W HITEPA PER

Modernizing legacy
banking systems:
3 key steps to unlock bigger results
Contents

Executive summary 03

Introduction 04

Defining a legacy system 05

The risks relying on legacy systems 07

Traditional legacy modernization approaches 09

3 key steps to an effective legacy modernization strategy 10

01 Align IT and business initiatives 10

02 Unlock core systems and siloed data securely 10
03 Maximize reuse, minimize complexity 13

Legacy modernization in action: RBC Wealth Management 14

Conclusion 15
Executive summary

MODERNIZING LEGACY BANKING SYSTEMS

Few industries feel more pressure to modernize legacy technology
systems than banking. Banks are under increased pressure from
heightened customer expectations, advents in new technology, and
economic uncertainty.

To be successful, banks need to
continuously consider:
→ How customers are responding.
→ What the competition is doing.
→ How to comply with regulations.
now legacy systems. While they have served
these institutions in the past, today, the
use of these mainframe systems and legacy
infrastructures only create technical debt
and hinder innovation by preventing the
implementation of modern technologies.

The time is now for banks to evolve their Most banks recognize that in order to retain
IT infrastructure, capitalize on growth their competitive advantage, they must
opportunities, and overcome these

3
modernize their legacy systems, but are
headwinds. unclear where to start.

However, modernizing technology and

competing in a digital-first world can be
daunting and overwhelming, especially for
financial institutions that have existed for
decades — even centuries in some cases
0M

— and have over the years acquired these

$2
%
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Introduction

MODERNIZING LEGACY BANKING SYSTEMS

In the financial services industry,
73% of customer interactions
WHAT PERCENTAGE
are now digital. Customers are
73%
OF CUSTOMER
increasingly attracted to service INTERACTIONS ARE
NOW DIGITAL?
options that offer convenience,
flexibility, and accessibility going
beyond the four walls of a bank.

To create a seamless, connected customer
experience, banks must realize the value of
important data used to derive insights and
drive business decisions. To access this data, a
myriad of data sources and applications must
exchange information quickly, effectively,
than modernizing the system itself. The
right modernization strategy should
unlock core systems, realize the power of
data, and orchestrate business process
automation outside of the core system to:

4
→ Achieve operational excellence.
and securely. However, many critical banking
→ Create connected experiences for
systems rely on legacy infrastructures that
customers.
are siloed and unable to communicate
with other technologies. This results in data → Launch differentiating services.
not being easily accessible to provide the
seamless experience customers have — in
more recent years — come to expect.

As competition increases and customer

behaviors evolve, so must digital banking
initiatives. Yet, legacy systems and IT
resources prevent banks from evolving
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

alongside these demands, creating a

widening delivery gap, jeopardizing
growth, profitability, and scalability.

Modernizing legacy systems helps bridge

the delivery gap, but it’s not a one-size-
fits-all approach and is oftentimes more
Defining a legacy system

MODERNIZING LEGACY BANKING SYSTEMS

In many cases, a legacy system is an old or outdated system,
technology, or application put in place to resolve previous business
challenges. Because of this definition, legacy systems often remain
in use because they still perform the function they were originally
intended to do. However, not every outdated system should be
considered legacy.

In some cases, a legacy system — systems that are specifically hindering

regardless of age — is one that
simply can no longer support a bank’s
business goals. When considering
modernization, it is important that banks
define the characteristics of legacy
modern initiatives, such as unlocking
a 360-degree view of the customer or
enhancing the customer onboarding
process.

THESE HINDERING CHARACTERISTICS CAN
INCLUDE:
01 Limited interoperability. When new
initiatives are introduced, new technologies
must make up for the legacy system
limitations. However, it’s difficult for legacy
systems to co-exist with modern technologies
because they often operate very differently.
Because legacy systems are built on outdated
and inflexible technologies, they lack the
ability to translate the data within them
5
02 Lack of support and maintenance.
With any technology comes required
maintenance and updates. As legacy
systems age, support and maintenance
efforts become more complex or cease
altogether. Without regulatory updates,
legacy systems can quickly become
obsolete or require more dedicated time
and resources, consuming an increasing
amount of budget with diminishing returns.
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

into a language modern technologies can 03 Poor performance. Unstable IT

understand. This incompatibility further siloes
the data and ultimately deems it useless.
As a result, banks relying on legacy systems
may not fully benefit from the features and
functionalities new technologies have to offer.
systems with the threat of failure should
be a major concern for any bank relying
on legacy systems. These systems
operate inconsistently with a more
significant margin of error and lag in
retrieving real-time, accurate data.
 Even with limited functionalities, some banks Altering these systems could disrupt the

MODERNIZING LEGACY BANKING SYSTEMS

are hesitant to modernize because these entire architecture.
core systems still serve essential IT purposes.
These legacy core systems are indeed a The familiarity and convenience of legacy
core; the place where daily banking activities systems often outweigh the problems
are conducted. For many banks, their core associated with them — until it’s too late.
systems serve as a repository for the data
that is generated to power traditional banking
activities — i.e., demand deposit accounts.
However, the core system is a closed system
that leaves little room for innovation and
growth outside of the platform itself.

6
©2022 M U L E S O F T ­­— M U L E S O F T . C O M
The risk of relying on legacy systems

MODERNIZING LEGACY BANKING SYSTEMS

Imagine a well-oiled vehicle that transports cargo from point A to
point B. Time and time again, it does just what it was designed to
do. After some time, the vehicle must increase its transportation
from point A to point C. However, it lacks the features and stability to
guarantee a safe delivery to a new destination. What then happens
when the vehicle must go to point D? How far can the vehicle go
before the problems cause a crash? How far must the vehicle push the
limits until a new model makes sense?

Banks must ask the same question: how far is too far with a legacy system?

Legacy systems lead to slow innovation and difficult implementation of modern technologies, but
what other risks do banks with legacy systems face?

IT overcapacity and lack
of business alignment
Legacy systems are complex and
require a certain level of expertise,
understanding, and training. As
demands continue to increase, this
applies pressure on a small number
of IT members — the central IT team —
within the bank to complete technical
initiatives. Furthermore, if one of these
equipped team members leaves, the IT
7
Weakened security
Lacking regular maintenance, legacy
systems will not have the support
available to complete necessary updates
and stay secure in the digital ecosystem.
This leaves them vulnerable to data
breaches that can wreak havoc on an
entire IT infrastructure.
The manual nature, poor reference
data, and poor validation methods
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

team is left with even fewer resources.
Asking more of IT with the same or
fewer resources creates bottlenecks
and time-consuming delays in project
completion.
of monolithic legacy systems can
also make them prone to erroneous
digital transactions, which can lead to
customer dissatisfaction and regulatory
implications.

Failure to comply with regulations
It’s no secret that there is a high demand
for digital financial services, especially
in banking. With online banking and
mobile applications, customers can
easily manage daily financial tasks by
simply opening their devices. With an
influx of demand comes increased
regulations banks must comply with
— or face penalties and fees. A variety
of federal laws regulate how banks
collect, use, and transfer customer data
digitally. A bank relying on a legacy
system allows its siloed customer data
to sit unprotected by regulations simply
because the system cannot complete
the required, updated regulation
requirements.
! Poor user experience
In many cases, banks can classify their
goals for digital initiatives under two
categories: operational excellence (for
employees) and service excellence (for
customers). Both are important end-
users that will either benefit or suffer
from the outcome of these initiatives.
Operational excellence is often defined
as the process of executing strategies,
processes, or workflows consistently,
efficiently, and without error. Effective
operational excellence can lead to
MODERNIZING LEGACY BANKING SYSTEMS
improved productivity, engaged
employees, lowered costs, increased
revenue, and fewer risks. Ineffective
operational excellence — often rooted
in legacy systems and siloed data — can
spiral to longer delivery times and loss
of productivity, frustrated employees, IT
bottlenecks, and higher operating costs.
Operational excellence is the
foundation of service excellence.
Service excellence also aims for
consistency, but consistency in meeting
customer needs and expectations.
For banks, this can look like easy and
secure online transactions, a smooth
onboarding process, or a 360-degree
view of every relationship an individual
has with the bank. These cannot
8
happen with operational inefficiencies
stemming from the limitations of a
legacy system. In addition, a legacy
system’s capabilities to provide a fresh,
updated interface for customers can
taint the bank’s reputation and leave
customers asking for more.
The ultimate risk of a poor end-user
experience is losing that business to a
competitor.
So, when the risks start to outweigh the
©2022 M U L E S O F T ­­— M U L E S O F T . C O M
convenience, where do banks typically
turn?
Traditional legacy modernization approaches

MODERNIZING LEGACY BANKING SYSTEMS

The road to legacy system connectivity typically begins with two
traditional approaches:

→ RIP AND REPLACE: COMPLETELY REMOVE OLD → CUSTOM CODE: ENABLE WEB FUNCTIONALITY
SYSTEMS AND REPLACE THEM WITH NEW WITHIN THESE SYSTEMS THROUGH CUSTOM
ONES. CODE.

Both approaches bring their own set of drawbacks and limitations.

Completely replacing a legacy system can
be an expensive and time-consuming
project many banks can’t afford to complete.
These systems often sit centrally within an
IT architecture and power critical business
operations. Removing them risks the
capabilities of daily functions and loss of
and more challenges hiring outside services to
connect legacy core systems with newer front-
ends and additional third parties.
In the long-run, traditional legacy
modernization approaches are unable to
address scalable connectivity. They lack a

important data. In addition, a rip-and-replace
approach requires an up-front investment and
prolonged resources to see the replacement
through.
The second approach works efficiently when
a small number of systems are involved.
With custom code, the majority of legacy
systems are connected through point-to-point
integration — a quick-fix solution to retrieve
data from systems. While the initial need to
access data is met, this process requires a
new code with every subsequent project. On
9
critical piece to expose data in a way that
protects the integrity of the system, enables
secure and governed access, and increases
productivity. Solutions such as API-led
integration and automation can combat
these challenges and bring life to legacy
systems in the digital world.
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

average, banks and financial institutions have

nearly 1000 systems and applications. At
that scale, custom code quickly complicates
integration and reduces the capacity for
future technologies. Over time, each endpoint
that’s added requires more integration work,
3 key steps to an effective legacy
modernization strategy
As banks consider moving toward API-led integration and
automation, they must take three key steps to activate the benefits of
this approach. These pillars are imperative to unlocking benefits for
any initiative and business decision thereafter.
01 Align IT and business initiativess
IT and business alignment is perhaps
the most important element when
determining business goals and the
initiatives to support them.
Initiatives such as digitizing and automating
processes, lending, and digital payments
can stem from leadership’s drive to present
business results. However, leadership may
not fully understand the technical demands
these initiatives require or have visibility
into IT pressure and limited resources.
This misalignment can not only lead to IT
overcapacity but patchwork solutions that
only meet short-term objectives, leading to
greater problems down the road.
When looking to modernize legacy
systems, it’s imperative both IT and
business teams align on clear objectives,
available and realistic technology resources,
and allocated budget. It’s not just another
IT project, and it’s certainly more than
modernizing technology. Every stakeholder
involved should focus on the business
value, not just the technology replacement.
Aligning IT and business initiatives
MODERNIZING LEGACY BANKING SYSTEMS
addresses the widening delivery gap with
easy-to-use tools to automate and lays the
foundation to empower all users — both
technical and non-technical — with the right
integration approach.
02 Unlock core systems and siloed data
10
securely
Increased IT pressure has accentuated
the need to unlock the data that lives
within legacy systems and decompose
the processes they drive. Decoupling rigid
core systems is the first step to creating
a composable infrastructure. However,
legacy modernization is more than its
core systems. An effective strategy can be
broken down into two phases.
In the first phase of the legacy modern-
ization journey, core systems are accessed
©2022 M U L E S O F T ­­— M U L E S O F T . C O M
by modern approaches, such as API-led
integration.
APIs are the composable building
blocks that unlock and integrate data
wherever it presides — on-premises, in the
cloud, or hybrid.
Banks looking to modernize legacy systems
can use a three-tiered, API-led architecture
to abstract away system complexity and
decompose monolithic cores into fine-
grained services for reuse across channels
and line-of-business teams.
In this API-led architecture, system APIs
provide governed access to their respective
downstream systems. They also serve
as wrappers that insulate these systems
from excess traffic received by upstream
applications.
The second phase of the legacy
modernization journey moves beyond
the access of core systems. The process
layer orchestrates data and functionality
from these system APIs, abstracting
away system complexity from business
technology consumers. Here, the
APP DEV
ASSET EXCHANGE
KNOWDLEDGE/
COMMUNITIES
DEVELOPER
LOB/
DEV IT
CENTRAL
IT
C4E
ACCESSIBILITY
& OWNERSHIP
transactional data retrieved from the core
MODERNIZING LEGACY BANKING SYSTEMS
systems of record, exposed through APIs,
now operates in a process outside of the
core. This allows other applications to have
access to the value of this data and build
automated business logic.
An experience gateway encapsulates
this business logic managing the
authentication, authorization, and auditing
of traffic that consume these APIs across
different modern channels (web, mobile,
chat, etc.) that customers are using for a
variety of banking use cases ranging from
payments to product applications.
With this approach, not only is the data
surfaced from legacy systems and easily
accessible but its workflow is automated
11
and protected with security and regulatory
compliance built-in at every step.
EXPERIENCE APIs: INNOVATION AND DIGITAL PRODUCTS
PROCESS APIs: AGILITY AND NEW VALUE CREATION
©2022 M U L E S O F T ­­— M U L E S O F T . C O M
SYSTEM APIs: DECENTRALIZED ACCESS TO CORE ASSETS
03 Maximize reuse, minimize complexity
Banks leading the way in the digital
financial services ecosystem break
their business capabilities down into
composable building blocks they then
use to unlock core systems, integrate
data, automate processes, and govern
their digital landscape. Composability
is defined as a system design principle
that uses standardized, reusable building
blocks — like APIs. Instead of having to
write custom code or starting from scratch
every time, exposing data as APIs builds
new experiences, products, and services
with greater speed, agility, and efficiency.
When banks build in this way, they create
an application network.
API API API
APPLICATION
Re-architecting existing legacy
applications and exposing functionality
through APIs can improve IT agility by up
to 40%.
In an application network, banks have all of
MODERNIZING LEGACY BANKING SYSTEMS
the assets, business functionality, and data
that sits behind it in a format that allows the
appropriate teams across the organization to
know where it is, know what it is, and be able
to securely access it and compose it.
Just like a network effect, each building
block adds exponentially increasing value
and security, and it is strengthened as banks
unlock data and business capabilities.
Each node is secured by design and is ready
for discoverability and self-service. Depending
on their role, teams can simply build upon
the existing APIs to enable new features and
functionalities faster, and reduce time-to-
market with each new service launch.
12
API-led integration easily enables reuse, thus
simplifying the technology, empowering all
users with clicks, not code. No longer do new
initiatives require complex approaches that
can only be completed by a limited number
of resources on the IT team.
The right tailored legacy modernization
approach will:
→ Integrate any system and any data,
including hard-to-reach and on-premises.
→ Streamline complex processes, drive
©2022 M U L E S O F T ­­— M U L E S O F T . C O M
efficiency, and unleash innovation with
end-to-end automation.
→ Deliver better customer experiences, faster.
Top benefits of an API-led integration MULESOFT ACCELERATOR FOR

MODERNIZING LEGACY BANKING SYSTEMS

and automation approach
An effective legacy modernization strategy
takes a holistic approach and considers
initiatives beyond the short-term. While there
are many benefits associated with this, there
are two that drive the most business value.
Increased efficiency and flexibility
Decoupling core systems through APIs
and automation builds a future-proof
foundation that easily adapts to change.
Banks become more flexible because they
can extend the life of their legacy systems
without being encumbered or dependent
on them. They become more efficient
because they can make changes at their
own pace and move as quickly as the growth
FINANCIAL SERVICES
Boost time-to-value in your customer 360
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and reference architecture for financial
services.
MuleSoft Accelerator for Financial Services
is a collection of technical assets and
documentation — designed as modular
building blocks — to accelerate the
implementation of multiple use cases
supporting a larger business or industry
problem. Customers will save hours of
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Financial services customers expect
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services. MuleSoft Accelerator for

of the business requires. Advanced and
automated technology enables banks with
the right approach to lead the industry and
offer services before competitors. It drives
transformative business outcomes.
Core-agnostic business model
Ultimately, banks should aim to move toward
13
Financial services simplifies customer
360 initiatives by unlocking both core
banking and insurance platforms, systems
of engagement (such as CRM and ITSM),
Insuretechs, and FinTech data. This
enables a higher level of customer service,
real-time relationship management, and a
more connected digital experience.
SYSTEMS OUTCOMES

a core-agnostic business model and embrace

LOAN MDM

more interactive standards. The right

DOCUSIGN CREDIT BUREAU ORIGINATION

CORE BANKING CUSTOMER

FOUNDATION ONBOARDING

integration approach should have the ability

FSC CREDIT CARD CORE BANKING FRAUD ANALYSIS

MULESOFT ACCELERATOR FOR

FINANCIAL SERVICES

to point to any core system and implement FOREX ACH / FEDWIRE

/ SWIFT
MULTICHAIN CORELOGIC
PAYMENTS ADDRESS CHANGE
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

MODERNIZATION ORCHESTRATION

business logic. Instead of sitting separate SALESFORCE

INSURANCE
MARKETING
CLOUD
SLACK USPS

and siloed, the core systems holding critical APPLICATION

data can work in tandem without the fear of

complete infrastructure disruption.
 CUSTOMER STORY

MODERNIZING LEGACY BANKING SYSTEMS

Legacy modernization
in action: RBC Wealth
Management

RBC Wealth Management, a global wealth management firm,

has $528 billion in total client assets and more than 2,100 “With MuleSoft by
financial advisors. To accommodate the growth of the business our side, we’re
and remain competitive, RBC set out to create a best-in-class
confident that the
customer and advisor experience — but siloed data in legacy
systems proved to be a challenge.
reusable APIs we
built will be critical
Align IT and business initiatives in enabling us
Considering budget and available IT resources, RBC adopted to maximize our

14
an API-first integration strategy and selected a solution to legacy investments
accelerate legacy modernization and unlock critical customer
and launch
and financial data.
future customer
Unlock core systems and siloed data securely innovations faster
Utilizing MuleSoft AnyPoint Platform, RBC completely digitized than ever before”
and automated the onboarding process by building APIs that
exposed customer data — previously siloed in key systems of GREG BELTZER, HEAD OF
record — in a consistent and secure way. This enabled customers TECHNOLOGY, RBC WEALTH
MANAGEMENT
to open a new account online with ease and advisors to monitor
client relationships — all in one interface.

Maximize reuse, minimize complexity

©2022 M U L E S O F T ­­— M U L E S O F T . C O M

In the second phase, RBC built a client service portal with a single
view of the customer by leveraging the existing APIs from the
onboarding project.

Learn more about how modernizing legacy systems enables

RBC to deliver a best-in-class experience 3x faster than before.
Conclusion

MODERNIZING LEGACY BANKING SYSTEMS

The banking industry faces unparalleled disruption with an influx of
digital-first customers, increased competition, and regulatory and policy
changes.

To drive efficiency and growth in the application environment in a structured

changing industry landscape, banks
know they must create a best-in-class
customer experience. However, in many
banks, important and operational data
remains siloed in outdated IT systems.
To successfully unlock the value of their
data, it’s critical that banks modernize their
manner. They must consider three essential
steps in doing so: align IT and business
initiatives, unlock core systems and integrate
data securely, and maximize reuse of APIs
with automation. With this approach, banks
of the future will unleash untapped capacity
to create seamless digital experiences, faster.

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©2022 M U L E S O F T ­­— M U L E S O F T . C O M
Learn more

MODERNIZING LEGACY BANKING SYSTEMS

REPORT
%
20

0M
$2
THROUGH THE INDUSTRY LENS

The state of digital

transformation for

%
62
financial services
INSIGHTS FROM THE 2022 CONNECTIVITY BENCHMARK REPORT

In collaboration with Deloitte Digital

1

An API-led approach to The state of digital transformation

payments modernization for financial services

Learn how Mulesoft’s Payments Application Customer expectations are increasing

Network offers a framework to support
the delivery of an agile payments strategy
built on compliance, connectivity, and
orchestration.
Watch the webinar
alongside competition, putting increased
pressure on financial services organizations
to digitally transform. Get insights from data
in the 2022 Connectivity Benchmark Report
through a financial services lens.
Read the report

16
Streamline and scale lending operations
with AI and API-led integration

Find out how APIs can help lenders

streamline costly processes and accelerate
the delivery of connected borrower
experiences.
©2022 M U L E S O F T ­­— M U L E S O F T . C O M

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