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In 1975, Businessweek ran a story identifying the ways in which technology would reshape the workplace. Leaders at Xerox and IBM correctly predicted that by 1995, offices would have an integrated network of personal computers on every desk and electronic filing systems. The article now circulates regularly on the Internet as an amusing time capsule of office technology in the 1970s, when automation was just beginning.
Really, though, the piece was an in-depth analysis of new technologies, intended to help large office-using businesses navigate “the introduction of new hardware and processes”, and it addressed real-world challenges such as adoption Speed, cost control checked. Transition and employee training. Although technology has advanced far beyond desktop computers (not even IBM could have predicted the technology of 2023), these same complexities and challenges are as relevant to businesses today as they were in the 1970s.
Take payment for example. The industry is currently experiencing a similar onslaught of new systems. Financial institutions (FIs) are grappling with how to modernize and meet the ever-evolving expectations of customers, and many are finding the process difficult and complex.
Nearly five decades later, financial institutions are looking for a new guide. While there are many options, progressive modernization is one path financial institutions should seriously consider in order to upgrade their technology stacks and meet their goals.
migrate to the cloud
Technological advancement and the cloud are synonymous – especially in 2023. Cloud-based technology processes payments, opens up artificial-intelligence and machine-learning capabilities and improves flexibility, giving businesses the opportunity to partner, grow market share or devote resources more strategically Get. business work. Migrating systems to the cloud is the path to digital maturity, and is an important step if companies want to embrace current innovations and prepare systems for future demands.
FIs already understand the tremendous benefits of the cloud, with a report from IBM showing that 91% are using or planning to use cloud-based services in some capacity. However, that same report found that 9% of organizations had transitioned mission-critical workloads, and IDC’s Worldwide Industry CloudPath Survey found that only 25% of organizations had a cloud-optimized payment strategy.
While there is a general consensus among FIs that cloud infrastructure is a part of the way forward, many are still struggling with how to get there.
Ultimately, there are three strategies to get started. The most invasive, what we like to call the “heart transplant,” is the complete replacement of legacy technology with cloud software. This is a risky and disruptive process and should only be undertaken with careful planning. The next option is to build a standalone tech stack built from the ground up on a cloud platform. It is a clean-slate approach that allows FIs to run a parallel program and test before partners integrate it into the organization. While this is less risky and disruptive, it is also more expensive and not a viable option for most banks. The third method is “progressive modernisation”, where technology is moved to the cloud in a phased process.
Making the Case for Progressive Modernization
Although perhaps a misconception, FIs do not require an immediate and reflexive response to an innovation such as the “heart transplant”. Rather, a scaled compute strategy should be considered to convert traditional technology to a cloud-based platform. Through progressive modernization, FIs can combine trusted processes with new functionalities, limiting risk exposure and disruption as the organization changes.
research McKinsey suggests that progressive modernization is the best option, especially for mid-cap banks. This process upgrades the core system and unlocks advanced capabilities, all in a condensed timeline and at a substantial discount. According to McKinsey estimates, progressive modernization requires a financial investment of only 20% to 30% of the cost of a full core-modernization plan. This is a tremendous advantage. In the past, financial institutions have largely identified cost as the top challenge for modernizing IT infrastructure.
A recent study by IDC exposed a similar set of benefits. Financial institutions that implemented a phased transition to cloud platforms minimized disruption to business operations and extended the life of legacy systems, and they minimized the financial impact by spreading costs over smaller phases. In addition, IBM’s research shows that a progressive modernization approach supports internal trust by creating a secure platform and meeting regulatory requirements without disrupting core processes.
As we consider the competitive landscape in 2023, there is no doubt that cloud-based infrastructure will be critical to modernizing payments technology, future-proofing the technology stack and gaining competitive ground in an increasingly crowded payments market. Is. At the end of the day, adopting new technologies will always seem like a difficult process, whether you’re operating a company in 1975 or 2023. But with the progressive modernization, there is a painless and direct route to FI.
John Mitchell is the CEO and co-founder of global payments and banking infrastructure provider Episode Six And an expert in the payments industry with decades of experience in leading and growing startups. before episode six, he served as CEO of turn around worldwide, as well as the primary architect and strategist netspend of corporation Initial sales and distribution strategy.
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