Banking on technology for growth

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By Renee Haeberlin

The status quo for financial services organisations looking to modernize their ICT is no longer as straight forward as it was ten years ago. Customers’ needs are ever changing and often hinge their expectations on great retail experiences from the likes of Amazon or Apple. Now they want the same level of service from their bank.

Data is changing how banks view the capabilities of their systems and the scale at which they can manage their IT infrastructure, protect it, make sense of it, and improve it all while staying compliant with changing regulations.

These challenges are coming at once. Not only is the robustness and growth of the business dependent on technology keeping pace with these challenges, but is also fundamental to many banks’ core ambition of remaining competitive.

The themes that define the current period of technological innovation and transformation have been well identified by Deloitte in its 2018 Banking Industry Outlook.

The report suggests: “For banks globally, 2018 could be a pivotal year in accelerating transformation into more strategically focussed, technologically modern, and operationally agile institutions, so that they may remain dominant in a rapidly evolving ecosystem.”

Dealing with regulations, cyberthreats and customer centricity are identified as critical success factors driving change for the financial sector.

Challenges that banks face are not simply external, in fact three key internal factors that need to be addressed before the wider challenges identified in the Deloitte report can be broached:

• Legacy systems: Managing the shift from legacy and outdated technology can be a monumental undertaking. There was a time when what we refer to as legacy systems today were state-of-the-art; technology such as data centres powered the bank, managed huge volumes of customer transactions and information and made for great operational efficiencies. Now, banks often struggle to deliver compatibility with newer, faster approaches to IT that move beyond these legacy systems, in part due to the investment in past infrastructure. This hinders the move towards a hybrid cloud solution that draws focus and effort away from the traditional data centre.
• Organisational structure: Top-tier talent, which characterises the most senior stakeholder grade within banks, runs the risk of creating a culture of siloes. Many are high-level experts. Some are not accustomed to working across the organisation with teams from multiple disciplines, or even across locations in a geo-dispersed financial institution. These are factors fermenting the silo effect; where an organisation is not optimally joined up to provide continuity of processes, panoramic vision, or maximum operational efficiency.
• Historic processes: Processes that have been historically set up in IT operational management do not always represent the most efficient way of doing things. They also do not always align with the way customers now expect to get things done with their financial services providers of any description. FinTechs strip out layers of complexity to offer speed of interactions and transactions (consider mobile or app-only providers such as Monzo for example).

Looking at how banks can survive in a disrupted marketplace, KPMG has observed: “The fundamental definition of how customers experience and interact with a bank is being challenged and redefined. The financial services industry is facing a new and complex environment. Customers now want different ways of handling their money.” Among traditional banks one still tends to find procedures that, at best, seem outdated and, at worst, can aggravate customers.

Aggravation is no longer an emotion that customers feel they have to put up with. They know there’s a better way. It’s up to providers of financial services to make sure they offer it. In its  'Banking Outlook 2018: Pivoting toward an innovation-led strategy', EY says: “Consumers are drawn to FinTech services because propositions are simpler, more convenient, more transparent and more readily personalised.”

Such common constraints as these three come from an historical legacy of pre-established systems, and the financial sector is in the process of rewriting its history.

The main areas that need to change

The best place to start is refreshing cultural values, evaluating the value that resides in legacy systems and finding ways to transition in high-profile, business critical parts of the IT infrastructure. 

Operational improvements are critical if banks are to stay relevant to their customers’ expectations and needs. Running and delivering effective customer operations, not least with interfaces that makes sense to customers across every channel, depend on creating an agile environment, where processes are simplified and streamlined to improve speed, efficiency and performance.

Cybersecurity is at the top of the agenda across the entire IT estate and globally-dispersed corporate structures. The more customer-centric an organisation becomes - and it must - the more exposed it becomes to the risks posed by cyber security.

Customer centricity

Seamless orchestration and connectivity across the enterprise is essential for a bank to be able to contend with external pressures (and, indeed, opportunities) on many fronts while eliminating the inefficiencies that don’t so much come from legacy IT as from legacy thinking. This is the reliance on the established way of doing things because of a mistaken belief that even if it’s not the best, it serves its purpose, avoids new investments, and hasn’t yet led to the slipping away of market share that the doomsayers suggest it will.

Customer centricity will define how banks are perceived in the future. It drives the need for both cultural and technological change. For banks to transform customer service management, SaaS models can help. On the one hand they provide attractive lower costs of entry than can be entailed with a complete system overhaul; on the other hand, they can be easily deployed, enabling a bank to manifest relevance to customers while it attends to the bigger issue of digital transformation. Cloud solutions simplify and automate processes to transform the customer experience and increase customer satisfaction. They are a big step in the right direction but only a step. The complete journey is of far deeper implication across the organisation and across its IT. Every journey, however, starts with the first step.

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#banking #wealthmanagement #fintech