RPA and APIs spearheading bankers move away from legacy systems

WHEN bankers talk about digital transformation, the conversation often revolves around breaking-free from the shackles of legacy infrastructure.

The move is neither easy nor risk-free, but holding on to them is bound to prove detrimental in the long run as new-age digital banks wow customers and woo them away with exciting products delivered seamlessly.

In an interview with Tech Wire Asia, IDC Senior Research Manager Anuj Agrawal talks about the journey some of leading banks have embarked on and paints a picture of what their future might look like.

“Big banks are definitely progressing and putting efforts, resources, and money towards breaking silos that had been built over several decades, spanning multiple programming standards and technologies.

“The emergence of new technological capabilities such as Robotic Process Automation(RPA), Open Banking and APIs based partnership models have helped banks to break these silos at an accelerated pace.

According to the banker turned analyst, this transformation is a continuous process which will continue for at least three to four years till banks, especially, the large ones, disintegrate the silos they’ve built previously.

Agrawal sees tomorrow’s banks interacting with each other without meaningless friction by successfully building a large pool of APIs covering all internal and external processes.

Banks are getting bolder with tech use cases

When JP Morgan announced that it created a new digital coin (using blockchain technology) to facilitate payments, it made headlines in print and online.

However, the financial institution isn’t the first to launch a bold technology project, and it won’t be the last.

“In last few years, the banking industry has witnessed fundamental shifts in IT  with regards to how data is provided and used, how functionalities are developed and deployed to end users, and what level of control customers should have.”

Agrawal is spot on with his observation, of course.

Bankers, from HSBC to Standard Chartered to ANZ are beginning to use artificial intelligence in their anti-money laundering (AML) and know your client (KYC) efforts, experiment with blockchain for trade finance and cross-border payments, and use chatbots to connect customers with bankers.

We live in a whole new world now where technology is driving bankers close to customers and bridging the gap between front-end applications and back-end systems. That’s a great start.

IDC sees banks battling with legacy systems, but it also sees a massive shift where bankers are thinking about how existing IT architecture can be made ready to accommodate the changing requirements without losing control.

“This very need to change has caused banks to consider moving enterprise and business applications using new technologies such as blockchain, AI, and RPA as a way to future proof their technological capabilities.”

Invisible and frictionless — a recurring theme

Agrawal made a bold statement during the interview: “The future of banking will be both invisible and frictionless.”

The conversation that followed was similar to the one Tech Wire Asia had with Tune Protect Group’s Chief Digital & Marketing Officer (CDMO) Loh Ben Jern earlier this year who explained that the future of insurance needs to be invisible.

“Industry needs to be re-invented. The future of insurance is very much invisible. Going digital is the only option for insurers, and the vision for this future state of insurance is only possible if the industry learns to collect data and use technology efficiently and intelligently,” said Loh.

Diving back into banking, Agrawal explained that in the future, IDC believes consumers will not depend on banking platforms like mobile banking and internet banking or physical infrastructures such as branch and ATMs for transactions or any other banking activities.

Further, since banking will be real-time in the future, it is expected that it will be wrapped around activities without customers technically transacting as they do today.

Banks must focus on building in this invisibility, but Agrawal cautions that its impact is expected to be limited to the retail segment of the banking industry.

“The corporate segment will still need some hand-holding and physical infrastructure support for large and complex products such as structured or complex credit products.”

As per IDC’s estimate, worldwide financial services IT spending is expected to reach US$500 billion in 2021, with bankers contributing to 57 percent of the value of the forecast.

Bankers are definitely carving out budgets to make the transition to digital and the progress we see is only the tip of the iceberg. More interesting innovations and a more integrated future state are right around the corner.

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