DCN July 2017 | Page 50

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.