By Andy Cureton, Founder and Managing Director, ECS Digital
The banking landscape is changing at an accelerating rate, and competition in the sector has never been greater. Traditional banks are encountering threats from multiple sources, all of which need to be met and mitigated head on if these banking giants are to stay relevant and competitive.
On one side there are the nimble challenger banks who boast smaller, easier to manage product sets. On another are the regulatory changes including Open Banking and the EU’sGeneral Data Protection Regulation (GDPR). And the digital unicorns ofGoogle, Apple, Facebook and Amazon (GAFA) are already beginning to stake their own claims on the banking world with their innovation-driven culture, and immense worldwide customer scale and data.
The internal threat to traditional banks is no less pressing; the majority are reliant on legacy systems that are slow, bulky and process-heavy. And it is these systems that will hold the banks back from moving at the pace their customers expect and demand. Tied into this is another issue – that of skills shortages. As time goes by, legacy skills are becoming less and less available, and can only be bought at a premium.
Unlocking the Value in Legacy Systems
Time is running out for the traditional banks; if they are to stay relevant they need to embrace agile methodologies across their entire organization – and this is where DevOps can help. It’s true that, for most banks, re-engineering and replacing these bulky legacy systems with modern technology simply isn’t feasible. In most cases it would involve unpalatable levels of risk and would require a capital investment bigger than they could withstand.
A more viable solution is to work with the systems they have, using DevOps practices and tooling to bring them up to speed. DevOps is an approach to IT where software developers and IT operations combine their skills and responsibilities to produce software and infrastructure services rapidly, frequently and reliably by standardising and automating processes. Contrary to popular belief, it’s not purely for new, startup or unicorn companies. Adopting DevOps principles and practices allows companies to unlock value in the systems they already have. It allows them to move as fast as the rest of the marketplace – so maintaining their competitiveness, compliance and, ultimately, profitability.
Changing the Legacy Mindset
In the more traditional banks, it is common for people and teams to have very set ways of working, often within distinct siloes. To ease the cultural challenges associated with the adoption of new ways of working, it’s important to involve the teams that will be impacted, and help them to fully engage with the benefits both to the business and to their own professional development.
Creating small, interconnected teams, all working towards a common, achievable goal backed by a considered plan of how to get there makes the transition much more palatable. The agility that creating these integrated, task-focused teams allows, means they can find the optimal balance between speed, control and risk management, therefore improving efficiency and reducing the time to market of any new and fully compliant products.
The key to gaining the most benefit from the DevOps way of working for any business is to understand fully what they are trying to achieve, and which elements are best placed to be transformed to help meet those goals.
Regulation vs Innovation
Since the banking crisis of 2008, regulations have grown even tougher. Banks are being closely scrutinised by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority. They also have to adhere to the data management requirements of GDPR and similar regulations in other countries and regions. At the same time, the Payment Services Directive II has given customers access to more innovative and flexible financial services through third-party internet and mobile banking solutions. Keeping up with consumer demands, whilst complying with these new regulations is a fine balancing act.
Banks must keep an eye on every regulatory change, whilst at the same time innovating in order to stay competitive. The risks of a single mistake at any point in the development process, especially of core systems, could have serious repercussions.
The DevOps methodology of collaboration between business and IT teams can mitigate some of these risks. It ensures regulatory compliance is built into products from the start, and allows any subsequent changes to regulations to be easily and quickly trialled, tested and implemented. The focus on automation,which is part of DevOps, in turn provides the auditability and visibility needed to demonstrate compliance, and cuts down on the need for manual overheads – a huge financial drain on most of the major banks.
Automating to Rise to the Challenge
As well as the demands of data security and the new, stricter regulations, traditional banks are also facing competition from challenger banks and GAFA – many of whom have DevOps built into the core of their processes and systems.To rise to these demands, they need to achieve digital transformation at all levels of the bank.
DevOps brings people, processes and technology together, working more collaboratively in order to speed up and improve the quality of the development process, and take software to market faster. Paramount to this is the need to get testing practices right.
Traditionally, testing is a manual and time-consuming process, and typically prone to errors. It commands huge amounts of resource, which are unavailable for innovation. To test effectively, DevOps/agile testing processes use anonymised production-like data; data that is consistent and quality assured – that can be replicated in real production-like scenarios and automated, ensuring consistency across the data being used for each set of tests.
As well as speed and efficiency, automation also produces cost savings. It reduces the risk of human error and allows increased test coverage in a shorter period of time – which in turn reduces the number of unpredictable and costly outages, with their associated downtime while a fix is sought. The failure of TSB to migrate its customer data without serious operational and security incidents, highlights some of the worst possible outcomes.
One top five UK bank is working towards a solution where all processes are automated or orchestrated, including testing. This would dramatically reduce lead times and delays in projects and provide considerable efficiencies in their end-to-end delivery model.
A Shift in Culture
The threats from challenger banks and GAFA to the more traditional banks are pressing. And the only way the traditional banks can meet those threats head on is to adapt their cultures to suit more modern ways of working – both at a leadership and a team level.
Leaders within these big banks need to embrace and promote a culture where it’s acceptable to fail – with the emphasis on identifying, learning from and, of course, remedying those failures as quickly and early as possible. They must recognise the need to constantly embrace new ways of doing things – instilling a culture of continuous improvement and growth. One way to achieve this is by running agile ‘experiments’across multiple teams and locations. These experiments can be used to assess the benefits of new methodologies and tools whilst, at the same time, focusing on communication and collaboration across the teams.
Ultimately, DevOps adoption is a journey. For big banks the challenge is to make this journey from a cumbersome heritage system to a modern, agile way of working as seamless and efficient as possible. The rewards of doing so will be a formidable capability with which to compete in the digital era.
For more information about implementing DevOps the ECS Digital whitepaper ‘Why bank on DevOps’ is available for download here.
RegTech 2020: The rise of Open Banking
This month on the RegTech 20:20 podcast, host Alex Ford is joined by industry experts Gavin Littlejohn, Chairman of The Financial Data and Technology Association (FDATA) and Jamie Leach, Regional Director of FDATA ANZ and Founder of Open Data Australia, to discuss developments in Open Banking, and the place of RegTech.
Today, the focus is on the digital customer experience and the insight offered indicates that there has been a major shift in the FinTech ecosystem as a source of potential innovation for banks, rather than being a direct competitive challenge.
In the podcast, Alex quizzes Jamie on the concept of sharing data and the impact of the introduction of Open Banking rules under the Consumer Data Right (CDR) in Australia. Jamie shares that it is an exciting time to be involved in the sector:
“…what we really need to consider is that Open Banking in Australia is very different to Open Banking in the UK. Really, what has spurred Open Banking in Australia under the Consumer Data Right is the pursuit of creating greater competition and greater innovation, while allowing consumers to do more with their data.”
Gavin, who has many years of experience in the industry and, as well as his role with FDATA is also a key member of the UK Open Banking Implementation Entity, speaks on the theme of advocating Open Finance in the UK.,’
Delving deeper into Open Banking, he highlights the fact that it has been an interesting journey and states that “the important thing to understand is the difference between the UK’s Open Banking order and the wider payment services directive.”
Not only concentrating on Australia, Jamie also works across the sector in the UK and, also looking at its evolvement here, she suggests that the people creating the rules are now taking notice, adding: “We are just getting started – the UK has been at it for nearly three years and it is still gaining momentum.”
With regards to future predictions, Jamie believes “It’s going to take 12, 18 or 24 months before we see any mainstream major adoption and where the potential of Open Banking can go in this market”
Moving to the differences between Open Finance and Open Banking. Gavin defines the latter as “payment initiation and access to payment data, which enables a third-party provider or fintech with a customer relationship to initiate a payment and get access to the data relating to transactions.”
“…the concept of Open Banking is a bit like electricity – you don’t use it directly; you use an appliance that uses it. This could mean loans, money management apps, or cloud accounting platforms, which all use Open Banking.”
Throughout the episode, both guests provide interesting insights and hint at the significant potential of Open Banking.and the connection to RegTech within this domain.
It is clear that what we see today is only the beginning. Despite the industry still being in the early stages of implementation in almost all cases, there is increasing interest in moving beyond this to include a far broader spread of financial products.
You can listen to the full episode at https://www.encompasscorporation.com/regtech2020-podcast/ or across all major platforms, including Apple Podcasts, Google and Spotify.
New digital first bank – Monument – announces its key technology providers
- Monument selects Mambu, Salesforce, Amazon Web Services, Persistent Systems and Accenture as key providers for its technology build
- Monument is the first challenger bank in the UK to service the unmet demands of more than 3.5 million mass affluent clients: professionals, property investors and entrepreneurs
- It is building a modern, unique, lego-like technology platform which takes best of breed SaaS providers and integrates them in a cloud based microservices architecture
- This will deliver an exceptional client experience and enable Monument to innovate and to introduce new components on a frequent basis
- Monument today announces that Mambu will be the central core banking engine in the platform alongside Salesforce for CRM, and AWS for cloud services
- Monument has also engaged Persistent Systems and Accenture Interactive to support the platform build
Following receipt of its banking licence with restriction on 6 October 2020, Monument has now signed agreements with a number of key technology providers to enable the build of its bespoke technology platform.
Monument wants to deliver exceptional client experiences by using technology solutions that are modern, flexible, easy to integrate and ultimately, if necessary, able to be replaced should the need arise. The design of its lego-like technology platform is Monument’s solution to the huge challenges faced by the legacy systems of established banks. Having assessed the market over many months, Monument concluded that no appropriate single solution existed in the market for the products and services that Monument will launch in 2021.
In addition, Monument only wishes to develop its own technology where it can deliver significant competitive advantage, for example in the mobile and web services to be used by clients. Much of the technology platform is therefore based on best of breed solutions from modern, cloud-based providers.
Mambu has developed the leading cloud banking engine which is an excellent fit for the platform that Monument is building. Similarly, Salesforce provides an industry leading CRM (customer relationship management) solution which can easily be integrated with Mambu and other solutions. AWS, as a leading provider of cloud-based infrastructure, provides a range of components to ensure the platform is reliable, scalable, secure and flexible.
To support Monument in building and integrating a platform with more than 18 different components/providers, Monument has chosen to work with Persistent Systems, a leading global solutions provider specializing in digital with extensive experience in software as a service (SaaS) solutions. To support Monument in rapidly building its mobile app and web-based channels, Monument has chosen to work with Accenture Interactive, which has significant expertise in building innovative digital experiences in both the financial and non-financial sectors.
Steve Britain, Monument’s Chief Operating Officer said:
“We have been working closely with our chosen providers for some months now, to lay the foundations for the build of our platform. We are delighted at how much we have already achieved, particularly as much of the work has been done by a highly distributed team because of COVID-19. We are now focused on completing the work to build a unique configuration of best in class software components that will make us highly flexible for the future and deliver market leading client service.”
More announcements will be made shortly as other key components of the architecture are confirmed.
Sudip Dasgupta, Monument’s Chief Technology Officer added:
“It was essential to me that we selected the strongest providers available. Those that offer us modern technology solutions with the best degree of integration that we need, together with flexibility for the future and proven operational reliability. In Mambu, Salesforce and AWS we have certainly achieved that objective and we are excited about our future engagement with them. Equally, as we rapidly build our platform for launching with clients in early 2021, we wanted support from providers who have been on this journey before and in Persistent and Accenture Interactive, I am delighted to say we have found that.”
Monument will be the only bank to offer its clients an entirely digital journey for buy-to-let and property investment lending of up to £2million. It will offer market leading, top quartile savings rates and its model is designed to reward loyalty. So, if a saver deposits money for a subsequent fixed term, they will get a better rate than a new customer. And a borrower who renews their loan will also be offered a favourable rate.
UKRSIBBANK, part of BNP Paribas Group, announces a strategic partnership with financial wellbeing startup Dreams, to enhance the digital user experience of its 2 million customers in Ukraine
- The technology powering popular consumer app, Dreams – which has helped 460,000 users save over 440M EUR – will be made available to UKRSIBBANK’s users in Ukraine.
- Through the integration of the Dreams platform within UKRSIBBANK’s own digital tools, customers of the bank can set and achieve money-saving goals, track and improve their financial lives.
Dreams (https://www.getdreams.com/en/b2b/), the Stockholm-born fintech empowering millennials to save and feel better about their money, today announces a strategic partnership with Ukrainian commercial bank UKRSIBBANK, a subsidiary of French international bank BNP Paribas Group.
This partnership follows the announcement earlier this year of Dreams’ first enterprise partnership with banking software provider Silverlake Symmetri, and the recent unveiling of a new department in Stockholm dedicated to the development of Dreams’ B2B partnerships. The announcement marks an expansion of the company’s business model as it consolidates its B2B offering and evolves its services as a provider of white label solutions for financial institutions.
Through the integration within UKRSIBBANK’s own digital tools of the Dreams Platform – which is rooted in scientific principles – customers can set and achieve money-saving goals through clever, automated saving features, in addition to nudges and saving hacks.
The Dreams Platform will be included as part of UKRSIBBANK’s digital banking offering for its 2 million+ customers, and is set to grant millions of potential consumers across Ukraine access to products which will help keep their finances on track and improve their financial lives.
The rise in digital self-help tools has long been anticipated by Dreams and forward-thinking financial institutions. The current global economic uncertainty brought about by the COVID-19 pandemic has also placed significant strains on people’s finances, and the demand for better personal finance tools has only accelerated. The partnership with Dreams is welcomed by UKRSIBBANK which is currently striving to equip its customers with the best possible banking solutions whilst helping them achieve a more sustainable lifestyle.
Dreams is firmly established as an authority in its industry, having launched its consumer-facing app in its native Sweden in 2016 and Norway in 2018 – where it has already achieved a 16% market share of all 20-39 year olds.
Henrik Rosvall, CEO and founder of Dreams, comments: “It’s a true honour to be partnering with UKRSIBBANK and BNP Paribas Group, and we’re incredibly excited to be introducing the Dreams solution to UKRSIBBANK’s customers and the wider Ukrainian market.
“Dreams and UKRSIBBANK can now lead the charge, with BNP Paribas Group’s corporate strategy having shifted in recent years to focus on guiding customers towards responsible consumption and sustainable personal finance management. I’m confident that our mission of helping millennials save more and feel better about their money makes us the ideal partners.
“Our financial wellbeing platform – which is built upon behavioural science and personal finance management principles – will provide the perfect tool for UKRSIBBANK to help its customers make better financial choices and become more sustainable in the way they handle their finances. This partnership will also help UKRSIBBANK safeguard the loyalty of its customers and futureproof its digital banking offering against a growing number of challenger banks and fintechs.”
Konstantin Lezhnin, Head of Retail at UKRSIBBANK BNP Paribas Group, comments: “I believe that banks have a role to improve their customers’ lives. Planning and saving for important life events improves our quality of life by reducing stress levels, and we wish to make our customers feel more confident and in-control of their lives.
“UKRSIBBANK has always applied innovative ways to assist our customers in financial planning, so we are very happy to now be working with Dreams, the best European player in behavioural savings. They have an extremely solid track record in Sweden and Norway based on scientific research, so we are confident that this partnership will work positively for our customers in Ukraine. This also demonstrates our strategy to cooperate with startups and innovative companies that seek ways to expand their operations.”
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