How financial institutions need seamless tech we can bank on

With online banking now the norm it might seem that bank IT is a job done, but in such a fluid marketplace, and with constantly rising customer expectations, the job is never truly done.

Leslie Duckett, group head of business development and marketing at CubeMatch, a global change and transformation consultancy specialising in financial services, said that Irish banks have been working their way through the process of digital transformation, but that this has become even more important as two banks exit the market.

“There’s a big rush to digitisation. It's really come to the fore with the closure of KBC and Ulster Bank, which has caused a rush of new customers, but up until now the traditional banks have not moved fast,” he said.

Indeed, Duckett himself has experience of how technology has been used to bring on board new customers, having banked with one of the banks that is leaving Ireland.

“I moved to a new bank and opened the account on the phone which took about 45 mins, which is too long to begin with, and this was for a personal account. If you're looking for a simple product like a current account it works, but as soon as you have more complex needs, even something like a joint account, you have to go to a branch,” he said.

The problem seems to be that the systems in place can handle standard queries, but anything that veers too far from the path causes a failure requiring human intervention. This is an issue because banks, and not just in Ireland, have made it clear that they see their futures as digital; thus they need to be able to offer a level of self-service to customers well above what can be achieved today.

“They're trying to go digital first. People are expensive, let's be honest, so you see the use of artificial intelligence (AI) and robotic process automation (RPA). There was a study saying a robot can do the work of 15 people and, of course, it can work 24/7 so you can see the attraction, but it needs to not result in a degradation of customer service,” Duckett said.

Neo-banks have managed this, but at the cost of having a limited product offering.

“If you look at the disruptors, they are very much going for vanilla things and targeting niche users. When something doesn't go right it can be a real problem to sort it out. [Using a neo-bank] I had a transaction that didn't go through and I was talking to the chatbot to the point where I just gave up,” Duckett said.

Here, the traditional pillar banks have a number of advantages that they can leverage, not least the trust of the public. What is needed on top of that, then, is a means of bridging from legacy batch processing technology to more flexible and modern systems.

“The interesting thing – and it's a bit of a challenge for the institutions – they’re trying to make things as frictionless as possible, but then they also need it to be as secure as possible. The customer wants to know they are not being defrauded.”

Long-term technology migrations are ongoing, but they must be approached with care, so adding layers that can transact live and then reconcile with core systems is a potential path to change.

“The legacy technology that they’ve had, through no fault of their own, is mainframes that are not very open, and migrating away from it doesn’t immediately add to the bottom line,” he said.

The upshot of this could be greater collaboration, something banks have not been famed for.

“There’s an interesting initiative in Singapore: the Singapore Monetary Authority is trying to get banks to be more collaborative, to share data, which is something that they wouldn't have done much in the past. That way they can help to identify fraud and work on anti-money laundering. To do something like that here would require Central Bank of Ireland intervention, in order to take a lead,” Duckett said.

In the meantime, Duckett said that while people had found the closure of Ulster Bank and KBC frustrating and challenging, it had not driven vast swathes of customers into the arms of neo-banks.

“With a few exceptions, people are going to the traditional players because we still have that trust in them. They’ve spent a huge amount over the years. If you want to go and speak to someone, you can do it if you really want to, and they inherited a lot of regulation and compliance,” he said.

This does not mean that the banks can afford to rest on their laurels, however, as the passage of time naturally erodes the advantage that they enjoy.

“They've had costs, and they've had to absorb them and they produce a service to us and people will happily have their salaries paid into them. At the same time, they’re trying to compete with payment providers. It’s an issue of generations, really,” he said.

Of course, banks are all too aware that holding cash for customers has not been a profit centre in the past decade.

“Retail customers cost money; that's why they want us all moving online,” Duckett said.

Done right, however, technological shifts could not only reduce costs for banks, but also improve the customer experience.

“Our area of speciality is digital transformation. We work with a number of the banks here. There's a great opportunity in KYC [know your customer]: to have a kind of ‘digital passport’ that works with all institutions. I do it once, it’s secure and I don’t have to do it all again to do something with another institution,” he said.