In recent years, cloud technologies, SaaS, and advanced innovative tools are increasingly receiving adoption by many financial institutions and investment firms to keep up with the competition and remain the market leader in the new digital economy.
It’s a well-known fact that if financial institutions and banks stay on legacy systems and provide poor experiences, they will be left behind by new innovative fintech organizations. Yet, technology investment in any industry always has its own challenges. In this article, let’s take a look at the software development challenges in the banking and financial industry, and ways to effectively deal with those challenges.
- Legacy Systems
Today, many financial institutions and investment firms still rely on legacy systems as the core business applications for day-to-day operations. One of the significant risks of operating on outdated legacy systems involves security risk, making financial institutions becoming vulnerable to data breaches and other malicious activities.
Also, old legacy systems are also prone to become incompatible with new, advanced software solutions. The option of replacing legacy systems with modernized ones could seem like a straightforward solution, but it’s really not that simple.
Software development companies understand that it’s not rational for financial institutions and investment firms to replace or modernize their systems overnight. Change should happen gradually to ensure business continuity and without disruption, for example, using solutions that can work on both cloud and on-premises.
Thus, it’s important that firms seek out software development companies that understand the challenges involved with systems modernization and are well-equipped to help.
- Cyber Security Risks
When it comes to the financial industry, ensuring the safety of customer’s sensitive data and information is of utmost importance. Financial institutions are particularly among the target of hacking activities and financial crimes.
It is a significant challenge that institutions need to address cyber security threats to protect their customers. Having a response plan to protect the IT infrastructure and customer data to avoid disruption is crucial.
One of the factors that is linked to the increased security vulnerabilities is the discontinuance of certain banking information systems.
Cybersecurity is critical to the financial industry as it seeks to ensure both the security of its assets and the success of its business. This is especially true in the post-COVID world, which is becoming increasingly connected and digitalized.
Organizations in the financial sector need to be more aware of the different types of cyber threats they face, and their teams need to be more proactive to protect their customer’s data, networks, and operations from cyber-attacks.
- Integrating AI & Big Data
Creating a strategy to adopt AI and Big Data within financial institutions provides significant benefits as well as potential challenges. In the Financial industry, it could be a challenge to find the right domain experts in the team.
There are various aspects including, banking regulations and compliance, technical stacks and planning, data sources, and many more requiring extra attention by experienced specialists to define adequately.
Therefore while adopting AI and Big Data Analytics on an organization’s financial software applications, it is essential to acquire domain expertise to offer detailed contextual information. Moreover, specific financial and investment applications might require a dedicated and experienced team from top Artificial Intelligence (AI) solutions development companies to achieve the compelling industry’s expected goals.
In particular, with Big Data and Advanced Analytics, institutions need to meet all the necessary data privacy laws ( e.g. GDPR) and regulatory compliance to protect personal data.
- Cloud Adoption
In the past, financial services organizations usually operate using on-prem systems. However, in the new economic landscape where digitization is being accelerated by the Covid-19 pandemic, there’s a big transition toward cloud applications modernization across all industries including banking.
Shifting to the cloud (e.g. AWS, Azure, etc.) means that outdated legacy applications are no longer sufficient to compete with the new systems running on the cloud, containers, and microservices architecture. Yet again, migrating to new technologies is not painless, especially for complex legacy systems. It also doesn’t make sense to apply changes by moving everything to the modern systems all at once.
Digital transformation is a long-term effort that takes time and thorough planning.
Ultimately, it’s practical for financial institutions to gradually build up their digital capacities through in-house IT talents development along with outsourcing and other methodologies such as up-skilling and cross-skilling.
The important thing is to be aware of the future trends and stay current with changes and adapt efficiently.
- Digital Transformation With Covid-19
The Covid-19 pandemic has caused a big disruption to lives and businesses around the world. Before Covid-19, many financial institutions have already been moving away from legacy systems toward modern technologies, except the pandemic has accelerated digital transformation even more.
Various banking and financial transacting activities can now be done via online channels using mobile devices, decreasing the need for physical branches and allowing employees to work remotely. This equals offering the best-case user experience to consumers via digital channels and adopting digital tools to enable work-from-home for internal staff.
Businesses with limited digital capacities or slow to transformation will need to do so urgently.
Advanced technologies beget opportunities and challenges. For the financial industry, software development challenges may involve the complications of modernizing legacy applications to the cloud, cyber-security risks, and continuously adapting to changes as well as other related problems. Thus, it’s essential to have the right tools and methodologies to implement all the digital initiatives effectively and properly.
Digital Transformation can not happen overnight, but with the proper tools and technology, narrowing the gap between the old and the new landscape would happen soon.
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