Introduction
Progressive modernization delivers the optimal balance for banks: medium speed and cost at significantly lower risk. There are three distinct approaches to choose from, each suited to different bank needs and resources.
Of course, there's several different ways to approach your bank's progressive modernization, which we'll narrow down here to three:
- Journey-based — selecting a single journey to modernize, front-to-back, beginning with the ones that are in need of an overhaul and have a positive ROI or cost impact.
- Segment-based — starting at the business segment level, typically on the onboarding or servicing side of things, and replacing existing apps/services
- Headless — rewiring your core systems and adopting a digital banking platform that will power your different channel applications, allowing you to reduce logic duplication across your tech stack.
Key insight: These approaches aren't mutually exclusive. Start with journey-based, then transition to segment-based or headless as your bank evolves.
We'll elaborate on each of these plays in the blogs to come, but here, let's dive into the 3 reasons why you should select one over the other, which will help inform your bank's decision as you begin your progressive modernization journey.
1. Your bank's needs
Your progressive modernization approach depends on three factors: your bank's specific needs, institutional size, and available resources. Match your approach to your primary problem.
Journey-based works for specific pain points like outdated loan books. Headless solves fragmented systems and duplicated logic across channels. Segment-based replaces entire business segments like onboarding or servicing.
2. Your bank's size
Institution size directly influences your modernization approach. Smaller banks lack the IT sophistication for headless rewiring.
Size-based approach guidelines:
- Small banks: Journey-based approach - modular and digestible
- Mid-size banks: All approaches viable depending on needs
- Large banks: Headless optimal for complex, fragmented systems
All bank sizes benefit from journey-led approaches because they deliver business value without massive reinvention programs.
3. Your bank's resources
Resource allocation determines feasibility. Match your approach to available budget, timeline, and technical capabilities.
Resource requirements by approach:
- Journey-based: Low-risk, low-cost - modernize incrementally
- Segment-based: Medium-cost "big-bang" - requires feature parity investment
- Headless: High-cost, high-reward - needs solid business case and skilled team
Headless delivers the most benefits but demands significant upfront investment and technical expertise.
FAQ: Progressive Modernization Approaches
Q: Which progressive modernization approach is fastest to implement?
Journey-based is fastest because it targets specific pain points without overhauling entire systems.
Q: Can small banks use headless progressive modernization?
Small banks typically lack the IT sophistication required for headless approaches and should start with journey-based modernization.
Q: What's the biggest risk with segment-based progressive modernization?
Feature parity requirements make segment-based approaches expensive and prone to scope creep.
Journey-based progressive modernization
Up next, we'll dive deeper into the journey-based approach we've described above, and then move on, in turn, to the segment-based method and the headless play. Check out all three for the pros and cons of each, as well as a dissection of how your bank can actually get started on your progressive modernization journey.
