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The Cloud and Beyond: The Next Wave of Fintech Innovation

IPC's Ranjan Singh discusses how financial services firms can best incorporate the next wave of fintech evolution into business strategies.

First published in SiliconIndia, October 25, 2016

Headquartered in U.S., IPC Systems empowers the financial market globally by anticipating changes and solving problems, setting the standard with industry expertise and providing exceptional service through comprehensive technology.

Financial technology innovation continues to grow, global investment in fintech in the first quarter of 2016 reached $5.3 billion, according to Accenture, driven, in part, by increasing regulatory requirements. As banks and other financial institutions realize the challenges in building or acquiring their own proprietary technology, and the potential barriers to collaboration it can create, alliances that foster innovation and mutual objectives are becoming a priority. At the same time, enabling much of this innovation, cloud technology has continued to mature and make its leap from the world of financial startups to large enterprise players. The financial services industry has discovered that adopting a cloud solution can deliver a faster time to market, greater infrastructure flexibility, and a way to address complicated compliance mandates. 

The adoption of cloud technologies is also signaling the next wave of innovation in fintech, acting as a natural stepping stone to the adoption of other consumer-oriented technology used in our everyday lives. Enhanced with the functionality, critical safeguards and security necessary for compliance, biometric authentication, mobile devices and customized apps are starting to change the landscape of financial communications. Worth noting for their rapid adoption as well as the proficiency and advancements they are bringing to financial services and in particular, the financial trading sector, biometrics, mobile devices and customized apps must be both appreciated and understood by corporate decision-makers that want to maintain a competitive edge. 

Biometrics Beginning to Supplant Password Authentication

In a burgeoning trend, millions of customers of the largest banks regularly use fingerprints to log into their accounts on their mobile phones, while others are using biometric technologies such as eye scans, facial and voice recognition to authenticate identity. Goode Intelligence predicts that by 2020 bank customers will be using biometrics as the predominant method of identifying themselves in order to access bank services. Biometric technology is providing an important layer of security critical for keeping customer data secure. With security and compliance as priorities, it is no surprise that biometrics are also starting to penetrate financial trading as a way to authenticate users into telephony and data systems, particularly as mobility increases. 

In financial trading, vast amounts of voice, video and other data are being collected daily. Biometrics tied to voice, the primary communication means in financial markets, or other biometric-based authentication methods, can foster greater efficiency by enabling additional compliance checks when traders may be away from their desks. Current regulation requires firms to be able to instantly access all forms of communication across transactions and retrieve them in a way that allows the "reconstruction" of that communication pre-and post-trade, along with specific data relating to a transaction. So, it is invaluable to be able to validate and authenticate through biometrics that it is your user in the telephony and data system, no matter the platform of communication they employ or for that matter, you are using to verify them. 

What’s more, with financial institutions increasingly using biometrics, it is imperative that there is a secure place for this highly sensitive data to live. The cloud is increasingly becoming the platform for such confidential data given its safe, reliable and expansive capacity. 

Mobile as a Business Norm

Regulation has changed the nature of how financial markets participants communicate, report and trade. The trade lifecycle now involves more participants, not only because of the demand for increased transparency,but because of firms' needs to continue to differentiate their services to remain competitive. That means firms are hiring more economists, research staff and analysts, who in addition to compliance, need to be actively engaged in front-office activities. They need to see and hear more instantly from on site, off-site and abroad. They need to be untethered and mobile ... and they are. 

Those traditionally bound to their desks to perform their jobs are now up and on the go, handling transactions in real-time and many times, on their mobile devices. Tablets and smart phones are housing tools and mobile trading apps that process real-time activity, instantly. This adoption of mobile platforms is increasing productivity and cost-effectiveness, and enhancing infrastructure flexibility by empowering organizations to use consumer-friendly technology that is customized based on needs. 

When it comes to trading, regulations are requiring that all communications that are intended to result in a trade are recorded and stored. That includes mobile calls, emails and instant messages in addition to hard line calls. While emails have for years been archived in the cloud, we are now at a time when many other means of communication and trading, ultimately all services should be stored in the cloud to minimize risk, improve flexibility, lower infrastructure costs due to the storage scalability cloud offers.

The Right App for the Right Need

Financial services and trading firms need to increase workforce productivity, efficiency and profitability, all while minimizing risk in an increasingly demanding regulatory environment. The path each company takes in order to achieve these goals may be different and merit tailored solutions. For example, a global bank may want an app that helps correlate the time spent by the trader and transaction support team with each customer and the resulting transaction profitability so it knows which customers to focus on, and perhaps, which members of its own team need to operate more efficiently. On-the-go traders working on mobile devices need to have instant access to their business contacts and the ability to make a phone call in seconds; they do not have time to manually search for business contact information or dial phone numbers. Apps that utilize the cloud help users migrate from on-premise solutions to on-demand access, enabling them to find data faster, make calls quicker, communicate from anywhere and integrate their work with existing enterprise applications and office systems. This is a growing collaboration and innovation trend among trading and technology firms that are partnering with companies possessing both the industry expertise and development platforms to meet their specific app needs.

While regulatory requirements for financial firms are not expected to wane any time soon, they are inadvertently furthering a new age of technology innovation, collaboration and progress. Companies that have already adopted a cloud strategy should be mindful of these emerging technology trends, but the entire industry needs to recognize their influence and future role. Those that can resourcefully incorporate the next wave of fintech evolution into their business strategies will inevitably be able to transform regulatory and market pressure into a thriving competitive advantage.