INNOVATE OR FAIL!

David Layton, UK Financial Services Director at Delphix, the provider of Data as a Service,looks at why banks need to embrace a culture of continuous innovation if they are to compete in the customer experience battleground.

Nothing says tradition, stoicism and endurance so much as the outside of a high-street bank. Classical columns and marbled edifices; banks seek to present stability, experience and wisdom as their ultimate values. However there is change afoot. Consumers are no longer basing their trust and commitment on the gilded lettering and venerable dates outside the door. Customer loyalty has been eroded, and in the age of the distracted consumer, customer experience is the name of the game.

Contender, are you ready?

The global economic crisis demonstrated that banks veneer of stability is no guarantee of safety, levelling the trust playing field for new entrants to shake up a traditionally static marketplace. Previously, the big four UK banks have had things mostly their own way, holding about three quarters of the UK’s 50 million current accounts, according to the Office of Fair Trading.

However, new regulation has sought to shake-up the industry. In September 2013, the UK Payments Council introduced its Current Account Switch Service, guaranteeing a smooth switch from one bank to another in just seven working days. In addition, the emergence of Metro bank, Tesco bank, Apple Pay and Google’s interest in mobile payments has breathed fresh life into the financial services sector and given the big four plenty to think about as competition for customers’ loyalty soars to an all time high.

Whilst becoming a bank is a regulatory quagmire, the big four have realised that they can no longer rely on the hurdles of cost and compliance to protect them from the competition.As challenger banks rise out of industries better known for their customer centric, and innovative approach, banks need to develop the systems and processes to deliver change. Yet, with highly complex back-end legacy systems in desperate need of modernisation, a rapidly evolving market and a very demanding consumer, innovation is no easy task.

Innovation: a double-edged sword

David Layton

As competition for customers reaches new heights, retail banking needs to embrace continuous innovation as a cultural and organisational shift.Evidence of this shift is seen across the financial services industry, with investment into digital transformation and new services happening apace. The importance of this cultural shift towards continuous innovation even dictated the contents of Lloyds’annual statement to shareholders. Last year, Lloyds outlined its plans to launch a new Digital, Marketing and Customer Development function to focus on exactly this. However whilst funds and intent are one thing, the cultural, technological and methodological shift is entirely another.

The time spent on creating and delivering innovative new services depends on how financial organisations are able to balance speed, agility and quality. Banks need development lifecycles that are days long, rather than the usual weeks or months. However, achieving this kind of speed in innovation and testing depends on embracing new methodologies such as DevOps and the ability to spin up and tear down an environment in weeks. Whilst Agile development has helped speed things up considerably, one constraint is holding financial organisations back – data.

It is not unheard-of for banks taking months to provision a single full-sized masked data set. Within a software development lifecycle this is refreshed and reset numerous times. Even if the bank reduces this down to one day – you can begin to see the problem.

As a customer’s relationship with banks becomes dominated by technical innovation, financial services organisations are leading the way in calling for a new approach to data management. The answer is Data as a Service (DaaS).This enables the delivery of data on demand at any moment in time, refreshed at will and provisioned in minutes to aid innovation.

Disrupt or be disrupted

Today’s businessesare constrained by the dependency on IT infrastructure to deliver data on time, complete and protected that can be used to test new applications before they are launched. Where as once it was acceptable to wait for weeks or even months, now the business needs data immediately to rigorously test new apps and cut development times to gain a first-mover advantage.

We’ve already seen banks are beginning to recognise how their software delivery models underpin this brave new world of customer experience strategy and the big four are committed to digital transformation and understanding the shift in mentality that this requires. Lloyds Banking Group’s adoption of the DevOps methodology is a great example of how banks are trying to break down the barriers and obstacles between developers, testers and operations to accelerate delivery and achieve the speed of movement demanded by a fast-paced industry.

With financial services becoming a consumer-choice minefield, only those traditional organisations embracing technologies like Data as a Service, which enable DevOps and continuous delivery, have a hope. The bar has been raised in recent years, and with competition for customers fiercer than ever, banks need to plan for the future or risk failure.