”
After banks have dealt with the frictions and siloes of legacy via platforms and APIs, that’s when intense product innovation is ignited.
Sanchez said at that point, “You need to start saying, ‘What do they really want? What product innovation can I bring to the table?’ That requires a new core and a delivery system that can deliver that innovation right through to the customer, regardless of when, where and how they want to bank.”
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