TECHNOLOGY – AT THE HEART OF MEETING CLIENT NEEDS.
One of the challenges that the buyside faces today is the lack of agility in their trading systems, which may struggle to keep up with changing client demands. Nick Barker, Head of Electronic Distribution Products at RBS, argues that banks need to embrace a new approach to technology and development to ensure their products remain relevant.
The future of banking technology is to offer clients a platform that is flexible and adaptable to meet their business needs and lets them shape how they use services themselves, whether for sales, trading or market intelligence. Those services might be provided by either the bank offering the platform or by a third party, such as research from other institutions or third party analytics.
An open source offering, combined with HTML5 code, allows banks to provide solutions from execution and post trade applications to transaction cost analysis tools in a more dynamic, user-friendly way.
It can be a collaborative model that allows people other than the original developer to make changes or improvements to the code. The benefits include better software because more programmers can have an input, the ability for banks to keep up with changing client demand and lower cost and risk.
Among the many advantages to clients are that a number of small changes can be made over a period of time, allowing the software to evolve gradually. They can be tested and the feedback used to channel future investment and adjust the direction of a product. It could even make the software as easy and enjoyable to use as their personal technology.
In my opinion such smaller, more regular releases are a lower-risk way of developing software than offering one or two more major updates a year, a tendency we have seen in the past in some areas of the industry. Sometimes clients were being expected to take on board a complete redesign every six months, potentially a massive risk to them and the banks. Having an agile approach to development is more dynamic and much less jarring.
You also avoid a scenario where you effectively go off into a darkened room for three years and emerge with a product only to find it has missed its target because demand and technology have moved on. That is a significant investment risk to a bank; incremental releases mean you can spend small and test as you go, and that way make sure you are always on track to meet the end goal and adapt if the goalposts move.
Traditionally, open source means giving full access to everyone. In the case of banking, this is not practical, so the code is open to an approved community of users to avoid regulatory, compliance or data protection issues.
The easiest way to approach this is to have a library of content and standard components that can be built on. So when you want to offer a new service or capability you don’t have to start from scratch and can amend or add to what’s already there.
It’s also possible to use a third party provider to build part of the software offering; for instance if you want to create a service that uses an SMS engine, there is no point having your own people work on building it when you can get one from a third party provider. Again, this means greater speed of development and a better ability to align your offering with client needs.
Improvements do not go into production until they have been technically approved. We do not want to make the approval process so onerous that there is only one software release a year, but quality control checks need to be built in the process, so it’s about finding an appropriate balance.
While one benefit of open source is the input from other people and new solutions and developments, you must still have an overall strategic plan. You must know the direction in which you want to take your product and an idea of where your next investment should be, but be prepared to shift that depending on client demand and the changing market landscape.
The reason that perhaps some banks do not take this approach is that they have very successful trading and market platforms already. However, they may find that they are stuck with a legacy infrastructure that could be difficult to alter or build on as client demands change.
Using HTML5 and open source means you are not tied to a particular software vendor and can evolve the platform or system as necessary. I think that HTML5 will be the technology of choice for the industry going forwards and banks that embrace this approach now will find that they have a head start on their competitors in future.
Allowing clients to self serve and decide for themselves how they want to consume services ties in with an industry-wide drive for simplification. Regulatory changes are forcing banks to become more transparent in their offerings, and ultimately letting the client choose how they use our products allows us to serve them better.
In our personal lives, most people are used to a high-end, enjoyable user experience from their mobile phone, tablet or whatever technology they are using. In the banking industry, outside of the retail space, clients don’t have that same enjoyment. We need to move the dial on the client experience and make it as easy as possible, and pleasant, for clients to do business with us.
This is one of the biggest changes in banking technology I have seen in the past few years: we are at the start of another wave of digitalisation of the banking industry.
As consumer technology is evolving – for instance, a car manufacturer using technology to measure how efficiently you are driving, and how you can save money on fuel – the banking industry needs to evolve. We need to remain relevant to our clients and this will be achieved by the quality of our digital offering.