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Comment by yarou | Hacker News Reader

Disclosure: I work for one of the biggest US investment banks.

They fed us this line during training, and often senior leaders who left our company would say the same thing when interviewed on CNBC. This is naïve at best though. Banks are only recently starting use "Big Data" (how I love this buzzword), because they have unmaintainable mainframe systems running on LPARs. The reason it's "Big Data" is that as time goes on, the retention of financial data will increase as well. Banks are definitely NOT technology companies, at least as far as the compensation structure is concerned ;)

Don't believe me? Compare any bank CTO to an equivalent position in front office.

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I think you're sort of right. Banks don't think of themselves as tech companies. Their culture, priorities and upper managemet aren't those of a tech company.

But they are now tech businesses. Here's an example: Last year RBS made a mess of deploying some code[1]. It shut down their online and telephone banking services as well as stopping money transfers for a few days. Their ATM and branches were still giving out money but this pretty much shut the bank down because people rely on transfers to get paid and pay their bills. The backlog of transactions took days to work through and the whole thing cost the bank 100s of millions in compensation and damaged reputation.

Their branches remained open, but it didn't matter. What people need banks for now is the storage and processing of electronic money transfers. They are a SaaS business with a branch network bolted on. They just haven't realised it yet.

[1] http://www.bbc.co.uk/news/uk-15606707, http://en.m.wikipedia.org/wiki/2012_RBS_computer_system_prob...

Right, but being a "tech business" wouldn't have prevented the root cause of that, which was laying off their experienced workers and offshoring to a cheap location. Tech businesses make that kind of blunder all the time.

(I'm the author).

I completely agree with you that currently most banks only pay lip-service to modern technologies, even if they throw buzz words around like crazy. Mainframes, COBOL, etc, are still the standards in many, if not most, large financial institutions.

My point is that when you actually boil down what a lot of commercial and retail banking is to it's core (I would exclude capital markets here, mostly for simplicity) then it's a technology and data problems. It's a technology problem that is surrounded by legacy systems, culture, and regulations.

Ultimately, though, I believe that those banks that can most quickly infuse themselves with modern technology and -- most importantly -- actually run themselves like technology-first institutions, will be the ones that have the most success in the future. I'm not sure any bank is currently doing that, exactly to your point about compensation.

I agree with your point on commercial and retail banking. I also agree that if banks pivot in the direction of "technology-first", they will succeed in the future. I'm a bit skeptical (perhaps I'm biased in this regard since I work for one) that they will pivot in the near future though.

Like BOFI?

I've worked with several hundred regional banks and credit unions.

One thing people forget is that there are over 14,000 banks and credit unions across the country, not including the top 10. The challenges of regional FIs is dramatically different than that of large organizations. (Note, most comments on HN are from large banking backgrounds, very few from the other 14,000).

FWIW, the two themes I have seen emerge are:

1) Regional banks outsource a lot of their technology, often times leaving them with the inability to quickly adapt.

2) The regulatory environment drives technology and has created a gun shy approach to tech.

3) Most CEOs of banks and credit unions tend to have some type of finance background as opposed to technology.

I also work in tech for one of the big investment banks and agree with the author's thesis. Essentially, the banks are going to continue to replace their processes with technology solutions in all areas of the institution, and it's already happened in many parts.

It's just a matter of them moving slowly over time to make sure nothing breaks. Security, not negatively affecting customers, and not losing any data are the primary priorities. Those priorities are what keep adoption of technology slow.

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