The Pervasive IT Failure Problem in the Financial Services Industry

In 2019,  1,629 bank branches were closed in the United States. According to recent studies, consumers are less interested than ever in withdrawing money from ATMs, leading to ATM machine removals across the globe. Simply put: the way we bank is changing. Liquid cash is no longer the de facto payment method for goods and services.

80% of consumers prefer to bank online instead of going into a brick-and-mortar bank branch. From digitally-native banks to financial institutions that are quickly investing in online banking in the digital-first economy, the vast majority of banking happens online.

But with the rise of digital banking, comes the rise of IT-related threats and failures. In 2018, the Financial Conduct Authority in the UK commented that the number of IT failures reported to them had increased by 187% over the past year. These same issues are echoed across countries. Financial services are dealing with a plague.

As more branches close down, the resiliency and functionality of online banking has to be near-perfect. People rely on banks to access critical liquidity during their day-to-day lives. Small interruptions can lead to major consequences for consumers. And every glitch, failure, and UX issue that happens to consumers in the financial services sector is magnified by the nature of banking. When people bank, they expect near-perfection.

Understanding the Impact of IT Failures in Financial Services

In 1984, 90 million people's credit histories were openly posted to an electronic bulletin board accessible by phone line. In 2019, Capital One had 100 million records breached. Despite the constant evolution of fintech and online banking, digital systems aren't perfect. When we talk about IT failures in banking, it can be easy to glance over those massive data breaches and assume they're the primary pain point.

But, in between every banking breach that smashed headlines, there are thousands of outages that interrupt services. Just two weeks ago, on the same day that the first round of stimulus checks were routed to banks, U.S. Bank, BB&T, SunTrust, PNC, and Fifth Third Bank all experienced service outages.

Think about that. These stimulus checks were provided to assist people during a critical time. Unemployment numbers are at record highs last seen during the Great Depression, and people across the United States were completely unable to access their funds. Even before this recent pandemic, nearly half of Americans were living paycheck to paycheck. Given the number of closed banking branches, shrinking ATM demands, and the push for digital banking, IT disruptions can significantly disrupt the lives of customers. To put it simply: when IT frictions cause customers to temporarily lose access to their funds, it can severely impact their ability to pay rent, get food, purchase gas, and make critical business decisions.

But it's not all about immediate needs. In a recent Treasury Committee Report on IT Failures in the Financial Services Sector, The Bank of England, Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) explained that, "customer and market participant expectations about the availability of financial services have changed dramatically, with 24-hour access to services often expected."

Customers expect banking availability in today's digital ecosystem. Failure to deliver on that promise can lead to serious financial consequences.

• 33% of customers will leave a brand after a single poor experience.
• 56% of people have boycotted a brand over a poor experience.
• Customers tell 21 people about a poor experience.

And, no matter how great your customer service team is and no matter how impeccable you are at reactively correcting IT issues, 91% of unhappy customers will churn from your financial services institution without even complaining.

IT failures impact customers, and they impact your business. A single quick interruption can quickly lead down a path of churn. And given the hyper-competitive financial services landscape, a robust and well-architectured IT framework doesn't just prevent churn — it's a competitive advantage that breeds agility and confidence in your systems.

A Brief Glance at IT Failures in the Financial Services Sector

In 2018, TSB rolled out a new IT upgrade meant to migrate the data systems holstering 1.3 billion customer records. Unfortunately, they didn't appropriate test their new upgrade before they rolled it out across their online banking architecture. This resulted in 1.9 million customers being unable to access their accounts for a full 6 days.

The gravity of being locked out of your banking system for a week is significant. The very few branch locations were packed with angry customers, and phone lines had day-long hold times as customers rushed to acquire their liquid assets. Small businesses were left without a lifeline, and over a million peoples' lives were on hold.

The glitches introduced by this new system were far-reaching. TBS's chief executive admitted that customers who were able to access the system were seeing private information belonging to other members of the bank. This outage cost the bank over $350 million, caused the CEO to step down, and resulted in a blast of negative press. Obviously, customers weren't happy. 135,403 customer complaints related to the incident were filed — which certainly cost money, time, and resources to resolve.

While the direct business loss and fines were certainly significant, the brand damage may have been worse. Given that TSP had another IT failure a mere two months later, they were a regular face in the news cycle for over a year. In fact, the Conservative MP and chair of the Treasury committee, Nicky Morgan, went on record during the incident to say:

"It simply isn't good enough to expose customers to IT failures, including delays in paying bills and an inability to access their own money.... Warm words and platitudes will not suffice. TSB customers deserve to know what has happened, when normal services will resume, and how they can expect to be compensated." — Nicky Morgan

This isn't the first time a major bank has dealt with fallback relating to IT failures.

• A critical IT failure caused over 5 million payment failures for Visa.
• JP Morgan's mobile app went down for 24 hours leading to hordes of angry customers filing complaints.
• A massive Bank of America outage panics over 66 million customers.
• Millions of customers were unable to access their Barclays accounts due to an IT failure.

The list goes on... But when we look at some of the major news stories involving IT failures, it can be easy to look at failures as a "scope" problem. But it's not just large banking institutions that are dealing with these IT pain points. According to Anne Boden, CEO at Starling Bank, "There are big [financial services IT] incidents that hit the press and everybody talks about. But all banks have small incidents."

These failures are causing major problems for banks with dwindling branches. Customers have plenty of options in the financial services space. 75% of customers expect a consistent and reliable experience across channels — including their online banking systems.

Preventing IT Failures From Becoming Business Failures

For financial services companies, finding ways to mitigate IT failures isn't just a competitive advantage — it's an operational necessity. According to the recent report by the House of Commons Treasury Committee, financial institutions need "the ability to prevent, adapt and respond to, and recover and learn from, technology, cyber-related and any other operational incidents." if they want to survive the digital wave of online banking and financial services.

Generally, organizations use one of two methods to resolve IT incidents:

1. Prevention: This is stopping IT failures from happening in the first place.
2. Mitigation: This is how you respond to IT incidents once they happen.

 To put it simply, you need both. But when it comes to value, the pros of prevention are significant. While some customers will be happy when a problem is resolved, everyone is happy when they don't pop up in the first place. So how do you prevent IT failures from plaguing your financial services business?

You monitor.

IT failures can come from anywhere. Whether that new systems update/system migration causes unforeseen failures or a user finally finds that forbidden link, discovering problematic IT issues early and often will help your business avoid risky failures. This requires a best-in-class monitoring solution.

You want to run ample tests after each update and on every new system. Ideally, you want a solution that mimics user behaviors, allowing you to find both break points and UX issues that can impede your quality-of-service. You want your monitoring solution to help you answer questions like:

• Where are their failures in my infrastructure?
• Are there any points in the user journey that are laggy or slowed down?
• How is my overall application performance?
• How rapidly can users access their funds?
• Are transactions working appropriately?
• Are there any specific parts of my app that are having performance issues?
• Are the third part components that empower my software creating failures?

By incorporating an agentless monitoring solution into your existing tech stack, you can pinpoint app problems and rectify them accordingly. If this solution is shifted left into earlier parts of the testing phase, you can properly prevent issues from ever impacting users. In addition, you can find all of your UX gaps that interrupt application flows, disrupt SLA agreements, and frustrate your users.

To learn more about agentless monitoring, check out this blog post. It's a disruptive, transformative technology that completely alters the way you introduce and launch technology projects across your project pipeline.

Are You Ready to Stop IT Failures in Their Tracks?

As financial institutions transition to digital-first ecosystems, there's an incredible amount of pressure on their infrastructure. Outages can have serious consequences for customers, who, in turn, will get frustrated, annoyed, and disappointed in your brand and your systems. The House Commons Treasury Committee notes that "customer inconvenience and distress is the main impact" of these outages.

You have a brand to protect. Every interruption and failure drives your closest customers to your competitors. And, given that a 5% bump in retention raises baseline profits by around 25%, keeping your current batch of loyal customers is critical. You need monitoring.

At 2 Steps, we believe that eliminating IT failures and reducing UX issues starts with an effective, holistic agentless monitoring solution. 2 Steps can help you monitor your infrastructure for UX and IT issues using synthetic bots that identify critical issues before they become crippling problems. Our incredible video replay feature shows a replay of critical issues to share with stakeholders, and our robust Splunk integrations help IT teams monitor, protect, and mitigate in an atmosphere they're familiar with.

The world is changing. financial teams need the agility to introduce incredible infrastructure changes that will help them stay competitive and disruptive. We can help you upgrade, migrate, and innovate safely and effectively. Want to learn more? Contact us.