Banks Need a Compliance-Ready Core Transformation Strategy

Banks Need a Compliance-Ready Core Transformation Strategy

Aug 30, 2022

There have been numerous articles published in the media on the topic of US Banks moving to next-generation core banking platforms. While the articles provide great information and justification for moving to a next-generation core banking platform like:

  1. Ability to be more strategic through innovation
  2. Quicker time to market with new offerings
  3. Better reporting and analytics

A key factor that is missing from the evaluations is ‘Regulatory compliance’.

Regulatory compliance is by far one of the top expenses for a financial institution. Compliance requires the investment of not only dollars but key talent, and both are many times diverted from strategic projects. Failure to comply can lead to significant fines and penalties, but even higher loss through reputational risk. The window to get compliant with a regulatory change is many times very small, as governing agencies do not understand how long a project can take to implement a new regulatory requirement on old technology. This is one of the many reasons regulators are pushing for financial institutions to move to new technologies.

Another concern that creates compliance risk from a regulator’s perspective is the aging workforce. Finding talent that can support COBOL and other older programming languages is a real risk. Associated with this same risk is the fact that many financial institutions are running on platforms that are no longer supported by the technology provider and the institution has taken support in-house.

Due to lack of an automated solution capability and an aging workforce, financial institutions are unable to quickly respond to changes and the result involves a manual solution, in whole or in part.

Human intervention always carries a compliance risk component.

Finally getting data out of legacy systems is becoming an even bigger concern for regulators. With older technology custom reports and extracts must be written to pull the information into a database where the information can be analyzed. While this may not sound concerning, the fact is it takes several weeks to perform this step once the project can be prioritized. This leads to delays in providing information for exams, audits, and performing analysis to determine potential consumer compliance violations.

In moving to a next-generation core banking platform the discussion should include how to move to a solution that provides me with next-generation compliance support. Here are two very important questions that issuers need to ask in this regard.

  • How can my investment in technology provide me the ability to innovate my offerings while at the same time reducing my overhead costs to comply with Federal laws and regulations?
  • How can my new technology get me compliant faster so that my resources can focus on revenue opportunities?

Factoring in these questions will greatly increase the justification for a move, ease regulatory burden and regulator concerns, and the results will also be seen when looking at the institution’s bottom line after the move is complete.

By choosing the right technology service provider that offers a next-generation core banking platform with a pre-configured and highly extensible compliance framework, banks can ensure that they are not compromising on regulatory compliance in this journey. Zeta’s next-gen, cloud-native, API-first, payment processing, and core processing platform enables banks and issuers to be 100% compliant with every existing US regulatory statute today. Moreover, leveraging never-seen-before innovations in the processing industry it is flexible and extensible to comply with practically any future regulatory requirement in a matter of days.

For additional reading

The recently proposed legislation by Senator Durbin, the U.S. Senate Bill S.4674, or the Credit Card Competition Act of 2022 (aka Durbin II) that aims to provide dual routing for credit card networks can potentially have significant implications on issuers from a compliance standpoint.

Read this insightful blog post by Karla Booe, Chief Compliance Officer at Zeta, as she outlines those implications and how a next-gen card platform can enable issuers to achieve compliance in a multi-network scenario.

About Author
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Chief Compliance Officer, Zeta
Karla Booe, is Zeta's Chief Compliance Officer and an expert in regulatory compliance. She occasionally contributes articles to our company's blog page, offering readers a glimpse into her wealth of knowledge. Be sure to check out Karla's latest articles and stay ahead of the ever-changing regulatory landscape.

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