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IBM and RFi Group brought together industry participants to hear about how the financial services sector can better capitalize on innovation and the increasing move to digital banking.
Financial services continue to embrace digital innovation. But at the same time, banks need to re-think their IT infrastructure so they can deliver security and agility without adding complexity.
IBM executives explored how strategies such as blockchain and cloud innovation supported by its LinuxONE solution can help banks overcome those challenges.
Drawing on research from IBM’s Institute for Business Value, Mark Ebeling, IBM CTO, Financial Services Industry, set the scene by exploring a raft of “disruptive forces” that are “redefining possibilities in the banking and financial markets industry”.
Such forces are now driven by shareholder demand for better returns, regulation, emerging risks in security and fraud, new technologies and changing customer behaviour and expectations.
Non-bank entrants such as fintechs and neobanks in Australia have raised the bar for financial institutions. Regulatory scrutiny remains high and with that comes extra complexity and cost.
“The sheer volume and growth of compliance requirements combined with significant costs of non-compliance make this an area of continued focus,” Ebeling said.
Security also remains a priority. In fact, the financial services sector was attacked 65 per cent more than the average business across all industries.
Thus, a focus on reducing costs and harnessing technologies will be key. These innovations will not only deliver on cost but also on agility and efficiency. Ebeling noted that data from Reuters research firm, IDC Financial Insights, revealed that
global banks can save $15 billion by 2019 on cloud adoption. Other innovations include the use of AI particularly in harnessing data.
IBM has used this innovation to develop its own ‘cognitive systems’. “Banks are using cognitive systems to gain insight from massive amounts of data and to discover ways to improve products and services, engage with customers and make
operational decisions,” Ebeling said.
This approach can also be applied to mitigating fraud attacks by providing banks with better insights on behavioral patterns to identify warning signs of fraud attempts.
“Cognitive capabilities can only make this more precise and deliver insight in real time,” Ebeling said.
The focus for our clients here has been around changing the structure of costs, moving from monolithic to modular middle and back office functionality, Mark Ebeling, IBM
Ebeling said the “focus for our clients here has been around changing the structure of costs, moving from monolithic to modular middle and back office functionality”.
In fact, according to Ebeling, IBM clients are also responding with massive investments in understanding and enhancing the user experience, offering easy-to-use self-service options, and unbundling products to improve choice.
He highlights the example of Vietnam’s Techcombank, [https://www.ibm.com/case-studies/techcombank-systems-linuxone] a bank that has managed to transform its business to deliver for customers by harnessing IBM’s LinuxONE platform.
Reaching for the cloud
As highlighted earlier by Ebeling, cloud solutions will play a critical role in banking’s future.
Research revealed at the event found that 50 percent of financial institutions believe a hybrid cloud strategy – and the systems that underpin it – can significantly lower the cost of IT ownership.
The research also found that 47 percent believe mainframe-enabled hybrid cloud can improve operating margins while 47 percent said they believe dual-platform hybrid cloud can accelerate innovation.
Craig Bender, Director, IBM Competitive Project Office, assessed how financial institutions can create and deploy hybrid cloud-based services while protecting their customers from cyber-attacks and data breaches.
Cloud is the linchpin of our clients' digital transformation; it is the default choice for new workloads, Craig Bender
“Cloud is the linchpin of our clients' digital transformation, it is the default choice for new workloads,” Bender said. In shifting to this new model,organisations can harness a number of IBM’s cloud innovations including on the private and public cloud.
There is also the opportunity for organisations to use a multi-cloud solution supported by the IBM Z platform. This solution can reduce costs by over 40 per cent over a three-year period.
For Bender this resonates with clients. “The solution provides clients with a simpler data centre that can be better managed on the cost front with a smaller server footprint and lower cost.
“It also provides the basis for modernization and expansion,” Bender said. Another key innovation is the use and application of blockchain technology on the cloud, branded as the ‘hyper protect family’ which provides a new set
of “highly secure cloud native services to help developers create new, born-on-the-cloud applications of the highest security,” Bender said.
“This is how we are enabling our clients’ journey to cloud and this is where we continue to invest to meet our clients evolving needs, building on the strength and differentiation of the platform.”
The blockchain momentum
There is no doubt that blockchain has had a significant impact in financial services and its momentum will only continue.
Anand Subramanian, IBM Systems Specialist – Digital Assets and Blockchain Solutions, highlighted findings that revealed 78 per cent of institutions would risk losing their competitive advantage if they don’t adopt blockchain.
Ranked as number one by 65 per cent of respondents as the top firm in blockchain, IBM also has a solid track record with deploying blockchain – beginning as far back as August 2015 when the business developed the first prototype of
blockchain technology – open blockchain.
From bank guarantees, trade finance, insurance to universal payments, “IBM is making blockchain real for business with cross-industry solutions and over 100 active networks,” Subramanian said. John Wagner from IBM Research – Blockchain
Research and Development, provided a case study on how tokenization has transformed plastic waste as a currency.
“Tokenization is the process of converting the assets and rights to an asset into a digital representation (token) in a blockchain network,” Subramanian said.
Backed by IBM technology, Canada’s Plastic Bank works with budding entrepreneurs from the world’s poorest communities to help remove waste from their communities. It does this by using IBM’s tokenization tool to provide secure asset-backed rewards that essentially underpin the exchange of plastic waste for goods.
“It is an example of how IBM LinuxONE technologies has created an asset from a liability,” Wagner said. For Ebeling, IBM LinuxONE provides a “quantum step forward in performance and transparency. By allowing financial institutions the capability to use a platform that delivers on scale, performance and security, the industry has got a “game changer”.
For more information on IBM LinuxOne, visit https://www.ibm.com/au-en/it-infrastructure/linuxone