When boiled down to the customer experience, there’s virtually no competition between digital-first financial services and old-school banking mechanisms. According to the March 2022 U.S. Weekly Consumer Confidence Survey, more than three quarters of Americans prefer mobile banking to visiting a traditional brick-and-mortar bank. In a market crowded with popular fintech offerings powered by the latest technology, it seems that soon the old model of banking might become completely obsolete, taking legacy banks with it.
But of course, we don’t live in a world of pure customer experience. In the real world, there is still a host of obstacles holding fintech back from fully transforming the financial world. And as Max Nirenberg recently wrote in an article for the Forbes Business Development Council, foremost among those barriers are legacy systems.
“Emerging tech — from cloud to big data, blockchain, AI, and beyond — is opening doors for innovation and industry-wide transformation, but accessing these capabilities requires data to flow seamlessly from one platform to another,” said Nirenberg. “This is particularly problematic in fintech, as many financial organizations still rely on legacy systems designed for siloed departments, all of which must manage their own information for banking functions separately. These systems simply don’t talk to each other.”
In other words, no matter how critical the breakthroughs achieved by fintechs, if their products still rely on the shrinking supply of coders literate in COBOL and other antique programming language, there’s a hard limit to their commercial viability. To illustrate the seriousness of this issue, Nirenberg reported that a majority of financial experts attributed problems with banking data processes to legacy systems.