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Richard Whomes, director sales engineering, Rocket Software

Retail banks have a well-earned reputation for being the stable behemoths of industry, but they are currently facing a new challenge in the form of fintech firms looking to encroach on the traditional banking landscape. These new technologies have the potential to eclipse established IT practices, particularly in the light of the new Payment Services Directive, which will oblige banks to allow other financial services organisations to access their data. Many banks still run on IT infrastructure that was designed 20 or even 30 years ago, providing stability and reliability, but not necessarily the flexibility and engaging interfaces that today’s customers require. With fintech companies constantly developing nimble and fast-moving technologies, banks need to ensure that they can protect their market position and retain their customers.

Key challenges 

1)     A massive increase in the number of transactions

The way in which people engage with their bank has changed beyond recognition. Fifteen years ago, the majority of transactions, other than cash withdrawals, took place over a bank counter. Interactions with the computer system were managed by bank staff and processing took place at set times. Consumers now do most of their banking online; often with a mobile device, whenever they feel like it. In 2017, BankMobile found that Americans were interacting with their bank between 20-30 times a month on their mobile devices, whereas they would visit a branch once or twice a year. This has created an unprecedented pressure on banks to meet a vastly increased demand, 24 hours a day.

2)     Managing the volume of data

With consumers increasingly turning to online and mobile banking, financial organisations are handling more transactions than ever before. With this has come an explosion of new data that is open and unstructured. Banks need to be able to handle these mountains of information to gain insights and use these to tailor their marketing and customer service approaches. Retailers are still ahead of banks in their use of data to target customers with personalised offers and recommendations; banks have much to learn from retailers in this regard.

Another effect of a greater volume of data is the pressure on banks to make sure they remain compliant according to the regulations, new and old, that govern the management of customer information. One of these is EU GDPR, which will come into force in 2018, placing greater control over personal data in the hands of consumers. This will increase the burden on banks to ensure that they have data security and management entirely under control.

Modernisation: the means to address these challenges

 1)     Automation and machine learning

Using artificial intelligence technologies such as machine learning, banks are increasingly able to automate administrative tasks to make “back office” work more efficient. These technologies can also be applied at the customer-facing side as well, however. For example, ATMs are now able to gain an understanding of customers based on an analysis of their behaviour, enabling them to target customers with offers of overdrafts or other services when they withdraw cash.

 2)     Data virtualisation

 Much of the data in banks is still held in different repositories as a result of mergers and acquisitions, or simply because different types of information have been held separately.  Data virtualisation has allowed banks to bring this data together without requiring a complete restructuring of the bank’s infrastructure, making it much easier to maintain a view of customer records for compliance purposes. Without disrupting existing databases, virtualisation makes it possible for the data to be retrieved and analysed in a single location and through a single dashboard. Bank staff can be accessing information on a secure and trusted mainframe, but through a modern interface created with the latest programming languages. The same technology can provide a unified view of accounts to the end customer.

 3)     Business intelligence

With data virtualisation, banks are also able to make better use of business intelligence software to analyse the abundance of data that they have in their possession. Incorporating new, smarter technologies will help banks gather data about how their customers behave and what they care about. Spending habits, location data and even social media patterns can all be used to improve the way in which banks communicate with their customers. We can expect to see some rapid progress in this area as the battle to attract customers develops.

This is a crucial time for the banking sector. FinTech challengers are poised to absorb new business that would traditionally go to the banks. The long-standing financial giants must ensure that the solid IT infrastructure they rely upon has the speed and flexibility to keep up with the demands of today’s customers, across all channels. Modernisation is essential if they are to keep hold of their slice of the pie.

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