James Petter, VP International, Pure Storage
The days of “business as usual” are over for financial institutions. Retail banks, insurers, investment firms, and wealth management companies alike are all under pressure to deploy new “anytime-anywhere” digital services. Not surprisingly, according to Ovum’s recent ICT Enterprise Insights, the banking sector recorded high digitization maturity-progression of 42 percent, second only to the telecoms sector at 43.9 percent.
The most evolved enterprises know the potential of their data as a competitive lever and for insights into their customers. They also know that not all data is created equal. To build the most modern IT environments and derive the maximum value, there must be an acknowledgment that data types have different needs for access, storage, and management. This is where there is some catching up to do in the finance sector. To survive and thrive in today’s era, financial organizations must become data-centric for managing all key tasks, from customer-facing services to internal back office operations.
By adopting a data-centric approach, using application performance transformation, and by consolidating critical data from multiple source—including IoT devices―financial services firms can now accelerate processing, adopt automation, deliver personalized experiences, and slash costs. Much of this will be achieved through artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and advanced analytics.
Tapping into these innovations, however, requires highly scalable, high-velocity access to vast amounts of customer and business data. This all begins with employing modern data strategies in four critical areas.
To accelerate their digital transformation journeys, financial enterprises require a data platform that can consolidate, connect, and accelerate data from both historic and current data sources. The platform must have the capacity to accommodate streaming data from IoT devices and telemetry. It must also deliver analytics and AI/ML applications on-demand.
Financial services firms are now deploying data hub platforms to accelerate data in a way that improves both performance and profitability. It has enabled some, in fact, to reduce database job latency to below 1ms.
Every type of investor faces constant pressure to improve performance and top-line revenues. To address this pressure and keep pace with ever changing markets, more firms are deploying models powered by analytics that produce AI and ML driven insights. In fact, according to a report from Accenture, AI will contribute US$1.2 trillion to the financial sector by 2035.
As examples, quantitative analysts are sifting through big data, using AI and ML to create more immediate investment strategies that identify profitable opportunities and balance risks. AI, ML and predictive analytics also add new capabilities to improve forecasting and optimize trading decisions. But none of this can be done without fast processing of large volumes of data from multiple sources.
Firms need scalable storage for constantly growing data volumes. They also require high-performance processing to optimize machine analysis and get human beings the answers they need.
Reinvent the customer experience
Online and mobile banking customers demand convenient services, whenever and wherever they want them. For financial institutions to stay competitive, delivering such experiences is now strategically critical and customer loyalty depends on it. The opportunity now exists to reimagine the entire customer experience, from core banking to mobile to call center. With analytics-driven ML, organizations can transform their retail applications, including conversational commerce, voice interfaces, and virtual assistants.
Financial firms can now obtain more value from the data they store and protect. They are now embracing AI, ML, and predictive analytics platforms to leverage their vast data sources, add new value, and deliver experiences that help them attract and keep customers. To cite an example, 78 percent of Swedbank’s contact center interactions are resolved on first-contact by AI. Data storage must be able to keep up with these new capabilities by offering fast access to all data resources with scalable processing power.
Transform Governance, Risk & Compliance (GRC)
Regulatory compliance is now a huge expense for financial institutions. Analysts estimate it costs the banking industry US$270 billion annually. In addition, according to a recent Thomson Reuters report, compliance and risk practitioners expect that price to climb. Stopping fraud and criminal activity remains a top, yet expensive, priority. As does risk management. Both require more immediate access to data and intelligence. Consequently, many firms are accelerating the identification and reporting of liquidity, counterparty, market, and credit exposures.
The ultimate challenge, however, is to make all data immediately available to all applications in a cost-effective way. Financial firms can’t afford to devote more people to these problems. Instead, many are turning to new regulatory technology powered by AI and ML to automate some of the processes and complement existing systems.
In fact, 45 percent of respondents to the same Thomson Reuters study expect to invest in automated GRC solutions by 2021. These solutions enable a comprehensive governance, risk, and compliance automation strategy that operates across all functional silos and delivers round-the-clock compliance monitoring, scalable capabilities, and lower costs.
If financial services firms are to differentiate themselves in the competitive marketplace, innovation is now more crucial than ever. Digital transformation and capitalizing on data provide a vital opportunity for organizations to focus on emerging customer needs, uncover deeper insights, and mitigate risks when launching new services. This, however, will require the use of data enrichment with “alternative data” from geolocation, demographics, medical records, retail foot traffic, and other specialized external sources. It also requires a financial institutions’ data platform to collect, aggregate, and process data in any format.
The starting point for all this is a high-performance, highly agile data storage platform. Modern IT environments should consist of data strategies based on flexible consumption models across on-premises, hosted, and public cloud—aligning application workloads with the most effective infrastructure. Importantly, modern IT environments should work harmoniously with a common management interface, 100 percent non-disruptive architecture and proactive/predictive support services. This kind of infrastructure will be able to share data from a multitude sources and facilitate the creation of data pipes for AI workloads.
It’s time to put your organization’s data to work.
HOW IDENTITY IS SECURELY UNLOCKING THE SME BANKING MARKET
By Mike Kiser, senior identity strategist at SailPoint
Have an identification card in your wallet? With a selfie and a few short minutes, you could have access to a business bank account.
Small and medium enterprises (SMEs) have long been the fuel that drives the global economy, representing around 90% of businesses and more than 50% of employment worldwide. Over the last few years, a range of financial services and platforms have arisen over the last few years to support the banking needs of these organisations. They are often digital natives and are innovating to meet the needs of their clientele.
This innovation provides great ease-of-use and rapid access to credit but also demands a careful consideration of their assumed security approach. The aforementioned scanning of an identity and a quick photo to establish a bank account demonstrates the rising importance of identity in both the consumer and enterprise arenas.
The blurring of the lines between personal and corporate identities (in this case, an individual acting on behalf of a small business) is still in its infancy. Combined with the ubiquity of mobile devices, individuals will tire of maintaining different accounts, different personas, different lives for each activity. Usability will demand that identity be reusable, portable, and secure.
This has massive implications for enterprises and the financial institutions that serve them if they seek to prevent cyber-attacks; thankfully, the same element that presents the security challenge also offers the solution: identity.
A New Vantagepoint
Just as individuals desire a single identity to unify their interaction with disparate parts of the world, organisations can use identity to grant them a single, holistic view of an individual (attributes, access, and behaviour) rather than seeing only a fragment at a time. This is particularly important for these new financial institutions—much of their technology stack is cloud-based, which often leads to splintered security approaches. An identity-based approach must be cloud-aware, and able to distil these complex environments into simple and easily governed infrastructure.
This collectivisation also allows security to use identities in the aggregate: to see what groups of similar individuals exist, what access these groups have, and what their usage of this access typically is. All of this contributes to the establishment of what normal is, whether it’s attributes, access, or behaviour. Once the “normal” is established, then the outliers—the potential threats—may be quickly triaged.
Adaptability: The New Imperative
The recent wave of change has demonstrated that financial institutions and organisations must be ready to adapt quickly to shifts in the environment. Portions of IT staff and services have been furloughed, and adjustments to new realities are essential. An identity approach that learns from the evolution of changes in the previously established areas of normality can grant enterprises the ability to see what is coming next and invest appropriately. Much like a view from an elevated position grants the ability to see beyond the normal horizon, basing a security strategy on identity makes it inherently adaptable.
Identity: Innovation and Security Intertwined
Identity, then, is a foundational consideration for financial institutions seeking to provide services for the perennially important small and medium enterprise sector. By eradicating barriers to entry that have historically kept financial organisations and enterprises apart, it is driving rapid adoption and a growing market for innovative banking. At the same time, it shows the path forward to securing those new services in a pre-emptive, adaptable way.
Now if you’ll pardon me, I must go open a bank account for my next start-up—from my mobile.
OPEN BANKING: ARE CONSUMERS KEEPING AN OPEN MIND?
Last September, the European Union’s regulatory requirement for banks to open up their payment accounts via application programming interfaces (APIs) came into effect. Since then, open banking has taken centre stage within European retail banking and payments. In this blog, Elina Mattila, Executive Director at Mobey Forum, shares insight into how emerging consumer attitudes may impact open banking services in the coming months.
It has been over six months since the revised Payment Services Directive (PSD2) came into full effect and with it, required banks to allow third party providers to access payment initiation and account information. While the regulation was designed to facilitate open banking, the market demand was uncertain. Would we, as consumers, choose to embrace the new services enabled by open banking? And if so, under which conditions?
To understand consumer attitudes, Mobey Forum and Aite Group partnered on a pan-European study to determine the appetite for open banking services amongst 1000 consumers in Finland, France, Germany, Spain, and the United Kingdom. The study, launched in November 2019, revealed many important consumer trends and attitudes, including key priorities and potential barriers for adoption.
Consumer appetite for change
The consumer benefits of open banking are largely perceived to be compelling, yet this counts for little if the providers of those services are not deemed trustworthy. This is an observation reflected in the study, which highlighted consumer confidence in service providers as critical to open banking adoption. People want clear visibility of who is managing their finances, and the overwhelming majority (88%) would prefer their primary source of open banking services to be their main bank, as opposed to other banks or third-party providers (TPPs).
Consumers also indicated high levels of trust in their current bank of choice, reflected by 77% preferring to use a financial product comparison service offered by their main bank. By enabling customers to compare the pricing and conditions of a range of financial products on the market, they feel more comfortable that banks have their best interests at heart. This is a welcome trend, and one which should be celebrated in the aftermath of the 2008 financial crisis. For the banking industry to have rebuilt trust levels in this way bodes well for consumer adoption of future innovations.
With a trusted provider, one third of consumers were then either ‘very interested’ or ‘extremely interested’ in integrating open banking services into their financial routine. This applied to specific use cases: account information services (32%), pay by bank (33%), purchase financing (25%), product comparison (35%) and identity check services (35%). Unsurprisingly, consumer willingness to adopt these services relies heavily on providers continuing to prove that they can be trustworthy stewards of personal data.
For those unwilling to adopt open banking, concerns largely focused on reservations around security and privacy. As open banking becomes more sophisticated, it will be interesting to analyse the nuances around how consumers engage with third parties. Established brands are perhaps more likely to be trusted by consumers than lesser-known online retailers. For this reason, consumers may hesitate to engage newer companies than brands they are already familiar with. In an industry as varied as finance, this creates additional intrigue in the ongoing battle for market share between the newer ‘challenger’ banks and the older, more established European banks.
Consumers might, however, be willing to deprioritise trust and, instead, favour convenience and usability. When questioned over their willingness to adopt a new payment method, for example, 91% of respondents indicated that they could be tempted to switch either by financial incentives or the promise of greater convenience.
The path forward
While open banking is still in the relatively early stages of development, it has made significant progress in a very short period of time. Not only is it allowing consumers to share financial data with authorised providers as they wish, but it is set to spark more competition and innovation within the market.
From a business perspective, open banking is expected to create lucrative new revenue streams, particularly for companies which are able to innovate quickly and react to consumer demand. It is prompting consumers to reconsider how they manage their finances and – most excitingly – it’s not even close to reaching its full potential. It should bring a whole new era of service partnerships between banks and TPPs, which will enable a new generation of innovative financial services.
For the industry to truly fulfil its potential, it is vital that stakeholders are able to explore new business models, innovations and changing customer expectations for open banking in a commercially neutral environment. Mobey Forum’s open banking expert group provides exactly this, and we look forward to supporting our members as they shape the future of digital financial services.
Where to find out more
The opportunity for open banking is explored in more detail in a report by Mobey Forum and Aite Group, entitled Open Banking: Open Minds? Consumer Appetites for New Banking Services. It provides banks and other financial services stakeholders with a market view on consumer appetites toward new open banking services and explores the possible roadblocks to consumer adoption. It is also discussed in a podcast featuring key representatives from Interac, Erste Group Bank and Strands Finance.
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