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In What Ways Do Legacy Systems Hold Banks Back?

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Many banks still use legacy systems, which they have had for years. Their systems were mostly written using the COBOL language from the 1960s. While some banks transitioned into modern systems, adopting newer technology, many are still stuck with their old systems. One of the reasons why they are hesitant to make the change is because they encounter a problem during the transition, like the system crashing. Another concern is security.

These problems can be prevented through proper planning and working with reliable providers in the industry. Security is also no longer a big concern because system providers and developers have found ways to ensure a higher level of security, including multi-factor authentication and biometrics use. However, there are various ways that legacy systems hold banks back, including the following listed below.

Difficulty providing customized offerings

Clients now look for customized services, something difficult or almost impossible to do with legacy systems. Old systems usually have separate ways of handling different products and transactions.  For example, clients are unable to efficiently pay for their credit card, mortgage, and car loan under a unified method. Fortunately, the rise of financial technology (FinTech) makes it possible to personalize products and services without a complete overhaul of their system. Banks can integrate their system with Earnix, for example, to consolidate different products and make them easier to manage while also offering tailored experiences to each customer. This results in more efficient operations and the ability to agilely respond to opportunities and address challenges.

Slow process

Old systems get sluggish over time and are susceptible to system difficulties. The slowness can affect the overall operation of the bank. Employees take more time to finish their job, and clients must wait longer to get the service or assistance they need.

Incompatibility with new applications

Modern systems now have the capacity for integration, which means you can use them with other applications. New tools and applications are developed, but unfortunately, they are incompatible with legacy systems. So, if your bank still uses an old system, you may not be able to take advantage of these applications. Examples of these are the use of online or mobile banking, which offers convenience to clients.

Discontinued support from vendors

Systems that use the COBOL language are at risk of being phased out. When the vendor no longer supports the system, it will not get updates, thus making it slower and more prone to errors. In addition, if the system crashes, it can be difficult to get service.

Lack of in-house IT support

Since COBOL is anold programming language, it's no longer being taught in school. So, students, who are the future banking system support, would also not know about it. Thus, getting help for the old system in the years to come will be even more difficult. These students are developing their skills and knowledge of newer programming languages and systems, not the old ones.

Legacy systems keep banks from moving forward with modern systems, preventing them from offering more to their clients and achieving more in the field. Transitioning to newer systems could improve their overall process.

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Published Monday, April 03, 2023 7:01 AM by David Marshall
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