Banks’ unwavering dedication to innovation is hardly a new phenomenon. Financial institutions (FIs) have long turned to technology to transform their organisations and deliver enhanced solutions for clients. And, with the global pandemic adding significant momentum to the finance industry’s shift towards digitalisation, now more than ever, they are seeking out new innovative ways to adjust to new realities and position themselves and their clients for tomorrow’s opportunities.
Developing said innovation, however, requires keen strategic focus. Working in tandem with partners is particularly conducive to innovation, allowing valuable input from sources with varying perspectives, skillsets and experience. For example, fintech providers and start-ups are characterised by speed and inventiveness and such partnerships are also effective ways of developing new ideas and testing the potential of different products.
It is at the cutting edge of a bank’s business model that innovative collaboration with partners can deliver true value. In fact, collaboration is evolving in a way that is enabling FIs to extend their services beyond banking, adding value by addressing broader client needs through solutions – such as corporate travel expense management systems – that would have been difficult to provide alone. Indeed, the banking sector’s horizons continue to grow broader every day, as FIs think outside the box to add value and solve client problems.
Quantum computing and new possibilities
At main incubator, we dedicate our research and development (R&D) efforts to nascent technologies – those far from the cusp of mass adoption, but that have the potential for wide application across the financial services sector.
Quantum computing is undoubtedly one of the most exciting technologies being explored in this respect. By employing phenomena studied by quantum physics, processors with superior processing power to classical computers are being developed. Such capabilities enable computational problems to be solved faster, and could perform processes that current computers cannot yet carry out.
Furthermore, with big data often referred to as the most important resource in today’s information-driven ecosystem, this expanded processing power could be key to managing ever-expanding quantities of data. It could become key to portfolio management solutions, for instance, with algorithms applied to efficiently and effectively identify an optimal portfolio of assets from a large pool of potential options, based on select criteria.
Quantum computing also has the potential to create significant cost savings by dramatically reducing the time spent on complex computations. Regulatory calculations, which can involve processes that take hours to complete, would be greatly simplified using this technology, for example.
But while the technology holds undeniable promise, development is still at an early stage and the hardware will require extensive development before it can be used in real-life solutions. We are working with Fujitsu on a project that, while not a full quantum computer, uses quantum-inspired technology to deliver precise calculations at enhanced speeds. Called digital annealing, this project has so far given rise to a number of promising prototypes and should serve as a basis to study the further benefits of quantum technology in finance.
Technology is key to navigating a data-rich world
Artificial intelligence (AI), algorithms, machine learning and data analytics are all driving innovation across the banking sector, and are bringing market players together in the spirit of collaboration. The Financial Big Data Cluster (FBDC), for instance, aims to set up a secure data exchange framework to connect FIs and enhance the efficiency of existing processes. This will be particularly valuable for due diligence, which currently creates in duplicated work due to multiple banks requiring the same kind of data. A shared data pool also provides the foundation for a variety of AI and machine learning applications, which can be built upon a common ecosystem.
The belief in the power of collaboration is also present in another major data-related initiative – Lissi. An acronym for “Lets initiate self-sovereign identity”, Lissi is a project driven by distributed ledger technology that aims to give individuals and organisations – rather than major tech companies – control over their digital identities. With Lissi now gathering substantial momentum, significant progress is expected by the end of the year, and the principles behind this project could later potentially be applied to devices and appliances as these become ever-more connected through the internet of things.
Working together for sustainable prosperity
Climate change and related environmental concerns are as valid a catalyst for change as technological innovation. Afterall, sustainability and innovation go hand in hand. A broad-based transition to sustainable development will involve change across all economic sectors – change that will present challenges but also inevitably create new opportunities. Technology can be a powerful tool when used to create a more sustainable financial sector, and the potential for innovative sustainable solutions is clear. For instance, we are working on a system aimed at clients in the funds space that will provide ESG ratings for illiquid assets. While ESG ratings are already prevalent in public capital markets, a private equity fund that invests in unlisted companies might not have access to the information it needs to make sustainable, commercially viable decisions – a problem this solution will address.
With innovation, sustainability and collaboration all key factors driving the development of the finance industry, empowering organisations to work together and putting innovation to work for the common good is becoming increasingly important. The “Impact Festival”, which has quickly become Europe’s largest B2B sustainability event, is more than just a conference. It is a community-based platform designed to connect corporates with innovative start-ups and other resources to support their ESG needs. By introducing the most promising innovators, thought leaders and green solution providers to our extensive global network of corporates, the initiative acts as a hub for the sharing of ideas and best practices.
Innovation is more than developing the next generation of hardware – it also involves embracing new ways of thinking about the future of our planet, our industry, our offerings, and having an open-minded approach towards working with others. The banking sector of tomorrow can come to embody all this and more, and deliver opportunities and benefits for all.