Banks need meaningful monitoring to cut out further payment glitches

By Dave Lewis | 29 January 2016

Failures within the banking system’s payments processes come not just with alarming frequency, but also with damaging impact.

In August it was HSBC’s turn to experience embarrassment, as 275,000 payments failed to clear on a Friday, leaving many customers furious as they looked forward to the weekend.

The following week, NatWest had to tackle a payments glitch in the full glare of publicity, as its customers found they were unable to transfer funds – not even to their other accounts with the bank. NatWest of course, is run by RBS, which had its own payments problems earlier in the summer, when 600,000 payments failed to enter its customers’ accounts.

One of the stark problems facing the banking industry is its inability to effectively monitor its infamously complicated IT systems.

These were often set up piece-by-piece to deal with particular challenges, or as a result of mergers and acquisitions. Because of this, it is difficult to provide visibility of many potential blockages, meaning banks lack a genuine end-to-end view of their payment systems.

When RBS had its difficulty, Anthony Browne, the chairman of the British Bankers’ Association quickly placed it in the wider context of the £3 billion a year that banks spend trying to improve what he called “creaking IT systems”. The institutions were aware of their IT shortcomings, but it was unacceptable for them to experience failures like RBS, he added.

Using logic

If we ignore both the media mud-slinging and the banking sector’s standard explanations for a few moments, the truth is that the kind of process problems that lead to failures in payments can readily be avoided.  What banks have to do is to use the right business logic, having established what it is they should be paying closest attention to. Once they have the right business logic in place, using their existing monitoring tools, rather than adding another layer, they will be in control of their processes.

The HSBC example is just one of the many different kinds of process failures that can hit banks sideways, but which the right kind of monitoring solution can flag up before the damage is done.

In some cases, such glitches are caused when overnight processing of a large amount of payment data collapses, missing a crucial deadline. Monitoring this seems simple enough to an outsider.  After all, what can be more important to a bank than processing payments?

The importance of end-to-end visibility

The problem for most institutions is that their current monitoring setup does not allow them to see their payments processing end-to-end because of the siloed nature of systems they have inherited. The complications of this set-up have been further aggravated by the inevitable side-effects of extensive outsourcing.

Key staff at the banks lack the crucial business insight that tells them what is really important and then measures and represents it in a way that is easy to understand. A bank may have systems in place that monitor its every process, but they are of little use at the business level if it is difficult for anyone looking at them to understand what the impact on the bank’s functions will be.

In effect, despite having what appears to be an excellent monitoring solution, the business has no end-to-end view of the millions of transactions it must process every day. Nor does it know how to see the wood for the trees when it comes to millions of daily IT alerts. There is no comprehension of what is critical, from a business delivery perspective, and such systems lack the transparency that permits anyone to find out. When market conditions lead to a sudden peak in trading or payment transactions, the unfortunate bank will never know if the system is coping until it crashes.

Yet even when the processes are monitored with any degree of effectiveness, the alerts and signals they relay about threats and problems are usually delivered when it is too late to fix anything. What is required is monitoring that is designed to predict a failure, raising the alarm and allowing for preventive action to remove the problem before damage is inflicted.

Applying insight

Having the right monitoring tool is important, but having the right business logic and knowing what to monitor is really at the heart of this. It may seem straightforward, but for most banks their systems do not make it easy to put into practice. Banks need to acquire the ability to understand end-to-end payment flows and performance criteria and then apply that insight to the monitoring tool.

In this way it is possible to establish what is vital and must be picked up and then create a set of meaningful metrics around it, establishing what must happen and by when. 

The criteria can be organised so that if, for instance, a bottleneck is developing in one area, a warning will be issued at a predetermined time before the deadline, giving staff the chance to intervene, manually if necessary, and eradicate the problem. This approach quickly establishes what is normal for each institution and benchmarks performance against it.

The methodology successfully avoids the pitfall of examining every transaction and only opens up the detail when a risk is indicated.

A real return-on-investment

Once a bank embeds the right business logic in its existing monitoring technology and knows what is critical to its operations, where it is and when it has to happen, it will rapidly see a return on its investment in the form of priceless continuity and efficiency.

Its processes are far less likely to suffer embarrassing failures that lead to fines and compensation payments. Instead it will retain a solid reputation with customers and be capable of adding additional value to external partners by informing them of any problems before they are aware of them themselves.

Achieving this level of transparency and automation also gives both IT and business access to the same critical metrics and so the value of current monitoring tools can be vastly increased.

At a time when the banking sector is subject to such close and antagonistic scrutiny, it is to everybody’s benefit for an institution to have technology that shows it is fully in control of its processes and at the forefront of risk-management.

By Dave Lewis, Director, Alpha Insight.

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