Financial services has quickly become a software-driven industry, banks have to be prepared to change how they operate and embrace the era of Big Software.
CIOs of major banks and financial institutions are today facing a task equivalent to the feeding of the five thousand. While IT systems in the past have always grown, it was comparable to making one casserole for four people stretch to six when two uninvited guests showed up for dinner. Now hundreds of people are coming for food, all day, every day, and they all want different meals, at different times of the day.
This barrage of meal requests is like the complex needs of the staff and customers of a modern-day bank or building society – the challenge is leveraging the power of Big Software. How to learn about it, manage it and deploy it for a variety of use-cases.
Scalability is critical and costs must be kept down, so choosing between public clouds or building your own, all while keeping data secure and systems (including legacy or home-grown ones) interoperable, is the ultimate goal.
Open source has long been a part of these complex IT infrastructures, but with customer data security of the utmost importance (and so heavily regulated) how can financial service providers take advantage of the latest software engineering expertise, protect customers and still maintain a cost-effective operation?
While there is no one-size-fits-all answer to this question, what has become clear is that IT departments need to be the ones leading these strategic conversations.
Banking on software
It’s no secret that, amidst changing regulations, mounting customer expectations and increasing competition from a plethora of fintech start-ups, the banking sector is experiencing some serious disruption.
Financial services has quickly become a software-driven industry. Customers are demanding innovation and want to be able to interact with their chosen bank at a time that suits them, across a combination of both online and offline channels.
This means banks have to be prepared to change how they operate and embrace the era of Big Software through the likes of Software-as-a-Service (SaaS), big data, cloud, containers and microservices. If they don’t, they will likely be overtaken by faster and more innovative competitors.
The introduction of Open Banking has also played a key role in this shift. Open Banking refers to the use of open APIs (Application Programming Interface) that enable third-party developers to access UK banks’ customer data and build applications and services on top.
It is heavily dependent on the use of open source software and, with 99% of payment executives saying their bank plans to make major investments in Open Banking by 2020, will likely be an integral part of the future of financial services.
The challenge is that although these technologies present several opportunities, they also bring complexity. Where applications used to be relatively contained and simple to manage, they now have to be rolled out across hundreds or thousands of on-premise and hosted physical and virtual machines.
Not only does all this have to be accomplished as cost-efficiently as possible, with the right mix of products, services and tools to match the requirements of the business, customer data also has to be kept secure.
To address these issues, organisations have to realise the importance of the IT department in enabling innovation while also ensuring security and business continuity.
Raising the bar for IT
The position of IT across all industries, not just financial services, has been significantly elevated as the Big Software revolution has continued to take hold.
Indeed, many IT departments now enjoy strategic recognition, rather than simply being consigned to supportive, back-office functions. For example, in a recent Brocade survey 97% of respondents recognised the IT department as important to enabling their organisation to innovate and grow, highlighting how IT teams’ knowledge is now frequently tapped into when it comes to shaping strategic direction.
However, there are still challenges that need to be overcome, with nine in ten (91%) IT Decision-Makers (ITDMs) saying there are issues preventing their IT department from delivering on business demands. For example, IT departments often spend large proportions of their time maintaining data security (73%) and legacy systems (63%) which will restrict the time they have available to innovate and digitally transform their organisations.
For those banks that haven’t yet realised the value of IT, now is certainly the time to do so. Technology has already transformed business processes in financial services and, with the growth of Big Software and Open Banking, having access to a robust IT infrastructure that leverages the capabilities of these technologies is only going to increase in importance.
As such, the emphasis for IT teams is now geared more towards building platforms that enable banks to innovate and solve specific business problems, rather than simply keeping the lights on.
With their ability to understand the business value of technology, IT departments can bring a huge amount of value to strategic boardroom discussions. Given the widespread disruption opportunities available to fintech startups, this expertise could prove invaluable.
It’s no secret that technology has significantly changed the way banks and financial institutions work and will continue to do so over the coming years as the momentum behind Big Software grows.
IT teams, therefore, are perfectly positioned to understand these latest digital trends and in turn use cutting-edge innovations to solve their organisation’s specific needs.