From Legacy Systems to Digital Integration: A Roadmap for Financial Services

The financial services sector is at an intriguing turning point, with long-time major players finding themselves threatened by scrappy new disruptors with a critical advantage: technology. Old-school financial giants may have resources and established reputations, but they also rely on legacy systems that limit their agility, efficiency, and customer satisfaction in a modern digital era. 

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It turns out that relying on outdated systems can have serious consequences, slowing down your ability to innovate and meet customer expectations. A 2024 Deloitte survey found that half of businesses identify outdated technology infrastructure as a significant barrier to meeting new business needs​, pointing to the urgent importance of embracing digital integration. 

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In this blog, we’ll take a look at the challenges financial organizations face when relying on legacy systems, the benefits of transitioning to digital platforms, and offer a playbook for making the shift.  

Challenges posed by legacy systems

Legacy systems are outdated or obsolete software applications, hardware, or technological frameworks that organizations continue to use even though better, newer, and more efficient alternatives exist. Usually, these systems remain in operation because they are critical to the business or because replacing them would entail substantial cost, risk, or resource commitment. 

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The problem is that, in a quickly evolving financial landscape, legacy systems are a serious roadblock impeding progress for individual financial institutions and the financial services industry as a whole. Gartner notes that 91% of organizations cite legacy system technical debt as a major obstacle to agility.

Some of the challenges associated with legacy systems include:

• High operational costs: Legacy systems require specialized knowledge and extensive resources to maintain, repair, or upgrade–which adds up.
• Lack of flexibility: Legacy systems have a limited ability to integrate with newer technologies or processes, making it difficult to adapt to changing customer demands. 
• Innovation bottlenecks: Legacy systems slow down development cycles, hindering competitive agility.
• Performance bottlenecks: Legacy systems typically have slow response times and rely on batch processing instead of real-time operations.
• Security risks: Legacy systems often do not meet modern cybersecurity standards, making them susceptible to breaches.

Benefits of transitioning to digital platforms

Legacy systems may continue to work, but their limitations tend to create inefficiencies, higher risks, and missed opportunities. Modernizing these systems allows you to be agile, improve customer experiences, and gain a competitive advantage in an increasingly digital marketplace. By switching to digital platforms, you can address each of the limitations of legacy systems, unlocking new efficiencies, enhancing customer engagement, and driving long-term growth.

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Key benefits of digital platforms in financial services include:

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• Cost-efficiency: Digital platforms automate repetitive tasks like loan approvals, account openings, and claims processing, minimizing manual efforts and reducing operational costs. 
• Scalability and flexibility: Digital platforms accommodate growing customer bases and transaction volumes without degrading performance and adapt to new business needs, regulatory changes, and technological advancements without significant reengineering. 
• Enhanced agility: Digital platforms support agile development and faster innovation cycles to enable quicker response to market changes. 
• Security and compliance: Digital platforms protect sensitive financial information, embed validation processes to ensure adherence to regulation standards, and provide comprehensive logs for tracking and auditing transactions. 

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McKinsey highlights a case study in which Lincoln Financial Group transitioned its legacy systems to a cloud-based platform. Vice President Satyendra Kumar discussed the outcomes: "Parameters such as environment stability, meeting service levels, and running at optimized costs have shown promising results. Initial anecdotal evidence suggests improved performance for both external customers and internal business users…Notable improvements in cycle times, with a reported enhancement of 20 to 30 percent…have been the highlights so far.”

A roadmap for digital transformation

When making the transition from legacy systems to a digital platform, following a structured approach is key, ensuring minimal disruptions and maximum impact. McKinsey’s interview with Lincoln Financial Group highlights that successful modernizations rely on robust leadership and iterative planning. 

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Below, we offer a roadmap for successful, deliberate digital transformation.

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Step 1: Evaluate the current state of legacy systems: Start by doing a comprehensive assessment of your existing legacy systems. Identify:

• Risks
• Limitations
• Inefficiencies

Evaluate their impact on:

• Operational performance
• Customer experience
• Regulatory compliance

Gather feedback from stakeholders across the organization to understand pain points and areas for improvement and prioritize accordingly.

Step 2: Define clear transformation goals: Set measurable, specific objectives that align with your border organizational business strategy. Examples of possible goals include:

• Enhancing customer experience
• Increasing operational efficiency
• Reducing costs
• Improving agility

Of course, your goals will be far more specific than these, with numbers and deadlines. And, remember, the best goals are both ambitious and realistic. 

Be sure to connect goals to KPIs to track progress and keep stakeholders aligned.

Step 3: Implement a phased migration strategy: In order to minimize risks and disruptions, break down the transition into manageable phases. Prioritize the transformation of systems and processes with the greatest impact on business operations or CX. Begin with non-critical components to build confidence and refine the process before tackling core systems. Use pilot programs to test the new platform in smaller environments before launching full-scale implementation.

Step 4: Utilize agile methodologies: To maintain flexibility and adaptability throughout the transition, adapt agile practices:

• Create cross-functional teams to collaborate on each phase of the transformation.
• Emphasize continuous feedback, iterative development, and regular stakeholder reviews to address emerging challenges and evolving requirements.
• Keep the roadmap remains dynamic and responsive to change.

What to look for in a digital platform

An essential part of a successful modernization is choosing the right digital platform that aligns with your business needs and goals. Consider the following criteria when selecting your platform:

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• Low-code development capabilities: A low-code platform enables even non-technical users to create workflows, reducing dependency on IT, allowing for more rapid deployment, and accelerating time-to-market. 

• Seamless integration with existing systems: The best digital platform for you will be able to facilitate real-time data exchange between the CRMs, ERPs, and external systems that you are already using to ensure real-time, personalized customer interactions.
• Automation of complex processes: To enhance speed and accuracy, reduce turnaround times, and improve customer satisfaction, look for a digital platform that can automate complex workflows like KYC compliance and document validation. 
• Enhanced personalization and customer experience: Advanced digital platforms use AI-powered insights to enable hyper-personalized customer interactions, such as tailored investment recommendations based on a customer’s transaction history. 
• Regulatory compliance features: Embedded compliance and regulatory checks that ensure adherence to data privacy and security regulations are essential features. 
• Scalability and flexibility: Scalable platforms can handle increased transaction volumes without performance degradation, supporting growth and adapting to changing business needs. 
• Robust security measures: Modern digital platforms implement advanced encryption and threat monitoring to protect data, essential in the financial services sector. 

• User-friendly interface: Intuitive design and drag-and-drop functionality simplify adoption and streamline workflow creation. 

Time to let go of legacy

There’s no way around it: digital transformation is essential for staying competitive in the modern financial services industry. The limitations of legacy systems are only holding organizations back from offering the agility, efficiency, and customer experiences that today’s market demands. 

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Digital platforms are the solution, offering cost-efficiency, scalability, better compliance, and the ability to respond quickly to changing needs: all core advantages that will set industry leaders apart from those who are struggling to keep up. 

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If you’re ready to make the transition, EasySend’s digital platform bridges the divide between outdated systems and modern digital capabilities, simplifying the transformation process. Schedule a demo to see how EasySend can help you achieve agility, efficiency, and superior customer experiences.

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