DORA the explorer travels light
Those of us who didn’t need to travel during the global systems outage a few weeks back fetched the popcorn and watched the chaos unfold.
Things are only going to get faster and more demanding. So travel light, because you need to go far.
There were sensationalist reports focusing on the human inconvenience and practical fall-out. There was thoughtful coverage on what caused it and what we need to do or think about next. And there were endless conversations around global dependencies and who is to blame, as well as inescapable DORA implications and horror-scenario speculation for those of us in the financial services industry about what an outage like that would mean under DORA, once it comes into effect.
And, of course, there was the endless reminiscing of outages past, along the lines of: “Oh, do you remember the [insert company name here] outage a couple of years back, when we were meant to have dinner and Dave got stuck in the office firefighting?”
Or the time one of the major cloud providers had what we officially call ‘a wobble’ in the industry (technical term) and we all almost had heart attacks as a result of contemplating the potential implications of the regulators asking for full portability for all the things we ever do on the cloud forever?
Oh, the fun. The horror. The fear. The fear is real. But the reality is… outages happen.
And they will happen. As much as it pains all of us to admit it, we will never be in a world where nothing ever breaks.
And although they are disruptive when they do happen, and we should always learn from them and ensure they happen as rarely as possible and we recover as quickly as possible, we will never be in a world free from them. So, the question (especially with DORA looming) is not how do we totally prevent them, but how do we manage the impact they have on our business, our customers and our own ability to sleep through the night when they inevitably do happen?
Because, even if you strive for perfection in your own estate (and I am sure you do), you have so many third-party dependencies that not everything that affects your life is in your control. It can’t be.
And as we live in an ‘online’ world, those things outside your control are multiple and not all of them real time. Although, in a digital world, the impact of them working… or not… is visible in real time.
Because everything is digital.
It’s not just a thing we say. It is a lived reality with all its enabling requirements met and accepted as a baseline for our everyday lives.
We all work from home thanks to high-speed internet being ubiquitous, as are the tools for system to system to person connectivity for real-time video communications, real-time ID verification, real-time payments… real-time everything. The tools for real-time everything (another technical term) are all available and, frankly, taken as a given.
I listen to my music on a streaming service that doesn’t buffer or slow me down. Ever.
The one time my video streaming service paused for a second, I was so puzzled and confused you’d think I wasn’t the very same person who grew up with a TV without a remote. (Back me up here, children of the 1980s: we were the remote. When your grandad wanted to change the channel, you were called in to change it for him.)
Why am I saying this?
Because if everything is digital (and it is, that is not up for debate) and we expect real-time connectivity and real-time truth for everything from money to music controllers, then of course things like authenticator capabilities and real-time data parsing are key. From prescriptions to transactions, it all relies on the assumption and belief that you can confirm I am me, I have the right to do what I am about to do and the twin ability to access it in real time (securely) and fulfil my obligations (payment, consent and so on) equally quickly and securely. Whether we are talking about my money or streaming the latest Taylor Swift album.
In that context, every service provider is and will remain on a digital journey. And for financial services, this digital journey has been a steady but tumultuous one. I am not one of those people who revel in pretending banks are slow and stupid. They are neither.
Digitisation has been going on for a couple of decades now and although it has not always been elegant, the amount of progress is staggering and undeniable.
My view, known to any of you reading me regularly, is that banks are not failing to engage. They are however falling behind in terms of their pace of digitisation as the world is digitising faster and, which is a heavy combination, they are further burdened by their reluctance to switch systems off. That last part means that they carry more operating complexity than is good for them, more cost and more vulnerabilities.
Unit costs go up.
Dependencies go up.
The number of things that can go wrong goes up.
The number of teams that need to keep an eye on things so they don’t go wrong goes up.
Which means the costs go up even more.
And your organisational complexity goes up, so your operating complexity goes up.
So your dependencies go up.
Do you need me to continue, or do you get the picture?
In this context, banking organisations and FIs have done stellar work in managing the complexity, but get a generous B- if the exam question is to reduce the complexity. That has not been a priority and therefore it has not been done. At all, in some organisations. Half-heartedly in others.
DORA will undeniably shine a light on a lot of that complexity, plus a tangle of third-party risks that I haven’t even talked about yet. So the pressure to simplify will be on in very real terms for our industry, even if no spectacular outage affects us to add fire to the mix.
But it shouldn’t take an outage. And it shouldn’t take regulatory pressure (although, I am not naïve, that is exactly what it will take).
The reality is that the watchword of your average financial services digitisation strategy pack has been ‘hyper personalisation’. Which, as I have said before, is aspirational, but fundamentally nonsense because no bank holds all the necessary information. The very idea harks back to a world where you joined the bank your dad banked with when you had your first pocket money, got all your loans, mortgages, credit cards, travellers cheques (that’s Revolut for the stone ages, for the youngsters among you) and pension and whatever else from them and never ever used a different service from a different provider.
And even in those times… that’s not everything a human is or does.
Today, particularly in advanced economies, everyone is multi-banked. Plus, just to complicate the data fragmentation and access footprint further, we all use a variety of other solutions and apps and fun things like aggregators. Blame it on open banking as it allows the fragmented data footprint to not be a problem for me as a consumer but so far it doesn’t hugely help you as a provider unless you do something really, really clever which hasn’t quite happened yet. People have tried to make the most of data aggregation, and there’s some interesting stuff going on, but don’t hold your breath quite yet.
Besides, hyper personalisation is really not the best idea you’ve ever had.
Seriously, I will be more excited if someone works on extending my phone battery life than every single one of my banking relationships claiming to hyper personalise and then offering me a product I already have with them or have with someone else but pay out of my account with them for it so they should know. So seriously. Leave it. It’s not the thing.
You can’t do it and I don’t want it. Not from you, anyway.
You know what I want from you? Scalability, resilience and security.
And the regulator wants it from you too. DORA is not your friend. Your operating complexity is not your friend. All the systems you are carrying from every part of your past history are not your friend.
You want to be digitally fighting fit?
DORA-ready?
Able to sleep at night even though system outages are going to happen again because they will?
Switch the antiques off.
Simplify your footprint. Lighten the load you are carrying.
Things are only going to get faster and more demanding.
So travel light, because you need to go far.
#LedaWrites
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
She is a recovering banker, lapsed academic and long-term resident of the banking ecosystem.
Leda is also a published author – her first book, Bankers Like Us: Dispatches from an Industry in Transition, is available to order here.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!
Follow Leda on X @LedaGlyptis and LinkedIn.
