Change continues to rock the financial industry, and it’s not just technology rocking the boat.
Blockchain, financial services technology, mobile technology and the cloud are gaining traction in the financial services sector today, but legacy systems and cybersecurity could be holding the industry back.
Mergers and acquisitions are on the horizon as larger financial institutions acquire smaller banks and credit unions. Capital markets firms have the quantity of data they need, but not the quality. Mobile remains a key focus, as more than half of investors surveyed by E-Trade want their investing app to have capabilities and functionality that rival their desktop, and nearly two out of three investors surveyed believe mobile is critical to monitor their investments.
What technology limitations could be holding back your financial services organization? And what are the key technology trends you need to stay on top of?
Legacy Systems Pose a Hurdle
Legacy IT systems are a challenge to digital banking implementation, with 100 percent of banking executives indicating their institution’s core system posed at least one major challenge. However, only 4 percent are planning to replace it, according to data from NTT DATA Consulting.
Meanwhile, according to Gartner, banks are facing intense pressure to increase efficiencies and reduce costs while delivering next-generation digital services. Yet incumbent application vendors have been slow to respond to these new requirements. How might this get resolved? Gartner predicts 25 percent of retail banks will use startup providers by the end of 2019.
Blockchain Gets Buzz, but Is That All?
Blockchain is a digitized and automated technology that is considered tamper-proof, because anyone can verify that a transaction has been made (a user’s signature is attached). Only the user, though, can unlock the container to get access to the data. Blockchain allows all parties to a transaction to keep track of it via a secure network, with no need for third-party verification.
According to a Synechron/Tabb Group survey, 55 percent of financial services executives surveyed think that over the next 10 years, blockchain will be an extremely important technology in financial services. Yet only 12 percent said they currently have any kind of deployments in blockchain, with 88 percent either in research and development or doing nothing. They indicate the main hurdles to adoption are “unclear legal and regulatory aspects,” “unproven scalability and performance capabilities,” and “interoperability.”
Blockchain could make a bigger splash in the capital markets. In another study by Greenwich Associates, financial services firms believe that blockchain will enable meaningful change across capital markets within five years, and that vested interests in legacy technology systems are the main impediment to adoption. This is just the beginning for this promising technology.
Buying In to the Fintech Market
Traditional financial services firms are concerned about the competition, with 83 percent believing that part of their business is at risk of being lost to standalone fintech companies. Today, according to a survey from PwC, they are taking action in a big way, with 78 percent of CEOs supporting the integration of fintech at the top levels of management and 60 percent putting it at the heart of their strategy.
The Financial Services Roundtable has stepped up the action with the launch of a “Tech Collaboration Program” to bring together leaders from the financial and technology industries to envision the long-term future of the financial industry and to collaborate on innovative technology projects. One of the first projects is a study on the integration of wearables and creating best practices for securing, moving and accessing sensitive “data in motion” in a mobile financial services world.
Cybersecurity Remains a Concern
Cybersecurity continues to be a concern for financial services and enterprises when considering cloud computing. The Financial Services Roundtable Tech Collaboration Program will be developing standards or best practices for data security, integrity and accessibility in the cloud as one of its first two projects. Until then, financial services firms can ensure they are up to speed with current industry practices.
A recent Intel survey provides insight on how financial services and enterprises in a variety of industries are investing in cybersecurity for the cloud now and over the next 18 months.
Enterprises are using an average of three security solutions to protect their Software as a Service applications. The most common is file encryption (60 percent), followed by email security (55 percent).
For Infrastructure as a Service, organizations are using an average of four security solutions. Most common are firewalls (70 percent) and encryption (62 percent). Private cloud also has an average of four security solutions, with firewalls being the most common (67 percent).
Some key areas for cloud security investment over the next 18 months include vulnerability scanning, multifactor authentication, data loss prevention, log management, intrusion detection systems (IDS) and intrusion prevention systems (IPS), security information and event management (SIEM), and cloud access broker services (CASBs). With ever-increasing data management demands, it’s time for the cloud to rise.
Read more about where the fintech market is going in this CDW report.