The evolution of banking: Retooling for the digital age

By Angela Christian-Pye – Senior Quality Engineering Manager

The banking sector is currently undergoing a profound period of transformation. The days where customers would pop into their local branch and interact with an employee are now a rarity. Thanks to technological advancements and changing consumer behaviours, financial institutions are now moving away from traditional person-centric methods and embracing a more “digital first” approach to banking.

This evolution, accelerated in part by the global COVID-19 pandemic, has seen banks re-evaluate their physical presence, laying off staff and closing branch locations in favour of an online self-serve approach. Today, the digital landscape dominates, and banks are rapidly realigning their strategies to meet customers where they are – online.

Banks or big tech?

Statista claims that the number of active online banking users worldwide will reach one billion by 2024. As a result, banks are transforming into entities that now more closely resemble large IT and technology companies. The ethos of innovation, agility, and customer-centricity that defines the tech sector is becoming intrinsic to banking. This is not a surface level cosmetic shift; it represents a fundamental change in how financial institutions operate and deliver value to their customers. They place a strong focus on developing cutting-edge financial products, heightened cybersecurity and resilience and 24/7 access to services.

This evolution is not just a strategic choice, but a necessity to stay competitive and relevant in a rapidly changing financial ecosystem. According to a report by McKinsey , banks that operate like tech companies will be the new winners in the retail banking industry and those that fail to innovate will not survive.  

RTGS/ISO 20022:

The renewal of the Real Time Gross Settlement (RTGS) payments system and the adoption of the new ISO 20022 standard are crucial milestones in the ongoing transformation being undertaken by the sector. RTGS allows for real-time settlement of financial transactions, providing unprecedented speed, security and efficiency for customers. What’s more, ISO 20022 provides a richer, standardised data format for financial messaging, enabling banks to offer a broader array of personalised services to customers which is essential in today’s digital age.

However, in order to facilitate such widespread and complex change, Quality Engineering (QE) must be at the forefront of such critical transformation projects to ensure they are successful. For projects like RTGS, QE simply cannot be treated as an afterthought or an exercise in compliance. Rigorous project scoping, thorough risk analysis, and continuous monitoring are indispensable components of a successful delivery. QE is a strategic imperative that should be woven into the fabric of every stage of development.

The risks and rewards of RTGS and ISO 20022:

After all, the stakes are high for both banks and their customers. Banking is an arena where there is zero tolerance for mistakes. Trust is paramount, and any glitches, outages, or security vulnerabilities can erode this trust rapidly and could result in organisational and personal fines. Customers are now accustomed to 24/7 seamless digital experiences and expect nothing less from their banking services. The bottom line is, financial institutions need to get this right.

However, while this widespread transformation poses a challenge, there are also rewards for those that approach this correctly. Banks that take the time to understand the benefits ISO 20022 will deliver meaningful, personalised experiences to their users and outperform their competitors. Behind the scenes, they can empower their staff by minimising repetitive manual efforts with automation, offering them more time to focus on building relationships and other meaningful work.

The role of Quality Engineering within this transition:

For financial institutions QE will be key to navigating this transformative period successfully. Banks must uphold quality to ensure their service is resilient, safe, reliable, and customers are protected. QE can act as a safeguard against potential pitfalls and put in place a proactive strategy for ensuring a successful digital transformation. A dedicated QE team, applying a shift-left approach, becomes indispensable in identifying and rectifying potential issues early in the development process, where things are quicker and cheaper to rectify.

Summary:

The ongoing transformation in the banking sector is reshaping the industry, with a shift towards a digital-first approach and the incorporation of advanced technologies like RTGS and ISO 20022. As banks embrace their new identity as technology-driven entities, they must adopt a robust approach to QE to ensure a successful and seamless transition.

While RTGS and ISO 20022 may introduce further complexities and risk management concerns for banks, there are also competitive advantages to be seized for those willing to go the extra mile. Banks must uphold quality to ensure their service is resilient and safe, as failure to do so will have serious consequences. However, those excelling in harnessing the richer data enabled by these standards will gain a competitive edge by offering personalised services and enhancing customer acquisition.

As banks navigate this transformative period, the role of QE is pivotal, and cannot be considered an afterthought. Ultimately, a holistic approach to quality is integral for delivering resilient, safe, and reliable banking services which are critical to the daily functioning of our society.

For any financial services providers who fear they may not be ready to meet the impending deadline, be it the RTGS impending deadlines or any other critical transition, Roq is here to help. The path to a resilient, technologically adept future in the financial sector requires a critical shift, and Roq is here to help pave the way.