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The banking and financial industry has seen tremendous transformations in the technology landscape over the few decades. The customer’s expectation has moved towards Omnichannel platforms and the usage of gadgets and virtual assistants like Google Home, Alexa from Amazon, and Siri from Apple. The usage of wearables have increased significantly, aligned towards the latest technology.

Banks & financial institutions need to equip themselves to reap benefits of latest technology offerings as mentioned below:

1. Cloud Adoption:

Banks can migrate their existing applications (core banking/ risk management applications/ digital banking offerings) to a cloud environment as part of their IT road map.

Banks would achieve the following benefits as part of IT application migrating to a cloud environment:

  • Data security & data privacy play a key role, as banks have critical customer financial data and transactions as part of their service offerings to their clients. Cloud providers ensure that financial and non-financial data stored the cloud environment are highly secured and tamper-proof in nature.
  • Meeting compliance regulation: Banks / FIs want ensure customer data in the cloud are stored as per the central bank regulatory framework. Every cloud solution provider like AWS, Microsoft Azure, and Google Cloud will ensure that data is stored as per regulatory requirement in the cloud, taking into account the regulations of a country. For example, as per GDPR, there are separate cloud data centers maintained within Europe to store data in cloud to meet the EU compliance & regulatory requirements.

2. Cloud Banking:

Cloud banking is the future technology that banks & Finance Institution would like to adopt. This is mainly because of the fact that banks want to reduce costs and offer better product & service offerings across the retail & corporate banking segments.

Faster-to-market with new product launches will be key differentiating factor in the cloud banking space, with the help of API’s integration, which can be easily integrated with another ecosystem or fintech company in quick time. Enterprise level support will be the key differentiating factor in cloud banking, as data across the group level can be integrated and offered as services to its customer.

According to the IT road map, banks can decide the products and data, which need to be on cloud and premise and deploy the solution accordingly. Moreover, banks can decide the storage of data in public, private cloud or hybrid cloud as per the business decision.

This can further help banks meet the regulatory and compliance framework levied by the central bank / regulatory authorities. Like GDPR in European countries or CCPA regulation in California State, US, banks need to adhere to specific regulations and store data accordingly in the respective geo locations.

3. Business Process as service (BPaas):

Bank & FIs would like to leverage technology and pay only for services offered by the product / software vendors. This will be the emerging trend in coming days. Going forward, banks will reap the following benefits with BPaas.

  • Reduces software license and product cost
  • Reduces cost of operation in maintenance of data center
  • Pay for service offered by the product / software vendors, based on the transaction volume or user-based licenses as per the agreements
  • Bank can go live to any geography with pre-configured products offered by the vendor to start with
  • Meeting regulatory and compliance standards, based on central bank regulations.

4. Cyber Security:

The banking and financial sector has been under tremendous pressure with financial data breaches / crimes in the course of many years. Cyber security plays a key role, as banks offer a majority of their services via Omnichannel platforms and transaction processing via different payment networks across the globe.

Banks expect to have an endpoint security solution to overcome data breaches over external networks / payment gateways. This will ensure that financial data is not tampered with malicious code / data breaches as part of transaction processing.

For commercial banks, there are innovative technologies developed on cyber security such as multi-factor authentication and virtual reality with the help of facial recognition. Apart from such measures, bank implement firewalls and anti-malware applications to prevent data breaches.

With help of AI / ML (Artificial Intelligence / Machine Learning) technology solutions banks can perform security and system audit to identify suspected / fraudulent transactions. AI / ML will help banks to analyze the weakness area in the existing application and build more security.

5. Instant Payments:

Instant payment is the new emerging trend in the payment space for banks and FIs. This trend will help the customer to leverage technology and process the payment instantly without compromising on transaction security.

Banks and market participants will have a level playing field with more integration towards third party Fintech / Regtech companies to offer instant payment service and meet the regulatory standards of the central bank.

The Euro Retail Payments Board (ERPB) proposed that at least one common-European solution for instant payments in Euro should be available to all payment service providers in the EU. This decision was taken by ERPB in 2014.

Banking and financial institutions in the US operate the RTP (Real Time Payment) system, which is widely used for real time settlement among themselves. The US Clearing House is working with key payment service providers, banker’s banks, and corporate credit unions to ensure that every financial institution in the US will have the option to access the RTP network by 2020.

Sources:

https://www.ecb.europa.eu/paym/integration/retail/instant_payments/html/index.en.html
https://www.theclearinghouse.org/payment-systems/rtp
https://www2.deloitte.com/global/en/pages/financial-services/articles/bank-2030-financial-services-cloud.html

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About the Author

Arunachalam Natarajen
Business Consultant, BFS

Arunachalam is a subject matter expert and strategic business enabler with Mindtree's BFSI vertical. He is responsible for delivering innovative technology to our customers while leading domain consulting, alliance management and domain competence building.

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