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Modernizing Core Technology without Disrupting the Bank

The simplest yet most complete business requirement that I ever received was from the CIO of a large bank a few years ago. The CIO explained the function of technology in a bank in simple words – a bank’s core business is to open a window to receive and lend money. The differential rates or margin must fund the operations, expansion, new offerings, maintenance and profits. Information Technology clearly is a bank’s window for the clients in a digital world. Even a planned outage, therefore, constitutes a lost opportunity to conduct business for the bank.

Surajit Chakravarti
Technology Consultant & Advisor, ex-SVP
Standard Chartered Bank

One of the biggest challenges facing the banking industry is to embrace newer technologies and integrate with the legacy applications while maintaining the security and regulatory commitments without disrupting their services. With the adoption of digital technology, the industry faces new challenges (for instance – regulations, security), competitors (like fintech), and alternative ways of working (rising client expectations and better user experience).

The opportunity to transform

The challenges mentioned above present perhaps the best opportunity for the banks to transform and modernize their core technology platforms and practices. The approach to the modernization journey can be executed by running focused end-to-end functional journeys for core banking, payments, cards, wealth, loans, trade and channel systems along the following strategic areas:

Modernizing Legacy Systems:
In any modernization program, one of the biggest impediments remains the existence of the legacy systems. Banks have plenty of them – each built incrementally over time using the technology stack of that era. These need to be technically evaluated whether they can scale and cater to the business needs for the future and be considered fit-for-future. This is often a hard call, both technically as well as economically, to decide which legacy systems are to be retained and which are to be retired.

The retained systems need to be made completely fit-for-future which may involve investing in multiple cleanup activities including stack upgradation, automation, monitoring and rewriting components for Cloud and API adoption.

Retire a legacy system by creating the new system in parallel, which is fit-for-future to start with, and migrate the load gradually from the legacy to the new system in a phase-wise manner using the automated DevOps pipeline. Enforcing platform environment parity between development, integration testing and production will ensure better quality, seamless user testing (UVT) cycle in production and faster resolution of defects in production in the future. Incremental releases and phase wise migration approach (instead of a big-bang approach) from legacy to the new system would ensure zero disruption.

Automate Everything:
Keeping the agile processes in mind, the DevOps culture and the CI/CD (continuous integration and continuous delivery) tooling adoption is the first step towards achieving development automation. For newer systems, this adoption should start from the first sprint itself while for the legacy systems, the induction of CI/CD pipeline must be part of the sprint planning and exit criteria. The DevOps culture is critical to achieve development automation and ensure shorter and cleaner production deployment cycle. This will result in minimizing disruption of services for the clients.

Process automation can be achieved using Robotics automation (RPA) and Machine Learning (ML) for backend processing, regulatory compliance and reporting which are plentiful in a bank.

Development and Process Automation should provide enough cost efficiency and optimization opportunities to merit investment as part of the Modernization journey.

Enhanced Monitoring and Adoption of AIOps:
Virtually all legacy systems lack effective end-to-end monitoring which delays resumption of services for banks in case of any outages and failures. A modernization journey, therefore, presents an excellent opportunity to plug this critical gap. Setting up an effective event logging, monitoring and end-to-end visibility platform can delivery rich dividends to a bank.

Setting up effective end-to-end monitoring framework would also lay the foundation for adoption of AIOps in the bank’s Information Technology modernization journey. Once the necessary and sufficient logs or events are captured through an effective log monitoring tool, the data can be used by analytical and ML tools to provide multiple benefits and insights. The benefits include reduced system outage (proactive alerting, root cause analysis, automated service ticket handling), better client experience (Faster failure recovery, integrated ticketing systems) and deeper business insights (targeted marketing, business prioritization).

Cloud Adoption:
The push towards cloud adoption has been late for most banks. Banks are fundamentally challenged by additional regulations and security concerns unlike most other industries. Furthermore, cloud computing being a relatively new technology varies greatly in its maturity and adoptability from country to country and from system to system. Banks being most vulnerable to cyber security threats make the cloud adoption even more challenging. For instance, a global bank which operates across multiple countries must adhere to the cloud and security regulations (or lack thereof!) of each of the countries and be able to respond to any future regulatory changes quickly.

Modernization journey provides an excellent opportunity for banks to increase their cloud adoption – system by system and country by country with minimal disruption to the existing legacy infrastructure yet aligning with the fit-for-future strategy. Furthermore, adopting the cloud strategy aggressively provides the opportunity for banks to work with and leverage Fintechs and niche financial players seamlessly.

Moving the workload from legacy on-prem infrastructures and data centers to public cloud can also free up the overhead of running data centers. It also would enable Banks to break away from the vicious cycle of hardware and software stack upgrade due to obsolescence which consumes an enormous part of the CIOs budget.

As part of the cloud journey, the application systems should look to adopt third party and channel integration patterns using API aligning with the service oriented architecture. This may require discarding some legacy applications or interfaces but sets the framework for Open Banking and interfacing with future disruptive trends in the banking and financial sector.

The Way Forward:

Modernization of the bank’s systems is an on-going journey. It provides the CIOs a wonderful opportunity to take a strategic view to solve the challenges and embrace newer technology trends at the same time. The key components of this journey should include:

  • Fit-for-future assessment of legacy systems – to upgrade or to retire: Modernization to adapt to the transforming banking industry
  • Adopt DevOps using CI/CD tooling: Automation to provide business agility
  • Cloud and API adoption: Infrastructure optimization and faster integration with evolving ecosystem
  • Lay the foundations to adopt AIOps and ML: Improve client experience and better business insight

Needless to say, to maximize the outcome value for any modernization journey for the bank, the definition of done is when all (or maximum number of) the modernization principals for a system are met and causing zero disruption to the bank’s business.

About the author

Surajit is an IT industry veteran with over 30 years’ track record leading multiple enterprise product development efforts globally for tech giants like IBM, Intel, Oracle and Digital. During the past 5 years, he has headed middleware development under the CIO organization for Standard Chartered Bank, driving multiple modernization programs for the bank.

Over the years, he has worked across software, hardware, infrastructure, cloud, DevOps as well as application levels- from product development to solution consulting. He has also co-founded a startup catering to product development consulting and served on the board of directors for four companies during his career.

Surajit holds a Masters in Electrical Engineering from The Ohio State University and a Bachelors from Clemson University.

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
Reproduction or Copying in part or whole is not permitted unless approved by author.

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