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IT is changing banking architecture

Digital technology has wrought rapid change in the banking ecosystem over the last ten years. Established institutions now face competition from startups who have been using IT to push into what was once the preserve of banks and credit unions. Traditional financial organizations now face challenges that require rethinking their standard business models and their operational architecture, which has grown up over the last fifty years and now must be modified to meet changing market factors.
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There was a period, from the 1970s until the early 2000s when their core architecture could at least keep pace. However, these legacy systems were becoming outdated by the mid 90s as IT changed the focus of the financial services industry. Things were becoming more customer centered and the need for flexible multi-channel processing and integration was increasing. Online banking was growing and so was the need to address big data and cloud based platforms.

Now, the concept of digital services operating through multiple channels has taken hold, which requires a massive change in IT architecture to create platforms that are scalable, adaptable and economically feasible.

The core banking platforms of the future will focus on agility in order to provide fast customer centered solutions. Banks must be flexible enough to adapt to changing market circumstances. This may mean that financial institutions will be forced to reduce overhead by outsourcing back office functions to contractors and concentrating on automation in order to compete with technology services companies like Google and online startups who either already have a technological edge or a low overhead, or both.  

Fortunately, service oriented architecture enables banks to mix existing functions into innovative products and services that can address changing customer demands, while analytics enables a leveraging of customer behavior and preferences through many different channels. The key to future development lies in being able to see the gaps between the desired results and the present situation.

And so the future of banking involves leveraging disruption as a driver of innovation, while minimizing risk through the accurate prediction of future scenarios, which is something that digital technology can also help with.

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