Cloud-based core banking: those who don't modernize face extinction!
In the ever-evolving world of finance, modernizing banking systems has become a necessity for future-proofing businesses. This is particularly relevant for small and medium financial service providers, who face unique challenges due to limited resources, growing regulatory requirements, and ongoing operations.
The support of experienced partners can be decisive in implementing this modernization efficiently, securely, and regulatory compliant. These partners are technologically strong, offering comprehensive modernization solutions. They include providers of modern, modular IT architectures, often referred to as "composable architectures," and those specialized in integrating AI-driven financial recommendations and digital services to meet evolving customer needs.
The solution to growing risks and hindrances to innovation lies in a shift from outdated IT structures to modern container architectures and automated security and policy workflows. Modularity, APIs, containerization, scalable message brokers, event streaming, zero-downtime deployments, and horizontal scalability are essential components of this shift.
Legacy core banking systems impede innovation, compliance, and modern security architectures. Infrastructure-as-Code (IaC) allows security-by-design to be combined with compliance-by-code, enabling every resource change to be traced, versioned, and controlled. This approach is crucial for these providers, as it ensures that compliance with regulatory requirements like DORA, BAIT, or GDPR is no longer manual, time-consuming, and error-prone in legacy infrastructures.
Modernization is not optional; it's necessary for progress. System demands rise, requiring modern IT solutions to be multi-tenant, multi-channel, and CI/CD capable. Core reengineering is a key step in this process.
Cloud-native Systems address many of these challenges. They offer consistent logging with Open Telemetry, role-based access controls (RBAC), automated change tracking via GitOps, on-demand reprovisioning, and ISO-compliant SLA contracts with cloud providers. However, scaling, failover, dynamic patch management, and controlled operation of sensitive data can be achieved on-premise with significant effort.
Banks need a true DevSecOps model, not isolated SIEM or vulnerability scanning solutions. CI/CD pipelines must include security gates for static code analysis, dependency scans, secrets scanning, infrastructure validations, and dynamic penetration tests. Implementing internal bank policies as Rego policies can be integrated into all CI/CD workflows and automatically block deviations.
Central banking processes accessible via the internet, automated, or exposed via APIs pose systemic risks. External integrations, identity federation, open APIs, and microservices can potentially open infinite attack surfaces in cloud-native systems. Maintenance costs, integration efforts, and lack of flexibility increase exponentially with each regulatory adjustment.
Joeri Barbier, from Getronics, emphasizes the importance of this strategic approach. A strategic approach with clear priorities, a step-by-step restructuring, and a focus on long-term operational security is crucial for these providers. Modernization is not a one-time event; it's an ongoing process that requires continuous monitoring and adaptation.
In conclusion, modernizing banking systems is a complex task, but with the right strategic approach, experienced partners, and modern IT solutions, small and medium financial service providers can ensure their future success in the digital age.
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