The Modernization Imperative for Banks to Lead the Future of Affluence
Mohit Joshi, the CEO of Tech Mahindra, recently made an analogy where he compared modern technology, like AI, to driving high-speed sports cars. His take was spot on: these cars can go from 0 to 100 (from 10 to now 2 seconds), but they are only as useful as the roads we drive them on. This perfectly captures a reality for banks and financial institutions today - no matter how advanced their customer engagement front-end is, it’s not sustainable and scalable without a strong, underlying infrastructure (data assets and tech estates) supporting it.
And when it comes to serving a fast-growing base of affluent customers, that infrastructure needs to be modernized, simplified, and future-ready. Sure, AI has immense potential to transform the industry, but even the best AI tools can’t thrive if they are entangled with outdated systems and inaccessible and fragmented data.
The Growing Affluent Segment
As average incomes rise, ASEAN’s affluent population is expanding at an impressive rate. This younger, wealthier demographic brings both challenges and opportunities for banks. They are not just looking for basic services - they want personalized experiences, sleek interfaces, and dynamic offerings. If their bank doesn’t deliver? They’ll switch, FAST.
It’s no news that acquiring new customers is significantly more expensive than retaining existing ones. Therefore, to cater to this segment, banks must:
- Appeal to the younger demographic with innovative, user-friendly offerings that reflect their lifestyle.
- Identify and retain those on the cusp of entering the affluent category.
However, legacy systems can’t keep up with the speed and scale modern technologies (like Gen AI) demand. To truly harness its potential, banks need to focus on core modernization. That means breaking down silos for comprehensive data, enabling real-time insights for smarter, faster decisions, and offering the agility to roll out personalized products quickly. Without these foundational elements, even the most advanced technology won’t live up to its promises.
Modernizing core systems allows banks to use anonymized data to segment customers more effectively, building relationships that evolve with them, and ensuring today’s young customers become tomorrow’s loyal HNIs.
Legacy Modernization: An Imperative, Not an Option
Core modernization isn’t just about cutting costs or mitigating risks, it’s about laying the necessary groundwork for new revenue streams, growth opportunities, and improved customer retention. More importantly, it empowers banks with the infrastructure they need to scale AI securely, enabling faster insights and better customer experiences.
Without modernization, even the most advanced AI tools will struggle. Clean data and simplified infrastructure are essential to let technology perform at its best. For banks looking to grow, the real question isn't whether to modernize - it’s how soon they need to begin.
Hollow the Core: A Practical Approach
Modernizing a bank’s core doesn’t have to be an overwhelming, all-at-once transformation. Tech Mahindra’s “Hollow the Core” approach advocates an iterative path to modernization. This strategy ensures minimal disruption while enabling banks to:
- Assess readiness and identify priorities.
- Strategize transformation with a clear, actionable roadmap.
- Implement modernization in an agile, scalable manner.
This method avoids the risks and disruptions of a "big bang" transformation, offers quicker ROI, and gives banks the agility to pivot as needed.
With modern architecture in place, traditional banks can achieve:
- Faster time-to-market for new products and services.
- Embedded finance capabilities to seamlessly integrate with non-banking partners.
- Omnichannel experiences to meet customers wherever they are.
Why Tech Mahindra?
Tech Mahindra stands out with its unique ability to Scale at Speed™. We are right-sized: large enough for complex projects and nimble enough to quickly mobilize diverse talent, ensuring timely delivery of modernization initiatives, regardless of size.
As banks aim to attract and retain the affluent wealth segment, core modernization becomes non-negotiable. By investing in the right infrastructure today, financial institutions can drive faster, smoother, and more successful customer journeys for tomorrow. With a partner like Tech Mahindra, they can confidently undertake this transformation, ensuring that the road ahead is as smooth as their customers expect.
