Avoid Vendor Lock-In: How to Break Free from Legacy Tech Limitations

Roughly 94% of U.S. banks rely on legacy core systems that batch process transactions overnight. Given the cost and risk associated with replacing existing technology like core systems—a process industry experts liken to swapping jet engines while flying—it’s little wonder that banks and credit unions tend to stick with their cores for decades.    

Still, the complexity of legacy technology can prove a barrier for financial institutions (FIs) looking to adapt to evolving member and customer demands while managing financial pressures and talent shortages. To help navigate this divide, we’ll explore strategies for harmonizing systems with automation.

Limited scalability and vendor lock-in  

While often regarded as more reliable than newer market entrants, legacy systems can also create challenges for banks and credit unions pursuing digital transformation.    

Because many of these systems are difficult to modify or integrate with newer solutions, legacy systems limit an FI’s ability to innovate and respond to market changes.    

Eventually, this fosters vendor lock-in—an over-dependence on specific vendors—further minimizing an organization’s growth potential. As a result, FIs may face stagnation, unable to pursue new technologies that accommodate a growing customer base or support new products and services.  

Strategies for vendor-independent growth  

Banks and credit unions who rely on established systems like legacy core technology can keep up with an increasingly rigorous competitive pace by embracing strategies that circumvent vendor dependence without destabilizing operations.  

1. Evaluate your current environment  

Look closely at all the systems and applications used in your organization today. Which ones require the most manual work? If all interoperability issues were erased, which solutions would you most like to connect for seamless communication? For example, how much manual work could you eliminate opening communication between your core system and your loan origination solution or CRM?    

By asking questions like these, you’ll gain a clearer understanding of where your greatest opportunities for improvement lie.  

2. Create a technology roadmap  

If you’re struggling with vendor lock-in, chances are you’ve already passed up on investing in certain applications. Revisit your technology wish list and define a roadmap aligned with your organization’s goals—assuming legacy tech limitations were gone, which solutions would have the biggest impact on your institution?     

Establishing your current pain points and ideal state will allow you to prioritize improving the elements of your environment that will have the greatest overall impact.  

3. Explore integration solutions  

To truly bring legacy systems up to speed, you’ll need a robust integration tool, like an integration platform as a service (iPaaS) solution. By seamlessly connecting every system and application in your organization, iPaaS solutions break down the operational siloes often forged by legacy cores.  

With low-code or no-code interfaces, iPaaS solutions empower teams across the organization to build integrations relevant to their roles, resulting in real-time connectivity between critical systems and better interdepartmental collaboration.  

The operational impact of harmonized systems  

Too often, financial institutions grapple with an extremely complex IT environment after decades of accumulating systems; they struggle with data fragmentation and operational inefficiencies as a result.    

Integrating solutions through a single platform not only eliminates vendor lock-in, but also simplifies complex environments, provides real-time access to all data sources, and fosters organizational synergy.    

As member and customer expectations rise and competition mounts, financial institutions can no longer afford to accept vendor lock-in as a fact of life. To innovate confidently, banks and credit unions must bring their systems into harmony.