Transforming Financial Services with Mainframe-Led Digitalization

3:50 pm
July 31, 2023

When it comes to modernization challenges, the banking industry faces some of the biggest hurdles. Before the era of internet and smartphones, banks relied heavily on mainframes for electronic settlement and record-keeping. Today, as customer demands for flexibility, agility, and innovation rise, banks have a lot to gain from bringing their mainframe applications and data up to modern standards. A successful digital transformation can lead to improved customer satisfaction and business growth, while a failure can result in significant losses.

Why Modernization Stalls in Banking

The banking industry has faced various economic uncertainties, making modernization initiatives a challenge. Delayed modernization can be attributed to bad management decisions, inadequate risk analysis, and lack of technical resources. Large institutions often struggle with technical debt and high-gravity data movement issues, while smaller banks may lack the necessary technical expertise. Many banks have experienced failed modernization or migration initiatives, leading to frustration and hesitation to undertake further changes.

To overcome these challenges, banks should focus on modernizing key aspects of their mainframe infrastructure without undertaking a complete overhaul. By prioritizing the most critical business needs, banks can gradually refactor their mainframe code, introduce new technologies, and improve performance while minimizing disruption.

Transforming Core Systems and Application Code

Addressing technical debt within existing mainframe code can be intimidating for banks. However, Atruvia AG, a leading banking service technology vendor, successfully modernized their mainframe systems by gradually replacing 85% of their core banking transactions with modern Java. By refactoring in place and writing RESTful services, they improved functionality for customers and boosted mainframe performance by 3X.

Ensuring Cyber Resiliency through Faster Recovery

Data protection and disaster recovery are crucial for banks. ANZ, one of Australia’s top-five banks, implemented an inter-site resiliency capacity by running mirrored IBM zSystems servers. This allowed them to perform backups and recovery processes without experiencing service disruptions, ensuring high availability for their millions of customers.

Gaining Visibility through Enterprise-Wide Analytics

Analytics plays a vital role in banks’ decision-making processes. However, running complex analytical queries on mainframe systems can be time-consuming and can strain compute budgets. Garanti BBVA, Turkey’s second-largest bank, deployed IBM Db2 Analytics Accelerator for z/OS to accelerate query workloads and reduce mainframe CPU consumption. This allowed them to run more than 300 analytics batch jobs every night and generate compliance reports in just one minute, down from two days.

Improving Customer Experience at DevOps Speed

Banks need to deliver innovative applications and services to meet customer demands. Integrating mainframe teams into the DevOps movement can accelerate software development and feature delivery. Danske Bank successfully brought nearly 1,000 internal mainframe developers into their DevOps transformation by using the IBM Application Delivery Foundation for z/OS. This enabled faster development, debugging, testing, and release management, allowing the bank to bring new offerings to market in half the time.

Conclusion

Mainframe-led digitalization is essential for the success of the banking industry in today’s digital era. By modernizing core systems and applications, ensuring cyber resiliency, gaining visibility through analytics, and improving customer experiences, banks can meet the evolving needs of their customers and drive business growth. Each bank’s modernization journey will be unique, and it’s crucial for IT leaders to select use cases that align with their specific business needs and architecture.

FAQ

1. What is mainframe modernization?

Mainframe modernization refers to the process of updating and transforming legacy mainframe systems to align with modern technological advancements. This involves improving flexibility, agility, and innovation in mainframe applications and data to meet changing business and customer demands.

2. Why is modernization important for banks?

Modernization is crucial for banks as it allows them to keep up with customer expectations, improve operational efficiency, and enable faster innovation. By modernizing mainframe systems, banks can deliver better customer experiences, streamline processes, reduce costs, and remain competitive in the digital era.

3. Is mainframe modernization risky?

While any transformation comes with some level of risk, delaying modernization also carries risks for banks. Outdated mainframe systems may not provide the flexibility and agility required in today’s fast-paced business environment. By employing appropriate modernization strategies and methodologies, banks can mitigate risks and achieve successful transformations.

4. What are some challenges faced in mainframe modernization?

Mainframe modernization can be challenging due to factors such as technical debt, lack of resources, complex legacy code, and potential disruptions to ongoing operations. Banks often face the challenge of balancing modernization efforts with the need for continuous service delivery. However, by prioritizing key areas and adopting a gradual and strategic approach, banks can overcome these challenges and achieve successful modernization.


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