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Regulatory and economic pressures argue for banks to embrace new approaches to technology

The banking sector finds itself under pressure from an increase in regulation and a trend towards non-traditional digital banking applications, says Neil Dodgson, global head of tech sales, risk and compliance at IBM Watson Financial Services.

IBM has undergone its own transformation from a leading mainframe company to a more focused, solutions-oriented firm with its focus in the financial services sector primarily on risk/compliance, financial crime and commercial payments.

Dodgson discusses how regulatory demands and heightened reporting requirements have placed a “significant burden” on banks in terms of the amount of capital that has to be set aside.

He suggests banks are having to cope with these demands while simultaneously coming to grips with non-traditional digital banking platforms: “Young people today don’t know what a high-street bank is. They can take care of all their banking on their mobile phones.”

Topping it all off is the low interest rate environment in which banks now find themselves. Dodgson recalls when banks were worried about rates falling below 4%: “Today, we’re looking at rates below 1% and even in negative territory in some places.”

He notes how the pressures on banks are showing up in shareholder returns. The overall returns for the FTSE 100 has been around 30% but if breaking out just the banking sector reduces that return to 15%. Even more worryingly, at least two high-street banks were actually down 15% over that same time period.

Today IBM Watson Financial Services is working closely with its clients in rolling out new technologies across six main areas:

  • Data aggregation
  • Blockchain
  • Cognitive capabilities
  • Big data
  • Cloud computing
  • Quantum computing

Dodgson suggests one way of looking at what IBM was trying to do in implementing those new approaches was to give risk managers and compliance officers the appropriate tools for the new regulatory and economic environment. “We want them to be able to do the jobs they were employed for,” he says.

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