Exponential is the new linear
Innovating at the speed of digital, often expressed as “exponential is the new linear,” will be a top priorities for the financial services industry in 2019.
For CIOs, this means enterprise-wide adoption of Agile and DevOps methodologies, further investments in multicloud, and significant leaps in the journey leading to “Infrastructure as Code.”
I also expect banks to increase investments in expanding digital capabilities as they accelerate the pace of digital transformation to address evolving consumer expectations and defend against digital challengers while extracting cost efficiencies from their internal operations.
Looking ahead at 2019 — and further out over the next three to five years — I foresee a number of disruptions and accelerating trends.
I see the following seven trends materializing in 2019:
Trend 1: Open banking acceleration
For most incumbents, open banking acceleration means exposing back-end systems to modern front ends through the use of APIs, and continued partnerships with and acquisitions of innovative Fintechs. This trend will be further exacerbated by regulations such as PSD2 and GDPR.
This can be viewed as a defensive play to diminish the threat of new entrants (including digital-only banks in Europe and online retail giants in Asia offering end-to-end retail, insurance and banking services).
Trend 2: Pervasive AI across the enterprise
Artificial Intelligence (AI) will expand beyond robo-investment and robotics process automation (RPA) into areas such as customer contact center (smart assistants), fraud management (with a focus on biometrics), and employee experience.
Pervasive AI will require the development of an AI-as-a-Service platform to enable data scientists to create and consume AI models with maximum IP re-use, seamless data access, and the ability to spike into the public cloud as needed.
Trend 3: Multicloud adoption
Multicloud (“integrated” private and public) adoption will evolve beyond POCs and MVPs. 2019 will witness a push towards massive workload migration to the cloud, with figures from 20% to 50% advertised by various banks.
This will trigger significant investment in automation, security and cloud management to bring flexibility and agility features to private clouds. It will also create consistent cloud management and provisioning services and enable seamless movement of workloads across public and private.
Trend 4: Cybersecurity on steroids
Financial organizations will continue to invest significantly in their cybersecurity capabilities, including the development of enterprise-wide end-to-end patching, further adoption of biometrics to replace traditional passwords, and wider implementation of zero-trust cybersecurity architectures across the organization.
Trend 5: From mobile device management to mobile data/information management
Data and information-level security will emerge to push cybersecurity away from the device level. In the new BYOD reality, this will further secure key information assets while addressing user privacy by segmenting personal/social from business-critical zones within a single endpoint.
Trend 6: The next-gen omnichannel branch, hyperconnected with untethered bankers
2019 will see banks’ continued investment in redesigning their branches to drive end-user engagement and boost productivity. Banks will also focus on untethering their bankers (replacing desktops with mobile/tablets) and improving branch network connectivity (SD-WAN, wireless, 5G) as they adopt branch of the future models.
Trend 7: Upskilling the IT workforce
Financial institutions will make IT workforce upskilling a top priority. For instance, with infrastructure migrating to code, companies will need to effectively retrain and upskill current hardware engineers as “software engineers with a hardware spike.”
Additionally, Corporate Digital Responsibility as an extension of Corporate Social Responsibility will force banks and other large financial corporations to evaluate the societal implications of their digital transformation choices on their employees and customers.
I see the following three trends developing over the next five or so years:
Trend 8: Mainstream 5G adoption
The proliferation of 5G cellular networks will change the financial services industry through increased speeds and system capacity, higher data rates, and reduced latency. 5G will force banks to reevaluate their LAN and WAN infrastructure plans at both branch and data center levels, with some organizations pursuing the opportunity to play at both consumer and network-provider roles.
Trend 9: Blockchain will enable universal (self-sovereign) identity
Blockchain use cases within the financial services industry will expand beyond inter-banking applications (e.g., capital market settlements and international payments) to begin addressing the holy grail issue of “universal identity.” Blockchains run by banks may ultimately enable a self-sovereign identity model with KYC/AML attributes that is PSD2 and GDPR compliant.
Trend 10: Quantum computing will change the game
Advances in quantum computing will lead to more accurate predictions in fields like algorithmic trading, public health, meteorology and more. In the short term, we’ll likely see investments in quantum-resistant cryptography to better protect from enhanced brute-force cybersecurity attacks as well as the development of quantum-enabled algorithms. Early availability of quantum computing on public could also significantly accelerate cloud adoption.