3 steps to IT modernization in banking

Replacing legacy systems developed over several decades is a daunting but necessary undertaking for today’s financial institutions. By taking a risk-reducing, step-by-step approach that integrates new technology – like artificial intelligence (AI) – while protecting existing assets, institutions can achieve IT modernization that enables quicker time-to-market and reduced IT costs. Following are three steps to get started.

Step 1 – Enable API-first architecture

The first recommended action is to introduce an API gateway (e.g., WSO2) to either decouple the systems and break up so many point-to-point connections or replace old-fashioned integration methods. This enables the API-first architecture principle so that the communication is more lightweight with dedicated, defined and documented interfaces that can be orchestrated even to business APIs. The API gateway then becomes the central component for communication of the IT landscape – the first step to componentizing monolithic systems.

The API gateway also serves as the central component to manage all APIs for developers and operations. Utilizing RESTful APIs is a more efficient and easier way to connect systems for operations as well as development. RESTful APIs are the underlying basis for the journey into the public cloud. The API gateway is the registry and catalog of interfaces for the whole IT landscape, supporting necessary documentation with minimal effort.

Step 2 – Refresh the front end

After decoupling systems to componentize the architecture, the next priority for IT modernization is to refresh front-end systems. This improves the user experience by adding value and focus to the entire client journey. An improved e-banking or mobile app also helps introduce more efficient business processes, reducing operational costs.

This step of IT modernization is the easiest one for calculating a business case. By first introducing the API gateway, the old e-banking and aging mobile apps are already decoupled, and deploying a new app or e-banking application or refreshing the user experience will be faster than any back-end modernization.

Step 3 – Componentize back-end systems

The most challenging and expensive, yet longest-lasting, step is the improvement of the core banking, securities processing, enterprise resource planning, customer relationship management, risk management and treasury systems. Breaking the IT landscape into different components with APIs is key to working on one project at a time. This approach reduces complexity and prevents failing.

Functionality can be exchanged by new systems as auxiliary components. Or the monoliths can be divided into well-defined microservices with APIs as an access layer, orchestrated with the help of the API gateway and a workflow engine. Cleaning the entire technology landscape is a large component of IT modernization and enables the introduction of AI.

It’s necessary to encapsulate and replace the capabilities of the silos while also implementing enhancements with slim features and meaningful data. Through this approach, the data stewardship is created sustainably. Clean and high-quality data is the basis for meaningful AI.

Continuous improvement is the key to success

IT modernization is an endurance run, and crossing the finish line requires focusing on each step while keeping the end goal in mind. By implementing consistent improvements that utilize the cloud and other technologies like AI, you can build the business cases needed to fuel your project over the long term.

Read the white paper for more info: Modernize to mobilize – A cleaner, clearer banking IT landscape through cloud and AI.