A guide for banking and finance businesses


As we have seen over the past 18 months, it is impossible to predict what technologies a business will need in the future. The pandemic is proof of this, as the world has seen digital transformation happen at a pace never seen before.

With a drastic increase in digital banking, the financial sector has been one of the most important industries to experience rapid change, finding themselves forced to digitize their business operations sooner than initially expected. In fact, Deloitte noted in its 2021 Banking and Capital Markets Outlook that COVID-19 “has not only accelerated digital adoption, but has also been a litmus test for banks’ digital infrastructures.” .

So, with this growth and new direction, CIOs in financial companies around the world are now faced with the consequences of how to solve the growing technical debt resulting from the adoption of new technologies at the last minute. Enterprise architecture – the conceptual blueprint that defines and organizes the structure and operation of organizations – can play a key role in solving this problem.

What is technical debt?

Technical debt is the implicit cost or interest of adapting an additional solution or “last minute” technology in business operations. It borrows against future effort by opting for a practical – but perhaps not quite ideal – short-term solution. Naturally, a company will have to repay the effort with interest.

Technical debt has been a factor in software development for decades. It exerts a strong influence on the general technological infrastructure of a company and was initially considered a short-term development choice. However, as the pandemic has seen tech demand change at a faster rate than ever before – and businesses need to implement new tools to adapt to unprecedented circumstances – costs have quickly skyrocketed. in a poorly navigated and panic-buying manner.

This phenomenon has spread to a variety of sectors, including the financial and banking industry. According to EY, the financial sector has been under heavy pressure to go digital in recent years, with fintech companies overseeing a 73% increase in banking apps in Europe in 2020. Banks have been pushed by investors to go digital, which led to many financial companies. take last-minute technological solutions.

According to John Duigenan, technical director of financial services at IBM, technical debt is costing banks agility and innovation. Indeed, the longer a bank has outstanding technical debt, the less it will be able to react quickly to unforeseen situations. When banks become less agile, they are less able to innovate in code and are therefore more vulnerable to cybersecurity attacks. Additionally, resolving these violations significantly reduces the development budget, which means all organizations can afford to fix emergencies rather than spending money building new features.

Adopting last-minute technology choices can sometimes undo the initial benefits gained. This is due to last-minute technological choices which – although beneficial to the organization in the short term – can lead to the accumulation of technical debt in the long term. It can also lead to technical debt that increases over time, creating a domino effect that companies need to deal with as quickly as possible. For example, increasing technical debt adds to software complexity, making support and further development more difficult and expensive. As companies often prioritize the need for speed and tend to want quick, short-term fixes, they often end up with unexpected technical debt that they weren’t prepared for, which ultimately makes the situation worse.

Since no company is able to predict the future and see clearly what it should or should not invest in, companies could go into debt in unpredictable ways. This is often due to budgetary difficulties, as even a corporate CTO does not have the power to unilaterally increase the funding available to them. Making quick decisions is enough to start generating heavy technical debt. McKinsey estimated that technical debt is equivalent to 20-40% of companies’ technical assets, while Gartner predicted that there is now approximately $1 trillion in global IT debt.

That said, that doesn’t mean companies should avoid technical debt altogether. Rather, companies should ensure that they have a clear plan and methodology in place to prevent technical debt from accumulating over time.

Technology Roadmap and Role of EA

A Google study found that Google software engineers with high technical debt were 1.6 times less productive, while Gartner found that business leaders who actively manage their company’s technical debt will get 50% service. faster. That’s why it’s crucial for businesses to be ahead of the game and try to avoid mounting technical debt, in order to be as efficient and productive as possible.

Enterprise Architecture (EA) can step in to help reduce technical debt pressure. Finance company CIOs can use application and technology roadmaps, backed by EA, to plan and manage the removal of technical debt. Roadmaps communicate and influence change, gaining buy-in from key stakeholders and providing an action plan to achieve goals. In this case, it refers to the removal of redundant technologies and data.

To create an effective technology roadmap, a company needs to know the current state of its technology landscape, as well as the target state it seeks to achieve. While it is difficult to define this many years in the future, it is virtually impossible without fully evaluating the current configuration. Many roadmaps get stuck due to a lack of understanding of the technologies and applications a business is currently using. Companies need to have a deep understanding of their technology and application portfolios in order to illuminate technical debt.

According to McKinsey, financial firms have successfully developed a method to measure the complexity of technical debt through EA and are able to identify when technical debt is expected to arise. By linking this method to the management of the company’s overall financial performance, financial companies can ensure that technical debt is taken into account when making business decisions. This is also done by reworking formal practices and methods, such as changing the costs to show the technical debt that a company collects and will have to pay as interest.

EA is the best tool to help companies achieve greater technical awareness, by clearly defining a blueprint for the business and creating a single source of truth for applications, technologies, data flows and their lifecycles. life. This roadmap will help identify potential technical debt risks so businesses can be better prepared.

The bottom line

Technical debt is inevitable in today’s ever-changing environment, and businesses, including financial firms, must act quickly to adopt the most relevant technology systems in order to be as efficient and productive as possible. In order to ensure that technical debt does not accumulate and cause unnecessary stress to an organization, CIOs in financial and banking institutions would benefit from the implementation of enterprise architecture and the route to help minimize any potential technology debt that may be incurred in the future.


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