IBS Journal November 2017
Legacy technology is still a worry. People who work on true legacy technology are becoming even thinner on the ground. We can’t persuade young programmers to become interested in them – that’s not going to happen. And there is the cost aspect of legacy – it’s expensive to run, maintain and repair. Yet it still runs some important parts of our bank. But if I have my thirty-year old DBA and I want to see how it works with a real time payments capability of then front end of the payments processing, I have to realise this is a batch-based overnight system and it just cannot handle that unless we add layers in. Obviously that adds even more complexity into your environment.”
If you are a regional organisation you will have systems for each region. If you are a siloed organisation you will have dozens of silos that can’t talk to each other. You will also have systems that have been inherited from mergers and acquisitions.
“What we have done in Deutsche Bank’s cash management franchise – led by Michael Spiegel, who took it over earlier this year - was that we have stopped looking at legacy as a ‘problem’ to be solved I was appointed as Cash Digital Product Head to look ahead at the next four to ten years step-change product roadmap. Michael was getting fed up with having the same ‘Legacy vs digital’ discussions that were taking place in the division. So that is why I talk about fintechs, the long-term markets, new business models, what the digital opportunities are and what we can do with them.
I have a peer, Shahrokh Moinian, Head of Cash Products, who drives the development of our existing product set. ”He focuses on the medium-term needs and opportunities such as: ‘I want to roll out a new payment processing system over the next four years or do I need a single DDA platform I can concentrate on. Do I need a single billing platform; how do I roll out PSD2 regulation compliance’ etc.
Watson concentrates, with his team, on the medium to longer term problems. “That has really helped us as an organisation solve this tension between legacy and transformation of the future. We learned this from companies in the past who have future-proofed themselves. “
I ask Watson about cloud technology and how quickly the banks will bow to the inevitability of cloud technology. “This is not about one single new technology disrupting business processes. It’s about using those elements of cloud, APIs and blockchain that become relevant to you and answer a problem you have.”
He responds with the story of how Swift, the global payments services provider, came to solve the problem of payments truncation through the Global Payments Innovation initiative. “When someone transfers money it can go through a number of different banks to its eventual destination. Because they all have different systems the identification number can be moved onto different fields, it can get lost or mislaid due to the customisation a bank has done and money gets lost. And often what is originally £100 comes out as £85 after various fees are deducted. None of
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very complex strategy for Deutsche Bank seem relatively easy
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the banks involved has a clear idea of what has happened to the money all the way along the chain.
“So Swift got all of the banks together in one room and we came up with a solution to use the cloud. The information sits in the cloud and we use open APIs to tap into the cloud to find out where that payment is in reference to that number. And now the client knows who had the payment, exactly how long they had the payment for and what fees they deducted. Suddenly everything is simpler – the cloud holds the information and if any bank drops out along the journey it just passes to the next bank in the chain transparently.
“This is where API and cloud technology will play a key part in banking. This new payment system went from a discussion to a concept to implementation across the Swift network and hundreds of banks in eleven months, which is not really a very long time in banking terms. Banks must remember that the value of the cloud is not just in running your network – it has other capabilities which can be utilised if you use the solutions creatively.”
Watson makes a very complex strategy for Deutsche Bank seem relatively easy. Like many other banks I subsequently talk to at Sibos, Deutsche Bank is embracing change and the very agents of change which were, previously, seen as a threat.
Watson makes a
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