Banks are laying the foundation for the digitisation of their businesses and anticipate emerging technologies — from IoT to biometric authentications and blockchain — to make a substantial imprint on the industry within five years.
This is among the findings of a VMware survey of banking professionals that explores how technology will shape the future of the banking industry.
Results of the survey made one thing clear: technology will drive banks’ next transformation. The question for financial institutions is no longer whether to invest in technology, but how fast they can invest. And, banks are already laying the groundwork for their digital transformation.
When respondents were asked to describe their bank’s core mission over a three- and five-year horizon, respondents described the bank’s top business focus as “integrating digital and physical channels” and “becoming a digital leader”, respectively.
Key survey results include that emerging technologies are taking centre stage:
* More than 50% of banks with $100-billion or more in assets expect to have commercial implementations of the following major categories of emerging technology: mobile apps, APIs/open banking, artificial intelligence (AI), augmented reality, biometric authentications and blockchain — in the next five years.
* 78% of respondents say that AI voice-based banking has the potential to be transformative in retail banking; about a third say AI voice-based banking could be transformative in commercial banking.
* 67% of respondents from banks with $100-billion of assets or more are currently implementing blockchain technology.
It also highlighted some implementation challenges:
* Integration of new technologies into existing platforms and upgrading legacy systems are banks’ top implementation challenges. In fact, 46% of respondents say legacy infrastructure has some impact on their institutions’ ability to launch new products.
* Of bankers who say legacy infrastructure has a high impact on their ability to launch new products about half of respondents say their institutions are currently engaged in data center modernisation (52%) and cloud computing projects (48%) to address the problem.
The survey delved into the impact of data centre modernisation and cloud computing deployments:
* 81% of respondents from banks with $100-billion of assets or more and 68 percent of respondents from banks with $15-billion to $100-billion of assets are currently implementing cloud computing technologies.
* Among banks currently considering, piloting, or implementing security upgrades, data center modernisation programs, cloud computing deployments, and fintech innovations, at least 73% expect the initiatives to have a moderate to high impact over the next 12 months.
* 82% expect the initiatives to have a moderate to high impact in five years.
VMware is actively participating in advancing blockchain technology — a distributed ledger that cryptographically store “blocks” of data — to provide secure, reliable and scalable blockchain platforms for a variety of customers in the financial services industry.
Banks, for example, are implementing blockchains to streamline back-end processing and reduce costs dramatically. In traditional banking, there are central authorities that verify the authenticity of transactions and maintain records of them. Not only does this consolidate power in those authorities, it leaves these sources of truth open to compromise.
With blockchain technology, transactions are recorded in a digital, distributed ledger and are verified by multiple decentralised parties. These multiple parties have copies of the ledger, making the blockchain data secure.
“Our research and development team has been hard at work advancing enterprise blockchain technology to solve some of the current problems around speed to finality, scalable fault-tolerance, and security,” says Michael DiPetrillo, senior director of blockchain technologies at VMware. “The work our research team has done over three years has produced a full blockchain environment with many industry firsts in the consensus, ledger and smart contracts layers.
“Unveiling this initial proof of concept is a huge step forward in our blockchain journey and one we are excited to share with our customers.
“It’s clear blockchain has the potential to disrupt many industries for the better, including every facet of the financial industry. We will continue to work with our customers and partners across industries to deliver solutions that help them address what’s needed not only for today but in the future as well.”