Earlier in the month, I wrote an article questioning whether financial institutions can afford to stay with legacy systems. This is because there are three unstoppable forces which we believe will change how all financial institutions operate in the future. If you haven’t got time to read the article in full, then I can summarise them as:

§  the increasing investment in new technology in the form of fintech disruption

§  the impact of Open Banking

§  changing consumer behaviour and expectations

These changes are forcing institutions to make critical decisions about their IT strategy. However, banks are now struggling to resolve a new problem. How do they attract the right talent to help them manage, now and in the future?

Old system, old approaches…new problems

Imagine IT directors of large financial institutions confronted with requests for five year plans. They know they need to change things but their teams are using complex systems originally devised when ATMs were considered innovative. In the back of their minds they know they need to shift all, or at least part of them, to the cloud and use modern agile systems. However, they feel the cost would run into tens, maybe hundreds of millions. The easiest decision would be to delay and continue to squeeze more performance out of the existing platforms.

You may be an IT Director reading this and recognise the scenario. If so, you’ll also recognise two emerging and closely linked risks that your technical teams are managing.

Security

The longer financial institutions persist with legacy technology, the greater the operational risk. These organisations are less agile, less able to adapt to new threats and therefore become more vulnerable to cybersecurity breaches.  In the past, resistance to cloud-based technology was centred on the argument that it is less secure than a legacy system, but this has recently been challenged quite successfully.

When a new type of threat is identified an important defence is speed and the ability to react. Many legacy systems are simply too unwieldy, too vulnerable and difficult to change quickly. This makes then an easy target compared to one that is constantly adapting.

IT teams are then faced with ongoing pressure to implement a series of changes and manage operational fixes. The consequence is that the nature of the work is very different from that of neo-banks and those operating on modern platforms.

People, resources and talent

A dearth of experience and talent is now becoming one of the biggest problems faced by many financial institutions, as banks struggling to manage archaic code on hard-coded systems are also less attractive employers. The best IT professionals are not motivated by the prospect of working in organisations struggling to maintain their creaking systems. Such people are denied the freedom to utilise their creative skills when much of the IT budget is spent on fixing emergencies rather than devising new applications.

Many institutions’ technology, processes, ways of working and financial demands inhibit innovation and prevent developers from challenging themselves.  Good developers can work anywhere in the world as more and more applications are shifted to the cloud. They are less likely to choose to work in places where the environment dates from the 1980s. As venture capitalists pour money into the new fintech ventures there are now infinitely more exciting prospects for the very best talent available.

In short, while large financial institutions need the best, they are now recruiting from an ever-decreasing pool of motivated people.

Learn about new ways to operate

We have been hosting round table events online where we gather IT professionals from around the world to discuss the latest problems facing the industry. Security and the availability of the right skills has been high on the agenda. At one recent session, several professionals from neo-banks and large global institutions discussed their approach to operational risk, and were also concerned about recruitment of the right people.  Even so, we know that the attendees gained valuable information simply from sharing ideas.

If you would like to join us on one of our exclusive (and free) events, please email me. 

Jim Tomaney

COO, Renovite

jim.tomaney@renovite.com