This article is based on the IBT Apps ebook—3 Legacy Tech Risks Threatening Your Bank’s Future.
In just a few decades, digital technology transformed the way the banking world works. It’s a remarkable world now, with even more conveniences and opportunities on the horizon.
But with all its good, this new digital world has also given birth to new challenges. While many are the typical headaches brought on by any emerging technology, some challenges threaten to be as destructive as the overall benefits are exhilarating.
Community banks aren’t immune: Although the digital revolution offers these localized banks potential admittance into markets that were once the domain of larger institutions, embracing it also exposes community banks to dangerous risks.
Major Risks in Legacy Tech
Security Breaches & Data Loss—Malicious actors are on the rise, intent on disrupting or stealing data from interconnected computer networks. Community banks depending on aging legacy systems are especially vulnerable. If an unfortunate event were to happen, they face either replacing the system altogether or employing IT staff to repair and maintain it. Either choice is expensive, but the alternative—a security breach with possible data loss—can be catastrophic.
Financial Plateau or Loss—Things change quickly in digital technology: what was cutting edge a few years before suddenly becomes obsolete. To maintain a legacy system’s efficiency, a community bank must continuously upgrade and enhance it. The alternative—decaying performance—inhibits a bank’s ability to grow and engage with new revenue opportunities.
Service Quality & Customer Loss—Many banking services and amenities arising from digital technology debuted as bonus options to entice new customers or to give existing customers added value. Today, many of these are standard in the industry: customers now expect them, even from community banks. Community banks failing to regularly upgrade product and service offerings face losing customers and chance of future growth to larger banks.
The Right Solution to Mitigate Legacy Risk
While attempting to mitigate these critical risks, community bankers often find themselves between a rock and a hard place. Employing an IT staff to protect and upgrade their legacy system or replacing the system with a newer one are expensive—and their benefit may only last for a relatively short period of time before the necessity of another overhaul.
By contrast, modern core technology offers a community bank a better alternative, enabling it to address these tech risks, but often through less cost and with longer-term efficiency than maintaining a legacy system.
Of course, much of that depends on the core provider. An ideal provider will offer a secure platform that’s continuously enhanced and updated, and is scalable and customizable to each individual bank client. Such a provider would also interact with their individual customers with full transparency and eager responsiveness to issues, concerns, and requests for improvement.
With the right core technology and provider, a community bank can protect itself from the vulnerabilities inherent in an aging legacy system. Furthermore, they can effectively position themselves to attract new customers and engage in new growth opportunities.
Eager to learn more about managing risk with modern core technology? Download the free ebook from IBT Apps.
Ready to secure your bank’s future with a trusted core provider? Contact us to discuss your core options.
