An ever-frequent bugbear of large, historical financial institutions is legacy infrastructure. Built in decades long gone, the monolithic platforms struggle to keep up with the fast paced demand of the financial sector today. However, replacing it is an uphill task. So how does one replace legacy? Dovetail might have an answer. Patrick Brusnahan investigates
As payments evolve, banks and financial institutions need to move faster than ever. However, legacy systems are a hindrance.
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According to Efma’s Innovation in Retail Banking report, the two biggest priorities for banks are system integration challenges and the legacy technology landscape. This is on the forefront on the sector’s mind.
“The biggest barrier to digital transformation in 2016 was the legacy technology environment,” the report states.
Dovetail
UK-based vendor Dovetail, recently acquired by Fiserv for an undisclosed amount, is one of many firms trying to solve the problem.
Speaking to EPI, Trevor LaFleche, Dovetail’s Vice President, Product Marketing & Analyst Relations, sums it up.
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By GlobalDataHe says: “I think legacy platforms are running out of steam.
“We find a significant replacement market in places where the technology isn’t able to deliver on the needs of the organisation.”
Dovetail prides itself on delivering an “out-of-the-box” capability to process payments. This results in a speedier process than a toolkit offering, which typically leads to a very long implementation cycle of around 3-5 years.
LaFleche states: “Our clients on the Dovetail platform are going live in-between six and twelve months because we start from the basis of doing this straightaway in a modern way. From that point, you can go live and derive value much quicker.”
Obviously, Dovetail is not the only company trying to make their mark in this way. Fiserv acquired Dovetail, but FIS snatched up Clear2Pay and Finastra added Fundtech to its roster for $1.25bn.
In addition, core banking vendors, Temenos for example, are moving into the payments space.
However, these companies may not be Dovetail’s biggest competitor.
“There is still a lot of desire for banks to build their own systems at the higher end,” LaFleche explains. “We see in-house as our strongest competitor. That’s something we always see.”
He adds: “Some of the arguments just fall on deaf ears in some institutions that have a very ingrained IT development shop. You can show them a reinvented payments system that takes a few years, but then they move onto another project. They always forget maintenance and payment systems evolve with regulatory change.
“We still find that some people are less aware of how much you have to invest. North America and Asia definitely has more of an acceptance to a more packaged product. In Europe, and some other geographies, there is still a strong desire to build. I wouldn’t say we’re completely out of the wood in terms of people understanding that it is not a good idea to build your own software.”
Hellenic Bank
Cyprus-based Hellenic Bank chose Dovetail in October of this year to help further its digital transformation plan. This followed Bank of Cyprus’ same decision in February.
Why did they both pick Dovetail?
“We fit very nicely into the shape of the project that they have,” LaFleche says.
“They wanted a full payments reinvention and we had everything they needed right out of the box.”
Legacy challenges differ from bank to bank, but why?
LaFleche adds: “It varies on what kind of services and how far they’re going in the front end. They’re all beginning to realise that, unless you have the capability of processing payments in the back end, there’s not a lot you can do in the front end. It’s all based on the fact that they need a modern platform.”
The hesitation from many institutions is inspired by the heavy task ahead. Replacing an entire system takes time and money.
LaFleche concludes: “It is a challenge for banks to admit they need to modernise. It takes the alignments out of a lot of areas in a bank. It’s basically open heart surgery for a bank.
“These projects are quite big in scope and affect the facilities of the bank. What we found with organisation is that we can put in a programme to locate pieces that need significant improvement. Maybe you start with high value payments, as there are fewer of them, and you renovate the house room-by-room over a period of time.
“In months, generally not years, you end up with a very robust and modern payment capability.”
