Legacy people and legacy customers could be holding innovation back when it comes to the services banks provide. Story by Chris Skinner.

I talked about the legacy problem recently and, in reality, the problem isn’t just the legacy system. It’s the legacy people and legacy customer. The legacy people are the ones who sit in the organisation and resist change. They know where their cheese is and they don’t want it to move. This appears to be the mentality with ANZ, as the real resistance to changing core systems is more the fear of the risk of doing this than the actuality of doing it.

Legacy people are also those who sit and look at new technology and wonder how to apply it to existing processes. For example, the bank that has built a great virtual branch for Oculus Rift. Yes, you can augment my reality, but if in reality I never visit a bank branch, why would I want to do so in virtual reality? These legacy barriers to change and legacy thinkers are the reasons for creating faster horses, rather than inventing new forms of transport.

Go and ask the legacy customer what they want, for example, and the answers would vary, but would most likely include lower fees, better interest rates and being made to feel special. OK, that’s what all the challenger banks are focused on, but the customer doesn’t think outside the box. They think inside. This is why you have banks that have delivered innovative apps, easy payments and fee-free accounts, but the customer is still using internet banking (because they don’t trust mobile apps), cheques (because they’re easier than that PayPal thingy) and passbooks (well, it worked in the past and I like to see my balance).

No glory for innovating

It may sound ridiculous, but show me one mainstream bank that has gotten rid of anything from the past. If they had branches, they still have them (maybe a few less); if they try to get rid of cheques, the outcry is so huge that they still issue cheque books; and if they try to stop customers using a particular service, such as shutting a branch, the press make out that the bank is like Lord Voldemort from Harry Potter. Banks get no glory for innovating if it means that they tell their customers they can’t do something any more.

The result is that we have the legacy bank with legacy people looking after legacy customers. So here’s a reason that can be given for not changing legacy core systems, and is likely to be the one that ANZ are using.

Does the fact we have a 40-year old core mean that we’re losing customers, cannot compete effectively or exposing us to cyber security issues?

No.

So why change them?

If the customer doesn’t care, has no issue and it’s not causing any problems in processing and operations, why should they be changed?

Where’s the compelling reason?

READ NEXT: Leverage legacy – don’t put lipstick on a pig

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo: Fernando Cortes, Shutterstock.com

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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