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techUK calls on financial institutions to reform in wake of IT system failure.

RBS has been hit by another IT failure overnight, affecting an estimated 600,000 transactions and causing difficulty and inconvenience, not to mention outright anger, for thousands of customers. It is, of course, not the first time that systems have crashed at the bank and RBS was fined a record £56 million for its 2012 outage. Following a subsequent IT failure in late 2014, Chief Executive Ross McEwan admitted that RBS had neglected its technology for decades.

Whilst the cause of the latest IT crash has not yet been announced, techUK has for some years highlighted the extent to which incumbents' technological foundations are impeding the development of a fully digitised and modern financial services sector. In our recently published whitepaper, Taking the Initiative: Leading with Technology in Financial Services, techUK outlines how, in our view, the imperative for change has increased. The challenge from new market entrants, the rising expectations of digital consumers, increasingly stringent regulatory requirements, and the pervasive threat of cyber-attack means that established financial institutions can no longer ignore the inadequacies of outdated legacy systems.

The legacy problem can be solved. The techUK Financial Services & Payments Programme recognises the 'technological art of the possible' and advocates a digital modernisation strategy to meet those challenges and maximise the opportunities generated by innovative technologies. The paper outlines a strategy, pointing to three levels of transformation.

1. Financial institutions must transform core systems to make better use of cloud technologies, allowing for an agile response to shifting consumer demand and regulatory requirements.
2. Incumbents must use data and analytics to enhance performance.
3. Renewed emphasis on customer experience is needed to improve customer satisfaction.

Leading on from that transformation strategy are some key recommendations:

• Move faster: Strive for a more decisive and faster rate of change. Senior management needs to accelerate the transformation of their operations, informed by a clear vision of the organisation's long term goals.
• Embrace and accelerate the use of industry utilities. Capabilities that do not offer differentiation should be outsourced or transferred to industry utilities.
• Build a more structured approach to technology renewal, focusing on the use of cloud services and the more effective use of data to deliver an improved end-customer experience.
• Work alongside the regulators. Tech suppliers and financial institutions must engage with regulatory authorities to fully realise the benefit of using new, especially cloud-based, technologies.

The goal, and challenge, of technological renewal is clear – to ensure the development of a more resilient, competitive and transparent financial services sector, better able to serve the needs of consumers and businesses across the UK.