Based on our latest research, banks are grappling with a variety of issues when it comes to transforming IT in their business. There is confidence when it comes to cloud adoption, lowering legacy spend and scaling up usage of AI and automation across the business. However, this is balanced by a lack of in-house DevOps skills and concerns over security. Are banks ready for disruption?

Optimism around legacy and cloud, but not security
When it comes to sorting out legacy issues, banks believe microservices (78%) and APIs (69%) are a key strategy for unlocking value in the business. However, banks are struggling in this area: 43% see legacy IT and the costs of integration as a major obstacle to an agile approach to disruption. Banks think legacy is a significant hindrance to retaining staff (39%) and innovation (30%). 

But banks are optimistic about lowering their spend in this area. The majority of banks (43%) currently spend between 10-30% of their IT budget on legacy issues; but in three years’ time, banks reckon a third (31%) will only spend 5-10%. 

There is a similar level of optimism around cloud adoption. 17% think they are currently ‘optimized’ (the top of five categories, including – in descending order - measurable, systematic, opportunistic and initial) and a third (33%) reckon they will be in that category in three years’ time. However, just over a third (36%) still experience security issues around the cloud. 

In fact, security was a major reason for a delayed response to market disruption – almost half of all banks cited this as a factor (46%). Over a third (39%) said that the biggest challenge to IT transformation was security risks around legacy systems.

So there’s plenty of ambition.  But the debate is over how quickly this will be delivered and particularly how security issues will be resolved.

Lack of DevOps skills is a major obstacle
Half of the banks felt they lacked in-house skills for handling market disruption. Specifically, acquiring DevOps skills is the biggest obstacle (53%) and banking was the top sector (we covered 21 in total) with this issue. This was a theme we have picked up on in our Workplace Experience research. 

Significantly, almost half of banks (47%) reckon they can free up 25-50% more time for other activities when they use a DevOps approach. So, the logic for increased investment is strong, but it appears that the business case has yet to be made, given the lack of skills in this area.

Banks are using Automation at scale
Banks are using AI at scale to modernize IT (53%), improve EX (41%) and optimize CX (50%), compared to developing pilots (19%, 34% and 25% respectively).  The trend is even stronger when looking at automation. Banks are using automation at scale in the same three areas: modernize IT (66%), improve EX (44%) and optimize CX (53%) compared to pilots (22%, 38% and 38% respectively), although EX and CX are still high for the pilot stage. This resonates with our research around digital transformation that shows that automation and integration are the top banking priorities over the next five years.

Are banks ready for disruption?
The bottom line is that banks need to unlock value from legacy and get to grips with microservices, APIs and analytics in order to become more agile. This is not an option. Our research indicates that legacy issues are still present in many banks and that cloud adoption is low – despite the desire for lower legacy spend in future and greater cloud take-up. Security and the lack of DevOps skills are major issues. The increased use of AI and automation is encouraging, but the acid test is whether this is genuinely integrated at scale into the various systems across the business. There are still a number of IT transformation challenges to be resolved before banks are fully ready for disruption.

Find out more about our approach to business transformation, Ready by Design, a holistic approach to applications that includes cloud-native architecture and modern software engineering techniques. Ready by Design helps banks adapt quickly to changing market dynamics and ensures they are effectively prepared for disruption - in whatever form it comes.