Published on the 08/08/2016 | Written by Beverley Head

Banks, which think they have finished their core systems revamp, need to think again…

The escalating pace of fintech disruption means that banks need to ensure that their core systems are able to easily integrate with emerging consumer facing platforms.

Forrester analyst Zhi Ying Ng told iStart that even banks like Commonwealth, which was first to refresh its core systems and install a SAP solution, would need to continually update their cores and ensure that they are accessible via application programming interfaces to allow rapid rollout of new consumer facing services – many of them developed by fintechs rather than the big banks themselves.

A report from Ng noted that in 2015 investment in fintechs across Asia Pacific rose from $880 million in 2014 to $4.5 billion, and shows no sign of abating. The report also suggested that financial sector disruption would emerge on three key fronts – digital investment, security and identity and authentication.

At the same time she said that the advance of artificial intelligence and blockchain “will fundamentally change the business models” in the sector. The impact of better analytics across the sector has already been telegraphed.

Ng said that banks needed to develop API-based access to their back end systems so that new, often cloud based, services could be rolled out rapidly.

Many of the banks are well down that path – some out of necessity. ANZ, for example, which has eschewed a core systems overhaul costing billions, has used an API strategy to allow new front end access to the old back end and is now considering making that API available to third parties. An API-centric approach was also key to Westpac under the SIPS initiative.

Ng said that the banks all needed to work continually on their software infrastructure to be able to respond quickly to emerging technologies. She also said that while many banks were now using cloud services for “non-critical” services, she believed that it was inevitable that banks would eventually have to move to more comprehensive cloud platforms, though probably a hybrid mix of private and public.

“Cloud helps to enable banks to be more agile and scale more rapidly,” she said.

Tim Scott, Oracle cloud sales director, said that there was a growing appetite for platform and infrastructure as a service from the banks, though he acknowledged today it was at the periphery rather than in the core.  Cloud is however being embraced by the fintechs themselves.

Scott said that as a foundation member of Sydney fintech hub Stone & Chalk Oracle was currently engaged with “between five and ten” of the 90 fintech focused startups in the hub.