Progressive modernization: 3 approaches for building a future-proof bank

Introduction

By now, we hope this blog series has served to convince you about the importance of modernizing your bank, as well as its operating model — and sooner, rather than later. While there are several viable options for doing so, we maintain that your best bet is progressive modernization, the middle-of-the-pack option that gives you medium speed and cost, but at significantly lower risk.

Of course, there’s several different ways to approach your bank’s progressive modernization, which we’ll narrow down here to three:

1. Journey-based — selecting a single journey to modernize, front-to-back, beginning with the ones that are in need of an overhaul and have a positive ROI or cost impact.

2. Segment-based — starting at the business segment level, typically on the onboarding or servicing side of things, and replacing existing apps/services

3. Headless — rewiring your core systems and adopting a digital banking platform that will power your different channel applications, allowing you to reduce logic duplication across your tech stack.

Keep in mind that these approaches above aren’t mutually exclusive, as you may want to begin with a journey-based play and then transition to a full re-platformification down the line or even go headless later on, for example.

We’ll elaborate on each of these plays in the blogs to come, but here, let’s dive into the 3 reasons why you should select one over the other, which will help inform your bank’s decision as you begin your progressive modernization journey.

1. Your bank’s needs

This may be somewhat obvious, but your bank’s ideal strategy for progressive modernization depends entirely on your needs, particularly the root problem you’re trying to solve. For example, if you want to expand your outdated loan book, which generally happens every 10 years or so, a journey-based approach is the best fit for you. Conversely, if you’re more concerned with the bespoke systems, integrations, and logic that power your various channel applications, you’ll want to go headless. It’s all about deciding what you’re actually looking to get out of your modernization journey and setting clear, incremental goals, which will dictate your approach.

2. Your bank's size

Naturally, the size of your institution will also influence the model you select. For example, a smaller institution is far less likely to opt for a headless approach, as rewiring applications to a common platform is typically the domain of mid-sized or larger banks, one with higher levels of IT sophistication and experience. Conversely, all sizes of banks can benefit from a journey-led approach, as this more modular, digestible model scores high on the business value you can unlock without fundamentally reinventing your bank in a massive modernization program. Again, you’ll want to refer back to your motivations for change, considering your bank’s business needs, as well as the needs of your customers and employees.

3. Your bank's resources

Finally, you’ll also want to make your decision based on the resources your bank can allocate to the project. A journey-based approach is relatively low-risk and low-cost, since you can choose to modernize only a few journeys and then reassess as needed. Conversely, a segment-based play is slightly more in the realm of a “big-bang” project, and often involves chasing feature parity, an expensive prospect at the best of times. But if you have the resources, skillset, and time, we highly recommend going headless, as a unified platform model will come with a host of benefits, albeit ones that will necessitate a solid business case to get buy-in.

Journey-based progressive modernization

Up next, we’ll dive deeper into the journey-based approach we’ve described above, and then move on, in turn, to the segment-based method and the headless play. Check out all three for the pros and cons of each, as well as a dissection of how your bank can actually get started on your progressive modernization journey.