IBS Journal January 2017
37
An open IT architecture and common standards in a secure environment are necessary to achieve business and data flexibility. An open approach can also accommodate new developments such as real-time payment infrastructures and technologies such as the blockchain or artificial intelligence (AI), which will need bolting-on to bank systems in the future.
“We are fortunate because our core banking and processing platform is based upon the principle of a service orientated architecture (SOA),” says Beck. “Ever since its development in the early 1990s we’ve constantly updated our Avaloq Banking Suite – accessible in the cloud or offline – and our business process outsource (BPO) full service options, but always with the aim of keeping it open, flexible and SOA-like so that banks can integrate easily and new capabilities can be simply added.”
Collaboration on shared services is a key industry trend, particularly in the compliance and operational processing field, where it can deliver economies-of- scale savings and cut costs post-crash. This is necessary as banks struggle to raise their capital bases in an era of lower return on equity. Collaboration is also crucial when developing and integrating new tools from FinTech startups.
“Banks aren’t doing it on their own anymore,” says Beck. The digitalisation and collaboration trend is clear and supported by changing regulation such as the European Union (EU) Payment Services Directive (PSD2), “which will force banks to open their platforms and share application programming interfaces (APIs)”.
The UK Competition and Markets Authority’s (CMA) Open Banking initiative should also encourage a further opening up on bank APIs, spurring innovation. Other such initiatives can be expected around the world.
Two key technology trends – towards cloud computing and open APIs – should mutually support each other in helping to grow a more open and competitive banking industry. The growing Big Data revolution is also another driver towards more IT openness.
In the future connected devices on the Internet of Things (IoT), allied to cognitive technologies like AI that can run self-service options, will rely on the cloud to
enable the free movement of data. Indeed, data must be fed into some of these cognitive end users in order for them to operate successfully – a driverless car is useless without maps, for instance, and a bank self- service AI app, biometric access control mechanism or marketing application is no good unless it truly ‘knows’ the customer. A convergence of technologies is clearly underway and open – but secure – IT must underpin it.
In regard to core bank processes, a cloud-based operational model will enable smaller ‘challenger’ banks to take advantage of FinTech innovation via the use of middleware wrappers that can more easily be accommodated into a bank’s operation. Services can be accessed in the cloud without the need to build or even host the systems themselves. Larger banks too are increasingly moving towards this model to protect their position.
Open APIs and banking protocols will mean more and more bolt-on apps can be developed quickly and cheaply, by more new players entering the banking technology arena. This could be construed as a threat to established, older FinTech players such as Avaloq – which existed before financial technology became a hashtag associated with startups – but Beck doesn’t see it that way.
“I see the rise of FinTech startup innovation as an opportunity, not a threat,” he says, stressing that partnering with startups and allowing them access to Avaloq’s platform is his vision. “Blockchain and its associated distributed ledger technology (DLT) is not a threat either, but another opportunity.”
“We can stress our integration capabilities to bring various apps and technologies together on one platform, our security, and our 20 years of core banking technology expertise to ensure continued success.”
Technology roadmap
Beck’s technology vision for the company includes a new developer portal unveiled at Avaloq’s 2016 user conference. The idea is to enable the “Avaloq community”, which includes 450 banks and wealth managers in over 20 countries worldwide, to innovate jointly on a dedicated online portal.
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