Many financial institutions still rely on legacy systems or outdated computer hardware and software that were introduced more than half a century ago. These technologies were not designed with future-proofing in mind and were not intended to be upgraded or replaced.
Fast forward to 2023, and the financial services industry has changed beyond recognition. Digital start-ups are disrupting the market, and customers expect digital integration and seamless transactions. Banking services are no longer the sole preserve of established financial institutions.
Established financial institutions can feel like supertankers compared to agile speedboats, such as digital disruptors, racing off into the distance with their innovative products that exceed customer demands. But the process of updating or replacing legacy technology is not completely bleak. With their size, resources, and momentum, these institutions can weather the storm while nimble disruptors are at risk. Established institutions have financial stability, customer base, and solid reputations that digital disruptors lack, and some may question why they need to innovate at all.
Customer expectations are changing.
A PwC survey from June 2020 found that 41% of customers would switch providers due to a lack of digital capability. Nowadays, customers expect the latest technology across all their financial interactions, and companies that can’t meet these high standards are quickly left behind. As Gen-Z comes of age, they expect intelligent technology as a simple fact of life. Staff working within these organizations will also have higher expectations and be reluctant to work with outdated tools.
The changing scenery can be bewildering for established banks with legacy tech, especially since research from BCG has shown that 70% of digital transformations failed in the last few years. Complicated and costly legacy core banking transformation projects are negatively impacting profits and not hitting the mark with consumers.
A smarter way to innovate.
Fintech enablement offers a smarter way to innovate. It allows organizations – not just financial institutions, but any company operating digitally – to create and launch new digital products without the need for a full digital transformation. Fintech enablement is a full-stack technology solution that works with existing legacy systems and can transform them into efficient, automated ecosystems. Hyper-personalized customer journeys become simple, which not only better caters to existing customers but also wins over new ones. Backend processes can be automated, saving time, resources, and money.
Traditionally, there are three ways for established financial institutions to innovate: innovation labs, incubators/accelerators, and venture capital investment.
Innovation labs allow established financial institutions to maintain their steady course while creating small, innovative teams that can develop agile digital products that match those of their nimble digital competitors. Fintech enablement solutions enable these small teams to create and launch innovative financial products that meet the needs of the market without being reliant on legacy systems and teams of tech support.
By finding a way to balance legacy institutions with agile innovation, traditional financial establishments can reap two significant benefits.
- Meet customer expectations – especially those of GenZ, who expect seamless technology across all aspects of life.
- Reduce costs – digitally superior financial institutions will see dramatically reduced costs compared to their competitors.
Fintech enablement is a smarter way for established financial institutions to innovate, modernize their operations, and keep up with customer expectations. By embracing this approach, they can create and launch innovative digital products without the need for a full digital transformation.
Currently dealing with outdated legacy technology? Book a demo to learn about FintechOS’ fintech enablement platform here.