The Legacy Challenge - Is It a Case of Mind over Matter?


 Editors Note: In part 2 of the blog series, we discuss quantum physics, predictive algorithms, and legacy systems. Retailers have been offering personalized experiences to their consumers for quite some time. Banks and Credit Unions, are seemingly far behind and most don't appear ready to move at a rapid pace. However, if these financial institutions want to provde the experience their consumers are demanding, a shift in mindset needs to take place.Niels Bohr, one of the shining stars in the work going on in a new area of physics early in the 20th century is quoted as saying "If quantum mechanics hasn't profoundly shocked you, you haven't understood it yet."

Anyone who has spent even a small bit of time delving into quantum physics at the most general level understands the humor in Bohr's quote. The theories from this branch of physics makes lasers, MRIs, digital cameras and other technology vital to our economy possible.

Yet, while scientists know how to apply the principles of this discipline, they do not like to discuss the implication of those results. For example, quantum physics has proven that one thing can be in two or more places at the same time, that instantaneous actions can be generated in particles separated by great distances and that the presence of an observer changes what is observed.

That last one is really what I want to focus on in this entry and not from the perspective of physics but rather as relates to innovation within financial institutions. Anyone who has been selling to banks or credit unions more than about six months will learn to use "legacy problem" as a response to anything, from issues around availability to the lack of innovation found in these institutions. 

The "pitch" goes something like this:

  1. The core and back end systems at financial institutions are very old, especially in terms of how we measure the age of technology. Some of the systems date back decades. In some, COBOL is still running. (Pause here while Gen X, Gen Y, and millennial types Google COBOL).
  2. These systems are typically structured in silos, usually with the exception of the core to which most all systems must connect. This structure makes it very difficult for these systems to share information in most cases. This was not a particular issue several decades ago when the channels through which financial services were delivered were few. However, today - with the digital devices on planet Earth now out number people - it is.
  3. This complex and costly infrastructure presents a host of challenges for banks and credit unions.
    1. Comprehensive end-to-end testing of code is mostly unachievable lending to consumers being impacted, usually at the most inopportune times.
    2. As nearly all projects touch one more legacy systems, the budgets and deadlines for such are very difficult to predict.
    3. When it comes to innovation, the ability to add emerging solutions with state of the art features supported by modern architecture is not only painful but risky.

In a post from a few weeks past, Postcard from the Digital Banking Summit, I mentioned a dinner at the Red Fish Grill in the Vieux Carre. (Pause here for anyone who has forgotten the French name for New Orleans' most storied area to Google Vieux Carre.) At the dinner, Michal Panowicz, head of digital at Nordea, said a lot of financial services execs - especially in the United States - suffer more from a legacy mindset than a legacy problem. 

I doubt that Michal was thinking about Niels Bohr or quantum physics when he said that but he does suggest what has been proven by those who explore the small physical world underpinning our larger existence, i.e. our minds shape our reality. Specifically, Michal was suggesting that legacy systems are blamed for a lot more than they actually cause. If this has ever been true, it is true today.

In the blog, Brexit, English Soccer and Humility, it was stated that , "Many retailers are already using predictive tools and algorithms to deliver this level of personalization while most banks and credit unions are far from ready to do the same." Why? Well, you can't really say it's the fault of legacy systems since retailers have IT landscapes where the beasts roam freely as well. Maybe it is the legacy mindset Michal identified that causes the difference.

Retailers do not have the luxury of not adapting to what the consumer wants, needs, and expects from them. Those who thought they did are no longer around to weigh in. Financial institutions, on the other hand, think of themselves as more of a utility that consumers and business require rather than buy. That surely can be the cause for at least some difference between these two verticals in how they "see" the "legacies" they have inherited. 

It is interesting to note that maybe both retailers and bankers in this instance prove the power of mind over matter. However, if financial institutions are going to make the shift they need to in order to meet the expectations of consumers for personalized, seamless, consistent digital experience, they will, as a recent Forrester report indicated, need to free their minds much as retailers have.