Two years ago, the world’s largest banks were yet to make significant progress in delivering digital transformations that they had promised for so long. Hindered by fears of compliance risks, data security and capital expenditure, many had been hit by an inertia. They were neither committing to next-generation cloud solutions, nor entirely convinced with their crumbling legacy of electronic communications and archiving systems that were no longer fit for purpose.
Then the coronavirus pandemic flipped the world entirely and an industry famed for its aversion to collaborative tools and flexible working was forced to support a remote workforce. By late March, tools like Zoom, Microsoft Teams, and Slack had swiftly become the life blood of these businesses.
As Microsoft CEO Satya Nadella put it, businesses then went through two years’ worth of digital transformation in just two months. For banks, this was a much-needed shove in the right direction. But implementing the right collaboration tools was only the beginning of what they had to overcome.
The proliferation of digital communication creates more content that compliance and risk management teams need to retain and monitor. Before the pandemic, emails, phone calls and in-person meetings took up most of daily communications. Now we are always connected to a web of direct messages with GIFs and emojis, group chats, text messages and video calls—and all of this is happening across multiple platforms. That said, a distributed working model where thousands of employees work in widely dispersed locations makes compliance infinitely more difficult.
Using legacy archiving systems that were built years or decades before any of these technologies existed is proving too expensive and risky for banks. This has been one of the key challenges that banks are facing and will be one of the defining challenges over the next 12 months. And to meet these challenges, banks will need to make significant investments in public cloud and AI-powered compliance solutions.
Scaling with the volume, variety and velocity of communications data
We saw unprecedented innovation in the communications and collaboration space over the past 12 months. This will not stop in 2021. We will continue to see greater connectivity from new platforms, new features and new investment into the space. But with this constant innovation comes increased pressure on banks to manage the exponentially increasing volume, variety and velocity of communications data.
Investing in compliance solutions built to contextually capture the variety of multi-modal communications channels needed for today’s workforce—versus a legacy email archiving system—will allow banks to future proof themselves.
Updating legacy systems to meet today’s data requirements takes significant time and is hugely costly. Moving to cloud-first solutions built for the entirety of enterprise communications means that banks will be able to leverage the vision and leadership of the world’s leading infrastructure providers (like AWS or Microsoft Azure) to support their compliance function, enabling them to scale their operations at the same pace as communications technologies are innovating. Banks will be able to push for innovation without worrying about the compliance risks of depending on out-of-date archiving systems.
Investing in communications intelligence
Before the pandemic, between 10 percent to 15 percent of overall payroll in the financial services industry went toward compliance. Expanding the function to support a remote workforce is only going to increase the cost burden. Available electronic communications compliance technology required them to add headcount commensurate with the volume of data that required oversight to scale their compliance, review and surveillance functions. And they would get no return from it other than risk reduction.
To overcome this challenge, banks need to turn to solutions driven by AI, machine learning and natural language processing. This technology enables compliance teams to surface trends, anomalies and patterns of employee behavior from petabytes of data. This means it is quicker, more accurate and less resource-intensive to escalate issues so they can be addressed as soon as possible—and in the right way.
This will enable banks to streamline and scale their compliance operations but without a corresponding increase in the number of people needed to oversee the operations. It also will empower firms to surface valuable intelligence in their growing and diverse communications data layer at scale, broadening the ability to identify other areas of risk and powering initiatives to strengthen their business.
Many banks have already begun to invest in communications intelligence and will reap the rewards as the ways that employees communicate and collaborate continue to grow and change. Those that cling to legacy technology will run the risk of being left behind. We will see the difference between those banks which make the investment, and are able to introduce new products and respond to the rapidly changing financial services market, and those who don’t make the investment and struggle to grow and remain relevant. My prediction is that 2021 is going to be the tipping point for investment in these technologies. But the innovation that they will unleash will impact the industry through the decade ahead.