by Hans Tesselaar, Executive Director of BIAN
Publication: The Information Daily
Recent IT outages have brought the reputation of our established high street banks into question.
Outages on the most popular shopping day of the year and payment delays of up to 4 days have created a burden on the relationships consumers have with their banks.
Online banking disruptions and high street branch closures have meant that some customers feel that banks are not paying attention to their needs. From the point of view of the banks, these outages have resulted in significant fines that could have been prevented if they had invested in their IT infrastructure.
The British Bankers Association has stated that the number of mobile banking transactions has soared over the past year, with smartphones and tablets used for 18.6 million transactions a week, so banks now have no choice but to turn their attention to their IT to ensure they keep their customers satisfied.
What alternatives are there for consumers?
Challenger banks have been hitting the headlines recently, with consumer interest leaning towards finding alternatives to traditional banking platforms. Metro Bank has recently opened 10 new branches, and 63% year on year growth shows that slowly but surely consumers are considering Metro as a viable and trustworthy option for their finances.
Other challenger banks such as Oaknorth are awaiting licenses that will allow them to launch in the UK and challenge the long standing banks we are accustomed to on our high-street.
Challenger banks have the ability to combine an entrepreneurial energy with the established banking services that we need. They do this by offering digital services that are combined with the traditional lending usually provided by large corporates, opening the door for a host of new financial opportunities for smaller businesses.
Challenger banks have thrived off of the fact that they don’t have a legacy holding them back, both in reputation and within their IT infrastructure.
Banks have infrastructure that is expensive to maintain and inefficient to use. This adds an additional barrier for banks to embrace new technologies. The combination of IT outages and the rise of smaller agile competitors could result in the demise of the traditional banking industry as we know it.
What can banks do to stay ahead?
Due to their decades of heritage, banks will always be key players in the financial industry. However, this same heritage is the reason for the antiquated technology systems and outdated services that banks still employ.
To prevent future IT outages and to stay ahead of new competitors, banks should concentrate on innovating their current IT infrastructure to make way for future innovations.
Unlike other aspects of the industry, the banking sector could benefit from collaboration instead of competition. A standardised IT infrastructure which aligns all banks across technology will allow for the whole industry to be built on a solid and non-competitive foundation that can then allow banks to differentiate themselves through their services and products.
The financial industry will not be out of the lime light any time soon, but a pro-active approach to sorting out underlining technology issues will allow banks to be better prepared for what is expected of them in a rapidly changing world.
Alternatives to traditional banking services will continue to grow in popularity. Banks need to act now and concentrate on improving their underlying infrastructure issues to ensure they are still key players in the highly demanding financial sector.