Commercial Banks are at an important crossroads where tech savvy customers, outdated IT infrastructure, and strong regulatory headwinds are all coming together.  Today’s personal and business customers demand and expect their banks to rapidly adopt and integrate the latest technologies to enable anytime access to their accounts and provide the same convenience and flexibility to which they have grown accustomed from other types of vendors.  IT departments are becoming more challenged to keep pace with rapid business change with their legacy systems.  At the same time, regulators are working on new and ever-more complex banking regulations.  For a bank to thrive in this environment, change is inevitable.

Peaceful Coexistence

To regain their competitive edge, banks must quickly figure out how the new can efficiently, at least for the foreseeable future, coexist with the old.  Recognizing that branches, checks, passbooks, and other holdovers from the last two centuries may be decreasing in volumes, they will still be around for the foreseeable future and coveted by some of the bank’s most profitable customers.  Today’s banks are becoming more challenged to service traditional banking products and comply with new regulations while providing innovative, compelling new offerings to attract and retain customers. 

As IT departments continue to retrofit ancient COBOL/Assembler applications to support the latest Java-based technologies and comply with new industry regulations, they are creating overly complex solutions that are becoming more brittle, harder to support and more susceptible to failure.  These integration challenges further prolong the time-to-market for implementing new products as well as accommodating basic system changes.  It is no surprise that up to 80% of some bank's IT budgets cover basic support activities, and new product implementations can take over a year.

Transformation Will Be Key

Banks can no longer defer decisions on modernizing their infrastructure; they need to adopt scalable, modern platforms that can enable the following: 

• Better customer views, including complete party-to-party relationships to enable meaningful relationship pricing;
• Capabilities to rapidly launch innovative, new products to drive new revenue streams;
• Support for both traditional and emerging financial services products to retain existing, profitable customers while attracting new, potentially profitable ones;
• Process centricity to drive consistent service quality across all channels;
• An efficient regulatory compliance framework to redirect IT resources toward competitive enabling initiatives

Inhibitors to Change

Most large banks still rely on batch processing architecture to post transactions to customer accounts and leverage a memo post file to ensure accurate customer cash positions throughout the day.  Though this architecture has proved surprisingly resilient for last half century, today’s customers expect immediate confirmation of their transactions, accurate, real-time cash positions, and consistency across channels.  All of which can best be accomplished by phasing in real-time transaction processing.

To thrive in this new environment, banks must be able to simplify their processing infrastructure while allowing customers to self select their service offerings.  Customers expect the flexibility to transact when and how they want as they have become accustomed to instant gratification for everything from downloading music to buying books. 

The successful bank of tomorrow must find a way to allow its customers to self-serve across all channels while minimizing the need for assisted channel support from branches or customer care centers.  This transaction ubiquity and process centricity has the ability to drive innovation in how banking services are driven in branches as we may see iPads and other mobile devices in tomorrow’s branches instead of the traditional design of today.  The inevitable move toward real-time processing must and will simplify the customer and bank experience.

Neal Beasley, Financial Services CIO

David Bomser, Senior Director, Oracle Financial Services