Tough tech critics say banks should balance more than the books

Who’s killing the great banks of Europe? If you ask Computer Weekly, it’s those pesky CIOs, stubbornly refusing to put their legacy IT out to pasture.

“Large retail banks with outdated technology face extinction – unless they can replace IT legacies – as new players use the latest IT to disrupt the market,” warns a recent CW story.

The article lists a litany of IT banking glitches: a 2012 outage left 12 million customers of Royal Bank of Scotland with no account access for over a week; and in December 2013, another hiccup prevented RBS and NatWest Bank customers from using debit cards and online banking during one of the busiest shopping days of the year.

Apologizing for the December debacle, RBS CEO Ross McEwan laid the blame on legacy IT. “For decades, RBS failed to invest properly in its systems,” he said.

So what’s a poor CIO – in financial services or elsewhere – to do with that legacy IT albatross? Take a hybrid IT approach, says Accenture’s Mark Sullivan.

He suggested it in a recent webcast called Innovation in Financial Services: Staying Ahead of the Competition. Sullivan outlined highlights from an Accenture survey of 1,700 CIOs worldwide. Although the webcast focused on financial services, the survey looked at various sectors. And CIOs at the survey’s highest performing firms are consistently good at “mastering a hybrid IT environment,” said Sullivan, head of Accenture’s financial services IT strategy and transformation practice in North America.

Sullivan explained the hybrid model as a balancing act:

* balance your legacy IT assets and in-house development with acquiring or outsourcing services from outside providers

* balance the use of more traditional technologies with emerging ones like cloud, mobile, social, analytics and virtualization

“So we see much more emphasis on (transitioning) the traditional infrastructure strategies to more of an elastic, cloud-based, scalable, flexible, agile model. That gives them additional capacity without some of the legacy constraints that have existed there in the past,” said Sullivan.

Don’t regulatory constraints thwart financial firms from diving into digital? Maybe not that much. Last October, Ernst & Young Global surveyed 100 insurance firms around the world on their use of digital technology.

* less than half supply company information or customer quotes via mobile

* only 11 per cent use predictive modeling, employ online product comparison tools or encourage the development of an online community

* “A startling 89 per cent do not leverage past interaction when recommending products or services to online customers,” the survey’s authors noted.

Asked to name their major impediments to growth, 96 per cent of insurers in the Americas blamed legacy IT – but regulatory issues didn’t even make the top five. What did make the list? Nearly half (45 per cent) cited “intermediary or agent channel strength or resistance.” Ah, good old resistance. As the survey’s authors summarized: “Insurers are holding themselves back…insurers need to embrace the mobile and social wave.”

In his webcast, Sullivan suggested the above advice can (and should) be applied to legacy IT issues in all industries, not just finance.

So is legacy IT really killing the banks? It may end up killing the traditional way banks have operated. But if it also forces them to embrace digital, it might just give birth to brand new ways of banking that serve us even better than before. And that can’t be bad.

photo credit: Cold Cut via photopin cc