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BRINGING BANKS INTO THE DATA AGE

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Iain Chidgey

The banking sector is overflowing with data. Everything from monitoring stock price fluctuations to developing new applications, to managing customer’s card transactions is generating new data. All of this data is being gathered, duplicated and stored in the extensive IT systems installed within banks and financial institutions. Many of these organisations are already investing billions in modernising their IT systems in order to meet the demands of this data deluge yet a large proportion of these projects have yet to truly take off, ending up over budget, behind schedule, or reduced in scope.

When one of the largest global banks was undertaking a significant modernisation project it estimated that it would require three months of work to convert each of its old Unix-based Oracle databases to Linux. The bank has 2,500 of these databases, so had planned for 625 work-years to complete the conversion, a ridiculous length of time for an organisations in any sector!

The biggest problem for these years-long, million-pound projects has been that the data itself is overwhelming the tired legacy systems already in place; the data has simply become too cumbersome and expensive to manage within them. These old systems are contributing to the numerous glitches which have been blighting our banks and causing extensive problems for their customers as they try to go about their lives.

So why are our banking and financial services organisations continuing to use old technology if it’s causing these problems?

Iain Chidgey

Iain Chidgey

CIOs facing this problem are stuck, they want to rebuild systems in order to take advantage of the benefits offered by public and private clouds, the explosion of mobile, services, and software-defined everything, which are becoming increasingly popular, yet the huge data sets they have to contend in the outdated IT systems are holding them back as, until recently, migrating the data to new environments has come with some significant problems:

  • Migration by Truck. Existing business-critical applications can’t go offline during the migration process, so there are inherently small windows of access available to the migration teams to convert, test and certify of the new architecture. Sheer size of data and the need to keep these applications running has given rise to the ineffectual practice of “migration by truck,” – literally moving servers physically to new target locations.
  • Systems Retirement. Data is often required for regulatory purposes, making it difficult to retire old systems if only to have the data (and related applications) available in case of audits, for example. As a result, the expected cost savings of modernisation projects simply never appear, as the old architecture continues to demand a significant percentage of new budgets.

With these problems it almost sounds as if organisations have no choice but staying entrenched with legacy IT and continuing to grapple with the software glitches taking out banking systems. Thanks to new techniques such as data-virtualisation, there are ways to tackle this problem. CIO’s simply need to start putting their data first, making it more agile so they can finally reap the rewards of a modernised system.

In order to benefit from agile data it is imperative that organisations also unlock the data from the old systems trapping it in place, virtualising servers and databases is one way of doing this. By unlocking and virtualising the data it enables IT teams to update remote copies and make data available anywhere and everywhere it’s needed, taking up a fraction of the space. Unlocking data allows new systems to be created, in which data can be copied and converted, improving effective operations all without disrupting existing systems, something with organisations in the banking sector have struggled with historically.

A few years ago these techniques to help create agile data would have been difficult, but today they are not only possible, but already in use in organisations around the world.

Although virtualisation in databases and servers is relatively new, it’s already bringing astounding results giving organisations the potential to save billions of dollars and hundreds of work-years of time. By using virtualisation tools that same global bank stuck with a modernisation project of 625 work-years manage to reduced that time down to two weeks per database, eliminating 520 work-years from the project, which saved the bank $1 billion.

Most CIOs are already virtualising servers and now starting to understand the agility and mobility benefits of virtualising databases. By adopting these techniques for modernisation banks and other financial institutions are now able to free their data and even entire applications from the things that weigh them down, enabling them to reduce the risk of software glitches and support the next decade of their data needs .

Iain Chidgey – EMEA VP and GM Delphix

Iain Chidgey is the EMEA VP and General Manager of Delphix, a leading global provider of agile data management platform to enterprise companies all over the world. Prior to joining Delphix, Iain was VP and General Manager EMEA for ArcSight, a leading global provider of compliance and security management solutions. Iain was responsible for setting up ArcSight in EMEA in 2004, growing it to a multimillion dollar company which culminated in a successful IPO and subsequent acquisition by Hewlett Packard in 2010 for over $1.5 billion.

In his 20 years of experience in the IT Industry, Iain has held senior sales, consulting and technical roles for various high growth software organisations, including Portal and Oracle both in the EMEA and the US.

Banking

Over 60’s turning to digital banking up by 90% during pandemic

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Over 60’s turning to digital banking up by 90% during pandemic 1

More than 90% of people aged over 60 have used online banking for the first time during the Covid-19 pandemic, according to a poll by iResearch Services, highlighting the importance of banks getting digital right in 2021.

In comparison, 17% of people aged under 30 said they were accessing services via an app or web browser for the first time.

The findings show how banks must adapt to help service the influx of new digital users and gain their trust, accelerated by the Coronavirus pandemic. With 97% of 18–24-year-olds trusting their bank with their data, compared to only 33% of people aged over 66.

Commenting on the findings, Gurpreet Purewal, Associate Vice President, Thought Leadership, at iResearch, said: “Our study demonstrates the lasting impact of Coronavirus on how people will access banking services from now on. Banks will be required to refocus on really understanding customer needs in order to engage with the different requirements of each individual customer.

“More than half (54%) of respondents said they are less likely to attend a physical branch after the pandemic. This demonstrates a seismic shift in the way people will access banking services now and into the future.”

In other findings, 63% of respondents said their bank acted in their best interests during the pandemic, but a third said they would consider switching their bank for better, more personalised communication.

Purewal added: “On the whole, High Street banks have emerged with great credit from the pandemic for the way they have supported their customers. As the economy rebuilds, it will be more important than ever that they communicate in the right way to help consumers through 2021 by leveraging digital platforms and understanding their needs fully.”

Asked how banks can improve their communication with customers, ‘connecting on a personal level’ ranked highest, followed by ‘more honest and open dialogue’, a ‘demonstration of how they are helping customers’, ‘more creative campaigns’, ‘consistent messaging across channels’ and finally ‘responsiveness to major events’.

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Banking

Banking on the cloud to create a crucial advantage in financial services

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Banking on the cloud to create a crucial advantage in financial services 2

By Rahul Singh, President of Financial Services, HCL Technologies

Once considered a revolutionary technology, cloud is now at the heart of agile and innovative businesses. The financial services industry is no exception, and has been a major adopter of cloud-based Software-as-a-Service (SaaS) for its non-core applications. Functions such as customer management, human capital management, and financial accounting have progressively shifted to the cloud. Several banks have also warmed up to using cloud for services such as Know your Customer (KYC) verification. IDC analysts say that public cloud spending will grow from $229 billion in 2019 to almost $500 billion by 2023, and a third of this will be spent across three industries: professional services, discrete manufacturing, and banking. The time is ripe for an increasing number of financial services providers to consider moving more of their core services to cloud.

Adoption is already on the rise

Earlier reluctance to move core activities to the cloud has softened, and many banks have put strategies in place to migrate services, including consumer payments, credit scoring, wealth management, and risk analysis. This significant change is driven by factors such as PSD2 and open banking, which require secure and cost-effective data sharing.

Regulators too were once cautious in their approach to cloud technology, but this is also changing. The Australian Prudential Regulation Authority (APRA), for example, whilst acknowledging the risks associated with cloud, also recognised the risk of sticking to the status quo. ARPA trusted the enhanced security offered by the cloud, and updated its cloud-associated risk advice. Wisely, APRA recommended that banks must develop contingency plans that allow cloud services to be provided through alternate means if required.

Rising pressure from new challengers

The other pressure for incumbent banks is from next generation fintech firms. These are cloud-native organisations, and are able to onboard customers remotely in minutes, roll out new services in days, and meet compliance requirements at lower costs.

As a result, the need for traditional banks to upgrade core systems and integrate the latest technologies is stronger than ever. The COVID-19 pandemic has been an additional driver, highlighting the importance of upgrading and migrating core systems to the cloud. Financial services organisations have been forced to rethink their approach to digital transformation, and pay special attention to a cloud-aligned culture. The industry is recognising how the cloud can address new and ongoing regulatory changes, meet different demands from customers, support the roll-out of emerging technologies, and enable incumbent providers to respond to the relentless competition from fintech firms.

New year, new priorities

As we enter 2021, financial services providers will need to reset their priorities, and go beyond using the cloud for scalability and cost efficiency alone. The new areas to focus on will include:

  • Creating a robust digital foundation: The cloud market is expanding fast, and there is an ever-increasing number of services on offer. Whilst the big three hyper-scalers are the obvious choice, various other players are also gaining traction, such as IBM, Oracle, and Alibaba Cloud. Organisations will need a robust digital foundation to adopt cloud at scale in a secure and compliant way. A well-architected digital foundation, supported by resilient operations, ensures that organisations have continued access to their systems and data, regardless of where employees are located, or what device they are using.
  • Adoption of technology platforms: Enterprises are finding ways to reduce complexity by embracing a platform approach, and increasing the speed of business IT consumption. Physical infrastructure is being abstracted into cloud-based platforms, with data consolidated into data lake platforms. Software products like Apigee are being offered as capability platforms to drive better analytics and intelligence.
  • Enhancing IT security: Cloud offers organisations greater security than on-premises servers, if implemented correctly. Financial services organisations have relied on control and compliance-based security for years, but these practices are increasingly vulnerable to cyber threats. Whilst service integrators create robust cybersecurity solutions for financial services organisations, cloud providers are also looking to provision industry-specific security and regulatory measures like end-to-end data encryption – making it easier for financial services organisations to be compliant whilst migrating to cloud.
  • Driving innovation: Cloud is the fundamental factor behind the ability of fintechs to innovate rapidly. Using cloud, financial services can leverage new technologies and tools like augmented reality (AR), virtual reality (VR), natural language processing (NLP), machine learning (ML) and the Internet of Things (IoT) to unlock new processes that improve customer interaction and experience with portable real-time services. Whilst fintechs have led the way in cloud-based innovation through open banking platforms, some of the leading banks are also adopting cloud to simplify their business processes, including KYC as a Service, to enhance customer experience.
  • Enterprise synchronisation: Effective collaboration, both internally and with external partners, is crucial to success in the ever-expanding financial services ecosystem. Cloud allows businesses to integrate collaboration through shared tools and platforms. This is a critical ability as it leads to faster decisions and improved innovation cycles.

Legacy systems hold banks back from improving revenue generation and restrict their ability to build a responsive and resilient business. Cloud is a key factor in the success of challengers: traditional banks have no time to waste in migrating their core systems to cloud and building a secure future.

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Banking

State of the Industry: optimism high in global financial services, although some key issues cause concern

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State of the Industry: optimism high in global financial services, although some key issues cause concern 3
  1. Exclusive research from Barclays Corporate Banking reveals the views of financial services leaders from across the globe on a range of key issues
  2. Recovery from Covid-19 is a key priority for FinTechs over the year ahead, however their number one aim shows the optimism in the sector: focussing on business growth
  3. Asia-Pacific may be the new focal point for expectations around Open Banking, with interest from Europe dropping year-on-year
  4. Firms confidence in their own cybersecurity fell 5% versus 2019, with less than half of respondents (42%) feeling satisfied with their own approach to the issue

Key players in the financial services industry are optimistic about the year ahead, according to a new ‘State of the Industry’ report from Barclays Corporate Banking, Alive to Opportunity.

Exclusive research from the bank also highlights regional differences in approaches to regulation, expectations for payment innovation and confidence in cybersecurity.

Optimism for 2021

As the official insights partner of last year’s Money 20/20 global conference series, Barclays conducted a survey of over 200 financial services leaders from across EMEA, the Americas and Asia-Pacific. From these senior executives, Barclays Corporate Banking found that optimism in the sector is high as it enters into 2021.

Whilst recovery from Covid-19 might be seen as a likely top priority for the coming year, it came in second place when respondents were asked what they would be focussing most on during 2021 – with 42% of leaders selecting it. Top spot instead went to ensuring business growth, with nearly three in five (57%) respondents picking it as their main area of concentration.

Commenting on this trend, Phil Bowkley, Global Head of Financial Institutions Group, Barclays Corporate Banking, said:

“Given that 2020 was such a tumultuous year, it is encouraging to hear FinTech businesses are confident and focused on future growth. Many firms have grasped the upheaval of the global pandemic as an opportunity. Covid-19 has driven a huge surge in ecommerce and cross-border business. This has significantly increased flows across FinTech payment providers, which have worked hard to enable cross-border trade, payments and ecommerce. At the same time, the industry has been collaborating with banks to ensure much-needed financial support from government flows to the real economy.”

Regions back themselves on innovation

In a continuation of a trend seen in 2019, respondents often rated their own region as the most likely source of future innovation. This ‘home’ bias was particularly strong in Asia-Pacific, where China, India, Japan and Southeast Asia together claimed over 83% of regional votes when considering the key sources of innovation over the next five years.

However, China’s reign as the most likely site of financial services innovation did not continue from 2019, with Barclays’ most recent survey showing that nearly one in four (24%) key industry leaders now view the United States as the most probable location for the rise of payment innovation over the next five years.

A shift eastwards for Open Banking?

Barclays’ research also suggests that Asia-Pacific may be the new focal point for expectations around Open Banking, with interest from Europe dropping year-on-year.

In 2019’s report, the impact of this key regulation was anticipated to be strongest in Europe – however, this time round just 38% of EMEA leaders now expect Open Banking to have a big impact on their business. By contrast, the majority (59%) of senior respondents from Asia-Pacific feel that the regulation will be key for their companies as we move into the remainder of 2021.

Security and resilience in a post-Covid world…

Firms’ confidence in their own cybersecurity dropped by 5% versus 2019, with less than half of respondents (42%) feeling satisfied with their business’ approach to the issue. Businesses in EMEA feel least confident about their security provisions, with one in three (33%) indicating that their own cyber security needs further investment.

The importance of resilience to customers was also a theme that many felt would rise in significance in 2020, given the recent growth in remote working as a response to Covid-19 – however just 5% of respondents viewed this issue as important when considering customer loyalty.

Steve Lappin, Managing Director, Barclaycard Business, said: “From remote working to e-commerce, coronavirus has meant that digital channels play a much greater role in working life. While this has undoubtedly presented new opportunities, it has also put additional pressure on infrastructure and heightened potential vulnerability to attacks. Therefore, it’s not surprising that confidence in cybersecurity has dropped, with many firms feeling that their rapid adoption of these new channels has left governance and control lagging behind. It’s critical that businesses remain vigilant – security may not be a key driver of customer loyalty, but cybersecurity issues are definitely a driver of disloyalty.”

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