Experts spar over relevance of banks’ legacy systems


…but agree that transition must occur to keep pace with digitalisation

Financial institutions, particularly traditional banks, must make the demanding yet ultra-important transition from decades-old legacy systems to newer, more agile alternatives if they are to remain competitive in the digital-first era.

This was the consensus of a group of experts in finance, digitalisation and innovation, who argued that to enhance efficiency in general and customer service delivery in particular there is a need for banks to rethink their approaches to digital transformation and maximise returns on their IT investments.

Broadly speaking, banking legacy systems are often decades-old, mainframe-based platforms which support a bank’s back-end operations across core functions such as account opening, account set up, transaction processing, deposit processing, loan processing and several more.

These systems are often derided as borderline obsolete, and criticised for their high maintenance cost due to limited support and scarcity of personnel who can operate and maintain these core systems.

The slow pace of transition has been highly publicised, even in advanced economies – with reports suggesting that pre-pandemic “nearly 50% of banks do not upgrade old IT systems as soon as they should, according to a report by the UK’s Financial Conduct Authority (FCA), and 43% of US banks still use COBOL – a programming language dating from 1959”.

Despite agreeing on the urgency of the transition, in the light of changing consumer expectations – with cloud-computing, robotics and artificial intelligence (AI) proposed as solutions banks should adopt – the experts however differed on how much of the legacy systems should be maintained going forward.

Speaking during the maiden edition of the RBGH-B&FT Digital Conference, the Managing Director of Republic Bank, Farid Antar, called for a measured approach to making the transition; arguing that with the volume and value of transactions passing through these systems daily, caution must be exercised so as to minimise exposure to vulnerabilities while bridging the divide between different generations of IT.

Juxtaposing the security and reliability of the legacy systems with the pace of newer ones, Mr. Antar said: “Legacy systems go beyond the hardware to the processes and what you do with it. With the newer systems, you will still need the older ones as they are robust…. ultimately, new solutions are making it easier to interface these legacy systems with newer ones”.

He added that the sector’s stringent regulation is, in part, responsible for the comparatively slow pace at which it can transition. “One of the challenges we have in embracing new technologies early is that we are heavily regulated – and quite rightly so, because we manage customers’ wealth and data; and data is perhaps becoming more valuable than the cedi, as it can be sold and used for many things.”

On his part, Futurist and Chief Executive at Reset Global People, Kwame A.A. Opoku, urged banks to embrace collaborations and third-party engagements in improving their systems. This, he noted, will ensure that banks can still focus on the customer experience by combining existing systems with key technologies they can implement today.

Offering a contrary opinion, Chief Innovation Officer at the Consolidated Bank Ghana (CBG), Bill Yeboah Kyeremeh, stated that institutions must look to overhauling their systems; adding that the benefit will eventually outweigh the initial cost.

Likening the decision to construction, he said: “Sometimes, you must ask if it is more prudent to break down a building and rebuild it on the same piece of land, or seek a new plot. Technology is expensive, but today the most profitable businesses are those driven by technology. If you do the cost-benefit analysis, you will realise that investing in technology is the only way to go. If you invest well, the benefits will outweigh the costs”.

However, for CEO at the Hacklab Foundation Foster Awintiti Akugri, every institution must look at its circumstances and make decisions best suited to them. “It is a highly subjective issue, as banks do not rely on a universal system. Even within the same bank, there have been transitions to newer iterations of their systems. Every bank must seek to transition – but they must remember that it is a journey, not a sprint.”

The one-day conference, jointly organised by Republic Bank and the B&FT was held under the theme ‘Digitisation, Artificial Intelligence and the Future of Things: The Impact and Immense Opportunities for Ghanaian Businesses’.

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