BLOG – September 2023
Data Migration Fears are Paralysing Financial Institutions
Financial institutions’ fear of data migrations is restricting their ability to modernise and grow.In a world of ongoing margin compression and demand for faster, better services, the onus on automation and digitalisation will only increase. Keeping current with technology innovations that add real client and enterprise value can help firms attract and retain customers, expand their product sets, access opportunities in new markets, drive operating efficiencies and stay compliant. Yet the data migration difficulties we so often see firms struggle with make moving from one IT system to another among the biggest perils financial institutions face.
IT implementations create serious riskCautionary tales abound. The near £50 million fine the UK’s Financial Conduct Authority and Prudential Regulation Authority meted out to TSB Bank in December 2022 for operational risk management and governance failures stemming from its catastrophic 2018 IT upgrade project has been a particularly high-profile example. But it is far from alone. In its 2018/19 Cyber and Technology Resilience questionnaire exercise, the FCA found that technology change-related incidents were consistently among the top causes of failure and operational disruption, with 17% of the nearly 1,000 material incidents reported to the FCA in 2019 attributed to change activity. And such incidents can be costly. The fine TSB had to pay is dwarfed by the £330 million bill it racked up in 2018 to deal with the system meltdown. The reputational hit from such events, while harder to quantify, can be equally damaging. An American Express study found a third of customers would consider switching companies immediately after receiving poor service. With the cost to attract a new customer five times that of retaining an existing one, avoiding losing clients through poor service should be a priority – especially when, as McKinsey observes, a seamless customer experience can be worth at least as much as a superior product or efficient process, “building customer loyalty, reducing costs, making employees happier, and boosting revenues significantly.”
The 3 costs of data migrationMany points of potential failure arise in any IT system implementation/upgrade, but data migration issues are at the root of much of the risk. And troubled data migrations – or the fear they will be – cost firms in three major ways.
- Fear of starting
- Cost of transitioning
- Post-migration clean-up
Move forward with better dataWith so much at stake, it is little wonder many financial organisations are terrified of IT implementation failures. Fearing what can go wrong, they remain too long on creaking legacy systems that are unable to deliver the operating efficiencies, customer service quality and digital experiences today’s institutions need to boost their competitiveness. Troubled technology integration projects are also why corporate acquisitions often fail to deliver the economies of scale and cost streamlining benefits that the merger was supposed to deliver. So it’s vital firms get a grip on their data to make the data migration – and overall IT implementation – as smooth, cost efficient and error-free as possible. How? Focus and control are key … as we’ll discuss in a future blog.