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How to get rid of the legacy

I often talk about changing core systems, and most people tell me I’m mad. It doesn’t have to happen. You can have an overlay of middleware to deal with it. You don’t need to change those old systems. It’s too risky and too costly. Blah, blah, blah, blah, blah.

And yet nearly every digital bank I’ve met have changed core systems in the past ten years. I asked them how and get two answers:

  • Eat bite-size chunks
  • Roll like a snowball

So, the bite-size chunks are easy to relate to. How do you eat an elephant? One bite at a time. You never bite off more than you can chew, and you start small and do it piece-by-piece.

What I like about the second statement is that it builds on the first. The idea is that you should treat core systems change or, for that matter, any organisational change as a snowball. Start small and let the ball roll down the hill gaining speed and size until it eventually takes all the snow off the hill.

The reason I like this is that it relates to that frozen middle analogy I mentioned the other day. How do you thaw the frozen middle? Roll a small snowball down the hill and the further it rolls the more the snow disappears, the more it thaws.

OK, OK, maybe I’m stretching the metaphors too much, but I like the discussion as it gets to the heart of the issues. The main challenge is getting rid of legacy. Legacy people, legacy customers, legacy structures, legacy systems, legacy everything.

If and when your leadership team wakes up and realises that everything is legacy, then you can change. This part is probably the most difficult: getting things started. Does the leadership team recognise that they have legacy everything? Why do we have legacy everything? Well, you have legacy everything because the systems and structures implemented in most banks, cemented the processes, products and services that date back to when the bank was first invented to support commerce in the industrial era.

That structure was based around the physical distribution of paper in a localised network focused upon buildings and humans. That industrial era structure is now being replaced by a brand-new digital era structure, focused upon the distribution of data in a globalised network focused upon software and servers. This new era demands a totally new business model and approach, as I detailed in my last book Digital Human, so I’m not going to get into all of that here. The key is that you have to recognise this is a totally new structure, with totally different products and services, a radically altered model of physical versus networked structures and a realisation that you’re transforming the bank from analogue to digital.

That sounds too big to start, so most fudge it. They think digital is a project, an evolution of what was there before and evolving the bank into a cheaper and faster service, getting rid of branches and tellers and providing customers with self-service everything.

For the few banks that do realise this is a revolution, they also see this as too big to start but they don’t fudge it. They start eating bite-size chunks and roll the snowball down the hill. They see it as a journey, a continuum of change – the only constant is change – and just start small and keep plugging away, piece-by-piece, chunk-by-chunk.

By being dedicated to a vision to convert from analogue to digital and do it fast enough to maintain parity with the internet giants, they completely transform their organisations slowly but surely.

And, by so doing, they thaw that industrial winter of legacy everything focused upon products and shareholders, and start a new digital era where the customer is the sun.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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