By Richard Muirhead, CEO of Automic
The Urgent Need for Banking Innovation
Faced with rising competition and the unrelenting need to evolve their user experience to match changing customer expectations, banks now need to innovate faster than ever before.
Today’s banks need to be responsive to customer needs in a technology driven world, all while keeping pace with innovation driven by mobile payments providers and challenger banks.
Richard Muirhead
Customer purchasing behaviour is also influencing the development of mobile payment solutions – with both merchants and payments companies increasingly seeking to develop their understanding of consumption patterns through analytics.
Identifying opportunities for profit and service innovation in this new banking landscape – whether from virtual cards, mobile wallets, in-app payments – requires dedicated resource, as does measuring return on investment.
Any innovation – whether through internal channels, acquisition or partnership – is also fraught with risk. Bet on the wrong technology and a bank can be lumbered with technical debt with no discernible benefit.
Technical Debt and Infrastructure Risks
The recent spate of glitches at the major banks – from NatWest through to RBS and Knight Capital – have demonstrated the risk of allowing technical debt to accumulate.
CIOs can no longer be sure that the underlying infrastructure they have is fit for purpose and able to accommodate the additional complexity that mobile payments solutions will inevitably layer on.
Even if the IT infrastructure can be made to ‘not fail,’ without the ability to report on payments data from a single pane of glass, it’s unlikely that banks will be able to realize the full benefit of using payments data to drive, for instance, targeted customer service.
Regulators too, are in increasingly bullish mood, with the recent record fine at BNP Paribas highlighting regulators confidence in pursuing eye watering fines and appetite for making an example of corporate executives.
CIOs cannot simply sit and wait for a key service to go down. Bank leaders who rushed to implement third party solutions with the best of intentions now need to reclaim control over their IT stack.
That means making a sustained effort to reduce the technical debt on their IT infrastructure. Without this vital work, CIOs will simply be “going in blind” when trying to implement the latest and greatest in mobile payments.
Reducing technical debt is not glamorous work, and involves an admission that previous strategies have not worked. However, interoperability will bring its own benefits.
Freed from the responsibility of getting third party ‘black boxes’, composed of sub-systems written in different programming languages, on different machines by disparate teams, banks` best and brightest staff will be free to innovate.
To effectively innovate, banks must first avoid becoming the next Knight Capital. Yet every bank today has many thousands of points of potential failure built into its system – a Knight Capital waiting to happen.
How Automation Addresses Banking Challenges
Many businesses are now turning to automation to out-pace the competition and ensure that legacy IT infrastructure is not a drag on innovation.
Automation – a tried-and-tested technology that has been around for the best part of 25 years – is a key enabler for banks seeking to keep pace with mobile payments innovation and challenger banks.
Moving Beyond Ad-Hoc Automation Solutions
By taking a platform approach, banks are also able to move away from the ad-hoc automation that they have implemented in the past through shell scripts towards a solution that can report from a single pane of glass.
Customer purchasing behaviour is also influencing the development of mobile payment solutions – with both merchants and payments companies increasingly seeking to develop their understanding of consumption patterns through analytics.
Reducing the amount of time spent managing the IT infrastructure also frees up a bank’s best and brightest to identify opportunities for profit and service innovation and measuring ROI.
Automation is now becoming a strategic imperative for banks seeking to innovate – whether through internal channels, acquisition or partnership.
Bank Leadership and the Path Forward
Faced with rising risk (highlighted by the recent glitches at the major banks), a creaking IT infrastructure, and the need to move their business faster, CIOs need to remain both in charge and in control.
Time will tell which banks are up to the challenge of taming their IT infrastructure – and which will be devoured by the challengers.
