The role of systems in banking modernization


Close your eyes and picture this image: panic stricken depositors trying to withdraw funds from a shuttered bank. Home owners watching the value of their properties plunge by 100 percent or more. Businesses and manufacturers unable to secure credit, even if they have excellent ratings, from some of the world’s largest financial institutions. Now open your eyes and realize you are not looking at some circa-1929 grainy black and white image of the Great Depression. You are looking at the recent Great Recession and its lingering effects from the greatest financial calamity to occur in the past 80 years.

Back in the 1930s, banks thought they had the tools to prevent a financial meltdown to the world’s markets. As history has proven, they were wrong. The tools at their disposal were insufficient and the results were devastating. The obvious questions are, “What did we learn from that experience?” And, “How can we apply these ‘lessons learned’ to minimize the risk of our present-day financial challenges?” The answer is analytics technology. In our connected world, smart financial institutions are adopting analytics to mitigate risks associated with IT availability, payments fraud and regulatory compliance.

Currently, many banks are looking for ways to modernize their systems to increase efficiency and security and unleash the power of analytics. For banks, opportunities to modernize fall into three key areas: cloud computing, data management and security. Each of these areas relies heavily on recent advances in business intelligence and data analytics.

Taking advantage of cloud computing

Cloud computing is new to many financial organizations. Many major banks have started to investigate cloud computing as a means to simplify IT operations, create an agile IT infrastructure and optimize operations across multiple data centers. But fundamental cloud capabilities such as automated self provisioning of computer resources, application lifecycle management, and system metering and chargeback can be used to enable innovative IT services that can transform banking.

With services like cloud desktop, cloud analytics, cloud development/test platforms and cloud storage, banks can save money and deploy new applications more quickly. For example, some IBM clients using the IBM Pure Application System’s built-in operational analytics reduced system provisioning time by 65 percent and reduced physical infrastructure through a 30 percent improvement in application virtualization. These types of tangible results can have a major impact for financial institutions that are looking for new opportunities to remain competitive.

Gaining insights from data

Historically, data at many financial institutions has been fragmented and lacked structure. But as banks realize the importance of customer-centricity to attracting and retaining new business, it has become vital for them to work with all types of data, including both structured and unstructured data, logs and alerts.

To drive revenue and achieve competitive advantages based on data retention and retrieval, banks need integrated systems and storage technologies that include:

  • Real-time data compression to reduce the storage footprint required for explosive account growth and storage of regulatory reports.
  • Automated information tiering to eliminate manual restructuring of data in response to financial transaction work loads.
  • Storage virtualization to reduce data access time and enable data sharing across systems during peak transaction times.
  • Solid-state disks to reduce data access time for the analytical queries required to create and save regulatory reports.
  • Accelerated querying to enable real-time fraud detection and customer activity analytics.

Today, banks are contending with massive volumes of structured and unstructured financial and operational data, frequently referred to as big data. Data analytic solutions from IBM combined with systems technologies enable banks to organize, reference, filter and transmit with an efficiency unsurpassed by other IT vendors.

Keeping it all secure

For banks, nothing else matters if the data doesn’t remain secure. IT security is critical to success. Bank clients demand secure access to their funds, and CIOs must ensure that security is integral to all IT functions. Although client account access security is fundamental to any financial institution’s core operations, a bank’s systems must also offer reliable, secure public access from a myriad of channels that include mobile devices, remote personal computers, ATMs and connections to non-traditional financial service providers.

In the current financial world, security goes beyond the usual access controls and data encryption as well. Today, banks must proactively anticipate and guard against criminal intrusions and denial of service attacks. With advanced analytic solutions, banks can deploy solutions that address online fraud, employee fraud, transaction monitoring and suspicious behavior detection, list screening, and know your customer (KYC) scoring.

For banks, cloud computing, data management and security should be more than just IT technology buzz words. They might be the means for survival in today’s increasingly volatile environment. It’s time for banks to look beyond cost-cutting measures toward new systems like IBM Power Systems and System z storage, which can help revolutionize modern banking.

Ken Muckenhaupt is an Executive IT Specialist and Financial Services Sector CTO. He has 35 years experience in IBM hardware and software development. His past assignments include microcode development on IBM’s mainframe processors, management of a mainframe microcode development department, a technology leader assignment for the introduction of object-oriented technology on OS/390, a 3-year assignment in the development and test of IBM’s Component Broker on OS/390, and an 8-year assignment as an e-business on-demand consultant at the IBM Design Center and Center for Solution Integration.

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