CAST recently participated in a TechMarketView round table in London, discussing the effectiveness of digital strategies in banking. It's no surprise that banks are facing some significant headwinds heading into 2017, including geo-political uncertainties, increased regulation, the need to modernize legacy systems and growing cyber threats.
Digital is no longer "just another channel" - it's essential to success and securing optimal position for the next generation of banking customers. In order to capitalize on opportunities, bank management must establish solid KPIs to create and sustain the right behaviors in a digital environment.
Challenges to Digital Success
Today, software risk is one of the major sources of profit loss and security exposure for banks. Despite tightening regulations, there are still major technological challenges that legislators have failed to address. Technology risk is less understood by regulatory entities, and system-level risks are most poorly understood at the software layer. As banks continue to build or re-engineer their software assets to meet market demand, they will also introduce new risks into their organization.
Within the banking sector, there remains intensifying competition between incumbent major banks, challenger banks and mono-line specialists. The aim of challenger banks is to ensure that the use of alternative banking methods and multiple banking relationships become accepted across the wider market. These banks have an advantage in that they do not have the burden of a universal mandate. Therefore, they can simplify their operations by choosing to decline applicants who would be complex to manage.
Banks as a group also find themselves under threat from non-bank digital specialists. Here there remains considerable debate as to whether consumers consider “being a bank” necessary to be entrusted to manage the bulk of a person’s transactions. For example, does Amazon have a trusted enough brand to play the key banking role?
Digital pressures are also mounting for corporate and investment banks. In these sub-sectors, client expectations are high posing challenges for bank CIOs and IT managers to modernize and upgrade legacy systems. Digital transformation is critical for this group.
No matter the market specialty, operational and technology risk remain chief priorities for banking executives.
Cloud Readiness & Legacy Modernization
Incumbent banks know that they need to leverage cloud technology to compete with cloud natives in pace of change and innovation. For many, considerable work is required to understand the implications of this method of delivery and enable the building of a satisfactory regulatory framework. There are more significant steps required in the transformation of legacy systems but the move to cloud is a necessary enabler in terms of meeting cost targets and facilitating improvements in user experience.
To enable a more smooth transition, CAST has created a Cloud Assessment using industry-proven metrics to ensure stability for key characteristics like structural robustness and efficiency, security vulnerability, architectural compliance and transformation potential.
The challenge for the established banks is made much greater by their complex legacy back-ends which need to be able to deliver on the new demands of the digital initiatives. This is particularly true in cloud migration. Simplification of the application “spaghetti” built up over a considerable period of time needs to be done with minimum risk to the ongoing operations of the bank and as cost-effectively as possible. This crucial process requires a deep understanding of the interactions between applications and of the major potential “pain points” in the transformation programme. CAST tackles this complexity with System-Level Analysis, which provides a detailed report on the "health" status of applications in order to build transformation and development strategies.
To learn more about CAST, visit www.castsoftware.com. You can also read the full version of TechMarketView's research report, Are the Digital Strategies of the Banks working?, here.