“We’ve been talking about the need for banks to upgrade and update their legacy systems for a long time,” she said.
With new payment methods being made more available in the market, banks are cognizant of the need to meet consumer and commercial clients’ expectations, she said.
Each of these banks “has their own ideas about the experiences that they want to create for their consumers and how they want to drive efficiencies within their particular organizations,” Smith said.
It’s a challenge to get there given the fact that many FIs are operating with mainframes and coding that stretch back over decades. Much of the technology that is in place is outdated, she added.
Although the United States introduced the FedNow® Service in July, faster payments have been gaining ground globally for some time. Instant payments require that debit and credit transactions be processed across banks’ core ledgers in real time. In addition to those stresses on core systems, Smith noted that data-rich ISO 20022 messaging will also be a new consideration for banks to manage.
To grapple with all of these real-time shifts, many banks have embraced middleware to help facilitate new flows.
“At some point,” she said, the FIs “are going to have to address the inability of their back-end systems not being able to manage in real time.”
The back-end systems and processes span mortgage operations, debit, credit and other banking products and services, she said.
Elsewhere, open banking is becoming a requirement in several countries, which means that banks will have to give third parties access to their data. In most cases, she said, that data “lives” within the firm’s legacy core operations.
A multifaceted approach is warranted, she added. In an effort to avoid wholesale replacements of legacy operations, some FIs may opt to “never change” the core banking systems or to remain with core providers. However, they can augment the core with “different digital experiences and technologies” through collaboration with partners such as i2c.
The platform approach, she said, “can pull lots of data systems” together to create what winds up being a “holistic view” of a banking customer. In the platform itself, you have the ability for all that data to sit within the same tech stack. There’s no longer the need for far-flung, siloed systems within the bank to try (and fail) to talk to one another.
“The benefit to the financial institution is that now they can see exactly how the consumer is behaving across all the different product sets that the bank is providing, across their DDA, savings, money market, mortgages and loans,” Smith said.
The holistic view, she said, also improves defenses against fraud, as banks better understand their clients’ behavior, prompting them with stepped-up authentication to make sure they want to send money via peer-to-peer channels and know exactly where that money is headed.
The enhanced data flows help banks tailor financial wellness programs for their users, helping proactively guide them in their efforts to build savings, reduce debt and plan for the future as they cement trust with their financial service providers, Smith said.
“When you think of the services that you can provide going forward, but how you protect the consumer and the bank against losses, there’s tons of value that comes with just having that holistic view of the client,” she told PYMNTS.