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By Bhavin Turakhia,Founder and CEO of Zeta

Are legacy banks operating on borrowed time?

At first glance, it may seem like banks and technology are in a warm relationship. In reality, there’s a great distance between both sides — so great, that both parties are missing out on what the other has to offer during these difficult times.

Banks are yet to optimize the full potential of technology. This pressure builds on as the tech industry is independently coming on board the financial services wagon with new-age fintech offerings even as the entire system has been disrupted due to the novel Covid19 pandemic. But, the good news for traditional or legacy banks — as they are known — is that they still lead the charge when it comes to owning the suite of exclusive banking services and products like accounts, cards, and regulatory features. It is something that FinTechs are still procuring.

But, the race has just begun. In the wake of these changes, how can banks revive their entire ecosystem without changing their core?

Moving with the Covid19 times:

Technology advancements, combined with consumers’ demand for digital banking experiences, are what’s pushing the banks towards a digitized future. According to global reports, it is inevitable for banks to modernize its processes to stay relevant and profitable rapidly. It could include SaaS or cloud-based services to boost the banks’ existing core technology.

While all this is lurking behind the balance sheets of banks, traditional banks are still bound by their legacy core systems. With few exceptions, most of the leading banks in India run their core banking operations on older platforms and several of their products on antiquated software. And, most of these cannot cope with the ever-evolving needs and demands of digital-native customers.

Often homegrown, these platforms lack the agility to adapt and can’t be quickly modernized as per the market needs. Banks can take on these changes by being proactive. It starts by creating products that meet the customized needs of the customers.

Rise of digital finance:

In this banking game of thrones, banks are no longer competing with each other, but with everyone offering financial services. Digital experience has set a new benchmark for banking products and services. It stems from the growing digital-native customers, who are critical of new products that are led by speed, transparency, convenience, and security.

All this builds up to modern banking experiences, where understanding the customer is critical. Thus, leading to trust and customer retention.

The critical equation that banks need to solve is how can they revamp their complex legacy systems and make way for modern experiences without leaving what’s core to them.

Encompassing the digital core:

A bank cannot go completely digital without the renewal of its core systems as it requires advanced banking intelligence that’ll help in altering their strategy, to cope up post Covid19 crisis: Things they need to keep in mind:

• Own their customer experience: Designing the right experience to meet current customer expectations is critical for success in today’s open banking era. For instance, when a customer approaches a bank for a savings account, he/she is already in the know-how of what they want. To further enhance this ask, banks could proactively offer banking experiences for the whole family and not just the individual. It could include looking at offering add-on experiences in the value chain like a spending tab for children, setting monthly expenses tab, and so on. It can be done by understanding the full scope of customers’ needs, making the whole experience inclusive and complete.

• Enhance their core competencies: Building a digital core also requires banks to ease their employees’ tasks, so that they can focus more on the consumer. It means assisting employees in breaking down the context behind banking transactions, simplifying control centers, and more. It will help employees get a complete overview of what customers need and the ability to deploy solutions faster. Thus, focus on the end-to-end customer retention cycle.

• Offer integrated services: With a robust digital core, banks can provide integrated services to both its internal and external base. Thus, helping them to own the complete banking ecosystem; while making way for new business opportunities. A digital core has the potential to help banks mould their offering with simplicity and speed. It includes managing regulation changes, operational enhancements, and more.

The best way forward would be to adopt a low risk, transformation model that keeps banks through the core functionalities, while offering modern banking experiences. The critical thing to watch out for during this change is scale, personalization, and time for delivery.

It is no secret that banking and finance are leading a frenzy of change. What was once dominated as services from banks and other traditional financial institutions, is now coming back to bite the whole finance sector. The winner in this game will be those who can shake this inertia at the earliest.

(Disclaimer: The views and opinions expressed in this article on COVID19 are those of the author and do not necessarily reflect the views of  IBS Intelligence.)

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