Innovation is critical for financial services companies to stay relevant and competitive in our fast-changing tech-driven world. On June 10, I joined experts Ian Hollowbread, Ian Rae, Mitesh Soni, Philip Freeborn and Kevin Covington for Delta Capita’s Webinar called “Financial Sector: How to Make the Right Innovation Decisions.”

Hosted by Kevin, the aim of the Webinar was to discuss insights, processes and tools that financial services companies are using to make the right innovation decisions and secure a competitive edge.  The first half of the Webinar focused on the challenges facing financial organizations in adopting innovation, and the challenges of fintech in addressing them. I spent the second half demonstrating proprietary technology from prooV that solves many of these issues.

Following are the points that piqued my interest and that I hope members of the financial sector  will be able to act upon as the industry evolves:

Financial services are heavily, and increasingly regulated

Challenges to financial services are well known and have not shifted. What do ATMs have to do with fintech technology of the 2020s? Way back when, when it came to early adopters of technology, banks were actually some of the first to jump on the bandwagon. That’s before technology became more agile and regulations became stricter for the financial sector.

Unfortunately, banks’ hands have been tied due to heavy compliance and regulation. With so many hoops to jump through, it has been difficult for financial institutions to be agile without compromising on strict industry processes and security. While innovation can originate from other sectors, financial institutions need access to an infrastructure that will allow new customer journeys to appear, without requiring native knowledge of these technologies.

To keep ahead of the competition (seemingly), financial institutions have been lured by showroom scenarios and spent money on new technology. However, this has not necessarily been done in a cost-effective manner. And while other financial institutions have identified the benefits of investing in new technologies, they have not been able to do so due to legacy systems and regulations. Therefore, how can financial institutions develop new business models and commercialize their organizations? How then do you identify and ingest technologies when you have shrinking budgets and resources?

Fintechs struggle to understand FS expectations

We pondered about whether banks are making it clear enough for fintechs to understand what problem they are trying to solve. Banks should be clear about the policies and regulations that they need to comply with. The British Standards Institute (BSI) formed PAS as a publicly available specification to establish the integrity of a new innovation or approach. This was an effective step to adopt technology and scale. But how can FS more effectively collaborate and share knowledge, beyond FAS?  Regulations are not disappearing. In fact, operational resiliency is becoming a growing priority. Selecting a third-party vendor who may inflict a data breach will cause reputational damage not only to the third-party vendor but to the bank itself. Therefore how can banks be more agile in enabling fintech to be more fluid? Are there external capabilities that they can leverage?

Working collaboratively can combat constraints

When external law firms and regulators overlook a PoC, they can collaborate and solve problems at one time, and make things move more quickly. When it comes to regulations, there is no competition, as most institutions have the same obstacles to overcome. By evaluating similar benchmarks, FS can adopt fintech more quickly. Using a PoC as a platform tool such as prooV, you can test several vendors at once, and help innovation be consumed easier across all financial organizations.

Overcoming constraints by proper vendor evaluation

There’s a myriad of challenges because the data, and production environment is sacrosanct. Testing a new technology requires an available environment and a lot of time. You need to represent a set of data that will be accurate, yet secure. But if you test data in isolation, how does it really work in the incumbent environment? A lot of financial institutes and vendors see the data issue as one of the biggest challenges.

Synthetic and data masking does not solve all data challenges

Some vendors have handled the confidentiality issue of data by creating masking or synthetic data, but this can take several months. Even after that, the CISO of a company needs to analyze all this data to make sure that no real data has been exposed by accident. There are also regulations that claim that data masking is not sufficiently secure. This is because clever cyber criminals can apply an algorithm to remove the mask and reveal the data.

Evaluating vendors while remaining compliant

To navigate a roadmap, you need to identify the technical use cases that need to be met, scalability concerns and other technical and business KPIs. However, if you use a solution like prooV, you already have some use cases in place. By reusing these scenarios, you can accelerate the PoCs and make the whole vendor selection process less painful for both sides. Banks have similar use cases that are strict but common. To have an environment available and get it ready quickly is one of the biggest challenges for banks. Organizations have such a framework of compliance and oversight, that innovating and living in that highly regulated environment requires slickness on behalf of the fintechs. When you get past the early stages and then put the technology into production, how do you get the process to work?

Immediate journey for integration and obtaining business impact

Banks have been trying to implement innovations for the past few years. But we’ve all reached the stage that the way we are doing it needs to change in several areas:

Innovation as a service: Delta Capita can introduce fintech to banks and steer them in the right direction, ideal for banks that do not have the resources or budgets to innovate in-house.

Open doors for Fintech: Delta Capita can help prequalify technical companies by prequalifying fintech, i.e through solutions such as prooV.

Vendor selection: Applications and services can be tested more systematically.

Ensure operational resilience: prooV can test whether a platform will work on several environments and estimate the risk of future damage or other negative impacts on customers

Cloud migration: Covid-19 has been a catalyst to show that platforms on-premises work only up to a point. It’s time to assess legacy applications to see whether they work in the cloud, or how to integrate new cloud applications with legacy infrastructure.

Using a platform like prooV can facilitate better fintech engagement with financial institutes, more success, shorter time-to-value, better KPIs, more robust solutions and lower total cost of FS innovation adoption.

How prooV addresses FS challenges

I demonstrated several PoCs in the Webinar. 

MRI for technology

Banks chose three vendors to try to defend some attacks to the banks. Before the PoC, we help banks to establish what benchmarks they want to measure.  With prooV, we can create KPIs for the PoC and see how the vendors are performing. However, we also show how the vendors behave in various environments. Sometimes we can connect a PoC lab of a financial institution such as a bank or insurance company. You do not need to recreate these environments each time you test.

Deep mirroring solves data masking issue

We create specific data for the PoC that is not masked or synthetic. We can detect the context and dependency, and map the connections between the data. Once we map it, we can extrapolate the data, based on the customer’s requirements. 

Tackling the traffic conundrum

We solve the traffic problem by creating traffic between the machines of the PoC. We can generate traffic that we can inject between the PoCs that can provide the full dynamic environments. This encapsulates the data as well as simulating the behavior of the production environment and the flow of traffic between different environments. 

Beware of “Identical Twins”

If we see vendors that show similar graphs on our platform, this will raise a red flag. This could be because these vendors are using a copied open-source so that they behave like ‘identical twins”.  When we detect this phenomenon, we deduce that these vendors have downloaded the same open-source without conducting any modifications. If a bank signs an agreement with one of those vendors, the technology would not be able to scale. prooV allows us to run everything on a PoC, and then simulate legacy API to see if the technology will crash under production.

To sum up, prooV provides an infrastructure to run new PoCs and produce beneficial results:

• Better contrast between vendors; not just a smart sandbox
• Simulated data and traffic that can be extrapolated without infringing on security regulations
• Testing as a service platform including production environment, storage and APIs
• Safe and secure environment to improve operational resilience
• Advantages in three stages: before the PoC, during the PoC and after the PoC

In other words, prooV helps you find the right solution and make sure you can implement the technology once you have chosen it. Otherwise, you could spend as much as 18 months from initial idea to adoption, and then fail! Organizations like Delta Capita can dramatically reduce friction costs and time for adoption with solutions such as prooV.

Watch the on-demand webinar and demo here.