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Reinventing Banking for Speed and Security

Maywun Wong
Director, Product Marketing

The Challenge: Maintaining a competitive edge, while increasing customer loyalty in a rapidly changing digital world.

Expectations of retail and commercial bank customers are changing. Banks are now expected to offer a superior digital experience, customized for each customer's personal preferences, that provide solutions and financial services to customers—not just transactions. To remain competitive in the modern marketplace, they must transition from a purely transaction-based business model to deliver data-driven, meaningful experiences to the modern consumer.

Shaped by the recession and student loan debt, millennials are having a massive effect on the financial industry, more so than any generation before. Legacy banks have been disrupted by savvy fintech startups, like Venmo, who have changed how society is interacting with money. Banks, and even older financial tech companies like PayPal, have recognized the need to evolve fast and often to meet the ever-changing demands of digital natives. IT in particular are under immense pressure to speed up web and mobile banking response times and to develop new apps to meet customer needs in real-time. Many are seeing the benefit of developing partnerships with third-party financial services providers to meet these needs. 

These shifting consumer demands are driving a digital revolution across all industries. For banks specifically, millennial consumer behavior is putting increasing pressure on the IT infrastructure of banks to rapidly create, capture, and process growing volumes of data—and analyze it in real-time so banks can better serve this new generation.

What are the key drivers for better banking IT infrastructure, and how can banks build it efficiently? For one thing, infrastructure must address the growing needs of the modern consumer and be flexible enough to adapt to unknown disruptions of the future.

  • Retail customer trends is placing pressure on old banking IT infrastructure. Retail banking customers increasingly rely on digital access to their banks. For example, more than 68% of millennials say desktop or mobile is their most frequent channel of interaction with their banks. Banks are upgrading their legacy infrastructure for improved speed and performance as well as developing apps to be used for more complex proceses like financial planning, loan applications, and portfolio asset management. These apps generate vast amounts of data, and require fast processing speed so that users can manage, send, or receive their money in real time. Because you don't want to get in way of someone and their money.
  • New ways to pay require stability and security. Alternative payments are taking hold with consumers, and banks are having to accommodate their expectations. The use of mobile wallets is projected to grow, for example iPay and Google Wallet, from 19.4% of U.S. smartphone users in 2016 to 33.1% by 2020. And person-to-person (P2P) payments like Venmo and Square's new Cash App have become increasingly commonplace. To remain competitive, many banks are now offering P2P payment services to their customers, often white-labeling through third-party providers to meet needs immediately. While these alternative payments may often flow through non-bank providers, a connection to banks’ systems is usually required for processing payments through bank accounts or bank-issued credit cards. These connections add to the complexity of the banking IT ecosystem—and increases the load on banks’ IT infrastructure. These systems must maintain the highest levels of security and stability in order to meet business continuity demands.
  • Regulations have recently favored open banking, with financial services that were once the exclusive domain of banks now being offered by third-party providers. These providers may at the same time be partners and competitors of banks. It will be interesting to see how this relationship evolves over time.

These are just a few ways that the financial industry is changing due to shifting customer behavior and values. Banks that cannot keep pace with the rate of change associated with digital transformation risk becoming irrelevant. Sanjay Mathew, Senior Director of Financial Services Industry and Oracle, noted the rise of consumer input that is shaping the future of retail banking.

"Customers and external influencers," Mathew notes, "potentially numbering in the millions—should be invited to share their ideas, too. For example, with advanced innovation management tools, banks such as BankMobile and Santander are holding idea contests, asking customers to submit ideas and giving them a chance to share in the excitement when those ideas come to life."

Without that type of bank-customer collaboration, consumers are already running out of patience at banks' lack of adaptation to a new digital future; voting with both their wallets and their notion of trust. The statistic that 60% trust banks (and is probably declining) rocks the very assumption and currency banks have around their role in the global economy.

Caveat: Banks now require more data storage and processing power thank ever before

As these forces put pressure on data storage and processing capabilities, many banks are making the transition to the cloud—but still have large legacy on-premises data centers and applications. Regulations governing data residency and security make a hybrid on-premises/cloud model appealing, in which functions and applications that are not business critical operate in the cloud, while regulated, sensitive data and applications remain on-premises. But, as reported in a recent survey of IT decision-makers at financial organizations, “it is expected that as digitalization continues to dominate and organizations progress with writing their own applications, the industry will see the value in transitioning” to the cloud for faster application development and greater agility to respond to customer demands.

To prepare, bank IT systems need to be architected in such a way that on-premises data storage and applications can be seamlessly transitioned to the cloud.

The Solution: Build the banking infrastructure of tomorrow

IT budgets are not getting any bigger, so how can banks efficiently build an IT infrastructure that meets current and future regulatory and customer demands?

  1. Opt for technology stack comprised of engineered systems. Engineered systems include hardware and software designed to work together with very high processing speeds and reliability. Engineered systems provide the performance that modern banks are looking for in simple, pre-configured packages, allowing valuable internal IT resources to focus on other high-priority initiatives.
  2. Limit the number of vendors for IT infrastructure projects. This will free up resources so IT can focus on strategic improvements rather than dealing with multiple vendors. Managing multiple vendors with hardware and software solutions that are not designed to work with each other can add cost and time to projects.
  3. Create on-premises data storage systems and applications with exact, fully compatible cloud counterparts. This not only reduce the level of effort required by the IT department, but also allows public and private clouds to work together seamlessly and limit complexity when moving workloads to the public cloud.

Oracle Engineered Systems Help Banks Remain Relevant to Customers

Oracle Engineered Systems, which includes systems like Oracle Exadata and Oracle Exalogic, is a fully integrated technology stack with hardware and software designed to work together, giving banks a system that is optimized to run business applications efficiently, and blazingly fast.

Allied Bank Limited (ABL) was able to reduce critical close of business (COB) processing time by up to 50% by deploying Oracle Exadata Database machine. ABL also found that using Oracle Engineered Systems gave it the ability to expand their business faster by scaling their IT systems with less effort and a reduced total cost of ownership.

Zagrebačka Bank of Croatia was able to increase cash loans by 15% within 18 months due to a higher conversion ratio enabled by faster predictive analytics as a result of implementing Oracle Big Data Appliance.

According to Ignacio Vera, CIO of Banco de Chile, “It is important to have Exadata and Exalogic because it is a perfect combination. You have one machine that holds the database and another that holds the applications.  The other big advantage is in a single box you have communications, back-up, hard disc, processor; you have everything.”

For bank IT departments with limited internal resources, having support from Oracle to keep their database up and running allows the IT department to focus on other high priority needs.  Oracle Database Cloud has the option of being fully managed by Oracle when customers desire this level of service.  This option may be turned on and off, providing customers with the level of service they need to meet peak workloads.

In order to provide a superior digital customer experience, banks need an IT archictecture that enables agile development to create services and products to meet customer needs as determined by analyzing customer data. Oracle Engineered Systems provide banks with the exact same IT architecture on-premises and in the cloud. This simplifies the development process and makes it easier to migtrate on-premises solutions to the cloud.

For example, CTBC Bank of Taiwan uses Oracle Exadata Database Machine to run Oracle Flexcube and offer a standardized platform for its over 250 national and international branches. With a single platform, CTBC has been able to create customized reports 5x faster across the entire enterprise, and deliver new services to branches abroad 2x faster.

By building an IT infrastructure based upon Oracle Engineered Systems, modern banks can meet customer expectations for a better digital experience with the IT resources they have available. Oracle Engineered Systems require less effort to deploy and provide a platform that can scale easily.

Their story, their own words

At this year's OpenWorld, we've invited banks, credit card firms, and other financial industries to tell us their digital transformation story in their own words. If you're heading there this October, be sure to check out those sessions and our other infrastructure sessions. Hope to see you there!

Want a preview? If you will be attending this year's Oracle OpenWorld 2017, be sure to check out our infrastructure sessions and hear how other industry leaders are preparing for the future from the bottom-up by modernizing their infrastructure first. Before that, Michael Forhez and Sanjay Mathew join Anne Plese on Sept 28th to discuss how the retail and finance sectors are changing and how technology is helping companies stay competitive in these industries. Register today!

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