Editor at Large

When JPMorgan Chase recently launched a new website, Gavin Michael, head of digital for consumer and community banking, credited much of the success and speed (it took 18 months) of the project to the bank's recent migration to agile development.

Last year, when BBVA Compass opened a new operations center in Birmingham, Ala., it too signaled a commitment to agile development, and showed off a space redesigned with agile pods. Tangerine Bank and Capital One have also spoken of shifting to agile methods.

The benefits of agile development — a way of building software in small chunks and short spurts rather than in one big, long "waterfall" project — are well-known: faster-moving projects that are adaptable to change, collaborative groups, end-user feedback throughout the process, quicker successes and failures.

"You're designing at the same time as you're developing, testing and implementing, so it's much faster," said Jose "Pepe" Olalla, interim head of business development at BBVA Compass; previously he was BBVA's CIO for Digital Banking. "You work in what's called 'sprints' of two to three weeks, so every two to three weeks there's some kind of new capability."

The method has existed in some form since 1957; today's version dates to 2001, when a group of developers at a Utah ski resort published the Manifesto for Agile Software Development.

It raises the question of why banks are getting into this now.

One reason is that they finally can. In the past, banks beholden to old core systems written in languages like COBOL haven't been able to use agile methods. But for the many institutions that have either written middleware that links legacy cores to new front-end software or have created or bought customer-facing software written in more modern languages like Java, agile is becoming an option.

"As time moves on and legacy systems are replaced by new platforms built in more current languages, the opportunity to try agile methods of software development start opening up," said James O'Neill, senior analyst at Celent. "If I'm building something new from scratch, I can try agile methodology to do that."

Newer, more modern applications tend to be in the areas of mobile banking, online banking and payments.

Another reason for the shift to agile is the fact that banks are creating more of their own customer-facing technology that needs to adapt quickly to changes in customer preferences.

"The most relevant reason is we're producing more technology for our customers, and our customers have rapidly transforming demands," Olalla said. Agile "is the way you come out with a minimum viable product ASAP, you learn quickly from the customer response and you react quickly to generate new releases or new versions of the software."

Banks typically appoint a product manager to act as the voice of the customer and dictate customer needs to the programmers. This way, "developers aren't trying to guess what users need," O'Neill said.

A third motivation for moving to agile is it can help attract highly skilled developers. It more closely matches the skills and ideals of young developers.

"Developers now want to be in front of the customers, they want to understand what they're producing, who's going to be using that, what's the reason they're working," Olalla said. "They like to see on a daily basis what they produce, the reason for it, who's using it and what kinds of revenues it's producing."

Agile development also sidesteps the money pit of traditional software development "where you have this elongated, linear process of collecting requirements for software, then going to specifications and then building code, then testing it and bringing it to the user, only to find out it was a disaster and having to write off a big project," O'Neill said.

Agile methods allow a project to "fail fast." "If the project is not going anywhere, you haven't tied up a bunch of capital in a three-year program, you can figure out quickly what's not working and learn how to pivot from that initial failure toward something that makes more sense," O'Neill said. "That's the secret sauce of agile, the fact that development cycles are much shorter, and they can get real user feedback more often."

BBVA, Chase All In on Agile

BBVA started shifting to agile two years ago in Spain. In summer 2014, it brought the methodology to its subsidiaries in other countries. BBVA Compass in the U.S. has been working with agile for one year. About 50% of the U.S. unit's programming is done with agile development, Olalla estimated.

One example of an agile project at BBVA is the one that created BBVA Wallet, an app customers use to manage their payment cards.

"With agile methodology we could develop and very rapidly have new releases," Olalla said. "Now we have come out with a lot of other functionality like the ability to block and unblock cards, the ability to acquire a new card or cancel a card and the ability to convert a card payment into instalments."

JPMorgan Chase moved its digital team into new agile-friendly digs in December. There are pool tables, scrum rooms, and almost every surface can be written on.

"We've got multidiscipline teams that sit together; product design, technology quality assessment, all work together in relatively small teams focused around product features, and work on the requirements that result in a daily build,"said James Young, managing director and chief information officer of the digital group.

"Every day we can demonstrate an improvement to the site," Young said. "And every three weeks we've got a ship of a product. This translates into great predictability in terms of what we build."

Adjusting to Agile

Agile methods can bring culture shock to a traditional company.

Some departments adjust better than others, Olalla said. "Marketing fits perfectly, typically product design fits perfectly. Risk tends to fit quite well. Finance is more difficult," he said. "There are people who can't work in agile. It's something you need to learn over time and not everybody is willing. There are people who prefer to have clear job descriptions — this is what I'm supposed to do and this is what I'm supposed to produce, in a stable and predictable environment. In agile, things happen fast, you're a bit of everything in the team and you need to be willing to adapt to changes quickly, to work with uncertainty and be accountable for the results."

Unless the whole organization embraces agile, budgeting can be a problem, Olalla said. "If you still budget in the old way, it's difficult to budget for an agile team."

The flow of investment dollars is less predictable in agile projects than in traditional projects, O'Neill said. "It's a completely different mindset. I would understand why someone would have growing pains trying to manage it."

Also a challenge: banks' conservatism and risk-aversion. "Managers by nature can feel that in an agile project they have limited control, because it's injecting the basic principles of entrepreneurship into the process," O'Neill said. "It's not top-down management, it's almost bottom-up management. You have to have the right people making correct judgments on what's being built and when, and you have to trust that they're doing the right thing."

Misperceptions can make bank executives shy about doing agile. "Inside an institution people sometimes think, this is loose and people aren't paying attention," said Jason Alexander, head of digital platforms at Chase. "It's very disciplined, it's very structured, it's very methodology driven."

The banks making this shift are positioning themselves well for future relevance. If it's hard to find IT talent today, it will only get harder for those that cling to archaic software practices.

Editor at Large Penny Crosman welcomes feedback at penny.crosman@sourcemedia.com.

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