There is no denying we are living in the golden age of digitisation. The consumer love affair with being hyper-connected has created a demand for digital capability in every aspect of daily life.
The financial services industry has excelled in supplying to this demand. According to Fujitsu’s Digital Inside Out study into digital enablement in the UK, investment in digital and has catapulted Financial Services as the people’s hero in digital offerings.
But even with highly sophisticated customer-facing services paving the way to a ‘Digital First Britain’ the industry couldcould still be facing one of its toughest challenges yet. We are seeing the back-end infrastructure of financial services companies lagging behind the new digital front-end services. Whilst not customer visible, this back-end infrastructure is critical to the operation of all FS business services with investment shortfalls increasing business continuity risk profiles.
Being the tech-savvy society we are, we now expect the digital services and culture we have in our personal lives, at work too. But somewhat surprisingly, this is not translating across the Financial Services industry.
Our research found only a third of financial services employees had a complete understanding of the technology services and applications available to them. More than half (54%) said not knowing what digital services were available to them was the reason they didn’t get the most value out of it. On top of this, while more than 40 per cent cited lack of training as the main issue in using digital services in the workplace.
These findings clearly highlight the digital discrepancy in the tools available externally and those being provided internally.
However, even if financial services companies want to invest in more digital services and training for their team, there is one hurdle many can’t seem to jump – leveraging legacy IT systems. In my view, the size of the task to modernise and associated risk with these systems is preventing the banking giants from bringing their internal processes into the digital age – hindering new development and innovation.
Ironically, the total cost of ownership is now increasing within some FS giants as their new digital front-end systems are causing manual integration in the back-office, which drives up costs. It would appear that a lot of the larger FS companies become paralysed as their legacy systems are complex. The problem they now face is disruptive FS newcomers to the sector (challenger banks) who do not carry this legacy and are able to build a ‘Digital First’ culture, operating model and supporting IT services.
These new kids on the block are covering all bases – offering customers the most up to date digital services, while adapting modern IT infrastructure for their employees.
Banks therefore, in my opinion, are faced with two approaches:
- Reinvent themselves; create a new legal entity within the group, which in effect mimics a challenger bank. This entity should be built based on a ‘Digital First’ culture and operating model leveraging the 21st century IT services available. Over time, customers of the legacy could be encouraged to migrate to the new bank through promotions, etc.
- Modernise themselves; in essence, take a holistic approach to IT transformation and look to tackle some of the big ticket items within the back-office, modernise where possible leveraging assets with longevity and consolidate systems as much as possible to make material operating cost savings.
Given the proliferation of IT systems, applications and other tools of the technology trade, it is surprising that some companies still don’t have some form of strategy around transformation.
After spending decades building up their business processes and technology infrastructures, companies now need to decide which systems are past their expiration dates and what approach to use to move forward. Both approaches outlined above carry risk and have different types/levels of implementation complexity. Either way, doing nothing in the digital world we now live and work in, is simply not an option.
Image credit: Alex Wong, via Unsplash