Originally posted on www.vmware.com by Pankaj Arora

This is the second part in a series of articles on how legacy banking architecture needs to evolve to keep pace with the increasing customer expectations. This part talks about the process of reimagining banking and having a playbook for digital transformation.

To be successful, the bank of the future needs to embrace emerging technology, remain flexible to adopt evolving business models, and put customers at the center of every strategy.

Researchers at the MIT Center for Information Systems Research (CISR) identify two crucial dimensions for mapping digital transformation: customer experience (CX) and operational efficiency. 

The Four Pathways to Future Ready

Bank of the future’s goal is to meet customers’ need rather than push products, and provide a delightful experience. You measure this typically by NPS or similar metrics. On the operational side, banks need to get more efficient, and is measured by cost-to-income ratio, net margin and similar metrics.

A bank may be advanced on one and need to improve on the other or may need major work on both. There are four paths to transformation to Future Ready.

Four Pathways to Future Ready


The first pathway moves to the future-ready state by building API-enabled business services, getting rid of legacy systems to improve efficiency, and then focusing on improving the customer experience. This pathway is usually slow and very complex because it impacts the entire firm as part of the transformation. Danske Bank, Nielsen, CBA, and Tetra Pak are among those that have adopted this approach.


If an organization wants to focus on improving the customer experience across the entire organization before improving the company’s efficiency, this is the path to take. With this pathway, new products are developed, contact centers are improved, apps are updated, etc., all with the focus on improving customer satisfaction. mBank, a fast-growing bank based in Poland took this approach, focused on adding features and channels and growing the customer base rapidly

As the customer focus improves, the concentration shifts to building a new operating platform that will improve efficiency. The challenge with this pathway is that the focus on the customer experience can increase complexity initially before the new systems are built to improve efficiency.

Nearly 40% of organizations chose efficiency as the primary driver for improving the operating environment

IDC-VMware Industry Thought Leadership Survey, 2022


This pathway moves to a future-ready state by alternating the focus from customer experience to improving operations. This pathway is made more possible today because of the ability to replace components of a legacy platform versus the entire back office, and by the availability of APIs. BBVA and Schneider Electric are examples of companies that have effectively taken Pathway 3.

This pathway requires a very structured approach where the entire organization is aware of the projects underway and the impact of each component to the overall strategy. This pathway has less risk that the other options since each change is smaller. It does require careful planning and communication, so that change in focus from step to step doesn’t  introduce confusion in the organization.


This option focuses on building a completely new subsidiary organization that is future-ready. By separating the new organization from the existing entity, many of the challenges around legacy systems and creating a customer focus are eliminated. Some example of this approach are Mox by Standard Chartered, Marcus by Goldman Sachs.

Two of the challenges include how to avoid embedding some of the old legacy thinking (or systems) in the new organization as well as how to integrate the new and old organizations. Sometimes, there is an internal battle against allowing the improved organization to ‘steal’ business from the less efficient, product-focused organization.

For most organizations, the decision as to the correct pathway revolves around what part of the organization requires the most amount of improvement (customer experience or efficiency). Another factor in the decision is the level of urgency caused by the marketplace. The further from market norms an organization is, the more radical the pathway selected.

While any pathway is difficult to execute successfully, the process is made simpler because of current solutions available that allow a “plug and play” implementation instead of requiring massive back-office overhauls. In most instances, highly focused leadership is the key to success.


Digital Transformation leaders place a greater importance on tightening customer relationships and engaging in new ecosystems, while followers focus on operational efficiency, managing costs and exploiting new markets.

IDC Study – Achieving the Future Enterprise Through Digital Business Acceleration, 2022

Roadmap for Future Ready Bank

Organizations need to have an adaptive roadmap, with high priority use cases that adds color to the vision.

Future Ready Bank

Considering Future Ready Bank as the destination with transformed Customer Experience and Operating Efficiency, the main characteristics will be:

–           Both Innovative and Low Cost

–           Great Customer Experience

–           Modular and Agile

–           Data is a strategist asset

Data is currently the biggest asset of the banks against the FinTechs, if it can be unlocked and leveraged. Big Data will cultivate customer loyalty through innovative and personalized offerings. It will boost cybersecurity and increase the trust for customers.

Data will act as the right foundation for Machine Learning and Artificial Intelligence. It will fuel efficiency, reduction of false-positives and much better use of workers’ time and bank’s resources.

AI Models can further provide significant value to customers as well as bank using solutions like Robo Advisory

With a flourishing partner ecosystem, OpenAPIs will allow banks to connect to accelerate the value creation and also allow banks to shift from building end-to-end financial solutions to assembling best-of-breed financial services.

The trust in the ecosystem can be based on Blockchain and DLT which can reshape many of banks’ daily operations as well as automatic execution of contracts and changing the way value is transferred.

And infrastructure will become a utility service via Cloud.

While adopting any of the paths to reach Future Ready there will be substantial time when the old and new need to co-exist. Banks have to decide how they want to balance improvements in customer efficiency and operational efficiency as they move to a future ready bank.

In the next part of the series, we will cover the levers available to modernize.

  1. KPMG, 2019 – Pulse of Fintech H2 2019, https://home.kpmg/xx/en/home/campaigns/2020/02/pulse-of-fintech-h2-2019.html
  2. Rene Stulz, 2019 – FinTech, BigTech, and the Future of Banks, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3455297
  3. Unbundling Bank, 2015, https://www.cbinsights.com/research/disrupting-banking-fintech-startups/
  4. Banking in 2019, 2019, https://www.worldfinance.com/banking-guide-2019/
  5. Martin Fowler, 2014 – Microservice Prerequisites, https://martinfowler.com/bliki/MicroservicePrerequisites.html
  6. https://www2.deloitte.com/au/en/pages/financial-services/articles/bank-of-2030-the-future-of-banking.html
  7. https://cisr.mit.edu/publication/2021_0201_PathwaysUpdate_WoernerWeill
  8. https://thefinancialbrand.com/88407/digital-banking-readiness-transformation-journey/

Jens Koegler

Jens Koegler is VMware's Healthcare Industry Director in EMEA. He is helping our healthcare customers develop and run modern applications to drive innovation and ensure better patient care through a digital foundation that includes data center, hybrid cloud, mobile, networking and security technologies. VMware plays a strategic role in the healthcare industry. Its leading innovations in enterprise software help ensure consistent patient care and reduce IT access time for healthcare professionals so they can spend more time with their patients. Jens plays a key role in helping customers understand how new applications, devices, the latest IT technologies and digital transformation are driving innovation in healthcare.