INDUSTRY WATCH

understand that legacy cores are holding them back from reaching the digital superiority account holders demand . Financial institution executives also understand the other potential side of that equation . That ’ s the one where a lengthy evaluation leads to an even longer transition period , as costs spiral upward and the organization hangs on by their fingertips , waiting for the transformation to yield results .

Still , the advantages of legacy system upgrades are clear , including a more holistic view of customer and member relationships , as well as greater compatibility with the digital solutions consumers want to use . But what if many of the same results could be achieved quicker , giving more time to the dreaded core system evaluation and transition process ?

To gain the digital advantage , many banks and credit unions are opting to layer the core over the rip-out-andreplace approach .

A simpler way to start the digital journey

Fifty-seven percent of consumers now prefer Internet banking to in-branch services , and 47 % consider mobile banking apps their new branch in a pocket . An emerging 21 % even prioritize the use of chatbots and automated voice assistants over in-person contact .

To meet the rising demand for digital access to banking services , some of the larger financial institutions are spinning off all-online subsidiaries . These alldigital ‘ branches ’ function solely in cyber space , allowing account holders to access accounts and perform transactions from anywhere they can use the Internet . To create a branch in the cloud , financial institutions often use a Banking-asa-Service ( BaaS ) partnership . A BaaS provider delivers access to application programming interface architecture , more commonly known as APIs .

APIs plug into banking core systems and support a host of digital services , by streaming data back and forth between the bank ’ s core systems and the new digital interface .

The approach enables rapid speed to market , with lower costs . Research by Oliver Wyman reveals a startling difference in customer acquisition costs for all-digital banks when compared to traditional financial institutions . Many existing banks spend as much as $ 150 to acquire a new customer , a stark contrast to the approximate US $ 30 cost incurred by all-digital challengers .

However , spinning off a subsidiary is not the simplest or fastest solution for most banks , particularly those with deep community ties and strong customer or member relationships . In fact , consumers are seeking more than check deposits and bill payments from their financial institution . An increasing number are also looking for a partnership .

J . D . Power reports that 78 % of banking customers would like to receive financial guidance from their bank or credit www . intelligentcio . com INTELLIGENTCIO

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