Whether it’s new initiatives, processes, projects, or technologies, legacy and digitally native financial services companies will have differing priorities but there is some common ground.
Here are five areas we predict the financial services sector will prioritise for their technology strategies and budgets in the financial year 2018/19.
Data will be at the heart of change in financial services
Being data smart should be an imperative for all financial services companies, which have long collected masses of data on customers and markets.
It’s widely known that much of that data is stored in silos throughout various parts of a company with no single view into all data that a customer has shared.
Without a 360-degree view, a company cannot make full use of that data to better serve the customer, anticipate their needs or direct customers to new services.
In wholesale banking, for example, customer data may provide more efficient ways to process payments. In retail banking, data can reveal what the customer wants before the customer even knows it.
Disruptors know that customer experience is king after all. Amazon doesn’t win on price alone – it wins on consistency of customer experience. To have that, you have to know your customer really well, know what they’re interested in and what they’re going to do next.
Newer database technologies enable companies to ingest a wide variety of data and make it available for real-time analytics.
Data is where legacy financial services players have the advantage; however, disruptors have newer technologies and fewer data silos, making them more agile and able to better leverage value from their data.
Notifiable Data Breach Act (and GDRP) enforcement: it won’t be pretty but there’s opportunity for innovation
Sixty breaches have been notified to the OAIC at time of writing, and the financial services sector was third in volume which shows that data governance, increased transparency, consumer privacy, and investor and consumer protection is no longer a nice-to-have but a must-do.
These breaches represent the tip of the iceberg, and the first large-scale post-NDB and GDPR-enforcement data breach in the financial sector will set the tone for the industry.
By embracing what’s required of regulations, companies can seize opportunities to improve data quality and their governance over that data. In so doing, they’ll not only comply with regulations, but will also be better positioned to use that data, with customer consent, in ways that benefit customers.
In this, there’s a great opportunity to use regulatory budgets to accelerate innovation.
But there are also harsh security realities: IT security budgets will need to increase accordingly
As Facebook recently experienced with its data debacle involving 50 million users, knowing how data is being used and whether consent was given is critical to retaining customer trust. For the financial services industry, consumer trust is king, so budget allocation here will continue to rise.
We see there will be more money thrown at the problem, yet expect no decrease in occurrences of breaches (or at least announced breaches).
Toward the latter half of 2018, smart enterprises will shift attention toward more behind-the-firewall protection such as data-level security enforcement within the database.
Vendors that make this both turn-key and comprehensive will do well, because IT security budgets will need to increase as the volume and disclosure of breaches and incidents increases.
Blockchain and artificial intelligence = smarter data insights
Blockchain technology is already beginning to enable a reduction in settlement and other manual-intensive processes in the financial ecosystem.
Almost 80 per cent of financial services incumbents expect to adopt blockchain as part of an in-production system or process by 2020, PwC research shows.
In many industries – in fact any that rely on recordkeeping – blockchain technology promises to reduce risk and enable more transparency and trust.
The list of potential uses for blockchain in financial services is almost limitless, from settlements to smart contracts to trading to simplifying cross-border payments.
Another technology sweeping through financial services is artificial intelligence (AI). Today, a full 30 per cent of large financial institutions are investing in artificial intelligence, PwC reports.
Both blockchain and AI will be put to better use if companies have a good handle on their data. AI, for instance, is only as good as the data that goes into it.
If AI includes only a slice of a customer’s data – whether that customer be a consumer or a wholesale bank—the intelligence won’t be as sharp as possible or, worse, could lead to bad decision-making.
The more nimble a company is with data, the more quickly it can adopt new technologies, such as AI and blockchain, that allow them to innovate and drive business outcomes faster, while at the same time maintaining the accuracy of the data to deliver smarter data insights, so expect this area to grow.
Data assets in the cloud: the need for hybrid cloud and cloud neutrality
Data logistics across various “boundaries” – on-premises, inter-cloud, inter-PaaS – will become more of a “thing” in the new financial year as enterprises realise the need to maintain control over their data assets, particularly in a cloud/platform world.
Azure’s play in the hybrid cloud arena will make that space an active battleground for 2018/2019.
This will also shine more of a light on cloud-neutral capabilities as many enterprises apply their traditional “two-vendor” strategies to the cloud.
To continue unlocking and extracting value from data, it needs to be accessible on your terms, so that you retain ultimate control of the experience your brand delivers to customers. Hybrid cloud and cloud neutrality give you control of your data assets.
The reality is that the pace of change will only increase and the battle for the customer will become ever more competitive.
Facing up to the challenges in your organisation, proactively exploring and learning about the opportunities that new technologies provide, and getting on board quickly with wider industry changes will pay dividends.
The fintech and 'finsev' sector in Australia and New Zealand is known for disruption and innovation, and we believe the new financial year holds great opportunity for those who choose to embrace the next wave of digital transformation.
Tim Macdermid is the area vice president for APAC at MarkLogic.