By Jason Hand, Global Account Executive – Enterprise Sales, Commvault
Back at the start of 2019, before we’d ever heard of COVID-19 (hard to imagine these days, I know), mobile banking was predicted to overtake high street branch visits within two years. But the restrictions placed on daily life to get to grips with the pandemic proved to be a catalyst in speeding up adoption.
Although banks haven’t had to close during the UK lockdowns, they discouraged unnecessary visits — and many people new to online banking discovered that it could provide a quick and easy (and COVID-safe) way to manage their finances. No surprise then, that as summer came to an end, over three-quarters of the UK population were using some form of online banking and one in ten people had switched to a digital-only bank.
When it’s implemented well, online, digital and app-based banking is as easy as shopping with Amazon, booking a cab on Uber or grabbing a takeaway via Deliveroo. With so much potential to create a similar customer experience — and so much to lose if they fail — banks are under pressure to deliver on digital services. But their success (or otherwise) will depend on how well they manage their digital data and, in particular, how willing they are to adopt more agile, scalable, cloud-based solutions to underpin their new services.
Adopting New Technology in a Risk-Averse Sector
The UK’s financial services sector is undoubtedly slow when it comes to adopting new technology. Indeed, many UK banks continue to rely on mainframes. This cautiousness stems from the continued rise in cybercrime and the fear of non-compliance with FCA and data protection regulations.
Banks have to tread a thin line. They do want to embrace technology that will help them scale and support customer demand for digital services. But they can only do so with an IT infrastructure that keeps out cybercriminals, hackers and anyone else without explicit authorisation to view the data. So, if their legacy IT systems are secure and protect customer data from cybercriminals, banks do not want to risk implementing new solutions that could leave them exposed — even if those old systems make them less nimble and less responsive to changing customer demands.
Open Banking and Shared Financial Data
The increased digitalisation across the sector leaves banks facing a second security and data management challenge. Once, they only had to worry about managing their data and keeping it safe within their closed IT environments. Now Open Banking — a UK government-backed programme — encourages banks to securely share their data with trusted third-party financial services providers via an API (Application Programming Interface).
Typically, these third-party providers offer apps to assist with utility bill management, accounting and auditing, and savings (usually rounding up apps). Once a user grants authorisation, the app directly interfaces with that user’s current account. Customers — whether individuals or SMBs — love them, but for banks, they’ve meant a reassessment of security and data management strategies.
What Constitutes Good Data Management?
To begin with, it could mean switching to a single data management solution. Banks historically have deployed several different products to manage their data. Multiple applications add complexity and need more people to oversee them operationally. This approach will add cost, risk, and ultimately will not align to their digital transformation agendas.
Running multiple data management solutions makes it harder to get a holistic view, understand customer behaviour and predict future trends. It also creates unnecessary security risks. Consolidating data management platforms reduces these risks and costs. At the same time, fewer inter-app data transfer points decrease the number of potential weak-link entry points for hackers and cybercriminals. From a practical point of view, using a single data management solution also enables all relevant data points in a hybrid world to be viewed on a single pane of glass — making it much easier to digest, interpret and deliver data management as a service back to their internal clients.
Automating data management components can improve security and cut costs by reducing human contact. In addition, it enables faster and more accurate data management that can accelerate cloud adoption where data management is key to success.
It’s worth saying at this point that banks have been slow on the uptake of both public and private cloud technology, and are clearly still concerned about security and privacy threats. This is despite the fact that cloud computing — particularly with a zero-trust approach to security — has become a lot safer and carries far less risk.
In the middle of 2019, the Bank of England published a report that estimated the world’s largest global banks conducted just a quarter of their activities in the public cloud or software hosted in the cloud. But change is happening, albeit slowly. Larger banks have started to recognise that cloud computing holds the key to running an agile business — allowing them to scale their online services and safely store, process and mine vast amounts of digital customer data.
The maturation of the hybrid cloud market may have played a role in increased adoption and allayed many of the sector’s previous doubts. A hybrid cloud infrastructure combines public cloud, private cloud and on-premises architecture, giving users the flexibility to keep some applications and systems (those with particularly sensitive information, for example) within their own four walls while still being able to migrate other systems. It’s an elegant and cost-efficient way to balance security, scalability and compliance.
Demand for the Future
With so much change taking place across the UK banking sector, data management has never been more critical. Open Banking, consumer demand for digital banking, and app-based banks like Starling and Monzo are all shaking up the market. But the threats from cybercriminals and the risk of falling foul of FCA regulations are still very much present. And, while navigating all these challenges, banks still face pressure from shareholders and investors to make a profit, retain customers and grow the business.
For these reasons, data management strategy — and linked to that, the pace and effectiveness of cloud computing adoption — are now two of the most significant determining factors in how banks cope today, and how effectively they will operate in the future. As such, 2021 should be the year that most banks and financial organisations embrace and invest in new technology when it comes to data management.
WHAT BANKS NEED TO KNOW ABOUT OBSERVABILITY
By Abdi Essa, Regional Vice President, UK&I, Dynatrace
More aspects of our everyday lives are taking place online – from how we work, to how we socialise and, crucially, how we bank. To keep pace, financial organisations have stepped up their digital transformation efforts, supported by a shift to dynamic multicloud environments and cloud-native architectures. However, traditional monitoring solutions and manual approaches cannot keep up with these vast, highly complex environments. As a result, many banks are turning to new, observability-based approaches to understand what is happening in their digital ecosystems. These approaches, however, bring new challenges to overcome.
Here are six things banks need to know about observability to ensure they can gain true value, combat the complexities of their modern multicloud environments, and drive digital success in 2021 and beyond.
- Most banks have very limited observability
The scale, complexity, and constant change that characterises hybrid, multicloud environments presents a real challenge to banks’ IT teams. Our research found that, on average, banking digital teams have full observability into just 11 percent of their application and infrastructure environments – not nearly enough to understand what is happening, and why, across the digital ecosystem. Additionally, 87 percent said there are barriers preventing them from monitoring a greater proportion of their applications – including limited time and resources. Without improving observability across the entire cloud environment – by drawing in metrics, logs, and traces from every application – banks’ IT teams are limited in the success they can have driving initiatives to deliver the new banking products and quality user experience customers want.
- You can’t bank on manual approaches
With many banks beginning to rely on more dynamic, distributed multicloud architectures to deliver new services, IT teams are stretched further than ever. More than a third of financial services organisations say their IT environment changes at least once per second, and 65 percent say it changes every minute or less. This rate of change creates a volume, velocity, and variety of data that has gone beyond banks’ IT teams’ ability to handle with traditional approaches – there’s no time to manually script, configure, and instrument observability and set up monitoring capabilities. The need for automation is therefore critical. By harnessing continuous automation assisted by AI in place of manual processes, teams can drastically improve observability to automatically discover, instrument, and baseline every component in their bank’s cloud ecosystem as it changes, in real-time.
- Cloud native adoption is obfuscating observability
To remain agile and keep up with the rapid pace of digital transformation, banks are increasingly turning to cloud-native architectures. Our research found 81 percent of them are using cloud-native technologies and platforms such as Kubernetes, microservices and containers. However, the complexity of managing these ecosystems has made it even harder for banks’ IT teams to maintain observability across their environments. Nearly three-quarters of banking CIOs say the rise of Kubernetes has resulted in too many moving parts for IT to manage, and that a radically different approach to IT and cloud operations management is needed. Such an approach should be based on a solution that is purpose-built to auto-discover and scale with cloud-native architectures.
- Data silos result in tunnel vision
To boost observability, many banks have simply thrown more tools at the problem. Our research found that most organisations use an average of 11 monitoring solutions across the technology stack. However, more isn’t always better, and multiple sources of monitoring data can result in fragmented insights. This fragmentation makes it harder to understand the full context of the impact that digital service performance has on user experience and unravel the nearly infinite web of interdependencies between banks’ applications, clouds, and infrastructure. Instead, financial organisations should seek a single platform with a unified data model to unlock a single source of truth. This will be integral to ensuring that all digital teams are on the same page, speaking the same language, and collaborating effectively across silos to achieve business goals.
- Observability alone is not enough
Simply having observability doesn’t help banks achieve tangible benefits or reach their business goals. To get true value, the data processed must be actionable in real-time. As such, observability is most effective when paired with AI and automation. This observability enables teams to instantly eliminate false positives, prioritise problems based on the impact it will have on the wider organisation, and understand the root cause of any problems or anomalies so they can resolve them quickly. The alternative is to manually trawl through dashboards and data to find insights, which is incredibly time-consuming and makes it almost impossible to act in real-time. Our research found that 94 percent of CIOs think AI-assistance will be critical to IT’s ability to cope with increasing workloads and deliver maximum value to the organisation. AI is clearly no longer just a ‘nice to have,’ but a business imperative.
- Observability isn’t just for the back end
Far from just having observability of their multicloud environments, banking IT teams also need to be able to see how the code they push into production impacts the end-user experience, and how that in turn affects outcomes for the business. This is a major goal for many CIOs, with 58 percent citing the ability to be more proactive and continuously optimise user experience as a benefit they hoped to achieve from increased use of automation in cloud and IT operations. By harnessing automatic and intelligent observability, banks’ digital teams can unlock code-level insights and precise answers to their questions about user experience and behaviour, so they can continuously optimise their banking services.
Observability is key for modern financial organisations looking to accelerate their digital transformation. By understanding these six key things about observability, IT teams will be better placed to master dynamic, multicloud ecosystems, and drive better digital banking services for the business and its customers.
NEARLY HALF OF BUSINESSES NEED MORE ASSURANCE ON DATA SECURITY TO ADOPT OPEN BANKING
- Financial services businesses in the UK and Netherlands call for better education, training and increased guidance on data security issues to propel adoption
- Study of 800 senior professionals from banks, lenders, personal finance management tools (PFMs) and retailers, in the UK and Netherlands
42% of financial services businesses want better support and guidance on data security in relation to open banking, according to the latest research by open banking provider YTS.
The survey of financial professionals including banks, lenders and retailers, revealed businesses want better education and training, alongside increased guidance, to help reduce fears around the security risks of open banking adoption. Respondents also stated that they wanted this support to come primarily from regulators.
This ranked higher than taking a ‘wait and see’ approach by allowing more time for open banking technology to develop (39%), which has often been cited as a way to assuage data security concerns, but as YTS’ data demonstrates, won’t solve the issues businesses are facing.
Lack of customer and business willingness to accept risks around data security were the second and third most cited factors threatening the progress of widespread open banking adoption, on 27% and 25% respectively. Over a third of respondents (35%) also believe that an ‘unfriendly’ regulatory environment is threatening the progress of widespread open banking adoption.
YTS is calling for the entire open banking and financial services industry to do more to empower businesses to adopt open banking technology, creating a more nurturing environment for the technology to thrive. This can primarily be achieved by introducing better education and accessible, transparent support for businesses looking to adopt the technology. This must be the spearhead of an industry-wide effort to banish myths and create more solid foundations for growth.
Roderick Simons, Chief Technology Officer at Yolt Technology Services comments:
“To fully maximise open banking’s potential, we must all do more to educate businesses and consumers about its security foundation . Open banking means their financial data is more protected than ever, with the individual in charge of whether their data is shared or not and secure APIs preventing risks from unwanted third-party access. We want to work with regulators, financial services institutions, and businesses themselves to lead the way in educating, training, and supporting businesses to overcome misperceptions of open banking. Doing so will unleash the power of open banking and create huge opportunities for both consumers and businesses.
“Once there is widespread adoption and trust in open banking technology, stakeholders across the open banking ecosystem can then turn their attentions to creating an open finance framework that gives consumers the ability to access their entire financial footprint in one place.”
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