Tech museums: pragmatism or pioneering spirits?

Legacy Banks Losing Customers due to Poor Technology, Says 10x Banking Founder

Earlier this year, FinTech Magazine interviewed Antony Jenkins, the Founder of 10x Banking, who highlighted the impact of poor technology at legacy banks on customer rates. According to Jenkins, these outdated technological systems have led to a 20% drop in customer loyalty, as consumers shift their allegiance to challenger banks.

Jenkins argues that banks have neglected the customer experience and have become “museums of technology” in the process.

Banks Underestimate Technological Progress, Says GFT’s Retail Banking Lead

Richard Kalas, the Retail Banking Lead at GFT, holds a different perspective. He believes that the technological progress within the legacy banking sector is not adequately recognized. While he acknowledges that many large high street banks use outdated technology, Kalas argues that this doesn’t portray the full picture.

Instead of dismissing them as “museums of technology,” Kalas suggests that banks should be viewed as complex networks of both legacy and modern technology that continuously evolve to meet customer requirements efficiently and affordably.

Assessing the Need for Technological Upgrades in Banking Systems

Kalas questions whether every banking system requires an upgrade. He emphasizes that upgrading technology is a complex process that should be assessed on a case-by-case basis. He argues that the need for renovation depends on the specific requirements, budget constraints, and revenue generation opportunities of each bank.

Modern banks, whether digital or traditional, carefully consider their renovation projects and approach technology upgrades pragmatically. They evaluate the retirement of outdated systems to optimize efficiency and enhance customer service.

The Challenges and Consequences of Legacy Systems

While acknowledging the outdated nature of legacy systems, Kalas believes that legacy institutions apply pragmatism in order to avoid incurring greater consumption costs. He argues that renovation projects, regardless of size, require a cost-benefit analysis to determine whether the benefits outweigh the expenses.

Kalas highlights the challenges faced by legacy institutions, comparing them to the transport sector. Just as Transport for London (TfL) coexists with both Victorian infrastructure and advanced technology, banks have to navigate the coexistence of legacy and modern systems. Kalas suggests that banks can still operate effectively using their older systems while strategically adopting new technologies where appropriate.

Engaging in Pragmatic Upgrades and Balancing Costs

Kalas concludes that while fintech professionals may desire a faster adoption of new technologies in the banking industry, pragmatism is necessary to assess the benefits against the costs. He encourages banks to weigh the advantages of upgrading their infrastructure with the potential consumption costs and consider the benefits of optimizing efficiency and customer service.

While legacy banks may lag behind in adopting new technologies compared to challenger banks, it is important to consider the challenges they face in upgrading their systems. Kalas believes that their pragmatic approach to technology renovations is essential for maintaining an efficient and cost-effective banking sector.

Have your say on the importance of technological upgrades in the banking sector on the FinTech Magazine LinkedIn page.