It’s Now or Never: Hacking Financial Infrastructures and Retrofitting New Technologies
We’re living in a digital age and with it comes endless opportunities for advancement and innovation. While once upon a time we made the choice to move forward, now it’s no longer a choice, but a necessity.
For the financial sector, innovation and advancement is crucial to survival.
Not only do users expect a modernized experience including the digitization of services – think online and mobile banking – there’s also been a surge in competition across the sector.
Historically, core banking systems – commonly referred to as legacy systems – were developed in the 1970s and 1980s to ensure that banks and other financial institutions could manage information. As the companies using the systems grew, so did the volume of systems needed. Instead of building on to the existing system, new systems were added and more than 30 years of evolution has resulted in a lack of interconnectivity and infrastructures that are complicated, expensive and often difficult to manage.
While the systems have proved themselves as solid, robust and ultimately secure, the majority are now outdated and continuous improvement is needed in order to keep up to date in this era of radical technology.
So, the time has come to move forward – but how?
This is where fintech and RegTech come into play. RegTech, often dubbed a subset of fintech, offers solutions to regulatory challenges through innovation while also reducing manual tasks and processes and the cost of compliance. As global demand for RegTech grows – largely due to innovation in the business and technology sectors and a changing regulatory landscape – so do the opportunities for retrofitting archaic legacy systems and other infrastructures.
Of course, as with anything there are obstacles to innovation, from understanding key challenges to making sure developments and advancements are in the best interest of both the institution and the end users. A point of difference is also key as is working quickly, in a secure and non-disruptive manner.
In order to take full advantage of what RegTech offers, financial institutions and banks need to update their core legacy processes, making things more efficient, sustainable and scalable.
However, this doesn’t mean that existing systems need to be completely overwritten, often Cloud-based RegTech solutions can be overlaid on top of existing legacy systems resulting in a dovetailing of systems that are up-to-date and advanced.
Aside from staying ahead of the competition, the benefits of retrofitting existing systems include furthering innovation, enabling easier access to analytics and other insights, as well as a reduced cost and a more secure centralized framework. RegTech tools can also assist in customer due diligence (CDD), a critical element of Know Your Customer (KYC) procedures that ensures a company effectively manages risk and protects itself against potentially nefarious activities.
Not only is it essential to update and evolve our legacy systems, but our legacy thinking. The financial sector must look forward and plan ahead as the risks associated with refusing to innovate are high. The recent WannaCry ransomware attack is an example of the dark-side of legacy system technologies leaving banks and other financial institutions vulnerable to attack. There are countless instances of banks and other institutions losing large sums of money – billions even – due to system crashes and the dependence on outdated IT systems.
In reality, everything is riding on these older, somewhat antiquated systems. Financial technology continues to move at a rapid pace and in order for financial institutions to keep up, they either need to dedicate resources to maintaining their existing systems, or look to RegTech. As the European Securities Markets Authority recently said, “embrace RegTech or drown in regulation”.
There’s no time to sit on the fence, either you’re in or you’re out.
As technology changes and adapts, banks and other financial institutions need to innovate and become more agile and adaptive. RegTech enables organizations to alter their processes in a cost-effective, secure and dynamic way.
Stephen has founded and successfully sold several consumer data focused start-ups over the last decade. As a serial entrepreneur, Stephen likes to challenge the status quo and if it’s broken, he likes to fix it. In 2011, the identity veteran started his most recent startup, Trulioo, to help build a trust layer into the Internet, and fix the problem of broken identity that today affects so many online businesses.