final thought
The Financial Frontier
The financial services industry is surrounded by unprecedented technological change.
But, unlike in other sectors, the response to such shifts has been lagging.Technological
innovation can either hinder or harness. Russell Poole, MD at Equinix UK, discusses
the importance of embracing this change so businesses don’t fall flat.
I
gnoring disruption will see
companies fall behind. Actors in
the financial services sector are
operating in a new ecosystem in
which the old model of a sector
dominated by a few large players
no longer holds. Ironically, it is the
monolithic entities themselves that
may be most liable to falling behind.
With the rise of hyper-
connectivity, distributed processing
and open standards, it may become
possible to disaggregate individual
banking components into free-
standing enterprises based on their
distinct roles. In doing so, companies
such as Amazon, Microsoft and
Equinix can serve as enabling
partners. This new way of working
would contribute to a dynamic
ecosystem consisting of large and
smaller players that co-exist to offer
an integrated set of services.
FinTech start-ups are forcing
even the biggest players to reassess
their business models. London is
emblematic of this change, as host
to more than 1000 such start-
ups. In the face of this activity, a
re-partitioning of the financial
services industry seems inevitable.
Disrupt or disappear
The financial services industry
– indeed every industry – is no
longer discrete or self-contained.
Interconnectivity is now a business
reality. To meet consumer
expectations, players in financial
services will have to embrace
50 | July 2017
‘To continue
to thrive in
this climate,
financial
players must
exploit their
scale and
financial
competencies
to carve out
their own
territory in
an emerging
digital
landscape.’
this new paradigm and forge new
partnerships. Collaboration with
companies of all sizes across digital
suppy chains and closer to the
digital edge where data is transacted
offers the key to future growth.
The banking sector is currently
stuck between a rock and a hard
place of customer inertia and
tight regulation. Cloud offers
upward growth. A new digital
landscape is available to one of
the world’s largest and longest
standing business sectors. In this
new playing field, it is likely that
large, complex banking entities
will break up into sub-components.
The new system will bring together
four components: Proposition
innovators (dominated by FinTech
activity), functional innovators
(providing tools to proposition
innovators), core utilities and giant
utilities which lead scaling projects
and large scale transactions.
A mobile future
The banking crisis of 2008 clamped
down on the sector with new
requirements and regulations.
Yet the apparent rigidity this
represents also stimulates new
possibilities. JP Morgan Chase,
for example, is embracing digital
disruption. Public cloud computing
is a significant part of the bank’s IT
strategy – a move that most large
banks have been too cautious to
take. Combining public and private
cloud services offers a flexible and
cost effective hybrid platform to
accommodate new applications
developments, as well as peak
transaction periods.
The anticipated rollout of 5G
mobile services over the coming
years will further revolutionise
opportunities for financial services,
especially mobile banking. For
the UK’s top financial players to
maintain their competitive lead,
they will have to look towards the
intersection of large and small
corporations. Customers expect
the financial industry to offer a
similar user experience to tech
companies like Amazon, Uber and
Google. Internally, too, CIOs in
large banks see ageing transaction
systems as a major impediment
to supporting new practices, and
a heavy constraint on product
development.
To continue to thrive in this
climate, financial players must
exploit their scale and financial
competencies to carve out their
own territory in this emerging
digital landscape. This will require
deep levels of interconnection
between all participants, so that
data can be exchanged rapidly and
securely to make service seamless.
No matter their size,
companies that embra ce digital
interconnection will benefit from
performance as well as efficiency
advantages. Those that shy away
from change and turn their back on
collaboration face the risk of falling
into insignificance.