Overcoming technology hurdles in banks

By Booshan Rengachari | 5 January 2018

Every new day dawns on anachronistic banking systems replete with crippled systems, manual work and a plethora of paperwork and spreadsheets. Weary bankers are saddled with mind-numbing work, having to put up with obsolete systems that are people and paper centric.     

Many of these defunct systems are doctored by temporary upgrades by the vendor. But the reality is that the management turns a deaf ear to the plea for euthanasia by these systems on their deathbed. Let’s analyse why and what is holding them back from replacing it with a better, state-of- the-art, system.


Certainly, money is not a hindrance for banks. Banks continue to spend a substantial amount of money in maintaining these ungainly systems, leaving only very little to apportion towards innovation. A huge amount is spent on employing many associates with expertise in the obsolete technologies that make up the complex patchwork of these monuments. As technology becomes more critical to banks, a 5-year cost plan to replace the ageing systems will certainly reduce the overall cost of ownership for the bank.

Is it lack of interest?

Certainly not! Concerns about frustrating work environments, demanding the use of unwieldy systems is growing in all strata of employees in banks. There is no doubt that there is a palpable penchant for migrating to newer technologies and friendlier systems.

Then what is the bugaboo?

Complex integration

First and foremost is the complex nature of integrated systems at the bank. Each transaction at the bank creates a domino effect that ripples through seven to 15 systems. For example, one payment initiated by the branch goes through wire initiation system, core banking system, core banking middleware, back office system, OFAC screening system, fraud monitoring system, anti-money laundering system, bank’s internal blocking and screening, confirmation repository, general ledger, payment network, file transmission or messaging systems, at the least, if not many more. If the bank needs to replace any one of the system sitting in the middle, which is usually more complex and old, then it is shaking up the whole chain of systems.

Lack of knowledge

As the systems are isolated across several departments, there is often a lack of a one-stop resource who can ideally orchestrate through the systems as a whole. People work in silo in departmental functions like accounting, compliance etc. and often fail to understand the other pieces that makeup the jigsaw. Medium and large banks hire consulting firms, who try to connect all the dots often culminating in restructuring advice and unnecessary transformation programs. These firms have the same inherent problem as the banks. They need to hire specialists for each business line, without whom connecting the dots will only be a losing game.

Old fashioned vs start-ups

While the newer, energetic startups bring greater experience at extremely lower costs, banks continue to watch their steps in terms of vendors. The old-fashioned multi-billion-dollar vendor continues to win the vendor manager’s confidence.  What the vendor manager fails to realize is that one antiquated system is replaced with another one, leading to escalated cost, with no respite to the bankers.

Fear of failure

The fear of failure looms in the risk manager’s mind each time he is presented with a compounded problem involving a fragile design. The decision makers fall back to their default decision, and an easy decision is to maintain the status quo. Tinkered systems continue to rule the roost!

What else is an option?

Simpler systems

One of my ex-manager once brilliantly said “good architecture is one that is simple”. Steve Job’s iPhone became an instant success with its simple user experience. After the iPhone revolution, the world now expects technology to be very simple. One can’t expect an age-old system to magically transition to a simple architecture, but a long-term action plan must be put in place to demand, identify and install a system which is simpler in architecture and easier to integrate.

Plug and play

Current systems and technologies require too much of investment, monitoring and maintenance for each interface. A replacement of vendor-built proprietary interfaces with standards based interfaces encourages plug and play. Older systems can be plugged out and newer counterparts can be plugged in. In this way, banks can replace their systems without the need to rewrite their interfaces.


Banks function differently due to market segments, customer segments and some geographically-driven motives. Any new system must be capable of supporting changes in the workflow, additional validations, newer services and interfaces – basically should be configuration-driven.

Multi-domain expertise

As any newer implementation requires expertise in multiple systems and domains, banks must select a vendor, who brings such multitude of expertise. This enables to navigate the complex systems and promises seamless integrations by breaking down the complexity into simpler workflow. In short, expertise that can challenge the need for old- fashioned methods of functioning and recommend the best practices and processes can be a certain advantage. 


It is time to clean out the scum from the banking systems. If senior managements vow to appreciate that ‘less is more’, better systems can be built on the theory of mindfulness. Greater results can be guaranteed by simpler and more robust systems. A collaborative effort from the senior management and vendors can help banks gain a competitive edge and tackle the complexity of issues facing them.

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