In this guest post, Anthony Walton, CEO of Iliad Solutions, explores how businesses and regulators can increase the safety and efficiency of transactions, and introduce technological advances into the system.
A combination of ‘big data analytics’ and ‘distributed ledger technology’ could help financial institutions combat escalating levels of financial crime. This is the view of the FCA, the UK’s financial regulator. Andrew Bailey, the CEO, has a clear view on what should happen over the coming years:
“If ever there was an area that strikes me as ripe for applying technology to harness the power of big data alongside distributed ledger technologies to produce better outcomes, while rationalising the process and cutting costs, it is financial crime.”
The regulators want to increase the safety, speed and efficiency of transactions. The fundamental problem however is the transition from the legacy systems to new technology. I’m sure the regulators appreciate the complexity involved, as there are lots of working groups with people stroking their chins and thinking this through. But the problem is that without scrapping what they already have and building on new foundations it is hard to adopt the changes they want quickly. As a result, the deadlines for implementation keep getting moved back.
What are the problems that delay progress?
Put simply, banks and payment providers need to change to new systems but find migration immensely difficult to implement. We have been helping organisations with these big change management projects for years and I wanted to share our experience and the solutions for overcoming the problems.
The world is full of ageing legacy payment systems that are no longer fit for purpose. They are expensive to maintain, slow and increasingly hard to adapt to new technologies. However, Switch and Authorisation system migrations are inherently complex and high-risk projects. It is not uncommon for them to:
- Go millions over budget
- Be abandoned due to the scale of the complexity
- Have their scope reduced or compromised
- Have two systems maintained, the old and the new.
So the fundamental question is: Why do migrations and development programmes go wrong? There are a number of reasons.
A lack of detailed documentation
Over many years, those responsible for the systems have travelled into work each day to be confronted with a mountain of work and ever-tightening deadlines. Add to this pressure the churn of contractors and staff and you have an accumulation of functionality changes that have never been fully documented. Over the years, their work has involved customised and patched software amendments. The technology has become layered but all the inbuilt interdependencies have been left undocumented.
No one inside the organisation wants it to be that way, and everyone wants to maintain records and keep a tidy ship. But the demand for more delivery reduces the time available for good record keeping, resulting in a fragile system. People become fearful of making changes as no one can speak with total confidence about the effect of the proposed change. How can you migrate to a new system under those circumstances?
A lack of the right kind of knowledge
Along with a lack of documentation there are problems with expertise. Some companies suffer as people move on to other organisations and their detailed knowledge of the systems leaves with them. At the other end of the spectrum, some organisations find themselves totally reliant on a small group of grey-haired experts, many of whom have one eye on retirement. The single person dependency is a huge risk they haven’t addressed and some organisations ask retirees to come back to help on a day rate.
And in all organisations, bringing old and new technology together raises problems. There may be experts in specific fields but no unified approach across the two technologies.
Unsurprisingly, this challenge is a major issue. The melting pot of problems makes it hard to define precisely what the change requires. In addition, there is a lack of clarity about how new systems can be tested and moved into a live environment. This leads to:
- Wasted time – as people pore over the details and procrastinate. Individuals involved ask themselves whether they can put their name to the requirements when they are less than 100% confident that they understand the detail.
- Lack of confidence – nervousness increases as the analysis gets ever deeper.
- High costs – costs increase as people worry about how to plan, test and implement without any hitches.
So, what to do?
If you are experiencing a degree of nervousness about making a change or launching a new system, join the club. You aren’t alone. We speak to many organisations in the same position but we have spent years refining our technology to deal with this complexity. Our belief is that the problem can be solved with:
- Technology – which allows you to emulate any change.
- Test expertise – where specialists have managed the transition before.
Technology now allows you to create a virtual environment so you can run the change live, in isolation, and monitor how it performs. Virtualisation delivers great benefits through the removal of resource constraints and the consolidation of skills, and it is an approach to testing that creates a more consistent, standardised environment. Being able to virtualise an environment is, in most cases, sufficient to produce greater efficiencies and overcome many of the problems identified.
Creating multiple virtual images of the system under test enables entire testing streams to be run in parallel. Each engineer, or group of engineers, has access to their own virtual system, without affecting the testing of others. Virtualisation enables the emulation of a real world environment, without the impossible costs of operating multiple mirror images set up end to end solely for testing purposes.
The next element to consider is expertise and specialism. Many generic testing solutions are available but only a very small handful with a long track record of working on payment systems. It goes without saying that extensive experience means that you get more than just a technology solution, you get it manned by people who know the industry inside out. And that’s the critical part and the area in which lots of companies are struggling.
As the pace of change rolls on unabated, having the right testing solution in place will pay for itself in reduced project costs. The regulators are right about the need for change, but the industry needs to employ the right thinking to overcome some of the barriers to progress.
Anthony Walton is the CEO and founder of Iliad Solutions – a specialist in testing payment systems. A veteran of 25 years in the payments industry, he founded his first company called DNA in 1996 with the intention of bringing an open system switch and test tools to the payments market.
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