Old fears about core banking systems migration could hold back the next generation of cutting-edge products and services. As the adoption of public cloud services gathers pace, organisations should reassess their views on a project once thought too dangerous to attempt.
Legacy systems still hold an enormous market share in the financial services sector. This naturally means that most – if not all – talent in the industry has grown up on these systems. That includes an understanding and an acceptance of the problems these systems bring.
Many organisations fail to see the business case for migration. Vishal Dalal, Pismo CEO (North America, EMEA, and APAC), says banks sometimes consider migration an afterthought: “If they were a hotel, they would be asking, ‘Why does repairing my foundation bring me more customers?’”
Running with that analogy, people don’t visit hotels due to the foundation. They visit for the room’s features and the restaurant’s food. However, none of that matters if the floor falls out from under them. The demands of modern banking require the deployment of a modern core at the heart of the bank.
No more heart transplants
Core migration is often associated with large change projects. Legacy core transformation is compared to heart transplants or repairing an aeroplane mid-flight. The level of risk and uncertainty involved can make the hardiest of CEOs feel anxious.
“I remember migrations happening over a long weekend – or a four-day period – chosen three years in advance,” says Vishal. “Sometimes 1,600 or 1,700 steps must be completed in unison for everything to work. Otherwise, it all had to be rolled back.”
That view has permeated the market to the point it is considered the norm. Yet digital-savvy banks no longer complete migrations in that way. Testing, sandboxing, and parallel data transfers have become standard. Banks can move 100,000 accounts, monitor a situation, and then move another 200,000.
“This couldn’t be done earlier because it essentially meant running two cores simultaneously,” says Vishal. “The cloud has solved part of this. Costs are much, much lower. This, plus an emerging pool of talent in the sector, ensure the days of risk appear in the rearview mirror.”
Is the future on the cloud?
The adoption of the public cloud is growing rapidly in the financial services industry. Over a quarter of banks now plan to migrate more than half of their business. Deployment of any cloud-based software sits at 86%.
At the pace adoption is growing, plenty of questions are being answered about its capabilities for processing larger quantities of data. “Huge strides have been made in ensuring transactions happen in particular orders,” says Vishal. “In handling 20,000 transactions a second or sending events from location A to location B, the public cloud is indistinguishable from an on-premises data centre.”
The proof of the pudding is in the eating, adds Vishal. Regulators worldwide are taking a more serious approach to the public cloud. This includes increasingly sophisticated testing techniques and rigorous checks on data sovereignty.
Pismo success stories in the cloud
BTG Pactual, the most significant investment bank in Latin America, launched BTG Pactual Banking, its digital retail bank (initially called BTG+) in Brazil at the beginning of 2021 – after just eight months of development.
The digital bank uses the Pismo platform, hosted on Amazon Web Services (AWS), for back-end processing. It leverages the platform’s features for core banking, card issuing, payment processing, and other financial services. The AWS infrastructure assures the resilience and scalability that the bank needs.
The BTG Pactual team also activated tailored financial advice, an interactive and two-way connection to the investment app and a dynamic insights section that changes daily according to the customer’s behaviour.
Cora is a Brazilian digital bank that offers free checking accounts, debit and credit cards, and billing management for small and medium enterprises (SMEs).
Cora uses the Pismo cloud-based platform, hosted on AWS, to integrate its core systems with Visa and card embossers.
It approves 80% of the new accounts in less than three hours, a short time compared to other digital banks in Brazil. Three years after launching in 2020, Cora has exceeded 700,000 account holders.
Want to hear more from Vishal? Watch his Pismo webinar about core migration below:
