Banking

Where is the financial services industry in the digital transformation journey?

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At last month’s Money20/20 conference, the event brought over 10,000 people together and hosted speakers from start-up disruptors to incumbent financial institutions, and everything in between. IBM was there in full force. And I had the pleasure of hosting a panel of CEOs three mornings in a row.

I thought one panel participant explained eloquently where the financial services industry is in the digital transformation journey when he put it in terms of the incumbent bank’s relationship with fintechs. He observed: We’re in what was described as “Phase 3” with fintechs. Phase 1 was about understanding if fintechs were a competitive threat. Phase 2 was about investing, piloting, or incubating. Phase 3 is about partnering with fintechs at enterprise scale. Banks are collaborating closely with fintechs, especially in Europe and Asia in part because of the UK’s PSD2 or open banking policy that just went into effect. U.S. banks must be thinking about how to move to more flexible infrastructures and open up their APIs to keep up.

He hits on an important insight. Banks are reinventing not only their infrastructure but their operating models, too, in order to win on the battleground of customer experience. This shift means financial institutions must do three things:

  1. Improve use of data: Competitive advantage will come from creating value from proprietary data, whether that be breaking down data silos to create better integration or using AI / Machine Learning to power analytics. This new technology is used to generate greater insights and better personalization — seamlessly working across public and private cloud environments. However, integrating siloed data from multiple legacy systems to extract insights is still one of the biggest challenges financial institutions face.  Rob Palacios,  EVP and Director of TCB Labs at Texas Capital Bank, sat down with Yousef Hashimi from IBM at Money2020 to discuss the banks’ work around AI and their use of the IBM Garage.
  2. Invest in the right talent: Talent continues to keep leaders of financial institutions up at night. To carry a company through digital transformation, not only do business leaders need to attract the right talent, but they also have to train and coach talent, and make the right tools available to their talent.
  3. Develop faster: Not only are financial services institutions moving more workloads to the cloud, they are also looking for ways to do it faster and more securely. Core banking systems have long been untouchable, but many banks are exploring private cloud options to make even core banking systems more agile.  There was a lot of buzz at the event on fighting fraud faster as criminals have become more adept at fraud schemes in record time. With the help of AI, IBM is protecting banks from fraud within hours.  You can learn more about Fraud Prevention capabilities at upcoming events in San Francisco (Nov 27) and New York City (Nov 28).

  

General Manager for IBM Financial Services Market

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