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FOUR NETWORKING CHALLENGES FACING THE RETAIL BANKING INDUSTRY

By Simon Poole, head of enterprise business development, SSE Enterprise Telecoms

With the financial industry suffering from data deluge, the IT departments of retail banks are inevitably feeling the pressure.  Retail banks have a particularly high data usage and the repercussions of their services and systems failing are serious, not only in terms of reputational damage but also due to increasingly complex compliance requirements.

Four key megatrends are transforming the type of connectivity retail banks need; the competitive landscape, customers’ expectations, virtualisation of IT assets and regulatory changes.

Evolving competition in the retail banking sector

Retail banking has gone through a digital transformation in recent years.  Rather than being adapted to fit the current market, modern banks’ core banking systems and branch networks are likely to be much more flexible, built with stringent compliance requirements in mind, and their online, mobile and social channels are more likely to be user-friendly.

Paul Thomalla, MD of software house, ACI Worldwide, told the FT around the time of the RBS fine that ‘the antiquated IT infrastructure of many of our biggest financial institutions is a ticking time bomb which requires surgery and not just a sticking plaster’.  Indeed, there has been a large connection between system upgrade failures and legacy technology infrastructure, making it vital that retail banks handle this carefully but rapidly in order to maintain a competitive edge.

Customer-driven transformation of retail banking services

Today, customers have zero tolerance for downtime and expect their bank to be keeping pace with the mobile generation, without fail.  While ATM’s were becoming mainstream 25 years ago, 24/7 online banking on smartphones and tablets has become the new norm.  It’s not just a case of checking balances online either, customers expect to be able to make important transactions online, which the network needs to support.

Retail banking has also been transformed by social media.  Not only is it a source of information, it is now also a method to resolve problems.  In the future, it may even provide the opportunity for banks to cross-sell their services.  Indeed, big data analytics could provide insight on emerging consumer trends to inform strategy and enable traditional retail banks to maintain their dominance in the industry.

Meeting these consumer service demands, while being reliable and secure is a must for retail banks, but the level of data and systems involved can make achieving this a challenge.  High-capacity, ultra-resilient networks are the only way to ensure that connectivity is fast and reliable.

Virtualisation of IT infrastructure

The IT department itself is also changing as the efficiency improvements enabled by emerging technologies continue to carve out a competitive advantage for banks.  While virtualisation and cloud technologies are used in the front and middle offices of many organisations and their data centres, orchestration technologies can be the most disruptive to the underlying network infrastructure.

Orchestration allows retail banks to allocate processing requirements between virtual servers housed across multiple data centres, therefore optimising compute power.  This makes delivering multichannel services and the use of big data far more cost-efficient and reliable. It does present challenges, however, due to the greater amount of capacity, performance and flexibility required by the network.  In fact, some legacy infrastructures simply can’t deliver this level of performance and an attempt at better orchestration could jeopardise business continuity.

For many retail banks, flawless integration with a network that’s able to scale and perform at the level now required, requires a considerable change to the network itself. This type of network would be able to cope with fluctuating demand and ensure that the advantages of newer technologies can be harnessed, rather than them overloading the network. In many cases, this requires a complete switch to incorporate fast and reliable optical and Ethernet services.

The ever-evolving challenge of compliance

The financial industry has to satisfy stringent regulatory restrictions and retail banks must keep compliance front-of-mind with every change in process or technology implementation.

This in itself puts pressure on the network as ensuring and then proving compliance means vast amounts of information is continually crossing the network.  What’s more, for those retail banks that operate internationally, the number of regulations that have to be adhered to are multiplied for every country.  It’s not just processes and data handling that needs to comply with legislation either, the network itself and the data centre portfolio also needs to meet certain criteria.

Compliance largely depends on how effective, efficient and well-integrated a managed infrastructure is, making a well-designed network critical to a retail bank’s ability to comply.

Future-proofing a network

To cope with these four megatrends, retail banks must achieve seven key attributes in their network: accessibility, dependability, affordability, availability, scalability, security and responsiveness.  Ensuring access will mean that services won’t suffer due to network issues, regardless of the level of customer requests.  Dependability will keep customers happy, while ensuring that legislation is adhered to when it comes to delivering a certain level of service. Affordability is important to keeping a retail bank competitive and equally significant is the availability of digital services and the ability to be responsive, in order for customers to o get the best service possible.  Retail banks must be prepared for further change, making scalability critical to a well performing network. Last but not least, good security – both cyber and physical – is essential for compliance, social responsibility and to keep reputation intact.

Retail banking has changed; an ‘anytime, anywhere’ service is now expected and it’s critical that infrastructures can adapt to these ongoing changes. The network plays a role in almost all transformations of the retail bank and it is therefore absolutely critical that it is prioritised every step of the way.