Independent Banker - May 2023 - 48

says. " They'll have to do something fairly massive in terms
of intervention to try to right the ship. "
TECHNICAL DEBT: PAYING TO MAINTAIN OLD TECHNOLOGY
To start, older systems may work, which is why it's
tempting to leave them in place. Starting over from scratch
is expensive, but technical debt is expensive, too. In a
2020 survey, McKinsey Digital found that 30% of chief
information officers believe that more than 20% of their
technical budget earmarked for new products is actually
being used to address problems created by technical debt,
and that technical debt accounts for 20% to 40% of the
value of their technology estate. That's money that could be
spent elsewhere if it weren't servicing technical debt.
Most community banks won't have technical debt of
their own, says Charles Potts, executive vice president and
chief innovation officer for ICBA. " But they suffer from it
every single day. "
That's because community banks typically outsource the
bulk of their technology to vendors. " System providers are
making decisions in real time with short-term horizons
that often have trade-offs that pile up, " Potts adds. If
community banks continue contracting with legacy core
systems, then they're paying for the maintenance of that
vendor's piled-up tech debt.
This isn't just a recent problem, either. Technical
debt has compounded over decades. " Some of these
core vendors have been around for 50, 60 years at this
point, " says Robert Johnston, CEO of Adlumin, a security
operations platform. That could mean a community bank
is running its software on top of code that no one even
knows how to program anymore.
It's not unlike when governors of individual states
begged for programmers who knew Common Business
Oriented Language (COBOL), a code first developed
in 1959, to raise their hands during the pandemic and
help them manage the influx of unemployment claims
with the systems they had.
When carrying a lot of technical
debt, as core vendors typically do,
" there are portions of their products
that no longer have relevant use
or can no longer continue to be
developed, " says Johnston. And
community banks are paying for it.
How the cloud can help cut tech debt
Cloud computing harnesses the power of the internet to
give companies on-demand software and storage solutions.
Enterprises (including community banks and fintech vendors)
can use the cloud's speed and tools to deploy nimbler, faster
and often cheaper applications, software and data storage. It's
the go-to operation model for startups, especially those in the
fintech space.
The cloud can do this because it works with a network of
servers, which are operated and maintained by the cloud
owner. That takes a weight of cost and time off a vendor's or
bank's IT staff, which can free them up to do other things, like
innovate new applications and solutions.
Fintech startups are taking advantage of cloud-based
offerings like Software as a Service (SaaS), where software
is licensed and maintained as a subscription; and cloud
computing, which uses the power and speed of the internet
to deliver services instead of relying on-premises servers that
can be expensive and slow.
" Everything is brand new, " says Charles E. Potts, executive
vice president and chief innovation officer for ICBA. " An
innovator can move at light speed. "
TECH DEBT DAMPERS THE
CUSTOMER EXPERIENCE
Beyond the cost of paying for the
maintenance and upkeep of old
technology, technical debt hampers
advancement at community banks,
says Potts, adding that it's " usually
expressed in lost opportunity. "
Community banks are under
pressure created by the so-called
Amazon Effect, says Karl Falk,
founder and CEO of Botdoc, a secure
file transfer service. Customers expect
a seamless, fast, flawless experience,
whether they're ordering shampoo or
applying for a mortgage.
" What Amazon is really selling us is
time back in our day, " he says. " This
customer base today is craving this
convenience. " Despite community
banks having a fraction of the revenue
of Amazon, customers still expect that
kind of service.
The good news is that advances in
fintech technology to deliver that kind
of service exists, with new vendors
still coming online. That said, if a
48 // ICBA Independent Banker // May 2023
Independent Banker - May 2023

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