More than 40% of U.S. banks still run their core processes on technology that dates back nearly four decades. These aging systems are not only costly—eating up around 80% of banks’ IT budgets—but they also stifle innovation and prevent banks from adapting quickly to market demands. Middleware offers a solution by bridging the gaps between outdated core systems and modern applications to transform operations, improve risk management, and unlock growth potential.
What is Middleware?
Middleware is a platform that connects siloed systems, acting as a critical link between legacy infrastructure and new digital solutions. It allows banks to innovate without the need for complete system overhauls, enabling them to integrate best-in-class technologies, streamline processes, and reduce dependencies on outdated core systems. In essence, middleware provides a gateway for banks to modernize incrementally, enhancing flexibility while avoiding the risks of a full-scale core replacement.
How Middleware Solves Critical Bank Challenges
Middleware addresses several key challenges that banks face:
- Overcoming Legacy Technology Limitations
Legacy systems often lack the documented, RESTful APIs needed for integration, limiting banks’ ability to collaborate with third-party providers or adopt new technology solutions. Middleware solves this issue by connecting diverse systems through a modern integration platform.
- Enabling Innovation
Limited connectivity and support from outdated core systems often prevent banks from implementing new features or expanding services with new providers. Middleware opens doors to new partnerships and solutions, empowering banks to work with fintech and extend their service offerings without waiting for outdated systems to catch up.
- Breaking Down Silos
Many banks operate in a siloed environment, with data spread across multiple systems and providers. This fragmentation limits visibility and efficiency. Middleware integrates these data sources, providing banks with a unified view of their customers and operations. This holistic approach enhances decision-making, compliance, and customer experience capabilities.
- Enhancing Security, Compliance, and Continuity
Security and compliance are critical, especially for banks reliant on older, on-premise infrastructure. Middleware solutions consolidate data into cloud environments with advanced security features, including SOC 2 Type II compliance, improving data protection and reducing risks associated with external service providers.
Real-World Successes with Middleware
Middleware doesn’t just solve problems; it creates new revenue and efficiency opportunities. From my experience at Core10, here are some examples of where middleware transformed banking operations:
Enhancing Business Banking Value
A bank sought to increase value for its business customers so that it could stand out in a competitive market. One of its largest clients wanted transactional data pulled into an ERP system for reporting and faster reconciliation. Using middleware, the bank connected its core to the client’s ERP system, NetSuite, which enabled real-time connectivity between systems. This was a significant value-add for their large commercial accounts and has since become an offering for other customers, opening new revenue streams and attracting new commercial customers to the bank.
Supporting Data Warehousing and Analytics
Another bank wanted to innovate above the core by aggregating data from various systems into a centralized data warehouse. Middleware provided the connectivity needed to pull data from disparate sources, accelerating time-to-market for fintech partnerships and driving revenue growth through improved analytics capabilities.
Mitigating Security Risks in Legacy Infrastructure
For banks with legacy infrastructure, security and continuity are ongoing concerns. Middleware can offer a secure, cloud-based solution that aggregates and normalizes data, meeting an FI’s compliance standards. Controlling integration access and data in a centralized environment enables banks to enhance their security posture and simplify compliance management.
Key Takeaways for Banks Considering Middleware
Middleware offers a practical path forward for banks looking to modernize through manageable steps, without facing an all-or-nothing system overhaul. To maximize impact, banks should focus on a few key approaches. Rather than broad transformations, it is often more impactful to pinpoint where middleware can provide the greatest ROI, such as breaking down data silos, driving new revenue streams, or enhancing compliance. Middleware also presents opportunities to minimize manual data entry and streamline workflows, freeing team members to concentrate on high-value initiatives like customer service and product expansion.
Using middleware can also enrich business banking services, strengthening commercial customer relationships to drive loyalty and profitability, and support more robust compliance and security.
Looking Ahead
Middleware is more than a stopgap solution; it is a strategic enabler for banks struggling under the weight of legacy systems. It empowers banks to unlock innovation potential, drive efficiency, and enhance customer experiences, ensuring they stay competitive in a digitally-driven market. As banks continue to face challenges with legacy infrastructure, middleware stands out as a proven pathway to modernization—allowing banks to embrace the future while securing their present operations.
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Tyler Brantley, VP of Revenue and Marketing at Core10
Tyler Brantley is the VP of Revenue and Marketing at Core10, a leading U.S.-based provider of middleware, lending, and account opening products, as well as software development services. The company delivers the Mesh middleware layer, giving FIs a flexible, modern infrastructure to connect their entire technology ecosystem with their core. Core10’s Accrue product, is an omnichannel digital lending and deposit account opening solution, helping elevate and streamline banking operations.
