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How technology will transform banking in 2017

Matthew Finnegan | Jan. 3, 2017
The banking sector is bracing itself for Brexit, but will have to contend with new technology challenges too.

The last 12 months have been another period of technological change in the British financial sector, with digital challenger banks launching, the development of blockchain based systems, increased cloud adoption and a growing cyber security threat. We take a look at how financial firms have adapted to these challenges this year, and what their priorities are likely to be for 2017.

Blockchain evolution to continue, but real transformation is still years off
Interest in blockchain continued to grow in 2016, with some of the world's largest banks unveiling pilot projects aimed at streamlining processes. Royal Bank of Scotland, Barclays and Santander are among those currently creating blockchain-based applications in areas such as international payments.

At the same time, there was a reining-in of expectations of what can be achieved with the distributed ledger technology in the near future. Many industry commentators predict that it will take the best part of a decade for blockchain-based systems to see widespread, mainstream usage.

Nevertheless, IDC analysts expect that the first wave of blockchain systems to move from test stage to production will centre around trade finance, with a number of pilot projects coming to fruition next year. In its 'FutureScape: Worldwide Financial Services 2017 Predictions' report, IDC describes trade finance as an area that is "still largely paper based, commoditised, and inefficient" making it a good candidate for blockchain applications.

"It is the proverbial "low-hanging fruit" for the application of blockchain technology as it offers the potential for an immense disruption of an important financial service supporting global trade," the report states.

The vendor ecosystem around blockchain continued to evolve this year, with IBM and Microsoft pushing products and services to support development of distributed ledger systems in the finance sector and beyond. IBM has also been calling for wider collaboration to develop blockchain technology as part of the open source Hyperledger project.

Service providers are keen to capitalise on interest in the technology, and are quickly positioning themselves to advise customers that are keen to kick off pilot projects. This has lead to the likes of Capgemini and CGI snapping up blockchain expertise to build out advisory teams.

Peter Roe, research director at TechMarketView, said that the blockchain ecosystem will continue to mature next year, with collaboration between smaller fintech startups and better-funded, more established vendors.

"Throughout 2017, we should see further major changes to the Blockchain landscape and the emergence of some key players," he wrote in a blog post. "Although the widespread use of Blockchain is still some way off (not helped by understandable caution in the regulator community), we can still expect plenty of activity."

Cyber crime will remain top of the agenda senior bank execs
Cybercrime was one of the big topics across all industries during 2016, and the financial services sector was no different. One of the most high profile breaches was the theft of $81 million from the Bangladesh central bank through rogue SWIFT transfers, a heist that almost resulted in the theft of $1 billion.


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