Financial institutions are no stranger to the role information technology plays in their industry. Over the past few decades, financial services have come to rely on it heavily.
Traditional banks and financial services once relied on customers coming into their bricks and mortar branches to make transactions or withdraw funds. Financial data was stored locally, and privacy and protection of this data wasn’t a concern until a few decades ago, when technology driven transactions became common.
Today, information and data are flying around the world, no longer confined to local financial institutions. More customers are online than ever before, whether that’s personal banking, wealth management, online shopping, or investment.
The financial industry has had to work hard to keep up to date with the advances in emerging technologies, particularly with a view to improving customer experience and staying ahead of the digital changes that keep coming. Whether that’s protecting data and securing transactions, it’s not only good business for financial institutions to prevent malicious activity, but also a legal requirement.
Financial institutions are required to meet strict compliance regulations relating to the security and integrity of data protection. While many financial services believe they are compliant with data protection regulations, as technology keeps changing, so does the complexity of security breaches. Most commonly, the problem stems from financial institutions using what’s known as legacy technology.
What is legacy technology?
As the name implies, legacy technology is software, hardware, systems, or technology that has become outdated or obsolete by today’s standards. Many financial institutions carry on using legacy technology because it’s become vital to the daily operation of the business. This might mean technology that’s used in multiple processes, across several departments or operations within the business.
Critically, legacy technology can lead to problems even if it often still supports the operational needs of the financial business. It’s older technology that is part of the overall IT infrastructure, and it has been used for many years so holds vast amounts of critical data. Replacing legacy technology can be a complex and challenging enterprise for financial institutions.
What are the risks of legacy technology?
Legacy technology is outdated technology which is still critical to daily operations but has the potential to cause big problems for businesses:
- Cyber risk in the form of compromised accounts, data theft, file corruption
- Degraded systems cause data loss and corruption
- Increased system failure or downtime
- Business and IT strategies not aligning
- Increased cost of supporting IT environments
- Lack of compliance with government regulations
- Obsolete or disrupted technology hinders competitiveness and agility
- Complicates the IT environment if businesses merge or are acquired
- Financial technology (fintech) disrupting traditional delivery methods of financial services and becoming the dominant business model of the future. Fintech includes technologies such as Artificial Intelligence (AI) and Robotic Process Automation (RPA).
How does IT benefit financial services?
Banks, insurance companies, and all other financial institutions are working harder than ever to improve customer experience and meet the demands of consumers. Today, the biggest driver of digitizing financial institutions is creating a faster and more efficient service for customers.
While the fundamentals of financial services, such as payments, loans, and safekeeping, haven’t changed much in 100 years, these services and how customers expect to receive them have significantly altered.
The changes tend to focus on more mobile-based options, which are quick and easy to access. Moving funds securely, changing investments, or running a business – financial institutions are expected to ensure their customers can undertake these activities with maximum ease and security.
Cloud based technology is so often used today, particularly helping financial services improve data management and meet regulatory reporting requirements. Cloud technology vastly improves costs and scalability of businesses, making information technology even more critical in the financial world.
Financial services can benefit from embracing the latest technologies in many ways, such as:
- Secure financial transactions:the internet has made financial transactions faster and easier than ever before, but without proper IT measures and security, this can come at a huge cost. Security breaches, data hacking and identity theft are real concerns for all, so investing in a robust and effective system that protects consumers assets is an essential IT service
- Global finance opportunities:information technology offers financial institutions the ability to react to global not just local developments, be on the same playing field as competitors and quickly access potential customers credit scores, offering more products and services that increase borrower’s opportunities for wealth management – no matter where they are
- Improved internal security:malicious attacks on healthcare organizations have increased exponentially in recent years, and it’s expected financial businesses who hold substantial amounts of sensitive client information will not be far behind. Complex IT solutions are needed for finance institutions to protect data and become operationally efficient, allowing internal IT teams to focus on business innovation.
IT support for financial institutions
Every financial service today is faced with rapidly changing technology, which changes the way business is being done. Legacy technology can potentially hinder your business growth and relevance in a constantly evolving digital environment. With the increased demand for convenient, efficient, and secure financial services, businesses need more modern IT infrastructure to manage their operations or face becoming a dinosaur unable to compete in the real world.
There are solutions that offer both functional and operational support to help your organization maintain, integrate, or upgrade or your IT systems with minimal disruption and in a cost-effective way. Managed service providers offer strategic and secure IT solutions that optimize and safeguard critical data, allowing your business to stay relevant and keep your customers satisfied.
When it comes to safeguarding and streamlining your organization’s critical data, call the industry experts at Merit Technologies. Our highly skilled team of IT professionals specialize in helping financial institutions keep their vital data secure, improve operational efficiency, and reduce IT costs – all so you can focus on keeping your customers satisfied.