Financial services organisations are not prioritising compliance in their modernisation efforts – new report from Advanced reveals
- Banking , Compliance
- 01.06.2020 11:08 am
Just 6% of financial services organisations say it’s essential for them to modernise their legacy systems to meet current regulatory and legislative demands. This surprisingly low figure is according to new global research from Advanced, which also reveals that only 20% cite an inability to meet compliance and regulatory demands as their top reason for modernising mainframe based legacy systems.
The IT services provider’s 2020 Mainframe Modernisation Business Barometer Report surveyed business and technology employees working for large enterprises in the financial services industry with a minimum annual turnover of $1 billion across Europe and the United States. The report explores trends within the mainframe market, the challenges organisations face, and the case for application modernisation.
The new figures are a cause for concern, especially when the financial services industry is highly regulated, with enormous fines to match. In the six months to the end of June 2019, for example, the UK’s Financial Conduct Authority (FCA) imposed fines worth a total of £319 million for non-compliance – more than five times the annual total for 2018 of £61 million.
“These findings are shocking given the regulations, such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA), which have come into force over the last few years, comments Brandon Edenfield, Managing Director of Application Modernisation at Advanced. “It begs the question: have organisations become complacent?”
The research also reveals that over 95% of organisations in the financial services industry feel there would be either minor or no risks of non-compliance or security issues if they didn’t modernise their systems within the next two to three years.
Brandon continues: “Arguably, the industry would not want to admit there is a major risk, but there are clearly lessons to be learned. We know from TSB’s IT glitch in the UK in 2018, for example, that there have been a number of outages in banks, with critics blaming legacy systems. This demonstrates the consequences of organisations failing to modernise are huge.”
When asked what the ancillary consequences to not modernising legacy systems would be, 60% of financial services organisations state difficulty in integrating legacy systems with modern technology. This is followed by difficulty to recruit the right talent (43%) and reduced levels of customer service (38%). Only 19% say inability to meet new regulations.
What’s reassuring, however, is that 98% of organisations have active plans to move their legacy applications to the Cloud in 2020, which can support compliance. This push is likely driven by key benefits such as enhanced business agility and flexibility as well as the opportunity to attract new generations entering the workforce who expect advanced technologies. Above all, it offers significant cost savings for IT infrastructures. In fact, organisations could save around $44 million (£36 million) if they modernise the most urgent aspects of their legacy systems.
Brandon continued: “As our world grows increasingly connected, organisations need to get more serious about modernisation. Many people today do their banking on their phones and tablets, hardly ever setting foot inside a branch. What’s more, for the majority of them, banking has become a completely digital experience. However, in almost every bank, once you get past the digital veneer of the customer facing applications, the systems are still the legacy transaction processing applications that have been driving the business for decades.
“If organisations are to adapt to customers’ digital habits, they need to consider legacy modernisation as the foundation. Those who fail to prioritise this shift risk falling behind their competition and significant revenue loss in the future.”
To view the full report, please visit: oneadvanced.com/Modernisation2020
The 2020 Global Application Modernisation Business Barometer Report was carried out online by Coleman Parkes throughout March and April 2020. The sample comprised of 400 people working for large enterprises in Europe and the U.S. with a minimum annual turnover of US $1 billion. 200 of these people worked for organisations in the financial services industry.