In this month’s In Profile, The Fintech Times spoke to Prakash Pattni, MD, FS Digital Transformation, EMEA, IBM, on digital transformation and the potential the technological revolution in finance has to improve people’s lives and make financial services more accessible, convenient and inclusive.
Tell me more about your company
IBM is a Hybrid Cloud and AI company and we bring together our expertise in technology and consulting to help solve our clients’ – and the world’s – toughest problems. From using the power of AI to accelerate discovery of sustainable new materials and helping banks modernise, to protecting organisations from the latest cyber-threats and preparing for the Quantum era, IBM tackles the really complex problems that have a big impact on business and society.
What problems are you trying to solve?
The main purpose of my role is working with our financial services clients across EMEA to help them be successful in their digital transformations so they can achieve their business goals. A big part of this is supporting banks as they adopt cloud technology, which provides the foundational layer for the kind of agile, digital business model many financial institutions are moving towards.
What is the need for digital transformation in financial services?
We live in a digital-first world becoming dominated by digital natives. If I’m used to paying bills, ordering food, and booking concert tickets in a couple of clicks, it feels very inconvenient if I can’t manage my finances in the same way. People want seamless, personalised services from their banks while feeling satisfied that their personal data and money is secure. A new breed of digital-native banks has been responding to this need for years, and traditional banks are under pressure to keep up and provide the kind of experiences customers demand today. In fact, a recent survey we did with Censuswide in the UK found that 71% of financial services firms view digital challengers as a threat.
But to be able to deliver the experiences digitally-savvy customers now want, banks must seize market opportunities and get new products and services out much faster that are secure to the core. The more personalised those offerings are the better. This capability requires banks to become digital businesses, built on hybrid cloud and AI to open up opportunities for innovation.
What are the biggest barriers to digital transformation for companies?
According to our recent survey, 45% of IT professionals and decision-makers in highly regulated industries, including financial services, view regulation and compliance as their biggest barriers to digital transformation, followed closely by data security concerns (40%).
Interestingly though, they were also viewed as the biggest drivers of transformation, presumably because if business can overcome these challenges, there is huge potential to unleash innovation and growth while meeting compliance and security needs.
How can companies use AI to modernise their businesses?
AI plays an essential role in helping businesses to modernise – from enabling automated, digital customer services to fraud detection and prevention. But the quality of the insights AI can provide depends on the quality of the data being fed into it. Before companies can really harness the power of AI to gain a competitive advantage, they first have to make sure their data is accessible, of suitable quality, and at the right level of detail to address a given business problem.
Our UK study suggests that financial services businesses are doubling down on this, with nearly half (46%) of respondents saying that investing in data analytics and AI is their primary focus for modernising their business.
What are some of the use cases of AI in financial services?
We are seeing AI become a key differentiator for why customers choose a bank in our increasingly digital age. From a user experience standpoint, AI enables banks make their services more personalised and convenient for customers – many of whom do all of their banking digitally. For example, conversational AI technology enables virtual banking assistants like NatWest’s Cora to deliver brilliant digital services for customers that offer immediate solutions and assurance. Customers get the benefit of instant, intuitive solutions to their needs, but still have the option to speak to a human if needed.
AI also plays a key role in financial fraud detection and prevention. Last year, IBM unveiled a new chip for mainframes that can allow banks – for the first time – to detect and stop fraudulent financial transactions before they even happen, thanks to a unique AI capability.
What are the challenges involved with this?
A big challenge for all organisations is being able to use AI effectively, whether it’s a bank or an NGO, having the right data architecture and capabilities in place to start with. IBM research shows 90% of business leaders view AI as a priority, yet only 15% of organisations are unlocking the value they need from their data. Often, this is because their data exists in disconnected silos and hasn’t been organised effectively.
Adopting a data fabric architecture is the key to solving this problem. It seamlessly connects all data sources and makes them accessible to everyone in the organisation, helping businesses to arm their employees with the right data, exactly when they need it, while making sure it’s also compliant and secure.
What are the advantages of utilising cloud technology within financial services?
Over 40% of UK financial services professionals view evolving to an API and digital platform-based business model as a priority for modernising in the next five years, according to our survey. This reflects the conversations we’re having with our clients and the trend we’re seeing in the market. It’s impossible to achieve such a digital business model without cloud technology, which is the very foundation it’s built on.
But when we talk about cloud we’re really talking about a hybrid, multi-cloud approach, where a company has the option of using cloud platforms from multiple providers and a mix of public and private cloud environments. This is the reality for banks today and indeed most organisations. An important benefit of a hybrid, multi-cloud model is that it creates a unified IT architecture, which allows banks to securely move data and IT workloads to where they’re needed. For example, some data may have to remain on-premises to meet regulatory requirements, while other applications – such as a mobile banking app – need to be hosted on a public cloud to operate effectively.
How can cloud help reduce risk?
The UK banking regulator is looking at increasing its oversight of cloud use in the sector. A key concern is a potential risk that arises when there’s a lack of interoperability between the different cloud platforms.
To avoid vendor lock-in and address the regulator’s concern, it’s important for banks to adopt a hybrid, multi-cloud approach that supports seamless interoperability across different providers, as well as private and public cloud environments. This is possible with open-source solutions such as Red Hat OpenShift, which uses container technology on the IBM Cloud, allowing clients to create a workload once and move it to any other public or on-premises cloud.
Cyber resilience is also a priority for regulators as the financial services sector modernises. In recent years, we have seen more large-scale cyberattacks exploiting vulnerabilities in third and fourth parties in an organisation’s supply chain. But what if the vendors in a bank’s supply chain adhered to a common set of control standards, that could be evidenced against and monitored in real-time, delivering enterprise grade security and protection? Such a solution would offer a singular view of security threats, mitigating any weak links in the chain. This is the capability IBM introduced when we launched the IBM Cloud for Financial Services in 2019 with the aim of reducing risk for the entire industry ecosystem and allowing all parties to innovate at pace while keeping the regulators satisfied.
What are your thoughts on the future?
There has never been a more exciting time for the financial services sector. Exponential technologies like hybrid cloud, AI and soon Quantum computing, are opening up a world of new opportunities for banks and fintechs alike to innovate and grow.
One of the most exciting things about the technological revolution in finance is the potential to improve people’s lives – and make financial services more accessible, convenient and inclusive.
I can’t wait to see how much things have changed by this time next year!