Beyond The Hybrid Cloud: An AI-Based Approach For Smart Finserv Institutions

Charles Crouchman is the Chief Product Officer of Redwood Software, a leading orchestration platform for the autonomous enterprise.

Within financial services (finserv), legacy automation remains a vexing issue. It could be worse; the IRS has run its “Studebaker System” mainframe with patches, prop-ups and bolt-ons since 1962, when John F. Kennedy occupied the White House.

But the situation isn’t much better for banks. An astonishing six in 10 use code written before 2000. Legacy banking core systems often rely on back-end tech up to 40 years old, mainframes that run outdated programming languages, the Kansas City Federal Reserve notes.

Banks must commit to a smarter, safer and more efficient way to do things, and the Kansas City Fed argues as much: “Next-generation systems have many advantages over legacy systems [...] Their cloud-native infrastructure typically has lower operating and maintenance costs.” Hybrid cloud systems are one option for helping financial services organizations move toward an age of autonomous enterprise.

There’s an important caveat, though. Even hybrid systems must move forward.

Cloud Solutions, Remaining Problems

Many financial institutions opted for a “rip-and-replace” strategy to push their outdated systems forward. But it proved expensive, and as tech progress gathered steam and speed, many of the replacements themselves were on a path to obsolescence. As recently as 2017 and with semi-annual updates, these systems were “improved but still faced with integration challenges with newer technologies,” according to the fintech consultancy CCG Catalyst.

By the mid-2010s, hybrid cloud architectures were becoming a practical alternative for financial institutions looking to modernize without abandoning existing infrastructure. But some software providers promised more than they could deliver—and none could solve the issue of fragmented automation.

Where Cloud-First Meets AI Power

Complexity itself isn’t necessarily the problem. Unmanaged complexity is.