Truist is modernizing its core infrastructure from a 40-year-old mainframe technology as it prioritizes minimizing risk and attracting and maintaining deposits, but isn't planning a "big bang" system conversion anytime soon.
Jay Poole, head of consumer products technology at the bank, said that revamping core technology is an opportunity to mitigate risk, drive revenue and increase efficiency, but the bank plans to take it in small steps. Charlotte, North Carolina-based Truist is starting with its deposit core transformation, and will likely operate in a dual core environment for the "foreseeable future," Poole said in a Tuesday panel at American Banker's Digital Banking conference.
"When I think about core modernization, it's really the heart of the bank, if you will," Poole said. "If you think about core banking, it's either deposits or lending. We're starting in the deposit space. If you've been following the market since March, deposits are pretty important in the very competitive environment right now that we're all living with. What core banking is to Truist is the deposit system, the system of record."
Truist's core deposits system is a decades-old, COBOL-based platform that was sold to the bank by a party that is no longer in business, and integrates with 180 other applications, he added. The bank is still evaluating how to bring the modern architecture to the Truist brand, but the foundation for what it will use is already in place, through a subsidiary called LightStream.
Poole said the company has been piloting a deposit product on a modern core through Lightstream, a platform that SunTrust acquired about 10 years ago that does unsecured lending. The pilot program began nine months ago, and the bank has been testing on and learning about the platform with about 2,000 loan clients that now have deposit accounts. Poole said bringing that technology to the bank will start simple, and build complexity over time.
"This is not going to be a big bang journey," Poole said. "We just spent three years integrating two institutions to form Truist, and there were a lot of big bang system conversions. That's not the approach we're planning to take here. … That will allow us to mature and learn along the way, it'll allow our partners to mature and learn along the way. Because we're all learning this."
Combining BB&T and SunTrust Banks into Truist was a
Poole also said at the conference Tuesday that the $565-billion-asset bank is operating in an expense-constrained environment, and will move as fast as possible with its available resources. The bank plans to start by offering a simple savings product under the Truist brand on a modern core, which only needs about 30 of the deposit core's 180 integrations. Poole added he doesn't know if migrating from the dual core strategy will take "three years, five years, 10 years, but it's going to take some time."
Truist has recently been
At the end of last year, about 40% of global, national and regional banks cited core banking platforms as one of their top-five technology spending priorities, according to research from Arizent, American Banker's parent company. Research from this year shows that more than 70% of banks' digital banking strategies are bogged down by outdated core systems and budget restraints. About 40% of banks surveyed said modernized core systems are critical to their strategies.
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Gys Hyman, a principal at Deloitte who facilitated the Tuesday panel, said Truist's modernization is an opportunity to not only replace a platform, but also challenge peoples' thinking around creating a more agile, flexible platform that can roll out features quickly.
"[Truist is] going to be in this awesome coexistence," Hyman said of the dual core strategy.
He added, though, that cost reduction and efficiency is difficult with a dual core system.
There will be "an increase in costs for a while," he said. "When I speak to some of the other customers out there, what they're saying is, 'What are sort of the main drivers in the business case? Cost avoidance? Innovation? New business that we sign? A risk or compliance thing?'"
Poole said the modernization will drive operational efficiency over time. He added that the business case is also driven by a confluence of risk mitigation and revenue potential.
"There's a risk element to this, in terms of the age of the existing technology," Poole said. "There's certainly a revenue opportunity through creating differentiated experiences for the client, and more personalized experiences for the client. Then I think over time, things get more efficient."
