The panel featured the technology perspective through Finastra’s Chris Walters, the banking perspective through HSBC’s Manish Kohli, and the market research perspective through Datos Insights’ Erika Baumann.
Setting the scene, Baumann shared several data points that underscored the rest of the conversation, and poignantly show that banks are significantly investing in payments modernisation:
As we’re moving into the digital economy, the panel highlighted the complexities as the half life of technology significantly shortens. Baumann referred to the legacy infrastructure as the black box between investment plans and end results. Crucially, from her experience, some of the corporate end users are moving faster in terms of their modernisation than their financial institutions.
“If the businesses are investing, but the bank cannot meet the end-users needs, where are those investment dollars going to go?” She asked: “It goes one of two places. It goes to a competitor of the bank, or it’s going to go to a fintech. Already, around 78% of mid- and large corporates say that they are partnering with a fintech for something they would have partnered with their bank on a core cash management or treasury service. The good news is they say, if my bank were to offer these things, I would much rather be with my financial institution than with the fintech.”
So how are banks building the business cases to approve and move ahead with such wide ranging programmes of modernisation? From Kohli’s perspective, there are three large factors dominating your tech strategy to make this business case:
“The aim is to be modern, not to modernise,” Kohli commented. “Forget everything that you have, and don’t look incrementally, but just step back and say: what does modern infrastructure look like? And with that principle, if you devise a future state architecture, then every time you’re spending dollars, you should factor in and assess: are you spending money to advance your infrastructure towards the future state infrastructure?”
Walters commented that, on the technology side that, it was important to break down software into microservices to enable low risk transitions for their bank customers. Yet in light of today’s speed of change, transformation becomes non-negotiable. “You need technology that can easily integrate new solutions. You don’t know what’s ultimately going to win, and so therefore you need to be able to easily test and learn,” Walters stated.
When it comes to timescales of modernisation, the panel discussed that there is no one right answer, and timings not only vary depending on organisational size or region, but can even vary within the same organisation.
Walters gave an example: “Probably 10% of our customer base are on the leading edge of modernisation and investing quite aggressively. Well, it would be perfectly rational to say: ‘Well, if only 10% of our customers are looking for this, maybe we should actually invest a little bit less, because we’re going to serve 90% of the need.’ The reality is, we’ve materially upped our investment to align with those customers are in the 10% on the front end. We need to be where they are, because everybody else is going to come. And so one of the benefits right for those that come a little later is that you can get the learnings of others who are at the forefront. There’s no one right answer in terms of timing. It’s unique to each bank.”
In order to drown out the noise and focus on what’s important, Kohli outlined three key themes that he lives by:
“There’s a lot of distractions and noise about technology and how fast it’s moving,” Baumann concluded. “And then sometimes we forget about that North Star. What are the business needs of your end user? That’s your North Star.”
