The UK’s retail banking sector is currently facing many sources of upheaval. The government is preparing new regulatory measures, ostensibly to protect the public from a repeat of the credit crunch. Meanwhile, emerging consumer technologies offer new ways in which to engage with customers, but new market entrants are offering fresh competition for those customers’ attention.
Will IT help the banks meet these challenges, or will it hinder them? That was the topic of debate at Information Age’s latest roundtable debate, which took place over lunch in the City of London.
Delegates did not regard the prospect of additional regulation with fondness. “Our biggest challenge today is meeting regulatory requirements,” said the UK head of IT from a developing economy bank.
The government’s proposal that banks should ‘ring fence’ their retail operations from their riskier business and investment divisions, in order to protect account holders, was discussed with a degree of scepticism. Some delegates questioned whether the government understood the machinations of the banking industry well enough to executive such a ruling. Others questioned whether it would address the real structural issues that threaten the sector. “We still don’t understand what the exposure of the banks is to each other,” commented one.
As for the technical challenge, the view was that some IT departments may be ill-prepared. “Ring-fencing means separating the bank into different legal entities, and some organisations just aren’t set up to do that right now,” remarked a delegate from a European bank.
The opportunities in mobile banking were discussed with interest, although delegates remarked that they had yet to see anything that was likely to make a customer switch banks just to be able to use such services.
There is, perhaps, a more lucrative opportunity, one attendee commented, in becoming the trusted data broker that helps customers manage all their expenditure across multiple cards and accounts from one screen.
Slow on the take-up
Delegates remarked that the retail banking sector does not quite share the investment banks’ progressive attitude towards technology. “For financial traders, technology is their business,” said the systems architect of a major European bank.
As a result, the IT infrastructure of a typical retail bank contains more legacy applications. “Some retail banks are running on 40-year-old machines,” the systems architect said. “The COBOL code running RBS was reputedly written by the CEO when he was a lad in Scotland.”
Nevertheless, attendees agreed that whatever technical issues the banks may face, they can be overcome as long as there is a solid business case for doing so. However, with many of the banks still in acute cost reduction mode, it can be difficult to persuade the business to fund IT projects with long-term objectives.
One high street bank in particular, a delegate remarked, is notorious for short- termism. “Longer-term investments don’t figure there at all – they’ll always go for what’s cheap,” he said.
Delegates acknowledged that there are many issues that banks – and their IT departments – must address in the near future, but they also commented that this has always been the case for the sector.
“There’s always a lot going on,” said an executive from a large UK bank. “It’s business as usual.”
This article draws on a recent Information Age debate, sponsored by systems and software vendor Oracle. To download a white paper from the company about how making the right choices can help banks to reshape their IT to pursue new opportunities and build a competitive future.
To facilitate open discussion, Information Age’s roundtable debates are run under the Chatham House Rule, meaning that no comments are attributed to attendees or their organisations.