How banks can remove friction to working with FinTechs and unlock innovation
By Prakash Pattni, Managing Director, Financial Services Digital Transformation, IBM EMEA
For many financial services businesses, the pandemic has sped up their journey towards a more agile, digitalised way of operating that is more in tune with tech-savvy consumers. This shift was highlighted in a recent IBM survey by Censuswide that found over 40% of UK financial service professionals view evolving to an API and digital platform-based business model as a priority for modernising in the next five years.
For banks to become as agile as they’d like to be, they need to partner with technology firms - from FinTechs to cloud providers - to adopt the innovation they need and exploit technologies of the future. There’s just one snag. For this to happen, the products and services from those providers must comply with the same stringent regulations that banks have to meet.
The time this usually takes – often years – leaves banks unable to take advantage of booming FinTech innovation. In the first half of last year, UK FinTechs attracted a staggering $24.5bn in financing, up from $5.9bn for the whole of 20201. Banks are therefore looking for ways to remove barriers to working with technology vendors as a priority.
Removing bottlenecks while maintaining compliance
This innovation bottleneck is partly what is driving the trend towards solutions that are custom designed to meet the complex security and compliance needs of the financial services industry. In fact, 88% of UK financial services respondents in IBM’s recent survey said their organisation had already adopted, or intends to adopt, an industry-specific cloud platform to accelerate their digital transformations. Nearly half of respondents also agreed that adopting a cloud platform with built-in, automated regulatory compliance controls would have the biggest impact on accelerating innovation in their organisations.
Industry solutions like the IBM Cloud for Financial Services are already providing this capability to some of the world’s largest banks, connecting them with a growing ecosystem of over 125 technology partners and FinTechs to accelerate their transactions securely.
De-risking the financial services supply chain
Cyber resilience is top of mind for regulators as the financial services sector modernises. In recent years, we have seen more large-scale cyberattacks exploiting vulnerabilities in third and fourth parties and impacting organisations along the supply chain. But imagine if the vendors in a bank’s supply chain - such as FinTechs - adhered to a common set of control standards, that could be evidenced against and monitored in real-time, delivering enterprise grade security and protection? Such a solution would offer a singular view of security threats, mitigating any weak links in the chain. This would help to reduce risk for the entire ecosystem and allow banks, FinTechs and other vendors to innovate and transact with each other at pace while keeping the regulators satisfied.
Looking to the future
In order for banks to unlock innovation, it’s essential to select cloud service providers that can reassure all parties – including regulators – that interoperability, security and compliance are central to their offering. The technologies that can deliver these capabilities are becoming increasingly important as the speed of change, and the hurdles this creates, become more challenging to surmount.
FOOTNOTES
1 UK FinTechs shatter records and attract $24.5bn investment in first half of the year
