Financial services in 2022: an opportunity for transformation

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

Through Monique Sasso, Chief Technologist FSI EMEA, Red Hat

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

The Customer: request for customization

The platform economy is giving 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, pioneered 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 kinds of hyper-personalized products that customers are increasingly asking for. For example, behavioral finance or insurance can inform virtual personal finance personalities or “butlers” who analyze customer data to suggest products and predict future spending patterns. Our favorite streaming services and online shopping services are already doing this for us, and consumers are looking for the same convenience with the added security and stability we expect from our banks and insurers. All of these things are already possible and powered by structured big data, analytics, IoT (Internet of Things) and artificial intelligence (AI) and machine learning (ML) – technologies that are thriving in flexible, cloud-native environments.

In terms of treasury, corporate and investment banking, edge computing is in the line of sight, i.e. bringing real-time processing and analysis closer to exchanges, supported by an ecosystem of ‘APIs that add value across 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 business reports and transactions, or manage cash flow transparently, or have real-time dashboards for senior executives to make decisions. more enlightened. The customer experience becomes rewarding and individual.

People and Process: reinventing work

New products and technologies drive 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 want to take advantage of the speed and flexibility that cloud-native software can deliver (and that their consumers demand), they will need to rethink their operating models.

It goes beyond agile development – ​​it needs to incorporate 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 compartmentalized ecosystems. To kiss 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 is operating in a way compliant on all three lines of defence.

What it looks like at Red Hat on our best days is that everyone in the company participates in a free exchange of views, contributes ideas, and solves problems together. Collaboration and community balanced with responsibility drives innovation – and we strive to help other companies realize the same benefits.

Technology: Reinvigorating Computing

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

Modernization is not necessarily a matter of “out of the old, into the new”. It is about using available resources efficiently, safely and sustainably to generate new value for customers. And it’s about getting new and old to communicate and work better together – using integration capabilities, agile delivery techniques and cloud-native platforms to improve speed and Security software delivery.

Agile integration comes into play when connecting technologies such as APIs are run in containers and when integration roles are extended to cross-functional teams, or “citizen integrators”. Microservices can essentially be “brought” into the existing architecture seamlessly, so they quickly start delivering value to internal and external users.

Similarly, moving to the cloud doesn’t mean organizations have to shut down their data centers and start over; instead, 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-driven architecture, real-time risk reporting, and end-to-end automation can provide operational resilience and increase uptime. By integrating control functions into the journey, compliance teams gain the understanding and confidence they need to feel comfortable automating controls.

Technology: the computing of the future

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

Containers provide options: the business can decide where and how to run workloads. They also consume fewer resources – from the server to the electricity bill – and provide a home for microservices that communicate via 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 that a Flexible resilience is needed in all aspects of our personal and professional lives. Choices with pay-as-you-go services allow CFOs to balance CAPEX and OPEX wherever they are in their digital transformation journey and within their own risk appetite .

The outlook is bright

Now that technologies from containers to AI to 5G are maturing, more traditional organizations have a golden opportunity to turn what they already have into a productivity powerhouse. 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 their trust and combine it with new leadership. in terms of innovation.

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