The financial services industry is under siege. Traditional banks are facing competition from non-banking organisations providing banking services. The diversity of non‐bank competition is increasingly threatening, and consumers are drawn to non‐bank competition out of convenience, efficiency, security, and the sheer reality that it is state‐of‐the‐art.
The IT leaders in financial services industries have huge challenges to address on a daily basis, and also to ensure that any and all technologies utilised must be able to grow and be sustainable for the long haul. And coupled with the disruptive compression from the non‐bank competition, there is even more for the IT leaders to grapple with on a real‐time and pressing basis.
Disruption of non‐bank competition
In 2014, leading business consultancy McKinsey & Company published a piece on "The digital battle that banks must win", which outlined what traditional banks face today against a new generation of non‐bank competition which have been empowered and emboldened by adopting cutting‐edge Web and infrastructural technologies.
For example, well-known companies like PayPal, Apple, Square, Google, Amazon, Western Union, are examples of non‐bank competition that are incredibly agile with cutting‐edge cloud and mobile applications, and enticingly convenient to consumers who can now make transactions in a variety of ways that prior to the emergence of such non‐bank providers, only credit‐card issuing banks could serve.
Closer to home, the new Asia giants such as Alibaba, Tencent, and even smartphone vendor Xiaomi, have become the new non‐bank competition to traditional banks, by providing financial related services that integrates with their online commercial offerings, such as convenient banking and payment services, previously available through banks. They have millions of customers, and are nimble and are more competitive in providing financial‐related services that also seamlessly integrate with their online commercial offerings, something sorely lacking in pure‐play financial institutions.
The challenges of legacy IT systems
Unlike manufacturing plants which base their operations on a single predominant enterprise resource planning (ERP) system supported by a few auxiliary solutions, banks running legacy systems often stack on layers of technology, invariably ending up with an unmanageable technology "black hole."
This complexity, compounded by running on legacy systems, the lack of efficiency, obsolescence, and difficulty in servicing, programming, or upgrading become the crippling pains every day.
Replacing such legacy systems means downtime, which can be unacceptable for customers and other stakeholders. Finding developers to service, upgrade or debug old code running on archaic languages can be difficult too. Another pressure to migrate comes from regulators as well, since legacy systems that are obsolete will not only fail at the advanced cyber‐threats, but will also progressively fail to address industry and customer demands today.
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