Banking can execute change in real-time

The financial sector is 10 years behind the times in its approach to management - partly because banking systems are supposed to be too complicated to provide real-time information. Not so, says Steve Boyle. The latest thinking in information processing could save the banks billions every year.

Information is the basis of the banking system. So changing the banking infrastructure is a huge concern for the financial sector. Many who were marked by failed attempts at wholesale change in the late 1980s have until recently seen the replacement of core systems as too large a project to contemplate.

But if traditional processes start to break down and threaten competitive advantage, a bank can quickly be left behind. Any delay in systems administration can have serious consequences. But the pressure is to leave things well alone. Back-office processing activities are not a priority in the thoughts of a bank's business executives. Short-sighted, perhaps.

Left too long, this attitude will lead to a systematic failure to keep up with business requisites and check-list complexity. The need to increase competitiveness across the banks has left most businesses no choice but to decide on some form of replacement.

Then comes the question of performance. Banks must consider their current needs and find a solution that will meet those needs head on. They also need to bear in mind current business and technology trends and how these might shape their core banking requirements over the next 20 years.

Perhaps the biggest issue to consider is the real-time concept in banking infrastructure. Real-time management is a strategic technology, which includes the real-time capabilities of customer, product and channel data, and how this can be used to provide real-time business information.

Businesses are coping with increasing financial uncertainty and battling to retain demanding customers. Real-time capabilities are now becoming an important competency.

Real-time management offers huge advantages for banks operating multiple branches or multi-disciplinary units. A real-time management system can operate globally on one single, integrated, real-time banking platform. It gives the capacity to access and manipulate data easily, efficiently and quickly.

No longer is the bank at the mercy of a series of time-delayed management reports. Instead it can see the progress of important operations as they happen. Problems can be identified before they become critical and efficiencies can be garnered into greatly improved margins.

All fine in theory. But is it achievable in practice? Perhaps there are lessons to be learned from change management techniques.

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For example, Deutsche Bank recently underwent the biggest outsourcing project in its history. The bank had plans for a sweeping upgrade of its data processing systems which could save the business €880m over 10 years. If it failed, it had the potential to bring the bank to its knees.

Real-time management techniques were introduced to ensure the project was brought in under budget and before the deadline. The project was so successful that the same techniques are now being applied throughout the bank to corporate real estate, trans-continental data transfer, private banking and the integration of a recent acquisition.

These new techniques, allied with the huge increases in available processing power, have set up an environment where real-time approaches are a real possibility.

Because real-time techniques have been so successful in the area of change management, organisations such as Deutsche Bank are increasingly looking to access all data in real-time. Traditionally, systems were built up in-house with no common data structures. Core banking systems today allow most data to be kept in one place.

This helps the bank to move from a higher level of risk assessment to dealing with it at a lower level, in real-time. This means far greater accuracy, which can benefit the bank in terms of regulatory compliance. Greater accuracy can free capital for investment in other areas.

With the removal of end-of-day processing, banks can truly adopt the concept of access to real-time transactional data. Having customer information stored on a historical information file means data is almost always out of date. Having real-time management systems makes way for real-time data, enabling a real advantage over competitors.

Having the right tools means banks have the option of running analytics in a real-time operating environment without affecting the performance of operational systems.

The model enables banks to work with a single source of truth, which will provide the organisation with a number of business benefits. Improved customer service, more accurate risk management and seamless access to banking services and information are just some of the advantages of the real-time model.

The philosophy behind real-time management has been around for many years but now the technology exists to make it possible. For banks looking at replacing the systems that are constricting their business activities, achieving real-time business intelligence could well be the answer.

We are not far from the day when the CEO of a multinational investment bank can track the flow of thousands of billions of euros in real-time from his or her desk at the press of a button. That is the kind of control CEOs dream of.

Steve Boyle is chief executive officer at Sutherland Consulting