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Ambitious but inefficient banks invest more in modern cloud technology

Chris Skinner’s excellent blog post "Banks spend megabucks on tech and yet are mega inefficient" last November got us thinking...

Everyone’s a critic, especially when it comes to banking services. Many people see their banks as utilities – it’s just there, like the plumbing. And as long as it works, and offers at least the basics, it’s fine. Not great, just fine. But if it doesn’t work, or if you are on the receiving end of what can appear to be rather Byzantine decisions … Hell hath no fury.

That attitude seems to be changing however, especially as consumers seem to enjoy the increasingly seamless digital experiences offered in retail (one-click purchase, like Amazon) and in car insurance, where you can just get it all done online – even including all the documentation you need.

Coming back to Chris Skinner’s blog last November (see link) I agree, it’s often astounding to see the amounts that banks spend on IT with seemingly little to show for it, other than keeping the lights on and the ventilators turning. But I only agree to a point about “power bases, silos, protecting turf and baronial battles”. Those aspects certainly play a role.

But more fundamentally, replacing or making changes to core systems, even those running on legacy (but robust and well-oiled) technology platforms, is very difficult. And really risky.

And the business case is notoriously touchy – how do you calculate the return on a project to upgrade or replace a billing or a current account (DDA) system? These platforms are business enablers, not revenue generators or ‘products’ that customers buy. A renewal project may bring cost savings in the long run (both tangible and anticipated). But what time period do you choose to calculate ROI, and what’s your investment horizon? Since there’s not really any incremental new revenue (at least none that’s directly attributable) the benefits side of the business case are open for lots of interpretation. And, as mentioned, the costs and the risk to the business are both high … so again, it’s really hard.

Which is why more banks are looking at modern, often cloud-based tech that either overlays on top of, or more easily integrates with existing systems. This approach means either building or buying access to the tech, or even acquiring the company that provides what you need, as Chris points out.


Bank investment in modern cloud technology solutions can come in many guises – some examples:

  • buy Fintech that uses modern cloud (a la Skinner);
  • integrate Fintech that uses modern cloud;
  • migrate internal infrastructure to modern cloud ; and …
  • put in place testing solutions (for the bank and for their clients) that leverage modern cloud.

Some solutions are externally facing, improving customer experience and addressing inefficiency; some purely address the internal efficiencies problem. And some solutions address inefficiencies in customer onboarding and integrations, like the XMLdation service.

At XMLdation we take a modern approach – our cloud-based testing and simulation tools sit alongside production systems, to ensure high quality UAT and client (or for clearing systems, participant) testing without any risk. In some cases, our test and validation functionality can automatically integrate with a production system, including using APIs.

Our technology approach shows how it’s possible to gain the benefits of speed, accuracy and ease of use, while limiting the risk.

About XMLdation

XMLdation is a world leader in financial messaging. Our solutions are designed for banks and clearers.

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