Banks need to unlock innovation faster

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Industrial cloud solutions are essential for balancing security and compliance with modernization.

By Jack Keddie, IBM Cloud Manager

The COVID-19 pandemic has taken the digital transformation of the Australian banking sector to a new level.

For many financial institutions across the country, the pandemic has accelerated their journey to more agile and digitized ways of operating, in line with the demands of tech-savvy, digital-first consumers, who are transacting more online than ever before.

Digitizing Australia’s financial sector is big business – spending on big data and analytics technologies reached $5.5 billion in Australia and New Zealand in 2022, with the banking sector investing the most of any sector in nationally (17.8%) in technology services, software and hardware .[1]

But there is a problem: to reconcile innovation and regulation.

To become as agile as they want (and as their customers expect), Australian banks need to partner with technology companies – from fintech start-ups to cloud providers – to adopt the required innovations and implement exponential new technologies.

There is a large ecosystem of ISVs, SaaS providers and fintechs willing to do business with Australian banks to accelerate their transition to the cloud, help them innovate and bring new products to market quickly.

However, for this to happen, the products and services of these vendors must be compliant and adhere to the same strict security and privacy regulations that banks must adhere to.

Traditionally, this collaborative process has been long, often taking years to finalize, particularly in light of increased regulatory scrutiny of the Australian financial sector since 2018.

As a result, banks have fallen behind, unable to take advantage of the boom in innovation around them. Unsurprisingly, Australian financial institutions are making it a priority to remove barriers to working with technology vendors, especially as this continues to stifle innovation and their ability to bring new products and services to market faster.

Eliminate bottlenecks while maintaining compliance

The innovation bottleneck is contributing to the trend of custom-designed technology solutions that address the complex security and compliance needs of the Australian financial services industry.

If technology providers have already been vetted and admitted to a platform that meets relevant regulatory and security requirements, then banks can onboard these providers in days or weeks, compared to historical months or years.

Industry solutions, such as IBM Cloud for Financial Services, already provide this capability to some of the world’s largest banks, connecting them to a growing ecosystem of more than 130 technology and fintech partners to securely accelerate their digital transformation.

Staying ahead of cloud regulation in banking

The biggest hurdle for banks in adopting cloud technology has been concerns about data security and compliance.

In fact, 52% of IT leaders in the financial services industry believe it is too difficult to ensure compliance in the cloud and a third cite regulatory compliance issues as a major obstacle to integrating workloads into private and public computing environments, according to a recent IBM study.[2].

To avoid vendor lock-in and to meet regulators’ requirements, banks should include a cloud platform in their hybrid multi-cloud model that supports seamless interoperability between vendors, 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 IBM Cloud, allowing each customer to create a workload and then move it to another public cloud or on-premises.

Cyber ​​resilience is also a priority for regulators as the financial services industry modernizes. In recent years, Australians have witnessed cyberattacks on a larger scale, exploiting third party and fourth party vulnerabilities and affecting organizations throughout the supply chain.

Building cybersecurity for banks relies on adhering to a common set of control standards, which can be attested (and monitored) in real time, providing enterprise-grade security and protection.

This solution provides a singular view of security threats, mitigating weak links in the chain and ultimately reducing risk to the entire ecosystem. It also allows all parties to innovate at pace, while keeping regulators happy.

To look forward

Over the past 12 to 18 months, Australian banks have had to accelerate their digital migration strategies, due to the pandemic, lockdowns and social distancing measures.

These changes are here to stay. In the coming years, the financial services industry can expect to see the continued acceleration of digital transformation. The country’s major banks have recognized this: they have embraced the value brought by technology providers because they can help them innovate and retain market share.

With large sums invested, the fintech revolution will continue and banks are happy to seize the opportunities. At the same time, regulators should step up their oversight of modern technologies such as cloud and artificial intelligence. The result?

Banks will need to find solutions to manage the increased complexities that this level of oversight will bring.

For Australian banks to take full advantage of the range of new opportunities available, it will be essential for them to select cloud service providers who can reassure all parties (including regulators) that interoperability, security and compliance are at the heart of their concerns. offerings.

The technologies that can provide these capabilities will become increasingly important as the speed of change accelerates and the obstacles it creates become more difficult to overcome.


[1] https://www.crn.com.au/news/government-initiatives-a-major-growth-driver-for-big-data-analytics-in-australia-idc-584914

[2]https://newsroom.ibm.com/2022-09-28-Global-Business-Leaders-Say-Hybrid-Cloud-is-Critical-to-Modernization,-Yet-Security,-Skills-and-Compliance-Concerns- prevent success

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