Banks encumbered with IT legacy, compliance: Experts

Australian banks need to upgrade IT infrastructure and data gathering skills if they want to compete with new players such as Google, according to financial IT consultants.

Speaking at an Australian Information Industry Association (AIIA) Banking and Financial Services briefing, director of MillStreet Consulting, Jason Millett (an ex-Westpac general manager), said that banks were slowly changing from a “product centric” culture to gaining a ubiquitous single view of customers.

“One of the things Google talks about is that data drives decisions,” he said. “If you’re interfacing with a customer and you don’t have a full picture of them, than how can you get full value out of that interaction?”

For example, Millett said that if banks got permission from customers to take data gathered on insurance applications people make, they could capture much more information.

“If you were able to combine that with different elements of their life in a regulatory framework that could give you that full picture,” he said.

“Organisations that commit to an enterprise architecture where data excellence is fundamental are going to do better.”

However, data analytics was sometimes hampered by legacy IT equipment. Invest-Ex managing director, Steve Shipley, shared the example of an IT project he did with Lloyds Banking Group Australia where it had to completely rebuild the systems.

“We were only dealing with 2,700 data elements,” he said. “Building it in greenfield, we were able to come up with rationalised data, but even to get that done required a great deal of discipline from the chief executive to make sure we kept to that and created a real strategic asset.”

According to Shipley, larger banks such as Westpac ,which recently announced it had hit halfway in its Strategic Investment Program (SIP) could have between 100,000 and 200,000 data elements which had been created “piece meal” over 45 years.

“You need to hack away and clean that equipment up so it becomes part of every project you do over a 10 year period,” he said.

Commonwealth Bank of Australia business products and development executive general manager, Kelly Bayer Rosmarin, said that its core banking IT transformation project, which began in April 2008, was a continual work in progress.

“I am on a big crusade with people who think we’re in the old paradigm of spending billions of dollars doing a project and then the project is over and there is no money left to build it,” she said.

“While we do invest an enormous amount in technology, innovation is a central part of our strategy at CBA. We also have to invest in compliance that is less exciting but necessary for the stability of the system.”

Looking to the future, Millett said banks had the ability to adopt, adapt and apply IT innovation such as redesigning social networking websites such as Facebook for the financial industry.

“Banks need to be fast followers, rather than first adopters,” he said.

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