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1 Introduction

In the next ten years consumer behaviour will significantly change. Children born after 1990 are entering tertiary education and by 2020 will make up 47% of the global population [1]. This generation is connected 24/7 and will have different expectations of banking products and services. As the most likely generations of users that will interact with services offered by digital natives, they will be focused on getting the best deal instantaneously [1]. Together with an increasing demand for digital products and services in the banking industry, regulators play an important role in ensuring that banks manage risk [2]. The way traditional banks respond to these two factors will determine their ability to compete with digital banks in the society of tomorrow.

Business resiliency in the financial services industry has become critically important with more data and information required to support decision making in real time using predictive modelling and analytics underpinned with artificial intelligence and machine learning. The application of systems thinking to business continuity management systems making use of big data as an asset can significantly enhance the responsiveness of banks to realise a fully integrated banking business model that is resilient enough to survive in the future.

According to the ISO22301 Standard for Societal Security and Business Continuity, organisations would need to define “the requirements to plan, establish, implement, operate, monitor, review, maintain and continually improve a documented management system to protect against, reduce the likelihood of occurrence, prepare for, respond to, and recover from disruptive incidents as they arise” [3]. The operating model of the bank of the future will be increasingly influenced by threats in the digital ecosystem. Technology convergence, the increased usage of robotics, artificial intelligence and machine learning will enable competitors to develop and deploy highly personalised and flexible products and services to clients in increasingly shorter timeframes. Other threats including cyber-attacks, cryptocurrencies and disintermediation all need to be catered for in contingency and crisis management plans.

Globally, banks must honour their regulatory obligations including compliance to GDPR, Basel, POPI and the Data Protection Act. The management of these regulatory requirements and digital risk, are all important elements that must be considered in the design of a business continuity management system fit for purpose for banks of the future.

Through the successful implementation and operation of a Business Continuity System underpinned by managed data and information, banks can not only meet regulatory obligations, but also gain significant advantage through a coordinated response to disruption in the industry.

The adoption of systems thinking and systems engineering approaches and methodologies, including the Systems Engineering standard (ISO15288), provides banks with the ability to develop a competitive business model with sound processes and operating practices taking account of multiple stakeholder perspectives. Alignment of the ISO standards provides a very structured and standardised framework that can be automated with accurate and correct data management.

This paper will provide a Big Data Systems Framework for a Business Continuity System in the context of the Digital Bank of the Future.

2 Business Resiliency

Terrafiniti Sustainability Consultants in 2017 stated: “In a world of increasing complexity, building resilient organisations depends on understanding operating context” [4]. With an ever rapidly changing world the challenge is to manage the emergence of change and to develop appropriate responses [4]. Emergence or emergent properties are the outputs of the system as a whole rather than any of the elements alone, be they desired or unforeseen. Unforeseen emergent properties can be wanted or unwanted [5].

Banks of the future must consider their operating context and be sufficiently adaptable to respond to these emergent properties, in the context of the rapidly changing world.

Mental models (i.e. the assumptions, beliefs and values people hold [5]) must be forward looking rather than focusing on current events or symptoms [4]. Furthermore, business resilience is currently only reviewed in context of Business Continuity Management Systems on a periodic basis and is retrospective; i.e. how well has the system performed over the past 12 months. Strategy is then based on the outcomes of these reviews [6].

Systems according to the Systems Engineering Body of Knowledge (SEBoK) v1.8 is “a collection of elements and a collection of inter-relationships amongst the elements such that they can be viewed as a bounded whole relative to the elements around them. Open Systems exist in an environment described by related systems with which they may interact and conditions to which they may respond” [7].

Making sense of complexity to design, develop and operate a resilient bank of the future in a rapidly changing and highly automated context requires a deep understanding of systems as well as a framework of standards that can be used to guide and inject best practice into their operation.

3 Banking Trends

Banking has existed in society since 1800 BC. The societies of the time used moneylenders to obtain a loan. Moneylenders also allowed people to change money. Early Roman banks had more formal mechanisms, allowing people to make deposits and obtain loans [8].

Modern banking started when fractional reserve banking came into existence. “Fractional reserve banking was a banking system in which only a fraction of bank deposits are backed by actual cash on hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties” [8]. Modern banking supported the waves of change that were happening during the second industrial revolution where mechanisation, electrification supported mass production of goods and economies was growing (Fig. 1).

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Banking trends.

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Since then, banking systems have become more advanced with the invention and implementation of automatic teller machines (ATMs) in the 1960’s and 1970’s, online banking in the 1980’s [9] and then the fourth industrial revolution where banks advanced their digital strategies.

The fourth industrial revolution has brought with it a massive increase in available technologies to enable business solutions. With this increase in technology came an exponential growth in the availability of data and information in digital formats including both structured and unstructured data. Banks sought to re-use existing assets while building innovative digital front-end interfaces with users. Many have achieved a digital hybrid model using centralised data, cloud based storage and simple user profiling to achieve this [9].

The emergent properties of modern banking systems introduced risks that had worldwide economic impact. As a result, there was an increased emergence of banking legislation. These emergent properties [5] had unforeseen and far reaching consequences in influencing and shaping the innovation cycles within the banking industry where legislative requirements had to be met first before responding to rapid change.

The management of risk is now at the heart of all banking strategies as banks not only have to manage their data and information risk, but must also ensure that the liquidity and capital reserve are optimally balanced. Fraud detection, the monitoring of suspicious persons, sanctions and money laundering to name a few are reliant on well managed data and the ability of the bank to accurately report and respond to in an appropriate manner. This is also required by the Basel III: International Regulatory Framework for Banks [2]. Further risks such as cyber security risk, conduct and reputational risk also require investment and focus and can be a lot more difficult to manage using traditional structured data systems.

In the last five years banks have needed to respond to the threat of digital disruptor activity including the emergence of fintechs such as Wealth Migrate - a real estate investment marketplace, EasyEquitites that allows anyone to invest in the JSE with very minimal transaction costs, and Zoona that provides technology, start-up capital and business support to entrepreneurs in South Africa. These new services are being consumed by the customer at a significantly lower rate than normal banking transaction fees [10].

According to Alan McIntyre in 2017, 2 billion adults and 160 million small and medium businesses do not have access to bank accounts [11]. Mostly are people and businesses that generally do not have good credit ratings and therefore poor access to credit. This does not mean that this market group do not have a requirement for banking services. This market segment has been traditionally ignored by banks, but now presents an emerging threat or opportunity, depending on the response that is taken in a new context of these “interested parties” [3]. Digital native service providers are utilising technologies that permit very close interaction with the life of the customer through non-traditional banking channels that fully integrate into on-line communities that are inclusive of un-serviced markets [9].

4 The Next Wave of Innovation

As is shown in Fig. 2, the 6th wave of innovation will be focused on sustainability and personalisation. This provides a new operating context with the emergence of these two new factors that will influence the way in which banking systems need to respond.

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Waves of innovation [12].

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History has also given some understanding of how economic assumptions can affect economies if risks are not managed in the changing economic context. Most significantly these include; the 1930 Great Depression and the 2008 World Economic Crisis). This will equally apply to the 5th and 6th wave [12] as new risks emerge.

According to Terrafiniti Sustainability Consultants in 2017, “Changes in resource availability, rising demand and changing ecological conditions” will also shape the agendas of the interested parties in the future [4]. A new generation of user is also emerging, the iGens and zGens. This generation of interested parties do not have to be concerned with staying connected, but will rather be always connected with near real time information availability in their pockets. This data and information will cover every aspect of their environment and will shape their everyday actions and responses.

Systems that will be needed to enable banks to engage customers will need to focus on providing a banking experience rather than a product or service [13]. These systems include those presented in Table 1.

Table 1. Types of systems that will be required.
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Banking systems must support various banking models, with banks as a channel and a platform being the most likely models for the future, according to Capgemini [14] (Fig. 3).

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Future banking models [15].

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5 Competing as a Digital Bank of the Future

To be successful in the future banks need to first consider their interested parties or stakeholders. According to the ISO22301 Standard for Societal Security and Business Continuity, interested parties are primary in defining the scope of a business continuity system. Along with organisational requirements and goals, a clearly defined operating context for the bank can be defined and established. The standard also specifies that the business continuity management system of the bank must take into consideration its “size, nature and complexity” [3]. Following these principles will lay a foundation for innovation where standards are maintained and quality services can be delivered.

In 2014 40 leading Finetchs met in London to describe the innovations that will shape the bank of 2020. These are listed in Table 2.

Table 2. Banking innovations [16].
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Resilience in the changing context of banking also required a shift in thinking and a change in mental models to fit the changing context in which banks in 2020 and beyond will need to operate. Current mental models for resilience focus on current operational strengths [4], threats to these and pre-defined strategic responses based on current Business Impact Assessments (BIAs) and Risk Assessments (RAs) [3].

For Business Continuity Management Systems of the future, Business Impact Assessments and Risk Assessments need to consider new contexts and will challenge existing mental models in the field of business continuity management.

6 Business Continuity Management System for the Bank of Future

According to the ISO22301 Standard for Societal Security and Business Continuity “BCM is a holistic management process that identifies potential threats to an organisation and the impacts to business operations those threats, if realised might cause, and which provides a framework for building organisational resilience with the capability of an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities” [3].

Innovation that is taking place in the context of the bank of the future must equally apply to its Business Continuity Management system.

The business continuity management plan, do, check act cycle currently operates on a 3, 6, 9. 12 month to three-year review schedule [6]. The rapid pace and new context in which the bank of the future needs to operate must consider an integrated systems approach through the performance evaluation cycle which includes business resiliency as a priority.

Unforeseen emergent properties that trigger an unscheduled review of risk assessments and business impact assessments, currently have strategies and responses that are planned and applied. These are then adjusted in response to the unexpected event and the cycle continues. To ensure that the Business Continuity Management System is operating optimally, regular exercising and adjustment is required [3].

An integrated approach to performance evaluation cycles (as shown in Table 3) in Society 5 considers both the satisfaction of the customer and interested parties of the bank as well as the bank’s ability to provide continuous service [3].

Table 3. Integrated standards view.
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7 The Role of Big Data Systems in the Bank of the Future

“Data in the cognitive era engages with humans on a sensory level. People speak; systems listen and respond. Data sees the world around us, feels the wind and the rain, hears the rhythms of music, smells the comforts of home, and tastes with a global palate. Data shifts from calculations in spreadsheets to shaping the decisions of everyday life” (IBM 2016).

Traditionally data was structured and was the mechanism of recording information about physical entities and the relationships between these as well recording the events or transactions taking place in the system.

In Industry 5+ data is no longer structured and can come from any broadcasting source in any format. The challenges for banks of the future is to deal with this and to be able to manage and utilise big data in both its operational and business continuity management systems whilst remaining compliant to BCBS239 regulation for data management.

The big data challenge is to understand data that is being generated by the bank as well as data that is being gathered from the ecosystem and to blend this data into meaningful insights. Insights are not an end in themselves as these only guide decision making. In Industry 5+ predictive modelling will be foundational to all systems within the bank which will be needed to anticipate potential disruptions, threats and opportunities.

Analytics in industry 5+ will enable systems to learn. There will be a shift from analytics providing an “insight” or a “result” to providing automated response triggers. In 2020+ banking will require machine learning and deep learning in conjunction with robotics to formulate appropriate responses to interested parties in the system context and responses will need to be fully automated (Fig. 4).

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Big data challenge [14].

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8 System of Interest

The context of the system in terms of ISO22301 Clause 4.3.2 provides an understanding of the environment that bank of the future systems will need to operate. Systems thinking allows us to understand the Systems of Interest within the context of a whole which is the containing system.

The bank of the future contains several systems. Each of these systems rely on data as a vital resource for their operations. Systems of interest in the containing system in the next wave must be designed for resiliency with tight integration with the business continuity management system of the bank. Big data systems also need to ensure that banks are compliant with local and international regulatory frameworks [17].

Bank of the future systems can be represented as follows in a poached egg diagram (Fig. 5).

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Bank of the future poached egg diagram.

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System boundaries must be clearly defined and the interrelationships between systems must be described. Using systems thinking in conjunction with ISO22301 Clause 4.3.2 the full scope of the Business Continuity Management System of the bank can be described in relation to its big data system as well as other interacting systems.

With clearly defined context and systems boundaries, emergent properties that may arise to affect or impact the bank can be identified and effectively managed within a well-defined systems framework. Emergent properties may become non-conformities and may require corrective action. ISO22301 Clause 10.1 provides a standard for dealing with these.

The integration of standards and legislation into automated system components provides the bank of the future platforms to operate intelligently and optimally. Systems learning and continuous improvement becomes dynamic (Table 3).

Big Data and Advanced Analytics Systems contain a System of Standards that are required for compliance. These include BCBS239, IFRS9 and Basel III. The Business Continuity Management System interacts with this through the application of its own standards. This would apply equally to other supporting systems.

Checkland’s soft systems methodology [18] can be applied to each system within its context and through the process of applying systems thinking theory and tools, they can be fully defined and applied to their individual problem statements and sets of requirements.

For each system, high level steps of understanding the situation, defining the problem statement, working with a system definition and activities, workable models for systems can be implemented [18].

Continuous improvement and review against systems of standards and regulations, provide auditable processes that are fully compliant and interoperable in the containing system of the bank of the future. The ISO9001 standard for quality management provides for the needs of the customer to experience quality service outputs of the system. ISO27001 ensures information is secure and ISO22301 places an emphasis on the management of risk within the context of the banking systems of the future.

9 5+ Bank of the Future Systems Model

The application of discipline in the system allows for ease of automation of process and deployment of these processes onto a platform that can service multiple channels. The addition of deep learning algorithms and artificial intelligence then allows the system to become self-organising, self-auditing and learning (Fig. 6).

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Fully integrated 5+ integrated processes.

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By defining banking systems of the future in this manner, inputs are managed and controlled in the process that have been integrated and standardised. Monitoring and controls have been applied as a foundation and non-conformities have been taken into account by considering and designing for emergent properties of the system. Disruptions can be monitored and responses formulated in the context of the system and its design.

The output of the system is a bank of the future (Fig. 7) that is sensitive to the needs and requirements of its interested parties, is able to respond rapidly to the changing environment while providing a deep level of personalisation on a platform that has the ability to interact with its users in their everyday lives.

Fig. 7.
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(Adapted from: Massachusetts Institute of Technology Digital Banking Manifesto: The End of Banks? Alex Lipton, David Shrier, Alex Pentland Connection Science & Engineering Massachusetts Institute of Technology, connection.mit.ed)

5+ Bank of the future.

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