Financial services in 2022: an opportunity for metamorphosis

Legacy and cloud native technologies can complement each other for a more productive business and happier customers.

Through Monique Sasso, Chief Technologist EMEA FSI, Red Hat

For financial services companies and insurers, customer relationships are based on trust that has been acquired over many years. In turn, these companies must be able to trust their fundamental IT systems to deliver the required availability, performance and security. With the stakes so high, redesigning the technology can seem risky because it represents a leap into the unknown. The key to successfully balancing reputation risk with the desire for speed and innovation lies in a more holistic approach to digital transformation: it must include people, processes and partnerships as fundamental pillars, not just technology. Here we take a look at how these areas offer opportunities for change over the next year and beyond.

The Customer: request for personalization

The platform economy gives rise to a wide variety of new services. Banks that embrace new types of collaborations and ecosystem relationships will reap the rewards. Open APIs are the currency that will enable this, and many banks are already moving in this direction, launched by PSD2 in the EU and UK and crystallized by technological advancements and consumer demand.

This move towards Open Finance will generate a lot of data, which can be used to deliver the types of hyper-personalized products that customers increasingly demand. For example, behavioral finance or insurance can educate virtual personal financial figures or “butlers” who analyze customer data to suggest products and predict future spending patterns. Our favorite streaming and online shopping services are already doing this for us, and consumers seek the same convenience with the added security and stability that we expect from our banks and insurers. All of these things are already possible and are underpinned by structured big data, analytics, IoT (Internet of Things) and artificial intelligence (AI) and machine learning (ML) – technologies that thrive in flexible environments. and cloud natives.

When it comes to treasury, corporate and investment banking, edge computing is in the crosshairs, bringing the real-time processing and analysis of exchanges closer together, supported by an ecosystem of APIs that add value to the entire chain. AI and big data can help process previously unused volumes of data. It then becomes possible to get in-depth business insights from trade and transaction reports, or to manage cash flow transparently, or to have real-time dashboards for senior executives to take more informed decisions. The customer experience becomes rewarding and individual.

People and Process: reinventing work

New products and technologies create the need for new processes. People are at the heart of delivering these business processes, and embracing them requires new ways of working. Simply put, if organizations are to capitalize on the speed and flexibility that cloud native software can offer (and that their consumers demand), they will need to rethink their operating models.

It goes beyond agile development – it must integrate governance, decision-making, and the relationship between management, business and IT. In this way, the organization becomes a harmony of interdependent building blocks, rather than separate siled ecosystems. Adopting open source principles and DevOps practices to maximize flexibility, transparency and speed can help break down silos while providing transparency to senior management (ExCos), regulators, shareholders and consumers who demonstrate that the organization operates in a consistent manner across all three lines of defense.

What it looks like at Red Hat in these better days is for everyone in the company to freely exchange views, contribute ideas, and solve problems together. Collaboration and community balanced with accountability drives innovation – and we strive to help other companies realize the same benefits.

Technology: revitalize IT

Modernizing hardware, software, and working methods is no small feat – financial services organizations have been on the way for years. It’s time to reinvent the way infrastructure can be used. Mainframes might not be the best home for all applications, but could be used for certain use cases that take advantage of their uptime and ability to quickly process large amounts of data, such as real-time analysis, AI / ML workloads or big data management. Power consumption is also an important factor, with a modern mainframe being more efficient than equivalent servers.

Modernizing does not necessarily mean “getting out of the old, into the new”. It’s about using available resources efficiently, safely and sustainably to generate new value for customers. And it’s about making the new and the old communicate and work better together, using integration capabilities, agile delivery techniques, and cloud native platforms to improve the speed and security of delivery. of software.

Agile integration comes into play when connection technologies like APIs are executed in containers and when integration roles are extended to cross-functional teams, or “citizen integrators”. Essentially, microservices can be “fed” into the existing architecture in a transparent way, so that they quickly begin to deliver value to internal and external users.

Likewise, moving to the cloud doesn’t mean organizations have to shut down their data centers and start over; on the contrary, data centers can be modernized alongside software and business processes. The data centers of the future are flexible and highly utilized with software-defined storage on a choice of industry standard hardware. Event architecture, real-time risk reporting, and end-to-end automation can provide operational resiliency and increase uptime. By integrating control functions throughout the journey, compliance teams gain the understanding and confidence they need to feel comfortable with automating controls.

Technology: IT of the future

The financial services industry is working towards a future flexible and portable IT state, supported by an open source native cloud architecture and the freedom to choose technology partners without vendor lock-in. Containers are essential here, providing a standardized foundation for moving workloads between private clouds and multiple public clouds or even at the edge.

Containers provide options: the business can decide where and how to run workloads. They also consume less resources (from the server to the electric bill) and house microservices that communicate through APIs. This is a radical departure from a single large system running on a mainframe or server.

Containers provide a strong, fungible foundation for financial services and insurance companies as they modernize – one thing we as a society have learned during the covid pandemic is flexible resilience is required in all aspects of our personal and professional life. Choices with pay-as-you-go services allow CFOs to achieve the balance between capital and operating expenses wherever they are in their digital transformation journey and as part of their own. appetite for risk.

The outlook is bright

Now that technologies ranging from containers to AI to 5G mature, more traditional organizations have a golden opportunity to turn what they already have into a powerhouse of productivity. A modernization strategy that embraces a more open culture and makes cloud native technology work in concert with existing IT will allow financial services companies and insurers to deepen the trust they are known for and combine it with a new leadership in innovation.

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