Best of both worlds

Banking is such a crucial sector that no matter what it does it will be criticised. When it comes to IT, this means keeping things the same is seen as failure to innovate, not providing continuity. At the same time, changes are complained of as disruptive. Truly, IT modernisation programmes in banking must seem like thankless tasks. And yet, they are necessary.

“There has been significant investment into IT by banks, much of it connected to cloud,” said Mark Kenny, client director of retail banking at Expleo.

“There are pros and cons to that. One is that it is time-consuming to move. The great benefit of cloud is the flexibility it allows, however there is also a problem if you can't manage the environments and risks of data breaches and vendor lock-in to consider,” he said.

That said, banking is a competitive sector and one where, increasingly, consumers and businesses alike have growing expectations set by their interactions with consumer technology. Indeed, even after the withdrawal of Ulster Bank and KBC, the remaining three banks face competition including from credit unions as well as fintechs.

Kenny said that Irish banks are aware of this, and of the fact that customers want to be able to do more online.

“What I'm seeing is improvement,” Kenny said, noting that banks tended to approach IT modernisation not as a risky ‘big bang’ or attempting to wholesale remove crucial mainframes but to develop new applications in the cloud and layer them into their existing IT stack.

“They're all looking at cloud, and all starting to do it. Loan origination platforms are a good example, and we’re seeing that not just in the Irish market but across the globe – and that has the potential to give a significantly improved customer experience and be integrated into the back end.”

Thinking about banking

Naturally, interest in artificial intelligence (AI) is growing in banking, as it is everywhere. However, use cases for it at the moment are strictly limited. For example, areas such as know-your-customer (KYC) compliance are seeing assistance from AI.

“Increased regulation around KYC is making AI very attractive,” Kenny said.

“We’re also seeing a greater adoption of technology such as RPA [robotic process automation] and hyper automation, which is bringing all of the technologies together to serve the customer better,” he said.

Customer service is another area in which AI has a bright future.

“An example could be an AI-driven chatbot, which in studies we have done have proven to give a better level of satisfaction higher than a human operator. In general, we are seeing broader organisations having a lot of conversations around AI and its impact,” he said.

Banks are being cautious, however, which is unsurprising given the importance of what they do and the regulatory environment in which they work.

“Overall, there's a lot of interest, though demand is not quite there yet. People want to understand what it will mean to them and how it can be deployed in a useful fashion,” he said.

For those outside the IT sector, hearing that banks, insurance companies and governments use mainframes probably comes as a shock, complete with visions of spinning paper tape or punch cards. In fact, mainframes are not only modern, they are both fast and robust.

However, it is true that what they excel at, batch processing, is not what the rest of us are used to with technology. Bank IT modernisation takes this into account, by adding the new layers of cloud-based IT without sacrificing the robustness banks are used to.

“I love the mainframe and what it has done, what it continues to do: millions of transactions in a very stable environment. Of course, the demands on the front end are different and that is a challenge.”

In fact, Kenny said, pitting one technology against another is doubly a mistake as the biggest issue is not really technological at all.

“The real challenge is not technology, it’s culture. Not just within banks, but within all organisations’ IT,” he said.

Part of this is a need to think in different terms: if new services and applications are layered in, then an ‘agile’ methodology is the right way to go about developing them.

“We’re seeing a large shift toward agile, which has established a fit for purpose operating model oriented around establishing client value.

“It embraces change and a culture of continuous improvement. It also changes the traditional way IT is delivered,” he said.

Despite being recognised as an improvement over ‘waterfall’ development, it is nonetheless a change, and one that needs people to be brought along.

“Different organisations, different banks, are in different stages of their journey [but] they are looking to build cross-functional teams that are self-contained. The upshot is that you see benefits in weeks or months with small, iterative changes and improvements,” he said.