Editor's Note: In this blog, we discuss baroque architecture and what it means for Digital Banking. Forrester analyst, Jost Hoppermann uses this analogy when discussing his "Trends in Digital Banking Applications for 2017". We examine the brief in more detail as well as how it relates to a previous report, also by Jost, where he introduces Digital Core Banking!
To talk about the limitations of the technology financial institutions depend on is common. It also is not a recent phenomenon. More than two decades ago, the problems presented by the disparate, legacy systems that formed the foundation for the financial services industry were a topic of regular discussion. Seems like not much has changed over time, except maybe the generations of solutions that have passed from "modern" to "legacy".
Thus, it goes in the technical equivalent of "survival of the fittest" and, as with evolution, the process can take time. However, unlike the biological/geological world, the IT landscape seldom features 'extinction-level" events. Dinosaurs still roam the IT world, especially in banking. They are even fed and nurtured at great expense. Oftentimes, their survival is linked to humans not interested in risking their careers by trying to replace the dinosaurs with a more modern "species."
Jost Hoppermann of Forrester has recently published a brief that is entitled Trends In Digital Banking Applications for 2017 that describes this phenomenon using a different comparative:
"Ancient banking applications today resemble baroque castles - castles that their owners changed and added on to for centuries with neither a comprehensive or well-documented plan. These ancient applications make it very difficult and risky for banks and their AD&D teams to introduce new business capabilities, cope with disruption, and comply with the increasing stream of regulatory requirements.
For those of us less familiar with European history, the term baroque applies to "a style of European architecture, music, and art of the 17th and 18th centuries that... is characterized by ornate detail." Jost's analogy is kinder and better than the term "dinosaur" when it comes to describing how the overall IT landscape at banks and credit unions is predisposed against innovation and speed.
This is a matter that needs some attention given Jost's predictions regarding what 2017 holds in store. His report asserts that "end-to-end" digital banking, APIs, AI and the digitization of branches are going to be key for any financial institution that wants to win the battle for customers. Of course, this is not a simple matter if one is faced with a baroque IT landscape. It is again to telling the architects of those fabulous castles Jost mentions that they need to design, build and fly the equivalent of the Starship Enterprise.
This brings us back to the report by Jost, mentioned in a previous blog, the new digital core. In fact, without a strategy similar to the one described in that report, it is hard to see how any financial institutions can successfully address the challenges of a dynamic technology environment where almost daily new challenges are added to existing ones that have not yet been addressed. Current strategies being used by banks and credit unions are referred to by Jost in his report on the new digital core as follows:
"Forrester calls this situation the Potemkin effect in banking. The term refers to the 18th-century Russian prince Grigory Potemkin, who is said to have tried to impress Catherine the Great during her tour of the Ukraine and Crimea by erecting fake villages with imposing facades along her travel route. We use this term in banking to describe a seemingly great system of engagement with no underlying application support."
Again, the analogy here may require a visit to Wikipedia for many of us in the States, but the futility of such an approach is clearly communicated.
As your organization prepares for 2017 and beyond, it would be worth reading An Introduction to the Digital Core and Trends in Digital Banking Applications for 2017 written by Jost and published by Forrester. If the content of these don't spur consideration of something other than business as usual, then things may be so baroque they cannot be fixed.