Financial Services Institutions must Bank on Modernising their Legacy Infrastructures to remain Competitive

Transition away from mainframes to advanced cloud-based platforms will prove crucial for financial organisations to adapt to the digital transformation

The recent news that the UK fintech industry has seen record investment in the first three quarters of 2017 shows that the traditional incumbents of the financial services industry are under increasing threat of disruption from new entrants into the market, that put advanced technology at the very heart of their operations. This is according to Carl Davies, CEO at TmaxSoft UK, the global software innovator, who suggests that with this spectacular growth showing no signs of abating, traditional financial institutions must ensure that they have equipped themselves with the tools and infrastructures they need to ensure that their businesses remain competitive in the age of digital transformation.

The mainframe has been the bedrock of countless financial services institutions for decades, but while these systems have served their owners well during this time, many major banks are finding that their utility is drawing to a close. Not only is it becoming more difficult and more costly to maintain the mainframe, as the technology gets older and the pool of IT professionals with the specialist skills required diminishes, the mainframe also makes it much more difficult for these organisations to keep pace with new, digitally-native market entrants.

Addressing how many banks and other financial institutions may find themselves struggling to keep up with the pace of change, Carl Davies, CEO of TmaxSoft UK, commented: “The financial services industry presents a fascinating dichotomy. You have vast corporations controlling trillions of dollars of assets, but relying on legacy mainframe technology and antiquated applications to service their customers and clients. At the other end of the scale you have small, fast-moving start-ups that are using advanced technology to fundamentally change the way we use money and how the banking systems works.

“The maintenance costs of mainframes alone should be incentive enough for financial organisation to move away from them, and that is without considering the cost to businesses of not being able to utilise innovative technologies such as Big Data and the cloud. It is also now no longer the case that moving a mainframe to a new environment is time-consuming or risky. Businesses can now re-host their mainframes in a new environment without having to alter their programmes and applications or rewriting thousands, even millions, of lines of code.”

This was the route chosen by GE Capital, which took the decision to modernise its Portfolio Management System (PMS) with a complete mainframe rehosting solution that moved mainframe applications into a multi-tiered, x86 environment, to save costs and accelerate innovation.

By moving the 71 million lines-of-code system moved from an ancient mainframe environment to a modern and open Unix environment, GE Capital’s annual run cost for the PMS system and related applications fell by 66 per cent; the time it took for PMS to recover from disaster decreased by 240 per cent; and the overall application footprint shrank by 78 per cent. While the cost savings were enormous, the most positive result was moving to a platform that integrated easily with the rest of the business and supported growth and innovation.

Carl concludes: “The growth we’re seeing in the fintech space, and the changing expectations from consumers about how they interact with the financial services industry, presents a challenge for the traditional banks, and I believe that the mainframe sits at the heart of this. Those that continue to operate on mainframes will find that they do not have the flexibility or agility to develop new applications and offer the innovative and user-friendly services that customers are becoming accustomed to receiving from fintech start-ups. If these large financial institutions are to thrive in the era of digital transformation, they must take the initiative and move to more advanced IT environments that are compatible with the new breed of digital services.”