The days when relationship banking consisted solely of basic checking and savings accounts are long gone. With regulators calling for stricter compliance and clients requiring ever more sophisticated products and services, IT integration is a top priority for financial institutions – but how do banks balance these demands? Ross Davies asks SEB’s Pia Warnerman.
"Above all, it needs to be stringent," replies Pia Warnerman, head of group operations and IT at SEB, when quizzed on what makes for the successful management of an IT project.
Given the increasing technological demands on financial institutions, Warnerman's succinct piece of advice is certainly worth heeding. As a leading financial services group and relationship bank in Sweden and the Baltic countries, SEB presently serves more than 400,000 corporate customers, and is one such organisation looking to benefit its clients through proffering better IT efficiency.
However, in the wake of the recent slew of EU financial regulations and associated cost compliance issues, IT departments currently find themselves under pressure to deliver more dynamic technological solutions to users. This has spurred a number of organisations, including SEB, to actively collaborate with regulators, such as the Basel Committee, in order to better tackle the current crop of data integration and management challenges.
Out with the old and in with the new
Within this present state of flux, the greatest predicament for CIOs across the continent remains the phasing out of old legacy systems; in maintaining existing applications on top of paying for new systems, banks are effectively required to double on costs. Subsequently, this has seen the rise of a new type of vigilance within the sector regarding capability portfolios and how to successfully harness potentially disruptive technologies.
Having previously held the position of head of operations at SEB, Warnerman undertook her latest role in December 2010 amid a revamp within the organisation. Explaining the decision to merge group operations and IT - up to then two separate divisions - president and CEO Annika Falkengren cited the need for heightened integration of business support processes as the most pertinent contributing factor.
"Operations and IT have long been essential part of our customer offering," says Warnerman, "but they previously consisted of separate departments. In joining them together, we believe we can engender greater efficiency for our customers."
With the rapid advancements seen in banking technology over the last decade, SEB is the latest in a long line of banks looking to consolidate its technology solutions. As the industry moves towards new mobile and tablet trade solutions, institutions are looking to effectively offer corporate customers a disparate range of self-service options.
Consequently, in developing prototypes of such technologies, banking R&D departments have their work cut out for them. Coupled with the ongoing eurozone crisis threatening to escalate into a full-scale economic contagion, the aforementioned headache concerning the proliferation of legacy systems remains the main talking point. Most often caused by mergers and acquisitions, banks are seeking to integrate applications while circumventing potential data pollution, as Warnerman explains.
"Striking the balance between old legacy systems and the efficiency demanded by today's clients is certainly an ongoing challenge," she says. "If you look back to ten years ago, IT requirements were completely different. Today, we have to consider meeting a whole host of expectations and demands regarding the integration of systems for both private and corporate customers."
A balancing act
As a result, the theme of 'innovation' is ubiquitous within the banking technology sector. Warnerman, similar to many of her counterparts and CIOs, believes it to be imperative in tackling the issue of post-merger systems integration. In addition to the stringency expounded at the start of our exchange, she is also an advocate of collaboration.
"We work closely with our large corporate clients," she stresses. "In their development, they have inspired us to form close relationships and ensure that our technology stays at the forefront."
Nonetheless, while Warnerman appears to be sanguine when discussing the advantages of a two-fold approach, she is more than aware that the topic of systems integration still remains a case of easier-said-than-done, with seamless and time-efficient implementation very much a work in progress.
"It is tough," she says. "It really needs a lot of organisation. In terms of fast integration, many banks are presently being stretched. The most challenging aspect often comes in actually understanding the large variety of products that the acquired entity is offering.
"To do this and reduce costs, banks obviously need time, as well as patience and skill. This is the key to moving forward and simplifying the IT landscape."
Despite a number of banks such as SEB adopting a head-on ethos in tackling the recent influx of regulations and compliance issues, Warnerman is also cautious in her optimism. While regulators expect bigger players to have sufficient capabilities to apply such actions, smaller institutions are still faced with the potential hurdle of stifled transactional flows as a result of the new reams of red tape.
"Regulatory demands are a key driver when it comes to IT development these days," she says. "You also have to remember that we are a mid-sized bank, as opposed to a large one, which means we have to be better equipped to remain competitive. As they demand all kinds of regulatory frameworks, it is increasingly becoming a balancing act between the IT agenda, regulations and client demands."
Is sustainability taking a back seat?
Although less conspicuous, another challenge comes in the face of sustainability. With greater calls for greener processes across all industries in general, backroom IT strategy within the banking sector is also upping its game.
"It is vital," says Warnerman. "While banking may not have a huge environmental impact compared with other industries, when it comes to the use of electricity on the IT side, there are a number of efficiency drivers to consider.
"In-house, we also consider printing and the amount of paper we use. In fact, we have just finalised a project in which we will aim to reduce our amount of printing, administered by a designated green IT team."
R&D investment
Returning to products, in February SEB launched a market application for Apple iPad devices, aimed at providing clients with research corporate factsheets and research reports.
The group is also set to offer additional tablet applications to partners in response to calls for greater transparency and visibility within the industry. According to Warnerman, this will require financial institutions to place an even greater onus on research and development.
"At SEB, we continue to set aside a certain amount of our annual revenue to invest in new core banking platforms and products," says Warnerman. "This isn't a new approach - in order to develop a winning strategy, it is important to have a long-term investment plan in place. This is something we have been looking at over the last few years."
Close connections
Towards the end of our conversation, when discussing future challenges, we return to the inevitable bête noire of legacy systems. How can banks such as SEB mount this challenge while satisfying clients' additional technological demands?
"For us, as a medium-sized bank, we need to concentrate on securing ample partners because, in areas of technology, a number of core competencies will be needed to tackle today's legacy system requirements," says Warnerman. "I believe these challenges can be met by focusing on forming strong partnerships in the market - the winners will be the ones that are closest to their clients."
While Warnerman also concedes that "there is a long way to go yet" regarding the balancing act of investing for future efficiency while complying with new regulations, the reaction among the banking community has been largely proactive and positive. This is because, ultimately, new technologies will always be synonymous with new growth opportunities for both banks and customers alike.
