Technology has long promised to future-proof financial services organizations, with some already embracing innovative solutions to meet evolving customer needs. Capital One, MasterCard, Royal Bank of Scotland and Santander are just a handful of institutions using chatbots, for example, while Gartner says banks are one of the biggest adopters of Robotic Process Automation (RPA).
But new findings from the Financial Conduct Authority (FCA) paint a very different picture – highlighting a serious issue that threatens to hold financial services back from successful digital transformation.
The FCA has revealed that banks are hit with a key computer problem or internet security alert almost daily on average. Between July 2018 and June this year, there were 336 significant incidents at as many as 31 banks in the UK. Almost half (150 to be exact) took place at the big seven high street banks – NatWest, Barclays, Lloyds, RBS, Santander, HSBC and TSB.
The damning report comes more than one year after TSB’s massive IT failure, which cost the bank £330m, with 80,000 customers switching their account to a competitor. After all this time, why are there still so many significant IT incidents? Have banks not learnt from this epic meltdown?
According to The Times, critics are accusing banks of having outdated systems that can’t cope with the technology needs to become a modern digital lender. It’s something Advanced sees only too often at banks and indeed other financial service institutions too. Many are deeply entrenched in legacy systems running on platforms such as Mainframe and OpenVMS that are unable to reliably support or integrate with modern applications.
The reality is that the failing of a technology system has a significant business impact and carries serious financial risk too. And, as more and more businesses run technology-driven organizations, offering services and products online, the risks and impact become greater.
First, there are the risks involved in standing still – in other words, running business critical technology on dated legacy systems. Second, in a rush to catch up and transform as well as upgrade to more modern infrastructures, it can be easy to ‘cut corners’ by not fully appreciating the associated impact or risks. This all makes it incredibly difficult to innovate and scale successfully.
What’s more, the dependence on ageing technology creates unnecessary expense. Core legacy business applications, and the infrastructure required to run them, often consume a high share of a company’s IT budget. In fact, there are plenty of statistics which suggest that maintaining and operating legacy applications consumes anywhere between 60% and 80% of corporate IT budgets.
What’s worrying is that most CIOs are willing to bear the large cost because they believe it provides a level of robustness, stability, performance and scalability that can’t be found elsewhere.
This couldn’t be further from the truth. Financial services organizations should be redirecting this significant amount of money to create modern and integrated systems. It will bring them a greater competitive advantage in the future as a result. Until they do, we will continue to see them held back from making the most of technology and seizing the ‘digital-first’ era we now live in.
It is time financial services leaders think ahead – and, as a priority, that means recognising legacy systems as only expensive and problematic barriers to long-term digital transformation.