Banks were at the epicenter of the financial meltdown of 2007-2009, and there's no question that hubris and overextending brought many financial institutions to the brink of disaster. But the fact that many institutions continue to rely on core systems that are 20 to 30 years old didn't help matters, inhibiting transparency and flexibility.
Christine Barry of Aite Group and Bill Bradway of Bradway Research each recently took a look at the state of the industry and market, concluding that there is still a lot of work to be done in terms of modernizing core banking systems. Their research, reported by Marc Rapport over at Credit Union Times, concludes that there's only so much more life that can be squeezed out of older legacy core systems, and it's time to move on to more open, flexible architectures.
Aite's Barry points out "many financial institutions continue to run core systems that were built 20 or 30 years ago," and that middleware can only do so much. Such complicated legacy systems, may even have " exacerbated the recent financial services meltdown by making it difficult for institutions to quickly provide transparent data, whether for external use by regulators and investors or internally for cross-selling and target marketing, or for fast-to-market new products and services."
Barry estimates 20 percent of U.S. financial institutions have reached a "'high level of urgency' in replacing their core systems and that an additional 56 percent "could benefit from a core system replacement or transformation.'" As she put it:
"Running a core system that is built on an open, flexible architecture is vital to improving operational efficiencies, enabling tight integration and real-time information, having a 360-degree view of customer relationships, remaining competitive and more easily providing the level of transparency and access to information required by customers, regulators and bank examiners."
Bradway observed that some banking systems packages on the market now offer modern, service-oriented architecture (SOA) platforms.