Just a few months before Lehman collapsed, a technology concept was launched that would have profound consequences. Apple’s App Store brought the concept of digital distribution platforms directly to users, via the newly launched iPhone 3G. A decade later, the idea of a platform business is being held up as the future of banking.
The fallout from the Lehman collapse, coupled with rapid technological development, forced banks to rethink and adjust their models. Client behaviours and expectations shifted, and new competitors emerged. At the same time banks’ resources were being stretched from declining margins and higher costs of capital, the need to drive efficiency and reduce costs, as well as evolving regulation. Increasingly sophisticated cybercrime required investment and education to defend against.
The following four commentaries take a closer look at the different aspects of how information technology has shaped banking since 2008.
Technology platforms: “Deploying applications in minutes not months” – Al Tarasiuk, Group Chief Information Officer
Until the financial crisis, the focus on driving efficiency and standardisation in banking technology was weak or even non-existent. Instead of thinking about efficient IT architectures, it was more important to get to market quickly and handle new business via one's own systems.
So when banks tried to become more efficient post-crisis, they couldn’t quickly switch to emerging cloud technology services, where the underlying infrastructure is shared by the applications resulting in faster time to market, potential for reduced costs and higher availability. Banks have to apply common standards across their technology environment and modernising applications to make them cloud ready.
Today it is the norm in the industry to use cloud first. And cloud vendors have capabilities hard for enterprises to replicate on their own premises. We have launched an application hosting platform – ‘Fabric’ – which allows developers to source computing power on demand from cloud infrastructures. They can now deploy their apps in minutes, not months.
Information Security: “It is now everyone’s responsibility” – Clark Smith, Chief Security Officer
In 2008, the financial services sector was mainly grappling with credit, liquidity and market risk. Cyber risk was growing, especially point-of-sale fraud in retail banking. But cybercrime wasn’t posing an existential threat to banks. As financial services increased its reliance on technology, and digitalised its channels, a significant increase in the frequency and sophistication of cyber-attacks followed. Cybercrime is now big business, and we’ve seen more integration with other types of criminal activities such as money laundering or fraud.
What used to be a small team of specialists working in the background has evolved into everyone at a bank battling cybercrime. Whether it is using proper passwords or being aware of potential phishing attacks via email, this first line of defense is critical. Clients are now more interested in cybercrime and our investment and focus on the topic has moved to top priority status.
As a practitioner, you have to stay on top of the latest developments and keep awareness across all stakeholders high. In 2008, cybersecurity was not mentioned in Deutsche Bank’s Annual Report. Today, it has its own section in our Non-Financial Report.
Regulatory Technology: “Big data and technology is helping to tackle anti-financial crime“ – Martin Perkins, Head of Regulation, Compliance and Anti-Financial Crime Technology
Over the past decade, financial crime has caused great financial and reputational damage – the attention on it has never been higher. The activities have become more complex and sophisticated and involve new and different players, channels and intermediaries. The result has been stricter requirements on early detection of potential wrong-doing. The scope is vast and diverse, from ensuring that we as a bank don’t do business with people we should not do business with, to the ability to spot misbehaviour of our own staff early on.
As a result, investment in technology to battle financial crime has soared. Systems need to monitor patterns quickly and in bulk across wide sets of current and historic data. The good news is that technology innovation and big data solutions will enable banks to process high volumes of data with complex models to identify patterns of prohibited activity. The focus is to be effective and efficient.
Perhaps unsurprisingly, progress depends on a number of teams working closely together. At Deutsche Bank this means strengthening partnerships between the Chief Security Office, Chief Data Office, Chief Regulatory Office, Compliance and Anti-Financial Crime technology.
Innovation: “A traditionally closed financial services industry is becoming more open” – René W. Keller, Group Chief Data Officer and Group Head of Innovation
In 2008, banks preferred to create products and services behind closed doors to give them a competitive edge and protect intellectual property. “Open banking” was a counterintuitive term. With the emergence of agile fintech companies, this mentality has been blown out of the water.
Banks provide client access, industry expertise and ready-made infrastructure. Fintechs in turn bring in innovative solutions, new technology insights and fast time to market. Combining the two is a powerful proposition for clients. We have established a network of innovation labs (London, New York, Berlin, Palo Alto, and soon Singapore) to make it easier for fintechs to work with us. The labs identify, evaluate and support the adoption of emerging technologies that enhance, improve and reimagine the way we serve our clients.
Thriving in a digital world is a cultural change. Banks need to get used to new ways of working, fundamentally different to what was best practice in 2008. Today we use agile development techniques meaning that programs are developed rapidly from the user's point of view, are released more quickly and are continuously developed. Today only a few weeks pass from the idea to the finished product.