Are Legacy Systems Holding Your Bank Back?

Aug 16, 2019

Banking legacy systems (think ACAPS, Strata and homegrown decisioning engines) have been core elements in many large financial institutions (FIs) for decades. These legacy systems support the account origination activities that fund much of your operations. They are tried and true – but are they starting to show their age?

For large organizations, these legacy systems may have become the proverbial albatross, weighing down your company and presenting significant roadblocks to embracing the changing origination landscape. Challenges with integrations, data acquisition, customization and more can hinder your ability to deliver on customer expectations, leading to attrition and missed acquisition opportunity.

Big, Burly and Potentially Buried

Legacy systems started with the best of intentions. At one point, they were shiny, new and perfectly suited to the task of helping your FI automate the decisioning process. But over time, as your company grew and your legacy system required customization, your IT team dove into the code base. They added a few lines of code – then a few more – and then more still. Today, your legacy system may have tens, hundreds, or even thousands of lines of custom code, rendering it rigid and inflexible.

The IT departments that manage your legacy systems may compound this scenario – unintentionally, of course, but due to limited resources. You may have spent 6 months adding custom code, only find that when you come up for air the market has moved – new competitors are out there, customer expectations have shifted or new regulations exist.

Getting changes into the IT queue might take another 6 months or longer, delaying your time to deployment. That puts you well behind in the race to make it to market, and you can find yourself in a seemingly endless loop of playing catch-up or simply making due with what you have.

While the breadth and depth of a legacy decisioning system may mean it is not going anywhere, it’s worth asking whether that same system has become a hindrance. Can it quickly and easily be adapted? Can you upgrade to the latest release of the software without breaking everything that you have built into the system today? If not, you may be facing a system that is “too big to fail” and one that is unintentionally keeping you from evolving with the changes in the industry.

Integration Frustration?

One of the elements that may stand out as particularly frustrating for teams struggling with legacy systems is the challenge of integration. When your company wants to enhance a credit decisioning workflow with a new data provider, fraud detection solution or alternative credit score, you may be facing an uphill battle to allocate the time and resources to accomplish that goal.

If hard-coding integrations into a legacy system is one of the things keeping you up at night as you plan your company’s strategic growth, you’re not alone. Many FIs are still putting time, effort and money into this approach, which leads to more customization, which in turn leads to an even more rigid and unwieldy core system. This brutal cycle will only slow you down, opening doors for faster and more nimble competitors to take potential customers away from you.

Data for Days

When it comes to making the right credit risk decision, data holds the keys to the kingdom. Use the right data at the right time, and you can improve customer experiences, provide credit to those who need it, decrease your exposure to risk and drive profitability. Without the right data, you risk all of that.

If your legacy system is limited because of its unique customization and the pain of integration, chances are that adding in new and different data sources is a very distant dream. But as more data becomes available, you risk losing ground to competitors who are using the broad spectrum of available information to make real-time, well-informed decisions to attract and retain new customers.

Leapfrogging the Legacy Systems

Systems like ACAPS are still suited to their core functionality, but you and your company can benefit greatly by supplementing or augmenting them with a nimble, flexible decisioning engine. A data agnostic engine that can pull in information from virtually any source can create a tremendous competitive advantage for your company, and help improve your customer experience as well.

One major advantage is reducing the strain on your IT department. An engine that supplements your legacy system can be created, updated and managed independently, often in a matter of days or weeks instead of months or years.

Using an augmentation strategy, you can also capture the right information from your preferred data sources, including legacy decisioning and customer-processing systems. You can create and test champion/challenger models, test policy rules and thresholds, and easily and quickly integrate new data providers to help support your growth strategies and goals.

A solution like Zoot’s WebRules provides an easy, drag-and-drop interface that lets you tailor and update on the fly to meet changing market conditions and regulations. You can take advantage of the visual analysis capability to see exactly what happens throughout the decision flow, and use test-driven development to refine and hone your engine as you build it.

With seamless connections between Zoot and your legacy systems, you will no longer feel the constraints of that rigid and brittle legacy system. And best of all, you will position your company for rapid, iterative growth for the future.

Ready to incorporate a Zoot Solution into your stack?