Banking
Three tips to help banks profit from the rise of managed services
Published
6 months agoon
By
editorial
By Chris Mills, Global Head of Managed Services Sales, Finastra
Research from IDC finds that only 29% of banks claim to have a long-term, strategic digital transformation plan in place, despite results showing firms that had invested in transformation saw improvements of 27% in reducing risk, 27% in innovation and 26% in improved customer satisfaction. The days when banks’ IT teams operated in isolation of business goals should be very old news. Effective CEOs build digital transformation into their strategies from the start, and the most successful CTOs understand how to apply technology to achieve business success.
In many ways, CTOs have become more like orchestrators or conductors than individual instrumentalists. They need everybody on their team to work in concert to deliver value according to desired business outcomes. It’s less about building IT from scratch and more about assembling components and making sure that they operate smoothly and cost-effectively.

Chris Mills
One of the most striking findings is that 40% of financial institutions said that the pandemic meant they had to accelerate and increase all of their digital-first initiatives. They had to innovate to remain viable and competitive. It’s also clear that there is no longer just one, singular path of IT delivery. Instead, CTOs are facing multi-threaded challenges. It means CTOs must consider many different deliverables and leverage all the resources at their disposal, including internal and external partners.
Changing customer expectations
The financial services sector was facing a range of external challenges even before the pandemic arrived. For example, from a consumer’s perspective, the exponential advancement of a smartphone’s technological capabilities in recent years has increased their expectations for new updates and improvements. This behavioural change has impacted customer decision-making and they now expect a high level of service and responsiveness, whether they are customers of a retail or a corporate bank.
The banking industry also faces regulatory, compliance, resilience, and sustainability issues. As ESG agendas become an increasingly important priority for financial institutions, pushed by the rise of net-zero targets, CTOs must respond to these demands, and that’s why they see innovation as such a key focus.
But how can financial institutions that are late to the digital transformation party use technology to capture competitiveness and improve responsiveness for their clients?
One approach that has proved successful is managed services, which is a term used to capture the blending of services, product, and functional capabilities. When CTOs consider this option, they need to start by thinking about the business outcomes with the associated technical and functional expertise they need.
This includes the business uptime that is required, scalability and deployment speed. Does the bank need to roll out capabilities across the globe, and does it need to serve only the main financial markets, or emerging markets too?
Another question CTOs must consider is choosing what service partner to work with. Large system integrators have been providing these services for a long time, but a software partner like Finastra has advantages in terms of product proximity.
Service providers must offer tailored products focusing on the needs of its clients. Offering quality software allows banks to achieve their long-term strategic outcomes.
It’s important to look at all areas of a banks’ business, For example, what does the payments team need?
What does the head of lending need? What does the head of treasury need in order to grow their business over the next five years?
With that in mind, I offer three tips to banks when considering managed services.
1. Be very clear about what your business outcomes need to be. Really drill down into KPIs and metrics that we can look at to ensure we provide the service your bank demands. This can range from resiliency, compliance, regulation or even functionality and capabilities – such as how often you require upgrades.
2. Measure and assess your own resources, skills and capabilities. Understand where you want to draw the line between the responsibilities you would want a service partner to take on and what you want to retain. There shouldn’t be any grey areas. You want a clearly-defined line where responsibilities lie, so that everyone is very clear about who’s doing what and how KPIs and service levels will be met.
3. Be prepared to develop a long-term strategic partnership, over five or 10 years. We expect hard questions, and you should be expecting them back – ultimately that’s how good relationships and partnerships work.
As IDC writes in its report ‘New service models to accelerate innovation in banking’ these holistic and software-led models require banks to master a set of new skills, including governance and partner management. Service partners should be industry-savvy, should supply end-to-end expertise, and should be aligned to support the financial institution’s business goals, not just technical KPIs.
Digital transformation infrastructure management requires CTOs to act as a conductor, rather than a solo performer.
Banking
Digital Acceleration – the next buzzword in banking tech? Or a new era for the industry?
Published
7 days agoon
June 2, 2023By
admin
Ove Kreison, CTO at Tuum
McKinsey’s latest report on banking found that traditional banks are spending a whopping 85% of their tech budgets on maintaining legacy solutions, with just 15% going towards building anything new for customers.
‘Digital transformation’ has been the buzzword in banking technology for years, but the figures suggest there’s still a lot of ‘transforming’ left to be desired. Now we’re beginning to see the term ‘digital acceleration’ come to the fore, what does that mean for the state of banking technology? What is the difference between acceleration and transformation, and what should banks and other financial services players do to remain competitive?
Digital transformation – the second machine age which has taken an age!
The idea of ‘digital transformation’ didn’t come out of the blue. Banking – like most other industries post-WW2 – has been experiencing the ‘second machine age’ for decades, exploring how technology can digitize processes and services to make cost, operational and organisational efficiencies. All the while, this process has also made it far easier for companies to be more competitive with new digital products that are slicker, quicker and more user-friendly.
Banks have benefited from wherever they have had digital transformation to date – but it is the digital transformation of core technology stacks that is having the most impact and making banks realise operational efficiencies while making them nimbler to adapt to changing customer needs and remain relevant and competitive in a highly disrupted market. Digital transformation to the core gives banks the ability to launch new offerings to market quicker, renovate and modernize business models, leverage and analyse data from multiple systems taking innovation of the more exciting front-end and customer centric offerings to the next level. Faster speed to market, highly personalised offerings, more agile, more scalable.
Success and progress to date, however, has been slow. Traditional banks especially are lumbered with highly complex and costly core technology stacks. Digital transformation and upgrading these core stacks still remains a priority, but the next wave of digital acceleration is now an urgent priority on the c-suite agenda to ensure banks compete and survive in a rapidly evolving industry.
Digital Acceleration vs Digital Transformation
Digital transformation at its core takes the existing ways companies have run their business and applies new technologies to digitize them – for example, taking a paper-based application process and making it online.
Digital acceleration is different. Here, digital becomes the very core of the business model, creating further new digital processes. It gives the power to not just make existing processes digital but to reimagine how those processes impact and improve the business. Some of the most forward-thinking banks are already doing this. BBVA, the second biggest bank in Spain, is actively and openly seeking to become a software company in the future and has digital at the heart of its offering. It embraced open innovation and new technologies to better serve its customers – for example, it launched an app-based money transfer offering, Tuyyo, in 2017. It’s also exploring how technologies like blockchain can be used to transform fundamental banking services such as loan origination, with the aim of improving the way it runs its businesses.
Co-Value Creation – Going it Alone isn’t an Option
A core facet of digital acceleration – especially in a highly mature and saturated market like banking – will be how banks, fintechs, enterprises and others collaborate to mobilise these more diverse capabilities and expertise, bringing mutual benefits to all parties.
The pace of technological change is so hypercompetitive to the point now where organisations cannot always sustain their competitive advantage or ‘do it all’. Constantly updating your offering to maintain market share and react to new demands has become a necessity for banks, but it is exhausting. More and more banks and FS providers are realising that the strategic resources and capabilities needed to deliver these innovative services lie outside of their business, and given the fast pace of change, developing everything in-house is unrealistic given the skills gap, time and cost constraints. Moreover, tech advances around integration and APIs mean collaborating with third-party experts has never been easier or more effective to bring capabilities that, combined with their own core offerings and customer data, provide an important competitive advantage and valuable proposition for customers.
One brilliant example of this is ING. Recognising the struggles associated with traditionally manual and paper-intensive trade finance processes, it launched a blockchain-based commodities financing platfrom Komgo in 2018 with a consortium of other banks and corporates like Société Général, Citi, and Mercuria. In an age of hypercompetition – mutually beneficial collaboration is the answer.
Transform, accelerate, create
Ultimately, banks can continue to digitally transform while also looking to digitally accelerate. In fact, the two go hand in hand; in order to reap the benefits and be able to consider platform co-creation and digital acceleration, banks need to transform their tech stacks from the core to have the capability and agility to think beyond the realms of their own core business and their own technology. Those that get it right by driving innovation from the core, are reimagining their business models for the digital age, tapping into new revenue streams and becoming more customer-centric are not only more relevant now but future proofed for digital acceleration of the future.
Banking
Banking on legacy – The risks posed by ‘stone age’ banking infrastructure
Published
1 week agoon
May 31, 2023By
editorial
By Andreas Wuchner, Angel Investor of Venari Security
Introduction
If you consider the most significant motivating factors behind cyber-attacks – the promise of large financial reward and the opportunity to cause maximum business and social disruption – it’s little wonder that banks and financial institutions are amongst the most inviting targets for would-be cyber criminals. In fact, according to IBM’s recent report, ‘banking and finance’ was the most attacked industry for the five years between 2015 and 2020 – surpassed only by threats to critical infrastructure in recent years. Successful attacks can provide aggressors with a mass of sensitive personal and financial information, and even access to people’s money itself. Furthermore, a suspension of withdrawals and deposits can cause huge social disruption and reputational damage.
As banks have reacted to years of new regulation and emerging technologies, they often operate with a hugely complicated and disparate technology estates. This provides malicious actors with a wealth of potential attack vectors. A small breach from anywhere in this network can have enormous consequences, and lead to entire systems being overrun. As such, it’s crucial that security teams operate with the highest-grade security possible, including ensuring the strongest level of encryption standards. Banks need to look beyond regulatory tick-box commitments and ensure they are taking proactive and preventative steps to monitor and combat malicious attacks across their entire network.

Andreas Wuchner
However, the ability to react to cyber-threats across a vast estate requires speed and flexibility to quickly react and update security protocols. The sheer volume of legacy infrastructure slows this process down considerably leaving many security teams in a vicious cycle.
The threat of legacy infrastructure
A sizeable proportion of the banking industry still maintains a reliance on systems first developed more than 40 years ago. In fact, many ‘core banking’ systems, like payments, loans, mortgages and the associated technologies, are still coded using COBOL (Common Business-Orientated Language), an otherwise defunct programming language that is older than the internet itself. In the UK and Europe, COBOL remains the ‘backbone of banking services,’ while in the USA, as much as 43% of banking systems are built on COBOL, meaning it underpins much of our financial system.
This presents a huge security risk. While code has been regularly updated over the years, these systems were built when security threats were far less sophisticated, less well-financed and the burden of data was far less pronounced. For several years, governments have pointed towards legacy systems, built using COBOL, as a major cybersecurity threat, incompatible with modern security best practices and solutions, including multi-factor authentication. For example, data from Kaspersky found that businesses with outdated technology are much more likely to have suffered a data breach (65%) than those who keep their technology updated (29%).
A further security consideration is the diminishing number of people who are trained in maintaining COBOL systems. Every year, experienced professionals exit the industry, making it increasingly difficult to service legacy technologies and creating significant delays in patching threats once they’re identified. This lack of supply of sufficiently trained experts, and the demand they face, makes any updates extremely expensive and time consuming.
Furthermore, legacy infrastructure is preventing the secure application of encryption, posing its own distinct cybersecurity and regulatory risks. Encryption is often heralded as a silver bullet solution for data privacy and has been a continuing area of focus for regulatory bodies in recent years. However, banks remain guilty of poor deployment, maintenance and management of encryption – using outdated protocols and inefficient methods of analysing and understanding network traffic. This, coupled with legacy ‘core banking’ systems that are incompatible with modern encryption techniques, equates to a regulatory and security headache for security teams.
Adopting a new mindset
The risks posed by legacy systems and the volume of cybersecurity threats facing banks, mean a concentrated re-think of overall cybersecurity strategy is needed to prevent breaches and ensure data is protected long-term. Traditionally, banks have taken an ‘outside-in’ view – dedicating capacity, finances and knowledge to dealing with threats that are existing, known and well publicised. However, to aid long-term security, this should be superseded by an ‘inside-out’ proactive approach, whereby security teams are cognisant of their own internal systems and where the key vulnerabilities are found. Once banks have a detailed view of the security risks posed by their legacy systems, and specifically what data is threatened, they can address flaws, update these systems and build a stronger overall security posture.
The secure path ahead
Many of our successful high-street banks today have centuries of experience in dealing with social, economic and regulatory upheaval. However, the rapid development and deployment of technology continues to present a unique challenge. Many ‘traditional’ banks have built a complex technology infrastructure through decades of adjustment to new legislation and emerging technologies. While serviceable in the past, fintech start-ups are pushing the long-term viability of these systems to the limit.
Challenger banks have the luxury of being built from the ground-up, prioritising convenient digital services and features, and modern security processes. As the user base of these banks increase, customers are increasingly expecting these features and security from their existing banks, meaning even more complexity added to legacy infrastructures. As outlined by Deloitte, existing firms simply aren’t positioned to support the rising expectation of the market, exposing banks to additional risk and liability.
What’s more, it’s estimated that banks spend as much as 80% of their yearly IT budgets on the maintenance of legacy systems. While an immediate switch away from these systems is unrealistic, there is an opportunity to reduce wasted spend and divert spend towards modernisation efforts. However, while traditional banks may want to adapt quicker to technological advancements, they need to do so while continuing to minimise cyber risk and without jeopardising the security of their data or systems. This means placing cybersecurity at the heart of any modernisation efforts and maintaining a steady rate of change. As more of the technology estate begins to be modernised, the potential risks of regulatory non-compliance will also reduce.
Legacy systems need a considered update
Banking systems have heavily relied on legacy infrastructure for too long now, bringing difficulties in maintaining the highest-grade cybersecurity and in facilitating innovation. The risks presented by novel cybersecurity attack vectors and competition from new and emerging digital services offered by challenger banks are exacerbating these issues. As such, legacy systems need a managed modernisation in the long-term, facilitated in part by a managed redistribution of existing IT spend. However, to ensure long-term security overall, cybersecurity needs to be central to be at the very heart of modernisation efforts.
Magazine
Trending


Taxing times for online marketplaces? Operators must act now to avoid losing sellers
By Niall Kiernan, Senior Director of Product Marketing, Vertex In today’s digital landscape, online marketplaces are an enabler for...


Five Ways to Save Money in Your 20s
Depending on your background, entering your 20s can be a bit of a precarious time. Among the things you’ll need...


Unlocking the Power of Data: Revolutionising Business Success in the Financial Services Sector
Suki Dhuphar, Head of EMEA, Tamr The financial services (FS) sector operates within an immensely data-abundant landscape. But it’s...


Hidden sources of FX risk: could your business be exposed?
Running a business can come with great rewards, but it’s not without risk – something businesses in the UK have...


Preventing fraud and detecting money laundering in real-time
Mathew Hobbis – Chief Architect FSI, Solace The number of payment channels has grown exponentially. The time it takes...


Money where your mouth is: on the need to modernize insurance tech stacks
Tim Hood, VP, EMEA and APAC, Hyland Once upon a time, starting an insurance company was a predominantly physical...


Making the Maths Work: Addressing Inflation Challenges through Measuring and Managing Risk
Matt Clementson, Head of Enterprise UK&I Persistent inflation is highly troublesome for every business – with or without a recession....


BioCatch Strengthens Collaboration with Microsoft Cloud for Financial Services
Collaboration Delivers End-to-End Intelligent Banking Cloud Platform with Online Fraud Detection Powered by Next-Generation Behavioural Biometrics BioCatch, a global leader...


HOW SMALL BUSINESSES CAN FIGHT BACK AGAINST POOR PAYMENT PRACTICES
SMEs across the UK are facing a challenging economic environment and late payments pose a severe challenge to maintaining cash...


Less than a year until EMIR Refit: how can firms prepare?
Leo Labeis, CEO at REGnosys, discusses everything that financial institutions need to know about EMIR Refit and how they can...


Enhancing cybersecurity in investment firms as new regulations come into force
Christian Scott, COO/CISO at Gotham Security, an Abacus Group Company The alternative investment industry is a prime target for...


How to think like an attacker & why it might be critical to your security strategy
Kam Karaji, Global Head of Information Security for Bibby Financial Services, argues at DTX Manchester that the most successful way...


Building a sustainable future – what’s on your agenda for 2023?
The most successful and progressive leaders are embracing ESG or Environmental, Social and Governance principles throughout their businesses, but how...


Digital Acceleration – the next buzzword in banking tech? Or a new era for the industry?
Ove Kreison, CTO at Tuum McKinsey’s latest report on banking found that traditional banks are spending a whopping 85% of their...


One year until EMIR Refit: how can firms prepare?
Leo Labeis, CEO at REGnosys, discusses everything that financial institutions need to know about EMIR Refit and how they can...


In the Name of the Family! Firms with CEOs under clan culture influence are much more likely to be internationally focused
In an increasingly globalised world, it is incredibly rare that a firm can expect to grow in the long-term unless...


Regulations, RegTech and CBDCs – Fintech’s Next Chapter
Teresa Cameron, Finance Director at Clear Junction Over the last decade, the UK has embraced the fintech revolution with...


Gearing up for growth amid economic pressure: 10 top tips for maintaining control of IT costs
By Dirk Martin, CEO and Founder of Serviceware Three years on from the pandemic and economic pressure is...


Find Your Tribe With Content Marketing
Ian is the CMO at Spotler Group Seth Godin, a writer, speaker, marketing expert, and influencer, describes audiences as tribes,...


The formula for success: delivering total experience in financial services
Monica Hovsepian, Global Industry Strategist, OpenText The tumult of the last few years has thrown many challenges at...

Taxing times for online marketplaces? Operators must act now to avoid losing sellers

Five Ways to Save Money in Your 20s

Unlocking the Power of Data: Revolutionising Business Success in the Financial Services Sector

Hidden sources of FX risk: could your business be exposed?

Preventing fraud and detecting money laundering in real-time

Money where your mouth is: on the need to modernize insurance tech stacks

PCI DSS v.4.0 Latest Updates That You Need to Know

RBI’s MASTER DIRECTION ON DIGITAL PAYMENTS SECURITY CONTROLS

EMV® 3-D SECURE: ENABLING STRONG CUSTOMER AUTHENTICATION

HOW TO SIMPLIFY IDENTIFICATION IN THE GLOBAL DIGITAL ECONOMY WITH THE LEI

EXEGER – CHANGING THE PERCEPTION OF POWER

FUTURE FX PROMO
Trending
-
News1 day ago
BioCatch Strengthens Collaboration with Microsoft Cloud for Financial Services
-
Business3 days ago
HOW SMALL BUSINESSES CAN FIGHT BACK AGAINST POOR PAYMENT PRACTICES
-
Finance1 day ago
Preventing fraud and detecting money laundering in real-time
-
Business3 days ago
Less than a year until EMIR Refit: how can firms prepare?