‘Back office’ really doesn’t do justice to the pivotal role played by banks’ operations teams. It conjures an image of people dutifully beavering away to keep the lights on, happy for those on the frontline that is the trading floor to take the credit and
glory. Nothing could be – or at least should be – further from the truth.
In Accenture’s 2018 North America Banking Operations Survey entitled “Back Office, it’s time to meet the customers”, the top three greatest strategic priorities shared by the 80 bank leaders questioned were customer experience (74 percent), fraud/risk
management (70 percent) and operating cost reduction (58 percent). While all agreed on the need for a “repurposing of the back office”, the report poses the question as to whether the “typical bank back office will be pliable enough to shapeshift into an enabler
of the future-ready bank”.
Facing an existential challenge from fintech start-ups, the fate of a bank’s future competitiveness and indeed relevance rests on the shoulders of the Ops team. The reality is that it is the ‘back office’ which is the driving force for innovation.
However, where fintechs are working with a greenfield, free to innovate and redefine the rules of the game, big banks are constrained by legacy. The pressure on them to modernise and automate
processes and back-end systems is immense and unrelenting. But they are going into battle with one hand tied behind their back. In an industry where trades are conducted in milliseconds, things can seem to happen in warp speed. And yet the combination
of legacy processes and regulatory red-tape dents their ability to move quickly. Put simply, innovation takes time.
And it’s not just about the innovation; that’s just part of the story. No idea is worth anything if it can’t be put into practice. They’re called the ‘Operations’ team for a reason – everything they do has to come back to improving the operational efficiency
of the bank.
The production deployment of the new improvements is at least as important as the innovations themselves.
There’s a great visual metaphor in the Accenture report which compares bank operations’ transition to Play-Doh. What began as a product for cleaning coal residue from wallpaper transitioned to a best-selling children’s toy, driven by a fundamental shift
in the wider market which made the need for wall cleaning putty obsolete (and as an aside, that the genesis of this idea came from a nursery school teacher and not someone embedded in the business is a invaluable reminder that transformational ideas can come
At the heart of this debate is the realisation that banks’ operations teams need to undergo a mindset change. If they are to compete with the nimble, dynamic and disruptive challengers, they need to think like one. They need to move from the old ‘waterfall’
model of software delivery to a DevOps model of continuous innovation anddelivery.
Research by the managed services provider Claranet found that of 750 IT professionals it surveyed from across Europe, 30 per cent of financial services organisations have already made the transition to a DevOps approach, with a further 61 per cent expected
to make the switch over the next two years. However, at the same time the biggest challenge reported about this shift was operations teams themselves were limiting the potential of DevOps.
The challenge for the Ops team is that they are facing competing pressures. The business wants innovation and for software to be adapted to reflect today’s world and drive competitive edge; but at the same time, they need existing IT systems to be stable
and uninterrupted by changes.
Nowhere is this balancing act more acute than on the trading floor. Every new improvement and innovation must be fully tested and validated before deployment. Remember, this isn’t a fintech-style greenfield – if something breaks, if a trading floor goes
down, that’s millions in lost revenue.
To cope with these competing pressures, they have to look to a DevOps mindset – and with it to embracing automation.
Automation is at the heart of DevOps, with continuous delivery (CD) pushing out software upgrades, patches and changes to configuration. Without it, upgrades, patches and other software improvements are stuck in a pre-production environment until they can
be tested and validated. And until now the solution has been for all this to happen first in the lab, and then only be rolled out into the live trading floor over the weekend, with the Ops team having to quite literally walk
the floor to check every voice trading Turret and Dealerboard.
Proactive automated testing is a significant step in addressing this, not only freeing up back-office time to focus on innovation rather than repetitive testing tasks, but also enabling the business to balance the competing pressures of innovation and production
Put simply, to modernise and compete banks must adopt a DevOps mindset to innovation and deployment. But it must be both. It can’t be all Dev, and no Ops. Only by addressing both, and really nailing the testing and validation, can they move quickly, securely
and safely from the lab to the live production network.