For the banks, it’s about completing moves to become cloud-native – while the insurance industry explores the potential of open APIs and IoT. Pascal Huijbers, Chief Technology Officer Financial Services EMEIA at Fujitsu, reviews what is on the horizon in 2019
Banks were among the first organizations to take the digital transformation agenda seriously, realizing the danger to their core business, or even their very existence, if they failed to respond to the threat of disruption from new entrants. Insurance companies, as we’ll see later, are also responding with imaginative new initiatives in areas such as IoT.
As far as 2019 is concerned, the banks’ agenda is very much about driving away from expensive legacy technology and towards becoming cloud native, with all the implications that hold for agility, innovation and cost efficiency.
New approaches, new processes
In 2019 Banks will start exploring and validating new cloud-native banking approaches based on a modular banking API approach to help them move away from expensive legacy environments. To help them do this, they will increasingly turn to agile software development techniques – this, in turn, will help drive continuous software deployments on multi-cloud, through seamless continuous integration and delivery pipelines.
Public Cloud adoption to take off
With nearly 30 percent of CIOs planning to decrease their investment in heavy IT infrastructures and data centers, the cloud is becoming the preferred model when it comes to replacing hardware and software. In addition, now that financial institutions have worked to address their internal cloud compliance and liability bottlenecks over the last couple of years, adoption of the public cloud will really take off in 2019.
Midsize banks will increasingly transition to shared community clouds that require less in-house expertise. We’re also likely to see cloud providers, dominated by AWS, Microsoft, and Oracle, driving a new level of PaaS (platform-as-a-service) capabilities in addition to the IaaS (Infrastructure-as-a-service) platforms, allowing banks to take their first steps in building cloud-native applications.
Driven by customer expectations for a more seamless experience, we will start to see the adoption of open banking – the use of open APIs that enable third-party developers to build applications and services with secure access to customers’ financial information. However, while the move opens up opportunities for some institutions, others will struggle – we expect traditional institutions to experience teething problems as they work to achieve differentiation in new cross-sector ecosystems.
Openness will also spread to the insurance industry – where we are likely to see some brokers start to move towards an open insurance concept, sharing “insurance insight” with products and services in other ecosystems.
The insurance industry will start to transform
We also expect to see some interesting IoT deployments in the insurance industry, which will increasingly explore profitable use-cases for the technology to lower risk while improving profitability and combined operating ratios (COR). Banks, on the other hand, are likely to continue to struggle with how to effectively leverage IoT in 2019.
A breakthrough in the blockchain
When it comes to breakthrough technologies, we will, however, see the much-hyped promise of blockchain start to come to fruition, as cryptocurrencies and/or distributed ledger deployments move to the next phase of maturity. We expect to see many experimental blockchain projects and proofs of concept in 2019, used initially for inter-banking purposes, M2M (machine-to-machine) payments and new digital wallet concepts.
The skills shortage will start to bite
The other side of the digital transformation coin is that there simply aren’t enough people with the necessary skills and experience to recruit into full-time, in-house teams. As demand for core technology skills increases, financial institutions will find it increasingly difficult to attract and retain IT talent skilled in, particularly, AI, cloud and blockchain. This is likely to make companies start to rethink their hiring and training/education strategies and adopt co-creation methodologies within an ecosystem of partners.
In the interim, there is a real risk there will be a slowdown in adoption and innovation. Fujitsu has long advocated the co-creation ethos that is now the preferred digital transformation paradigm for most major enterprises. We have proven methodologies, centers of excellence to promote best practice and a global network of Digital Transformation Centers where ecosystems can come together to devise plans for, or to defend against disruption.
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