By Steven Murray, solutions director, Compuware
The financial services sector has been subjected to significant technological change over the years. From the introduction of ATMs and mainframes in the 1960s, to internet and mobile banking in the new millennium, banks have ridden the waves of innovation to enhance their services. However, the digital transformation that the banks have been going through more recently is about to intensify to a whole new level, when the Payment Services Directive II (PSD2) comes into force in January 2018.
Under PSD2, European banks will be required to support open banking by providing third-party access to customer account and payment information. This will offer a greater level of innovation, convenience and transparency for consumers; enabling merchants to process payments directly and empowering customers to access multiple bank accounts from a single interface. As a result, banks need to be more integrated with the wider digital and Fintech economy, with the ability to share customer data quickly and securely through APIs (application programming interfaces). This will put them under greater pressure than ever to modernise IT processes and systems to meet the compliance deadline.
The stalwart at the heart of the bank
Chief amongst the systems that needs modernisation is the mainframe, which has sat at the centre of the bank for over 50 years, powering its transactions and underpinning its services since the day it was installed. Today, the mainframe remains the most secure, reliable and scalable platform around, which makes it the perfect engine for supporting the transformation that PSD2 requires. However, a reliance on legacy developer tools, cultures and techniques in the mainframe environment is obstructing banks’ ability to deliver innovation quickly enough to keep up with the changes being ushered in by PSD2.
Ultimately, banks can only move as fast as their slowest platform, so they can no longer afford to neglect such an important IT asset that contains such a rich source of company IP. Many believe that the only solution is to undertake risky, lengthy and expensive projects to move their so-called legacy applications off the mainframe. However, there is a much simpler option: banks must look at how they can bring the mainframe into the fold of mainstream IT. Doing so means it can then provide the same speed and agility as newer digital technologies, whilst enriching them with the deep-seated history and organisational DNA that lies within it. There are three key steps that banks must complete in order to do so:
- Step one: Give it a spring clean – The first step is to modernise the development environment so that even non-mainframe experts can create and update core banking applications quickly and without error. Providing a more intuitive toolset that closely resembles those they use on other platforms will significantly increase the mainframe’s usability for modern developers that are building out the ecosystem needed to achieve PSD2 compliance. It is also crucial that the mainframe be fully integrated into modern IT departmental processes, such as DevOps, so it can run at the same speed as the wider digital ecosystem rather than sitting in an isolated slow lane.
- Step two: Improve your visibility – The sheer volume of transactions being processed through the mainframe will rocket with all the additional requests coming through the banks’ APIs. As a result, banks will not only need to support the explosion in transactions, but also ensure that service levels are maintained for third-parties. They need the ability to say with confidence that they are not at fault if any issues arise in the third-party financial services using their APIs. However, whilst most banks will lean heavily on the mainframe to process open banking transactions, the complexity of these systems has historically made it difficult to monitor its performance. As such, it will be almost impossible to identify the cause of any problems that arise with complete confidence, leaving banks open to taking the blame. They therefore need to extend their performance monitoring capabilities to encompass the mainframe now more than ever.
- Step three: Strengthen auditing processes – Given that PDS2 will provide open access to sensitive payments and account information to authorised third-parties, banks need sufficient auditing processes in place to ensure they are conducting due diligence and safeguarding data as it moves between systems. They will need to maintain a record of how and where customer data is being used, which APIs are requesting it and for what purposes it is being called upon, so that they can provide a full record of data use and access if required. However, a recent global survey of CIOs revealed that this level of insight into the mainframe is currently a “blind-spot” for 84% of organisations. Given that the majority of the data for open banking resides on the mainframe, banks urgently need to eliminate that blind-spot. That can best be achieved by capturing complete, start-to-finish mainframe session activity data in real time, and integrating it into a SIEM platform such as Splunk for deep analysis.
PSD2 will create significant challenges for banks, but many are already taking the steps required to make it a success. Instead of seeing the legislation as a threat, those that are ahead of the game see it as an opportunity to embrace change for the benefit of customers, in the same vein as the adoption of ATMs and mobile banking. However, for this revolution to be successful, it is crucial that banks continue to ride the waves of innovation and push for the supportive cultural, process and tool changes to happen sooner rather than later. After all, it is not the strongest that survives, but those that are best able to adapt and adjust to the changing environment.
Sunak to give UK Infrastructure Bank £12 billion of capital in budget
LONDON (Reuters) – British finance minister Rishi Sunak is expected to announce an initial 12 billion pounds of capital and 10 billion pounds of guarantees for the new UK Infrastructure Bank in his budget statement next week, the government said on Saturday.
It said this will help the bank, which will launch in the spring and operate UK-wide, unlock billions in private finance to support 40 billion pounds of infrastructure investment.
The bank will offer a range of products, including equity, loans and guarantees, which can be tailored to support the needs of private sector infrastructure projects, in sectors such as renewable energy, carbon capture and storage and transportation, the government said.
It will also offer infrastructure loans to mayors and local authorities at low rates to help fund projects.
“We are backing this bank with the finance it needs to deliver modern infrastructure fit for the 21st century and create jobs,” said Sunak.
The government said he is also expected to commit a further 375 million pounds to co-invest alongside the private sector in high-growth, innovative UK firms.
While Sunak’s March 3 budget will include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown, he will also probably signal tax rises ahead to plug the huge hole in the public finances.
In an interview with the Financial Times, Sunak said he would use the budget to level with the public over the “enormous strains” in the country’s finances, warning that a bill will have to be paid after further coronavirus support.
($1 = 0.7178 pounds)
(Reporting by James Davey; Editing by Toby Chopra)
SoftBank reaches settlement with former WeWork CEO Neumann
(Reuters) – SoftBank Group Corp said on Friday it has reached a settlement with WeWork’s special committee and the company’s co-founder and former chief executive, Adam Neumann, putting to rest a legal battle dating back to 2019.
SoftBank, the new owner of the office-sharing firm, did not disclose terms of the settlement. Media reports earlier this week indicated the deal includes a nearly $500 million cut in Neumann’s payout from SoftBank.
The legal tussle between SoftBank and Neumann started in 2019, when SoftBank agreed to buy around $3 billion in WeWork stock belonging to Neumann as well as current and former WeWork employees. SoftBank later contested its obligation to purchase the shares.
Under the new settlement, SoftBank will purchase around half the shares it had originally agreed to buy, a source familiar with the talks had told Reuters on Monday.
The settlement is also expected to clear the decks for WeWork as it reportedly pursues a public listing by merging with a special purpose acquisition company (SPAC).
“This agreement is the result of all parties coming to the table for the sake of doing what is best for the future of WeWork,” said Marcelo Claure, executive chairman of WeWork and CEO of SoftBank Group International.
SoftBank, which poured more than $13.5 billion into WeWork, was pulled into the legal dispute with directors at WeWork after backing out of the $3 billion tender offer agreed when it bailed out the office-sharing firm following a flopped IPO attempt.
(Reporting by Shariq Khan in Bengaluru; Editing by Richard Pullin)
Banks weigh up home working – the new normal or an aberration?
By Lawrence White, Iain Withers and Muvija M
LONDON (Reuters) – As the finance industry prepares for life post-pandemic, commercial banks are moving quickly to harness working from home to cut costs, while investment banks are keen to get traders and advisers back to the office.
HSBC and Lloyds are getting rid of as much as 40% of their office space as an easy way to make savings when bank profits have been crunched by the pandemic.
But there are concerns that remote working does not benefit everyone. Junior staff miss out on socialising and learning opportunities and there are also risks home working can entrench gender inequality.
At investment banks, where long hours in the office were the norm pre-pandemic, bosses say they want most people back where they can see them.
HSBC plans to almost halve office space globally, as it aims to squeeze more use out of the remaining space and increase the number of staff per desk from just over one to closer to two.
Britain’s biggest domestic lender Lloyds plans to shrink its office space by a fifth within three years. Standard Chartered will cut a third of its space within four years, while Metro Bank said it would cut some 40% and make more use of branches.
“We’ve had a period where flexible working has been tested in full, with about three quarters of people not based in offices as we used to call them, and the business has performed remarkably well,” Andy Halford, Standard Chartered CFO, said.
But major investment banks take a different view, with Goldman Sachs Chief Executive David Solomon pouring cold water on the potential of remote working.
“It’s not a new normal. It’s an aberration that we’re going to correct as soon as possible,” he told a Credit Suisse conference on Wednesday.
Barclays CEO Jes Staley, who last year said he thought the days of 7,000 employees trudging into its Canary Wharf headquarters were numbered, is also unwilling to commit for now to large office closures.
The Barclays boss has said the bank had “no plan” to make a major real estate move as Britain’s prolonged third lockdown had shown the strains of working from home.
Nick Fahy, CEO of online lender Cynergy Bank, said working over screens often could not compete. “You might have a disagreement on this, that or the other but actually over the coffee machine or over a glass of wine or a bit of lunch, issues can be resolved.”
Some banks have acted quickly because they are used to flexing workforces in line with economic cycles, particularly in investment banks, Oliver Wyman principal Jessica Marlborough said.
But some are waiting on analysis of staff productivity changes before making final decisions, while others were mindful junior staff may still prefer going into offices, she said.
Banks are also concerned women may lose out from the shift to remote working.
“We thought the pandemic would be a big leveller for women. But actually what we’re starting to see is it’s extremely challenging to get women to move jobs in a pandemic,” Marlborough said.
“Banks were making progress in hiring a more balanced workforce in terms of gender and other metrics, but they’re actually struggling now (as banks are finding) they (women) are less likely to seek out a new job.”
Union leaders said part of the reason was that some women are juggling more childcare responsibilities during the pandemic.
Dominic Hook, national officer for UK union Unite, said banks must ensure working from home is voluntary, use of surveillance tools is limited, and employers respect staff hours so work does not spill into evenings and weekends.
“Our concern is that it won’t actually be a choice and that banks will pressure staff to work from home,” Hook said.
There are also concerns hybrid working will favour employees who visit the office more regularly, as they can spend more time in person with colleagues and managers, said Richard Benson, managing director at Accenture Interactive.
The staff most likely to go back to the office are traders, bank executives said, while back-office functions such as finance, risk management and IT will spend more time working remotely.
In Germany, Deutsche Bank said it had been challenging to adapt home office spaces for traders and expected many will want to return, but not all.
“We will pay more attention to the personal circumstances at home. Dealers also have children or parents in need of care. We have become more sensitive,” said Kristian Snellman, Deutsche Bank’s head of investment banking transformation for Germany and EMEA.
The trend to shed offices predated the pandemic as many banks made cuts after the 2007-09 financial crisis. Some have already made moves as a result of the pandemic, such as NatWest, which shut its tech hub in north London last summer.
Retained offices are being remodelled, with desks removed to make way for collaboration and break space such as coffee areas, gardens and libraries, property consultancy Arcadis said.
“It’s not just about adding a ping pong table and table football and hoping it will work, it’s about making sure people get downtime,” said Sarah-Jane Osborne, head of workscape at Arcadis.
David Duffy, CEO of Virgin Money, said the bank is among those planning to strip out office cubicles.
“The world of large-scale populations returning to a tall skyscraper building to come in and do their e-mail in the office doesn’t make any sense,” he said.
(Reporting By Lawrence White and Iain Withers in London and Muvija M in Bengaluru, Additional reporting by Patricia Uhlig in Frankfurt. Editing by Rachel Armstrong and Jane Merriman)
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