FT's recent article “EU bankers step up warnings on threat from big tech” highlights moves by the European Union (EU) to provide a level playing field in the European finance sector. Undoubtedly EU financial institutions are aware of the threat to existing business models posed by the global tech giants, and this concern may have been recently exacerbated by the new Open Banking regulations, which as the article suggests may allow the easy identification and cherry picking of the most lucrative parts of the business.
This situation leaves EU financial institutions with two key responses: the first is to innovate, the second is to try and steer the direction of regulation in a way that is favourable to themselves. Whilst the second choice may be comforting, it is not a long term solution and will not protect a business from innovative competitors who have achieved both regulatory compliance and innovation at scale.
For those wishing to innovate, the article notes that at present too many financial institutions are seeing themselves relying on cloud services offered by the tech companies they will be competing with. The EU expresses concern about the concentration of power achieved through the concentration of data within these tech giants, whilst the Bank of England cites concerns over resilience should access to cloud services be compromised or lost.
These points do however provide the key opportunity for EU financial services companies. Firstly, by protecting and treating financial data with the respect it deserves and not exploiting it in ways for which it was unintended they can win in the fight for customer confidence. Secondly, by providing innovative services that support the aims of Open Banking, they can help drive accessibility to their own services and act as the hub for access to the very best of innovative FinTech. Potentially this can see them become the AWS of financial services.
To achieve this will require serious investment and some detachment from hyper-scale cloud providers. Whilst hybrid cloud is here to stay, especially for non critical workloads, financial services firms should be looking for technology partners who can help them deliver their own objectives without the conflict of being in competition.
This especially applies to core IP as financial services firms undergo digital transformation and begin to increasingly make use of advanced techniques in Machine Learning and Deep Learning. At Verne Global, we can help financial services customers on this journey; both in terms of providing resilience for intensive High Performance Computing (HPC) and Machine Learning workloads and by providing access to latest technology stacks to help support and unleash the innovation from their technology and data science teams.