- 31st January 2024
- Posted by: Mark Dodds
- Category: Financial Services
Today, we’re going to take a look at a hot topic that’s been buzzing around the fintech world – the never-ending debate on legacy systems. New technology is coming out faster than ever, yet it’s still very common for financial services companies to use legacy systems for core business functions.
So, the big question remains, do financial services companies still need legacy systems, or should they go the same way as the dinosaurs – extinct!
Understanding legacy systems
First things first, what are these legacy systems, and why are they still hanging around? Well, legacy systems are the OGs of banking technology – the mainframes, databases, and software applications that have been the backbone of financial institutions since, well, forever.
Although legacy technology may continue to fulfil its initial purpose over an extended period, more and more often we’re seeing that they no longer align with evolving tools, processes, and regulations.
Why do financial services companies still use legacy systems?
If they’re not moving along with the modern world, it begs the question why are they still being used?
The key reason we see is that these systems often hold critical historical data and functionalities that have stood the test of time. Some companies are reluctant to let go of what they consider tried and tested, despite the fact legacy systems aren’t keeping up with the industry.
Issues with legacy systems
In a recent encounter with a company, we stumbled upon a legacy server running on Windows 2012. Despite being out of Microsoft support, the server was still hosting vital functions and data.
If there’s a problem with it, Microsoft won’t help and there won’t be any more patches for this – leaving the company open to massive vulnerabilities like data loss, system breaches, and potential regulatory headaches. Without the safety net of Microsoft’s support and the absence of regular patches, this legacy system is a ticking time bomb!
Another one of the major pitfalls of legacy systems is that they are often left to their own devices, quietly humming in the background, going largely unnoticed until there’s a problem. The lack of regular use and updates can lead to security vulnerabilities, making them easy targets for cyber threats.
Alternatives to legacy systems
“Okay, we get it, legacy systems are outdated; what do you recommend instead?”
We’re so glad you asked! In the era of rapid technological advancement, there are plenty of alternatives to legacy systems. One of the most popular routes today is embracing the cloud as it offers flexibility, scalability, and enhanced security which can be a game-changer for financial institutions.
In finance, the cloud’s flexibility is a game-changer. It lets financial institutions quickly adjust to market changes, varying transaction volumes, and new rules. This adaptability ensures that the IT setup works smoothly with business needs without the constraints of old-school systems.
Another big green tick is its scalability, letting financial institutions grow without huge upfront costs. They can tweak resources to handle more customers, enter new markets, or boost computing power. This not only saves money but also allows for quick responses to changing business needs.
This is a big one! Security worries in finance get some extra peace of mind when it comes to the cloud. Service providers invest heavily in strong security measures like protocols, encryption, and compliance frameworks. This proactive approach not only protects data but also helps financial institutions meet regulations confidently. The cloud’s advanced security goes beyond industry standards, offering protection hard to match with on-site solutions.
We met a company recently who had a legacy server and no one knew if they even needed it. It turns out – they didn’t! Everything on there could be moved to SharePoint, which we did for them.
Ready to ditch the legacy system? Come have a chat with our friendly team of experts today to find out how we can help!