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How developers are helping traditional banks modernise

Bitcoin and blockchain tend to grab headlines in the world of banking. Cryptocurrency is the poster child of “disruptive technology” in the traditionally slow-moving finance industry. But, there are other areas where developers and software engineers must update business-as-usual in banking in order to survive.

According to one survey, 80% of bankers agreed that their institution “needs to complete an assessment over the next three years, but only 15% expected that to lead to a modernisation effort.” Security threats, the demand for mobile banking, and outdated core banking systems are all driving banks to consider massive overhauls to their IT systems. These are the biggest modernisation challenges facing financial institutions – areas where developers and remote software teams can play a significant role in keeping banks competitive.

Making updates to “legacy structures”

In the same survey, 60% of bankers reported that at least one of their major technology challenges is directly tied to aging core systems. “Maintaining legacy systems accounts for 78% of a bank’s IT budget, and 70% of bankers feel their core processes cannot quickly adapt to change,” reports Ripple.

Over time, banks have resisted major changes to their core banking system, the backend system responsible for processing transactions, updates to accounts, and maintaining other financial records. Core banking systems are in charge of processing deposits, loans, and posting credits, as well as updating other reporting and ledger tools.

As consumer-driven capabilities like mobile deposit and peer-to-peer transfer have grown, these core banking systems have had ad hoc updates – but no complete transformation. Core deposit systems were built in the 1970s, written in “old, inflexible programming languages” like Cobalt and PL/I. Oracle’s analysis also found that these “decades-old legacy core systems are inflexible, and each time a bank wants to launch a new product, they must ‘hard-code’ the system, which can take 12 months or more.”

There’s no simple solution to updating a bank’s core system: it’s a massive technological undertaking, but one that banks must invest in to serve its customers well. Engineers can help banks develop an agile, consumer-centric approach to core banking. There are multiple approaches to solving the problem of archaic core systems, and software teams can phase in iterative changes that evolve a bank’s core infrastructure without too much service interruption.

Modernising Fraud Protection

Fraud prevention remains one of the most difficult technological challenges facing banks as cybercriminals get more sophisticated in targeting consumers. To illustrate the challenge banks face in keeping consumer account information safe, Kasperky Lab hacked a “large, publicly-traded financial company in less than 15 minutes.”

The traditional approaches many banks have taken do not work. Authentication requirements and verification processes fail to prevent fraud and provide a negative customer experience. Instead, writes one security expert, “banks should focus on creating better systems and techniques to collect and analyse internal and external data, develop more meaningful algorithms and profiles, execute penetration testing against current strategies, detect changes in transaction patterns and develop more effective solutions.”

To protect consumers from malware and fraud attacks, banks must shift from a reactive to a preventative operations approach. Developers can help banks prepare by modernising the systems that store user data, moving information onto an encrypted cloud. IBM’s AI tool, for example, is said to offer a faster analysis of advanced persistent threats and attacks. Developers must integrate the latest technology into banks’ security systems to modernise.

Digital account opening

Developers will play a critical role in helping traditional banks keep up with the demands of customers on-the-go. Digital account opening is one process where developers and software engineers can have an immediate impact.

Digital account opening (DAO) is the process of opening a bank account without ever stepping foot inside a bank. DAO involves taking the following steps:

  • Collect a customer’s personal identification information
  • Evaluate and approve (or reject) a customer from a risk/fraud perspective
  • Verify the customer’s identity
  • Accept funds digitally and immediately, either through a debit/credit card or with mobile deposit
  • Sync with the core banking system

Many banks are capable of letting customers open an account online through a web browser. Yet, mobile-optimised account opening is an area where the industry has lagged behind. There are some very good reasons why this process is so difficult. Application fraud and strict anti-money laundering laws make it difficult for banks to meet regulatory requirements. An, there are significant security risks: in 2018, banks faced a more than $31 billion in global fraud loss.

But developers who help banks modernise to provide DAO will have an immediate financial impact. One report found that 69% of those surveyed wish to perform all their banking through online and mobile channels. BAI found that around 75% of millennials and more than 65% of Gen Xers prefer to use a digital channel to open a deposit account. The core consumer of the future will expect to be able to open an account, take out personal loans, and transfer funds from any device at any moment. Developers must find a way to build the infrastructure to allow banks to offer DAO.

This article was originally published at https://www.indexcode.io/

KPMG hires Zurich veteran

KPMG has announced the appointment of Graham Boffey as insurance partner in its financial services consultancy team, effective October 01.

In his new role, Boffey will work closely with Simon Ranger, head of insurance at KPMG, to support clients across the UK market. Boffey brings considerable insurance industry experience and most recently acted as head of UK distribution at Zurich Insurance. He began his career at IBM and Barclays, and spent more than a decade at Aviva, where he fulfilled many roles including chief executive officer of Aviva Healthcare, and, later, managing director of corporate benefits.

“It’s great to be heading back to KPMG – its UK leadership team is bold and braced for change and I want to take that mentality out to clients,” said Boffey. “Customers, and society at large, are putting ever greater pressure on big businesses to demonstrate their value and nowhere is that more prevalent than in insurance; a sector designed to help people protect what’s important to them. Simon and the team at KPMG understand that we have to change now to be relevant in the future. I’m looking forward to getting to know the team and their clients to help them make that change.”

“Graham brings with him a huge amount of experience and a practical understanding of how the industry needs to change,” said Ranger. “He’s helped some of the biggest insurers navigate some of the choppiest waters over the last few decades. I’m sure our clients will appreciate his knowledge, and, most importantly, our colleagues will benefit enormously from working with him.”

UK consulting firms dream of glory at MCA Awards 2019

As the representative body for the UK’s leading management consulting firms, the Management Consultancies Association (MCA) has been its industry’s collective voice for more than six decades. Its members make up more than 60% of the UK consulting industry, and employ roughly 45,000 professionals, while working with more than 90 of the leading FTSE 100 companies and the vast majority of the public sector.

Organised by the industry body, the MCA Awards are now entering their 22nd year, and have long been seen as the benchmark for quality within Britain’s consulting industry. The event commends best practices and high-quality performance in the UK’s £10 billion consulting industry across three areas, with awards for client excellence handed out in the process. As well as demonstrating the value of consulting, the event also shows how clients and consultants working together can achieve the best results in the future.

Since January 2019, a team of expert judges has assessed which nominees across 21 award categories will win the battle for the prestigious industry prizes. In the 2019 nominations, PwC leads with 11 nods, closely followed by Big Four rival EY, which received nine. The ceremony is a long way from being monopolised by the professional services industry’s biggest guns however, with Coeus, Arcadis, Arup, GE Healthcare, NHS England, PA Consulting, Atos, BAE Systems, Curzon Company, iMPOWER, Jabobs, North Highland, Parker Fitzgerald, Elixirr, Sia Partners, Simon Kucher, Vendigital and Atkins all having picked up multiple nominations.

The winners will be announced at this year’s award presentation, which takes place at the Park Plaza Westminster Bridge Hotel. Some 700 guests from consulting firms, their clients, the media and representatives from across all forms of government are expected to take in the proceedings, while the ceremony will be hosted by BBC journalist Clive Myrie. Working for BBC News as London World Affairs Correspondent, Myrie is also Presenter of the BBC Weekend News, while anchoring the famous 10pm slot for BBC News on alternate Sundays.

Looking forward to the event, MCA Chief Executive Tamzen Isacsson said, “After months of preparation, marking and interviews, all eyes are now on the MCA Annual Awards ceremony – which is one of the key events in the UK consulting calendar… The judges have told the MCA the standard has been very high this year and over 40 of the UK’s leading management consultancies will be competing for 21 prizes, including 5 individual awards and 12 project awards. BBC Presenter Clive Myrie will host the awards, which will be promoted in our MCA social media channels, so do please follow us @TheMCA_UK if you are unable to attend on the night.”

Last year 16 different consulting firms managed to scoop a prestigious MCA Award. PwC Advisory and Deloitte Consulting dominated, with the two members of the Big Four grabbing a total of 12 accolades between them. Among the other consulting firms celebrated at the 2018 MCA Awards were Simon-Kucher & Partners, Coeus Consulting, Jacobs, OEE Consulting, PPL, Thales Cyber & Consulting, Arup, Egremont Group, Carnall Farrar, IBM, GE Healthcare Partners, Proudfoot, Turner & Townsend Suiko, and Atos.

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TSB chief Paul Pester to forfeit £2m bonus in wake of IT meltdown

The CEO of TSB will forfeit a £2m bonus payment in the light of an IT failure that left thousands of customers locked out of their accounts, as MPs accused the bank boss of being “extraordinarily complacent”.

During a bruising evidence session before the Treasury select committee, TSB chief executive Paul Pester and the bank’s chairman, Richard Meddings, said they had received 40,000 complaints about the outage but did not know exactly how many of the bank’s 1.9 million online customers had been affected.

Meddings told MPs that Pester had volunteered to give up a £2m bonus associated with the migration to a new IT system, hinting that other executives could also have their bonuses slashed. But Pester could still receive up to £1.3m in other bonuses for 2018, on top of a further £1.3m in basic pay, benefits and pension contributions.

Pester declined to predict when the problems, which have been affecting customers for 10 days, would be fixed. The committee chair, Nicky Morgan, accused Pester of being “extraordinarily complacent” after he said the bank’s move to a new IT system, which triggered the problems, had mostly run smoothly.

“What we are hearing this afternoon is the most staggering example of a chief executive who seems unwilling to realise the scale of the problem that is being faced,” she said.

Pester insisted that 95% of customers were now able to log in to the bank’s mobile app and website without problems.

However, MPs on the committee read out a series of emails and tweets from customers that indicated ongoing chaos. One customer said they had spent 14 hours on the phone to customer services, while another said they had been left unable to pay their gas and electricity bills and a third said they risked a house purchase falling through because they could not access bank statements.

Morgan questioned the notion that the IT problems were mostly fixed, saying customers had been put in an “impossible financial situation”.

Simon Clarke MP said Pester’s belief that most customers were now banking without problems could not be true unless there was a “mass conspiracy by members of the public”.

Morgan added that two Treasury committee staff members had found they could not log in during the evidence session, drawing an unexpected reply from Pester.

“It’s nice to know we have so many customers in the room,” he said. “Thank you very much for using TSB.”

He said he was “disappointed” that some customers, who he admitted were being made to wait 30 minutes for their phone calls to be answered, were hanging up in frustration.

TSB has marketed itself in large part on its ability to provide better customer service than larger high street lending rivals.

However, customers began experiencing problems with their accounts on Monday 23 April after the bank – now owned by Spanish lender Sabadell – migrated from an IT system inherited from the previous owner, Lloyds Banking Group.

Sabadell had hoped to make more than £100m in annual savings by using the new system, known as Proteo in apparent reference to Proteus, a Greek god of the sea often associated with change.

Pester insisted the switch to the new system had been rigorously tested beforehand and was “running smoothly” for the most part but that it was struggling to deal with high levels of demand.

“It’s the equivalent of having a shop that’s too small to let the number of customers in,” he said.

He said around 50% of customers had experienced problems with their accounts on the first day of using the new system, with 40,000 complaining, compared to an average of around 3,000 during a typical 10-day period. Pester said around 22,500 have had their problem “acknowledged” by the banks so far.

Morgan referred to a comment made by the bank’s chief information officer in December 2017, who said the switch to Proteo would make TSB “a digital business that just happens to be a bank”. She said TSB “is neither a digital business, nor a bank. In fact it’s a broken bank.”

Pester and Meddings said customers would receive compensation from TSB, not only for any financial loss but also for emotional distress and inconvenience, adding that no customer would be left “out of pocket”.

“We apologise profusely for the issues we’ve caused our customers,” Pester said, adding that it had been a “terrible decision” to go ahead with the switch to a new IT platform.

But he said that TSB was needed to challenge the so-called Big Five high street banks and provide greater competition.

The accountancy firm Deloitte is advising on the bank’s compensation strategy, while TSB has recruited IBM to fix the IT problem and the City law firm Slaughter and May to investigate the cause.

If you would like to find out more information, please visit: https://www.tsb.co.uk/