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FinTech
Innovation
Model 2015
Technologies for the future
Page 3Technologies for the future
Welcome Contents
Three things are clear. Firstly, financial services
firms hear the hype about new technologies, such
as cloud and big data, but they do not necessarily
understand their maturity or their relevance to
banking. Of equal importance, FSIs recognise that
technology will be critical to meeting business goals
such as efficiency and customer satisfaction, but are
not always aware of which technology is available
at the leading edge. Finally, innovative business
models are emerging that have the potential to
reshape the financial services market, but they are
not commonly understood.
This creates a real dilemma. Should FSIs societies
push hard to be at the leading edge, or leapfrog
by applying technology that is currently in research
and development, or play it safe and risk being
overly cautious?
HPE has created the FinTech Innovation Model
specifically to help FSIs navigate this challenge.
The HPE FinTech Innovation Model outlines, in
clear terms, the extent to which different
technologies have been adopted by FSIs.
“Innovative business models are emerging that
have the potential to reshape the financial services
market, but they are not commonly understood.”
Financial Services Institutions (FSIs) know that harnessing
technology will be critical to meeting their challenges.
But deciding where and how to invest can be a daunting
task, given tight budgets and resources. A new model
guides financial services businesses, step by step, through
this challenge.
David Rimmer
Director
Financial Services
Andrew Dare
Financial Services
CTO
It outlines the opportunities presented by four
global technology megatrends: mobility, big data,
security and cloud computing. The model also looks
through a business lens examining the technology
that can bring innovation in the key business areas
of customer interaction, internal operations and
payments. Furthermore, it examines the impact of
new business models.
The model is drawn from the perspective of
financial services practitioners within HPE, the
second largest provider of IT services to the
global financial services industry. Moreover, since
HPE spends $3.45 billion a year on research and
development there is in-depth understanding of
technology coming down the line.
With an increasingly competitive market and the
high expectation of customers, now is the time to
determine how to grasp the opportunities presented
by new technology.
10
Customer interation
12
Internal operations
04
Overview
07
New business models
14
Payments
16
Cloud
18
Security
20
Big data
Mobile
22 24
Conclusion
Page 5Technologies for the future
Technology for a
competitive edge
The Hewlett Packard Enterprise FinTech
Innovation Model enables financial services
institutions to gauge where they stand in
the market versus their competitors and to
plan their adoption of new technologies.
There is an alarming lack of literature explaining
how technology can be applied specifically to retail
financial services. Reports from technology vendors
focus on buzzwords and marketing ideas, rather
than specific business applications. In turn, much
advice that FSIs receive is generic, failing to answer
questions on what the state of the art is or how to
apply technology to the specific challenges of
financial services.
The Hewlett Packard Enterprise FinTech Innovation
Model will change this. It ensures businesses have a
clear understanding of the technology available to
them and of how widely adopted these systems are.
As a result FSIs can see where they need to be
if they want to be ahead of their competitors.
Likewise, they can assess whether technology is
ripe for adoption given their risk appetite.
Here’s how the model works: it looks at each of the
major technology trends (cloud, mobility, big data
and security) and key business areas (customer
interaction, internal operations, payments and
business models). Within each of these areas, the
model explains which technology is available and
how mature it is.
The technology innovation lifecycle
In today’s technology-driven world, it is vital
for businesses to shape strategy through an
understanding of what is possible. Traditionally,
IT strategy starts with a business objective and
then asks which technology is available to
implement it. This approach is still essential but it
needs to be tempered by working backwards from
an understanding of technology and how it can
enable business opportunities.
Technology passes through a standard innovation
lifecycle from research and development to
deployment by leading edge organisations, then
the mainstream and ultimately those who are
behind the times. It undergoes three or more
years of research and development, including core
technology research and incubation in start-up
companies and technology labs, and only at this
point does a workable product exist for industry.
The focus in the model is on the leading edge
and early adopters, since this is the stage where
most FSIs are likely to be targeting technology
for incorporation in their strategy and plans.
At the leading edge, the most ambitious industries
– often retail, hospitality and travel – will implement
the technology. Following this, the cutting-edge
tier one banks and challengers will typically begin
to adopt it, followed by mid-tier, ambitious rivals.
Start-ups will also be in on the act, taking advantage
of their higher flexibility and risk appetite. But this
entire phase, which takes one to three years, tends
to see only around five per cent of the financial
services industry actually adopting the technology.
In the following two to five years, many more
ambitious banks will adopt the technology, raising
the level of adoption to a quarter of the financial
services industry. The two to five years after
that will see the level rise to half of FSIs and the
technology now considered mainstream.
Some FSIs would prefer to play it safe, and wait to
adopt technology in the mainstream phase, but it is
too late. Adoption at this point puts them into the
late adopters category, given the months or years
required for implementation once the decision is
made to invest.
“Hewlett Packard Enterprise
spends more than $3 billion
a year on research and
development.”
2+
YEARS
1-3
YEARS
2-5
YEARS
2-5
YEARS
5+
YEARS
• Idea inception
• Market research
• Feasibility investigation
• Core technology research
• Incubation in start-ups
/ IT labs
• Implemented in non-FSI
industry sectors (e.g. retail)
• Innovators in FSI Tier 1 and
Mid-Tier follow quickly
• Adopted by FSI challengers
and new entrants with no
legacy
• Ambitious FSIs who are quick
to follow
• Widespread adoption across
leading players in FSI market
• Catch up of rest of FSI market
to near universal adoption
Mapping innovation across the lifecycle
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY ADOPTERS
5%
LEADING
EDGE
Page 7Technologies for the future
Multiple new business models are beginning
to emerge in financial services, enabled by new
technology. These trends pose a fundamental threat
to existing players but also open up opportunities for
them. Understanding these trends is vital, in order to
avoid being left behind.
Ten to 15 years ago, FSIs operated a broadly
consistent business model that had prevailed for
many years: a standard set of products offered
through a branch network. This model started to
change with the emergence of telephone banking,
online banking, and increased intermediation from
aggregators and comparison sites made possible by
the internet. Nevertheless, these trends represented
change in distribution, as opposed to fundamental
innovation in products and services.
What we have seen in the past few years is the
emergence of completely new business models
that overturn the fundamentals of banking. In the
peer to peer (P2P) model, the role of the ‘bank’ is
no longer that of a deposit-taker, merely a broker.
Meanwhile, basic aspects of financial interest are
challenged by community banks, such as Germany's
Fidor, where more Facebook ‘likes’ translates into
lower interest rates; by credit unions where interest
is determined at year-end according to the amount
of profit; and by social investment vehicles where
the rate is not the most important factor. We have
also seen the entry of new players that have chosen
to dispense with offering a broad set of services in
favour of specialising in a single market area, such
as payments, savings or online-only banking. This
approach enables them to focus on more profitable
segments and avoid the cross-subsidies that
universal banks have made for many years.
All of these trends are underpinned by new
technology, such as cloud computing, social media,
mobility and big data. This is emphasised by the
fact that some of the most threatening new entrants
are actually technology businesses, such as Apple,
Amazon and Google.
There is also huge investment by the banks
in financial technology innovation. A report by
Accenture, called The Future of Fintech and
New business models: keeping
up with disruptive innovation
Technology innovation is enabling new models for
banking that are transforming the competitive landscape.
Banking, found that financial services investment
in technology, in the UK and Ireland, rose from £176
million in 2013 to £415 million a year later. London
is now the biggest global centre for financial
technology companies.
Cryptocurrencies and distributed ledgers
One of the largest changes is in cryptocurrencies,
such as Bitcoin and Ripple, which are transforming
payments. At this year’s Sibos event in New York,
where 7,000 delegates come together to discuss
innovation in banking, a whole day of the agenda
was given over to cryptocurrencies with the focus
on when and how the change will take place,
rather than if it will.
Governments are taking an active interest. The US
Federal Reserve is looking into a government-backed
digital currency, the FedCoin, and the UK chancellor,
George Osborne, has announced a review of the
potential of virtual and digital currencies.
However, the implications are huge. Banks have been
accustomed to playing a central role in payments,
but customers see the appeal of putting the power
in their own hands. This is not the only threat: the
principle of the distributed ledger, where there is no
central registry, can be applied to other assets, such
as property, stocks and shares, bonds and beyond.
However, the most fundamental innovation will come
when cryptocurrencies are used not to replace
today’s money, but to deliver completely different
business models.
P2P lending and crowd funding are an additional
threat. The interest rates offered by P2P players
represent a challenge to FSIs offering traditional
savings products, as is the speed with which this
sector is gaining acceptance. The UK government
is currently consulting on the introduction of P2P
lending within ISAs, at which point P2P will have
moved from early adoption to mainstream, and the
government-backed British Business Bank already
lends through Funding Circle, a crowd-funder.
Equally important are non-traditional businesses
providing banking services. Payments (see dedicated
section of this report on pages 14 and 15) are a point
“By using the HPE FinTech Innovation Model, FSIs can decide
their appetite for risk and innovation, and act on it.”
“Cryptocurrencies, such as
Bitcoin and Ripple, are
transforming payments.”
Take a step forward
By using the HPE FinTech Innovation Model, FSIs
can decide their appetite for risk and innovation,
and act on it. In some instances, firms may choose to
adopt an across-the-board policy with respect
to risk, only choosing to adopt mainstream
technology, for instance. In other cases, FSIs may
decide that innovation is critical in a specific
technology or business area, and adopt technology
that is less mature but enables them to gain a
march on competitors.
It is our hope that with this model, you will be able to
discern where your company is placed, and how you
can use technology to make a tangible advance. As
the global economy continues to recover after the
2008 crisis, competition remains tight, and FSIs need
to plan innovation carefully. We urge you to consider
the best steps you can take, and to discuss with us
wherever you would like to see improvement – we will
walk you through real, actionable steps. The potential
for success is enormous.
David Rimmer, Director Financial Services;
Andrew Dare Financial Services CTO;
Sue Charles, HPE Labs
Page 9Technologies for the future
• New types of community banks
• Increased intermediation, e.g.
aggregators and comparison sites
• Telephone-only banking
• Online banking
Definitions
Research and development
Shared-service provision of discrete
banking services often exploiting cloud
Banks consuming IT / business process
services for standard banking processes,
e.g. new account opening / IDV and account
log-in (e.g. via Facebook) using service-
orientated / cloud based models
Banks entering other sectors, e.g. retail
As opposed to new players entering banking;
banks entering other markets, exploiting assets
and capabilities such as client base, online
authentication and payment mechanisms
Dutch auction of products
Extension of Dutch Auction principles from
share purchase and elsewhere to retail financial
services
Distributed ledgers
Shared blockchain based registers of assets,
ability to apply to new assets classes in addition
to currency
Leading edge
Crypto/Digital currencies and
payment methods
Virtual currencies, such as Bitcoin and Ripple,
using distributed as opposed to centralised
ledgers
Unregulated ‘banks’ that are not
technically banks
Companies providing traditional banking
services that do not require regulation,
e.g.Ffrees
Services based on over-the-top technology
Exploitation of existing IT infrastructure to
create new services, e.g. Netflix or WhatsApp,
now used in FS
New types of community banks
Banks and savings institutions whose
customers form a community with a shared
identity or purpose, e.g. FIDOR
Early adopters
Non-traditional players
New players entering the market from other
sectors (IT, retail and telcos), e.g. Apple, Google
and SnapChat for P2P payments
P2P lending / crowdfunding
Lending money to unrelated “peers“or
investing, without going through a
traditional financial intermediary such as a bank
Monetisation of data
Banks making use of customer data for different
purposes, e.g. selling aggregated customer data
to 3rd parties
Online only banking / mobile mainly banking
New players without any branch, telephony
or postal services
Mainstream
New common bonds and investment
principles
Organisations with a purpose other than
pure financial return, e.g. credit unions
and social investment
Increased intermediation, e.g. aggregators
and comparison sites
Online intermediaries allowing product
comparison and facilitate customer acquisition
Late adopters
Telephone only banking
Telephone banking as the sole channel,
e.g. FirstDirect
Online only banking
Online banks without their own branches
that only use telephony for exceptions
of particular vulnerability for banks because they are
one of the major touch-points with customers and
are a historically significant revenue stream. Telecoms
firms providing these services and new entrants,
such as Simple, often work on ‘over the top’ models
in the USA, offering easy-to-use services that exploit
existing banking infrastructure and circumvent the
traditionally high barriers to entry. Google, Apple and
Snapchat are also becoming highly active.
Meanwhile, no-frills e-money companies like
Simple in the USA and UK-based Ffrees effectively
operate as unregulated ‘banks’, because they are
not technically banks. The different regulatory
environment within which they operate could give
them a competitive edge.
New business models also allow new entrants to
compete in traditional markets from a very much
lower cost base. In online-only / mobile-mainly
banking, IT costs will be less than ten per cent of
administration costs compared with the more than
15 per cent of the larger banks, and they will have
a comparable advantage in other operational costs
owing to automation.
A different type of threat to FSIs comes in the form
of community / social media banks. An example is
FIDOR, which currently operates in Germany but has
plans to extend to other countries including the UK,
and works as a community of users who log in on
Facebook and share financial advice. Fidor converts
its members from the community to banking
services, polls customers on acceptable interest rates
for new products and lowers interest rates when it
has more ‘likes’ on Facebook.
“New business models
also allow new entrants
to compete in traditional
markets from a very much
lower cost base.”
New business models
The change is driven by social factors, as people
identify themselves less by where they live (as with
a traditional local savings bank) and more by whom
they regard as like-minded people with similar values.
The appeal of the community model is strong.
Real opportunity
All of these models are threats to existing market
players, but they also highlight opportunities. Shared-
service provision of discrete banking services, often
exploiting the cloud, allows financial services firms to
dissect their processes and specialise.
Banks will be able to draw from leading edge IT
and business process services to save them having
to handle common processes, such as account
opening, identification and verification, and
account log-ins. Innovation in cloud service
integration and management provides the
mechanism to manage the integration of these
services with in-house capabilities.
There will also be opportunities for FSIs to tap new
revenue streams, by exploiting their assets to address
new markets. An example is monetisation of data, in
which banks commercialise anonymous information.
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Further afield, banks may start to go on the
offensive and enter new markets. Banks can
digitally authenticate customers, take and receive
payments, and they know a huge amount about
their customers’ spending and finances: an ideal
base to challenge segments of the retail, utilities, or
insurance sectors.
FSIs have to recognise the serious threats they
face. Asking the key questions around long-term
business strategy, by taking into account the
emergence of new business models, will enable
them to shape an effective long term plan of action.
It is essential for their future.
David Rimmer, Director Financial Services
• Shared-service provision
of discrete banking services often
exploiting cloud
(e.g. new account opening / IDV)
• Banks entering other sectors, e.g. retail
• Dutch auction of products
• Distributed ledgers / blockchain
• Crypto- / digital currencies
• Unregulated ‘banks’, not technically
banks
• Services based on over-
the-top technology
• Community / social media
based banks
• Non-traditional players providing
banking services, e.g. payments
• P2P lending / crowd-funding
• Monetisation of data
• Online-only banking /
mobile-mainly banking
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
Page 11Technologies for the future
• Self service deposit
machines
• Call centre using
operators and IVR
• Online banking
• Self service kiosks
• Real-time personalisation of
communication / offer
• Online personal financial management
• Dynamic online tools e.g. calculators
• Single customer view
The evolution of customer expectations is driving
huge changes in FSIs. Each generation increasingly
expects to interact with the technology they use at
home, so businesses need to integrate new channels
continuously. Advanced financial services businesses
are better placed to keep up with these expectations
and transform the customer experience. The
challenge for smaller FSIs is developing capabilities
at a low cost. For the larger companies, it will be vital
to decide which of the technologies at the RD and
leading edge stages they want to back.
Major opportunities exist in serving expectations for
seamless and intuitive interaction across channels.
Many FSIs already have worked on enabling
customers to self-serve through online banking and
interactive voice response, and even self-service
kiosks have moved to the mainstream. There are
dynamic online tools to select products and online
personal financial management and budgeting.
Likewise, real-time personalisation has now become
mainstream through tools, such as HP Inc.'s LiveSite.
A new experience
Early adopters are moving ahead with full online
application tracking and channel hopping. This
needs to be seamless so that if a customer does
not complete a mortgage or savings application, a
customer service representative can contact them to
pick up where the application was left and complete it.
Mobile technology is essential here (see also the
dedicated mobile section of this report on pages
22 and 23), as it enables services to be re-thought
through location tracking, speech recognition and
biometrics. Mobile has tremendous potential to
reduce financial exclusion since, according to the UK
telecoms regulator Ofcom’s Adults’ Media Use and
Attitudes Report 2014, 92% of adults own a mobile
phone whereas only 82% have access to the internet
at home. The point being that home broadband
adoption continues to be highly correlated to
education and household income.
As with putting services online, successfully
harnessing new channels, such as video, requires
re-engineered processes. For instance, should
mortgage advice provided via a video link work in
exactly the same way as face to face in a branch when
the customer and the advisor can share documents
online? But whereas online, FSIs are following broadly
comparable strategies, multiple branch formats,
enabled by technology, in the branch multiple branch
formats are emerging enabled by new technology
quickly. Just in the UK we are seeing the Virgin
Money lounge, MS pop-up branches and the fully
automated Barclays branch of the future.
Customer interaction: serving
customers with excellence
Advanced financial services businesses are investing in technology innovation
to keep up with expectations to transform the customer experience.
Definitions
Research and development
Internet of Things
Exploitation of data from bank machines,
customer devices, wearables, etc.
Advanced analysis of customer-related data
Tailored, dynamic, proactive analysis using wide
data sets
User interface research
Natural and intuitive interfaces to improve
mobile and other interactions
Personal cognitive assistants
Support for customer interactions using
context aware advice, e.g. to manage
personal finances
Activate now! (STP)
Account opening through a customer’s ability
simply to press a button, based on pre-cleared/
populated customer data
Leading edge
“Branch of the future”
Advanced branch technology for instant
services e.g. card issuance and account opening
Processes re-engineered to video
Rethinking of processes and customer journeys
specifically for video
MyBank for sharing information
Availability online of all customer documents,
interactions and data for re-use and
transparency
Multi-party case management
Workflow to manage complex transactions
between banks, customers and intermediaries,
e.g. mortgage applications
Early adopters
In-branch / online video calls with advisers
Video conferencing to meet with advisers
remotely
Online application tracking and channel
hopping
Ability to save partially completed applications
and to pick up WIP in different channels
More complex online transactions
Product switching, payment holidays,
over-payments, etc.
Personalised propositions
Ability for customers to build their own
products, and choose the economic terms,
e.g. Novagalicia´s Personalised Deposit
Multiple branch formats
Wide variety of branch formats, e.g. pop-up
branches, stores and lounges
Seamless multi-channel experience for
voice/digital
Social media, and customer choice of channels
with consistent customer experience
Mainstream
Self service kiosks
In-branch kiosks offering banking services and/
or access to online banking facilities
Real-time personalistion of
communication/offer
Dynamic content management using customer
analytics and campaign management tools
Online personal financial management
Online tools to assist the customer with
financial planning and budgeting
Dynamic online tools
Tools for customers to enter data and
receive tailored advice e.g. calculators
and product selectors
Single Customer View
Customer data aggregated from all / most
systems under a “single pane of glass”
Late adopters
Self service deposit machines
For cash and cheque deposits
Traditional call centre and self service
telephony using IVR
First generation call centres supported by
call centre staff and maybe IVR
Online banking
Until now, much of the technology to enhance
customer interaction has supported simple
transactions, with customers doing what amounts
to data entry. At the leading edge, this is changing.
Instead, FSIs can use technology to collaborate
with customers, sharing the information they hold
about a customer in an online repository containing
documents, call recordings and communication.
This has two impacts. Firstly, transparency increases
markedly and so, too, will customer trust. Secondly,
once information is shared online it is possible to
make more profound changes in customer interaction.
With multi-party case management a customer,
an intermediary and financial services institution
can securely exchange messages and documents,
allowing a process such as a mortgage application to
be completed quickly with much less rework.
In addition, straight through processing services
exploit data services to complete KYC, AML, fraud
and credit checks so that decisions can be made in
real time. The next step will be ‘activate now’, where
customers’ applications for products and services
are pre-cleared and all they need to do is to use
a digital signature to sign and accept the terms
and conditions.
Geolocation and the Internet of Things
In order to make the most of customer interaction,
banks need to understand the whole journey and
integrate every aspect, providing a depth and quality
of customer experience. It is equally vital that they
understand the future of technology development.
The Internet of Things, meaning web-connected
objects that interact with each other, is enabling a
new outlook: there is huge potential to deliver deep
customer relationships by taking contextual data
from these devices to provide more responsive and
tailored services. Within this, geolocation and artificial
intelligence allow businesses to know and predict the
desires of customers.
Advanced analysis of customer-related data
will increase the degree of tailored services
and personal cognitive assistants will automate
processes. Customers will be able to manage their
financial affairs by scheduling account sweeps,
balance reviews and payments. Understanding
these new trends, and taking advantage of systems
being used by the early adopters and leading
edge companies, will allow FSIs to transform how
they reach customers. By satisfying customer
expectations in this way, there is an opportunity to
deepen relationships and deliver success.
Glynn Roberts, Financial Services Industry
Practice
“The Internet of Things will enable a new outlook and a
huge potential to deliver deep customer relationships.”
Customer interaction
• Internet of Things
• Advanced analysis of customer-related
data
• User interface research
• Activate now! (STP)
• Personal cognitive assistants
• Branch of the future (instant card
issuance, full automation, e-queuing
and real-time personalisation)
• Processes re-engineered for video
• MyBank for information
• Multi-party case management
• In-branch / online video
calls with advisers
• Online application tracking and channel
hopping
• More complex online transactions
• Personalisation of propositions
• Multiple branch formats
• Seamless multi- channel
experience for voice and digital
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 13Technologies for the future
• Process modelling tools
• Workflow and document
management
• Agent assisted
automation
• Legacy core banking
systems
Internal operations: improving
innovation and efficiency
Operations in back offices of FSIs have been adopting the digitised route for
some time now. It is an evolutionary process rather than a revolutionary one.
Definitions
Research and development
Cognitive Computing
Systems that reason using machine learning
algorithms
Internet of Things
Massive growth in connected devices for
automation and personalisation
Integrated document lifecycle ecosystem
Solutions for online and physical content
comprising security, forensics, authentication
and workflows
Software-defined infrastructure
All infrastructure is defined via software for
better orchestration of processes
New human computer interfaces and
cognitive assistants
To support advice and decisions including
augmented reality
Leading edge
End-to-end digitisation and STP
Removal of physical documents, digitally
processing all data to automate processes
and decisions
Complex event processing
Using data from multiple sources within
operations in real time
Next gen. search, KM and analytics
Retrieval and analysis of virtually all
information, regardless of source or format
Cloud-based / shared banking platforms
Next generation core banking systems, often
shared and deployed from the cloud
Middle-office automation suites
A single platform linking all front-end channels
to back-office and 3rd party systems
Open APIs
Application programming interfaces based on
common standards, enabling 3rd parties to
develop services
Early adopters
Model-driven process automation
Generation of automated processes from
tool-based models
Rules engines for complex decisions
For example, for credit and fraud
Task automation (robotics)
Automatic population of data from one
application to another
Legal and eDiscovery
Search, audit and hold of all enterprise content
for legal, compliance and audit purposes
Closed-loop knowledge management
KM systems containing automated feedback
to improve advice and guidance
Enterprise content management
Integrated systems for accessing, storing
and searching content in multiple formats
Mainstream
Business process management
Discipline and IT to manage and optimise
processes
Records management
Systems to store and archive records in
accordance with regulatory and compliance
requirements
Core banking packages
Off-the-shelf banking packages
Service-oriented approaches
Development and re-use of common business
and IT services
First gen. knowledge management
Capture, cataloguing and making available
knowledge - supported by little automation
Late adopters
Process modelling tools
Process mapping, modelling and flowchart tools
Workflow and document management
Automatic routing of tasks and associated
documents to work queues
Agent assisted automation
Tools to support agents such as desktop
integration
Legacy core banking systems
FSIs have been digitising internal operations, in the
back and middle office, for many years. The work
is an evolutionary, not revolutionary, process, and
the objective is not just to drive down costs but to
enable the creation of new products and services
that depend on automation, for example, to enable
immediate account opening or loan decisions.
Complex processing and advanced automation
Most financial services firms have at least partially
implemented business process management, a single
view of the customer and first generation knowledge
management which have now become mainstream.
But deploying these technologies across all products
and processes is an immense task and huge
opportunities remain for automation to reduce cycle
times, exception handling and manual processing.
The key is dedicating a proportion of resources every
year and running short, self-funded projects using
Agile development for rapid payback. Often there
is no need to buy new technology: it’s more about
stitching existing systems together and turning on
unused functionality in software packages.
Early adopters are now taking advantage of model-
driven process automation, developing easily
intelligible business process models that can quickly
be converted into IT systems with minimal coding.
FSIs become much more agile as responses to
new regulations, for instance, can be implemented
through updating models instead of an extensive
recoding exercise. Similarly, rules engines for complex
decisions allow risk and compliance functions to
define and refine policies that are deployed in fully
automated operational processes.
Leading-edge businesses do this with complex event
processing, analysing huge datasets with sophisticated
algorithms to address compliance, risk and fraud
while helping automatically upsell and cross-sell to
customers. Essentially, they are able to apply end-
to-end digitisation and straight through processing
- something to which financial services firms have long
aspired. This has brought leading-edge organisations
to a tipping point where they can allow customers to
fully self-serve which opens up the potential to design
very different products and services.
Capabilities to manage unstructured information
have progressed enough for early adopters to have
widely deployed enterprise content management
systems. The leading edge now entails next-
generation search, knowledge management and
analytics. This enables FSIs to access virtually all of
their information, no matter where it resides, and
perform sophisticated analytics on technology such
as HPE’s HAVEn big data platform.
A further area for improving internal operations lies
at a more technical level through service-oriented
approaches and service integration that enable
re-use of standard processes, data and interfaces.
Service-oriented approaches can be considered
mainstream, but many companies have not applied
them right across their operations. They will be taken
a step further by the creation of open application
programming interfaces (APIs) based on common
standards, enabling third parties to develop their
own services, transforming business models and the
customer experience.
Task automation (robotics) is also gaining ground,
enabling clerical processes to be performed by a
software ‘robot’. Meanwhile, cloud-based banking
systems (see pages 16 and 17) offer a different
option, moving to a ‘green field’ that simplifies and
automates core banking; and integration technologies
such as France's StreamMind that enable processes
to be streamlined rapidly. An example is SEPAmail
which was delivered in partnership with HPE.
Future opportunity
As with all areas of their business, FSIs need to
understand the technology in development. One
of the key areas is cognitive computing, in which
machines can learn context and apply ‘reasoned’
actions within set parameters, in order to more
greatly automate business processes and real-time
decision-making.
Work is also proceeding on developing new human
computer interfaces, including better visualisation
and cognitive systems. In the design industry, HP
Inc.'s Sprout creative 3D workstation allows a new and
tangible way of working with a computer. No such
interface changes have been developed in the office
environment, and new technology such as smart
wearables and cognitive processing will play a major
role in changing this.
The Internet of Things is equally vital to the internal
operations of a financial services firm. Systems are
being developed to enable data from all types of
devices and systems to be streamed directly into
cognitive analytics engines, improving the speed of
decision-making and supporting better automation.
Taking advantage of the many strands of new data,
at greater volume, variety and velocity (see pages
20 and 21), enables an understanding of different
customers, what they are doing and what to sell
to them.
FSIs must keep working on improving their internal
operations in order to get the most from technology
and empower innovation. HPE has practical experts
who help companies to digitise operations, and drive
their business forward.
RalfFluegge, Financial Services Industry Practice
“Leading edge businesses use complex event processing,
analysing huge datasets to address compliance risk and
fraud in real time.”
Internal operations
• Cognitive computing for greater
automation
• Internet of Things
• Integrated document lifecycle
ecosystem
• Software-defined infrastructure
• New human computer interfaces,
visualisation and cognitive assistants
• End-to-end digitisation and STP
• Complex event processing
• Next gen. search, KM and analytics
• Cloud-based / shared banking platforms
• Middle-office automation suites
• Open API’s
• Model-driven process automation
• Rules engines for complex decisions
• Task automation (robotics)
• Legal and eDiscovery
• Closed-loop knowledge management
• Enterprise content management
• Business Process Management
• Records management
• Core banking packages
• Service-oriented approaches
• First gen. knowledge management
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 15Technologies for the future
• Non-traditional FS players
• Cognitive computing:
for security and payment
systems management
• Reduced or changing regulation
• Mobile activated ATM withdrawals
• Person2person payments (e.g. Paym)
• Contactless (Card) payments
• Mobile wallet (money, loyalty
and rewards)
• Mobile location in card payment
fraud rules
• Basic biometrics
• Carrier Billing
• Mobile Points of Sale
• Online/Banking app
initiated payments
• Faster payments
Payments: undergoing great
change after years of continuity
The management of payments is a well-established process
for FSIs, but the landscape is undergoing huge changes.
Definitions
Research and development
Reduced or changing regulation
Enabling new players to enter the marketplace
Cognitive computing
Use of machine/deep learning-based analysis
for security and payment systems management
Non-Traditional players
Emergence of new OTT players in market
evaluating how they can play in the eco-system,
e.g. SnapChat with P2P payments
Leading edge
Cloud Based non-card Payment
Emergence of alternative payment schemes,
non-card based, centred around mobile
(i.e. Zapp)
Crypto/Digital currencies
New payment methods based on emerging
and virtual technologies. Examples being
cryptocurrencies, such as Bitcoin and Ripple
Beacons
Devices typically located in retail establishments
emitting radio signals that alert mobile devices
to store offers and can enable online cloud
based payment from an online wallet
Online wallets
Launched by Visa and MasterCard to
facilitate payment on retail checkout pages.
Improved checkout experience on VBV/3D
secure a la Paypal
Contactless (Mobile NFC) Payments
Based around mobile wallet and payment
credentials stored on SIM or utilising Host
Card Emulation
Tokensisation
Utilisation of tokens as a replacement for PAN
numbers. Complimentary to HCE solutions
Early adopters
Mobile activated ATM withdrawals
Ability to generate a code through an app
which can be used to withdraw cash from ATM
without a card
Person2person payments (e.g. Paym,)
Ability to pay by transfer direct to account or by
mobile number linked to their current account
Mobile wallet
Money, loyalty and rewards
Contactless Card Payments
Tap card at POS to pay
Mobile location in card fraud rules
Geo-location built in to fraud evaluation rules,
in particular in relation to overseas transaction
Basic biometrics
Mainstream
Carrier Billing
Use of mobile bill to pay for goods and services
through simplified billing via mobile number
Mobile Points of Sale
Retailers using card acceptance devices
tethered to mobile devices or with embedded
mobile connectivity
Late adopters
Online/Banking App initiated payments
Online or app based access to accounts to
make payments to third parties, either to
personal accounts or to make bill payments
Faster payments
Domestic payments made between institutions
same day, often immediately
Payments are a crucial part of national infrastructure
and help drive the economy. Even though managing
payments is a well-established process for any
financial services institution (FSI), this area is
undergoing huge changes. For FSIs, the perfect
storm is emerging: numerous start-ups are entering
the payments market, prompting consumers to have
increased expectations, whilst legacy technology and
regulatory challenges continue to hamper service
improvement and innovation.
It is crucial that financial services firms understand
this. Customers increasingly expect elegant and
intuitive payment journeys, across devices, and
they are looking for a more immersive experience.
Meanwhile, FSIs are grappling is grappling with their
existing systems at a time when data insight and
compliance demands dominate.
The struggle to keep on the lights is a priority,
and when payment systems fail, the reaction on
social media can be very damaging. In spite of the
disadvantages that established players – such as
banks, card issuers and online wallets, including
PayPal – face in quickly adapting to new challenges,
those firms continue to dominate consumer
payments. The reason is that customers trust them
and have already set up their money there. But
without action, start-ups could take away chunks
of business.
A new environment
For FSIs, by understanding the technology
approaches of their competitors, as well as the
opportunities, there is a strong opportunity to push
ahead. Among early adopters, mobile payments have
been a focus. In Poland HPE implemented person-to-
person payments for Polski Bank, allowing people to
pay others by simply entering a mobile number and
to withdraw money from an ATM using their phone
instead of a card. Hewlett Packard Enterprise is now
moving to the next stage in the technology'smaturity
by developing a solution called blik across
aconsortium of Polish banks.
Meanwhile, for online retailers e-wallets allow
consumers to store payment details for quick
transactions, and in-store mobile points of sale and
contactless card payments are also becoming popular.
Mobile-activated ATM withdrawals allow people to
take out money simply using a code from an app.
At the leading edge, cloud-based non-card
payment systems, such as Zapp, and biometrics for
authorisation of mobile payments, including Apple’s
Touch ID, are easing and speeding buying processes.
In research and development, over-the-top non-
traditional FS players, which provide services using
existing banking infrastructure, are evaluating what
they can do to take a further role in the market, at
a time when cryptocurrencies, such as Bitcoin, are
revolutionising payment.
Modernising payment methods
In order to stay ahead of the curve, established
businesses need to react to the changing
competition, customer demands and the technology
on offer. Alongside a transformation in their
payments infrastructure, they can draw on HPE’s
strong experience in finance, processing, broader
technology and outsourcing, no matter where
they reside in the payments eco-system.
Among the most important innovations, many
financial services firms are interested in working on
recent developments around host card emulation, in
which appropriate smartphones can effectively act
as contactless payment devices. Equally, tokenisation
means payment card data can be robustly protected
in these transactions. This opportunity cannot
be missed: by taking advantage of the changes,
financial services firms can embed contactless
mobile payment capabilities within their standard
apps. At the same time, value added services are
booming. Customers using newer forms of payment
channels, such as mobile, increasingly expect a
more in-depth experience. By adding rewards and
location-based vouchers, within existing mobile
banking or payment apps, companies can secure
greater business.
Making the most of these incoming opportunities
is essential for FSIs in remaining ahead of the curve
in the hugely competitive payments arena. The
potential is there for the taking.
Markus Orth, Payments Practice
“Many financial services firms are interested in working
on recent developments around host card emulation.”
Payments
• Closed non-card based payments
(i.e Zapp)
• Beacons
• Online Wallets (V.Me and MasterCard
Paypass)
• Contactless (Mobile) Payments – SWP
or Host Card Emulation
• Tokenisation
• Crypto/Digital currencies
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 17Technologies for the future
• Traditional infrastructure
• Public cloud for non-critical systems
• On-premise private cloud
• Converged infrastructure
• Service Integration and Management
• Evolving computer architectures such
as The Machine
• Software-defined infrastructure
• Cognitive computing for real-time
automated service management
• Advanced analytics and Big Data
processing for the Cloud (*aaS) as well
as “the Edge” (IoT)
The financial services industry has often looked at
cloud computing through a sceptical lens. Concerns
over where data resides, privacy, security and the
capacity of systems have dominated this debate.
However, we are seeing the tide turn, and financial
services firms are starting to exploit the many
opportunities cloud computing provides.
For FSIs to understand cloud and the opportunities
available for them, they would be wise to consider
it from two angles: horizontally, using cloud for
IT infrastructure; and vertically, applying cloud to
consume business applications and services over
the internet.
Transforming infrastructure
The attractions of cloud for computing power are
evident: speed, flexibility and pay per use. As a result,
public cloud for non-critical systems has now become
mainstream – as has on-premise private cloud for
mission critical systems, where businesses establish
dedicated services within their firewall. For example,
Deutsche Bank and HPE have announced a ten-year,
multibillion dollar agreement, under which HPE will
provide dedicated data centre services on demand,
including storage, platform and hosting.
Early adopters, meanwhile, are moving towards
more advanced off-premise private cloud and virtual
private cloud. The Leeds Building Society is one such
Cloud: a bright road ahead
After a great deal of initial scepticism, the financial services
sector seems to be understanding much better the real
benefits that can be derived from cloud computing.
Definitions
Research and development
Evolving computer architectures such
as The Machine
Reinventing the fundamental architecture
of computers to enable breakthroughs in
performance and efficiency
Software-defined infrastructure
Infrastructure defined via software for better
service management and orchestration
Cognitive computing
Machine learning-based analysis for real-time
automated service management
Advanced analytics and Big Data
processing for the Cloud (*aaS) as well as
“the Edge” (IoT)
The concept that data, processing and analytics
will occur in highly distributed environments
and exploit data from multiple sources
Leading edge
Cloud-based banking platforms
Core banking software architected for
the cloud.
Cloud-based bureau services
Cloud based services on a pay per use basis,
e.g. credit data and payments
Cloud storage and collaboration for
customers
“Personal cloud” for brokers and customers to
store documents and information for re-use
SDI
Software defined infrastructure allows
infrastructure to be administered by software
Service Management of Hybrid
environments
Bringing together public, private and virtual
private clouds under a single service delivery
model
Seamless Service brokering
Brokering of services, as opposed to systems,
from public, private and virtual private clouds
through a single pane of glass
Early adopters
Private cloud and virtual private cloud for
critical systems
Computing via elastic pay per use
infrastructures in vendor DCs or on site
Cloud end-to-end managed development
and test
Delivered in an elastic manner and pay per use
PaaS
Platform as a Service is the combination of
cloud based infrastructure and software
stacks to provide a platform such as e-mail
IaaS
Infrastructure as a Service delivers cloud
based compute platforms
Branch virtualisation
Delivery of branch systems on a virtual /
cloud model allowing central management
of applications
Cloud-based storage
Storage hosted in cloud environments
Mainstream
Public cloud for non-critical systems
Public cloud based systems for non-
critical systems such as HPEcloud.com for
development projects
On-premise private cloud
Cloud environments within an organisation’s
own DC facilities
Converged infrastructure
Infrastructure where components are grouped
into a single, optimised computing package
Service Integration and Management
Provision of single service management and
integration platforms
Late adopters
Traditional infrastructure delivery
Such as mainframes, servers etc. based in
customer or hosted data centres
organisation, using HPE’s virtual private cloud for
a fully hosted core application for mortgages and
savings.Adoption of cloud alongside traditional IT
leads to hybrid environments, and leading edge
businesses are employing service management of
hybrid environments to manage public, private and
virtual private clouds in one seamless delivery model.
A quantum leap in software delivery
Within applications, a major change is taking
place in how FSIs draw from the cloud. Historically,
software as a service has been used for non-
banking applications including human resources,
finance and sales. But at the leading edge, financial
services firms are connecting to cloud-based,
shared banking platforms, in which the core
banking software has been designed specifically to
be delivered in the cloud.
The potential is great: banks can make large
savings in operational costs, compared to managing
systems themselves, while enabling faster change.
Those companies at the leading edge are even
prepared to trade lower costs and higher flexibility
for less functionality when the situation requires it.
Meanwhile, cloud-based applications are enabling
brand-new business models, transforming customer
service and the structure of the financial services
market. They are generally consumed on a pay per
use basis, and include cloud-based services for
data and payments, and even account opening.
Cloud services can also enable more collaborative
customer service models, for example, cloud storage
customers / brokers and financial services firms for
the processing of mortgage applications. With the
Internet of Things (IoT) connecting everyday objects
to the web, so that they can communicate with each
other and humans, there will be greater interaction
between automated processes.
Traditional computing will not be able to process these
volumes of data. The cloud will be the only option for
organisations that want to design new services based
on real-time, context-rich data from the IoT.
But, ultimately, even the cloud will not generate
enough computing power to meet the demands
of big data and IoT. HPE Labs’ biggest project is
The Machine, which aims to reinvent the basic
architecture of computers.
Grab the opportunities
Within this complex landscape, there are two vital
areas in which all banks can experience a dramatic
advance by making use of the cloud: speeding up
development and testing and virtualising branches.
All FSIs are hampered by projects moving slowly
through a complex web of development and testing.
In order to expedite this, leading edge organisations
are turning to the cloud for end-to-end managed
development and testing. This opens up a common
development and testing architecture to enable
agile development, collaboration and smooth
transition from each stage of the lifecycle.
Finally, branch virtualisation, in which cloud
infrastructure is managed centrally across all branches,
offers huge benefits, including a cut in operational
costs and allowing reliable and fast change.
FSIs must take note of the many opportunities
created by the cloud, and of the way that challengers
are able to launch new cloud-based services. The
businesses that see best where and when to adopt
the technology are the ones that will succeed.
Andrew Dare, Financial Services CTO
“New businesses are
entering the market at
a lower cost, thanks to
cloud-based shared
banking platforms.”
Cloud
• Cloud-based banking platforms
• Cloud-based bureau services
• Cloud collaboration for customers / brokers
• Service Management and orchestration of
Hybrid environments
• SDI
• Service Management of Hybrid
environment
• Seamless Service brokering
• Off premise private cloud and virtual
private cloud
• Cloud end-to-end managed
development and test
• Platform as a service (e.g. for e-mail)
• Branch virtualisation
• Cloud-based storage
• IaaS
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 19Technologies for the future
• Electronic document authentication
• Mobile phone for two-factor
authentication (e.g. Mobile secured
credit card)
• Two factor authentication
• Enhanced web security
• Resilient security and privacy approach
• Dynamic data lifecycle security and
privacy
• Cognitive Security
• Integrated document lifecycle
ecosystem
• Secure network architectures
• Next-gen encryption
• Next generation biometric security
Definitions
Research and development
Resilient security and privacy approach
Dynamic, proactive, and self-healing across
entire FS security “kill-chain”
Dynamic data lifecycle security and privacy
Secure data management across the entire
data lifecycle
Cognitive Security
Use of machine/deep learning-based analysis
that supports data security and privacy for
resilient systems (see above)
Integrated document lifecycle ecosystem
Solutions for document/content (online and
physical) security, forensics, authentication,
tagging, document workflows
Secure network architectures
Secure peer-to-peer networks (using block
chain protocols) for transactions, contracts
and other financial activities
Next-gen encryption
Ability to do processing/analytics on secure
(encrypted) data; may include advances in
homomorphic encryption and other techniques
Next generation biometric security
Going beyond fingerprints towards facial
recognition, blood vessel analysis, retinal
scan etc.
Leading edge
Geo- and behavioural data for
transactional security
Identify and stop potential fraudulent
transactions by comparing against analysis
of typical behaviour and customer location
for that account
Mobile payment fraud prevention
Fraud prevention specifically aimed at mobile
applications and payment solutions
Data-centric encryption and tokenisation
End-to-end protection of the data itself,
e.g. HPE’s Voltage
Crypto/digital currencies
New payment methods based on emerging
and virtual technologies. Examples being
crypto-currencies, such as Bitcoin and Ripple
Early adopters
Voice authentication
Use of voice characteristics to identify
and verify customer identity, usually in
contact centre
Federated identity / shared authentication
Use of third parties for identification purposes
e.g. “sign on with Facebook”
Basic biometrics
Use of unique biological markers, mainly
fingerprints, to identify and verify
customer identity
Mainstream
Electronic document authentication
Providing a secure authentication mark on
documents such as e-signature
Mobile phone for two-factor authentication
(e.g. Mobile secured credit card)
Alternative two factor authentication protocols
for mobile devices where the shared platform
for app and communication could represent a
security risk
Late adopters
Two factor authentication
Two factor authentication using physical tokens
Enhanced web security
Greater web security based on combinations
of PIN code and passwords. Text validation
of transactions
Financial Services are the driving force behind these
figures, revealed in an HPE Survey conducted by
the Ponemon Institute, is the growth of the digital
economy and the associated black market.
IT security is a critical issue for any financial services
business, and it enables all of the other technology to
work effectively and safely. Traditionally, FSIs have had
their focus on the perimeter, using firewalls to stop
hackers getting in. Now, companies need to assume a
state of compromise, focusing on protecting the data
such as with advanced persistent threat protection,
based on the philosophy of defence in depth.
Segmentation and end-to-end control
The continuous innovation of cybercriminals
means that FSIs need to stay abreast of security.
Early adopters are already conducting proactive
segmentation and monitoring of their systems and
data, identifying which are the most essential assets,
applying appropriate defenses based on risk and
sensitivity. They are also exploiting big data for
enhanced security and fraud detection, processing
huge volumes of information to identify intrusions or
internal compromises.
Extensive work is also going ahead around
federated identity, in which a single authentication
token is trusted across multiple organisations.
In Denmark, a person logs into their online bank
and is able to access the systems of other trusted
organisations. The same principle is even used to
enable collaboration across US defence. Federated
access improves take-up of digital services because
people do not need to register countless times and
remember multiple logins.
At the leading edge, financial services companies
are going much further to protect themselves and
their customers, with end-to-end next wave security
operations centres, which observe and control
security on all levels, from technology to buildings,
including swipe cards, third party access and CCTV.
Security: keeping a step
ahead of cybercriminals
With cybercrime on the increase and posing a more serious
threat to companies, sound IT security has become of
paramount importance.
Such businesses are equally looking to encrypt at
the data level, rather than just at network entry.
Through Voltage Security, a company acquired by
HPE, businesses can take advantage of encryption
built into the data itself rather than simply protecting
at the network edge.
Consumerisation and security
The consumerisation of technology is transforming
how FSIs secure their systems and customer
accounts. While banking access online has
traditionally been a combination of passwords and
two factor authentication devices, the proliferation
of smartphones has made authentication available
through generating a unique code on a banking app.
Meanwhile, voice authentication has gained ground
in New Zealand, where one million people have
signed up to access Inland Revenue Department
services through speech identification that allows
customers to automatically check their account
balance, track tax refunds, and reset passwords. In
addition to this, with the fingerprint scanning and
facial recognition capabilities on newer smartphones
(see also the article on mobiles on pages 22 and
23), banks are able to use next generation biometric
security to control access to accounts.
At the leading edge, companies, such as Halifax, are
trialling access on cardiac pattern authentication,
through a wristband. It is also possible to
authenticate customers by the blood vessels in their
fingers, or by examining their eyes.
Businesses also need to be aware of the technology
that is in development in order to map out their
long-term plans. Cognitive security allows artificial
intelligence to learn the context of data. Other work
in the research phase includes proactive security
response across the entire ‘cyber kill chain’ through
both the hacker’s testing and subsequent execution
of their attack, as well as full security across the
integrated document lifecycle in which papers can
be quickly compared and verified.
It is essential, therefore, that FSIs understand these
trends so they can act. With the right security in
place, they can make the most of other technology
while knowing their data is well protected.
Chris Cooper, Security Practice
“The continuous innovation
of cybercriminals means
that FSIs need to stay
abreast of security.”
Security
• Geo- and behavioral data for
transactional security
• Mobile payment fraud prevention
• Data-centric encryption
and tokenisation
• Crypto/digital currencies
• Voice authentication
• Federated identity / shared
authentication
• Basic biometrics
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 21
• True in-memory computing
• Evolving computer architectures
such as The Machine
• Advanced analytics using deep
learning/cognitive systems
• Internet of Things
• Advanced analytics as-a-Service
• Dynamic data lifecycle security and
privacy
• Business intelligence
- Structured data
(mostly internal) -
Retrospective reporting
and analysis
- Periodic / batch
• Analysis of siloed unstructured data
(e.g. voice)
• Real-time consumption of
external data services
• Traditional static visualisation tools
• Automated data cleansing
• Aggregation of internal structured and
unstructured data
• Social media monitoring
• Data lake
• Advanced dynamic visualisation tools
• As-a-service IT deployment models
• Schemaless Databases
• Big Data across the enterprise
• Real-time
• Extreme scale
• New data sets, many machine
generated
• Optimisation and prediction
• Data monetisation
• Data stewardship approach
Technologies for the future
Definitions
Research and development
True in-memory computing
(or non-volatile memory) to enable extreme scale
analytics on devices of all sizes
Evolving computer architectures such
as The Machine
Reinventing the fundamental architecture
of computers to enable breakthroughs in
performance and efficiency
Advanced analytics using deep learning/
cognitive systems
For real-time prediction, decision making
and automation
Internet of Things (IoT)
Use of machine-generated data in real-time
for analysis and automation of transactions
Advanced analytics as-a-Service
Predictive and “real” cognitive analytics delivered
via cloud
Dynamic data lifecycle security and privacy
Secure data management across the entire
data lifecycle
Leading edge
Real-time
Real-time querying or continuous updating
of pre-set data views
Extreme scale
100% of data
Aggregation of data from wider sources
Broadening of data sources (especially
web and social media)
Optimisation and prediction
Models for optimisation and prediction with
ability to run ‘infinite’ scenarios
Data Monetisation
Using customer data for new purposes, e.g.
selling aggregated customer data to 3rd parties
Data Stewardship tools
Tools that support stewardship of data across the
lifecycle and cleansing at multiple points
Early adopters
Aggregation of internal structured and
unstructured data
Combination of data in various formats to create a
single customer view and support analysis
Social media monitoring
Real-time monitoring to follow trends and
identify customer service issues
Data lake
Storage of large amounts of data whose
subsequent value and use is determined
through test
As-a-service IT deployment models
Analytical tools, mostly cloud-based, especially
for discovery and test of new data sets and tools
Advanced visualisation tools
Dynamic data, visual querying, linked
multi-dimensional, visualisation, animation,
personalisation, and actionable alerts
Schemaless Databases
Databases where data that is modeled in
means other than the tabular relations used
in relational databases
Mainstream
Real-time consumption of external
data services
Access to data provided by data bureaux as
a service, e.g. credit records
Analysis of siloed unstructured data
Tools to monitor and analyse unstructured
data (voice, video, text)
Traditional visualisation tools
Static visualisation tools presenting data with
relatively little ability to support interaction
Automated data cleansing
Tools, processes and governance for data parsing,
profiling, matching, validation and enrichment
Late adopters
Business intelligence
Exploitation of structured data using
datawarehousing and operational data
stores primarily for reporting and online
analytical processing
Big data analysis is having a transformative
effect across science. In genetics, researchers are
analysing large sets of data and finding associations
between genes and diseases to fulfill the promise
of personalised medicine. In astronomy, the data
that has come back from the Hubble Telescope has
transformed our understanding of the universe.
In financial services, however, the impact of big data
has barely been felt. Yet, over the next decade, every
aspect of a bank or building society, from risk and
compliance to marketing and operations, will be
transformed by managing and analysing big data. The
ability to harness information is driving innovation in
other technology domains, including security.
According to Gartner, a leading information
technology research group, big data is not just about
the volume of information, but also about its variety
and velocity and complexity - and the topic is best
thought of across each of these dimensions. Winning
in these areas gives organisations real insights they
can apply to operations and strategy.
Data deluge
Data-warehousing to store and process siloed
information has now been deployed for more than 25
years and is mainstream. Even so, in most businesses,
the potential to exploit it further remains substantial,
with islands of information scattered across
Big data, big opportunities
It is not just a case of the volume of information gathered, but also about its
variety, velocity and complexity and most importantly how quickly intelligence is
created and acted upon.
the enterprise. This is one reason why business
intelligence investment continued after the global
financial crash in 2008.
By using ‘schemaless’ databases, early adopters
upload structured and unstructured data, and draw
out useful information. They can process huge
volumes of it, and still derive useful responses,
pulling on vast data lakes, which are made possible
by cheaper storage. They work on the principle
of a business collecting whatever it can and then
assessing it, instead of deciding what to store before
keeping it.
Many FSIs already process an ever-growing variety
of data that is drawn from outside the boundaries
of their own organisations, with a recent area
of interest being sentiment analysis of social
media. Early adopters, however, also look at more
broadly-located datasets, such as geographical and
government information. At the leading edge, they
use image processing to match a video or a still
photograph to a database when a person walks into
a bank. Underpinning all these techniques are data
stewardship systems, which are vital to help manage
and oversee information assets and ensure they are
easily accessible in a standard format.
In terms of the high velocity of data processing
required for fast analysis, at the leading edge
sophisticated work is taking place to run in-memory
databases and complex event processing allowing
potential fraud detection as it happens. Analytics
are being embedded across the enterprise, within
objects and wearable technology connected to
the Internet of Things, with banks using machine-
generated data in real time for analysis and
automation of transactions.
Extreme scale processing gives those companies
fast results. Evolving computer architecture is in the
development stage, to support massive data volumes.
Deriving useful insight
Historically, businesses have run dashboards and
reports in order to gain insight. This will continue,
but they will need to add new ways to interpret
data, progressing from static visualisation to
advanced dynamic visualisation that allows people
to explore data.
This reflects somewhat of a change in how data is
used. No longer are people only tackling standard,
known-world problems, they now want to discover
new patterns and unknown relationships, for
example, to cluster the data and draw out predictive
analytics from a variety of segments. These
techniques are essential in fields such as legal and
e-discovery where complex models are used to
identify activities and underlying patterns across
large sets of structured and unstructured data.
At the leading edge, real-time analytics on a variety
of data is crucial. In addition, machine learning, or
self-optimisation and prediction, means algorithms
become cleverer. At the research and development
level, natural language queries will see more intuitive
responses drawn out of databases, instead of the
user having to enter exactly the right wording.
How to succeed
The only way to succeed in all of these data areas
is to have the right data scientists in place, as well
as the people who can bridge the gap between
them and the business users. New and more
advanced tools will assist the business users in this
area and will allow some degree of self-service but
ultimately the variety, velocity and complexity of
data will require specialist skills and experience.
HPE can guide organisations on this journey, starting
with improving basic functions before advancing.
Shaun Connolly, Analytics and Data
Management Practice
Big data
“At the leading edge,
sophisticated work is taking
place to run in-memory
databases and complex
event processing.”
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 23Technologies for the future
• Information services
• SMS
• Balance and payment info
• Basic greater apps
• Person2person payments
• Mobile wallet
• Basic biometrics
• Business banking services
Definitions
Research and development
Wearable devices
Services accessed via wearable devices
such as smart watches and Google Glass
New user interfaces
To provide more intuitive services via mobile
Next generation biometrics
Going beyond fingerprints towards facial
recognition, blood vessel analysis, retinal
scan etc
Personal clouds or “servers”
Continuous broadcasting of data from
mobile devices creating opportunities for
real-time services
New nano- and compute- technologies
New forms of non-volatile memory, photonics,
and architectures for tiny devices
Leading edge
Branch queuing
App to start queuing at a branch before
a customer arrives
Greeter apps exploiting customer data
Branch greeter using tablet to advise action
according to the particular customer
Contactless mobile payments
Chip embedded in mobile phone linked
to payment card that enables contactless
payments
Geo-services / context awareness
Mobile app to determine user location and
present relevant data, such as nearest branch
and local offers
Mobile scanning / image capture
Mobile / tablet cameras to capture document
images
Closed non-card based payments
Alternative payment schemes centred on
mobile (e.g. Zapp)
Augmented reality
Layering of digital information, such as video,
on top of the physical world to enable customer
interaction, e.g. HP Aurasma
Mobile payment fraud prevention
Fraud prevention solutions aimed at mobile
applications and payments
Early adopters
Business banking services
App functionality for business customers
Basic biometrics
Use of unique biological markers, mainly
fingerprints, to identify and verify
customer identity
Basic greeter apps
Branch greeter using tablet to provide
generic greeting service
Person2person payments (e.g. Paym)
Payment by direct transfer to account or
by mobile number linked to an account
Mobile wallet
Money, loyalty and rewards
Mainstream
Mobile optimised site and forms
Websites that automatically adapt content
for mobile devices
Non-payment transactions
Low risk transactions, e.g. inter-account
transfers, within a single institution
Mobile Points of Sale
Retailers using card acceptance devices
tethered to mobile devices or with embedded
mobile connectivity
Late adopters
Information services
Generic information, e.g. product info.
and contact details
SMS
SMS to update customers, e.g. on the
status of an application, to request
information or to prevent fraud
Balance and payment info
Viewing of account information
Mobile: becoming further
entrenched in our daily lives
The ever-stronger
importance of smartphones
and tablets in our daily
lives is undoubted. As
such, it is fast becoming
the financial services
companies’ primary
channel of contact with
its customers.
Mobile websites and apps used to be an optional
add-on for FSIs. Increasingly, financial services
firms have a strategy of mobile first, or even mobile
only. Providing all services on mobile, and making
it the primary channel of contact with the customer,
makes sense given the technology’s popularity
and strengths. Crucially, mobile technology opens
up banking to many more people. While many have
been excluded because of a lack of broadband
internet, the proliferation of smartphones and
tablets means there is a much greater access to
financial services. The starting point for mobile
has been the provision of information services
including branch opening times, as well as balance
and payment information. In the mainstream, most
financial services companies have taken a step
further to offer mobile-optimised sites and forms.
Inter-account transfers and other non-payment
transactions are also now commonplace.
Geolocation and full mobility
The next stage in mobile has been to re-think
services, as opposed merely to enabling existing
online offerings to be accessed on mobile devices.
Mobile is a more powerful channel, because mobile
devices can readily incorporate voice, camera and
biometrics. Moreover, most people carry their
device with them all the time. The combination
of GPS and carrier information means companies
know where someone is when they use their device.
This launches a completely new type of app, one
that understands ‘context’.
Early adopter financial services firms are focusing
on offering mobile payments, such as person to
person (P2P) payment services, including industry
initiative blik (see payments section on pages 14
and 15 for more info). Mobile wallets, in which card
details are stored, as well as loyalty and rewards
coupons, are increasingly popular. Consequently,
there is a growing need for mobile payment counter
fraud that makes use of transaction, customer,
device and location data.Within branches mobile
points of sale are increasingly popular in-place
of the traditional ‘service window’. This has major
impact on the improvement of customer service, the
number one generator of customer loyalty.
A basic greeter app, that allows a branch employee
to gather information about a customer and why
they are visiting the branch is another major step
forward being pursued by many early adopters.
At the leading edge, geolocation and context
awareness services are crucial. This means users can
download a bank’s mobile app and be presented with
relevant information on their current location, such as
the nearest branch and local offers, and even line up
in the queue virtually, before they arrive.
Equally, augmented reality technology on mobile
phones gives banks the chance to improve the
experience on screen – such as Westpac in New
Zealand, which is allowing customers to scan their
cards and see a visual graph of categories they have
spent in. Augmented reality can also be used in retail
so that customers scan images in shops, online and in
shopping catalogues. Contactless mobile payments
allow customers with NFC-enabled phones to easily
make in-store payments at various retailers by
touching their phone to a reader.
The strength of technology on mobile devices opens
up other opportunities, and at the leading edge,
biometrics allow the use of voice, image or video, or
even fingerprint or iris scans, to access applications.
Business banking is inherently more complex than
pure retail banking and leading edge financial
services firms are only now thinking through how
it can be optimised for mobile, such as enabling
companies to check their payroll run and find out the
latest cash flow situation.
Leading-edge FSIs are also using mobile scanning
and image capture so that the same technology
employed in a central scanning centre can now be
deployed to the mobile device. Intelligence can be
applied to the process to enable banks to recognise
quickly what the document is, such as whether it is
a driving licence or utility bill, and to quickly extract
the key information or flag an exception.
The future
Mobile devices are enormously more powerful
than laptop technology, because of their immense
functionality and the fact that customers nearly
always have the devices with them. As the Internet
of Things takes off, including connecting wearable
devices, there is the opportunity to embed further
high performance, nano and compute technology
on mobile and advanced IoT devices. Meanwhile, a
more immersive experience with intuitive services
can be provided on smart watches and glasses.
Work is also going ahead for distributed mesh
computing, in which servers are located in many
locations to help process and analyse the massive
amount of data from IoT devices. Additionally,
personal clouds enable users to store documents
and to draw on contextual services based on their
activities and location.
FSIs need to start with a mobile-first mindset, if they
are to take advantage of all the new opportunities
available to them. This thinking enables the proper
back and mid office operations to be established, as
well as the right security. By taking advantage of the
systems on offer, they can capitalise on customer
opportunities and greatly improve the digital
customer experience.
Paul Evans, Mobility and Digital Customer
Experience Practice
“Personal clouds enable users to store documents and
to draw on contextual services based on their activities
and location.”
Mobile
• Wearable devices
(e.g. Google Glass)
• New user interfaces including advanced
augmented and virtual reality
• Next generation biometrics security
• Personal clouds or “servers”
enabling contextual services
• New nano- and compute- technologies
• Branch queuing
• Greeter apps exploiting customer data
• Contactless mobile payments
• Geo-services / context awareness
• Mobile scanning / image capture
• Closed non-card based payments
• Augmented reality
• Mobile payment fraud prevention
• Mobile optimised site
and forms
• Non-payment transactions
• Mobile Points of Sale
RD
80%-100%
LATE ADOPTERS
50%
MAINSTREAM
25%
EARLY
ADOPTERS
5%
LEADING
EDGE
2-5
YEARS
1-3
YEARS
2-5
YEARS
5+
YEARS
2+
YEARS
Page 25Technologies for the future
Conclusion: choosing
the optimum model
The way forward for FSIs to approach innovation
is to plan carefully and identify which technologies
have the most potential.
Four technology megatrends are having a huge
impact on financial services organisations. Cloud
computing, security, big data and mobility are
providing significant opportunities for FSIs to
strongly grow their business and enhance efficiency.
These trends offer financial services organisations
the opportunity to maximise their core business
areas of customer interaction, internal operations
and payments. Technology is also enabling
disruptive business models that bring both threats
and opportunities.
“By taking action now,
financial services firms
can gain a march on their
competitors and stay
well in front.”
Now is the time that businesses must act, drawing
on the expertise in this model. With global
economies growing and regulation increasing,
expectations are high for FSIs to meet the
challenges and deliver innovative, reliable, intuitive
and personalised services. The only way to
approach innovation is to plan carefully and identify
which technologies have the most potential.
In order to achieve this, the first step businesses
need to take is to discuss where they are along
the innovation lifecycle described in this report,
in each of the megatrends and core business
areas. Following this, they must decide where
they want to be in commercial terms and what
their risk appetite is.
HPE, with its extensive experience in financial
services, can help guide banks and building
societies of all sizes through these complex
and strategic decisions.
By taking action now, financial services firms
can gain a march on their competitors and
stay well in front.
Page 27
For further information, contact:
David Rimmer
Director,
Financial Services
HPE Enterprise Services
Mobile: +44 (0)7790 490827
Email: david.rimmer@hp.com
Andrew Dare
Chief Technologist,
Financial Services UKI
HPE Enterprise Services
Mobile: +44 (0)7717 541277
Email: andrew.dare@hp.com
FinTech Innovation Model 2015

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FinTech Innovation Model 2015

  • 2. Page 3Technologies for the future Welcome Contents Three things are clear. Firstly, financial services firms hear the hype about new technologies, such as cloud and big data, but they do not necessarily understand their maturity or their relevance to banking. Of equal importance, FSIs recognise that technology will be critical to meeting business goals such as efficiency and customer satisfaction, but are not always aware of which technology is available at the leading edge. Finally, innovative business models are emerging that have the potential to reshape the financial services market, but they are not commonly understood. This creates a real dilemma. Should FSIs societies push hard to be at the leading edge, or leapfrog by applying technology that is currently in research and development, or play it safe and risk being overly cautious? HPE has created the FinTech Innovation Model specifically to help FSIs navigate this challenge. The HPE FinTech Innovation Model outlines, in clear terms, the extent to which different technologies have been adopted by FSIs. “Innovative business models are emerging that have the potential to reshape the financial services market, but they are not commonly understood.” Financial Services Institutions (FSIs) know that harnessing technology will be critical to meeting their challenges. But deciding where and how to invest can be a daunting task, given tight budgets and resources. A new model guides financial services businesses, step by step, through this challenge. David Rimmer Director Financial Services Andrew Dare Financial Services CTO It outlines the opportunities presented by four global technology megatrends: mobility, big data, security and cloud computing. The model also looks through a business lens examining the technology that can bring innovation in the key business areas of customer interaction, internal operations and payments. Furthermore, it examines the impact of new business models. The model is drawn from the perspective of financial services practitioners within HPE, the second largest provider of IT services to the global financial services industry. Moreover, since HPE spends $3.45 billion a year on research and development there is in-depth understanding of technology coming down the line. With an increasingly competitive market and the high expectation of customers, now is the time to determine how to grasp the opportunities presented by new technology. 10 Customer interation 12 Internal operations 04 Overview 07 New business models 14 Payments 16 Cloud 18 Security 20 Big data Mobile 22 24 Conclusion
  • 3. Page 5Technologies for the future Technology for a competitive edge The Hewlett Packard Enterprise FinTech Innovation Model enables financial services institutions to gauge where they stand in the market versus their competitors and to plan their adoption of new technologies. There is an alarming lack of literature explaining how technology can be applied specifically to retail financial services. Reports from technology vendors focus on buzzwords and marketing ideas, rather than specific business applications. In turn, much advice that FSIs receive is generic, failing to answer questions on what the state of the art is or how to apply technology to the specific challenges of financial services. The Hewlett Packard Enterprise FinTech Innovation Model will change this. It ensures businesses have a clear understanding of the technology available to them and of how widely adopted these systems are. As a result FSIs can see where they need to be if they want to be ahead of their competitors. Likewise, they can assess whether technology is ripe for adoption given their risk appetite. Here’s how the model works: it looks at each of the major technology trends (cloud, mobility, big data and security) and key business areas (customer interaction, internal operations, payments and business models). Within each of these areas, the model explains which technology is available and how mature it is. The technology innovation lifecycle In today’s technology-driven world, it is vital for businesses to shape strategy through an understanding of what is possible. Traditionally, IT strategy starts with a business objective and then asks which technology is available to implement it. This approach is still essential but it needs to be tempered by working backwards from an understanding of technology and how it can enable business opportunities. Technology passes through a standard innovation lifecycle from research and development to deployment by leading edge organisations, then the mainstream and ultimately those who are behind the times. It undergoes three or more years of research and development, including core technology research and incubation in start-up companies and technology labs, and only at this point does a workable product exist for industry. The focus in the model is on the leading edge and early adopters, since this is the stage where most FSIs are likely to be targeting technology for incorporation in their strategy and plans. At the leading edge, the most ambitious industries – often retail, hospitality and travel – will implement the technology. Following this, the cutting-edge tier one banks and challengers will typically begin to adopt it, followed by mid-tier, ambitious rivals. Start-ups will also be in on the act, taking advantage of their higher flexibility and risk appetite. But this entire phase, which takes one to three years, tends to see only around five per cent of the financial services industry actually adopting the technology. In the following two to five years, many more ambitious banks will adopt the technology, raising the level of adoption to a quarter of the financial services industry. The two to five years after that will see the level rise to half of FSIs and the technology now considered mainstream. Some FSIs would prefer to play it safe, and wait to adopt technology in the mainstream phase, but it is too late. Adoption at this point puts them into the late adopters category, given the months or years required for implementation once the decision is made to invest. “Hewlett Packard Enterprise spends more than $3 billion a year on research and development.” 2+ YEARS 1-3 YEARS 2-5 YEARS 2-5 YEARS 5+ YEARS • Idea inception • Market research • Feasibility investigation • Core technology research • Incubation in start-ups / IT labs • Implemented in non-FSI industry sectors (e.g. retail) • Innovators in FSI Tier 1 and Mid-Tier follow quickly • Adopted by FSI challengers and new entrants with no legacy • Ambitious FSIs who are quick to follow • Widespread adoption across leading players in FSI market • Catch up of rest of FSI market to near universal adoption Mapping innovation across the lifecycle RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE
  • 4. Page 7Technologies for the future Multiple new business models are beginning to emerge in financial services, enabled by new technology. These trends pose a fundamental threat to existing players but also open up opportunities for them. Understanding these trends is vital, in order to avoid being left behind. Ten to 15 years ago, FSIs operated a broadly consistent business model that had prevailed for many years: a standard set of products offered through a branch network. This model started to change with the emergence of telephone banking, online banking, and increased intermediation from aggregators and comparison sites made possible by the internet. Nevertheless, these trends represented change in distribution, as opposed to fundamental innovation in products and services. What we have seen in the past few years is the emergence of completely new business models that overturn the fundamentals of banking. In the peer to peer (P2P) model, the role of the ‘bank’ is no longer that of a deposit-taker, merely a broker. Meanwhile, basic aspects of financial interest are challenged by community banks, such as Germany's Fidor, where more Facebook ‘likes’ translates into lower interest rates; by credit unions where interest is determined at year-end according to the amount of profit; and by social investment vehicles where the rate is not the most important factor. We have also seen the entry of new players that have chosen to dispense with offering a broad set of services in favour of specialising in a single market area, such as payments, savings or online-only banking. This approach enables them to focus on more profitable segments and avoid the cross-subsidies that universal banks have made for many years. All of these trends are underpinned by new technology, such as cloud computing, social media, mobility and big data. This is emphasised by the fact that some of the most threatening new entrants are actually technology businesses, such as Apple, Amazon and Google. There is also huge investment by the banks in financial technology innovation. A report by Accenture, called The Future of Fintech and New business models: keeping up with disruptive innovation Technology innovation is enabling new models for banking that are transforming the competitive landscape. Banking, found that financial services investment in technology, in the UK and Ireland, rose from £176 million in 2013 to £415 million a year later. London is now the biggest global centre for financial technology companies. Cryptocurrencies and distributed ledgers One of the largest changes is in cryptocurrencies, such as Bitcoin and Ripple, which are transforming payments. At this year’s Sibos event in New York, where 7,000 delegates come together to discuss innovation in banking, a whole day of the agenda was given over to cryptocurrencies with the focus on when and how the change will take place, rather than if it will. Governments are taking an active interest. The US Federal Reserve is looking into a government-backed digital currency, the FedCoin, and the UK chancellor, George Osborne, has announced a review of the potential of virtual and digital currencies. However, the implications are huge. Banks have been accustomed to playing a central role in payments, but customers see the appeal of putting the power in their own hands. This is not the only threat: the principle of the distributed ledger, where there is no central registry, can be applied to other assets, such as property, stocks and shares, bonds and beyond. However, the most fundamental innovation will come when cryptocurrencies are used not to replace today’s money, but to deliver completely different business models. P2P lending and crowd funding are an additional threat. The interest rates offered by P2P players represent a challenge to FSIs offering traditional savings products, as is the speed with which this sector is gaining acceptance. The UK government is currently consulting on the introduction of P2P lending within ISAs, at which point P2P will have moved from early adoption to mainstream, and the government-backed British Business Bank already lends through Funding Circle, a crowd-funder. Equally important are non-traditional businesses providing banking services. Payments (see dedicated section of this report on pages 14 and 15) are a point “By using the HPE FinTech Innovation Model, FSIs can decide their appetite for risk and innovation, and act on it.” “Cryptocurrencies, such as Bitcoin and Ripple, are transforming payments.” Take a step forward By using the HPE FinTech Innovation Model, FSIs can decide their appetite for risk and innovation, and act on it. In some instances, firms may choose to adopt an across-the-board policy with respect to risk, only choosing to adopt mainstream technology, for instance. In other cases, FSIs may decide that innovation is critical in a specific technology or business area, and adopt technology that is less mature but enables them to gain a march on competitors. It is our hope that with this model, you will be able to discern where your company is placed, and how you can use technology to make a tangible advance. As the global economy continues to recover after the 2008 crisis, competition remains tight, and FSIs need to plan innovation carefully. We urge you to consider the best steps you can take, and to discuss with us wherever you would like to see improvement – we will walk you through real, actionable steps. The potential for success is enormous. David Rimmer, Director Financial Services; Andrew Dare Financial Services CTO; Sue Charles, HPE Labs
  • 5. Page 9Technologies for the future • New types of community banks • Increased intermediation, e.g. aggregators and comparison sites • Telephone-only banking • Online banking Definitions Research and development Shared-service provision of discrete banking services often exploiting cloud Banks consuming IT / business process services for standard banking processes, e.g. new account opening / IDV and account log-in (e.g. via Facebook) using service- orientated / cloud based models Banks entering other sectors, e.g. retail As opposed to new players entering banking; banks entering other markets, exploiting assets and capabilities such as client base, online authentication and payment mechanisms Dutch auction of products Extension of Dutch Auction principles from share purchase and elsewhere to retail financial services Distributed ledgers Shared blockchain based registers of assets, ability to apply to new assets classes in addition to currency Leading edge Crypto/Digital currencies and payment methods Virtual currencies, such as Bitcoin and Ripple, using distributed as opposed to centralised ledgers Unregulated ‘banks’ that are not technically banks Companies providing traditional banking services that do not require regulation, e.g.Ffrees Services based on over-the-top technology Exploitation of existing IT infrastructure to create new services, e.g. Netflix or WhatsApp, now used in FS New types of community banks Banks and savings institutions whose customers form a community with a shared identity or purpose, e.g. FIDOR Early adopters Non-traditional players New players entering the market from other sectors (IT, retail and telcos), e.g. Apple, Google and SnapChat for P2P payments P2P lending / crowdfunding Lending money to unrelated “peers“or investing, without going through a traditional financial intermediary such as a bank Monetisation of data Banks making use of customer data for different purposes, e.g. selling aggregated customer data to 3rd parties Online only banking / mobile mainly banking New players without any branch, telephony or postal services Mainstream New common bonds and investment principles Organisations with a purpose other than pure financial return, e.g. credit unions and social investment Increased intermediation, e.g. aggregators and comparison sites Online intermediaries allowing product comparison and facilitate customer acquisition Late adopters Telephone only banking Telephone banking as the sole channel, e.g. FirstDirect Online only banking Online banks without their own branches that only use telephony for exceptions of particular vulnerability for banks because they are one of the major touch-points with customers and are a historically significant revenue stream. Telecoms firms providing these services and new entrants, such as Simple, often work on ‘over the top’ models in the USA, offering easy-to-use services that exploit existing banking infrastructure and circumvent the traditionally high barriers to entry. Google, Apple and Snapchat are also becoming highly active. Meanwhile, no-frills e-money companies like Simple in the USA and UK-based Ffrees effectively operate as unregulated ‘banks’, because they are not technically banks. The different regulatory environment within which they operate could give them a competitive edge. New business models also allow new entrants to compete in traditional markets from a very much lower cost base. In online-only / mobile-mainly banking, IT costs will be less than ten per cent of administration costs compared with the more than 15 per cent of the larger banks, and they will have a comparable advantage in other operational costs owing to automation. A different type of threat to FSIs comes in the form of community / social media banks. An example is FIDOR, which currently operates in Germany but has plans to extend to other countries including the UK, and works as a community of users who log in on Facebook and share financial advice. Fidor converts its members from the community to banking services, polls customers on acceptable interest rates for new products and lowers interest rates when it has more ‘likes’ on Facebook. “New business models also allow new entrants to compete in traditional markets from a very much lower cost base.” New business models The change is driven by social factors, as people identify themselves less by where they live (as with a traditional local savings bank) and more by whom they regard as like-minded people with similar values. The appeal of the community model is strong. Real opportunity All of these models are threats to existing market players, but they also highlight opportunities. Shared- service provision of discrete banking services, often exploiting the cloud, allows financial services firms to dissect their processes and specialise. Banks will be able to draw from leading edge IT and business process services to save them having to handle common processes, such as account opening, identification and verification, and account log-ins. Innovation in cloud service integration and management provides the mechanism to manage the integration of these services with in-house capabilities. There will also be opportunities for FSIs to tap new revenue streams, by exploiting their assets to address new markets. An example is monetisation of data, in which banks commercialise anonymous information. 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS Further afield, banks may start to go on the offensive and enter new markets. Banks can digitally authenticate customers, take and receive payments, and they know a huge amount about their customers’ spending and finances: an ideal base to challenge segments of the retail, utilities, or insurance sectors. FSIs have to recognise the serious threats they face. Asking the key questions around long-term business strategy, by taking into account the emergence of new business models, will enable them to shape an effective long term plan of action. It is essential for their future. David Rimmer, Director Financial Services • Shared-service provision of discrete banking services often exploiting cloud (e.g. new account opening / IDV) • Banks entering other sectors, e.g. retail • Dutch auction of products • Distributed ledgers / blockchain • Crypto- / digital currencies • Unregulated ‘banks’, not technically banks • Services based on over- the-top technology • Community / social media based banks • Non-traditional players providing banking services, e.g. payments • P2P lending / crowd-funding • Monetisation of data • Online-only banking / mobile-mainly banking RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE
  • 6. Page 11Technologies for the future • Self service deposit machines • Call centre using operators and IVR • Online banking • Self service kiosks • Real-time personalisation of communication / offer • Online personal financial management • Dynamic online tools e.g. calculators • Single customer view The evolution of customer expectations is driving huge changes in FSIs. Each generation increasingly expects to interact with the technology they use at home, so businesses need to integrate new channels continuously. Advanced financial services businesses are better placed to keep up with these expectations and transform the customer experience. The challenge for smaller FSIs is developing capabilities at a low cost. For the larger companies, it will be vital to decide which of the technologies at the RD and leading edge stages they want to back. Major opportunities exist in serving expectations for seamless and intuitive interaction across channels. Many FSIs already have worked on enabling customers to self-serve through online banking and interactive voice response, and even self-service kiosks have moved to the mainstream. There are dynamic online tools to select products and online personal financial management and budgeting. Likewise, real-time personalisation has now become mainstream through tools, such as HP Inc.'s LiveSite. A new experience Early adopters are moving ahead with full online application tracking and channel hopping. This needs to be seamless so that if a customer does not complete a mortgage or savings application, a customer service representative can contact them to pick up where the application was left and complete it. Mobile technology is essential here (see also the dedicated mobile section of this report on pages 22 and 23), as it enables services to be re-thought through location tracking, speech recognition and biometrics. Mobile has tremendous potential to reduce financial exclusion since, according to the UK telecoms regulator Ofcom’s Adults’ Media Use and Attitudes Report 2014, 92% of adults own a mobile phone whereas only 82% have access to the internet at home. The point being that home broadband adoption continues to be highly correlated to education and household income. As with putting services online, successfully harnessing new channels, such as video, requires re-engineered processes. For instance, should mortgage advice provided via a video link work in exactly the same way as face to face in a branch when the customer and the advisor can share documents online? But whereas online, FSIs are following broadly comparable strategies, multiple branch formats, enabled by technology, in the branch multiple branch formats are emerging enabled by new technology quickly. Just in the UK we are seeing the Virgin Money lounge, MS pop-up branches and the fully automated Barclays branch of the future. Customer interaction: serving customers with excellence Advanced financial services businesses are investing in technology innovation to keep up with expectations to transform the customer experience. Definitions Research and development Internet of Things Exploitation of data from bank machines, customer devices, wearables, etc. Advanced analysis of customer-related data Tailored, dynamic, proactive analysis using wide data sets User interface research Natural and intuitive interfaces to improve mobile and other interactions Personal cognitive assistants Support for customer interactions using context aware advice, e.g. to manage personal finances Activate now! (STP) Account opening through a customer’s ability simply to press a button, based on pre-cleared/ populated customer data Leading edge “Branch of the future” Advanced branch technology for instant services e.g. card issuance and account opening Processes re-engineered to video Rethinking of processes and customer journeys specifically for video MyBank for sharing information Availability online of all customer documents, interactions and data for re-use and transparency Multi-party case management Workflow to manage complex transactions between banks, customers and intermediaries, e.g. mortgage applications Early adopters In-branch / online video calls with advisers Video conferencing to meet with advisers remotely Online application tracking and channel hopping Ability to save partially completed applications and to pick up WIP in different channels More complex online transactions Product switching, payment holidays, over-payments, etc. Personalised propositions Ability for customers to build their own products, and choose the economic terms, e.g. Novagalicia´s Personalised Deposit Multiple branch formats Wide variety of branch formats, e.g. pop-up branches, stores and lounges Seamless multi-channel experience for voice/digital Social media, and customer choice of channels with consistent customer experience Mainstream Self service kiosks In-branch kiosks offering banking services and/ or access to online banking facilities Real-time personalistion of communication/offer Dynamic content management using customer analytics and campaign management tools Online personal financial management Online tools to assist the customer with financial planning and budgeting Dynamic online tools Tools for customers to enter data and receive tailored advice e.g. calculators and product selectors Single Customer View Customer data aggregated from all / most systems under a “single pane of glass” Late adopters Self service deposit machines For cash and cheque deposits Traditional call centre and self service telephony using IVR First generation call centres supported by call centre staff and maybe IVR Online banking Until now, much of the technology to enhance customer interaction has supported simple transactions, with customers doing what amounts to data entry. At the leading edge, this is changing. Instead, FSIs can use technology to collaborate with customers, sharing the information they hold about a customer in an online repository containing documents, call recordings and communication. This has two impacts. Firstly, transparency increases markedly and so, too, will customer trust. Secondly, once information is shared online it is possible to make more profound changes in customer interaction. With multi-party case management a customer, an intermediary and financial services institution can securely exchange messages and documents, allowing a process such as a mortgage application to be completed quickly with much less rework. In addition, straight through processing services exploit data services to complete KYC, AML, fraud and credit checks so that decisions can be made in real time. The next step will be ‘activate now’, where customers’ applications for products and services are pre-cleared and all they need to do is to use a digital signature to sign and accept the terms and conditions. Geolocation and the Internet of Things In order to make the most of customer interaction, banks need to understand the whole journey and integrate every aspect, providing a depth and quality of customer experience. It is equally vital that they understand the future of technology development. The Internet of Things, meaning web-connected objects that interact with each other, is enabling a new outlook: there is huge potential to deliver deep customer relationships by taking contextual data from these devices to provide more responsive and tailored services. Within this, geolocation and artificial intelligence allow businesses to know and predict the desires of customers. Advanced analysis of customer-related data will increase the degree of tailored services and personal cognitive assistants will automate processes. Customers will be able to manage their financial affairs by scheduling account sweeps, balance reviews and payments. Understanding these new trends, and taking advantage of systems being used by the early adopters and leading edge companies, will allow FSIs to transform how they reach customers. By satisfying customer expectations in this way, there is an opportunity to deepen relationships and deliver success. Glynn Roberts, Financial Services Industry Practice “The Internet of Things will enable a new outlook and a huge potential to deliver deep customer relationships.” Customer interaction • Internet of Things • Advanced analysis of customer-related data • User interface research • Activate now! (STP) • Personal cognitive assistants • Branch of the future (instant card issuance, full automation, e-queuing and real-time personalisation) • Processes re-engineered for video • MyBank for information • Multi-party case management • In-branch / online video calls with advisers • Online application tracking and channel hopping • More complex online transactions • Personalisation of propositions • Multiple branch formats • Seamless multi- channel experience for voice and digital RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 7. Page 13Technologies for the future • Process modelling tools • Workflow and document management • Agent assisted automation • Legacy core banking systems Internal operations: improving innovation and efficiency Operations in back offices of FSIs have been adopting the digitised route for some time now. It is an evolutionary process rather than a revolutionary one. Definitions Research and development Cognitive Computing Systems that reason using machine learning algorithms Internet of Things Massive growth in connected devices for automation and personalisation Integrated document lifecycle ecosystem Solutions for online and physical content comprising security, forensics, authentication and workflows Software-defined infrastructure All infrastructure is defined via software for better orchestration of processes New human computer interfaces and cognitive assistants To support advice and decisions including augmented reality Leading edge End-to-end digitisation and STP Removal of physical documents, digitally processing all data to automate processes and decisions Complex event processing Using data from multiple sources within operations in real time Next gen. search, KM and analytics Retrieval and analysis of virtually all information, regardless of source or format Cloud-based / shared banking platforms Next generation core banking systems, often shared and deployed from the cloud Middle-office automation suites A single platform linking all front-end channels to back-office and 3rd party systems Open APIs Application programming interfaces based on common standards, enabling 3rd parties to develop services Early adopters Model-driven process automation Generation of automated processes from tool-based models Rules engines for complex decisions For example, for credit and fraud Task automation (robotics) Automatic population of data from one application to another Legal and eDiscovery Search, audit and hold of all enterprise content for legal, compliance and audit purposes Closed-loop knowledge management KM systems containing automated feedback to improve advice and guidance Enterprise content management Integrated systems for accessing, storing and searching content in multiple formats Mainstream Business process management Discipline and IT to manage and optimise processes Records management Systems to store and archive records in accordance with regulatory and compliance requirements Core banking packages Off-the-shelf banking packages Service-oriented approaches Development and re-use of common business and IT services First gen. knowledge management Capture, cataloguing and making available knowledge - supported by little automation Late adopters Process modelling tools Process mapping, modelling and flowchart tools Workflow and document management Automatic routing of tasks and associated documents to work queues Agent assisted automation Tools to support agents such as desktop integration Legacy core banking systems FSIs have been digitising internal operations, in the back and middle office, for many years. The work is an evolutionary, not revolutionary, process, and the objective is not just to drive down costs but to enable the creation of new products and services that depend on automation, for example, to enable immediate account opening or loan decisions. Complex processing and advanced automation Most financial services firms have at least partially implemented business process management, a single view of the customer and first generation knowledge management which have now become mainstream. But deploying these technologies across all products and processes is an immense task and huge opportunities remain for automation to reduce cycle times, exception handling and manual processing. The key is dedicating a proportion of resources every year and running short, self-funded projects using Agile development for rapid payback. Often there is no need to buy new technology: it’s more about stitching existing systems together and turning on unused functionality in software packages. Early adopters are now taking advantage of model- driven process automation, developing easily intelligible business process models that can quickly be converted into IT systems with minimal coding. FSIs become much more agile as responses to new regulations, for instance, can be implemented through updating models instead of an extensive recoding exercise. Similarly, rules engines for complex decisions allow risk and compliance functions to define and refine policies that are deployed in fully automated operational processes. Leading-edge businesses do this with complex event processing, analysing huge datasets with sophisticated algorithms to address compliance, risk and fraud while helping automatically upsell and cross-sell to customers. Essentially, they are able to apply end- to-end digitisation and straight through processing - something to which financial services firms have long aspired. This has brought leading-edge organisations to a tipping point where they can allow customers to fully self-serve which opens up the potential to design very different products and services. Capabilities to manage unstructured information have progressed enough for early adopters to have widely deployed enterprise content management systems. The leading edge now entails next- generation search, knowledge management and analytics. This enables FSIs to access virtually all of their information, no matter where it resides, and perform sophisticated analytics on technology such as HPE’s HAVEn big data platform. A further area for improving internal operations lies at a more technical level through service-oriented approaches and service integration that enable re-use of standard processes, data and interfaces. Service-oriented approaches can be considered mainstream, but many companies have not applied them right across their operations. They will be taken a step further by the creation of open application programming interfaces (APIs) based on common standards, enabling third parties to develop their own services, transforming business models and the customer experience. Task automation (robotics) is also gaining ground, enabling clerical processes to be performed by a software ‘robot’. Meanwhile, cloud-based banking systems (see pages 16 and 17) offer a different option, moving to a ‘green field’ that simplifies and automates core banking; and integration technologies such as France's StreamMind that enable processes to be streamlined rapidly. An example is SEPAmail which was delivered in partnership with HPE. Future opportunity As with all areas of their business, FSIs need to understand the technology in development. One of the key areas is cognitive computing, in which machines can learn context and apply ‘reasoned’ actions within set parameters, in order to more greatly automate business processes and real-time decision-making. Work is also proceeding on developing new human computer interfaces, including better visualisation and cognitive systems. In the design industry, HP Inc.'s Sprout creative 3D workstation allows a new and tangible way of working with a computer. No such interface changes have been developed in the office environment, and new technology such as smart wearables and cognitive processing will play a major role in changing this. The Internet of Things is equally vital to the internal operations of a financial services firm. Systems are being developed to enable data from all types of devices and systems to be streamed directly into cognitive analytics engines, improving the speed of decision-making and supporting better automation. Taking advantage of the many strands of new data, at greater volume, variety and velocity (see pages 20 and 21), enables an understanding of different customers, what they are doing and what to sell to them. FSIs must keep working on improving their internal operations in order to get the most from technology and empower innovation. HPE has practical experts who help companies to digitise operations, and drive their business forward. RalfFluegge, Financial Services Industry Practice “Leading edge businesses use complex event processing, analysing huge datasets to address compliance risk and fraud in real time.” Internal operations • Cognitive computing for greater automation • Internet of Things • Integrated document lifecycle ecosystem • Software-defined infrastructure • New human computer interfaces, visualisation and cognitive assistants • End-to-end digitisation and STP • Complex event processing • Next gen. search, KM and analytics • Cloud-based / shared banking platforms • Middle-office automation suites • Open API’s • Model-driven process automation • Rules engines for complex decisions • Task automation (robotics) • Legal and eDiscovery • Closed-loop knowledge management • Enterprise content management • Business Process Management • Records management • Core banking packages • Service-oriented approaches • First gen. knowledge management RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 8. Page 15Technologies for the future • Non-traditional FS players • Cognitive computing: for security and payment systems management • Reduced or changing regulation • Mobile activated ATM withdrawals • Person2person payments (e.g. Paym) • Contactless (Card) payments • Mobile wallet (money, loyalty and rewards) • Mobile location in card payment fraud rules • Basic biometrics • Carrier Billing • Mobile Points of Sale • Online/Banking app initiated payments • Faster payments Payments: undergoing great change after years of continuity The management of payments is a well-established process for FSIs, but the landscape is undergoing huge changes. Definitions Research and development Reduced or changing regulation Enabling new players to enter the marketplace Cognitive computing Use of machine/deep learning-based analysis for security and payment systems management Non-Traditional players Emergence of new OTT players in market evaluating how they can play in the eco-system, e.g. SnapChat with P2P payments Leading edge Cloud Based non-card Payment Emergence of alternative payment schemes, non-card based, centred around mobile (i.e. Zapp) Crypto/Digital currencies New payment methods based on emerging and virtual technologies. Examples being cryptocurrencies, such as Bitcoin and Ripple Beacons Devices typically located in retail establishments emitting radio signals that alert mobile devices to store offers and can enable online cloud based payment from an online wallet Online wallets Launched by Visa and MasterCard to facilitate payment on retail checkout pages. Improved checkout experience on VBV/3D secure a la Paypal Contactless (Mobile NFC) Payments Based around mobile wallet and payment credentials stored on SIM or utilising Host Card Emulation Tokensisation Utilisation of tokens as a replacement for PAN numbers. Complimentary to HCE solutions Early adopters Mobile activated ATM withdrawals Ability to generate a code through an app which can be used to withdraw cash from ATM without a card Person2person payments (e.g. Paym,) Ability to pay by transfer direct to account or by mobile number linked to their current account Mobile wallet Money, loyalty and rewards Contactless Card Payments Tap card at POS to pay Mobile location in card fraud rules Geo-location built in to fraud evaluation rules, in particular in relation to overseas transaction Basic biometrics Mainstream Carrier Billing Use of mobile bill to pay for goods and services through simplified billing via mobile number Mobile Points of Sale Retailers using card acceptance devices tethered to mobile devices or with embedded mobile connectivity Late adopters Online/Banking App initiated payments Online or app based access to accounts to make payments to third parties, either to personal accounts or to make bill payments Faster payments Domestic payments made between institutions same day, often immediately Payments are a crucial part of national infrastructure and help drive the economy. Even though managing payments is a well-established process for any financial services institution (FSI), this area is undergoing huge changes. For FSIs, the perfect storm is emerging: numerous start-ups are entering the payments market, prompting consumers to have increased expectations, whilst legacy technology and regulatory challenges continue to hamper service improvement and innovation. It is crucial that financial services firms understand this. Customers increasingly expect elegant and intuitive payment journeys, across devices, and they are looking for a more immersive experience. Meanwhile, FSIs are grappling is grappling with their existing systems at a time when data insight and compliance demands dominate. The struggle to keep on the lights is a priority, and when payment systems fail, the reaction on social media can be very damaging. In spite of the disadvantages that established players – such as banks, card issuers and online wallets, including PayPal – face in quickly adapting to new challenges, those firms continue to dominate consumer payments. The reason is that customers trust them and have already set up their money there. But without action, start-ups could take away chunks of business. A new environment For FSIs, by understanding the technology approaches of their competitors, as well as the opportunities, there is a strong opportunity to push ahead. Among early adopters, mobile payments have been a focus. In Poland HPE implemented person-to- person payments for Polski Bank, allowing people to pay others by simply entering a mobile number and to withdraw money from an ATM using their phone instead of a card. Hewlett Packard Enterprise is now moving to the next stage in the technology'smaturity by developing a solution called blik across aconsortium of Polish banks. Meanwhile, for online retailers e-wallets allow consumers to store payment details for quick transactions, and in-store mobile points of sale and contactless card payments are also becoming popular. Mobile-activated ATM withdrawals allow people to take out money simply using a code from an app. At the leading edge, cloud-based non-card payment systems, such as Zapp, and biometrics for authorisation of mobile payments, including Apple’s Touch ID, are easing and speeding buying processes. In research and development, over-the-top non- traditional FS players, which provide services using existing banking infrastructure, are evaluating what they can do to take a further role in the market, at a time when cryptocurrencies, such as Bitcoin, are revolutionising payment. Modernising payment methods In order to stay ahead of the curve, established businesses need to react to the changing competition, customer demands and the technology on offer. Alongside a transformation in their payments infrastructure, they can draw on HPE’s strong experience in finance, processing, broader technology and outsourcing, no matter where they reside in the payments eco-system. Among the most important innovations, many financial services firms are interested in working on recent developments around host card emulation, in which appropriate smartphones can effectively act as contactless payment devices. Equally, tokenisation means payment card data can be robustly protected in these transactions. This opportunity cannot be missed: by taking advantage of the changes, financial services firms can embed contactless mobile payment capabilities within their standard apps. At the same time, value added services are booming. Customers using newer forms of payment channels, such as mobile, increasingly expect a more in-depth experience. By adding rewards and location-based vouchers, within existing mobile banking or payment apps, companies can secure greater business. Making the most of these incoming opportunities is essential for FSIs in remaining ahead of the curve in the hugely competitive payments arena. The potential is there for the taking. Markus Orth, Payments Practice “Many financial services firms are interested in working on recent developments around host card emulation.” Payments • Closed non-card based payments (i.e Zapp) • Beacons • Online Wallets (V.Me and MasterCard Paypass) • Contactless (Mobile) Payments – SWP or Host Card Emulation • Tokenisation • Crypto/Digital currencies RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 9. Page 17Technologies for the future • Traditional infrastructure • Public cloud for non-critical systems • On-premise private cloud • Converged infrastructure • Service Integration and Management • Evolving computer architectures such as The Machine • Software-defined infrastructure • Cognitive computing for real-time automated service management • Advanced analytics and Big Data processing for the Cloud (*aaS) as well as “the Edge” (IoT) The financial services industry has often looked at cloud computing through a sceptical lens. Concerns over where data resides, privacy, security and the capacity of systems have dominated this debate. However, we are seeing the tide turn, and financial services firms are starting to exploit the many opportunities cloud computing provides. For FSIs to understand cloud and the opportunities available for them, they would be wise to consider it from two angles: horizontally, using cloud for IT infrastructure; and vertically, applying cloud to consume business applications and services over the internet. Transforming infrastructure The attractions of cloud for computing power are evident: speed, flexibility and pay per use. As a result, public cloud for non-critical systems has now become mainstream – as has on-premise private cloud for mission critical systems, where businesses establish dedicated services within their firewall. For example, Deutsche Bank and HPE have announced a ten-year, multibillion dollar agreement, under which HPE will provide dedicated data centre services on demand, including storage, platform and hosting. Early adopters, meanwhile, are moving towards more advanced off-premise private cloud and virtual private cloud. The Leeds Building Society is one such Cloud: a bright road ahead After a great deal of initial scepticism, the financial services sector seems to be understanding much better the real benefits that can be derived from cloud computing. Definitions Research and development Evolving computer architectures such as The Machine Reinventing the fundamental architecture of computers to enable breakthroughs in performance and efficiency Software-defined infrastructure Infrastructure defined via software for better service management and orchestration Cognitive computing Machine learning-based analysis for real-time automated service management Advanced analytics and Big Data processing for the Cloud (*aaS) as well as “the Edge” (IoT) The concept that data, processing and analytics will occur in highly distributed environments and exploit data from multiple sources Leading edge Cloud-based banking platforms Core banking software architected for the cloud. Cloud-based bureau services Cloud based services on a pay per use basis, e.g. credit data and payments Cloud storage and collaboration for customers “Personal cloud” for brokers and customers to store documents and information for re-use SDI Software defined infrastructure allows infrastructure to be administered by software Service Management of Hybrid environments Bringing together public, private and virtual private clouds under a single service delivery model Seamless Service brokering Brokering of services, as opposed to systems, from public, private and virtual private clouds through a single pane of glass Early adopters Private cloud and virtual private cloud for critical systems Computing via elastic pay per use infrastructures in vendor DCs or on site Cloud end-to-end managed development and test Delivered in an elastic manner and pay per use PaaS Platform as a Service is the combination of cloud based infrastructure and software stacks to provide a platform such as e-mail IaaS Infrastructure as a Service delivers cloud based compute platforms Branch virtualisation Delivery of branch systems on a virtual / cloud model allowing central management of applications Cloud-based storage Storage hosted in cloud environments Mainstream Public cloud for non-critical systems Public cloud based systems for non- critical systems such as HPEcloud.com for development projects On-premise private cloud Cloud environments within an organisation’s own DC facilities Converged infrastructure Infrastructure where components are grouped into a single, optimised computing package Service Integration and Management Provision of single service management and integration platforms Late adopters Traditional infrastructure delivery Such as mainframes, servers etc. based in customer or hosted data centres organisation, using HPE’s virtual private cloud for a fully hosted core application for mortgages and savings.Adoption of cloud alongside traditional IT leads to hybrid environments, and leading edge businesses are employing service management of hybrid environments to manage public, private and virtual private clouds in one seamless delivery model. A quantum leap in software delivery Within applications, a major change is taking place in how FSIs draw from the cloud. Historically, software as a service has been used for non- banking applications including human resources, finance and sales. But at the leading edge, financial services firms are connecting to cloud-based, shared banking platforms, in which the core banking software has been designed specifically to be delivered in the cloud. The potential is great: banks can make large savings in operational costs, compared to managing systems themselves, while enabling faster change. Those companies at the leading edge are even prepared to trade lower costs and higher flexibility for less functionality when the situation requires it. Meanwhile, cloud-based applications are enabling brand-new business models, transforming customer service and the structure of the financial services market. They are generally consumed on a pay per use basis, and include cloud-based services for data and payments, and even account opening. Cloud services can also enable more collaborative customer service models, for example, cloud storage customers / brokers and financial services firms for the processing of mortgage applications. With the Internet of Things (IoT) connecting everyday objects to the web, so that they can communicate with each other and humans, there will be greater interaction between automated processes. Traditional computing will not be able to process these volumes of data. The cloud will be the only option for organisations that want to design new services based on real-time, context-rich data from the IoT. But, ultimately, even the cloud will not generate enough computing power to meet the demands of big data and IoT. HPE Labs’ biggest project is The Machine, which aims to reinvent the basic architecture of computers. Grab the opportunities Within this complex landscape, there are two vital areas in which all banks can experience a dramatic advance by making use of the cloud: speeding up development and testing and virtualising branches. All FSIs are hampered by projects moving slowly through a complex web of development and testing. In order to expedite this, leading edge organisations are turning to the cloud for end-to-end managed development and testing. This opens up a common development and testing architecture to enable agile development, collaboration and smooth transition from each stage of the lifecycle. Finally, branch virtualisation, in which cloud infrastructure is managed centrally across all branches, offers huge benefits, including a cut in operational costs and allowing reliable and fast change. FSIs must take note of the many opportunities created by the cloud, and of the way that challengers are able to launch new cloud-based services. The businesses that see best where and when to adopt the technology are the ones that will succeed. Andrew Dare, Financial Services CTO “New businesses are entering the market at a lower cost, thanks to cloud-based shared banking platforms.” Cloud • Cloud-based banking platforms • Cloud-based bureau services • Cloud collaboration for customers / brokers • Service Management and orchestration of Hybrid environments • SDI • Service Management of Hybrid environment • Seamless Service brokering • Off premise private cloud and virtual private cloud • Cloud end-to-end managed development and test • Platform as a service (e.g. for e-mail) • Branch virtualisation • Cloud-based storage • IaaS RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 10. Page 19Technologies for the future • Electronic document authentication • Mobile phone for two-factor authentication (e.g. Mobile secured credit card) • Two factor authentication • Enhanced web security • Resilient security and privacy approach • Dynamic data lifecycle security and privacy • Cognitive Security • Integrated document lifecycle ecosystem • Secure network architectures • Next-gen encryption • Next generation biometric security Definitions Research and development Resilient security and privacy approach Dynamic, proactive, and self-healing across entire FS security “kill-chain” Dynamic data lifecycle security and privacy Secure data management across the entire data lifecycle Cognitive Security Use of machine/deep learning-based analysis that supports data security and privacy for resilient systems (see above) Integrated document lifecycle ecosystem Solutions for document/content (online and physical) security, forensics, authentication, tagging, document workflows Secure network architectures Secure peer-to-peer networks (using block chain protocols) for transactions, contracts and other financial activities Next-gen encryption Ability to do processing/analytics on secure (encrypted) data; may include advances in homomorphic encryption and other techniques Next generation biometric security Going beyond fingerprints towards facial recognition, blood vessel analysis, retinal scan etc. Leading edge Geo- and behavioural data for transactional security Identify and stop potential fraudulent transactions by comparing against analysis of typical behaviour and customer location for that account Mobile payment fraud prevention Fraud prevention specifically aimed at mobile applications and payment solutions Data-centric encryption and tokenisation End-to-end protection of the data itself, e.g. HPE’s Voltage Crypto/digital currencies New payment methods based on emerging and virtual technologies. Examples being crypto-currencies, such as Bitcoin and Ripple Early adopters Voice authentication Use of voice characteristics to identify and verify customer identity, usually in contact centre Federated identity / shared authentication Use of third parties for identification purposes e.g. “sign on with Facebook” Basic biometrics Use of unique biological markers, mainly fingerprints, to identify and verify customer identity Mainstream Electronic document authentication Providing a secure authentication mark on documents such as e-signature Mobile phone for two-factor authentication (e.g. Mobile secured credit card) Alternative two factor authentication protocols for mobile devices where the shared platform for app and communication could represent a security risk Late adopters Two factor authentication Two factor authentication using physical tokens Enhanced web security Greater web security based on combinations of PIN code and passwords. Text validation of transactions Financial Services are the driving force behind these figures, revealed in an HPE Survey conducted by the Ponemon Institute, is the growth of the digital economy and the associated black market. IT security is a critical issue for any financial services business, and it enables all of the other technology to work effectively and safely. Traditionally, FSIs have had their focus on the perimeter, using firewalls to stop hackers getting in. Now, companies need to assume a state of compromise, focusing on protecting the data such as with advanced persistent threat protection, based on the philosophy of defence in depth. Segmentation and end-to-end control The continuous innovation of cybercriminals means that FSIs need to stay abreast of security. Early adopters are already conducting proactive segmentation and monitoring of their systems and data, identifying which are the most essential assets, applying appropriate defenses based on risk and sensitivity. They are also exploiting big data for enhanced security and fraud detection, processing huge volumes of information to identify intrusions or internal compromises. Extensive work is also going ahead around federated identity, in which a single authentication token is trusted across multiple organisations. In Denmark, a person logs into their online bank and is able to access the systems of other trusted organisations. The same principle is even used to enable collaboration across US defence. Federated access improves take-up of digital services because people do not need to register countless times and remember multiple logins. At the leading edge, financial services companies are going much further to protect themselves and their customers, with end-to-end next wave security operations centres, which observe and control security on all levels, from technology to buildings, including swipe cards, third party access and CCTV. Security: keeping a step ahead of cybercriminals With cybercrime on the increase and posing a more serious threat to companies, sound IT security has become of paramount importance. Such businesses are equally looking to encrypt at the data level, rather than just at network entry. Through Voltage Security, a company acquired by HPE, businesses can take advantage of encryption built into the data itself rather than simply protecting at the network edge. Consumerisation and security The consumerisation of technology is transforming how FSIs secure their systems and customer accounts. While banking access online has traditionally been a combination of passwords and two factor authentication devices, the proliferation of smartphones has made authentication available through generating a unique code on a banking app. Meanwhile, voice authentication has gained ground in New Zealand, where one million people have signed up to access Inland Revenue Department services through speech identification that allows customers to automatically check their account balance, track tax refunds, and reset passwords. In addition to this, with the fingerprint scanning and facial recognition capabilities on newer smartphones (see also the article on mobiles on pages 22 and 23), banks are able to use next generation biometric security to control access to accounts. At the leading edge, companies, such as Halifax, are trialling access on cardiac pattern authentication, through a wristband. It is also possible to authenticate customers by the blood vessels in their fingers, or by examining their eyes. Businesses also need to be aware of the technology that is in development in order to map out their long-term plans. Cognitive security allows artificial intelligence to learn the context of data. Other work in the research phase includes proactive security response across the entire ‘cyber kill chain’ through both the hacker’s testing and subsequent execution of their attack, as well as full security across the integrated document lifecycle in which papers can be quickly compared and verified. It is essential, therefore, that FSIs understand these trends so they can act. With the right security in place, they can make the most of other technology while knowing their data is well protected. Chris Cooper, Security Practice “The continuous innovation of cybercriminals means that FSIs need to stay abreast of security.” Security • Geo- and behavioral data for transactional security • Mobile payment fraud prevention • Data-centric encryption and tokenisation • Crypto/digital currencies • Voice authentication • Federated identity / shared authentication • Basic biometrics RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 11. Page 21 • True in-memory computing • Evolving computer architectures such as The Machine • Advanced analytics using deep learning/cognitive systems • Internet of Things • Advanced analytics as-a-Service • Dynamic data lifecycle security and privacy • Business intelligence - Structured data (mostly internal) - Retrospective reporting and analysis - Periodic / batch • Analysis of siloed unstructured data (e.g. voice) • Real-time consumption of external data services • Traditional static visualisation tools • Automated data cleansing • Aggregation of internal structured and unstructured data • Social media monitoring • Data lake • Advanced dynamic visualisation tools • As-a-service IT deployment models • Schemaless Databases • Big Data across the enterprise • Real-time • Extreme scale • New data sets, many machine generated • Optimisation and prediction • Data monetisation • Data stewardship approach Technologies for the future Definitions Research and development True in-memory computing (or non-volatile memory) to enable extreme scale analytics on devices of all sizes Evolving computer architectures such as The Machine Reinventing the fundamental architecture of computers to enable breakthroughs in performance and efficiency Advanced analytics using deep learning/ cognitive systems For real-time prediction, decision making and automation Internet of Things (IoT) Use of machine-generated data in real-time for analysis and automation of transactions Advanced analytics as-a-Service Predictive and “real” cognitive analytics delivered via cloud Dynamic data lifecycle security and privacy Secure data management across the entire data lifecycle Leading edge Real-time Real-time querying or continuous updating of pre-set data views Extreme scale 100% of data Aggregation of data from wider sources Broadening of data sources (especially web and social media) Optimisation and prediction Models for optimisation and prediction with ability to run ‘infinite’ scenarios Data Monetisation Using customer data for new purposes, e.g. selling aggregated customer data to 3rd parties Data Stewardship tools Tools that support stewardship of data across the lifecycle and cleansing at multiple points Early adopters Aggregation of internal structured and unstructured data Combination of data in various formats to create a single customer view and support analysis Social media monitoring Real-time monitoring to follow trends and identify customer service issues Data lake Storage of large amounts of data whose subsequent value and use is determined through test As-a-service IT deployment models Analytical tools, mostly cloud-based, especially for discovery and test of new data sets and tools Advanced visualisation tools Dynamic data, visual querying, linked multi-dimensional, visualisation, animation, personalisation, and actionable alerts Schemaless Databases Databases where data that is modeled in means other than the tabular relations used in relational databases Mainstream Real-time consumption of external data services Access to data provided by data bureaux as a service, e.g. credit records Analysis of siloed unstructured data Tools to monitor and analyse unstructured data (voice, video, text) Traditional visualisation tools Static visualisation tools presenting data with relatively little ability to support interaction Automated data cleansing Tools, processes and governance for data parsing, profiling, matching, validation and enrichment Late adopters Business intelligence Exploitation of structured data using datawarehousing and operational data stores primarily for reporting and online analytical processing Big data analysis is having a transformative effect across science. In genetics, researchers are analysing large sets of data and finding associations between genes and diseases to fulfill the promise of personalised medicine. In astronomy, the data that has come back from the Hubble Telescope has transformed our understanding of the universe. In financial services, however, the impact of big data has barely been felt. Yet, over the next decade, every aspect of a bank or building society, from risk and compliance to marketing and operations, will be transformed by managing and analysing big data. The ability to harness information is driving innovation in other technology domains, including security. According to Gartner, a leading information technology research group, big data is not just about the volume of information, but also about its variety and velocity and complexity - and the topic is best thought of across each of these dimensions. Winning in these areas gives organisations real insights they can apply to operations and strategy. Data deluge Data-warehousing to store and process siloed information has now been deployed for more than 25 years and is mainstream. Even so, in most businesses, the potential to exploit it further remains substantial, with islands of information scattered across Big data, big opportunities It is not just a case of the volume of information gathered, but also about its variety, velocity and complexity and most importantly how quickly intelligence is created and acted upon. the enterprise. This is one reason why business intelligence investment continued after the global financial crash in 2008. By using ‘schemaless’ databases, early adopters upload structured and unstructured data, and draw out useful information. They can process huge volumes of it, and still derive useful responses, pulling on vast data lakes, which are made possible by cheaper storage. They work on the principle of a business collecting whatever it can and then assessing it, instead of deciding what to store before keeping it. Many FSIs already process an ever-growing variety of data that is drawn from outside the boundaries of their own organisations, with a recent area of interest being sentiment analysis of social media. Early adopters, however, also look at more broadly-located datasets, such as geographical and government information. At the leading edge, they use image processing to match a video or a still photograph to a database when a person walks into a bank. Underpinning all these techniques are data stewardship systems, which are vital to help manage and oversee information assets and ensure they are easily accessible in a standard format. In terms of the high velocity of data processing required for fast analysis, at the leading edge sophisticated work is taking place to run in-memory databases and complex event processing allowing potential fraud detection as it happens. Analytics are being embedded across the enterprise, within objects and wearable technology connected to the Internet of Things, with banks using machine- generated data in real time for analysis and automation of transactions. Extreme scale processing gives those companies fast results. Evolving computer architecture is in the development stage, to support massive data volumes. Deriving useful insight Historically, businesses have run dashboards and reports in order to gain insight. This will continue, but they will need to add new ways to interpret data, progressing from static visualisation to advanced dynamic visualisation that allows people to explore data. This reflects somewhat of a change in how data is used. No longer are people only tackling standard, known-world problems, they now want to discover new patterns and unknown relationships, for example, to cluster the data and draw out predictive analytics from a variety of segments. These techniques are essential in fields such as legal and e-discovery where complex models are used to identify activities and underlying patterns across large sets of structured and unstructured data. At the leading edge, real-time analytics on a variety of data is crucial. In addition, machine learning, or self-optimisation and prediction, means algorithms become cleverer. At the research and development level, natural language queries will see more intuitive responses drawn out of databases, instead of the user having to enter exactly the right wording. How to succeed The only way to succeed in all of these data areas is to have the right data scientists in place, as well as the people who can bridge the gap between them and the business users. New and more advanced tools will assist the business users in this area and will allow some degree of self-service but ultimately the variety, velocity and complexity of data will require specialist skills and experience. HPE can guide organisations on this journey, starting with improving basic functions before advancing. Shaun Connolly, Analytics and Data Management Practice Big data “At the leading edge, sophisticated work is taking place to run in-memory databases and complex event processing.” RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 12. Page 23Technologies for the future • Information services • SMS • Balance and payment info • Basic greater apps • Person2person payments • Mobile wallet • Basic biometrics • Business banking services Definitions Research and development Wearable devices Services accessed via wearable devices such as smart watches and Google Glass New user interfaces To provide more intuitive services via mobile Next generation biometrics Going beyond fingerprints towards facial recognition, blood vessel analysis, retinal scan etc Personal clouds or “servers” Continuous broadcasting of data from mobile devices creating opportunities for real-time services New nano- and compute- technologies New forms of non-volatile memory, photonics, and architectures for tiny devices Leading edge Branch queuing App to start queuing at a branch before a customer arrives Greeter apps exploiting customer data Branch greeter using tablet to advise action according to the particular customer Contactless mobile payments Chip embedded in mobile phone linked to payment card that enables contactless payments Geo-services / context awareness Mobile app to determine user location and present relevant data, such as nearest branch and local offers Mobile scanning / image capture Mobile / tablet cameras to capture document images Closed non-card based payments Alternative payment schemes centred on mobile (e.g. Zapp) Augmented reality Layering of digital information, such as video, on top of the physical world to enable customer interaction, e.g. HP Aurasma Mobile payment fraud prevention Fraud prevention solutions aimed at mobile applications and payments Early adopters Business banking services App functionality for business customers Basic biometrics Use of unique biological markers, mainly fingerprints, to identify and verify customer identity Basic greeter apps Branch greeter using tablet to provide generic greeting service Person2person payments (e.g. Paym) Payment by direct transfer to account or by mobile number linked to an account Mobile wallet Money, loyalty and rewards Mainstream Mobile optimised site and forms Websites that automatically adapt content for mobile devices Non-payment transactions Low risk transactions, e.g. inter-account transfers, within a single institution Mobile Points of Sale Retailers using card acceptance devices tethered to mobile devices or with embedded mobile connectivity Late adopters Information services Generic information, e.g. product info. and contact details SMS SMS to update customers, e.g. on the status of an application, to request information or to prevent fraud Balance and payment info Viewing of account information Mobile: becoming further entrenched in our daily lives The ever-stronger importance of smartphones and tablets in our daily lives is undoubted. As such, it is fast becoming the financial services companies’ primary channel of contact with its customers. Mobile websites and apps used to be an optional add-on for FSIs. Increasingly, financial services firms have a strategy of mobile first, or even mobile only. Providing all services on mobile, and making it the primary channel of contact with the customer, makes sense given the technology’s popularity and strengths. Crucially, mobile technology opens up banking to many more people. While many have been excluded because of a lack of broadband internet, the proliferation of smartphones and tablets means there is a much greater access to financial services. The starting point for mobile has been the provision of information services including branch opening times, as well as balance and payment information. In the mainstream, most financial services companies have taken a step further to offer mobile-optimised sites and forms. Inter-account transfers and other non-payment transactions are also now commonplace. Geolocation and full mobility The next stage in mobile has been to re-think services, as opposed merely to enabling existing online offerings to be accessed on mobile devices. Mobile is a more powerful channel, because mobile devices can readily incorporate voice, camera and biometrics. Moreover, most people carry their device with them all the time. The combination of GPS and carrier information means companies know where someone is when they use their device. This launches a completely new type of app, one that understands ‘context’. Early adopter financial services firms are focusing on offering mobile payments, such as person to person (P2P) payment services, including industry initiative blik (see payments section on pages 14 and 15 for more info). Mobile wallets, in which card details are stored, as well as loyalty and rewards coupons, are increasingly popular. Consequently, there is a growing need for mobile payment counter fraud that makes use of transaction, customer, device and location data.Within branches mobile points of sale are increasingly popular in-place of the traditional ‘service window’. This has major impact on the improvement of customer service, the number one generator of customer loyalty. A basic greeter app, that allows a branch employee to gather information about a customer and why they are visiting the branch is another major step forward being pursued by many early adopters. At the leading edge, geolocation and context awareness services are crucial. This means users can download a bank’s mobile app and be presented with relevant information on their current location, such as the nearest branch and local offers, and even line up in the queue virtually, before they arrive. Equally, augmented reality technology on mobile phones gives banks the chance to improve the experience on screen – such as Westpac in New Zealand, which is allowing customers to scan their cards and see a visual graph of categories they have spent in. Augmented reality can also be used in retail so that customers scan images in shops, online and in shopping catalogues. Contactless mobile payments allow customers with NFC-enabled phones to easily make in-store payments at various retailers by touching their phone to a reader. The strength of technology on mobile devices opens up other opportunities, and at the leading edge, biometrics allow the use of voice, image or video, or even fingerprint or iris scans, to access applications. Business banking is inherently more complex than pure retail banking and leading edge financial services firms are only now thinking through how it can be optimised for mobile, such as enabling companies to check their payroll run and find out the latest cash flow situation. Leading-edge FSIs are also using mobile scanning and image capture so that the same technology employed in a central scanning centre can now be deployed to the mobile device. Intelligence can be applied to the process to enable banks to recognise quickly what the document is, such as whether it is a driving licence or utility bill, and to quickly extract the key information or flag an exception. The future Mobile devices are enormously more powerful than laptop technology, because of their immense functionality and the fact that customers nearly always have the devices with them. As the Internet of Things takes off, including connecting wearable devices, there is the opportunity to embed further high performance, nano and compute technology on mobile and advanced IoT devices. Meanwhile, a more immersive experience with intuitive services can be provided on smart watches and glasses. Work is also going ahead for distributed mesh computing, in which servers are located in many locations to help process and analyse the massive amount of data from IoT devices. Additionally, personal clouds enable users to store documents and to draw on contextual services based on their activities and location. FSIs need to start with a mobile-first mindset, if they are to take advantage of all the new opportunities available to them. This thinking enables the proper back and mid office operations to be established, as well as the right security. By taking advantage of the systems on offer, they can capitalise on customer opportunities and greatly improve the digital customer experience. Paul Evans, Mobility and Digital Customer Experience Practice “Personal clouds enable users to store documents and to draw on contextual services based on their activities and location.” Mobile • Wearable devices (e.g. Google Glass) • New user interfaces including advanced augmented and virtual reality • Next generation biometrics security • Personal clouds or “servers” enabling contextual services • New nano- and compute- technologies • Branch queuing • Greeter apps exploiting customer data • Contactless mobile payments • Geo-services / context awareness • Mobile scanning / image capture • Closed non-card based payments • Augmented reality • Mobile payment fraud prevention • Mobile optimised site and forms • Non-payment transactions • Mobile Points of Sale RD 80%-100% LATE ADOPTERS 50% MAINSTREAM 25% EARLY ADOPTERS 5% LEADING EDGE 2-5 YEARS 1-3 YEARS 2-5 YEARS 5+ YEARS 2+ YEARS
  • 13. Page 25Technologies for the future Conclusion: choosing the optimum model The way forward for FSIs to approach innovation is to plan carefully and identify which technologies have the most potential. Four technology megatrends are having a huge impact on financial services organisations. Cloud computing, security, big data and mobility are providing significant opportunities for FSIs to strongly grow their business and enhance efficiency. These trends offer financial services organisations the opportunity to maximise their core business areas of customer interaction, internal operations and payments. Technology is also enabling disruptive business models that bring both threats and opportunities. “By taking action now, financial services firms can gain a march on their competitors and stay well in front.” Now is the time that businesses must act, drawing on the expertise in this model. With global economies growing and regulation increasing, expectations are high for FSIs to meet the challenges and deliver innovative, reliable, intuitive and personalised services. The only way to approach innovation is to plan carefully and identify which technologies have the most potential. In order to achieve this, the first step businesses need to take is to discuss where they are along the innovation lifecycle described in this report, in each of the megatrends and core business areas. Following this, they must decide where they want to be in commercial terms and what their risk appetite is. HPE, with its extensive experience in financial services, can help guide banks and building societies of all sizes through these complex and strategic decisions. By taking action now, financial services firms can gain a march on their competitors and stay well in front.
  • 14. Page 27 For further information, contact: David Rimmer Director, Financial Services HPE Enterprise Services Mobile: +44 (0)7790 490827 Email: david.rimmer@hp.com Andrew Dare Chief Technologist, Financial Services UKI HPE Enterprise Services Mobile: +44 (0)7717 541277 Email: andrew.dare@hp.com