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Modernization – Is the new status quo

By: Venkataraman Balasubramanian
January 10, 2024
3 min read

In their article “Digital Transformation hits core banking” 1, Deloitte suggests that banks need to understand how fast they can change and carefully consider the implications of the chosen path for a successful journey. Additionally, the article explores five options for banks to consider as part of their transformation journey. It suggests that this need for change can arise from their business, the need to innovate or considerations related to their risk profiles. From our experience, it has been a combination of the above three factors.

2024 promises to be just as exciting as 2023 was! The uncertainty that persisted through most of 2023 is slowly giving away to the consensus that rates will not increase. However, the case for lower rates is starting to take hold and argue for the state of rate cuts. The uncertainty now is when these rate cuts will start, how many cuts will follow, and by how much each cut will be. The same challenges that arose on the way up also apply to the way down. Morningstar’s Preston Caldwell says, “In addition to the first cut in March 2024, we’re expecting a total of six cuts for the whole year. That will bring the federal-funds rate down from currently at a 5.25% to 5.50% range. It will take that down to a 3.75% – 4.00% target range. So, that’s a 150-basis-point reduction from current levels by the end of 2024. And then, we’re expecting further cuts, another 150 basis points of cuts in 2025, taking the federal-funds rate down to 2.25% by the end of that year. And then, even in 2026, we expect it to get down as low as 1.75%.” 2 So, we have a few more years of uncertainty – and that seems to be the only certainty!

It is this incessant change that makes “do nothing” a very risky proposition in the financial market space. With the prospect of having to “do something” banks, therefore, began exploring their options for a few years ago, culminating in 2023 becoming the year to start planning for change and 2024 to become the year of implementing change.

Where do I begin?

Made so popular (in 1970) with music by Francis Lai and lyrics by Carl Sigman, “Love Story” explored the story that is “older than the sea”. While our Legacy System Story also started on its journey around the 1970s, the risk aversion that was indeed once “older than the sea” has since gone. More and more banks are asking themselves, “where do I start?”

Deloitte’s 5 paths have already become 4 paths (with wait and see no longer an option). Our contention, proven through several implementations including those we began just last year, has clearly established that product innovation continues to be a significant driver, thus requiring banks to focus on the need to build the product catalog capability and the integration of that capability with the bank’s core system to create the business agility to cope with the upcoming changes.

Inertia and Status Quo

While inertia is all about inhibiting change, the status quo is about avoiding change. Many financial institutions have systems that are about inertia and, thereby, maintaining the status quo. Newer technologies and the need for innovation have been those external forces that Newton explored in his First Law of Motion … resulting in product externalization.  

Stay ahead of the curve. Join us next month for another insightful article.


Founded in 2002, Zafin offers a SaaS product and pricing platform that simplifies core modernization for top banks worldwide. Our platform enables business users to work collaboratively to design and manage pricing, products, and packages, while technologists streamline core banking systems.

With Zafin, banks accelerate time to market for new products and offers while lowering the cost of change and achieving tangible business and risk outcomes. The Zafin platform increases business agility while enabling personalized pricing and dynamic responses to evolving customer and market needs.

Zafin is headquartered in Vancouver, Canada, with offices and customers around the globe including ING, CIBC, HSBC, Wells Fargo, PNC, and ANZ.

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