As a new year starts and 2014 stands before us it is natural to wonder what lies ahead over the next 12 months. Playing the predictions game is of course dangerous but there are some big events coming up soon, such as the migration end date of 1 Feb 2014 for the single euro payments area (SEPA), if it goes ahead, which are bound to impact the financial technology world; and this is by no means the only regulatory or business challenge facing operational fintech professionals in 2014 with information security once more likely to be at the forefront. Bobsguide’s Neil Ainger looks ahead to some of the tech trends, bank acapital adequcy assessments and big projects expected to shape the financial and technology world in 2014.
Happy new year and a big welcome back to all our bobsguide readers. There’s been plenty happening over the yuletide period in the financial world, not least Latvia joining the eurozone and the European fiscal compact, which forces countries in the eurozone to deliver a balanced budget, starting up on 1 January 2014. Meanwhile the European Central Bank (ECB) will shortly begin its asset quality review of European banks, potentially flushing out all those ‘zombie banks’ still sitting on losses since the 2008 crash and possibly sparking another round of banking consolidation and technology integration challenges.
Across the Atlantic, Janet Yellen is taking up residence as the new chair of the US Federal Reserve central bank as a new year dawns. She is widely expected to accelerate her predecessor Ben Bernanke’s policy of ‘tapering’ throughout 2014, as Yellen turns off the quantitative easing (QE) money taps and signals the end of the era of easy money. This will potentially flush out further ‘zombie banks’ that haven’t repaired their capital bases adequately since the crash and aren’t ready for the pending regulatory challenges of Basel III and increased transparency and reporting demands under the US Dodd-Frank and European Market Infrastructure Regulation (EMIR) which mandate centralised clearing, trade repositories and so forth in-line with the wishes of the post-crash Pittsburgh G20 meeting way back in 2009. Tech budget will be needed to meet these regulatory challenges and the new post-trade processing environment and those banks - US or European - that haven’t yet repaired themselves since the crash of Lehman Brothers five years ago can be expected to struggle in the more operationally expensive finance environment that is now coming into place. The regulatory and market changes instituted post-crash are now truly coming home to roost as many of the ‘new normal’ regulations now come into effect worldwide presenting financial technology (fintech) professionals with considerable compliance and technological challenges. It will be interesting to see how the challenge is met in 2014 and beyond as project such as the TARGET2Securities (T2S) single securities settlement engine in Europe beckon.
Information Security and Privacy: Key 2014 Tech Challenge
Outside of the on-going need to introduce regulatory reporting and new compliant technology systems and working practices, the major challenge of 2014 is likely to be the need to beef up information security systems in the wake of last year’s Adobe attack and the loss of 40m plastic card details in the Target data breach, among many other such recent incidents. Financial services (FS) firms and the technology that they rely on in the modern interconnected world are increasingly vulnerable to savvy cyber-criminals and you can expect the continuing battle between hackers and chief information security officers (CISOs) and chief information officers (CIOs) to escalate throughout 2014.
In a related matter, the tension between privacy, data sharing and IT security can be expected to dominate the tech world in 2014 following Edward Snowden’s revelations last year about the extent of the snooping ordinary citizens of the global village have been subjected to. Admittedly Google, Apple, Microsoft, SWIFT, Yahoo and other such technology giants were not best pleased to learn of the US National Security Agency (NSA) and UK GCHQ spying activities, such as tapping into the fibre optic cables outside of data centres and their breaking of SSL and other internet encryption communication protocols, but they did acquiesce willingly with many of the spooks’ demands. Why therefore should ordinary consumers continue to share their personal data with such companies and might Snowden’s revelations remind everyone that nothing is ‘free’ on the net and your personal data is the cost of accessing online search engines and other such shared services. Could it prompt a retreat from putting every bit of data into the cloud and a certain wariness about the ‘big data’ analytical world in which we live? I doubt it will have this big an impact but it will be interesting to see how the tension between privacy, data and security evolves in 2014 when more and more of our lives, banking data and personal information resides in the ether and is potentially subject to cyber-attack or governmental snooping.
Tech companies aren’t averse to spying on their customers either of course in order to sell their preferences to advertisers. Google’s new ‘viewability’ software, which is designed to track if brand-building display ads are actually viewed by a user and in what context, for how long, will therefore be an interesting new launch in 2014. At the moment it is estimated that up to half of all display ads are not seen by users and the new ‘viewability’ Google software is designed to address this in the display advertising space, perhaps prompting more changes in the media arena. If the software works as expected it could further consolidate Google’s grip on the big data analytical world. Hadoop can also be expected to advance in 2014 as customer sentiment and data analysis becomes more and more important to financial institutions (FIs) and other companies around the world.
As mentioned above, the information security and regulatory compliance challenges of 2014 can be expected to dominate the lives of IT professionals directly employed at FIs or working for them indirectly on projects or under Software-as-a-Service contracts, but other big tech trends will also impact the sector this year. Bitcoin (BTC), for instance, can be expected to continue its rise as an alternative digital currency despite its fall in value after China limited its use last year, with many businesses’ now accepting it as a valid currency. BTC is an increasingly an acceptable payment method and it will be fascinating to see how it develops - or implodes - during 2014.
The continued rise of the mobile channel can also be expected to be another defining fintech technology trend in 2014, alongside cloud computing, big data and IT security. But there will no doubt be other surprises and new developments along the way too. I look forward to watching the evolving technology scene throughout the course of the year and reporting on it for bobsguide readers. Happy new year and enjoy 2014.
By Neil Ainger, Ed., bobsguide