Observability for Banks and Financial Services Organizations: Top 4 Challenges and How Monitoring Can Help

Observability for Banks and Financial Services Organizations: Top 4 Challenges and How Monitoring Can Help

The Covid-19 pandemic has disrupted how most businesses operate. In fact, 87% of global IT decision makers agree that the Covid-19 pandemic will cause organizations to accelerate their migration to the cloud. While digital transformation allows for a more agile online customer experience is a focus for every business, it’s an even bigger priority for banking and FSI organizations because they previously relied on in-person trade and office-based operations. 

With the stay-at-home directive from all governments, banks have had to rapidly adopt remote working technologies to allow their staff to manage their day-to-day activities and access their on-premise systems. Legacy technology stacks and systems, which were being slowly migrated to the cloud, are now the focus of large-scale modernization projects. Since consumers were restricted to online and telephone services during the pandemic and are now used to remotely accessing financial services, banks and FSI organizations must enhance their digital services in order to keep their business.

This full-scale change to systems and services has inevitably led to some challenges. The acceleration of modernization projects and changes in consumer behavior and demand have created opportunities for more agile fintech organizations. Keep reading to learn about some of the trends already driving change in this sector and some of the challenges brought about by the pandemic and changing consumer behavior. 

Digital Transformation in Banking Services

Banks and financial institutions are rethinking how they deliver services. As mobile banking becomes the norm and traditional brick-and-mortar banking fades to a specialized service, banking institutions have to become much more agile and competitive. Gen Z not only prefers a high-performing mobile experience, they expect it. Banks are shifting to meet this expectation to retain customers.

Along with mobile banking, banks and FSIs are automating business processes like credit applications and customer service with newer technologies such as remote procedure call (RPC) and artificial intelligence (AI). Moving to a digital and cloud-first strategy drives improvements in agility, but inevitably brings challenges with security. 

Application Modernization

Traditionally, the best way to manage large datasets and vast quantities of complex transactions was to use a mainframe to deliver the kind of computing power needed to achieve this. Today we have the public and private cloud to manage large datasets, along with containerized and serverless architectures to deliver agile development.

Banks need to be able to deliver new, secure functionality through their mobile and web-based banking systems very quickly. New technologies deliver simplicity and ease of customization. This is the opposite of the complex legacy stack, which was quite rigid. Application modernization has many benefits, such as customer service and satisfaction improvements, digital competitiveness, reducing risk and cost, improving operational efficiency, and flexibility.

Partnering With Fintech to Foster Agility

The rise of cashless payments and consumers’ preference for digital services has driven the adoption of more agile ways of working by banks. This has also created opportunities for fintech companies to lead with digital-first and cloud-native technologies to innovate faster. 

Banks are now viewing fintech as partners to help them enhance their service offerings instead of competitors. Fintech companies can help banks to break into new markets or deliver new services quickly. What might take a bank several years to deliver can be delivered in months by partnering with fintech.

Personalization

Traditional banking and financial services organizations build policies and services with no scope for customization and are typically fixed in structure. Modern consumers are used to having more choice and flexibility in how their services and products are configured.

With the ability to mine historical data on consumer behavior, customer experience, and feedback, it is now possible to tailor services to specific customers based on what they like rather than adopting a one size fits all policy or account structure. Hyper-personalisation allows FSI businesses to leverage historical data, bringing in information from a variety of sources. They use this information to deliver targeted services through the different platforms that a consumer uses to engage with the business (mobile app, web app, email, text). This allows FSI businesses to target consumers in a better way, as traditional means of engagement rapidly lose their impact.

Challenges Faced by FSI Organizations

Working in a Hybrid World: Workplace 2.0

The transition to remote working was a challenge for most businesses, but in the financial services sector, the added complexity of regulation and business units that were designed to operate on-premise further complicated this migration. 

The Covid crisis enforced remote working, which was exceptionally challenging for different teams within banks and FSI organizations. Traders that were used to high-speed connectivity and secure systems and analysts working with large volumes of data requiring serious computing power all struggled to adapt.

Increased Competition

Competition in every industry is helpful and can often provide self-regulation. Competitors typically drive down pricing to the consumer and improve things like customer service in order to win business. Unfortunately, competition can also lead to instability, and in a sector like banking, this can be very troublesome. Quite often banks cannot be allowed to fail and the burden of keeping the banks afloat falls to the taxpayer. 

Newer banks are choosing to prioritize online services and more attractive interest rates over providing a physical presence on the high street. They also offer innovative integrations with money management and accounting platforms to allow businesses to manage their financial accounting in a more simplified way. You also have banks like Revolut offering you access to foreign currencies with no charges, moving between international currencies with minimal costs.  

Increased Regulation

The financial crisis in 2007-2008 caused governments to rethink the way that banks manage their liquidity and determine what assets needed to be kept in reserve to maintain financial stability in the event of a crisis. The recent technological disruption affecting the banking sector has forced regulators to again review processes and compliance to avoid future risks.

New regulations on governance and remuneration were introduced in 2019 with the risk reduction measures packages. This will require significant work by FSI organizations to implement and compliance needs to be embedded in the business processes beyond the audit. The move away from the Libor exchange rate, which governs how banks borrow money, to new exchange rate mechanisms will introduce both risk and uncertainty as legacy contracts referencing Libor are no longer representative. 

Customer Retention

The fickle nature of today’s consumers means that customer retention is going to be more challenging now than ever before. Younger customers want convenience and a personal touch. Providing options like chat during onboarding or account management features can go a long way. 

Customer experience is key to maintaining loyalty. Some of the trends in Banking and FSI highlighted previously are key to maintaining this loyalty. The personalization of the customer experience and rewarding customer loyalty both have an impact, especially for younger banking customers. With the more recent trend of rewarding consumers for sharing their data, being able to analyze data and provide meaningful rewards tailored to your customers will be a differentiator.

Legacy Technology Stack

The trend of migrating to modern development architectures solves the problem of agility and allows FSI organizations to leverage big data easily. This process can be costly and time-consuming when considering the financial regulations, resource retraining, and process redesign required to pivot to these new technology platforms. There is also intellectual property embedded in these legacy systems in the form of business logic and process flow, which needs to be transferred to the new cloud platform. 

As with all cloud migrations, choosing the right candidates for migration ensures some quick wins early on in the process. Building a strong financial business case for the migration can help reduce TCO and improve business processes. A transformation has to involve all departments, not just IT, and ideally should evolve processes to take advantage of better ways of working with new technologies.

The LogicMonitor Solution for Financial Services Organizations

Helping Businesses Pivot to Hybrid Working

LogicMonitor provides automated discovery of multi-cloud infrastructures and applications whilst maintaining visibility of on-premise private cloud and the networking stack. There is also great coverage for most legacy technology environments like mainframe and older OS technologies.

Sample of popular integrations LogicMonitor offers.

LogicMonitor makes it easy to roll up technical work from home performance metrics into an overall executive dashboard, providing the ability to understand, in real-time, how a remote workforce is driving productivity. VPN, virtual desktop, and SaaS platforms all enable remote workers to be productive.

Remote workforce executive overview dashboard in LogicMonitor.

Tracking the Transformation of Applications and Infrastructure

LogicMonitor allows businesses to monitor their modern cloud workloads as well as their on-premise infrastructure, but it is also great at tracking the transition between the legacy stack and a newly migrated cloud environment. By leveraging things like automated tags with property sources, LogicMonitor makes it easy to track virtual machines as they move to the cloud.

Cost Control in the Cloud

By leveraging LogicMonitor’s inbuilt cost monitoring for public cloud workloads, FSI organizations can work out which of the newly migrated VMs is costing too much money. 

AWS Billing dashboard in LogicMonitor

Rightsizing Workloads in the Cloud

By using capacity optimization dashboards, FSI organizations can work out which virtual machines can be right-sized, reducing costs in the cloud. 

Public cloud under-utilized resources dashboard in LogicMonitor.

Secure by Design

Security is one of the primary concerns of financial services organizations and LogicMonitor takes security seriously. The following are just some of the ways LogicMonitor ensures the security of users and the platform itself.

  • Secure Architecture– RBAC, 2FA, and encryption of data in transit and at rest.
  • Secure Data Collection– Only outbound communication is allowed from the LM Collector, data is encrypted with TLS, and LM Collectors are securely locked to the environment.
  • Secure Operations– Collectors based on hardened Linux with perimeter and host-based IPS, operated out of top tier DCs and AWS regions, all with top security measures in place.
  • Secure Practices– Minimal personal data stored, device access credentials stored in memory and never written to disk, and salted one-way hashes used in place of user passwords.
  • Secure Standards– Constant penetration testing ensures maximum security, SOC2 validates our controls for security, high availability, and confidentiality.

In addition to LogicMonitor’s native platform, by leveraging a secure proxy, user operations teams will retain complete control of communications. This allows users to lock down traffic out of their networks to minimize exposure to external bad actors.

One Platform for Unified Observability – Metrics, Logs, Traces, and Powerful AIOps Capabilities

  • Metrics- The most comprehensive monitoring platform with coverage for more than 2500 different technologies spanning network, cloud, containers, and applications.
  • Logs- Eliminate context switching between IT infrastructure monitoring and log management products by correlating relevant logs with metrics in a single platform with out-of-the-box integrations (or via any custom log source).
  • Traces- Never miss an application error, improve code quality, and diagnose and fix issues faster. Gain insight into the performance of the entire app stack, from code to cloud, to ensure a flawless customer experience in agile environments.

The banking and financial services space has perhaps the most to gain from an accelerated digital transformation. Fintech companies can help more traditional banks and insurers leverage new technologies and differentiated solutions to traditional problems. There are still a lot of legacy systems and technology to be transformed in this sector. The highly regulated nature of the BFSI space makes transformation projects more complicated and time-consuming. 

Banks used to be able to rely on a customer for life, but this is no longer the case with younger generations. The personalization of banking services to provide consumers with custom solutions will help to keep more fickle, young consumers from changing suppliers but this is now a buyers market. It is an exciting time to be in banking as we enter the new industrial revolution and automation, the cloud, and AI provide new opportunities and ways of working.

Adam Nash

Director, Channel Sales

Adam Nash is an employee at LogicMonitor.

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