20201127 A friend asks…..

Q: What about digitisation without fintech, bigtech and regtech? How do banks do it? Do they have an internal team for it?


This is where there is a fatal flaw in the thinking of all the fashionistas in the financial industry, including regulators.

Banks have been digitising for decades. Literally since the 1950s. They are derided as being tardy but the fact is that banks have led technology more than any field other than pornography and weaponry (which always lead, no matter what the tech).

BigTech is a stupid concept.

Here’s what it really means: for decades, disparate providers of incompatible systems sold them to banks; moreover, they sold software that ran on only their own hardware and operating system. Also, data formats were “proprietary.” This meant that companies could force banks, etc., along an “upgrade path” and at the same time create massive disincentives to change to another supplier. When a bank, etc. decided that an offering from another (of course equally restrictive supplier because that was how the industry worked) the bank had to pay vast amounts to convert and transfer its data from one format to another. Migration was time consuming, costly and, worse, not reliable (it still isn’t – you try moving from one content management system or customer relationship management system to another). That meant that, often, the old records were kept on an old “frozen” system and only balances transferred.

Maybe 15 years ago, I told a conference on banking and technology somewhere in the Middle East that this was silly and that banks, etc. needed to be in control of their own data, that they needed to have access to ALL the data in the bank for a wide range of purposes; that if sales data were available to risk and compliance, that helps in relation to financial crime; if all data (excluding risk and compliance) was available to sales, they would be more efficient. The way to do this, I told them, was to build their own systems which isn’t very difficult, to use standard hardware (it’s amazing what you can do with a room full of networked basic machines) and using XML as a data interchange between an array of databases and with standardised querying. The tech companies were angry; the banks didn’t understand – most IT directors don’t actually do IT, it seems, they just manage budgets and sign off on whatever presentation takes their fancy.

That’s all “Big Tech” is – but the companies selling a “big tech” “solution” are still trying to hem in their customers. So it’s just lipstick on a pig.