Infrastructure modernization

The banking industry was among the first to drive large-scale investments in IT infrastructure. And, as it often happens, being the first mover is both an asset and a liability. While it has served to drive productivity improvements over the years for the banks, aging technology and rigid infrastructure have become more of a liability for them in recent years. This has spurred the banks to invest in complete technology infrastructure upgrades. While this is certainly necessary, it is not sufficient to drive competitive advantage, especially when the competition consists of fintechs and digital banks.

Infrastructure modernization is underway and is likely to be a big investment area for banks for several years to come.

Some of the key factors that will determine the long-term success of their core infrastructure modernization are:

• Cloud first: Most CIOs have accepted the fact that managing IT infrastructure is not a bank’s core competency and that cloud migration and enablement is the most important imperative for banks to be able to modernize their technology infrastructure.
• Cloud security: The rush to cloud migration needs to be balanced with the right cloud security, especially given the sensitivity of data banks have to handle (banks continue to remain the favourite target of malicious hackers). Most banks are opting, rightfully so, for a hybrid cloud infrastructure.
• Modernization is a journey: Banks are saddled with multiple systems, starting with the core banking platform and layers of other applications. This has created a patchwork of data sharing and integration built over years. Starting with core banking, upgrading all of the systems to a modern cloud infrastructure is a multi-year journey. Through these phased, multi-year migration programmes, it would be necessary to go through phases of data duplication across the legacy (on-premise) and modern (on- cloud) systems. This forced inefficiency needs to be managed well with integration governance.

Interoperability: One of the key – if not the most important – elements of a modern, distributed application ecosystem is the definition and adoption of architecture and interoperability standards built on modular architecture elements and well- established protocols for data sharing through APIs.