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Financial institutions are riding the digital transformation wave.
In this new era, the financial services industry is looking to invest in innovative technologies that improve business processes and address changing consumer expectations. Financial institutions are also looking to engage reliable tech partners to help them with IT engagements.
To seize opportunities in this burgeoning market, large IT vendors are offering platforms on which fintech companies, independent software vendors (ISVs) and systems integrators can build new applications. The result is a still-developing channel ecosystem that aims to deliver IT solutions tailored to the financial services sector. These emerging financial services platforms are surfacing as financial institutions place their bets on such technologies as cloud computing, blockchain and artificial intelligence (AI).
"What we are seeing is a confluence of technologies," said Tom Eck, CTO at IBM's Industry Platforms unit. Eck said cloud computing has not only brought about economies of scale to financial institution's data centers, but it has also increased the pace of application development.
"Banking technology traditionally has been on quarterly release cycles, but now they've learned by seeing what's going on with fintech companies that have shortened the cycles of getting new products and updates out into the marketplace," Eck said. "Cloud has accelerated innovation because it's much quicker to get from a concept into production on cloud platforms."
By working with cloud technologies and agile software development methodologies, Fintechs are able to develop applications faster -- on the order of months rather than years, Eck said. He added that banks can do the same by utilizing these tools and techniques, but the difference is that many fintechs were "born on the cloud" and hence these practices are instinctual. Nevertheless, banks are learning to adapt to these technologies as well.
Beyond cloud, financial institutions are also drawn to the attractiveness of using blockchain technology to keep a shared digital ledger of transactions that maintain a growing list of records. In addition, AI's cognitive capabilities, which can augment the intelligence or capabilities of a financial advisor, for example, are driving banks, insurance companies, wealth management firms and other financial companies to embrace this technology.
As the competition to build the next generation of financial apps takes shape, the IBM Cloud for Financial Services platform was launched in March to give fintech companies, ISVs and others access to APIs, data and content to build, monetize, and speed up the pace of developing financial services apps.
"IBM Cloud for Financial Services is a platform for developers to rapidly build next-generation financial services products and, as a platform, the value increases as more functionality is added," Eck said.
He added that IBM has capabilities that were previously only available as monolithic, on-premises applications. Now, the new platform is enabling some pieces of the functionality of those systems through APIs.
One example Eck cites is taking pieces of IBM Algorithmics, a risk management offering and financial modeling platform, and making it accessible to a much broader range of application developers. He said IBM is focused on accelerating the value of the platform by building out its ecosystem of third-party partners.
"We have a marketplace where we are plugging in offerings from fintechs that want to start selling some of their capabilities through the marketplace," Eck said. "By offering one platform with an integrated marketplace, a developer can tap in just as easily to the offerings from IBM as they can to offerings from the third parties. We think it is critical to build out this ecosystem so that we can more rapidly bring and expose value from our platform."
ISV joins platform
Executives at Actiance Inc., an ISV based in Redwood City, Calif., said it joined the IBM Cloud for Financial Services platform to extend its software offerings and introduce its tools to global financial customers. Actiance provides products for communications compliance, archiving and analytics.
"We are trying to sell our products to the biggest global banks worldwide," said Barry Ruditsky, Actiance's senior vice president of business development, channels and alliances. "Having a partner like IBM that has the infrastructure, the resources, and the relationships with these customers -- not just in New York, but in London and Hong Kong -- can help us deploy our capability to these global banks. IBM helps us gain that scale," he added.
Specifically, Actiance has three products: The company's Vantage and Socialite offerings enable organizations to add compliance policies to unified communications, collaboration and social media communications. These products capture this content and send it to a third product, Alcatraz, a cloud-based content archive for electronic communications. Actiance will use the IBM's financial services platform to take advantage of its AI technology and worldwide infrastructure.
Part of the strategy, Ruditsky said, is developing apps that, for example, track trader-to-trader discussions or communications between wealth managers and their clients on Twitter, LinkedIn and other social media products. That communication tracking feature is important in a regulated sector like the financial industry. Furthermore, employees at financial companies are using various social media platforms to interact with younger clients.
Barry Ruditskysenior vice president of business development, channels and alliances, Actiance
To deepen their understanding of this burgeoning market, companies want a better handle on customer behavior and financial product preferences. As a result, financial institutions can benefit from using AI along with archiving tools to mine communications data, spot trends and gain insights in a predictive and cognitive manner throughout their value chain, Ruditsky said.
"Many financial institutions can't do that right now," Ruditsky said, noting that those organizations are stuck in traditional on-premises environments that prevent them from digging into the content. They are unable to search through content and access the detailed metadata that would help them adopt predictive or cognitive applications moving forward, he said.
"It's costing them a lot of money to stay on the status quo and they are looking for new platforms that reduce cost and open opportunities to adopt new, compelling types of applications," he said.
A financial services platform for blockchain
As the financial industry marches toward adopting blockchain technology, Red Hat Inc. has been moving in that direction as well. Last year the company announced the OpenShift Blockchain Initiative, which encourages fintech companies and ISVs to develop blockchain solutions on Red Hat's OpenShift Dedicated, a container application platform.
"ISVs in general are struggling with the idea of how they do containerized app development and how they handle on-premises, hybrid and public cloud deployments," said Rob Cardwell, Red Hat's vice president of strategic partnerships and alliances. "We believe our technologies help them solve a lot of those struggles with how to architect their systems to meet these various demands from their customer base."
Cardwell described the initiative as being set up to facilitate building blockchain solutions on OpenShift which, in general, can work in a variety of environments. Options for deployment include the customer's site, Red Hat's managed cloud, public clouds or a sandbox brought in by a partner. As fintechs and ISVs develop newer applications more quickly, part of what Red Hat offers is a platform that lets them develop, test and deploy software on the same underlying application architecture, he added.
Similarly, Red Hat believes its technology lets application developers manage transitions from an on-premises environment to a hybrid private-public cloud mix without having to change their approach or architecture.
"Moving from one environment to the next is one of the foundational elements toward being able to develop applications more quickly and can change the turnaround time, or the cycle time, for developing these apps from months to weeks to days," Cardwell said.
The ability to work in different environments is one reason BlockApps Inc., an ISV, became a Red Hat partner. The company recently deployed its BlockApps Strato, an Ethereum blockchain infrastructure, on OpenShift.
Victor Wong, CEO at BlockApps, said many customers that originally launched the BlockApps offering primarily on a public cloud noted that they wanted more flexibility as they moved to serve larger blockchain production systems.
"OpenShift gave us the ability to provide our customers that flexibility of deployment on public clouds, private cloud or any sort of hybrid cloud environment," Wong said.
Wong added that financial companies have been toying with the idea of implementing blockchain in recent years, but they are suddenly moving into more serious production-grade applications and that has been a driving force behind the partnerships between vendors and application developers. It's the main reason why BlockApp is partnering with Red Hat.
"Prior to this partnership there was a big question about how our company was going to manage to serve new blockchain infrastructure," Wong said. "The primary reason we decided to work with Red Hat is to show that blockchain is a real technology that enterprises can start to take seriously."
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