You’ve heard the cool IoT-stories about the fridge that automatically orders milk when you ran out of it. Or the coffee machine that places a request to the vendor for service after brewing 10.000 cups. Wonderful stories, but I still need to go out every now and then to collect some stuff at a supermarket. Today a lot of supermarkets already have RFID-systems: the customer scans the articles, collects them in a shopping cart and simply hands in the scanner at the pay counter. More advanced systems are already available, where the customer simply gets the shopping cart through a RFID-scanner at the exit and the amount is automatically deducted from his account. Off course, in that case the customer is known to the supermarket. Before the shopping starts, the customer is identified and the account verified.
Now, this is not an article about modern retail. It’s a story about how financial services have changed our lives. If there’s one market where digitalization really transformed the business, then it’s financial services. It’s not that long ago that you had to get paper slips to your bank to get money transferred from your account. Periodically the bank would send you an overview of your account, on paper, by old fashioned mail. No way that you could have a real time overview on your financial status. All that has changed in just a couple of years.
This is a story on how retailers could learn from financial services. Banks and other financial institutions are definitively leading the digital transformation. The next step is to almost literally stretch that transformation to other markets. Banks adopted new technology at an incredible speed. They had to, especially after the financial crisis where they lost millions of customers that started actively looking for alternatives for the traditional banks. These banks had no choice then to adopt new technologies and start developing these new digital services themselves. It really took off from 2010 onwards.
I do all my banking on my smart phone nowadays. Transferring money, checking savings, credit card expenses and even contactless payments in shops using a bank app that turns my Android-phone conveniently into a debit card. And obviously it doesn’t stop there. Financial services are really ahead in exploring emerging technology. No wonder that the major cloud technology providers are targeting financial services such as banks and capital markets.
To grasp the massive amount of solutions for financials, you only have to take a look at the global fintech landscape with digital solutions for lending, investments, personal finance, equity finance, remittances and payments. Most of these new technologies and solutions are about creating convenience. In short: lending, saving and paying without hassle. That way, banks also play a big role in transforming other businesses, such as retail. How are they able to do that? The answer lies in the cloud.
To satisfy the ever growing demands of customers, banks and other financial institutions need to stay ahead in development of new services. Back to the supermarket: I push my shopping cart through a RFID-scan so that it can scan my purchases, scan my fingerprint on the payment terminal and the amount due is deducted from my account. Even better: the moment I enter the supermarket, the shop ‘connects’ to my phone, using it as scanner for my purchases and to fulfill payment as soon as I leave the supermarket again. Naturally, the supermarket would like to verify my identity and check my credits.
These developments require huge investments where the financial companies are in the very heart. Logically, they search for solutions to speed up time to market, however against low costs. There are just a few buttons to push to influence development costs: staff, hardware, software, services. Staff is expensive, so companies try to automate as much as they can. Extra capacity in hardware may only be needed for a short period of time during the development, so investing in physical kit is probably not the best thing to do. Last, re-inventing the wheel is never a good idea, so companies pursue services that already exist and configure these to their needs. That is what cloud native development is all about.
Both AWS and Azure are jumping in, not only with pure (IaaS) capacity, but in creating real added value for financial institutions with services, in cooperation with third parties that use the resources of the leading cloud providers. The Azure portal provides banks and capital companies with pre-built cloud solutions such as Numerix FRTB for financial impact assessments, Icertis Contract Management and Veritouch, a pre-built CRM-solution for financial services. All accessible and deployable within instants.
Cloud providers such as Azure and AWS understand that seamless financial services is about controlling the financial chain, from (online) payment and requests for mortgages and lending to credit checks. Identification, verification, certification are key processes, so a lot of the pre-built solutions have a strong value proposition on security and compliancy. Makes sense, since security, privacy and trust are the main drivers for business and consumers to start using financial services from the cloud. When I take my shopping cart through the RFID-scanner and money is deducted from my account, I don’t want to worry if it’s safe. I rely on the fact that all these companies are compliant with standing regulations and that all measures have been undertaken to prevent fraud.
In 2016 Ohpen was one of the first all-cloud open banking platform. I like to paraphrase Chief Commercial Officer Angelique Schouten at the start of Ohpen: ,,A large bank typically invests 60 to 80 million of hardware. And 20 percent of the staff of financial institutions are IT professionals. By switching to the cloud, they can realize a 80 to 90 percent cost reduction. However: it is really like open heart surgery. All accounts, data and customers are transferred to the new system.” Today, Ohpen has some large financial institutions as their clients, such as Robeco, also a top tier-client of Fujitsu Netherlands.
I think that we have passed the days of ‘open heart surgery’ when we talk about financial services and the integration of digital financial services in other markets, especially retail. Time for the next step.
Did somebody just say Bitcoin?