In April, Andrew Bailey, chief executive of the Prudential Regulation Authority (PRA), claimed that Britain’s banks will have to spend billions overhauling their creaking IT systems over the next few years, as complex networks bolted together after mergers are under strain. While it’s clear that a number of banks are lumbered with outdated IT, there are technologies available to revitalise legacy systems.

Mr Bailey describes how this is an industry with quite complex and aged IT due to companies having grown up through acquisition, and says that it makes more sense to strip the machine down and rebuild it instead of bolting bits together in a complex fashion.

KPMG’s latest banking report also briefly notes that the scale of investment required to fulfil a technological revolution in the banking sector will be massive. With technology being mission-critical to the future success of banks, it describes how “significant changes are required in operating platforms and data analytical capabilities to improve the ability to serve customers, enhance risk management and counter the increasing risks of cyber crime.”

There’s no denying the impact that technology and digital is having on the banking sector. The British Bankers Association (BBA) has revealed that the way people manage their money is undergoing a revolution, with the daily use of mobile banking apps in the UK doubling in the last 12 months, while banking retail footfall has fallen by 30% in the last four years. The use of mobile banking apps has actually exceeded what banks anticipated and led to outages as a result of the high number of concurrent users, according to a report from CSC

Any financial services organisation that is not looking at its digital strategy will get left behind. Especially as the UK’s first ‘digital only’ bank is expected to launch next year, with its owner Anthony Thomson claiming it will offer the first real alternative to high street banks, with a primary focus on customer service and satisfaction.

Atom is out to attract some of the millions of people who are believed to be looking to move banks due to a series of IT failures and bankers’ bonuses having dogged Britain’s high street banks in recent years. It’s another reason for traditional banks to formalise their digital strategies urgently.

Today, every business is a digital business – and a successful digital business strategy is more than having a website and delivering customer-facing mobile apps. Businesses must use digital technologies and competencies to fundamentally change the way they bring value to customers, partners, and employees.

Data powers all digital businesses: it’s the fuel that enterprises use to engage with, understand, and bring value to its customers, market, and business. Data is delivered by an application programming interface (APIs), and customers engage with data through modern mobile apps. Together, data, APIs, and apps are the core constructs of digital business.

However, banks and financial services businesses don’t need massive investment to become digital businesses and certainly don’t need to overhaul their IT systems overnight to address these challenges. API technology enables organisations to exploit their legacy systems in new ways, so banks and other financial services organisations can get their existing IT infrastructure into shape to meet increasing customer service demands and respond to changes in consumer banking behaviour.

Given the typically conservative nature of IT in the banking sector, however, it’s important to take a staggered approach. Start by looking at what areas of your business you want to apply a digital framework to, and then break these into more digestible chunks. Digital and mobile is what customers want, and an API approach means banks can get start offering services readily.

To embark on the digital journey, here are three key steps that banks should be taking:

  • Embrace an ‘outside-in’ approach. This is imperative to meet changing consumer demands for digital and the realities of disrupters and competitors already moving to use digital from the top-down.
  • Driven by this approach and the mandate to become digitally competitive, don’t rebuild old systems. Use an API façade layer to enable rapid prototyping and delivery of new products and experiences that will win share or loyalty, reduce costs, or drive revenue. Start deploying initial services now and create an API team.
  • Appoint a C–level digital transformation leader to ensure quick wins turn into progress toward overall transformation. The role of the Chief Digital Officer (CDO) is one that is appearing more as companies look to become digital businesses.