Digital spinoffs speed ahead
Banks have been forced to evolve and have begun launching their own fintech or digital bank. It is a trend we saw over the past 18 months and is just getting started. Spin offs like Goldman Sach’s Marcus and ABN AMRO’s New10 are helping to fight fintech with fintech. They are launching greenfield tech-enabled businesses to tap market opportunities and embark on a lower-risk technological evolution. Spinoffs draw on the resources and experience of the parent institution while operating independently, embracing the technology and culture of fintechs. They deliver significant results in a short period of time, free of organisational and technological legacy that holds back traditional organisations.
Transition not transformation
Digital spinoffs spurred a rethink of how to solve specific market, technological or regulatory issues. Spinoffs highlight another trend: strategic and surgical transition projects instead of long, expensive and risky enterprise-wide transformations. There is a movement to centralise control of the balance sheet but decentralise deployment of services. Flexibility of technology enables decentralised deployment by individual businesses instead of the whole organisation. With a modular or componentised approach, the business unit has more agility to innovate and deploy a myriad of services to address specific needs at lower risk and cost.
Collaboration in technology
Potential lies in a combination of technologies as part of a wider value chain. Institutions are beginning to design their operating model and technology for change which involves an API-driven composable architecture. This allows them to adapt quickly and mix the right technologies for the biggest impact.
Acceptance of platformification
Platformification in the form of open banking and composable architecture will enable continuous and fast innovation for years. Instead of building in-house and propagating silos, institutions will connect more cloud-based services together, access more digital channels and services. If managed like a product, core assets can be reused, shared and monetised, extending the reach of existing services or provide new revenue streams.
Easing of regulation
More regulators are embracing cloud driven services, noticeably in countries that may not have previously had a public cloud footprint. Following regulators in the UK, France, Australia and Germany, those in Africa and Southeast Asia will continue to loosen regulation on public cloud usage. Supported by banks and cloud vendors, more software and services like information security, business continuity will be cloud-based and cloud agnostic which negates the perceived risk of cloud providers.