Can reforming bank IT boost customer service?

A typical UK high street bank's ICT systems are extremely complex and the root causes of such complexity are myriad and varied. Many banks have spent the past 10 to 15 years patching legacy ICT systems, implementing shared infrastructure across group subsidiaries, and adding new technology and infrastructure on top of existing solutions. Mergers and acquisitions further add to the strain as banks struggle to integrate core systems and branch networks. The result is a truly complex modern day ICT landscape, writes Harry McDermott

A typical UK high street bank’s ICT systems are extremely complex and the root causes of such complexity are myriad and varied. Many banks have spent the past 10 to 15 years patching legacy ICT systems, implementing shared infrastructure across group subsidiaries, and adding new technology and infrastructure on top of existing solutions. Mergers and acquisitions further add to the strain as banks struggle to integrate core systems and branch networks. The result is a truly complex modern day ICT landscape, writes Harry McDermott

At the same time, customers have become more and more sophisticated in their banking needs and expect to be able to conduct their banking to fit in with their lifestyle; whether that be 24/7 banking; mobile banking on the go; or the traditional in-branch banking. All three have different ICT requirements in order to satisfy the range of customer needs.

A bank that can upgrade to a more connected system providing overall visibility of a customer’s interactions will take the lead in customer service and win customers from the competition when the new account switching rules come into force in September 2013. Those banks that have a single view of the customer have opportunities to cross-sell and up-sell products and services that the customer may be more amenable to buying – a coup during a time when banks are under increasing pressure to maximise revenues.

A recent report from Intellect stated that banks spend 80% of their ICT budget maintaining and operating legacy systems, leaving just 20% for new projects. Yet of this 20%, 80% is spent on compliance-related work, which leaves just 4% of the total IT budget available for improving technology and processes through innovation. These statistics ably demonstrate the constraints within which banks are forced to operate.

Many of our banking clients come to us to aid them with updating their legacy systems. It is not a bank’s lack of desire to innovate that is holding them back from spending on new systems but the sheer scale of maintaining a complex network of infrastructure. They recognise the need to future-proof their systems and provide an integrated, multi-channel approach that will aid customer service and retention.

Practical solutions

The key to solving these challenges lies with a change in mindset. Banks have become caught in a cycle of ICT budget cuts as well as budgets being taken over with fire-fighting existing issues. The only way to escape is to develop a longer term strategy which fosters a culture of innovation.

Change will not be achieved overnight, and an effective change management strategy should reach many years into the future. This may seem daunting but a long-term plan is the only way to solve such deep-rooted issues. Banks need to recruit senior ICT professionals with the right mindset, skills and stomach for the fight who can drive innovation. ICT is well placed to take the lead but it requires the right people to lead the charge and without these key figures on board the ICT department is often reduced to playing a facilitating role.

Banks should also focus on key areas first and look at what they can do to improve the peripheries and customer touchpoints with the end goal of improving service.

The future

Banks recognise the need to reduce cost and make major improvements to their ICT systems. But compliance is a heavy burden and ICT budgets are largely consumed by money-hungry legacy systems which are expensive to operate and maintain. The irony here is that in technology terms, new entrants to the retail banking market who are unburdened by complex legacy systems are probably better placed than established players on the UK high street.

As the UK government seeks to promote competition between banks and enable customers to switch providers, banks need now more than ever to develop a culture of innovation and investment. This will not only improve service to their existing customer base but encourage new customers and ensure the long term health and stability of retail banks is sustained in an increasingly competitive and ever-changing environment.