In years past, whenever a business required technology, they would look to the leading providers for a solution. It was a simple decision as all the big ticket, big price, big reputation technology firms had the time, money, staff, and resources to busy themselves producing world-leading platforms.
While on the surface this seems like sound logic, the reality (and the results) have been largely disappointing for many companies – particularly in the world of financial services. In this sector the so-called ‘big IT vendors’ have typically provided woefully under-resourced solutions for their customers. [1] The result has therefore been a level of IT service provision that has indirectly stagnated positive growth potential. [2]
Understanding the old tech problem
Old technology (the rate of change means we typically hear the word ‘antiquated’ applied even if it’s only three years old) within financial services – and within debt recovery – often remains highly expensive and cumbersome kit to maintain. [3] The problem starts with the choice of tech available, and the traditional reliance on an ‘established’ platform to meet customer needs. And it’s this choice – or rather the lack of it – that removes the imperative of the supplier to invest in upgrading their offering. Such a situation helps explain why many businesses are forced to adopt old, out-dated, and inefficient tech solutions.
Now for the good news: times are changing! The on-going problem of out-dated technology has begun impacting business operations to such a degree that it’s been elevated to a core strategic issue – and handled in a far more official capacity. Such a development has led to a total paradigm shift in how FinTech is handled for debt recovery in the UK.
How aged tech stalls business growth
While many of the major tech companies continue to maintain old technology, time as they say waits for no man (or woman) – and many smaller providers continue to push capabilities forward quite dramatically. In fact, today’s tech world contains a myriad of products designed to enable smarter, more user-friendly operations. From a business perspective, these developments help save both time and resources from being lost in terms of development and maintenance – as well as providing a more convenient and intuitive platform for the customer.
That’s not to say the problem’s fixed, and issues with aging tech continue to cause a host of core business issues:
Legacy systems are expensive to maintain
Simply put, the act of implementing old or legacy systems carries with it a much greater expense potential over time. For example, companies deploying old tech must also invest in the components needed to ensure it remains online: take a FinTech solution developed in the 1980s, where IT teams could still be tasked with maintaining the system – without any of the knowledge and understanding available from the original developers. And it gets worse, with these former programmers now being retired and colleges no longer teaching out-dated programming languages – challenges and related costs that will only continue to worsen as time presses forward.
Internal mainframe services are also expensive to install or remove
Another issue, when developing and integrating a mainframe system, is that pursuing such a solution can leave companies feeling far too invested in its success to consider removing or replacing it for a better option – given the logistical complexity and cost involved [4].This difficulty is often what keeps aged technology enduring despite its obvious limitations, and while this is less of a concern for larger companies able to maintain such systems, the out-dated and inefficient technology inevitably eats up budgets and restricts innovation.
Systems lack usability for customers & businesses
Usability is a critical component for any type of technology solution (debt recovery included), and older systems lack the technological innovations that have emerged over the last 10 years. For example, something as common as mobile integration or online payment systems are not always present within these older systems. As startling as this is, it remains part of the problem as long as businesses continue to support obsolete platforms.
Then there’s user adoption. Less usable systems require more time to learn, understand, and operate, which not only consumes excessive resource, but also impacts the overall user experience – leading to far higher levels of customer dissatisfaction.
Old-fashioned systems are also frequently lacking when it comes to integrating with cloud-based backups and data redundancy, because in more ‘established’ firms these daily tape backups are the only method used for this essential process. By comparison, cloud-enabled technologies deliver the accessibility, convenience, and security that’s typically not present within an in-house backup system. This is the realm of business continuity, because what happens when, for instance, if a fire, flood, or other disaster destroys a business and its on-site backup system? These risks are precisely why data redundancy through cloud-enabled solutions has fast become obvious choice for the vast majority of financial institutions.
Security exposures are frequently more common
We can all appreciate how financial systems are ranked among the most vulnerable within the data security world, with cyber criminals targeting the data for its black market value. Such a sustained threat places the emphasis on providing adequate protection, as businesses can soon find themselves liable for damages resulting from customer data breaches, theft of financial information, and related problems. Furthermore, a company can also face fines or suspension of operations for failure to maintain compliance in cases of mishandled security.
Aging FinTech typically increases this security exploitation potential because they lack the on-going updates to new and emerging threats that are common with more contemporary solutions. As a result, criminals have the time they need to infiltrate the firewalls in order to find different areas of weakness to exploit. With large-scale data breaches from major technology companies regularly appearing in the news, there’s no doubt that the outdated security offered by older systems poses a significant strategic risk.
The FCA: disruptive tech towards positive change
While aging FinTech still maintains a large market share across the major debt recovery firms, the days of these outmoded methods are numbered. The Financial Conduct Authority, the UK’s financial regulatory body, is making a strong push towards innovation across all areas of the industry. This level of ‘centralised policy’ will inevitably encourage the top financial firms to make the upgrades they need – or be left behind.
Since the Financial Services Act of 2012 (that ended the former Financial Services Authority and ushered in this new, independent framework for regulation) [5], the FCA has made a highly concerted push towards fostering innovation and promoting a greater level of competition across the sector. In many cases, the specific focus is on overcoming the on-going reliance on out-dated systems and technology. [6]
For example, a recent speech by Christopher Woolard, the Director of Strategy and Competition for the FCA, outlined the organisation’s emphasis on the role of FinTech in pushing the industry forward. Woolard suggested that innovation can be fostered within FinTech through what he calls ‘disruptive innovation.’ These are the type of paradigm-shifting technology breakthroughs that can shake up financial services/debt recovery – with many experts agreeing that such change is needed to overcome a traditional reliance on the obsolete and inefficient systems holding back progress. [7]
As Woolard mentioned, the role of disruptive innovation is to pursue those changes that directly lead to better competition and improve the customer experience. In his words, “ Disruptive innovation drives a number of dynamics in the market. A few firms will emerge as genuine competitors at scale to the existing incumbents. Many will be sufficiently interesting business models that they may find themselves purchased by bigger players and their technologies adopted in the mass market. And both of these developments may drive other incumbents to compete harder to retain or gain customers.” [8]
Woolard’s outline of disruptive innovation showcases the organisational support this new approach to debt collection technology holds in the marketplace. The days of old and antiquated systems are over. Today more than ever before, the focus is directly on delivering new and improved solutions that are better for customers and businesses alike.
Ushering in the SME in technology-driven debt collection
As the FCA’s push towards disruptive tech continues to take hold, the entire business climate is adjusting in order to compensate. In many cases, this is leading financial firms to adopt the services of smaller to medium enterprises (SMEs) to develop and manage their technology platforms. These businesses – frequently start-ups on the cutting-edge of tech development – are laser-focused on delivering solutions that better address the problems posed by older systems. Even better, their push towards efficiency and innovation ensures that the financial services industry will only continue to get better for all concerned.
