Migration and Modernization of Core Banking Systems

Prasad Puranik

Banking is adopting cloud at a never-before-seen pace. There are mounting pressures from customers, market dynamics, and regulatory bodies, and banks find themselves at a pivotal juncture, compelled to embrace modernization strategies to stay relevant and competitive.

Pressures driving Modernization

Customers are now seeking more than just transactions; they seek personalized experiences and holistic treatment. Meanwhile, FinTechs challenge traditional economic models with lower cost-to-serve customers and innovative approaches. Regulatory mandates evolve, emphasizing data control, transparency, and compliance, leaving banks with no choice but to adapt or risk falling behind.

 

Different Paths to Migration and Modernization:

Banks chart diverse courses in their migration and modernization endeavors, with each path offering unique opportunities and challenges. 3 main use cases emerge:


Augmenting existing core systems
involves building modern digital frontends while retaining legacy infrastructure.


Migration of core to the cloud
, gradually refactoring to leverage scalability and cost efficiencies. Develop, test, construct, and execute crucial workloads within the cloud environment, expediting transformation through the deployment of applications and digital services. Commence with a lift-and-shift approach initially, followed by subsequent modernization endeavors.


Replacing core
altogether, launching cloud-native banks independent of legacy structures. Additionally, launching a new bank emerges as a viable option, enabling fresh approaches untethered from legacy constraints.

 

Considerations on the Path to Modernization:

Amidst the modernization maze, several crucial considerations demand attention. Understanding the diversity of product offerings, aligning modernization goals with regulatory posture, and ensuring adequate support staff are paramount. Speed of change and technical capabilities also weigh heavily in the decision-making process.


You have to consider if you possess the necessary support staff to uphold your modernization objectives? Their presence is crucial, as, without them, you may have a modernized system without anyone to maintain it. Additionally, consider the pace at which you aim to drive change within your business.


Determine whether to opt for a SaaS or a self-hosted solution. Cloud-native platforms, built on microservices and event-driven architecture, offer scalability and agility. The decision to build or buy a core banking platform hinges on control, flexibility, and feature requirements.


Architectural Insights

 

Augmenting core:

Augmenting your core would be a great option for banks who are not able or not or maybe not even willing to model, or modernize their core banking systems. by adding an overlay on top of the core with modern API interfaces, the bank can build more modern user experiences for the customers and enable third parties to build on top of this infrastructure.

 

With the aid of seasoned AWS partners like Comprinno, this process can be expedited significantly. However, there may be challenges in automating back or middle office operations despite the seamless frontend experiences provided by modern APIs. Consequently, manual back-office tasks may be initiated by these APIs, contributing to increased workload, especially in handling heightened customer transaction volumes.

 

 

Migrating core:

At times, banks aim to minimize their physical space requirements and opt for a lift-and-shift approach, transitioning to macro-services. This enables businesses to fulfill their operational demands through auto-scaling while transitioning from capital expenditures to operational expenditures. However, a drawback lies in the necessity of overlays to develop contemporary front-end experiences. Despite its financial viability, the lift-and-shift method still demands significant effort in refactoring workloads for cloud optimization and crafting modern interfaces to achieve application modernization.

 

 

Replacing Core:

Some of the key benefits, you are removing the macroservice layer and are moving directly into more modern solution of microservices. This approach however involves time, cost, complexity.

In addition, for reporting and analytics, a variety of analytics services are available, including QuickSight for generating reports. These services contribute to the development of a robust application that can scale according to requirements. Similarly, the previous slide illustrates the construction of a cloud-native core banking system for unsecured lending, but with Amazon QLDB instead of Aurora. Amazon QLDB is a purpose-built database offering transparent, immutable, and cryptographically verifiable transaction logs, enhancing data integrity. In summary, banks have the option to augment their core by enhancing existing systems with modern interfaces or migrate their core altogether.

 

How Comprinno can help Banks Migrate and Modernize

Comprinno is a recognized AWS Migration competency partner, and also has Amazon EKS and ECS Service delivery validations. Our track record includes assisting numerous Fintech companies in migrating to AWS through a meticulously structured approach. Leveraging our well-architected EKS and ECS packages, Fintech firms can expedite their modernization journey. Our team of AWS-certified professional solution architects ensures a seamless migration process to AWS.

 

In addition, we provide managed services to organizations which helps them in the governance of newly migrated and/or modernized infrastructure.

 

Watch this space for more information on Migration Accelerate Programs.

About Author

Prasad Puranik, an accomplished Entrepreneur, Technologist, and Management Expert, brings over 24 years of invaluable experience in the Information Technology. As the Founder and CEO of Comprinno Technologies Pvt. Ltd., he continues to lead with a visionary approach, driving innovation and excellence in the ever-evolving tech landscape.

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