The apocryphal Henry Ford quote, “If I asked people what they wanted, they would have said faster horses,” applies to technology investment by banks. Most do not want to alter their underlying core technologies because they fear change.
Consequently most banks are riding “faster horses” when what they need is a car. Their last-generation technology is antiquated, according to the Prudential Regulatory Authority (PRA), the Bank of England’s supervisory arm for financial firms. Banks struggle to offer modern services as a result and are struggling to manage the cost of maintaining many, ageing technology platforms.
Aymen Saleh, partner at consultancy Boston Consulting Group, which benchmarks bank IT spending, says: “Among the banks, only a small handful have made an investment to simplify their technology and make it modular. They are now in a far better position than the others in addressing the three priorities of regulatory pressure, service provision and cost.”
For those that have not invested, the risk of technology failure from poor integration or mismatched performance levels is a threat that regulators are taking seriously.