In 2020, PWC published a report, “Financial Services Technology 2020 and Beyond: Embracing Disruption,” which outlines 10 innovations that will change FinTech. The research firm also identified six priority areas for financial services providers. Chief among them is modernizing the legacy operational IT model. Let’s find out what this means for fintech companies and how to conduct this process in your organization.

What is outdated financial software

Where is the fine line that will help distinguish between an outdated program and one that works as it should? Gartner suggests paying attention to six signs that an application is unusable:

• doesn’t meet changing business requirements;
• hampers the firm’s internal operations;
• software is hard to maintain;
• the app is difficult to scale;
• business spends a lot of money on the system;
• the platform cannot be integrated with other applications in the organization.

Generally, the legacy system runs on the computers of banks and other financial institutions and is maintained locally. As a rule, legacy technology and device specialists are in short supply. In addition, such services are expensive. Such software holds back innovation in a company, so it is better to replace or upgrade it.

How to modernize an outdated FinTech company system

If a bank or financial firm has determined from the above signs that a system needs to be upgraded, it’s time to start planning. Experts from Andersen recommend the following upgrade tactics:

Step 1: Determine the scale of the “realignment”

Modernization does not mean that you have to completely tear down the system and build a new one on its ruins. In some cases, a small repair is enough. A financial software company offers seven upgrade options:

• Encapsulation. Developers extend the functions of the platform by encapsulating data so that services with APIs have access to it.
• Rehost. IT does not change the code, structure and functions of the software, but moves it to a different infrastructure (physical or cloud).
• Replatform. An old application is ported to a new platform with a different execution environment. Programmers make small changes to the code without changing the structure and functions of the program.
• Refactoring means rewriting old code with new rules without improving the functionality of the application. The program works better and simple code is easy to maintain.
• Rearchitecture. The development team changes the code and migrates the application to a new architecture (e.g., from monolith to microservices).
• Rebuild. Developers refine and redesign the application without changing the scope or specifications.
• Replace. The team creates a new product from scratch: according to current requests and requirements.

The extent to which the application should be redesigned is worth discussing with the IT company that will be upgrading the legacy application. The technology partner will analyze the architecture, structure, code, and advise on how to improve the legacy financial application.

Step 2: Calculate modernization costs

In addition to the obvious costs of rebuilding the old system, there are hidden charges to consider. If you move to a new type of architecture (e.g. cloud), you will have to pay a monthly fee to the cloud provider. If the application needs to be redesigned, additional funds will be required for UX/UI research. If you replace it with new software, you’ll have to spend time and money training employees on how to use it. It’s also worth discussing with your IT partner on what terms they will provide technical support for the updated application. When all the details are figured out, you’ll know how much the upcoming changes will cost your financial institution.

Step 3: Select the technology stack

When upgrading your system, choose a technology stack designed for future enterprise processes. So that as your business grows, the application can scale to serve a growing number of users. You can easily add features and integrate with new enterprise platforms.

A customer of the bank, insurance company or other financial business wants the service provider to securely store and protect personal data. Therefore, technologies are chosen that ensure a high level of system security.

When choosing the right technology to update an outdated program, it is worth consulting with a financial software company. An IT consultant will tell you how to create a reliable working product.

Step 4: Choose a partner who will perform the upgrade

When a financial firm does not have the IT staff to assess the state of the software and update an outdated application in the best way possible, it is worth looking for a technology partner. Typically, this is a financial services company that has worked with similar software and owns a variety of technologies and tools. They know how to improve the application architecture, migrate data to a new system, add features to legacy software, protect sensitive information in compliance with PCI DSS (Payment Card Industry Data Security Standard) and OWASP (Open Web Application Security Project).

Examine the portfolio of an outsourced IT company to assess the level of expertise and see if it can help with the modernization of an outdated system.

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Conclusion

Outdated financial software hinders business like a flat tire in a car. It seems to be there, but it is of little use, and an accident can happen at any moment. “Repairing” such a part will help employees perform operations that are important to the firm’s operations faster. The company will reduce the cost of maintaining the system, as it will function according to the new standards. With updated software, a financial institution will be able to respond flexibly to market demands and meet user needs. Don’t put off changes until better times. Better yet, team up with a financial software company and upgrade your outdated system right now.