By Roel Jansen, Head of Marketing and Business Development, five°degrees 

‘Evolve or become irrelevant’ has been the mantra in the banking and finance sector for some time now. The challenge of updating legacy systems and transitioning to more agile, innovative technology has been at the forefront of most banks’ priorities within recent years.

The need for banks to transition to integrated cloud systems and utilise new innovative technologies such as artificial intelligence is essential in order to develop digital experiences for clients and keep up with increasing customer expectations. However, focusing on updating the technology itself is just part of the picture, banks must also remember that moving away from traditional systems is not just a technical process but also a management and human one.

The need to implement new technologies

FinTech’s continue to emerge with their digital-native structure, strengthening their presence within the financial market. As they do so,an increasing sense of urgency continues to emerge for banks to transition to more modern processes, in order to compete.

A 2019 Accenture report found UK digital-only banks were set to triple their customer base from 13 million to 35 million, in just 12 months. Additionally, a 2019 survey carried out by Finder– a UK comparison site, supported these findings, highlighting that 12% of British people have switched to digital-only banks, with a further two thirds planning on making the same transition in the future – suggesting there may be a limited time window in which traditional banks can act, before the market explodes.

For banks to keep up with developments in the banking and finance industry, they must digitalise or replace legacy systems and automate processes in order to offer a customer first, secure and personalised banking experience. Embracing new innovative technologies like Artificial Intelligence, open API’s and cloud-based systems, will enable traditional banks to stay ahead of challengers.

The time to transition

FinTech’s will continue to offer more flexible, agile, seamless and highly personalised services, therefore there is an opportunity for banks to reinvent themselves with this model, introducing new ways to appeal to the customer. To create these new business models, and stay ahead of the time, it’s important to understand that it’s not just the technology that needs updating but also the organisation itself.

A popular strategy these days is opening satellite banks for both retail and SME offerings. Operating in relative isolation – separated from the incumbent infrastructure. This strategy helps to launch personalised banking in a fast and agile way. However, innovative core banking has just began to emerge and it not yet widely used, meaning supporting existing technology with extensive fintech-like banking requirements is a stretch.

 What about management styles?

Updating legacy systems and implementing new technologies is just part of the challenge when developing a financial institution. Going hand in hand with new technologies is a more integrated approach to data and applications, new ways of working and managing workflows, and new responsibilities and projects.

For organisations to successfully harness the benefits of digital and cloud transformation they must adapt and evolve their delivery models as well as breaking traditional banking siloes and leadership styles. All personnel – from junior to senior staff – need to be equipped with the understanding of new technologies being implemented within the business, along with the reasoning as to why it’s been implemented and what it’s meant to achieve.

As new tools and technologies are introduced, with the aim to generate and leverage new data insights, it is important that all personnel understand the significance of those insights and what they should do with them. This will help inform and change processes such as service delivery, customer relationships, or other modes of working. Data on its own has no value unless it can be used to inform tangible actions which can lead to relevant insights.

Implementing new technology and creating a sub organisation is very much an organisational question: Who do you want to be and what do we need in terms of organisational structure and technology to cater for this. As well, what does it mean for the incumbent organisation when you centralize innovation in a satellite?

Businesses should also utilise the opportunity brought about by technology automating processes that were previously manual and time-consuming. This could allow companies to upskill its workforce and transition employees into more strategic areas of business – in addition to identifying alternative tasks that may require a final check on automated processes.

Overall it is clear that technology transformation programmes are about people, organisational aspects and process as much as they are about the technology itself. When updating any institution it is therefore essential to take a holistic approach when updating systems.