Many of today’s banks run on closed-box, legacy systems. A closed-box system is one where the underlying product code is locked away by the vendor – inhibiting the bank from being able to define product features. Some systems offer a limited set of configuration parameters for the product, but largely, they remain inflexible and unable to adapt to changing market conditions.

These systems were suitable for a bygone time of telephone and branch banking when customers expected only a basic suite of products, such as current accounts, savings accounts and credit cards. The closed-box system simply does not allow the bank to build innovative, personalised products as it is limited to a set of available parameters.

A closed-box system is not suited to the needs of modern-day customers. It restricts product innovation in several ways, including:

Manual changes: Banks running legacy, closed-box systems struggle to make automated changes to products or accounts en masse. To change one term across many accounts, such as changing interest rates or fees, the bank would rely on the vendor to make those changes manually. This is expensive and time-consuming. Banks, on occasion, have been forced to shut down entire product lines because they have failed to adjust terms in accordance with new regulation.

Vendor dependency: Legacy software vendors typically maintain the software’s entire codebase and provide switches to turn a limited set of features on or off. The vendor is responsible for core and product systems (credit card, CASA, loans, and so on). The underlying product code is unavailable to the bank, so it must rely on the vendor to change existing products or configure new ones.

Service reliability: With a legacy system, many of its services are tightly coupled and depend on one another. This means that a small change in one area of the system, be they scheduled or reactive, could impact a large part – or even all of – the