Breaking into the bank of ideas

A general theme for this column is that of how organisations are having to become more responsive, whether to customers, competition, regulation or to squeeze further operational efficiencies out of processes. Last December I talked about how this applied to the area of financial trading. This month I'm going to stick with finance but look at some of the likely areas of innovation in retail and wholesale banking that will make these organisations more responsive.

Regulation is one obvious area where banks, over a multi-year period, are going to have to become more adept at dealing with change. The implications of the Dodd-Frank legislation in the US is still being understood and, in the UK, banks may be facing an almost existential threat if one gives credence to the rhetoric currently coming out from government and regulators.

Regulation and compliance with regulation is only going to become more and more important. This is being recognised by non-banking institutions that work in financial services. Thomson Reuters, for example, recently announced the formation of a Governance, Risk and Compliance division to deliver information solutions to those needing to comply with regulation.

Useful certainly, but regulation will always manifest itself in different ways in different banks. The processes that support regulation must be able to change on a frequent basis. Applications set in concrete only allow this to occur slowly and expensively.

The method of building applications needs to be responsive itself and needs to focus around dealing with events, business rules, workflow and user interfaces, not around programming language coding.

As an example, a bank, now a customer of Progress, had to deal with complying with new regulatory requirements in a matter of weeks. This was not just a box-ticking exercise — the regulator wanted visible demonstration of the systems that had been put in place.

Related:

The bank's existing application was simply too inflexible to be changed for reasonable cost and in the time required.

An alternative approach, based on Business Process Management and event processing technology was selected which allowed the compliance process flow to evolve and change over time in a much more dynamic way and which could be tailored to meet the bank's own unique combination of circumstances.

Regulation isn't a nice-to-have or something aspirational. It's a must-have, because the risk of legal sanction makes it so.

Another focus for 2011 will be customer experience. Generally speaking, banks have been behind other industries in getting more responsive to customers' individual needs and how they're actually interacting with their bank.

A recent US survey, by the industry analyst firm AITE, found that only 22 per cent of small businesses were "extremely" satisfied with their bank and that 65 per cent of larger corporates believed that banks did a bad job of understanding their needs.