“When looking at exploiting them from the web, if you let “imagineers” run away with what they “might” want, you’ll fail. You have to start with exposing the transaction and database as a set of core services based on the first application that will use them. Define your API structure to allow for growth and further exploitation. That’s what we successfully did for NatWest. The project rolled out on the internal IP network, and a year later, to the public via the Internet.” Original source: API’s and Mainframes
Eventually every advisor will be a robo-advisor, which means there will be convergence.
Without some marketshare numbers, it’s tough to tell if the banking startups are making a dent against incumbent banks. Josh Brown suggests that banks are quick to catch-up and have nullified any lead that companies like Weathfront could have made:
It wasn’t long before the weaker B2C robo-advisors folded, the middling players were acquired and the incumbents launched their own competing platforms. The miscalculation on the part of the disruptors may have been the idea that they had years of lead time to scale up their assets before the lumbering giants of the industry would be able to fight back. Turns out they only had months, not years. Charles Schwab and Vanguard launched their own versions of the service and the mindshare / market share battle was joined.
From what I see out there, banks are quick to adapt and adopt new ideas into their businesses. While they’re beset with endless legacy IT and technical debt, they churn ahead nonetheless, e.g.:
While past performance is no guarantee of future results, and even though all the company’s results cannot be entirely attributed to BBVA’s digital transformation plan, so far many signs are encouraging. The number of BBVA’s digital customers increased by 68% from 2011 to 2014, reaching 8.4 million in mid-2014, of which 3.6 million were active mobile users.
Acquisition isn’t always failure, or victory
On the narrative framing side, it’s easy to frame a startup being acquired as “failure” and success for incumbents. That’s not always the case, and suggests a zero-sum view of innovation in industries. Acquisitions can have winners and losers – as with valuing anything, like real estate, the valuation could be wrong and in favor of the buyer or seller.
However, in the ideal case of an acquisition, it makes strategic sense for the buyer to spend their time and money that way instead of trying to innovate on it’s own. For the startup being acquired, they’re usually near the end of their gamble of sacrificing profit in favor of innovation and growth and need someone to bring them to the black.
A brief note, from William Fellows at 451, on HSBC’s use of Google Cloud’s big data/analytical services:
They have lot of data, that’s only growing:
6PB in 2014, 77PB in 2015 and 93PB in 2016
What they use it for:
In addition to anti-money-laundering workloads (identification and reducing false positives), it is also migrating other machine-learning workloads to GCP, including finance liquidity reporting (six hours to six minutes), risk analytics (raise compute utilization from 10% to actual units consumed), risk reporting and valuation services (rapid provisioning of compute power instead of on-premises grid).
As I highlighted over the weekend, it seems like incumbent banks are doing pretty well wtih all this digital disruption stuff.
By changing its development practices and investing in a private cloud platform as a service, there have been clear benefits to the business. “Historically it would take two or three days for a deployment to go to production, with lots of manual production. Now with the apps in the garages we can do it on the basis of Cloud Foundry within minutes.”
So why is everyone, including us of course, so excited? Because the benefits are extensive:- decentralisation, reliability, simplification, transparency, traceability, cost saving, reduced room for error, faster transactions and improved data quality… just to mention a few!
I don’t really understand any of this, but it seems like a thing.
It’s always good to see what goals and plans companies have with their IT projects. Here, you can see Standard Charter’s desires mapped to business goals:
As Derek du Preez says in the article I lifted this from:
The financial services sector – particularly retail divisions – are facing an incredibly challenging time. Many banks are still crippled by ageing mainframe systems, data silos and creaking infrastructure that means that not only are staff productivity levels incredibly low, but the customer experience is horrible.
Plenty of work to be done.
You can get a sense of the types of projects and applications of cloud native banks are interested in by looking over these Capital One startup contest winners:
– Credit Kudos – an alternative credit scoring platform that measures credit worthiness using real-time transaction data captured automatically from the borrower, providing a transparent and up-to-date view of a person’s credit profile. Freddy Kelly, CEO of Credit Kudos, said: “Our aim is to change the way credit scoring works, from an opaque black box system to something that allows individuals to get the most value from their data. As a pioneer in lending, we believe Capital One is the perfect partner for us to bring Credit Kudos to the market.”
– Multisense – a secure end-to-end solution put together as a user-friendly mobile platform which includes face, voice and fingerprint recognition which can be combined with GPS and NFC. Aviram Siboni, CEO of Multisense, said: “Being part of this accelerator programme is an amazing opportunity. Not only to get the chance to join forces with Capital One, but also to bring our biometrics authentication platform a step closer to the UK market – it’s such an incredible time for us to innovate alongside Capital One.”
– Pariti – a mobile banking app enabling users to take control of their money, reduce interest payments and start saving. The app connects to separate bank accounts and credit cards and automatically identifies income and bills so users know what they can safely spend each week. Matthew Ford, CEO and Founder of Pariti, said “It is extremely exciting to have been selected to go forward in this process and I look forward to working very closely with Capital One to further develop Pariti and enhance the future of banking.”
– Warwick Analytics – a provider of automated predictive analytics that can remove the 80% of time data scientists need to organise and process data prior to analysis. Dan Somers, CEO of Warwick Analytics, said: “We’re delighted to be part of Growth Labs and working with Capital One – one of the most innovative financial services companies. We are looking forward to collaborating to develop disruptive solutions for them and for this sector.”
– WealRo – a real-time assistant for savings and investing that aims to use AI technology and machine learning to find areas of a user’s budget where savings can be made. Owen Haggith-Khonje, WealRo’s founder, said: “Growth Labs presents a fantastic opportunity for WealRo to receive world-class mentoring, with the hope of building a long term relationship with Capital One that positively shapes the financial landscape.”
There’s a mixture of optimizing existing services (better authenticating, credit scoring, improving data analysis), but also analytics-drive services that encourage customers to keep more money in the bank (savings).
When Capital One started to roll out agile development in 2011, Wolfs said it amounted to just one percent of software that was delivered. Today, 85 percent of software is delivered by the agile method. With agile, Capital One now also releases approximately 400 product releases a month, has cut delivery times to three to six months while “cutting costs significantly” and has 95 percent of products meet expectations on the first release, according to Wolfs.
That 400 releases figure speaks to the scale of the applications supported in large banks. Getting a handle on the population of custom written software (that is, NOT package software in use, but software the enterprise has written itself) is difficult, so tracers like this are helpful.