A combination of powerful, disruptive forces has been altering the face of the financial services sector. In light of the changes that have been taking place globally, Asia has been uniquely placed with the opportunity to take advantage of the international shifts and trends, by watching for what has worked and adopting it locally.
Significant new technology waves, such as the adoption of mobile payment systems, suggest that Asia will look to Europe and the US and take a best of breed approach, adapting to specifically suit local market needs.
We anticipate that much of the shifts that have rocked the last year will carry through 2013, a year that will be defined by the ability to adapt to the transformations and transitions of a quickly morphing financial services landscape.
We have identified some key trends that will underpin the year ahead.
1. IT integration makes sense
Economic pressures and the desire for implementing cost controls across organizations will mean that integration of IT services across financial institutions will be back in vogue.
With enterprises seeking ways to gain cost optimization benefits and make maximum use of existing resources, the move to IT service integration will start to make much more sense to organizations. While financial institutions have a complex web of IT needs and requirements varying from department to department, finding a way to centralize resources in innovative and sophisticated ways will be key. A smart organization will be looking at optimizing and creating agility across offices and geographies.
2. Here comes the cloud
The cloud is not just coming, it is here. Many pundits have argued that the financial services sector will not use the cloud because it is perceived to lack the desired element of security. This is simply not true. While the sanctity of customer data and its place in the cloud may take some elements of the sector longer to adapt to than others, a great deal of financial services market data and reference data are ripe for use in the cloud and it makes sense that more financial institutions should leverage it.
3. Colocation is the new black
The move towards colocation for the financial services sector will escalate in the New Year as institutions realize that a centralized financial ecosystem leverages economies of scope and scale for all parties. By colocating within a network-rich data center, exchanges, data vendors, clearing firms, financial extranets, broker-dealers and others can dramatically reduce the number of circuits required to support multiple counterparties.
Colocation does not just mean proximity to the exchange, but to other counter parties as well, all inhabiting the same network rich environment.
The collaborative approach allows financial service players to reduce and better manage costs while also improving throughput. An efficient, network-rich data center configuration reduces latency (the time between a query and the results arriving at the screen or the time between initiating a transaction and its completion) to its physical minimum. Unquestionably, the financial industry will continue to scale, and its technology must increasingly do so in new, more predictable and more effective ways.
4. The mobile rise of M2M
In the payment sector machine-to-machine (M2M) transactions present a fast evolving, but not yet a totally mature environment.
The new electronic breed of financial services consumers cannot understand the latency of money disappearing from one account and not appearing for another three days in the destination account. That kind of latency will become unacceptable. Technology needs to mitigate that disruption.
In the Asian markets, particularly in the emerging markets, we are seeing huge populations ramping up to mobile adoption due to lack of fixed line infrastructure. With this will also come some significant transactional issues.
Examples of this include a push across the region from governments, regulators and the industry to move to a centralized mobile payments hub which will accelerate processing time.
5. Security and data sanctity
Cyber attacks and security threats remain at the top of every IT manager and CEO’s agenda. Selecting data center providers with security strategy at the core of their DNA becomes crucial to the big data story for financial services.
With the advent of the cloud, the boards of financial institutions will need to foster a culture that openly shares incident information across the industry, from technology partners through to law enforcement and the federal government. Identity and access management will also emerge as a key security control area that will attract new investment.
What are your predictions for 2013? Chime in the comments below!