Regulation still bankers’ top concern for 2017

A survey of more than 200 senior-level, global financial services business and IT decision-makers across the US, UK and Europe found 38% of respondents placed regulation as their top priority for 2017, reports Synechron.

The digital, business consulting and technology services provider, has released its predictions of top financial services trends for 2017, supported by survey data from TABB Group.

After regulation, survey respondents cited data management (14.4%), systems integration (10.6%), artificial intelligence (AI) (9.7%) and IT business transformation (8.3%). “These results clearly show that while digital innovation remains a long-term priority over the next five years, businesses need these programs to achieve pragmatic results for them in 2017,” commented Synechron.

“While digital innovation is at the heart of our business, financial services firms need immediate solutions to the problems they are facing today,” said Faisal Husain, co-founder and chief executive officer (CEO) of Synechron. “Regulation, cost-pressure and out-dated technology systems and operations are part of almost every client conversation, so it is no surprise these items toped their 2017 priorities list.

“Europe’s Markets in Financial Instruments Directive (MiFID II), Dodd Frank, Basel II and the Fundamental Review of Trading Book (FRTB) are all driving data and IT changes within organisations and have paved the way for firms to reimagine their business architectures and embrace established techniques in artificial intelligence (AI), systems integration best practices and design thinking. 2017 will be a year where technology is asked to offer tangible business value at an enterprise level.”

Synechron has also outlined its predictions on top 10 trends and priorities to expect in 2017:

1. Regulatory reigns supreme:

With 38% of firms citing regulation as their top priority for 2017 and data management second at 14.4%, expect data-driven regulations to be a hot-button topic over the next year. This includes regulations like MiFID II and Dodd-Frank which topped the list at 42.6% and 29.6% respectively but also others like the US Department of Labor (DOL) Fiduciary Rule and Basel III which 15.3% of respondents said they’d be focused on over the next year. Regulatory uncertainty related to technology Innovations like blockchain and AI are also a top concern (29.2%).

2. Uncertainty remains:

Regulations related to technology Innovations like blockchain and AI are also a top concern (29.2%) according to the survey; however, in this case, it is the uncertainty of future regulations that could be prompting inaction or staving off innovation. Global events like Brexit, the results of the US election, the threat of Frexit and more, have also created an environment of regulatory uncertainty that will prompt more steering committees in 2017 to assess options and develop plans that can be quickly enacted at the trigger moment.

3. Data management and the chief data officer (CDO):

With 14.4% of respondents focused on enhancing their data management initiatives, expect the role of the CDO to continue to gain prominence within the business organisation. This will mean a louder voice in the boardroom and stronger authority across the organisation to drive forward initiatives and invest in technologies like AI and blockchain; 8.8% of firms have even designated blockchain initiatives to sit within their data function.

4. Systems integration:

The third-highest priority highlighted by survey respondents as a focus for 2017 was systems integration at 10.6% and there is growing interest in enhancing systems responsible for liquidity risk management, credit risk management, counterparty-risk and collateral management whereby nearshoring, smartshoring and offshoring can be employed along with an agile development methodology.

5. The year of the chatbot:

2017 will be the year of the ‘BOT’. In one chat, banks can do everything from help someone onboard and make an important financial decision, to apply for a mortgage, personal loan or process an insurance policy. By combining hands-on service with some element of automation – alert notifications and auto-dialers, for example – financial institutions can manage customer relationships easier and with a degree of personalisation. Expect to see a whole range of customer service and virtual assistant bots going live in 2017 to enhance banking, trading and insurance interactions.

6. Artificial intelligence and advanced machine learning:

With 9.7% of firms citing it as a top priority for 2017, AI has reached a critical tipping point and will be at the heart of a convergence of technologies including data science, the Internet of Things (IoT), optical character recognition (OCR), natural language programming (NLP) and blockchain.

In 2017 robotic process automation will become a key priority for bank executives looking to do more with less and unique combinations of AI techniques will power new applications. Throughout the year expect the industry to launch a range of hybrid robo-advisor services targeted at millennials and high-net-worths. Also expect that AI will continue to and increasingly be used to address one of the industry’s greatest concerns across the enterprise – cyber security.

7. The future of fintech:

2017 is also likely to see the fall of what were hoped to be future fintech unicorns – as several significant fintech start-ups will have received more than three to four years of funding. If the market is not conducive to a healthy initial public offering (IPO), or results are not showing the massive potential once envisaged, the taps are likely to get turned off.

This trend will be no surprise given that most technology venture capital (VC) firms expect only one in 10 investments to pay-off, but it means that the fintech start-up scene, and associated hype cycle, may get a little dose of commercial reality and start to feel deflated in 2017.

8. Bank APIs and the Cloud:

As the Banking Financial Services and Insurance (BFSI) industry moves towards an environment that is fast and agile, runs in the cloud, and where customer acquisition is expected to be lightning fast, many firms will begin to launch their own app marketplaces through open application programming interface (API) programs in 2017.

Over the past 12 months there has been a consistent uptake in such platform solutions from leading organizations like Citi and BBVA, and pioneering leaders like Santander have established reliable business models for fintech banking borne out of open APIs. In 2017 open, unified solutions will continue to be launched by banks and insurers and make it possible to deliver new digital products and services, while still maintaining a multidimensional customer experience across all digital channels.

We are also seeing a rise of the usage of public cloud technologies in banking, with firms moving or considering moving risk and IT infrastructure to Google or Amazon. This indicates a major shift, after a gradual adoption of private cloud technologies and recent UK Financial Conduct Authority (FCA) guidance green-lighting cloud computing.

9. Design thinking:

Many financial institutions have embraced a mobile-first strategy or omni-channel strategy, placing mobile design as a critical component of their user experience (UX) and customer experience (CX) strategies. Design thinking, which has been around now for over a decade, is a design methodology that helps businesses understand their problem statements better by rooting them in end user research and using that research to influence a more impactful design solution.

As financial services organisations look to elevate their brands, communicate authenticity and engage with their customers, design thinking can deliver meaningful data to support those initiatives and is being considered by many as part of an integrated digital strategy.

10. More blockchain:

2017 will continue to be a year of blockchain experimentation, and while we are likely to see the rise and fall of some blockchain consortiums, one trend that will remain is the appetite for banks to work together and leverage blockchain accelerators to run proof of concepts or controlled pilot programs.

The biggest challenge facing the industry today is the scarcity of blockchain talent, not only from an application development perspective, but also from a domain expertise angle in which business use cases are validated and earmarked for blockchain transformation – making real development experience a unique asset.

In fact, when asked if their company currently has enough talent capable of implementing blockchain technology, the survey results found 39.3% of respondents answered ‘No, blockchain technology talent is still difficult to find’ and 31.3% said ‘No, we’re working with partners, vendors to supplement’, compared with 23.4% saying they would reallocate resources and 6.1% support training.

 

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