How To Avoid Core Migration Strategy Pitfalls

Research house, International Data Corporation IDC, says global Financial Institution FI spending on legacy payments technology is expected to grow 7.8 from 36.7bn in 2022 to 57.1bn in 2028. However, this increased spending on outdated systems is contributing to technology budget constraints and mounting technical debt, all of which hinders innovation and risks the banks relevance to an already fickle consumer.

Nonetheless, FI leaders are coming under growing pressure to take action. Research from McKinsey found that operating costs for banks still running outdated cores averaged 10 times higher than those with next-generation core systems. And there is no time to lose, with IDC cautioning that the cost of delaying migration is also increasing, saying banks that fail to migrate to a future-ready platform can potentially miss out on a 42 increase in additional payments revenue and savings on legacy costs of up to 21 annually.

There are a growing number of RFPs requests for proposals focussed on core migration at the moment with banks looking to migrate off their legacy infrastructure, says Sergio Barbosa, Chief Information Officer of enterprise software development house, Global Kinetic, and CEO of its open banking platform, FutureBank.

There are currently only three options open to Chief Technical Officers CTOs: Rip and replace, which almost never works co-existence and then what the industry refers to as an at-the-edge solution. We believe, no matter the size of the bank, there is only one solution that will work, and has a proven track record of working, and that is co-existence, hesays.

The rip-and-replace methodology of migration has been the primary option for replacement and upgrades to core banking systems for many years. However, migration delays and failures with this big bang method have given most technology leaders pause for thought.