There is a very popular sentiment that is expressed whenever the topic of legacy system replacement comes up; if it ain’t broke, don’t fix it. This is the phrase that stops any debate on legacy system replacement dead in its tracks. There is no good comeback. Why spend millions of dollars to replace a system that is not broken?
You might have really good reasons for wanting to replace your legacy system. Maybe it’s slow. Maybe it’s inflexible. Maybe it takes months and a bushel of COBOL programmers to make one little change. Maybe you have had to wrap so much custom coding around it to keep it functional that you couldn’t upgrade to the latest version if you wanted to.
It does not matter. Rip and replace is not an option unless the system actually dies.
So what do you do? There is a simple approach that provides amazing flexibility and power to existing legacy systems, without requiring large scale development efforts by the vendor or your internal IT department. Business users can gain control over many of the core functions of the origination process, allowing them to adapt and grow as they need to in order to meet the changing regulatory and competitive pressures of today’s market.
An Easy Fix
The first step is to acknowledge that the system is still providing value. For all its limitations, the system can still process applications. All you need to do is supplement the system’s functionality by interfacing more sophisticated functionality into the existing process without breaking anything. The best place in the process to add that additional functionality is the external data call. When the system is processing an application, one of the first things it does is send out a request to the credit bureaus for credit data on the individual whose application the bank is processing. Traditionally the bureaus would just send back the credit data in the correct format and the system would continue with the origination process. However, what if the bank wanted to add additional steps into the process of calling out to the bureaus? As long as the end data that is sent back into the origination system is in a format that the system can handle, it’s easy.
The credit bureaus were the first ones to figure this out. Instead of just returning a basic credit file, they started incorporating additional data and analytics into the response. But why stop there? You could redirect that external data call to an entirely new vendor. That vendor could help you:
- Incorporate alternative data sources that supplement credit bureau data and provide a more accurate view of a customer’s potential profitability and risk and allow you to optimize your data acquisition process in order to implement least cost routing.
- Create, test, and implement new credit attributes to help ensure your credit risk policy is up to date.
- Integrate sophisticated decisioning logic to more effectively deal with fraud and new regulations.
To truly regain control over your system, you would want to choose a vendor that provides you with a set of graphical tools for business users. These tools would enable the people who know the most about your credit risk and customer acquisition strategies to maintain direct control over your origination process.
The Middle Course
When a bank opts to completely replace one of their core systems, it’s usually because the problems with that system have reached a tipping point. But what about the legacy systems that have not reached that tipping point? These systems are no longer working well, but they are still working. As long as they keep working at an acceptable level, they will never be replaced because the process of replacing them is painful and expensive. So how can you break this impasse? Use the external data call in the origination process to infuse more control and flexibility. Choose an external vendor with a dynamic development environment and a set of graphical tools. Empower your business users to quickly integrate additional data sources, launch new products, and adapt to market changes.
If you are struggling with problems caused by a legacy system or if you have thoughts on how to solve such problems, leave a comment. I would love to know what you think.