Technology in modern financial services can be a complex subject. Here is what business leaders should focus on for success.
We often see clients suffering similar issues with their tech stack, especially around choosing the right tool for the job in building systems that are reliable, scalable and secure. While no two projects are the same, we’ve observed some common themes that we believe a better appreciation of will help ensure better strategic tech decisions in 2022.
Leaders need a greater overall understanding of emerging technology
We don’t mean getting as granular as knowing how to code, but you need enough knowledge to engage with your tech colleagues productively. More is being asked of tech teams beyond just keeping the lights on, and this demands business leaders invest in learning where the opportunities for innovation exist. You can find out more about how to bridge the gap between business and tech in our white paper Fintech Trends for 2022.
Machine learning (ML) and artificial intelligence (AI), for instance, can help firms to mitigate risk, combat fraud, personalise customer experiences and, crucially, analyse massive blocks of data to make truly informed decisions. We recently co-organised a panel debate as part of Fintech Week London on blockchain’s potential in financial services, which gave plenty of food for thought on where this emerging tech can have the most influence.
Software engineering should be at the core of business strategy
Business and IT borders are blurring – business is the technology, and technology is the business. Software engineering is key to creating value, and the best-performing traditional banks now focus more of their tech spend on growth and innovation rather than on maintenance.
As with what happened in telecoms, a centuries-old monopoly over the financial industry is being eroded, with significant disruption driven by technological advances. Although it is difficult to predict the future models of finance, they are sure to be created by the world’s brightest software engineers.
Customer-centricity is the driving force of change in the industry
The rapid digitisation of the past two years was ultimately in response to changes in customer behaviour during the pandemic. Customer-centricity has been a winning strategy for fintech firms for some time and is now being prioritised by those who were not already doing so.
“Banking is necessary, banks are not,” said Bill Gates in 1994 – and to some extent, he is being proved right. The rise of embedded finance (such as buy-now-pay-later) is all about providing a better customer experience in non-traditional financial environments. Whether it is Al personalisation, blockchain-powered digital onboarding, or something yet to be imagined, technology is only a means to an end – and being customer-focused is what determines longevity.
A clear strategy for the modernisation of legacy infrastructure is essential
Financial services incumbents have multiple core legacy systems that are complex and expensive to run and maintain but tricky to change. The stress placed on systems caused by spikes in online commerce since the pandemic has shown that many services and integrations added over the years were not implemented with long-term resilience and scalability in mind.
The potential damage from an IT system failure to reputation and trust is now more severe than ever and CIOs and CTOs must continue to prioritise effectively managing legacy tech.
System security, fault tolerance and resilience are more important than ever
When banking and fintech systems are suboptimal from a security and operational resilience perspective, the risks to customer trust are substantial if things go wrong. Top of what keeps tech leaders awake at night is the threat of potential cyber-attacks.
In modern financial services, fast delivery of new digital products and services must be balanced against the security and reliability of the system. If you have designed your system with resilience in mind, you can avoid any trade-off.
And don’t forget the human element
Fintech firms and incumbents use technologies such as cloud, blockchain, Al and ML, but there is often a lack of skilled employees that genuinely understand how to leverage them effectively. According to the World Economic Forum, more than half (54 per cent) of all employees will require significant reskilling in 2022.
Finding the right talent and expertise has never been of such value in organisations as it is today, but the reality is that finding and onboarding experienced fintech software developers can be extraordinarily difficult for CTOs. This is where partnering with an extended team to work on your architecture and backend services while your in-house team does the frontend and UI/UX can help you develop and launch products quicker than the competition. This can be a vital part of scaling a nimble fintech firm or for incumbents looking to protect their position.
For a deeper dive into these fintech themes and how they should inform your tech strategy and decision making, download our free white paper, Fintech Trends for 2022
by Michael Jaiyeola, Fintech Lead, Erlang Solutions