Financial institutions recognize that their customers now want and expect services that are convenient, relevant, seamless, frictionless, personalized, and instant. What many of these organizations fail to recognize (or fail to understand) is the substantive cultural and technological shift that has to occur to transform these expectations from marketing buzzwords to mission-defining strategies. This reluctance to move on from obsolete business strategies and legacy infrastructure prevents meaningful transformation that will sustain success and replaces it with shiny front-end interfaces atop clunky legacy systems. Putting lipstick on legacy infrastructure ultimately does little to disguise the limitations of these dated technologies, however, and it certainly is not a good look when competitors are making holistic efforts to create exceptional customer experiences that run more than just skin deep.
Banks Must Be More Than a Pretty Face to Survive
Today’s customers are becoming more savvy about superficial marketing tactics and changes that do little more than provide lip service to demands of real change. The pandemic revealed to everyone just how nimble and creative even the largest, slowest financial institutions can be when it comes to quickly rolling out remote workforces, digital banking accessibility and better, more straightforward loan applications, and they will expect these efforts to become the new normal—not just a response to an emergency.
Simply rolling out new technology to be trendy without looking at the underlying systemic issues in banking also puts organizations at risk to perpetuate inequities in digital banking that break customer trust. For example, in applying for a credit line on their Apple Card in 2019, a husband was granted a 20X higher credit line than his wife even though she had a better credit score and other more favorable factors. There was little transparency or accountability provided in this process that explained why this decision was made, leaving people to draw the conclusion that the algorithm was created with a sexist bias. Another example is the increasing prevalence of cryptocurrency and other digital assets as traditional assets like homeownership become less accessible to younger generations. Many larger, more established banks have dragged their feet on making needed changes to integrate these into their digital asset platforms, prompting many young customers to flee to fintechs and neobanks that understand their struggle and support this new pathway to building wealth.
This Isn’t a Facelift – It’s a Lifestyle Change
Perfectly applied makeup can only go so far in covering up sun damage or the effects of poor diet and exercise on skin; immaculately designed banking interfaces can only go so far in covering up the limitations and incongruencies of legacy banking systems with the future of financial services. Delivering on the full promise of digital transformation for their customers requires that financial institutions commit to modernizing their banking stack across the board. Fintechs, challenger banks, neobanks, community banks, brick-and-mortar, and tier-one institutions all face different challenges, constraints, and needs, but they are all at risk of falling out of favor without substantive transformation to their capabilities and infrastructure.
Just like a lifestyle change, this transformation does not have to happen all at once to be effective and ensure longevity. While some banks might choose to rip off the Band-aid and implement wholly new core technologies all at once, others may choose to build new systems alongside their existing ones and transition with a more phased approach. Any of these pathways can be effectively supported with open architecture like that which Temenos offers, enabling complete flexibility and control so that institutions can choose the combination of partners and resources that best fits their needs.
A true friend will let you know when you have lipstick on your teeth, and it has become apparent that many FIs need this kind of friend right now. With the right technology partner, even the most change-averse bank can find a pathway to successful technology transformation that supports both short- and long-term success.