Computer technology is at the core of financial services, yet it can be slow to respond to switched-on customers in a digital world, writes Rod Newing
As the financial services industry attempts to heal itself after a series of calamitous business and management failures, crippling IT crashes are hitting the headlines again and again.
A large portion of the UK population recently lost access to their funds through online and phone banking, cash withdrawals and debit card payments.
This is ironic as the financial services industry was the first commercial sector to use computers, more than 50 years ago, and its products are inherently digital. Unfortunately, this early automation has put the industry at a disadvantage.
“There are still systems that date back to the 1960s and 1970s,” says Daniel Mayo, practice leader for financial services technology at analyst Ovum. “A lot of the people who know and maintain them are reaching retirement age, and most graduates don’t have the computing skills for such technologies.”
Reshaping ICT, Reshaping Business, financial services research from Fujitsu, found that whereas chief information officers’ top priority is reducing costs (51 per cent), other priorities are technology-related. These are upgrading current systems (27 per cent), improving customer experience (22 per cent), implementing mobile banking and payments (20 per cent), and moving to the cloud (18 per cent).
Institutions can use technology as a source of competitive advantage by improving their operations and providing more personalised services
Institutions can use technology as a source of competitive advantage by improving their operations and providing more personalised services. However, this requires the ability to respond quickly through agile processes and systems.
“Banks are often like supertankers, not best suited to changing direction quickly,” says Anthony Duffy, from the retail banking consulting practice at Fujitsu UK & Ireland. “Regulatory needs, historic IT environments, security fears, complex applications and fear of the unknown all conspire to prevent the agility required.”
Daryl Cornelius, enterprise director for Europe, the Middle East and Africa (EMEA) at Spirent Communications, a performance analysis company, says that it is tough building networks and applications that work across regulated financial environments.
“It is even tougher to make them user-friendly and of value to the individual,” he says. “Then layer on top of that the internet, populated with hackers, crime syndicates and viruses. The challenge institutions face today is how to deliver unique services and quality of experience to customers with complete trust.”
The main requirement is to modernise and fully integrate ageing core back-office systems with the latest powerful technologies, such as the cloud, big data, risk analytics, smartphones and tablets. Providing reliable easy-to-use interfaces with increasingly digitally oriented customers is essential to restore tarnished reputations.
In its recent report on behalf of Ricoh, Money, risk, people and process: humans and machines in the ﬁnancial services industry, the Economist Intelligence Unit found that 41 per cent of ﬁnancial-sector respondents said their best innovations of the past three years could not have been delivered without technology and 30 per cent could not even have been conceived without it. Some 90 per cent emphatically deny that technology is usually the single point of failure when things go wrong and 78 per cent say it makes them more productive.
Andrew Douglas, principal consultant for financial services at management consultancy Hudson & Yorke, points out that the financial services industry spends more on IT than any other sector. “The harsh truth is that very little actually improves,” he says. “There are serious risks associated with IT change, which need to be very carefully managed, and they are required to spend more on regulatory compliance. Too often, there is limited board-level interest in what is seen as an overhead with no strategic value, which of course is incorrect.”
However, ING is one bank that seems to have understood the need to make its systems more customer-focused. “We are moving from solving problems from a technical point of view to solving them from a customer’s perspective,” says Ron Van Kemenade, the bank’s chief information officer. “It is not about being more efficient or effective any more. Success now depends on taking into account the emotions that customers bring to a transaction and using technology intelligently to create great customer experiences.”