What is progressive modernization in banking?

Progressive banking modernization is the gradual process of upgrading your bank’s infrastructure, technology, and processes, an incremental approach that allows you to minimize cost, time, and risk. While there are two other solid strategies for overhauling your systems — namely big-bang replacement and the greenfield approach — progressive modernization is the clear front-runner because it helps you accelerate delivery, reduce complexity, and anchor your bank’s priorities firmly in the customer experience.

Now that we’ve gotten the big-picture definition out of the way, let’s take a look at the four steps you should take during your bank’s progressive modernization journey.

This is the foundational step where you evaluate your existing systems, processes, and tech. It's not the time for rose-colored glasses — make an accurate appraisal of things, as this will help you address specific pain points and inefficiencies. To make sure you’re objective, you should solicit feedback from your customers and employees, as their experiences may differ from your own, and it’s important to ensure a smooth end-user experience. Progressive modernization doesn’t work if you don’t approach things as a team, and the last thing you want is last-minute surprises or misalignments later down the road.

After that, it’s absolutely essential to define clear objectives or your progressive banking modernization will never get off the ground. Be sure to isolate the burning issues that you need to address first, and even consider grouping things into short-, medium-, and long-term priorities. Align with the rest of your cross-functional team to decide what you aim to achieve and what’s most important for you — improved customer service, reduced operational costs, enhanced security, etc. To be clear, you can pull all of this off, but not without agreeing on priorities.

Then, you'll be ready to create your modernization roadmap, a detailed plan that outlines everything from short and long-term goals, timelines, and resource allocation. And finally you’ll need to select your desired tech. We highly recommend a platform model, and to make things easier, you can check out our list of the top 9 digital banking platforms on the market. Just make sure you choose a company that’s not only a vendor but also a true strategic partner for your bank. The last thing you want is vendor lock-in.

With all the foundational work done, you’re now finally free to actually progressively modernize your bank. Go journey by journey, prioritizing high-impact, customer-facing areas that will immediately demonstrate value. Small-scale pilots are the name of the game, as they’ll allow you to test things and then use feedback and performance data to make the necessary adjustments. Again, be sure you’re honest about how your customers and employees are responding to things, because successful banks don’t tell their end-users what they need — instead, these banks ask what they need. Once you’re ready, you can gradually roll out and then move on to the next journey.

If you’ve done things right, the digital factory you’ve created should make progressive modernization a modular, scalable process, allowing you to move fast and make a big impact. To that end, we highly recommend you adopt open banking standards and invest in an integration platform-as-a-service (IPaaS) so you don’t spend all of your resources reinventing the wheel, day after day. And don’t neglect to train your staff and customers. Change management is essential because even if you create the best tech infrastructure in the business, it will mean nothing if your end-users don’t know how it works. Finally, continuously monitor and improve your new tech/systems, assessing them against predefined metrics and KPIs. Iteration is key to innovation, so make sure you never settle for “good enough” because your competitors sure won’t.

Now that we’ve taken a look at progressive banking modernization, it’s time to explore another important modernization topic: decomposing your bank’s complexity. Up next, we’ll demonstrate how you can take the valuable banking logic from within your monolithic systems and then turn it into a composable, generic capability you can repurpose and reuse.

For more information, check out our Banking Reinvented podcast, where Backbase Founder/CEO Jouk Pleiter dissects similar topics alongside Tim Rutten, EVP/Chief of Staff, and other digital leaders. Stay tuned as they chat about everything from progressive modernization to decomposing your bank’s complexity.