IBS Journal November 2017


37


What the banks are up to


One of the most interesting aspects of the entire show was the attitude of the big banks to new technology and how they are dealing with it. Talking to the big banks they seem to be projecting a new ‘improved’ attitude to the future of banking technology systems. Until very recently the same old commentators were depicting fintechs as the disruptors in the industry but the harsh reality of the life the banks live has beaten that out of them.


Speaking to a US regulator at the show who, asked not to be named, it was interesting to see how much many fintechs underestimated the amount of regulation they would have to deal with. The new icy climate of global investment has changed the face of global business. Gone are the cocky disruptor startups who can take the feet from under the big banks.


Now all the talk in the booths at Sibos was about collaboration and partnership to ensure success. Until recently, a relatively under-experienced startup could put the fear of the devil into a big bank about the parlous state of their legacy systems and how they needed to start planning for their replacement soon.


The principal justification for AI seems to lie in cost reduction, but it can also mitigate risks and increase revenues, mostly through the indirect route of improving customer experience


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The latter emphasis is increasingly being loaded onto AI as the worries about massive middle-class job losses gains credence.


Celent is very careful to use its definition of AI as technology that makes inferences and decisions that previously required direct human involvement. A series of interrelated technologies around machine learning and natural language underpins all AI.


Building from the fundamental technologies to apply them in a banking context yields four main AI applications: analytics; bots; robotic process automation; and report generation. Celent believes that most institutions should be exploring at least the basic forms of the many technologies that fall under its umbrella.


Now, as the fintechs realise that they just don’t have the bandwidth to ensure every one of their initiatives will pass regulatory approval, they have been tamed by the banks and the polarity of the banking business ecosystem has been reversed back to nearer normal, with the big banks on top again. They always had the advantage, but the strange reality of the fintech PR Tsunami did make it seem as if the fintechs had the upper hand.


Paint it blue


As Deutsche Bank points out in The Big Interview in this issue, the number of CIOs and CTOs hasn’t much changed but the numbers of staff on their payroll has plummeted. I had a coffee with one big bank network manager who manages five staff. But not one of them are on the same continent. This leaves the creative thinking in the banks at the top of the tree but the distance between the chiefs at the top and the workers beneath them has drastically increased.


The internal research and development teams can no longer keep up. Now innovation in the entire global economy is being driven by the startup and why should you try to duplicate that effort when you can tap into it by partnering with a smart startup.


The future is in putting a major problem you face out to hackathons, partnering with a local fintech hub to find the company that can help you, or find one of the small consulting companies also flourishing on the edges of the fintech eco system and utilise their help to target the companies almost certainly already working on a solution to your problem or in the perfect spot to get there.


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