For banks in Asia, the signs of the times are unmistakable - open banking is here to stay. Across the continent, economies are on the rebound, disposable incomes are rising, and digital banking has exploded. In fact, reports have indicated that over 80% of consumers in Singapore and Hong Kong prefer digital banking to more traditional channels.

Consumer expectations, too, are moving upward. For example, 34% of consumers in Singapore would prefer personalised financial offerings based on their spending behaviour, as opposed to generic off-the-shelf products.

And governments have been moved to action in support of a booming fintech industry.

While China and India have had well-defined digital payment stacks for the past few years, Indonesia and Singapore have launched national open API standards to enable and regulate an interoperable payments ecosystem. Asian fintechs have leapt into action, embedding services into key consumer touchpoints across third-party apps and delivering a customer experience that incumbent banks have barely been able to keep pace with.

Why can't traditional banks keep up?
At incumbent banks, the steadfast competition from fintech has drawn a considerable response. Many have invested in upgrading customer experience technology and their digital banking user experience (UX). However, most of these improvements are cosmetic and are still supported by ageing core systems that are siloed and hard to integrate with newer technologies. Outside Tier-1 institutions, many banks rely on outdated hardware - for example, the 1988 AS/400 mainframe forms the core for over 16,000 banks worldwide.

For years, banking IT departments have defended legacy systems as a robust foundation for banking cores, able to execute transactions at scale reliably, with little chance of failure. But a rapidly declining skill base has also added to the cost of maintaining, upgrading, and innovating decades-old systems.

Additionally, within open banking ecosystems, rising integration demands, and digital transaction volumes can create bottlenecks within older cores. Agile, AI-driven customisations are also much harder to execute using legacy systems when compared to highly modular cloud platforms.

The need for migration is clear and present
Across the world, neobanking is rapidly gaining traction, and by 2030 the industry's projected global market share is expected to cross $2 trillion. This growth is largely driven by neobanks ability to quickly roll out personalised products and a low-friction customer experience. Traditional banks already know that without systems that can support a superior customer experience (CX), they risk a slow erosion of their market share and eventual obsolescence.

But core banking product innovation is hard when your basic banking services are powered by decades-old spaghetti code.

To effectively transition to cloud-based systems, the business case for mainframe migration needs to be clearly mapped out in the context of an improved customer journey vis-a-vis the opportunity cost legacy systems incur. Similarly, to avoid catastrophic downtime and mission-critical system failure, any migration needs a holistic approach that weighs everything from network topologies and infrastructure to data management and integration capabilities against current and future business goals.

Choosing the right technology partners will be key
An IT partner with granular experience in mainframe platform migration can help banks identify which applications to migrate first and simultaneously create a long-term modernisation plan - one that addresses stakeholder pain points, talent availability, ROI, and value creation.

Avanade's recent acquisition of Asysco, a specialist mainframe platform consultancy, has helped optimise our ability to deliver a seamless and risk-free cloud migration program. We've long been proponents of a step-by-step migration that maintains business continuity and minimises downtime while transitioning to a microservices-based architecture for improved innovation agility.

For example, banking cores can be strategically decoupled from a limited set of product offerings. These offerings can then be hosted and tested in a cloud environment while leveraging mainframe processing power and business rules via API. A phased approach can create quick wins, demonstrating the credibility of the cloud to all stakeholders before embarking on a full migration. It also offers a remarkably stable route to modernisation, allowing banks to choose which components of their core to retain, which to upgrade, and which to migrate, all without destabilising mission-critical systems.

Reach out to us today to learn more about how we can help you rethink your approach to cloud and unlock significant business value.