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Time for banks to rethink approaches to innovation, urges fintech

Felix Grevy, Global Head of Product Management, at Finastra

It is time for banks to reassess their approach to innovation, basing their thinking around collaboration and cloud-based platforms, if they are to remain successful, a leading fintech exec has claimed.

“Banks are facing four key challenges today – reducing costs, managing risk, boosting revenue and enhancing customer experience,” said Felix Grevy, Global Head of Product Management, at Finastra. “These factors are all driving changes in banking strategy. People expect financial institutions to be more agile and more innovative than ever before. It is this demand from customers that banks have to tackle head on to remain competitive. At the same time, Open Banking is pushing innovation to the top of the agenda, as new entrants and challengers step on to the scene. Banks have to adapt and that’s why the model for bank innovation is changing.”

The pressure to innovate is driven, said Grevy, by a world increasingly dominated by the likes of Google, Apple, Facebook and Amazon: “Consumers demand convenience in all aspects of their lives, so the imperative to innovate has never been so pressing,” he added. “Unfortunately for banks, innovation cycles are severely impeded by cumbersome legacy systems, from which new services and applications must be created. It’s not as simple as just ripping and replacing these systems, as any new applications must communicate with them. But if banks are to remain competitive, a new approach must be sought.”

Some banks, he pointed out, are recognising the value of cloud-based platforms in helping to open up proprietary systems to communities of collaborators who can create value for customers: “It’s important to ensure a smooth transition, a big bang approach is too disruptive,” he concluded. “This is why we support hybrid connectivity in, allowing banks to connect to on-premise core systems.”

Historically, said Grevy, developing new applications to sit on top of legacy systems involved working with new file formats, programming languages and standards: “The consequence of these incremental additions is that many banks now find themselves with an intricate framework of isolated and undocumented solutions that require constant maintenance to ensure mission-critical systems are always on – at great expense,” he pointed out. “Great care must be taken when creating new applications, as a day’s outage could cost billions of dollars and cause significant reputational damage, yet banks must not sacrifice innovation for stability. This is why collaborating with smaller, more agile technology providers such as fintechs – who do not have to contend with the problems of legacy – is an effective way to achieve faster innovation cycles, leveraging the stability of core, cleanly integrated and isolated open APIs. This gives banks the opportunity to gradually evolve their systems over time – rather than risking outages with a total systems revolution – while delivering new products and services that improve the customer experience and meet the innovation challenge head on.”

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