By Rob Orr, Executive Director, Virgin Media Business
Is there anything more frustrating than finding out your bank account is unavailable due to a technical issue? Or being an IT manager at a bank and, through no fault of your own, feeling powerless when your IT system goes down?
IT failures at major banks are high on the news agenda right now. A recent Treasury Committee report found that the frequency of crashes and associated customer disruption was “unacceptable”, leaving customers cashless and cut off. Recent outages have happened as a result of various factors, such as upgrades going wrong and – in some unfortunate cases – crippling cyber-attacks.
As more banks digitise their customer proposition, responding to the rise of challengers such as Monzo and Starling, the impact an IT outage can have on business operations becomes more devastating. Beyond the immediate effect of customers being unable to access their money, there is long-term reputational damage to consider, as several leading banks have learned in recent months.
Given the costs of disruption to both customers and to banks, outages are simply not an option. To cope, banks must ensure their systems, processes, and underlying infrastructure are resilient – but doing so requires significant investment. How then, do they select the right partners who will help them not only survive, but thrive, in the long term?
Swiping right on an IT partner
With a vast range of technological partners out there, the first step for banks is knowing how to select the business best equipped to help them build resilient and effective IT systems.
An obvious place to start is with the technology partners most experienced in the financial services sector. These businesses will be familiar with the problems faced by IT managers at banks, from a security and efficiency standpoint. They will likely have worked with multiple financial service providers in boosting overall resilience, as well as completing regular stress-testing and scenario planning.
But it’s not just about experience. Crucially, an effective IT partner will adopt a certain approach to contingency planning. It will not only think about today, restricted to existing infrastructure, ways of working, services and threats. Instead, it will focus on tomorrow, asking how will innovation impact on systems; what new threats lie over the horizon; how will increasing automation impact on networks?
Selecting an IT partner with foresight, infrastructure and technical knowledge to challenge a bank to think about the future, is critical. It is the only way to ensure systems can deal with the now while proving adaptable as their business, and customer expectations, evolve.
Resilience is king
If services go down – nothing else will matter. That’s why putting in place rock-solid connectivity with the stand-in systems and backup infrastructure for emergency situations is so important.
Whether that’s selecting a connectivity provider with 99.99% reliability or investing in high capacity backups to cover the 0.01% of times, banks need to plan for failure. Investing in resiliency is not a nice to have – it’s an essential part of keeping services running.
Evolutionary, rather than radical change
Financial service companies should look for a partner’s ability to implement incremental change. The best partners won’t be looking to rip out a client’s infrastructure and start again. Not only would that be incredibly expensive, but it would likely cause major disruption to employees and customers.
The best strategic partners are realistic about upgrading IT infrastructure. They won’t tell financial services institutions that they need to totally change direction, since they know that isn’t desirable or even possible. Instead, they’ll examine an IT system strategically, identifying areas for incremental growth in a way that will maximise business outcomes.
One bank that has realised this with great success is Danske Bank. Choosing Virgin Media Business to guide it through an overarching transformation agenda, it listened to advice on the potential of incremental change to deliver a new vision for customers, employees, stakeholders and society – with enormous success.
Boosting the bottom line
Banks should also consider whether their potential IT partner has experience making the connection between IT systems and customer acquisition. Perceptions of IT departments as back-end and functional parts of a business are misguided. In fact, small changes to IT infrastructure can hold the key to boosting profitability and bringing in new revenue.
Metro Bank has transformed its IT architecture in a way that supports business goals. By using application programming interfaces (APIs) and a loosely coupled IT platform – as well as putting the IT team at the centre of its digitalisation strategy – the business has implemented a rapid and streamlined process for customers opening new accounts.
Clearly, getting the infrastructure right can have a major business impact. An effective strategic partner can play a crucial role in guiding a financial services institution towards incremental success that drives revenue.
To prevent IT outages and move towards systems capable of supporting growth and a first-class customer experience, it’s vital banks choose a long-term strategic partner. This isn’t just to boost resilience in the face of cyber-threats, but to work out how infrastructure can feed into commercial growth and customer retention and acquisition.
As competition heats up in the sector and challenger banks continue to shake things up, infrastructure will take on a new importance – supporting business growth, creating compelling customer journeys and implementing effective cybersecurity strategies. Having round-the-clock counsel from a trusted and experienced partner is vital to achieving this.
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)
Bank of England’s Haldane warns inflation “tiger” is prowling
By Andy Bruce
LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that an inflationary “tiger” had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic, adding that central banks may need to respond.
In a clear break from other members of the Monetary Policy Committee who are more relaxed about the outlook for inflation, Haldane called inflation a “tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months”.
“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,” Haldane said in a speech published online.
“But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”
Haldane’s comments prompted British government bond prices to fall and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation.
“There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” Haldane said.
(Editing by David Milliken)
BOJ to highlight climate risks as key theme of bank tests this year – sources
By Leika Kihara and Takahiko Wada
TOKYO (Reuters) – The Bank of Japan will for the first time highlight climate change risks as among key themes in its bank examinations this year, sources said, joining major peers moving to gain research clout on the effects of global warming.
In guidelines on the examinations due next month, the BOJ will clarify its readiness to coordinate with Japan’s banking regulator in analysing the impact of climate risks on financial institutions, said three sources familiar with the matter.
The central bank will also beef up cooperation with the regulator, the Financial Services Agency (FSA), in studying European examples and specific ways to measure financial risks associated with climate change, they said.
The moves are part of Japan’s efforts to follow in the footsteps of an increasing number of countries working on or considering stress-testing financial institutions on climate risks.
“For the BOJ, green QE is still off the radar. The more approachable and near-term focus is to assess climate change risks on the financial system,” one of the sources said, a view echoed by two other sources.
“Climate change is a key theme for the BOJ this year,” another source said, adding that stress-testing climate risks on financial institutions is “not imminent, but something Japan needs to aim for in the future.”
The BOJ conducts hearing and on-site monitoring in voluntary examinations on financial institutions. But it does not have regulatory authority, which falls under the FSA. Neither the BOJ nor the FSA stress-tests banks on climate risks.
Officials of the two institutions have been discussing climate change as among topics that could affect Japan’s banking system. But progress toward stress-testing financial institutions has been slow because of a lack of data and models.
The BOJ began to gear up efforts on climate change after Prime Minister Yoshihide Suga last year pledged to make “green” investment a key pillar of his growth strategy.
The Biden administration’s focus on battling climate change, and the Federal Reserve’s decision in December to join an international central banks’ group focused on climate risks, also prodded the BOJ to engage more, the sources said.
But actual roll-out of stress tests will take at least another year as policymakers work out guidelines and details, including whether they will ask banks to conduct a “self-assessment,” the sources said.
(Reporting by Leika Kihara and Takahiko Wada. Editing by Gerry Doyle; Editing by Chang-Ran Kim)
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