A recent report by SaaScada found significant insights into the challenges UK banks face in migrating to cloud-based core banking systems.
The study, which surveyed 150 heads of innovation at UK retail and business banks, highlights a stark reality: nearly all banks acknowledge the necessity to modernise their core systems, but entrenched resistance to change and the clinging to legacy technologies by influential decision-makers are stifling progress.
A majority of the banks (77%) assert the need for modernisation; however, doing so is perceived as risky, potentially endangering careers. This fear is underpinned by 67% of respondents who feel constrained by legacy systems previously chosen by still-present decision-makers.
Additionally, 80% disclosed that their boards are apprehensive about undertaking high-risk projects. Despite the ambitious shift toward cloud environments—with 94% of banks either hosting or transitioning their core banking infrastructure to the cloud—the journey is fraught with difficulties. During migrations, 57% have experienced service outages, while 51% are accumulating technical debt, complicating future operations.
Furthermore, 60% of banks that have transitioned to cloud-based systems have not met their operational objectives, with over half unable to achieve the agility needed to implement changes or launch new products promptly. Access to necessary data remains an issue for 41% post-migration.
SaaScada CEO Nelson Wootton emphasised the necessity for cultural transformation within banks to fully benefit from cloud-native core banking technologies. “To fully reap the rewards of cloud-native core banking, banks must transform their culture, choose the right technology from the outset, and put customer-focused objectives in place,” Wootton said. He warned that without significant changes, banks risk losing competitive edge, market share, and struggle with regulatory compliance.
He further criticized the approach of some banks opting for a direct switchover during migration, likening it to “carrying out a heart transplant with the patient walking about.” He advocates for a phased, bite-sized project approach, which he believes can demonstrate efficiency gains, speed to market, and revenue opportunities while managing costs and minimising disruption.
The report also points out that rigid organisational policies and a shortage of skilled personnel are significant barriers, with 65% of respondents citing these issues as preventing optimal utilisation of new core banking technologies. The RFP process also came under scrutiny, with 77% viewing it as overly prescriptive and focused on minutiae rather than desired outcomes, and 67% seeing it as driven by risk-aversion and internal politics.
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