Four common challenges faced by retail banks in digital transformations

Paths for legacy banking systems to move successfully into a digital-first environment.

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Ben Bays, Director of Technology, Projekt202

Amdocs Financial Services

16 Mar 2022

Four common challenges faced by retail banks in digital transformations

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The journey to modernize technology within financial services firms is never straightforward, we take a look at some of the obstacles.

As we listen to retail banking leaders, the importance of two imperatives stands out: moving to the cloud and delivering better digital experiences to customers. The cloud’s elasticity and efficiency make it a perfect platform for digital experience innovation. Yet, those two imperatives can be at odds. Moving core banking systems to the cloud takes time – typically years for large-scale migrations. This can frustrate banks that want to launch new experiences in the cloud or risk losing ground to the competition.

Does that mean you have to separate cloud adoption from experience innovation? No. By embracing a collaborative approach, it’s possible to move your critical apps to the cloud while also increasing the pace of digital innovation.

Customers demand better digital experiences now

Why is it so important to bring velocity to digital experience building? Banks like yours are adapting to the digital-first world. That means ensuring that customers have smooth digital experiences through all channels. Branches matter less than ever. Many customers seldom – or never – visit a branch. While in-person experiences still matter, they aren’t the differentiator that they once were. Today, banks differentiate with digital.

A look at the industry shows that banks are struggling to deliver consistent experiences across digital touchpoints – much less differentiate. A recent survey from Celent reports that a new customer can fully open an account online at 74% of banks surveyed. But only 41% of those banks empower new customers to fully open an account via mobile. And only at 54% of banks can existing customers apply for a new product via online banking. Those numbers point to the difficulty of making every aspect of banking digital.

Customers frequently don’t like the digital experiences that banks offer. Take digital account opening as an example. According to Celent, zero percent of banks have an application completion rate of over 80%. A mere 25% have completion rates of over 60%, and 25% report dismal rates of 20% or less. That’s a problem that has to be addressed right away with a better digital account opening experience.

When right away means months or years

Backend legacy systems don’t readily support the digital front end that customers expect. Why? The details vary by bank, but we’ve encountered common hurdles. Core banking systems are complex. Plus, they’ve evolved in ways that have added thick layers of complexity through the years – and for good reason. Business users have demanded new features. Regulators have required new safeguards. New layers of complexity have developed. With them, organizational silos have formed that add workflow challenges. When embarking on a cloud modernization journey, it is these system complexities and organizational hurdles that must be addressed.

"Many customers seldom – or never – visit a branch. While in-person experiences still matter, they aren’t the differentiator they once were. Today, banks differentiate with digital."

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Ben Bays

Director of Technology at Amdocs Projekt202

Creating and launching a new digital experience in such an environment is a challenge, because these new applications are hampered by the constraints of legacy systems. It doesn’t have to be this way, and for all-digital banking upstarts, it’s not. They rely on modern cloud-based systems and Agile processes to advance innovative digital experiences in a fraction of the time. Incumbent banks can – and are – adopting those same modern methods, but change rarely comes fast enough.

Gaining speed while reducing risk

Agile methods require all-in adoption across the organization. A cloud modernization strategy must account for complexity and technical debt that has accumulated over decades. For these reasons, a holistic IT transformation is not an overnight endeavor. But there’s a path that lets you move to Agile methods and the cloud while advancing user-experience goals in parallel.

You can employ what’s been called a bi-modal or “two speed” approach. Large-scale change advances at a deliberate pace. With the cloud, that means following a strategy based on best practices and risk avoidance. At the same time, you launch digital banking experiences that quickly differentiate your bank in the cloud. You bring together product design and technology with a laser focus on reimagining digital experiences for your customers.

You start with research that uncovers your customers’ true needs and motivations. Understanding your customers’ journeys from their perspectives guides you as you design interfaces that amaze and delight users.

Cloud-hosted APIs decouple the new experience from legacy systems. But the new experience aligns with large-scale cloud adoption efforts. Collaboration across the teams driving the bi-modal approach helps you avoid the issues than can come with ad hoc cloud applications. Both teams follow cloud best practices. You further align to best practices through automated testing of your applications and your cloud configuration. As you deliver these new experiences, you do so with infrastructure-as-code and configuration management that provide you with predictable, repeatable, and migratable solutions.

Through agreed-upon standards and automation, your digital experiences align with your cloud migration strategy. In fact, the experience applications actually serve as incubation engines, proving out modern architectures, such as cloud native. When the organization is ready, your bi-modal journey comes together, with your innovative banking experiences merging into your cloud infrastructure.

Accelerate the process with a partner

You could pursue a bi-modal approach yourself, or you can accelerate innovation by working with a partner like Amdocs. At Amdocs, our experience development experts use research to help you deliver the digital-first banking customers want. We work efficiently by linking experience design to risk management and compliance from the beginning. Full-stack development advances your project with end-to-end best practices. We can even host and maintain the digital experience in the cloud, working with your team and regulators to ensure compliance.

Talk to us about your digital experience and cloud needs. We’ll listen and explore how you can unite experience, cloud, and culture to create the future of banking. See how we work with banks like yours.


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