With the help of two key technologies, financial services institutions in Canada and beyond can overcome long-standing legacy issues

So far in this series, I have presented three of the five key trends identified in our Technology Vision 2018 survey: artificial intelligence (AI), extended reality (XR), and data veracity.

In this post, I will continue with another trend that banks should not ignore if they want to be future-ready. We call this trend “frictionless business.”

Strategic collaboration now defines the path to success

In the digital economy, partnerships are becoming increasingly important to gather the best ideas from around the world and accelerate the pace of innovation. ING, for example, says it has a diverse group of 100 fintech partnerships.1

And in our Technology Vision 2018 survey:

Yet, banks are inhibited in their ability to partner by complex, usually inflexible operating and technology platforms. These legacy systems were not built to support technology-based partnerships.

Now, as banks expand their networks, participate in diverse ecosystems, and shift partners within them, they are finding that their outdated systems cannot keep pace and are a material barrier to growth and future-readiness.

Overcoming legacy challenges with new technologies

Two technologies—microservices and blockchain—are likely to play key roles in overcoming these challenges.

Microservices represent an approach to technical architecture that breaks down applications into simple components that perform recognized business functions. Organizations treat each of these functions as a single service, equipped with its own team of engineers responsible for maintaining their own code and, importantly, application programming interface (API) endpoints.

The fact that each microservice manages its own data, which can only be accessed through the API endpoints, eliminates much of the complexity of traditional architectures. An organization can create larger “applications,” such as mobile banking apps, by coordinating API calls to each of the independent services, allowing it to include services outside the organization.

Based on our survey, bankers are seeing the benefits:

Microservices architectures built around APIs are also a major investment priority for Canadian banks, with the goal of increasing their ability to collaborate with fintech partners and extend their ecosystems.

Blockchain, one of the most talked-about topics in financial services today, is a distributed ledger technology (DLT) that stores groups of transactions (“blocks”), and then links and sequences the list of transactions using cryptography.

The real innovation behind blockchain lies in the fact that no single organization owns the blockchain—it is distributed across a peer-to-peer network, with redundancies in the blocks and consensus mechanisms to ensure that no one can manipulate the transactions. With blockchain, organizations can track every piece of currency, and establish relationships with the network of peers rather than one-to-one.

The executives we interviewed in our Technology Vision 2018 survey are aware of the importance of blockchain:

By their nature, DLT-based systems currently make the most sense for retail banks when deployed at a market or industry level—for example, for property title registers, inter-bank clearing and settlement, or a central-bank-issued official cryptocurrency. As these technologies mature, they may one day provide cost-effective replacements for legacy core banking systems.

In my next post, I will conclude my review of the Banking Technology Vision 2018 with a look at the Internet of Thinking.

Until then, be sure to access our Banking Technology Vision 2018 and cross-industry Technology Vision 2018 reports.

References:

  1. “Fintechs Help Change Our Culture,” ING, July 27, 2017. Access at: https://www.ing.com/Newsroom/All-news/Fintechs-help-change-our-culture-Benoit-Legrand.htm.
  2. “Building the Future-Ready Bank: Banking Technology Vision 2018,” Accenture, 2018. Access at: https://www.accenture.com/us-en/insights/banking/technology-vision-banking-2018.

Robert Vokes

Managing Director, Financial Services

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