Banking still needs workhorse tech – don’t dump mainframes just yet

Common perceptions of mainframes are that they are old, stodgy, slow, clunky, inflexible, and expensive

In industries like financial services where IT systems are high-volume and mission-critical, news of mainframes’ demise is greatly exaggerated (to paraphrase W.C. Fields) – at least for the near term. It’s true that in today’s digital world, cloud-based services are being adopted rapidly across all industries – not least in the financial services sector as fintech providers launch applications that enable improved customer experiences and 24/7 banking.

Financial services business leaders are attracted to platforms such as AWS and Microsoft Azure because they’re quick to deploy. They can set up their environment and get new apps up and running in an hour and immediately start testing to see how well their business use cases are enabled. By its very nature, mainframe technology can’t offer this rapid implementation.

Common perceptions of mainframes are that they are old, stodgy, slow, clunky, inflexible, and expensive. These perceptions may be fair and mainframe providers wouldn’t argue – they just aren’t the full picture. In practice, perceptions of cloud vs mainframe are too binary – what we’re seeing now is an evolutionary phase in which the applications that provide customer service and/or direct customer interaction are migrating from mainframe to midrange cloud platforms.

Mainframes remain powerful workhorses critical to powering today’s digital economy. IBM says 92 of the top 100 banks in the world continue to rely on mainframe legacy IT systems because of their proven processing power. According to a recent article, 74 % of IT professionals say mainframe computing remains very important for large-scale transaction processing.

In the past, both customer service functions and customer-facing applications ran on mainframe technology. Balance checks, credit card transactions, payments and more tapped the mainframe to access underlying data – but the user experience (UX) was slow and unappealing. Today, Fintech providers are enhancing these applications to create a faster, more engaging and intuitive 24/7 experience – so applications are moving to a midrange environment capable of enabling these enhanced UXs.

But what the midrange platform is still unable to do is handle the massive amounts of computational, data and transaction processing that still underpin the customer experience. A midrange environment simply cannot produce the throughput required to process tens of millions of accounts overnight. This includes posting all the transactions and managing the many data feeds which must happen in a two-to three-hour batch processing window when banks are exchanging information. Currently, only mainframes can reliably perform this type of heavy lifting.

Processing power, reliability and proven performance are clear pros for the mainframe. In addition, security – the number-one concern to consumers, financial services companies, fintech providers and infrastructure providers – is a major plus for mainframe technology.

Mainframe providers need to define new commercial models and different pricing structures to improve their financial picture while their infrastructure is still needed. Fintech and mainframe providers need to work together to deliver customers’ ongoing UX experience.

By cooperating, they can solve the problems of time and speed and deliver the ability to spin up test environments that integrate mainframe platforms with today’s mid-range cloud solutions. This hybrid approach through the symbiosis of mid- and mainframe environments is today’s reality – driven by the need to keep moving customer-facing applications to the cloud while anchoring secure, mission-critical computational and transaction processing on the mainframe to support direct customer interactions and customer servicing technologies.

The financial services industry doesn’t have the luxury of stopping everything and spending ten years to replace billions of lines of mainframe code. No industry does. What is needed is to embrace and deploy rapid innovation and emerging technologies while also following a clear path to migrate mainframe processes to mid-range solutions in a strategic and staged manner. 

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