Traditional UK high street banks – under threat from rival ‘challenger banks’ that are better positioned to innovate – are being held back by their own outdated IT systems according to a new survey by Talend, the global big data integration software leader. Almost one half (48%) of the banking industry professionals polled cite the limits of legacy systems as the number one IT challenge facing the sector, with 43% also naming it as the main barrier to realising the benefits of big data analytics. As banks attempt to become data driven to meet the challenges of mobile and online banking, legacy systems are blamed for lack of data integration by 56% of respondents, with 45% saying that the quality of their data is preventing ‘real-time insights for the business’.
Extracting insight from the vast data sets that banks hold has never been more important, as new ‘seven-day switching’ services, which make it easier and faster for customers to change current accounts, add to the concerns. According to a report in the Financial Times earlier this year, competitors to the main big four banks are “gaining traction” with 26 new banks in discussions with the regulator about licence applications and four businesses already going through the application process.
Not surprisingly then, the need to develop new revenue streams was named as one of the main banking industry challenges over the next five years by 46% of survey respondents – second only to compliance and regulation demands (54%).
“There are clear signals that the banks know what they need and want to do. It’s encouraging that a decisive 76% of the banking professionals we surveyed agreed that the industry has a clear understanding of the benefits of big data,” says Nimish Shah, banking sector lead at Talend. “However, scratch beneath the headline stats and there’s a gap between this understanding and what’s being put into action.”
Business leaders typically have a positive outlook with 75% claiming their organisation is “well advanced” in their big data initiatives. But answers from more junior managers and professionals tell a different story – with only 30% making the same claim, probably because they are the ones trying to turn big data promises into a practical reality.
Addressing further challenges
The survey findings reflect a strong acknowledgement from the banking industry of the benefits of utilising big data technology, with 86% of respondents in agreement that banks do understand the potential power it could bring to the business. But this isn’t reflected in current investment in large scale big data projects, so further challenges are holding back adoption.
Uncovering the key IT challenges for the banking industry over the next 3-5 years, the integration of multi-channel data (cited by 34% of respondents), managing the data explosion (33%) and gaining actionable insight from customer data (25%) were all clear areas of concern. For all of these challenges, being restricted by legacy systems is a factor, but large banks are not in position to simply replace these systems – a key reason why challenger banks, free of the IT restraints of more established players, are beginning to thrive.
“Major banks are never going to ‘rip and replace’ the systems that form the backbone of their business,” Shah continues. “So, data integration and data quality should be top priorities across the operation. When you consider that banks are so focused on understanding their customers, the fact that 40% of respondents say that data quality prevents them ‘improving efficiencies or effectiveness of new marketing initiatives’ is very telling.”
The survey also revealed that 28% of respondents believe their lack of in-house skills is a major barrier to big data adoption, so taking the complexity out of data integration and data quality tasks and allowing organisations to start gaining real-time insight to the data they hold, will certainly address the banking industry’s most pressing challenges.
“Vendors like Talend have a responsibility to simplify the big data process for financial institutions,” says Shah. “For example, integration of big data can be a significant hurdle for banks, but in their quest to become data-driven they commonly find a lack of skills and tools are available to alleviate some of these major challenges.
“To start to see real value from big data projects, the industry must embrace technology platforms that simplify processes, reduce the need for complex coding and place graphical tools into the hands of users outside of the IT department. This way, banks will truly start to excel in their applications of big data and see 2015/2016 as the time when big data projects will start to show real returns.”
