Subscribe to CIO Magazine »

Finance sector: Invest in IT infrastructure or lose customers

Report claims legacy systems are contributing to series of bank IT failures

The financial industry needs to invest in modernising IT infrastructure or risk losing out on customers and revenue, according to a report from UK trade association Intellect.

Following the launch of its Financial Infrastructure Programme yesterday, Intellect has claimed that the complexity of existing systems used throughout the financial sector are hindering the ability of companies to serve customers, and monitor their operations.

In a report published alongside the launch of the programme, Intellect said that the failure to modernise systems has had clear repercussions in recent years. The financial crisis highlighted the inability of banks to extract and analyse data relating to their exposures to risk, while the industry saw a number of high profile bank infrastructure failures last year, such as the RBS IT failure which affected a number of retail banks. RBS has since indicated that it would invest £80 million in updating its systems.

In addition Intellect said that the lack of clear oversight of operations has left companies open to fraud, such as the presence of rogue traders.

Many of these failings have been attributed to faults within legacy systems. Part of the problem is that UK financial sector infrastructure has been developed over 30-40 years, with new systems effectively 'bolted- on' to legacy infrastructure, creating layers of complexity. The report acknowledges that this is to an extent unavoidable, due to the importance of keeping systems online at all times.

In addition, the effects of mergers and acquisitions, such as that of Lloyds Banking Group's acquiring HBOS, has led to significant consolidation of IT systems from data centres to integrated platforms for retail banking, further exacerbating complexity.

However regulatory requirements in the financial industry could offer companies the opportunity to upgrade infrastructure, according to Keith Saxton, Chairman of Intellect's Financial Services Programme, with many organisations having to invest in infrastructure anyway.

Saxton commented: "The challenge for the banks is to see that changes being driven by regulatory mandates are an opportunity to improve their operations and infrastructure on a broader basis - as they will be changing them anyway - and render them more adaptable to a changing market.

"Those banks that act upon this will ultimately benefit from doing so," Saxton said. "Those that don't will ultimately risk losing business to competitors that are able to react in a timelier manner to the demands of their customers."

Ben Wilson, Associate Director for Financial Services Programmes at Intellect commented that UK banks are at a "major inflection point" with regulatory changes and market realignments taking place in the industry, meaning that old ways of working could see traditional big hitters facing a strong challenge from new market entrants.

One of the problems cited by Intellect and its members is a lack of funding outside of core operation infrastructure. It is estimated that 80 percent of bank technology budgets are spent on basic systems, aimed at essentially 'keeping the lights on'. This compares with only 4 percent invested in non-regulatory driven innovation, such as improving the way a bank operates, or customer experience.

As part of the Financial Infrastructure Programme, Intellect seeks to create an open forum among banks, regulators and technology innovators, for the discussion of opportunities and challenges facing the industry's infrastructure, helping to facilitate a regulatory road map and "cohesive vision" to work towards.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Comments are now closed.
Related Coverage
Related Whitepapers
Latest Stories
Community Comments
Tags: infrastructure, IT management, intel, IT Business
Latest Blog Posts
  • 3 Strategies to Manage Compliance Mandates
    Meeting security-related compliance requirements is an increasingly complex job. Follow these best practices to easily manage compliance.
    Learn more »
  • Top 10 reasons to strengthen information security with desktop virtualization
    This paper discusses: • The growing challenge of maintaining information security in today’s evolving enterprise environment • Key advantages of desktop virtualization as an inherently more secure computing architecture • The top ten benefits of using desktop virtualization to strengthen information security • And how you can regain control and reduce risk without sacrificing business productivity and growth
    Learn more »
  • The F5 DDoS Protection Reference Architecture part 1 of 3
    Distributed denial of service attacks (DDoS) attempt to make a machine or network resource unavailable to its intended users, with a wave of crippling attacks on enterprises since 2012. This whitepaper offers guidance to security and network architects in designing, deploying, and managing architecture to protect against increasingly sophisticated, application-layer DDoS attacks.
    Learn more »
All whitepapers
rhs_login_lockGet exclusive access to Invitation only events CIO, reports & analysis.
Latest Jobs
Salary Calculator

Supplied by

View the full Peoplebank ICT Salary & Employment Index

Recent comments