3 Signs You’re About to Default on Your Technical Debt

In December, Southwest Airlines confronted a crisis during its busiest week of the year.

When a winter storm triggered mass delays, its 30-year-old flight scheduling system couldn’t keep up. The result: close to 17,000 canceled flights -- and tens of thousands of stranded passengers and employees.

While the results were disastrous (both for travelers and the airline’s finances), they were inevitable to a certain extent. Southwest had been patching up its aging for years. December’s perfect storm of bad weather and high travel volumes pushed the airline’s operations over the edge.

The bad news is that many banks are on a similar trajectory, piling on technical debt that’s impacting customers, employees, and revenue generation.

The good news? It’s not too late to avert disaster and change course. Here, I’ll highlight three of the most significant signs your bank may be headed toward a Southwest-like event -- and offer a few ways to course correct.

1. You Dread the Next CCPA

When the California Consumer Protection Act (CCPA) rolled out, many banks focused on updating their technology just enough to achieve compliance regarding customer data management and protection.

But with constantly changing customer expectations and regulatory needs, that approach is akin to paying the minimum balance on your credit card each month.

The mindset shift: Start thinking about technology as a growth tool, not a line of credit.

Rather than investing in technology solutions only as needed for regulatory compliance, they should seek forward-looking ways to create tech-powered customer and employee experiences.

For example, banks might go further than simply upgrading data infrastructure enough to comply with CCPA. They might push for a single source of truth for customer data that makes it easier to anticipate customer needs, cross-sell, and deliver customized support at scale.

2. Your Employees’ Workstations Are Covered in Sticky Notes

Southwest is known for being a budget-friendly, pro-customer airline. But whenever flights got disrupted, its employees had to use a phone system to get their next assignments -- a situation that led to waiting times as long as nine hours during the holiday debacle.

The crux of the problem: Southwest invested millions in customer experience but should have paid more attention to employee experience. Many banks operate in the same way.

On the surface, the thinking is sound: revenue comes from customers, so it makes sense to invest in retaining them. But the premise becomes problematic when it extends to not investing in employee experiences in parallel. Banks assume that employees will figure out a workaround when something goes wrong, but that’s not a sustainable mindset.

In many banks, those workarounds take the form of sticky notes on employees’ workstations. They might contain passwords or instructions for using a system. Or maybe an employee jots down Social Security numbers on calls because they know they’ll have to enter duplicate information to complete a service task.

Everything’s okay until someone forgets to shred this information. Or until someone posts a “company culture” photo on LinkedIn with their sticky note login credentials in the background.

The mindset shift: Relying on employee workarounds to “solve” technical problems may seem like the cheaper alternative in the short term. Still, if you’re not investing in employee-facing technology, you’ll likely pay in the long term.

If you’re lucky, those “payments” will take the form of lost employee time throughout their days as they enter duplicate data, wait for slow systems to load, and shred their sticky notes.

If you're not, you’ll have constant high turnover and customer attrition or a public meltdown like Southwest’s -- maybe in the form of a data breach or hack.

But the reverse is also true: when banks actively invest in improving employee experience, they also invest in customer experience. Better employee technology means better service. And better service means happier customers who stick because they love their bank -- not just because switching is painful.

3. You’re Investing in “Sticks and Tape” Solutions

It’s one thing to avoid investing in new technology. It’s another to invest instead in “sticks and tape” solutions necessary to keep your old technology from crashing. That was the situation Southwest was in for years before the December breakdown. And it’s a position familiar to many banks.

It’s not uncommon for a bank’s core technology systems to be 20 years old or more. These older systems often aren’t adaptable, making even small changes difficult. And many bank leaders are still scarred by the tough transitions to these same systems.

This approach creates two problems:

The good news is that today’s technology makes upgrading and modernizing easier.

For example, rather than building an on-premises system parallel to your existing one, you can likely modernize incrementally -- by creating or adopting API-based solutions (CMS, LOS, customer portal, etc.) to replace existing software.

The mindset shift: Think of technical debt the way consumers should manage their finances.

Technology upgrades shouldn’t be the equivalent of a one-time debt paydown followed by years of accumulation. The goal is continuous, incremental technology investment, just as a savvy consumer pays down their monthly credit card balance.

The ideal scenario is one where a bank can do the following:

With a solid data strategy and regular tech tune-ups, banks can maintain a healthy, growth-minded relationship with technology -- instead of hoping to avoid disaster.

Slash Your Technical Debt to Stay Agile and Competitive

A snowstorm won't cause banks to default on their technical debt. But a data breach might, or maybe a neobank competitor that offers a tech-powered, hyper-personalized experience your customers prefer.

Banks must tackle their technical debt now. With modern technology in place, banks can adjust to changing conditions. And with an employee- and customer-centric tech stack, banks can improve retention across the board.