Ian Perry, Principal Solutions Architect at Zscaler, shares his thoughts on financial services modernisation with Finance Monthly.
This past year has seen the financial services industry speed up the implementation of many digital processes. Not only did the global pandemic force banks to shut, employees to work from home and consumers to use digital payments services both online and in-person, it has also raised questions around the brick-and-mortar heavy model of banking, with many pointing to a fully digital financial future.
Maximising digital investments
Despite the technical capabilities available to assist in such a move, no analysis of how the financial industry is attempting to modernise would be complete without a reference to the sector’s legacy infrastructures holding them back.
This isn’t because of a lack of desire to modernise. In fact, most financial firms are quite well advanced in their cloud journey. The financial services industry as a whole has already invested heavily in digital transformation and is well aware of the benefits of moving workloads to the cloud in the backend. However, many financial services CTOs have not necessarily been able to move the corresponding infrastructure and users along the same path. This means that unfortunately, many financial services firms have been unable to fully realise their investments in new applications and cloud platforms to the frustration of many financial services CTOs and CFOs alike.
Many financial services are unfortunately falling into the trap of developing hybrid infrastructures that are flexible enough to adapt to some new digital services and requirements yet are still based within old foundations. We often see core banking applications stay in mainframe on-premise networks, whilst more general apps and functions, such as office and admin related tools, are moved to the cloud. For example, there has been a huge uptake in banks migrating to the cloud-based Office 365, which promises the agility required to adapt to our new digital ways of working. However, all the benefits and functions of new digital tools like Office 365 are often at odds with legacy network set-ups, and this inability to harmonise new tools with old systems is holding banks back.
The financial services industry as a whole has already invested heavily in digital transformation and is well aware of the benefits of moving workloads to the cloud in the backend.
The pandemic has only led to further existential frustrations around the banking model itself. For example, is there really a need for massive HQ locations? Is there still a demand for individual branches, which require complex architectures to secure all traffic? There are many predictions as to what the branch of the future might look like, but ultimately, the industry must face the facts that there will be less reliance on branches and more pressure on digital services.
Staying ahead of the curve
As other industries continue to innovate at a quick pace by maximising their cloud deployments, consumers and employees alike will increasingly expect seamless experiences across all their touchpoints with a financial services organisation as well. Taking a page out of the digital transformation of other consumer services, the finance industry must assess the journey of banking from a user’s point of view, rather than driven by processes and necessity. “Digital transformation” for banks is no longer providing the capability of a digitally scanned cheque – the ecosystem is far more reactive and more user-focused as the market opens with more options available, many of which are geared to disrupting legacy organisations and processes.
As such, agility is more important than ever if the financial sector hopes to adapt to new business models, while managing and deploying products remotely worldwide in a consistent manner. For financial teams spread across the world especially, agility in the market is more important than ever to manage and deploy products worldwide in a consistent manner. Many banks own different brands to drive differentiation in regional markets, and this behaviour needs to be reflected in their operating model. Not only do regional compliance needs apply, but markets have very different demands based on their local consumer needs.
These growing pressures don’t necessarily mean that financial firms have to undergo complex and expensive overhauls of their existing legacy infrastructure to fully realise the promise of the cloud. A future-proof infrastructure that can support flexible requirements during the pandemic and beyond, while delivering a great user experience, increasing productivity, and supporting business continuity is possible to implement. Indeed, true network transformation drives beneficial outcomes from a risk and cost reduction perspective without requiring heavy technical lifting.
For example, the growing popularity in the financial sector of the “Zero Trust” approach has been touted by many as a solid solution for financial services in particular. Many banks still rely on the legacy “perimeter” approach to securing their data – which focuses on stopping intrusions. However, the Zero Trust approach instead enables banks to “trust no one” as default, and requires further security before allowing access to secure assets.
This is every banking CTO’s dream as a Zero Trust model allows for traffic to run securely through the internet instead of having to run through corporate IT, which enables banks to have maintenance-free branches. Individual branches are not only more flexible and significantly easier to maintain – but costs are dramatically reduced. Furthermore, a Zero Trust model allows banks to fully realise the benefits of cloud-based tools like Office 365 as they can be deployed safely through the internet, rather than relying on legacy corporate IT systems. From this transition alone, it’s possible to see how financial services infrastructures can enable convenience and simplicity. A complicated refurbishment is no longer required to implement digital delivery of all the key requirements that customers expect from banking services, but with the same – if not more advanced – secure and frictionless experiences offered by other industries.
Looking ahead, it’s clear that financial services need to urgently assess their capabilities for keeping up customer demands and ability to innovate quickly, if they want to survive in our rapidly changing world. Only by truly realising the benefits that were promised by the cloud infrastructure financial services were so quick to adopt, can the industry shake off the curse of legacy infrastructure for good.