The barrier in banking that is the legacy mindset

I’ve been talking to one of our many special customers recently about putting a new Backbase case study together. Common in these discussions is the subject of legacy banking systems, and quite often the subject of business culture.

The person I spoke to had joined their bank a few short years ago and had achieved so much in so little time. This included developing a mobile-first approach to its digital channels, underpinned by a solid website and an omni-channel infrastructure that made it easier for its customers to bank across multiple devices.

I couldn’t help but think that the job could have been done even quicker. In fact, they brought up the subject of legacy mindset, saying that there’s always a culture of “reluctance to change”, but that the best organisations navigate through this rocky path diligently.

I saw new research by Fraedom recently, which revealed that two-thirds of commercial banks are prevented from developing fintech applications because of legacy systems. The barriers to progress include lack of relevant expertise and access to resources.

It’s interesting to note that, while fintech companies can help with overcoming these barriers, a “minority of senior members of staff in commercial banks” simply don’t want to change. 18% of shareholders surveyed by Fraedom believe fintech companies pose a risk to the entire banking industry (a view that was held by just 8% of middle managers). So legacy mindset is just as important, if not more so, than legacy banking systems.

I recall an article by Dimitri Anagnostopoulos last year, who wrote about something called an “efficiency mindset”. He said:

“Humans are creatures of habit, and as we all know, habits are very difficult to change. Inefficient everyday tasks that very quickly become habits, together with the lack of an efficiency mindset, is the perfect recipe for resistance to change.

“If such habits don’t change immediately; if non-value-adding activities aren’t remediated immediately, then chances are they will spread to the entire organisation and build a strong foundation for slow-moving and inefficient culture. Reality shows that many (if not most) finance resources in large financial institutions spend most of their time in such non-value-adding activities.”

My case study friend agrees with this: “The challenges are with legacy systems and processes, but also the culture. The culture [in our organisation] was perfectly aligned with the legacy. The mindset created all that.”

It’s one thing to have to fix a legacy mindset that’s already ingrained in the fabric of your business culture, and quite another to have the innate leadership skills and big-picture thinking to mould culture as it grows and thrives. It’s a difficult task, granted, but those organisations that overcome their legacy mindsets are usually those with good leaders; those who have built a culture of smoothly adapting to change.

I’m painting a slightly skewed image of banks not wanting to change, which I should redress. According to the Fraedom research, nearly half (46%) of domestic respondents said their bank outsources payment solutions to fintech providers, and only 26% of commercial banks are not outsourcing any services. Do you know whether your workplace is adapting to change?

Image by Jirsak, Shutterstock.com