The Business Case

 

Amazon Web Services was formed 13 years ago.  Box file sharing service is 16 and Microsoft Azure turns eleven.  These companies have made massive investment into their technology and it is becoming the standard for many industries.  Today, it is widely acknowledged that a modern infrastructure environment offers sustainable benefits to banks, their employees and ultimately, their customers. 

 

Today’s hot topics range from crisis management to digital banking to customer experience.  Behind these are the real challenges: Automation, Data Management, adoption of Emerging Technology, Service Metrics and Competency in Risk Management.

 

Timing is everything when designing solutions best for a bank.  While the quality of a solution greatly determines its strategic success, timing can be at least as important.  Its time to consider whether the time is right for a bank to plan for these challenges and begin implementation of technology associated with them.  

 

In a relatively short time-frame, the above referenced technology providers have become the universal gold standard for many new business challenges.  Major companies, including Netflix, Adobe, Apple, Samsung, BMW and Facebook, have all adopted them in a big way.  However, even a few years ago, the mere mention of a cloud-based solution or in house developed data management initiative in the boardroom of a major bank would likely fall on deaf ears.  For many years, banks have used their core processor, third party applications or aged, legacy software for analysis of their own bank.  Some cloud use was implemented for basic, non-critical systems, such as email, customer relationship interface and individuals file transfers and storage.  But banks were not ready to discuss moving these in house.  Instead, they relied on the trusted strategy of building out their bank IT on core partners or non-owned software applications.  Things have changed.

 

Recent developments impacting three vital areas are the catalyst for banks rethinking their data strategies: Security, Regulation and Customers.

 

Security: Data security was the most often-cited reason for banks not adopting ambitious data strategies.  But recently, the level of security available for in house data storage or the cloud is at least as good as that within bank data processing centers.  The major players take data security very seriously, and security standards are among the highest available.

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Regulation: In the past, the regulatory agencies have shown concerns about banks developing internal data management tools, business analytical services or using the cloud for customer data, due to perceived security risks.  They also worried about the implications of the concentration of so much data residing with the big cloud providers.  However, regulators now acknowledge the benefits of new Microsoft applications and cloud availability to banks, and they are starting to adapt to this new technology.  Moreover, together banks, Microsoft and cloud providers are engaging with the regulatory bodies to educate them about these technologies and what are the benefits.  In many circumstances, the bank regulatory agencies are using these new business analytical services for their work in determining the performance of banks.  Banks can leverage the massive investments of Microsoft, Amazon and Google, so their business analytical services or clouds can make banking more democratic and competitive.

 

Regulators also recognize that cloud technology can provide a very secure environment, which is better than most banks could achieve themselves.  In return, banks are starting to get more guidance from regulators regarding their use or outsourcing, and how they can leverage these business analytical services to enable them to focus on banking rather than IT.

 

Customers: In the age of the great customer experience, customers have high expectations – and the expectations keep increasing.  Banks are under tremendous pressure to deliver innovative digital solutions to a business customer base that expects to transact instantly, anywhere, and at any time.  These new dynamics are causing banks to rethink how best to build and deliver banking solutions.

 

Many banks are looking to better understand their own data, for product changes and deployment of new banking solutions, including MIS and work at home ability.  In house business analytical services can provide the best scope and scale to develop and deliver real-time services across any device without a significant investment in IT infrastructure.  Data, Dashboards and Reports can be accessed by customers and employees outside of the office environment and embedded into typical Microsoft applications, on multiple devices.  A simple PowerBI solution can offer a foundation on which to see performance insights using big data and visualizations and provides the task of maintaining data transparency in multiple bank jurisdictions.  In many of the largest banks, business analytical services have become top of the agenda.

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Use your Bank’s Core Banking System Better

 

Gartner defines a core banking system as “a back-end system that processes daily banking transactions and posts updates to accounts and other financial records.  Core banking systems typically include deposit, loan and credit processing capabilities, with interfaces to general ledger systems and reporting tools.”  In simple terms, a bank’s core refers to the mission-critical systems that facilitate virtually every transaction for a bank. Typically, bank cores are monolithic and often mainframe-based applications that can hinder innovation.  Seemingly simple updates can take a month, while a major enhancement can take upward of a year to introduce, and the custom change control costs could be a barrier. 

 

For most banks, MIS data is provided through the bank’s core provider.  Many banks carry the burden of legacy systems and are working with third parties to meet customer needs, report performance and accelerate progress.  Multiple vendors and their associated applications seldom interface well together, and many updates break existing interfaces entirely.  Changes to the data for internal use require use of vendor applications or more traditionally, use of Microsoft Excel. 

 

Banks can and should leverage the massive investments of Microsoft, Amazon, et al, and can exploit their computing, tooling and operations power without any significant expenses and other disruptions to their current MIS scheme.  In practice, they offer virtually infinite computing capabilities and resources (servers, storage, networks, business analytical applications and services) that are delivered as a service to the Bank.  In today’s world, where the focus is on enhanced user experiences and innovative products being brought to market fast, a core that can’t support these requirements is an impediment to progress. 

 

An in-house business analytical service built on Microsoft’s PowerBI service can serve as the foundation for reporting performance and managing risks.  Beyond the additional benefits of cost reduction, scalability, and ease of deployment, interactive dashboards offer greater agility to management and it enables the bank to see things that were previously impossible.

 

Strategic Advantages

 

With banks under pressure to transform and innovate quickly (example: adjusting to Covid-19 and PPP implementation), delivering innovation and information on a legacy IT infrastructure is unsustainable.  Implementing an in-house business analytical service is the right approach, but making a start is never easy.  Typically, poor data management and multiple systems (i.e. through M&A activities), are reasons banks cannot easily move or change the existing MIS reporting.  

 

However, banks can answer these fundamental challenges/questions:

 

• Which existing bank applications could be moved to an in-house business analytical service or the cloud to reduce costs and increase agility?

• Which Excel based MIS could be replaced with a PowerBI-native Dashboard or re-architected for a PowerBI environment?

 

Normally, when banks start moving MIS into a new environment or format, they will avoid a wholesale migration.  A gradual movement of reports or components, development and support strategies will ease the transition and build the foundation for an in-house business analytical service and its applications suite.  This can be done with us in stages:

 

1. Establishing a Development Environment - Enabling MIS development, architecture and user input that is business line native.

2. Starting Simple Application Migrations - Non-critical back-office use where rewriting for the existing MIS makes sense, including off-the-shelf applications, which can be migrated to a PowerBI dashboard.These can generally be moved with almost no (or very little) code modifications.Typical examples include Credit Administration, Branch metrics, daily MTD, YTD loans and deposit changes, etc.

3. G/L Component Re-architecture or Replacement - Banks at this stage will be looking to break apart their monolithic core systems into drill down subcomponents of the G/L based on business function; these sub-components can be rearchitected or replaced via a more interactive dashboard that are easy to consume and integrate with.

4. Core Data Modernization Testing - Banks will need to completely test their re-writing to the business analytical service and associated dashboards to ensure their MIS remains accurate, dimensions and measures don’t break and the initial dashboard visualizations are appropriate.

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