Banks buying into fintech innovation to escape legacy

Traditional banking institutions must work harder to innovate with the latest cloud-native platforms and move on from their reliance on legacy systems, a new report has found.

 

IDC revealed that banks are still investing huge sums in legacy payment technology, missing out on potential revenue opportunities available through digital platforms. It predicted that finance companies will spend £57bn annually on legacy payments technology in 2028, compared with £36bn in 2022.

 

Although banks are starting to deploy cloud computing technology after years of deliberation, legacy-based services are still widespread even if sometimes combined with cloud said IDC.

 

Many banks are seeking a way out of the legacy cul de sac by investing in fintech alternatives. HSBC for example has taken a $35million stake in Monese, following Lloyds, Bank of America, Nationwide and others who have made similar moves. UBS and JP Morgan have gone further and acquired whole fintechs in the form of Wealthfront and Nutmeg.

 

“Despite being much younger than traditional financial institutions, digitally native firms have long leveraged their unique ability to offer customers more agile services,” commented Ian Bradbury, CTO of Financial Services at Fujitsu UK&I. “It’s clear that these digital offerings are driving competition in the banking sector with challengers like Starling Bank hitting profitability. Thankfully, however, the traditional players are looking to catch up, investing billions in fintech. But this commitment to new technology doesn’t necessarily eliminate the old, and over the years the mainstream players have acquired a host of legacy systems and the longer these old processes are maintained the more difficult moving away from them becomes. We’re already seeing a real drive for the consolidation and simplification of the technology estate, but this must accelerate if banks hope to effectively modernise and reduce soaring support costs that will build up over time.”

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The Serendipity Mindset: The Art and Science of Creating Good Luck

By Dr Christian Busch
Serendipity is an aptitude for making desirable discoveries by accident. To other people it looks like “good luck”, but it is more the ability to recognise and seize an opportunity, rather than have good fortune thrust upon one. Finding a wallet stuffed with money on the conference room floor is good luck, whereas holding it up and asking if anyone has lost their wallet might be the beginning of a valuable friendship – that would be serendipity.

Chance encounters, or strokes of fortune, feature in countless stories of business success. This book looks beneath the surface, reveals and teaches the mindset that can transform pure chance into opportunity. The author is director of the Global Economy Program at New York University’s Center for Global Affairs, and a lecturer at the London School of Economics.

Serendipity is an aptitude for making desirable discoveries by accident. To other people it looks like “good luck”, but it is more the ability to recognise and seize an opportunity, rather than have good fortune thrust upon one. Finding a wallet stuffed with money on the conference room floor is good luck, whereas holding it up and asking if anyone has lost their wallet might be the beginning of a valuable friendship – that would be serendipity.

The author says “This is a book about the interactions of coincidence, human ambition and imagination”. In the above example: finding the wallet is the coincidence; ambition is the desire to make something of the discovery; add imagination and you open up a whole menu of possibilities: from spending spree to earning a reputation for honesty – or even making a wealthy friend.

Business is typically forged on human ambition and imagination, but early success often feeds an appetite for control – and “control freaks” can be blind to the opportunities thrown up by the unexpected. They only see chance events as distractions. If plans go awry, they may blame the failure on “bad luck” rather than admit their own inflexible attitude.

The author himself admits to being “a German who is used to planning” and prone to feel anxious when something unexpected happens. That makes him an ideal teacher, because he has worked hard to discover and analyse the mindset that enables one to “connect the dots” and cultivate serendipity. He presents a goldmine of examples from science, business and life where an apparent mishap or failure lead to a breakthrough.

Indeed, studies suggest that around 50% of major scientific breakthroughs emerge as the result of accidents or coincidences. A well-known example is Alexander Fleming’s discovery of penicillin, launching the whole field of antibiotics. Other examples include X-rays, nylon, microwave ovens, rubber, Velcro, Viagra and Post-it Notes – where would we be without these!

The book goes beyond the ability to recognise and respond to opportunities in chaos, but the subtitle – The Art and Science of Creating Good Luck – is actually a bit misleading. True, he does show ways to develop better fortune, but it would be better to call it “inviting” or “encouraging” good luck. For example, he suggests better ways to start a conversation with a stranger – ways that will make it more likely to lead to chance connections or shared interests.

The publishers may have chosen the word “creating” to make the book appeal to the human desire to control – for control freaks are exactly the readership that would benefit the most from this book’s wisdom and practical advice.

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“Following the success of The Serendipity Mindset hardback, a paperback edition has also now been launched under the title “Connect the Dots”.

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