By Anurag Vohra, Head of C&I India, Global Head of Core Trading Solutions, NatWest Group India
News around us is full of the massive transformations happening in the world of technology. The next cool app, the next AI advancement, the next cool apps built solely by AI and so on. Startups are often well placed to start from the latest and greatest, large well-established companies – of all kinds – have a very different challenge. Sitting atop mature stable revenue models and a sticky customer base, the struggle to modernise technology is quite real given the massive ‘legacy’ applications and infrastructure that powers their current business.
Let’s dive into this with a focus on banking and financial services, particularly trading systems though much of this applies more broadly.
Why Modernisation is Critical
Modernising core systems is critical for survival. Existing setups may have stood the test of time and feel robust, but they drag down agility and innovation. Maintenance costs, adding new features, speed to market, and even personalised customer services all suffer when the tech stack isn’t modern and simple.
Another major factor is ‘regulatory agility.’ Trading platforms must comply with an array of rules. Regulations like EMIR, SFTR, MiFID, and Basel III/IV may seem like alphabet soup, but they dictate crucial aspects of system behavior, data maintenance, and auditability. Compliance isn’t optional, making it as strong a push for modernisation as anything else.
The playbook for modernising legacy systems is fairly predictable, but it remains a hard nut to crack. Bank insiders know failures often outnumber successes, even if victories get the spotlight. Let’s break it down into two broad buckets: technology and people. Leveraging cloud infrastructure is a no-brainer. But ‘moving to the cloud’ isn’t just about scalability, it’s a total rethink of how banks build apps. A cloud-native setup involves breaking down monolithic applications into modular components, implementing automated pipelines, ensuring high availability and disaster recovery, prioritising security, and adopting flexible micro-frontends.
That said, not all banks seek to build their own trading platforms. When factoring in the complexity low latency e-trading, risk management, front and back-office functions, and regulatory requirements, buying a vendor product can often be a sensible choice. However, even functionally rich vendor products don’t always guarantee modern technology no easy options here.
The human dimension of successful transformations cannot be overemphasised. Two common traps include assuming an external team can come in and fix everything and equating the older technology stack with the people maintaining it. Leveraging the embedded knowledge of complex, interconnected systems no matter how archaic, is often a key differentiator between success and failure. New skills and people are needed, but both ‘old’ and ‘new’ teams must be jointly accountable for a successful transition.
The Role of AI in Modernisation
AI already plays a big role in areas like fraud detection, bottleneck prediction, and algorithmic trading. However, for modernising legacy systems, its impact is still more potential than practice. That said, this could change quickly. The future may see AI autonomously analysing legacy codebases, proposing replacements, and testing for quality perhaps sooner than we think.
Modernising trading systems or any core banking platform is not just about technology; it is a strategic investment that requires balancing innovation, human expertise, and regulatory needs. The journey is challenging, but the rewards- agility, resilience, and customer trust make it essential.
