Digital transformation is upending every industry under the sun, but as new players come onto the market, established businesses can, despite their large customer bases and other inherent advantages, find themselves frozen, deer-like, in the headlights.
Will digital transformation mean abandoning systems that have worked well for decades? Will the change process disrupt the core business? What if a large IT project fails?
Naturally, these questions are being asked both inside and outside an industry that finds itself challenged by and collaborating with the financial technology (fintech) sector.
“In fact, these are the key questions,” Tom Melville, chief executive of CubeMatch, said.
A global change and transformation partner, CubeMatch works with financial services organisations to modernise not only systems, but essential business processes. In short, it helps banks meet the disruptors head on, without allowing the change process itself to become a disruption.
“We identified a key area of interest to us: banks are excellent at strategy and high-level planning, but often lack the breadth of skillsets to deliver large transformation projects. When I was working as head of change in a bank, what I didn’t have was a change partner who could support me,” he said.
As a result, CubeMatch sees it as its job to bring its clients from an initial high-level vision to a solid plan and, finally, a functioning system by bringing in consultants with strong domain and technology experience.
Partnering with banks as a consultant, CubeMatch delivers bespoke strategies because, while all banks face similar challenges, they each have unique business profiles and even IT architectures that often demand particular attention.
They also may – once you get past high-level questions like how to embrace the future – each have very different long-term goals. This can even have an impact on how any particular bank works with partners.
“All banks have different resourcing strategies and what we believe works best is when they engage with a trusted partner like CubeMatch to deliver. We can either embed specialist consultants into their teams or can provide a complete change team to deliver the project,” said Melville.
Founded in 2002, CubeMatch now operates in countries including Ireland, Britain, Netherlands, Germany, India and Singapore, something Melville said adds to the company’s value proposition as it is able to respond to forces operating both locally and across the sector internationally.
“You can have a global team with local experience [so] you’re not constrained by location,” he said.
Today, a key issue for banking is how to respond to customer demand for speed and flexibility that legacy batch processing systems were never meant to deliver. At the same time, the stability of banking systems, capable of processing millions of transactions and with uptimes measured in decades, cannot simply be cast aside. There is an answer to this conundrum, though, he said.
“We’ve seen the pitfalls and know the challenges. We bring in the right team and bridge the Business to IT gap. You need to get rid of that chasm between IT and the business including banking operations,” he said.
For Melville, then, while the core technical challenge is real, the deeper issue is one of meeting business needs, which is the ultimate function of IT, after all.
In practical terms, this means that the IT systems should be subservient to the business, and the business of banking is centred around data. This allows new and flexible systems to be married to existing legacy investments in infrastructure.
“If you’ve got a good core legacy system with open APIs, the data can be standardised. Without that standardisation, you can’t get the data in and out fast enough,” he said.
New front-ends can deliver the expected customer experience and standardised data means that core banking can continue. The result of this is that banks can be enabled to deliver a level of services that can easily match new competitors without jettisoning other important business processes.
Regulatory developments such as PSD2 have already pushed banks to open data and, at the same time, double down on both compliance and security.
“It has opened up an opportunity for the banks to work with fintechs, so you get a really good fintech front-end linking into a really solid core,” he said.
This solid core is the jewel in the crown for the banks. In fact, some of the positive customer experiences with neo-banks are a result not only of their restricted product offerings, but also the fact that they do run the kind of complex back-end services a large bank is required to.
“The customer doesn’t think about what’s running in the background as long as it works [and] people underestimate what it takes to run a fully functional end-to-end banking system,” he said.
Legacy systems do not have to run in perpetuity, though, and CubeMatch develops migration strategies that take the pain out of the process by deploying new systems that meet today's expectations.
“You keep what’s good about what you have, the banking, the infrastructure, the payment systems, and you move away from the things that hold you back,” said Melville.
Ultimately, there is no single answer, and nor should there be: solutions should fit the organisation and new systems can be deployed on a modular basis, expanding from there, rather than going for a ‘big bang’ approach to change and, in doing so, reducing risk.
For Melville, this kind of approach is the reality behind otherwise potentially hazy terms like digital transformation.
“People talk about digital transformation, well ‘digital’ is a tool, not the answer. Getting your business strategy and processes right is the answer. Our goal is to meet the business goals as well as reducing the pain and cost of change,” said Melville.
“They need to drive their own agenda, and then we will be their right arm,” he said.