Lobby group techUK said having "outdated technological foundations" constrains the ability of traditional banks and other incumbents in the financial services sector from meeting the challenge of innovative new entrants to the market. It also impedes them from meeting the challenge of increasing regulation, cyber risks and fraud, as well as in responding to customers' demand for "24/7 access" to services via multiple channels, it said. TechUK said financial services companies have been too slow to deploy new technologies (20-page / 1.11MB PDF) and that "a more decisive and faster rate of change" is needed. It said senior managers need to drive this change. "CEOs, CFOs and CTOs of the major companies need to stand back and take the reasoned view of where their bank or insurance company needs to be in five years’ time," techUK said in its new report. "This is not fundamentally a technology question, but an economic one. Value will be created from the exploitation of an individual enterprise’s knowledge of its niche in banking or insurance and from its relationship with its customers. It will not be from its ability to run a server farm, write applications or shuffle pieces of paper." "This requires that banks and other financial services companies undertake an honest analysis of their various capabilities and map them according to the differentiation that they offer to the enterprise," it said. TechUK said financial services companies need to think about outsourcing IT functions that are "not offering specific differentiation" and that there will be an increasing role for cloud-based systems in the market once "full approval" of cloud computing is given by regulators. Banks and insurers also need to deploy new technology to improve the customer experience and ensure they use the data they hold more effectively, it said. "By having systems capable of utilising operational, customer and transaction data across the whole organisation, management are able to exert greater control over their business in terms of capital and resource allocation, risk management and putting the right product in front of the right customer in a timely manner," techUK said. "Another clear benefit is in the management of the relationship with the regulator, in part to help ensure that the enterprise avoids the swingeing fines and sanctions. Failure to manage operations and data effectively cost the UK retail banking sector over £20 billion in the case of the PPI scandal." TechUK recommended that established companies in the financial services sector work with regulators when engaging in digital transformation projects and also "shed their incumbent mindset and adopt a disruptor’s point of view". "This will facilitate the use of new technologies such as cloud services and big data and analytics and enable sustainable innovation through a culture of change, based around a central digital platform and driving seamless customer and user experience," it said. Earlier this year a report from software giant Oracle said that banks cannot expect to compete with "digital-savvy" new entrants to their market by 'bolting on' new software to old systems. At the time, technology and financial services expert John Salmon of Pinsent Masons, the law firm behind Out-Law.com, said: "Many traditional banks have long-standing legacy IT infrastructure that has proved to be robust and reliable. A complete overhaul of these systems to new digital technology is viewed by many in the industry as too costly and risky, with banks keen to preserve data security and avoid outages that can lead to bad publicity and regulatory fines." "The legacy IT estate will usually also be accompanied by a web of existing contractual arrangements with suppliers. Those agreements either need to be renegotiated or terminated to enable digital transformation to take place," he said. Salmon said that regulators have a role in helping banks to digitise and satisfy consumer demands. In May, the Financial Conduct Authority confirmed it will seek industry's views on barriers to digital and mobile financial services innovation later this year. Last year techUK called on banks, the UK government, regulators and IT suppliers to develop a "digital modernisation strategy" to help the payments industry harness digital technology. It said that the legacy systems used in the financial services industry on the one hand support "economically critical banking services … including the processing of transactions" but on the other lead to "information silos" and creates challenges in relation to how banks introduce new technology to better serve customers.
In a 10 page statement , lobby group techUK has said " outdated technological foundations " constrains the role of traditional banks and other players in the financial services sector from meeting the challenge of innovative new entrants to the market . TechUK said the industry has been too slow to deploy new technologies adding that a decisive and faster process of change is needed with senior managers leading the change .