Mainframe Modernization: Enabling Transformation in the Financial Services Sector

At Astadia, we approach mainframe modernization with a focus on our clients’ immediate needs and objectives. Many of them are actively pursuing cost reduction initiatives, addressing the impending scarcity of mainframe expertise, or leveraging cloud platforms with their extensive array of services. These advantages hold significant value, consistently forming a compelling business case for legacy modernization.

More recently, however, these conversations have been focusing on more specific benefits, addressing current challenges and positioning organizations for future growth.

The ever-growing market demand for online availability of information is putting increasing pressure on organizations relying on legacy systems. Financial services enterprises are no exception. Their end-users have different expectations than before. They expect to be able to instantly access, monitor and manage their financial information. They rely on instant banking solutions not only for routine activities like online shopping but also for high-quality digital interactions involving complex queries.

In this context, one of the most compelling arguments in favor of mainframe modernization for financial services companies is the imperative to enhance agility and competitiveness in an industry undergoing rapid digital transformation.

Staying Competitive in a Fast-Changing Market

The banking industry has experienced a seismic shift, from traditionally being product-centric to becoming more customer-centric. Improved agility and reduced time-to-market are critical benefits that financial services and banking companies can experience after modernizing their IT systems. Here are some examples.

Faster Product Launches

Introducing new financial products or services is a time-consuming process, often requiring extensive development and testing cycles on legacy mainframe systems. Modernized systems allow for quicker development and testing, enabling financial institutions to launch new products to market faster. For example, a bank can introduce innovative digital banking features, such as mobile payment solutions, more rapidly.

Rapid Regulatory Compliance Updates

Adapting to changes in regulatory requirements can be slow and cumbersome, often involving complex modifications to the mainframe codebase. Modern systems are designed to be more adaptable to regulatory changes. Financial institutions can implement updates and compliance adjustments more rapidly, ensuring that their systems stay in line with the latest regulatory standards.

Agile Response to Market Trends

Organizations relying on legacy mainframe systems tend to be less responsive to emerging market trends, making it challenging to quickly capitalize on new opportunities. Modernized systems provide the agility to respond swiftly to market trends. A bank relying on a modern IT infrastructure can easily integrate with emerging fintech solutions, such as digital wallets or blockchain technologies, to meet evolving customer expectations.

Efficient Digital Channels Development

Developing and updating digital channels, such as online banking portals and mobile apps, can be slow and resource-intensive on legacy mainframes. Modernization facilitates the rapid development and deployment of user-friendly digital channels. Financial institutions can roll out updates, features, and enhancements to their digital platforms more efficiently, improving the overall customer experience.

Enhanced Customer Experience

Implementing changes based on customer feedback tends to be a cumbersome process, often requiring extensive development efforts and testing on the mainframe. With modernized systems, financial institutions can respond quickly to customer feedback and offer improved and personalized experiences.This includes faster transaction processing, more user-friendly interfaces, and the ability to adapt services to changing customer expectations.

Streamlined Wealth Management Services

Traditional wealth management services are often constrained by legacy systems, limiting the ability to quickly adapt to changing market conditions. Modernized systems enable financial institutions to offer more agile and personalized wealth management services. For example, implementing robo-advisory features or real-time investment insights becomes more achievable.

These examples highlight how mainframe modernization empowers financial institutions to be more agile, responsive to market dynamics, and efficient in delivering new products and services to meet customer needs, which is crucial in the fast-paced and competitive landscape of the financial services industry.

Read more: Modernization: Laying the Groundwork for Digital Transformation

Traditional Drivers of Mainframe Modernization

The lack of agility and scalability is not the only pitfall. High maintenance costs, diminishing skills, and technological risk associated with these technologies have also made it clear that modernizing mission-critical applications is no longer a choice.

Depending on the selected solution and methodology, modernizing legacy applications can lead to a 40-80% reduction of operational and maintenance expenses. Some of our clients achieved up to 90% savings in operating costs following their digital transformation initiatives.

The shortage of mainframe skills is a common challenge in the financial sector. Modernization allows organizations to transition to technologies with a larger talent pool, reducing dependency on specialized mainframe skills.

Modern technologies also offer better scalability and performance, ensuring that banking systems can handle increasing transaction volumes and provide a seamless experience even during peak periods.

Modernization facilitates integration with emerging fintech solutions and platforms. This enables financial institutions to stay competitive by offering innovative services and partnering with fintech companies.

Modern systems often come with improved disaster recovery capabilities, ensuring business continuity in the event of system failures, natural disasters, or other unforeseen events.

Learn more about traditional mainframe modernization drivers >

Barriers to Mainframe Modernization  

Mainframe modernization in banking and financial services can lead to cost savings, improved agility, enhanced customer experiences, and a stronger competitive position in the market. It is a strategic move to align with industry trends, regulatory requirements, and the expectations of today's tech-savvy customers.

So why are there still banks struggling with technical debt?

Despite the significant advantages that mainframe modernization entails, many organizations are still postponing their modernization journey, in many cases because of the risks associated with this process.

Read about top 5 challenges of mainframe modernization projects >

As they hesitate to accelerate their digital transformation, they may expose themselves to a greater risk: relying on a business-as-usual model with no possibility to adapt and innovate, in an economic reality that is now essentially different than the one we were living in just a few years ago.

Learn how to reduce and manage risks in mainframe modernization projects >

At Astadia, we have a long history of working with financial services enterprises and have helped modernize some of the largest and most complex mainframe systems in the world. As a pattern-agnostic and solution-agnostic company, we help our clients identify their options, understand the advantages and disadvantages of various approaches, and map out a path that will get them there. Get in touch to learn more about your organization’s modernization options.