Modernizing Through Middleware

Modernizing Through Middleware

January 16, 2025

Technology Investment

The cost and risk of modernization often dictate gradual changes to a bank’s technology estate. This generally occurs when a rip-and-replace upgrade to a next-gen core is out of the question, and as such, the conversation turns to smaller steps that make sense based on current capabilities and opportunities. Middleware appears to be a popular option — 47% of respondents to our New Frontiers Survey 2024 said they had added it.

However, implementing middleware is not a strategy on its own. And its introduction can see varying levels of success depending on the approach of the institution and its wider modernization efforts.

Here are a few considerations:

Technical ability is table stakes, but commitment is also key. Middleware should enable new applications to integrate quickly via modern APIs, share access to a data layer, and communicate in real time. But a project takes commitment — it doesn’t happen overnight. Bankers need to firmly back a project based on a strategic technology plan and sustain their commitment to this modernization tactic during and after implementation. Development isn’t done after middleware syncs to the core. And it’s not a silver bullet for all issues with a legacy tech stack.
Bankers need to be pragmatic with their planning. Middleware touches the core only once, simplifying later integrations. However, it is important to accurately judge the work involved. The core provider will likely need to do development work, which will require time and planning. Additionally, to act as a true single point of integration, middleware may need to connect with tools across verticals and functions, including third-party software. As such, bringing new applications online will often take work from and coordination with a vendor.
Rethinking critical infrastructure will be an important exercise. To get the most out of a middleware approach requires creativity. Executives need to push past mental barriers — the sticker shock from the cost of integration, an inaccurate or incomplete estimate of returns, or inertia with old technology — and begin to consider what’s possible. A clear vision that emphasizes flexibility is a key ingredient to the success of any modernization plan, but especially one that involves bringing best of breed capabilities through an integration layer.

A choice about a major technology project should be one in a cycle of discussions and decisions. Leadership should dedicate a recurring part of its agenda to technology strategy, including macro themes in modernization and innovation, technology’s alignment with business strategy, and reviewing the marketplace for banking applications. With that context, they may then scrutinize proposals for strategic technology investments based on business alignment, cash cost, opportunity cost, and operational risk.

Modernizing Through Middleware

Modernizing Through Middleware

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