The lighthouse signals a digital disruption storm

The BFSI sector has been akin to the bellwether of technology’s impact on business. What is it telling about the direction of winds next?

Banking, financial services, and insurance (BFSI) are usually the first verticals to embrace the tremors and impact of any disruption caused by technology. It is the lighthouse that can see, prepare for, and signal a major technology storm much before its arrival.

But then, not all storms cause wreckage. Some end up rebuilding the industry to a new level of strength and innovation. In the BFSI lighthouse, some people peeping out of the windows feel that the gales of networking and communication technology are blowing in a new direction. They feel it’s time for BFSI to brace for a new tide.

With BFSI, everything eventually boils down to ‘money and, hence, to data. And, thus, to security, cloud, and intelligence. Let’s walk this shoreline one step at a time.

5G’s global presence has delivered a new era of connectivity and efficiency. However, communication between two devices on a 5G network can bring new attacks.

— Vaibhav Tare, Chief Information Security Officer (CISO),

Fulcrum Digital Inc

The need for efficiency, on-the-go services, customer experience and business continuity in remote operations has accelerated public cloud adoption in BFSI.

— Rajdeep Saha, Managing Director, Financial Services – Technology Consulting Practice, Protiviti India

Security alarms

Data can be augmented with speed, precision, and everything in between. But its compass test always lies in the aspect of security, more so when it is about financial data, customer trust, and a highly regulated industry like BFSI.

Vaibhav Tare, Chief Information Security Officer (CISO), Fulcrum Digital Inc cautions about the gravity of cybersecurity in this sector. “Financial system protection is important because it holds the organisation’s financial data and analysis. Fraud incidents increased 130% in the past years, according to reports from Ponemon Institute. These incidents have disrupted operations and led to losses.”

In BFSI, with remote working/collaboration and digital transactions, cybersecurity has become one of the main focus points during the COVID-19 pandemic, adds Rajdeep Saha, Managing Director, Financial Services – Technology Consulting Practice, Protiviti India. “In this context, secure access service edge (SASE) and Zero Trust model can help create a single cloud-native security service, coupled with other enablers.”

Tare recommends a host of measures underlining the new role that artificial intelligence (AI) and analytics would be playing ahead. “Cyberattack insurance is now available from several organisations. A bundle like this is a must for all financial institutions. Security analytics, machine learning, and artificial intelligence are some of the cutting-edge technologies that are helping strengthen the cyber defense mechanism. Before threats assault your infrastructure, the finest protection mechanisms detect and neutralise risks.”

Implementation of PCI-DSS compliance, card payment security, and others have reduced the impact of cyber threats in financial institutions, he adds.

5G wave

5G has turned out to be the V8 engine that many ships were waiting, and craving for, as they gathered dust in the BFSI harbor. Many cool and transformative ideas were stuck for the want of a high-speed, smooth, and enriching pipe that could support their ambitions. Now that 5G is gaining momentum, BFSI, too, would gain from its turbocharged capabilities.

In addition to the deployment of next-generation wireless networks, it’s the 5G standard that is expected to disrupt mobile networks and communication, opines Saha. “Two large local mobile operators have started 5G trials, and we should see early adoption in 2022. Also, for provision of the internet in rural areas, Low Earth Orbit (LEO) satellites will gain traction.”

Tare reminds us that 5G would stir things up – on both sides of the table. “5G’s global presence has delivered a new era of connectivity and efficiency. At the same time, communication between two devices on a 5G network can bring new attacks that organisations aren’t aware of. Due to its nature, there can be loopholes that will require advanced research to make any system connected to the network secure from external attacks.”

Saha expects a lot of change not just at the back-end and under the hood but also on the front-end of revenues and new products. “With 5G adoption, we will see high-speed internet and opportunities across many areas, such as micro-products in insurance, wealth management and advisory being rolled out, with fintech collaboration, via mobile apps.”

With more applications, cloud hosting, and centralised operations, the need for branch bandwidth has risen with a minimum of 2 Mbps per branch as a standard.

— Shivaji Chatterjee, Senior Vice President, Enterprise and Government Business, Hughes Communications India

Distributed ledger technology is gaining momentum, with prominent use cases such as CBDC and asset tokenisation being picked up in markets across the globe.

— Sudhir Pai, CTIO, Global Financial Services,

Capgemini

Cloud matters

If anything has been truly radical and seismic for the BFSI players in the last few years, it’s the possibility to be fast, without being expensive or inaccurate. That confidence has been enabled with the staggeringly perfect elasticity and scalability that cloud models have ushered in.

Market for BFSI digital transformation to touch USD121.70 bn by 2025 globally.

– Adroit Market Research

Shivaji Chatterjee, Senior Vice President, Enterprise and Government Business, Hughes Communications India Private Limited, dissects that traditional network architectures are lending way to SD-WAN with local breakout to the cloud in a secure, managed manner. “It also brings in broadband, LTE access technologies into the branch WAN as compared with incumbent MPLS and VSAT options. SD-WAN has evolved the router, network management, security, and network architecture in one go and made it more cloud-friendly, and kept the network elements aligned with user and banks’ needs.”

Saha notes that interactions and remote collaboration led by AI and the internet of things (IoT) will result in increased public cloud adoption. “The need for efficiency, on-the-go services, customer experience and business continuity in remote operations has accelerated public cloud adoption in the BFSI sector.”

Tare observes that many financial institutions are now increasingly using cloud services including banks, NBFCs, rating agencies, local governments, and credit card processing companies.

He adds some caution and explains that although the services are beneficial to organisations, they can expose them to the risk of data breaches when poorly secured. “Also, human errors such as disclosure of access details, connection to an exposed network service, or incomplete data deletion can cause data breaches.”

BFSI businesses are more interested in buying platforms, rather than building them, to keep technology debts and high maintenance costs at bay.

— Vivek Kulshrestha, Director – Technology,

Synechron

Vivek Kulshrestha, Director – Technology at Synechron, brings in a different angle as he signals how organisations are increasingly transitioning towards adopting a cloud-agnostic system, by moving towards hybrid cloud services and largely trying to make their applications part of a cloud-neutral solution by spreading critical functionalities across cloud providers. “This primarily helps in mitigating the risk from outages on a particular cloud. It also allows flexibility in dealing with providers and the ability to switch business volumes across the cloud options.”

Ubiquity is a must

In the COVID-19 era and new normal, a lot has changed for the financial services sector. As people were forced to stay indoors and yet continue life and work, there was an obvious need for the BFSI sector to run at double the pace, adding just the right service lane to the fast track of stay-at-home financial services.

Saha points towards the strong demand from customers and service providers around areas of internet access and works from anywhere. There is also an increasing demand for embedding AI and IoT in processes for the connected ecosystem, efficiency and speed; touchless operations; secured data on the go through the 3Vs, and multi-channel unified experience.

“Tomorrow’s networks can automatically secure and optimise workloads that are changing at an accelerating pace. Automation will get infused across endpoint management, SaaS platforms, self-service, and zero-touch provisioning,” he explains.

The first thing that one needs here, and a lot of it, is bandwidth.

Despite limited working hours and attendance in the BFSI sector, there has been no significant let-up of the telecom bandwidth utilisation, informs Chatterjee. “With more applications, cloud hosting, and centralised operations, the need for branch bandwidth has gone up with a minimum of 2 Mbps per branch as a standard. Technologies such as broadband fiber and HTS VSATs providing speeds of 5-10 Mbps would begin replacing MPLS and RF links.”

It is also important to note that autonomous networks and software-isation would play in adding frictionless experiences and speed to BFSI models. “AI and machine learning (ML) will be baked into network platforms. ML can make predictions based on network data, and AI can take intelligent actions based on those predictions and thereby evolve into validation mechanisms and the beginning of a self-operating network. To address the need to establish a variety of network connections consisting of assets in the cloud, data centers, and branch offices that function like a single, seamless system, SD-WAN will become a mainstay and replace traditional hardware-based onsite networking approaches,” Saha elaborates.

As the storm rolls in

With a broad swathe of capabilities and enablers by its side, the BFSI sector is once again ready to teach other verticals what to do and what not to do with technologies that can bend, and upend, traditional models.

Decentralisation and personalisation are becoming even more sharp and deep after the pandemic-spurred changes in the BFSI space. “Distributed ledger technology (DLT) is gaining momentum, with prominent use-cases such as CBDC and asset tokenisation being picked up in multiple markets across the globe. Hyper-personalisation is gaining ground,” notes Sudhir Pai, CTIO, Global Financial Services, Capgemini.

Networking and connectivity platforms can also have a significant impact on AI- and biometric-led payments. In India, UPI has simplified the entire payment experience and created the railroads for innovation. Adopting biometric-led payments, such as “nod/smile to pay”, in BFSI will be possible in the near future through new-age communication platforms.

“Thereby, network and communication platforms will greatly enable the data and digital communications medium in BFSI,” highlights Saha.

And how would this infrastructure shape up?

Kulshrestha points out that BFSI businesses are more interested in buying platforms, rather than building them. “This is to keep technology debts and high maintenance costs at bay. These debts result in higher future costs due to adopting complex platforms today.”

Financial institutions will continue to experiment and, in certain cases, win big with a different business model, with the focus shifting to possible collaborations with BigTech, feels Pai. “This almost invariably implies that organisations will move to a more ‘platform-driven operating model enabling unconventional partnerships, as well as driving production and distribution layers. While customer-facing platforms are already omnipresent, more organisations are expected to build internal platforms as well, with greater collaboration between their business and technology functions.”

But then, the BFSI sector would have to show how it is done by first fixing some innate challenges – around accessibility, democracy, costs, and skills.

The internet accessibility in rural India is less than half of its urban peer, reminds Saha. “This digital divide prevents the provision of digital financial services in rural India. The last mile connectivity for financial services dissemination is still an issue.”

Chatterjee echoes that worry. “The challenge lies in providing a uniform quality of service on a pan-India basis for the BFSI sector. The sector resorts to a store-and-forward non-online mode of communication via business correspondence while for online communication, the VSAT technology provides the most secure and reliable connectivity services.”

BFSI accounted for 16% of USD219 billion global cloud computing market in 2020.

– Fortune Business Insights

The pandemic has exposed inefficiencies of current financial services processes while disruptors have been gaining ground as more and more financial services consumption is going digital, reminds Chatterjee. “To compete actively at the customer touchpoints, the BFSI industry, present in the brick-and-mortar form, has to enhance its telecom and networking infrastructure at the branch touchpoint level to provide a similar or better level of services.”

Pai recommends that every enterprise should be on the path to become a tech company – digital to the core and agile in operations. “Without this vision, companies run the risk of becoming obsolete in the near future. Banks, insurers, and other financial institutions are striving to live up to their expectations through reimagined customer journeys and hyper-personalized products. For banks and insurers, this also implies significant investments in talent and new ways of working.”

What is encouraging, and reassuring, is the wide embrace being given to fresh-from-the-oven technologies.

4G/LTE penetration has reached far and deep into the country. The networks have got augmented with much more spectrum allocation and hence bandwidth cites Chatterjee. “These solutions have gained strong acceptance in several areas of the financial services sector.” Chatterjee also talks about High Throughput Satellite (HTS) in that vein. “The HTS solutions provide the BFSI sector with very high bandwidth of 2/4/6/8/10 Mbps at a fraction of the cost of the conventional satellite solutions (VSAT) which are restrictive in providing bandwidth higher than 2 Mbps. This technology jump from VSAT to HTS is being ably supported by ISRO with several satellites having already been commissioned in the geostationary orbit (GEO) to offer these solutions. In addition, LEO satellites offer low latency and are available from internet majors such as Amazon, SpaceX, and OneWeb.”

With all these changes turning into the undercurrents of tomorrow, it would not be surprising to see the six-foot distance that many industries have with technology, due to diffidence, lack of tools, lack of the right, hesitation, and skepticism, to be wiped away soon. At least, that’s the signal that BFSI is giving from its unique vantage point, seated very close to the storms. Clearly, BFSI has transformed from a canary to a seagull. It takes the first blow. But also the first glimpse of the sunrise.