Networking challenges of a modern retail bank

By Simon Poole | 23 May 2016

As consumers, we are increasingly demanding a better service online. We want webpages to load quickly and without errors, so much so that we’re often critical of those sites which are slow to load or crash. In line with this, our expectations of connectivity are high, downtime isn’t tolerated and, as we become increasingly reliant on the internet, this is putting networks under even more pressure. The data flying between consumers and businesses is greater than it’s ever been, and this has led to a dire need for capacity and bandwidth on the network.

The financial industry, in particular, is suffering from this data deluge, and it’s in the IT department that the heat is really being felt. Retail banks have an especially high data usage, and the repercussions of their services and systems failing is huge. Not only reputational damage – which could be fatal considering you’re dealing with people’s hard earned cash – but also in terms of compliance and consequential fines.

Broadly, there are four forces of change that are transforming the type of connectivity retail banks need; the competitive landscape, what customers want, virtualisation of IT assets and regulatory changes.

Evolving competition in the retail banking marketplace

A bank used to be a bank, but not any longer. There are digital only banks, foreign banks and high street only banks, and that’s not counting the peer-to-peer financial services which are due to add another dimension to the market over the next few years. The advantage these newer banks have is that their telecoms networks are being designed for the market now. Rather than being adapted to fit the current market. Their core banking systems and branch networks are likely to be much more flexible, built with stringent compliance requirements in mind and their online, mobile and social channels are often more ‘in-touch’ with consumers. 

This changes the entire competitive landscape for retail banks and it’s not as simple as an upgrade. As Paul Thomalla, MD of software house, ACI Worldwide, told the FT around the time of the RBS fine: ‘The antiquated IT infrastructure of many of our biggest financial institutions is a ticking time bomb which requires surgery and not just a sticking plaster’. In fact, there has been a large connection between system upgrade failures and ageing technology infrastructures, so it’s critical that retail banks handle this carefully but quickly.

Customer-driven transformation of retail banking services

With zero tolerance for downtime, the significance of what customers now expect from their retail bank becomes apparent. 25 years ago ATMs were becoming mainstream, now 24/7 online banking is commonplace and this is happening on-the-move with mobiles and tablets. It’s not just a case of checking balances online either, customers expect to do transactions and even complete mortgages online, all of which the network needs to keep in operation.

Social media has also transformed retail banking. Not only is it a source of information, it is now also a method to resolve problems. In the future, it could even provide the opportunity for a bank to cross-sell services. Indeed, big data analytics could provide insight on emerging consumer trends to inform strategy and enable traditional retail banks to retain their dominance in the industry. Other industries such as fashion and hospitality have already recognised the opportunity of this approach, so it’s perhaps only a matter of time before banks do the same. 

Meeting these consumer service demands, while being reliable and secure can be a challenge for retail banks, due to the level of data and systems the network needs to support. High-capacity, ultra-resilient networks are the only way to ensure connectivity is fast and reliable, which is simply a non-negotiable for the modern consumer.

Virtualisation of IT infrastructure

There are also changes happening within the IT department itself as efficiency gains afforded by technology continue to carve out a competitive advantage for banks. While virtualisation and cloud technologies are used in the front and middle offices of many organisations and their data centres, its orchestration technologies can be the most disruptive to the underlying network infrastructure.

Orchestration allows retail banks to allocate processing requirements between virtual servers housed across multiple data centres, thus optimising compute power. This makes delivering multichannel services and the use of big data much more cost-efficient and reliable. It does present challenges, however, due to the greater amount of capacity, performance and flexibility required by the network. In fact, some legacy infrastructures simply can’t deliver this level of performance and an attempt at better orchestration could jeopardise business continuity.

For many retail banks, flawless integration with a network that’s able to scale and perform at the level now required, means a considerable change to the network itself. This type of network would be able to cope with fluctuating demand and ensure that the advantages of newer technologies can actually be utilised, rather than overloading the network. In many cases, this requires a complete switch up to incorporate fast and reliable optical and Ethernet services.

The continuous yet ever-changing challenge of regulatory compliance

It’s not just market position that retail banks have to consider. With such stringent regulatory restrictions in the financial industry, compliance has to be considered with every change in process or technology implementation. 

This in itself puts pressure on the network as ensuring and then proving compliance, means vast amounts of information is continually crossing the network. What’s more, for those banks that have an international dimension, the number of regulations that have to be adhered to are multiplied for every country. It’s not just processes and data handling that needs to comply with legislation either, the network itself and the data centre portfolio also has to meet certain criteria.

Compliance largely depends on how effective, efficient and well-integrated a managed infrastructure is, making a well-designed network critical to a retail bank’s ability to comply.

A network built for change

To cope with these four forces of change retail banks need to achieve seven key attributes in their network: accessibility, dependability, affordability, availability, scalability, security and responsiveness. Ensuring access will mean that no matter the level of customer requests you’re receiving, service won’t drop due to network issues. Dependability means that your customers will be happy, but also that you’ll be adhering to legislation in providing a certain level of service. While affordability ensures that the retail bank can remain competitive, availability of digital services and the ability to be responsive means that customers also get the best service possible. Retail banks must also be prepared for change; whether that means more customers or new technologies – making scalability critical to a well performing network. Last but not least, good security will be essential for compliance, social responsibility and to keep reputation intact – and retail banks must remember that security is both cyber and physical. 

All in all, retail banking has changed, an ‘anytime, anywhere’ service is now expected and it’s critical that retail banking infrastructures are adaptable to these changes. The network plays a role in almost all transformations of the retail bank and it is therefore absolutely critical that it is considered every step of the way. Failing to do so could not only impinge the growth of the retail bank but it could, in fact, spell its demise.

By Simon Poole, Head of Enterprise Business Development, SSE Enterprise Telecoms.

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