Banks need Rogue IT and start-ups to innovate: ex-Westpac CTO

The financial sector should engage in "Rogue IT" projects and invest in start-up companies to foster technological innovation for delivering services to customers, according to veteran banking IT expert, Sarv Girn.

Rogue IT refers to setting up a small IT division in a company that is not subjected to the usual oversight of the business.

Sarv Girn.
(Credit: Westpac)

Girn has held the roles of Westpac's CTO and Commonwealth Bank chief information security officer, but is currently an independent IT consultant. He was speaking at the Australian Information Industry Association (AIIA) Banking & Financial Services breakfast briefing, in Sydney today, on fast innovation.

The financial sector is slow in terms of adapting to changing times and technology, particularly in Australia. According to the NSW Trade and Investment's director of business advisory and investment, Peter Gray, Australian financial organisations lag behind their counterparts in Singapore and Hong Kong in terms of delivery of services to customers.

Technology innovation is now a key part of delivering financial services to customers with banks, such investing in mobile applications to provide convenient banking for users.

The financial services sector knows it needs to innovate, but the challenge for companies is the execution. Having to deal with other people's money, innovation inherently carries a lot of risk for financial institutions. When pushing out a new technology product to users, such as mobile applications, financial organisations have to consider the risk of customer data being compromised.

Risk management, culture and governance are all factors that bog down the rate of innovation for financial institutions.

Here is where Rogue IT and engaging in start-up companies can help.

By just providing some funding, time and opportunity for Rogue IT groups to experiment, organisations might just be surprised by the outcome, according to Girn.

"There still needs to be a level of sandboxing of those types of projects — so whether it is capping the amount of funding, setting deadlines or giving a specific problem to solve," he told ZDNet Australia. "[But] if you give those divisions an area they can target in the business together, you can get some really innovative ideas."

Those ideas can then be trialled and industrialised, he said.

Early versions of CBA 's online banking service, CommBiz, derived from work by small departmental divisions within the company. Westpac and NAB have also engaged in similar projects.

"A number of banks have done that and have then rapidly brought industrialisation onto small departmental experiments," Girn said.

But it is often hard to conduct Rogue IT projects within the rigid culture of established financial organisations, particularly the big ones.

"In medium and small companies, it's easy to change the culture so they can speed innovation, whereas larger companies find it hard to do so," Girn said.

For the big guys, working with or acquiring a start-ups with an innovative idea may be the way to go.

"Many of the larger bluechips are starting to realise that to change an established culture and environment is actually too hard," Girn said. "So creating a small spin-off or having a stake in a start-up which can actually do that experimentation at the edge, without getting bogged down by internal governance — I think that is emerging.

"Between Rogue IT that is allowed to operate in an area, and some investment in start-ups, that's the only way you can get the innovation to come quickly."

He noted that the challenge now is to facilitate relationships and pair up large financial organisations with the right start-ups.

"There hasn't been a platform for start-ups and large corporations to intersect. So if that environment is created, you will discover a lot of things are happening and it will speed up innovation," Girn said.