Responding to the Treasury Committee findings on UK banking service failures

Bank boards still reflect a model of banking that started to become obsolete in the 1980’s when mainframe banking systems and electronic networks started to become the single most important piece of infrastructure in the organisation (even more so than branch networks). Where we stand today, functional divisions of responsibility on executive boards (sales, marketing, HR, finance, legal, compliance, IT etc) no longer works because they obviates the need for everyone to be taking decisions based on true knowledge of how and why financial technology works for customers and the bank; how the entire electronic bank infrastructure is being operated / delivered; how changes in technology based models are transforming the industry, including models being adopted from other industries; the power of Cloud, BigData, AI and Blockchain; how and why ‘IT strategy’ should be one and the same as the bank strategy (in a world of digital products and services); and, how software, systems and services should be built and by whom. Truly understanding these things will allow real collective decision-making to take place; a significant improvement in quality of decisions, including use of in-house and outsource resources; and, much improved governance and operational risk management. Functional strategies (eg for HR) will be better able to facilitate bank transformation if those functions truly understand and help top shape digital strategy. Making one role (head of IT — to give them a useful but unfashionably descriptive job title) responsible for effectively building, supporting and operating the entire operating model of the bank can never work, but that is where we are right now.

I argue that IT it is not a function at all. Not in banking at least. One function cannot be the design authority, developer, supporter and owner of the bank operating model, because then they are the bank. And that is arguably the crux of the matter: IT is the bank. Knowledge of what happens when operating, delivering and supporting electronic products, services and infrastructure, and the art of the do-able in improving these things is critical in all executive roles. As is how to change and how to build digital ‘things’. I reject the argument ‘I don’t need to be able to build a car to drive it’ mentality as banking and technology are now completely intertwined. And intertwined in a world where ‘the art of the do-able’ in financial technology is simply too big a topic for a single brain (eg with the opportunities of AI, Blockchain, Big Data and Cloud). As a result, the head of IT ends up making decisions based on knowledge that should be a collective decision based on high levels of passion, education and knowledge among a group of people with different — but converging — responsibilities around financial technology. Or the head of IT can end up blocked / starved of budget by people who don’t have the same level of understanding (even if some of the causes for concern have merit) and it is customers who suffer. An enlightened CEO understanding the risk being carried by the head of IT may call in consultants to help — but there are too many instances recently of this strategy resulting in disastrous outcomes for bank customers as the Treasury committee has observed. Again, where was the regulator on this issue when it was being openly discussed within the industry, including by people involved in those high-profile project failures? From this point on, I hope that stakeholders across banking will stop referring to ‘IT failures’ or at least come to understand the true organisational causes of the problem. Regulators paying for ‘better (IT) people’ (one strategy being proposed) misses the point completely and won’t make the slightest difference. Banking is (or at least was) full of IT talent. Post-crash it risks never regaining its attractiveness to graduate mathematicians, scientists and technologists — but changing how banks are led could make a big difference in this regard. There is so much to be done with banking technology once its fundamental importance is understood, celebrated and protected.

Cliff Moyce, 28 October 2019

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