The mainframe evolution: Banking still needs workhorse tech

In the financial services industry, where IT systems are high-volume and mission-critical, news of Big Iron’s ‘big crisis’ is greatly exaggerated, at least for now. It’s true that in today’s digital first world, cloud-based services are seeing rapid adoption across all industries, especially as fintech providers launch applications that enable improved customer experiences and 24/7 banking, but mainframes are far from becoming extinct just yet.

Financial services business leaders are attracted to platforms such as AWS and Microsoft Azure because they’re quick to deploy. They can set up their environment, get new apps up and running fast and immediately test to see how well their business use cases are enabled. By its very nature, mainframe technology can’t offer this rapid implementation but there is great value in its legacy.

With the influx of cloud, mainframes are perceived as out-dated, clunky, inflexible and expensive. Fair perceptions that providers wouldn’t argue with – but this isn’t the full picture. In practice, perceptions of cloud vs mainframe are too binary – what we’re seeing now, is an evolutionary phase in which the applications that provide customer service and/or direct customer interaction are migrating from mainframe to mid-range cloud platforms, with new releases issued regularly to provide customers with leading-edge functionality and capabilities, whilst the mainframes take care of the heavy lifting.

Mainframes remain powerful workhorses, critical to powering the digital economy. IBM reports that 92 of the top 100 banks in the world continue to rely on mainframe legacy IT systems because of their proven processing power. According to a recent article, 74 % of IT professionals say mainframe computing remains very important for large-scale transaction processing.

In the past, both customer service functions and customer-facing applications ran on mainframe technology. Balance checks, credit card transactions and payments tapped the mainframe to access underlying data – but the user experience (UX) was slow and unappealing. Today, Fintech providers are enhancing these applications to create a faster, more engaging and intuitive 24/7 experience – so applications are migrating to a mid-range environment capable of enabling these enhanced UXs.

But what the mid-range platform is still unable to do is handle the massive amounts of computational, data and transaction processing which underpins the customer experience. A mid-range environment simply cannot produce the throughput required to process tens of millions of accounts overnight. This includes posting all the transactions and managing the many data feeds which must happen in a two-to three-hour batch processing window when banks are exchanging information. Currently, only mainframes can reliably perform this type of heavy lifting.

Processing power, reliability and proven performance are clear pros for the mainframe. In addition, security – the number-one concern to consumers, financial services companies, fintech providers and infrastructure providers – is a major strength for mainframe technology.

For now, mainframe providers must define new commercial models and pricing structures to improve their financial outlooks, for as long as their infrastructure is still needed. For instance, ensuring compatability with hosted environments, or supporting open APIs and developing new solutions that can utilise an API framework, can help to future-proof themselves until banks, and other industries throw everything into their cloud investments.  

Fundamentally, fintech and mainframe providers should collaborate to deliver their customers’ ongoing UX experience. By cooperating, they can keep speeds up and deliver the ability to spin up test environments that integrate mainframe platforms with mid-range cloud solutions. This hybrid approach through the symbiosis of cloud and mainframe environments is today’s reality – driven by the need to keep moving customer-facing applications to the cloud whilst anchoring secure, mission-critical computational and transaction processing on the mainframe to support direct customer interactions and customer servicing technologies.

In this continuous evolution, there is a viable future where mainframes continue to provide the heavy lifting for applications that require significant processing power. They won’t be, and can’t be, priced and managed in the same way as cloud-based applications, because flexibility around cost and speed to scale up are two of the biggest arguments against the current flock of mainframes. Instead, the future could be architecture by which the right box is plugged into the solution, regardless of the type of box. If the interface is the same, then whether you buy a single virtual server or a super computer to plug in, it will no longer be an issue.

For example, FIS has developed a wide range of Open API solutions for its core products to rid clients of the need to perform mainframe calls. The Open API management solution Code Connect and intelligent middleware layer Infinity Connect allows clients to make calls that are identical – regardless of whether the back end is a windows server, mid-range or mainframe.

The financial services industry doesn’t have the luxury of stopping everything and spending ten years to replace billions of lines of mainframe code. No industry does. What is needed is to embrace and deploy rapid innovation and emerging technologies, whilst also following a clear path to migrate mainframe processes to mid-range solutions in a strategic and staged manner.

One way this can be done is for open-source software frameworks to be created, which bridge the divide between modern applications and the mainframe. This provides interoperability and scalability between different products, which can only help to modernise the industry’s perception of the mainframe – which albeit older, should still be considered mission-critical.  For suppliers, this is a logical approach which will keep mainframes in the game for the longer term.