Leveraging Data and Analytics to Circumvent Legacy Systems Challenges

With new data and analytics solutions banks may be able to improve their product development and speed-to-market, and put off the question of a core replacement indefinitely.

Many banks are bogged down by their legacy core systems when launching new initiatives, but data and analytics solutions may offer a path to faster speed-to-market for new products and improved pricing of customer relationships. New products and pricing initiatives can easily get slowed down by the need to make changes to these legacy systems, says Teresa Epperson, a managing director at AlxPartners, an advisory firm.

“We see banks consistently running into a wall on executing bundling and relationship pricing initiatives with their legacy core systems. It makes it difficult to execute [on those initiatives] because it is so slow and costly to make the changes to the core,” she explains.

AlixPartners recently announced a partnership with Zafin, a product and pricing software solutions provider, to help banks launch new product and pricing initiatives faster by sidestepping legacy core systems. Coupling AlixPartners’ analytics tools in financial services customer pricing and profitability with Zafin’s miRevenue Product and Pricing Lifecycle Management solution, the new partnership will offer a solution that can run simulations and bring products to market without reconfiguring core systems.

“We’ve been doing customer segmentation for a long time now with our research, uncovering new segments and how to relate to them… now we can help banks build new [product] bundles to attract those segments and do it more quickly,” Epperson shares.

[For More of Our Data and Analytics Coverage, Check Out "Banks Set Stage For Customer Acquisition With Data Analytics"]

The Zafin miRevenue solution circumvents the challenge of making fast changes to legacy core systems by pulling the logic embedded in system applications out of the core, says Seth Rosensweig, managing director in AlixPartners’ information management services. The solution then sits between the core and other systems and simply messages back-and-forth between them.

“One million people came to New York for the Super Bowl, and the bank needs to get a product offering out before the Super Bowl. People are getting jammed up by trying to put that in the core platform… and with an aggregation solution [like Zafin’s] I can have a better understanding of what is happening with more real-time reporting,” Rosensweig remarks.

And with this type of middleware sitting between the core and other systems, banks won’t need to take the costly and risky step of upgrading their core systems, Rosensweig says. Banks can then redirect their IT focus from major tech investments to key business goals.

“If you’re really after customer acquisition and customer retention you can invest in marketing rather than IT maintenance and upgrades,” Rosensweig explains.

Rosensweig says that there are a number of implementation challenges with this type of solution. Banks have to recreate their product catalogue and extract customer records, and make adjustments to current systems. But the implementation time (the first phase takes 7-9 months), costs and risks are still much more manageable then a rip and replace of a core system, he points out.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio