Symbiosis in banking: A rapid solution to the modernization challenge?

In today’s rapidly evolving financial landscape, banks are grappling with escalating operational costs, growing system fragility, and an inability to keep pace with agile competitors. The technology that once fueled their growth now hinders their progress, limiting their ambitions and stifling innovation. In contrast, new entrants unencumbered by legacy systems, can build modern, flexible infrastructures from from the ground up, giving them a strategic edge.

In an ideal world, established banks could replace their outdated systems entirely, gaining the technological edge of new entrants while leveraging their considerable assets—brand recognition, expertise, experience, and comprehensive banking services. This combination would create a formidable competitor. However, complete replacement projects often fail to deliver on their promises. They are notorious for running over budget, extending beyond timelines, and sometimes failing altogether.

Embracing symbiosis: A better, more strategic path forward

Symbiosis offers a compelling alternative that priorities human-centric innovation. Instead of replacing the existing core banking system, banks can deploy a next-gen core banking system alongside it. By targeting a specific business segment, such as lending, banks can implement the new system quickly and efficiently, without overhauling the entire operation. This approach can also mitigate the complexities of data migration, depending on the deployment strategy. With Symbiosis, banks can gain all the advantages of next-gen core banking systems faster, while reducing the risk often associated with complete system replacement.

Sounds simple. A simple solution to a complex problem. Sounds ideal, But, as they say, the devil is in the detail, so what are the key considerations when applying a symbiosis strategy in banking? Let’s explore.

Key considerations for symbiosis in banking

From a holistic, business-oriented perspective, key considerations include the impact on customers, the need to manage complex change while reducing risk, the absolute imperative to align with a changing regulatory environment and the need to accelerate long term strategy.

1. Customer experience
   • Objective: The project should be transparent to customers, providing a seamless experience across all channels.
   • Key questions to consider: How can we ensure that customer experience is not negatively impacted by this transition? Will customers need two sets of credentials – one for the old system and one for the new system?
2. Change management
   • Objective: The project should be delivered as smoothly as possible.
   • Key questions to consider: How do we secure buy-in from all stakeholders, including executives, IT staff, and end-users, as this is crucial for the success of the initiative? How will we deliver the necessary training programs for staff when everyone is so pressed for time?
3. Risk management
   • Objective: The project should be as close to risk-free as practical.
   • Key questions to consider: Do we have the skills needed to conduct the thorough risk assessments that identify potential issues and develop mitigation strategies? How do we ensure that scope creep doesn’t lead to a runaway project?
4. Regulatory compliance
   • Objective: The project needs to improve our regulatory alignment.
   • Key questions to consider: Given the evolving regulatory landscape, how can we ensure that the new system remains compliant with standards while integrating with our legacy systems?
5. Long term strategy
   • Objective: The project should be in line with our long-term strategic goals..
   • Key questions to consider: How do we ensure that this short-term project delivers long-term benefits aligned with our vision and strategy? As technology is changing so rapidly how can we be certain that this technology will future proof us?

From the I.T. and operations perspective, the considerations include how to simplify integration, deliver reliable, scalable and flexible services while managing costs, adhering to regulations and future proofing infrastructure.

1. Integration complexity
   • Objective: Reduce complexity to speed deployment and reduce downstream implications.
   • Key questions to consider: What approach will be taken to handle the integration complexity? For example considering the importance of data, how will data be synchronized across the different systems?
2. Operational continuity
   • Objective: Minimize disruption during the project and disconnects / inconsistencies after the project completes.
   • Key questions to consider: How can the addition of another system reduce system fragility? How can operational disruptions be minimized during the transition?
3. Scalability and flexibility
   • Objective: Ensure that the system enables rather than inhibits business goals.
   • Key questions to consider: How has the system been designed to deliver the agility we need today? How can I deploy the capabilities I need when I need them? How does the system protect my investment to eliminate the need for major overhauls when / if technology changes?
4. Cost management
   • Objective: Ensure costs are predictable, affordable and generate ever increasing ROI for the business.
   • Key questions to consider: While symbiosis avoids the costs of a full replacement, how can it reduce costs overall? With two systems in place what happens to maintenance and training costs?
5. Regulatory compliance
   • Objective: Ensure regulatory alignment while enabling business agility.
   • Key questions to consider: How does the use of symbiosis improve data security? In what ways can this help me prepare for a changing regulatory environment?

Conclusion

By carefully considering these factors, banks can effectively implement a symbiosis strategy, leveraging the benefits of next-gen core banking systems while maintaining, indeed enhancing, the stability of their existing infrastructure. Not only does symbiosis mitigate the risks associated with complete system replacements, especially the ‘rip-and-replace’ kind, but it also positions banks to innovate and compete more effectively in the rapidly evolving financial landscape.

Symbiosis represents a strategic path forward, enabling banks to modernize their technology without the prohibitive costs and risks of full-scale replacements. It’s a balanced approach that combines the best of both worlds, ensuring that established banks can continue to thrive and innovate in an increasingly competitive market. For established banks, symbiosis more than levels the playing field with fintechs – it helps them focus and amplify their incredible assets with the power of the latest technologies. And it does so quickly.