Why New Zealand financial services providers must modernise their operations in FY2026

A recent Backbase whitepaper highlights a critical challenge for banks: outdated legacy systems act as a major roadblock to innovation and a significant catalyst for customer churn.

Is keeping the customer satisfied a pressing priority for your organisation? If it's not, you face the risk of losing mind and market share to competitors, both homegrown and international; financial services providers that are more in tune than you are with the expectations of New Zealand citizens and businesses in 2025.

Research suggests they're an increasingly demanding cohort. Seventy-five per cent of customers today expect to be able to interact with their bank via multiple channels, including online, mobile and in-branch, according to McKinsey research. Furthermore, a typical mid-sized bank has over 1,500 customer journeys (across business units, product lines, and customer interactions) according to a recent report from McKinsey. Every journey needs to count.

And they want consistent, high quality customer experiences when they do. Fail to deliver and loyalty is likely to be short lived, as underwhelmed consumers and businesses explore their options and take their business to more responsive service providers.

Embracing new ways of thinking and delivering

Against that backdrop, wholesale reinvention has become critical, for old school banks whose systems and processes can't deliver what customers now expect and demand.

That means shifting the focus away from system-centric banking architecture and embracing a customer-focused service delivery model that delivers unified, cohesive customer experiences at every touchpoint.

Making this shift successfully is not a simple exercise and cautionary tales abound, of organisations whose transformation efforts and investments have missed the mark.

Here are some tips to help you avoid joining their ranks this year, as you shepherd your institution into the customer-centric banking era.

Set goals to inform your strategy

Successful replacement of your legacy systems and processes can't be effected without buy-in from both senior leaders and front-line employees.

Defining the goals your modernisation program is seeking to achieve and communicating them effectively will make this support easier to obtain.

Understanding where you want to go will also help you develop a strategy to take you there as expeditiously as possible.

Forge strong partnerships

Fostering trusted partnerships with key suppliers will make the transformation journey smoother. In today's times, even the largest of financial services institutions recognise that not everything they seek to accomplish can or should be done inhouse. 

Leveraging proven, off-the-shelf solutions for non-differentiating functions – the provision of simple savings accounts and loans, for example – can free internal teams up to focus on platforms and processes which have the potential to confer a significant competitive advantage.

Embrace progressive modernisation

Historically, high tech transformation programs have tended to have a strong whiff of the big bang about them. But replacing programs and platforms in one fell swoop is a high risk move, particularly for financial services institutions. Even a brief period of disruption can result in significant negative publicity and lingering reputational damage. There's also the perpetual risk of new programs and platforms becoming obsolete almost as soon as they're implemented. 

That's why embracing a progressive modernisation strategy makes so much sense. It allows banks to invest in scalable, adaptable technology solutions to avoid future legacy issues.

The term 'progressive modernisation' is used to refer to the gradual replacement of legacy systems, accompanied by the steady construction of a modern digital banking architecture around customers and employees. 

Seek steady gains

Commencing with the most critical areas and progressively modernising other components allows banks to maintain operational stability and ensure each stage of their transformation program is successfully completed before the next commences.

That's where engagement banking technology with composable, pre-integrated customer experience capabilities has a critical role to play. It can be used to implement out-of-the-box journeys that enable individuals and organisations alike to deal with your institution easily and efficiently, across all of your digital and physical channels.

Smartly utilised, it's the key to transforming customer experiences efficiently, cost effectively and safely.

Bringing a better banking experience to Kiwi customers in FY2026

If you're not delivering seamless, personalised banking experiences to your personal and business customers, you're barely in the game, in today's digital first business world.

Pursuing a progressive modernisation strategy will enable your organisation to start doing so, smartly, safely and at scale.

If you're serious about building a stronger, more sustainable customer base in FY2026, there's no better time to get started on your transformation journey.