2017 was an eventful year for technology. Who would have guessed that bitcoin would surpass all expectations and increase in value by 1,600% within a year?
While I am more than happy to leave others to speculate on the merits of bitcoin as an investment currency, I wanted to share my insight on two significant technology trends that will be shaping the CIO agenda for 2018 – Digital Reality and Powering AI.
In this post I will be covering Digital Reality.
2018 will become a significant year for profound digital transformation. Building on the initial success to transform the end user experience (UX), banks will start to digitise their middle and back office by incorporating new technology, such as AI and cognitive learning, to become faster, smarter and highly cost effective.
According to IDC, 20 percent of US bank technology budgets is spent on digital transformation. This is expected to grow to nearer 40 per cent in 2020, implying a significant increase in digital transformation expenditure over the coming four years.
Faced with declining revenues and increasing compliance costs, banks will be looking to adopt new utility based service models to drive down costs and increase efficiency. The new industry utilities will allow banks to migrate labour intensive control functions to a trusted third party. Key areas of focus include middle and back office control functions such as customer onboarding, anti-money laundering and trade surveillance.
The new financial utilities will be a key growth area for new RegTech firms who will look to disrupt the market with new innovative solutions, potentially partnering with legacy incumbents to gain market share.
In parallel, the open sourcing of banking will become a reality in 2018. As part of the EU Payments Service Directive 2 (PSD2) and the UK Open Banking legislation, banks will be required to provide third-party providers with access to their customers’ accounts through open APIs (application program interface). These new APIs will enable third-parties to build financial services, such as account aggregators, on top of banks’ data and infrastructure, potentially disintermediating the bank from the end customer.
Key to the success for Digital Reality is Powering AI which I will discuss in my next post.