The broad sweep of challenges facing the Financial Services Industry in the 4th quarter of 2020 has never been more daunting: the second wave of COVID-19 entailing more country-wide lockdowns, the looming Presidential election in the U.S. and of course for the Brits – and Europeans alike – the as yet unknown impact of Brexit.
Articles we have published this year have sought to link the underlying impact of meeting, or not meeting, these challenges with the use of our Software platforms. Some of these changes are truly structural and long-term and whilst our eye might be on the next three, six or twelve months, strategic planning has to look at three- and five-year time horizons and perhaps even longer.
Banking and Financial Services has for some time been seen as something of a pariah for the wider population, fuelling huge growth in Asset prices and then reaping vast rewards, but for the very few for whom this is true, it does not reflect the fact that the vast majority are ‘not guilty’ in that respect. Whilst the COVID crisis will undoubtedly lead to job losses in Banking and related Financial Services, it is equally true that as an Industry, Banking could be seen as being in one of the better places to weather the Storm.
One by-product of the shake-out is that many Banking roles can be conducted from home. The big reveal has been just how many people enjoy working from home and how productivity has been unaffected. But this comment depends on how you define productivity, because some of the deeper challenges that have manifested themselves – access to data, time to turnaround tasks, liaison with colleagues, collaboration, innovation and most importantly execution – have been seriously compromised by these harder-to-address challenges.
Dealing with the obvious big theme, a second wave of the virus is striking all economies at largely the same time and magnitude, despite various European governmental efforts. We certainly have to look to our friends in Asia to understand how better to tackle these outbreaks in the future. So whilst COVID has at times dominated the news agenda to the exclusion of everything else, it is obvious that this was not just a 3-month challenge but it looks much more likely to be a 3-year challenge and possibly even longer than that.
Picking your way through the morass of topics in Virtual Conferences is certainly a new challenge for interested professionals, but one of the key business challenges for 2021 and beyond is how to replace the qualities of a physical meeting. We suspect that much of the business written in 2020 was probably in train by the time the virus struck and might spill into new business next year in 2021, largely based on existing contacts and established business cases already in place. But what about 2022? Our current focus is closing the deals we see in our pipeline for 2021 and, perhaps more importantly, protecting what we need to achieve in 2022 by working very hard on that two- to three-year timeline, right now.
Before addressing the hidden themes, these are what we see as the main concerns in the Industry for 2021: an effective vaccine for COVID-19; the accelerating move to the Cloud; digitisation and digitalisation; a data strategy ahead of a digitalisation strategy; the legacy technology debate and a big-bang approach; and finally the bucket that is DLT, AI and machine-learning, and APIs.
Dealing with each in turn means we begin with COVID: Even if there is a vaccine, the shift to homeworking is now a fact for many and for a significant proportion, it is likely to be permanent. The hidden theme here is collaboration, innovation and how they happen. The benefits of the physical whiteboard session have gone and understanding how best to engineer a requirements document, how to hire, train and encourage a culture (all of which are in some sense collaborative) remotely, is a very serious challenge going forwards. Where such collaboration strays into non-core activities, like Banks trying build software solutions, the answer is: leave it to the experts. If it was difficult to engineer inhouse solutions pre-COVID, it has not got any easier since the virus impacted the global economy.
The move to the Cloud is a reality; it is more secure, it is more robust from a BCP-DR perspective, it permits instantaneous expansion in capacity and the move to Cloud-native applications is now an irreversible trend. But the hidden theme is core technology and its difference to desktop technology. Many Financial Institutions are striving to recreate legacy core technology in the Cloud, whilst simultaneously trying to upgrade or re-platform it, to keep pace with what is going on around them. Another hidden theme here is to stop reinventing the wheel (particularly while that wheel is still turning) and to progress radically towards better desktop applications, cutting out the need for the traditional heavy-lifting (define, design, develop, deliver, deploy) of a project. Move, almost immediately, to secure desktop delivery of the applications your staff and counterparties need.
This introduces a third hidden theme: digitisation. But is it digitisation or digitalisation? The difference is that digitisation is the process of converting information from a physical format into a digital one, whereas digitalisation describes the process that leverages digitisation, or digitised data, to improve business processes. This links into putting a data strategy ahead of a ‘digital’ strategy: getting your data right – accurate, clean, correct – is the precursor to any re-engineering of process-driven strategy. Organising that good, clean data in a coherent way, keeping it secure and yet making it available to all those who need ‘transparency’ is the next step. Bad data, no matter how well-organised, will always compromise the most efficient of processes. So digitisation should precede digitalisation and a strategy around good, clean data is the starting point for the digitalisation of your processes.
A recent conference panelist boldly observed that “technology represents fear”: fear of the unknown and a shift in working practice; fear of substitution and replacement; fear of adoption and adaptation; fear of misuse and abuse, and fear of making the wrong choices. The business case that permits the shift to value-added activity and away from manual processing or re-keying of data, or error investigation and manual remediation, is the business case that needs to be adopted in today’s world. The hidden theme here is that the temporary changes put in place in the spring of 2020 are becoming permanent and, as manual processing and access to physical documents when working remotely is no longer possible, the need for clever desktop solutions has become pressing. The lower the impact, the more “non-core” yet secure these desktop solutions are, requiring no local implementation or the involvement of centralised I.T. teams, the better. Adopting a phased approach and not big bang, de-risks the move anyway, but the pick-a-project-and-do-it-in-the-Cloud approach by way of a proof-of-concept is to be highly recommended. Business cases that needed more than the obvious operational efficiency gains and commercial benefits of a project are now being realised, because of the sheer practical benefits of having secure, remote access from your desktop or even personal device.
By way of a conclusion, we hardly ever hear about ‘robotics’ these days, certainly in the context of Banking and Financial Services. The fad word of three or four years ago has now been replaced by talk of AI, DLT, and sometimes APIs as the new “new technologies” we all need to embrace. It is almost as though the language used obscures what is really going on, which is not overnight change but a steady evolution of how things are done. The Securities Services Banker who looked over her or his shoulder 5 years ago at the looming advent of DLT is almost certainly still in post and will still be in post in 5 more years’ time. The perceived looming disaster that was DLT and the pan-Industry loss of jobs has simply not materialised and nor will it; the evolution of DLT as a useable technology was always going to be slowed by inertia at the very Institutions it is supposed to have threatened. Big Banks will buy proven solutions and not engineer them themselves and this points to the perhaps less hidden theme of this article: accessing good, clean data securely in a post-pandemic world, using proven solutions whilst sitting at your desktop and working remotely, is the way the world is going, no matter what your discipline.
