Tomorrow's World: Five Technologies that will Change Banking
Banks are among the biggest spenders on technology. The amount of spend is a source of pride for some institutions, but it is the extent to which they are spenders on technology rather than investors in technology that we should bring into question. It is not uncommon for banks to spend upwards of 80 per cent of their IT budgets on the replacement of legacy systems and regulatory compliance. It can be a struggle in this environment to drive innovation and bring new services to market, especially for smaller institutions.
Can inherently risk averse institutions transform themselves into technology leaders that embrace the new and sever attachments to the old? Do we want that? To a degree I think we do, so developments in the following five areas could be worth watching closely.
SWIFTNet. The interbank communications network has just been upgraded to use Internet Protocols, a plumbing improvement that should enable the development of new real time/interactive services. But just as pre-DSL broadband slowed to a crawl between the exchange and the home, so the promise of SWIFTNet needs to overcome the barrier between the bank’s SWIFT Alliance Gateway and its banking applications, many of which are still batch processors. Interactivity needs to reach deeper into the heart of the banking system.
Web Services. Integration between disparate systems remains a stubbornly complex, time consuming task 10 years after the first vendor thought it would be a bright idea to use ‘plug and play’ and ‘seamless integration’ in the marketing brochure. Vendors stubbornly repeat these promises despite all evidence to the contrary – perhaps because their clients want to believe in them so much. The vendor and client are seamlessly integrated in a consensual delusion. Web Services are the latest attempt to solve the integration issue and who knows? They might just work.
Mobile Phones. The mobile phone is the payment instrument of the future. Banks only handed out plastic cards because they could be carried everywhere and stuck into machines. People now reach for their mobiles before reaching for their wallets. Looking at the Simpay initiative from Vodafone, T-Mobile and others or the FeliCa mobile wallet from NTT DoCoMo it is not hard to imagine a day when your mobile account becomes your bank account, or when banks start to issue mobiles in preference to thin plastic rectangles.
Open Source Development. Banks face a huge host of problems, some of which are particular to an individual bank but most of which are common issues across all institutions. If airlines operated in the same was as banks, they would all be building their own aircraft and trying to compete with each other that way. Proprietary solutions to common problems are not the way of the future. A community approach to applications development would support standardisation, which is what clients want, and reduce total cost of ownership, which is what bank shareholders want.
Unified Modelling Language (UML). No matter how development is undertaken – open source or otherwise – the biggest challenge in any IT project is the prosaic matter of requirements management. The yawning gap between what the business wants and what the project team thought the business wanted is all the more pressing now that so much development work is done offshore. Structured modelling techniques such as UML can bridge the divide – any business person wringing their hands at the latest project delay or cost overrun should get themselves on a course ASAP.
There are a number of new technologies that hold great promise – endless possibilities and opportunities. The extent to which banks can explore and exploit these opportunities will be given by the degree to which they can embrace common solutions for common problems. This will free up time wasted on the maintenance of proprietary legacy solutions and enable institutions to be earlier adopters of new technology.