Technology Trends 2016

By Rajashekara V Maiya, AVP & Head – Infosys Finacle Product Strategy & Pre-sales

Puneet Chhahira, Global Marketing Lead – Infosys Finacle

Technology Trends 2016

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With technology changing constantly, it’s important that banks not just track but also adapt to what’s trending around the world.

In the coming year, banks need to keep their focus on technologies, some new and some evolutionary, that have the potential to redefine banking in 2016. We believe the five technologies that banks will have to watch out for in 2016 will be Blockchain, Internet of Everything, Cloud Services, Open Banking and Mobility & Wearables.


The financial services industry is all abuzz about the potential for Blockchain, the technology underlying Bitcoin, to transform the industry. To quote the Bank of England’s Chief Economist, Blockchain may offer an “imaginative solution to that distributed trust problem”.

Many Fintech startups are already running with the technology to create some unique solutions for the financial services industry: A smart contracts platform for syndicated loans (Symbiont); a decentralized clearing network for OTC derivatives (Clearmatics); a multi-asset multi-currency platform to simplify institutional payments (SETL); a DIY Blockchain and smart contracts platform (Eris Industries); a ledger that connects distributed ledgers (Ripple); a distributed ledger for the precious metals market (itBit’s Bankchain); and even a Blockchain-inspired challenger bank (Secco).

Even the incumbents are betting on the potential for this technology in banking. For instance, American Express made its first bitcoin move this year with an investment n Abra, a global remittance service built on Blockchain. Goldman Sachs has not only invested in bitcoin startup Circle Internet Financial but is also patenting its own cryptocurrency that simplifies securities trading and settlement. Meanwhile, Spanish Bank BBVA’s annual Fintech Open Talent competition featured 10 bitcoin and Blockchain startups in the finals this year.

Incidentally, BBVA is also backing the R3 initiative, an industry-wide coalition that currently includes over 40 of the world’s leading banks, to explore the use of Blockchain in mainstream banking. The consortium, led by Fintech firm R3, will focus on developing commercial Blockchain applications as well as defining consistent standards and protocols for this emerging technology.

So industry interest in integrating Blockchain technology is clearly building momentum and we expect some significant developments to emerge in the coming year. It is therefore clearly time for all banks to define a path to adoption for this transformational concept.

The Internet of Everything

The Internet of Everything (IoE) can potentially create an incremental economic value of up to $19 trillion within this decade. As everything from automobiles to refrigerators to kitchen containers become connected and smarter, banks have a huge opportunity to get closer to their customers’ lifestyles and financial needs. Banks need to ensure that they have the analytics infrastructure in place to take this huge deluge of data and turn it into hyper-personalized financial experiences. First movers in this space will also gain a reputational advantage of being seen as digital mavens by increasingly discerning digital consumers.

Thus far, the milk ordering refrigerator has become the de facto point of reference to discuss the possibilities of IoT-enabled banking. But some more tangible and immediate possibilities are emerging. For instance, progressive banks are already talking about a car banking concept that can turn the car into a wallet and create smartphone-free payment at gas stations and drive-thrus.

The IoT phenomenon has a lot of potential applications across the entire spectrum of banking services. Earlier this year, Santander InnoVentures, the Fintech innovation fund from the Santander Group, published a paper detailing multiple use cases that go beyond retail banking. One particularly significant example combines IoT data-capture devices with Blockchain’s smart contract functionality to streamline contractual processes.

For the banking industry, the IoE represents a disruptive opportunity that is as big if not bigger than the Internet revolution. But this time around, the pace of transformation will be much faster. Banks that tap in on the opportunity early, innovate quickly and consistently and create connected banking experiences will emerge as winners.

Banking on Cloud

There is this telling anecdote of how an e-commerce giant discovered that most of the banks in a particular market did not have the infrastructure to handle the estimated transaction volumes of a one-day only ‘Big Billion’ sale. Now it is hard to think of a provisioning strategy that could solve that problem without leveraging the potential of the cloud.

For banks, the key question when it comes to cloud adoption is not ‘why’ but ‘how’. Based on our experience with our financial services partners, we believe that banks should follow a simple three-step strategy to transition smoothly into a cloud-first model. The first step is to shift non-critical environments, like development and testing, to the cloud. This should be followed by a focus on leveraging cloud techniques to optimize infrastructure investments and performance. The third step is to move the production environment to the cloud and take a cloud-first approach to all future technology sourcing decisions.

In our view, banks betting on digital leadership should at least have progressed to the second phase of this three-step program. There already are some early examples of cloud-first banking. Robeco Direct N.V., a Dutch bank, has moved its retail banking platform to the cloud following the country’s banking regulator authorizing the use of Amazon Web Services. Bankinter, a leading Spanish bank, is using the cloud to run credit risks simulation. In fact, it has been able to do these simulations now in just 20 min instead of 23 hours it took earlier.

Banks need to view the cloud as a business model rather than a technology and evaluate its utility based on the value it delivers to all stakeholders. Granted, there are still some security concerns and regulatory gray areas that need to be addressed. But a coherent cloud strategy will be a critical component of any successful digital banking strategy.

Open Banking

Earlier this year, a European Union Council passed the revised Payment Services Directive (PSD2) that mandates the opening up of banks’ payment APIs. In India, the national payments council has introduced unified payments interface APIs wherein anyone can initiate a payment transaction and create unique payments experiences.

The UK government is also currently working with banks and Fintech to define a framework for an open API standard ecosystem that will make it easier for Fintechs to build apps for any bank’s customers.

We believe that open banking, a connected ecosystem of financial and non-financial services, is the future of digital banking. Now whether that happens by initiatives taken by banks, fin tech completion or regulatory mandate remains to be seen. But open banking technologies are certainly set to transform the business of banking. The fundamental promise of this model is to enhance the choice, utility and experience that customers derive from their banking service providers.

Open banking will be driven by – apps, app stores, and extended developer ecosystems which banks and other providers will build around their APIs. Banks stand to gain immensely from this model. As more and more third-party services integrate with their Open Banking ecosystem, banks will gain access to even more data that they can channel back to fine tune and personalize their customer experience. An API-centric approach also enables banks to seamlessly connect with innovative services that leverage emerging technologies like wearables or IoT. The ability to add value-added services and expand into new niches will create new revenue and growth opportunities for banks. It also makes it easier for them to address niche markets more cost-efficiently.

Mobility and Wearables

The mobile phone continues to evolve rapidly in terms of functionality, processing power and embedded services. This means that the goalposts for mobile-first banking are constantly being moved. Then, of course, there are wearables, tipped to become the second-largest selling consumer electronics product, behind smartphones, by 2020.

Digital banking strategies cannot remain static when the market for consumer digital devices is expanding rapidly in terms of profile and functionality. Banking strategies will have to be continuously reworked to accommodate these shifts. For instance, when the focus of digital banking shifted from the web to the mobile device, banking strategies had to account for some of the native functionalities of mobile devices like geolocation and camera. Now with the addition of wearables to the mix, banks will have to reimagine service delivery both in terms of the functionalities of the touchpoints as well as the consequent evolution of customer preferences.

Even within the smartphones category, the possibilities are continuously evolving. Take, for instance, the new Force Touch technology in the latest iPhones. Is there an opportunity to leverage it to enhance the app experience for mobile banking customers? Or do customers even want banking apps anymore? After all, Siri gets over 1 billion requests a week. How many of those users are hoping to upgrade from an app-based to a voice-based mobile banking experience?

The point is that technology is moving faster than ever before. Consumers are adopting new digital technologies more readily than ever before. This means that digital banking strategies will have to run even to stand still.

In Conclusion

We believe that 2016 will be the year that the focus within the global financial services industry shifts from digitizing banking functions to building a truly digital banking model. It is a model where all structures, systems and strategies stem from the needs and expectations of the customer at its center. The coming year will also see the bar for banking innovation being raised higher thanks to the new possibilities presented by technology concepts like Blockchain or IoE and the relentless competitive pressure being applied by Fintech startups. Most importantly, we believe that 2016 will be the year that the industry takes its first definitive step towards an open and collaborative banking model. The future of banking, we believe, lies in being truly digital.