AI, blockchain, augmented reality: what technology does 2018 really hold for banks?
February 2018 | EXPERT BRIEFING | BANKING & FINANCE
With Bitcoin becoming more established, regulatory deadlines around data usage, such as Second Payment Services Directive (PSD2) and General Data Protection Regulation (GDPR) on the horizon, and artificial intelligence (AI) and augmented reality (AR) remaining on everyone’s lips, 2018 is set to be a year of digital transformation in banking.
2017 certainly saw a lot of talk about emerging technologies, such as AI, Big Data and the Internet of Things (IoT). But at the moment, change has not always progressed past the talking stage. Although 85 percent of businesses plan to invest in AI and the IoT, only 22 percent of businesses have so far.
For financial services providers, who are often on the front foot when it comes to adopting new technology, implementation still takes a long time, and there are often hiccups along the way. For instance, in December, five major UK banks announced that they had secured an extension on the deadline for complying with PSD2, as the required software preparations were not in place to be able to make customer data available before 13 January 2018.
While the UK is arguably at the forefront of application programming interface (API) development, the extension of the PSD2 deadline is testimony to the challenging nature of tying APIs into existing infrastructures. Ultimately, this has highlighted that talking about new technology and implementing it successfully into a complex working system are two very separate things.
To turn 2017’s tech dreams into 2018’s reality, financial services institutions need to ensure that new technology is implemented in a planned, scalable and practical way that can fit within the existing infrastructure – with key business objectives at the top of the agenda.
While a host of opportunities are available for banks to make the most of new technologies, these need to be incorporated with key business outcomes in mind. To accomplish such outcomes, infrastructure must be addressed as a whole, spanning across management, orchestration and automation of service delivery, data and analytics, application rationalisation, modernising the network and transforming security.
When considering the new tech that is being touted, it is also wise to remember the lessons learnt when big developments, such as cloud computing, first started appearing. Commentators and vendors rushed to extol the virtues of the emerging technology, and many businesses wanted to migrate their entire network to the cloud. However, with an infrastructural technology, the solution is rarely diving straight in.
Financial services organisations are enormously data driven, but their systems vary in terms of whether they are suited to public cloud delivery, or would benefit from being deployed on premise. The hybrid cloud approach has emerged as best practice for most institutions as the technology has matured. It unlocks the best of both worlds, allowing firms to simultaneously optimise for performance, compliance and cost.
For instance, many traditional institutions continue to rely on on-premise legacy systems that have been in use for decades, and it is not always viable or cost-effective to migrate these services to the cloud. A hybrid deployment model allows financial organisations to maintain and support legacy systems alongside cloud-enabled ones, keeping older technology up and running without committing to additional data centre build-out.
So, remembering the lessons from infrastructure change on the scale of cloud migration, and looking forward to 2018, banks need to make sure they have the infrastructure to support what they want to achieve, and the expertise to ensure that it actually works. Deploying software without precaution can lead to a multitude of pitfalls, including features that are not best suited to your final outcome, or even a crash in the operating system. To put an application into place properly, banks need to assess whether their infrastructure is ready to support it, and update networks and protocols accordingly.
It is smart to test any new application before installing it on a production network, and this involves creating a test environment that emulates your ‘real’ network as closely as possible. Financial players can create a software testing environment that is cost-effective and scalable by using virtualisation software to install multiple instances of the same or different operating systems on the same physical machine.
As their network grows, additional physical machines can be added to grow the test environment, so that it continues to stimulate the production network and allows for the avoidance of costly mistakes in deploying new operating systems, applications or making big configuration changes to the software or network infrastructure.
To really make the most of digital innovation, banks need to take a holistic approach. The implementation of innovative technologies must be carried out under the guidance of a clear strategy, used and understood by the whole organisation, not just the IT team. It needs to be integrated properly, with the right security protections, to work harmoniously within the IT infrastructure and not pose a risk to the wider system. And most importantly, implementation must be carried out with clear business applications in mind, to make sure it is worth the cost of production – rather than a vanity project in an attempt to compete with FinTech players.
Ben Boswell is the area vice president of Europe at World Wide Technology.
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World Wide Technology