Navigating the future: a guide to future-proofing core banking systems

08 May, 2024

The pace of innovation in banking shows no signs of slowing. Although often driven by customer expectations most changes to core banking systems have a technological component.

Technology is evolving rapidly and some banks are still operating on inflexible and outdated legacy banking systems. Outdated systems run the risk of security risks, compromised data management and non-compliance with regulations.

Current trends for core banking systems

A number of key trends in banking bring a requirement for updates and improvements in core banking systems.

Open banking and customer data

The recent passing of Australian Consumer Data Right legislation means that customers may choose to allow their savings and credit card data to be shared with third parties. This has real implications for banks and will require attention to data management and security. Open banking requires trust and has data custodianship at its core. According to the Australian Banking Association (ABA) 42% of people trust major banks to keep their money safe, while 28–34% trust regional banks, mutual banks, and superannuation funds.

Are you ready to become a trusted custodian of your customers’ data?

Artificial intelligence and machine learning

The implications of artificial intelligence (AI) and machine learning (ML) are huge. Already employed extensively by banks and other organisations, AI and ML are helping banks to automate manual processes, improve risk management, personalise customer interactions and detect fraud.

To accommodate AI and ML technologies, banks need to focus on data quality and governance, infrastructure and technology and building talented, skilled teams. AI and ML also raise considerations for regulatory compliance, risk management and integration with business processes, with a commitment to continuous learning and improvement.

Is your core banking AI-ready?

Cybersecurity and data privacy for core banking

Evolving threats and a continuing rise in cyber attacks, mean that banks need to strengthen their cybersecurity. Banks need to invest in advanced cybersecurity solutions like endpoint detection and response (EDR), threat intelligence, and security analytics, to protect against data breaches and safeguard customer information.

Are your core banking systems able to fend off cyber attacks and protect customer data?

Migrating core banking systems to the cloud

It goes without saying that more and more banks are migrating their IT infrastructure and applications to cloud-based platforms. Migrating to the cloud improves agility, scalability, and cost-effectiveness. Cloud computing enables banks to accelerate innovation, deploy new services faster, and reduce reliance on on-premises hardware and infrastructure.

For banks moving their systems to the cloud, there are many risks and challenges that come along for the ride. Some of these challenges are related to careful selection of cloud providers. For sensitive customer data to be protected, cloud storage must provide a secure data storage environment with appropriate data encryption, access controls and data residency considerations.

Service uptime, performance, availability and support levels must meet business requirements. These are usually agreed in service level agreements (SLAs). It’s also important for banks to avoid ‘vendor lock-in’, which happens when banks find themselves locked into a single vendor, unable to switch providers or migrate to alternative solutions.

With the right advice, banks can mitigate the risk of vendor lock-in, using multi-cloud or hybrid strategies to provide flexibility, redundancy and resilience.

Are you future-proofing the migration of your bank’s core systems to the cloud?

How to future-proof core banking software and systems for innovation

Taken separately, these challenges require careful strategies and risk management. In combination, the planning becomes more complex, with more to think about and more moving parts. A great first step is to undertake a core banking assessment.

If you’re ready to start the conversation about future-proofed core banking solutions, talk to our digital transformation consultants about how 9Yards can help ensure your core banking systems are on track for a bright future.