Why are the banks spending heavily on technology?

Recent history has shown us clearly that there is no certainty in today’s technological outlook. All this comes from a very simple and intuitive term of operational resilience.


Recent history has shown us clearly that there is no certainty in today’s technological outlook. Some processes have accelerated so much, that the banking industry seems to not be stopping, and the scale of innovations is unparalleled to anything in the history of the human mind.

Many companies that don’t operate in the BigTech branch could only look jealously at this pace of things. But to be honest, this constant race could be exhausting and frightening, especially if we look at the numbers. J.P. Morgan has invested 11 billion dollars into a significant number of different technologies.

Why are the banks spending heavily on technology?

And there is also a less-known aspect to all that, as banks tend to outsource bigger and bigger chunks of their services and tasks to smaller companies that offer certain software. This symbiosis is particularly interesting, as the banks are benefiting by not being forced to innovate themselves and develop complicated structures, and the smaller companies receive huge investments and have a better chance of succeeding with such influential customers (or maybe partners/investors?).

What is ‘operational resilience’ and why is it so important?

All this comes from a very simple and intuitive term of ‘operational resilience’. In short, this is not something made up to ease the tensions on the market after the big crisis, but a real and highly important element of planning businesses’ steps and endeavors.

According to the Bank of England’s definition, this is the ability of firms (and the whole systems) to deal with the trouble. Sound peculiarly obvious, but it’s really important to see the difference between trying to maneuver out of the crisis once it already has happened, and the ability to absorb shocks and disruptions in order to maintain the undisturbed continuity of service provision. This brings us to the point that the reason and the source of disruption become irrelevant because the firm or system is perfectly capable of digesting it.

The United Kingdom’s approach is really fascinating, as the Bank of England believes that this is possible for the financial system to grow and develop when left unchecked. But this does mean the possibility of developing in such a way that it stays fragile and vulnerable. This is up to the authorities to maintain the sound system, which will be able to resist increased pushes from all the different directions.

And if you think about it, finding some examples of big institutions that failed to properly prepare their systems for trouble is really not that complicated. Recent stories involved Goldman Sachs and Citi, but there are plenty more.

Paul Ibarra, Fusion’s Chief Revenue Officer, spoke about the concept of operational resilience to Disruption Banking’s Benjamin Jenei. He discussed the development of cloud-based services in banking and other current trends.

According to the expert, resilience is a lot more than just an empty phrase. He distinguishes the six pillars that are the foundation of it. Ibarra points at the incident and crisis management, business continuity, the management of third-party vendors, audit and compliance management, IT disaster recovery plans, and operational risk. With them, you can anticipate what will happen to everything (from people to businesses), and thus plan your operations and possible ways out of trouble.

You’re basically able to analyze the risks and by breaking everything down to those six pillars, it’s easier to find proper and safe solutions. But the term is not widely used or adhered to. Ibarra claims that the lack of imagination is responsible for that and that this has become really visible during the pandemic. The unparalleled scale of changes and dangers has shown us how important the worst-case scenarios are, and we will probably be seeing more careful planning processes and deeper analysis in the post-pandemic future.

To find more about operational resilience, the argumentation behind banks’ big investments, and quotes from experts, use the link and find Benjamin Jenei’s piece: https://disruptionbanking.com/2021/04/19/why-are-banks-spending-so-much-on-tech/.

Like it? Share with your friends!



Your email address will not be published. Required fields are marked *

error: Hey Butler Content is protected !!