Here are the biggest IT challenges in financial services industry

In the financial services industry, market opportunities grow faster than IT budgets. Beyond financial institutions, other industries are also faced with the same challenges brought about by technology trends such as big data and social media.

However, for the financial services industry, these trends pose some unique challenges.

Compliance, regulations, risks, and evolving business models add on to the industry's burdens. IT departments are pressured to support all these business requirements, improve efficiency and manageability, handle budget constraints, and meet time-to-market goals, while ensuring the security of customer information.

When data is not managed properly, it quickly becomes a liability.

In this article, we'll take a look at some of the ways these trends can impact financial institutions.

Big Data

In-house data management and classification has gradually become a priority for IT functions with the financial institutions.

As information systems continue to generate more data, it needs to be managed in accordance to regulatory compliance, risk management and performance management standards. Organizations who understand how to tap into this data and translate it into useful business information will have a competitive edge over competitors.

Gartner noted that 2013 is the year of experimentation and early deployment for big data in many organizations, and a recent survey of 720 US companies shared during the Gartner Symposium/ITxpo showed that 34 percent of banking organizations have already invested in big data .

Asia Pacific organizations, on the other hand, were notably ambitious with 45 percent indicating that they plan to invest on big data during the next two years.

Social Media

Understanding social media is ultimately about understanding the pulse of consumer sentiment. Responding well and quickly in our digitally connected age may be the key to unlocking competitive advantages.

In an IDC study released in July 2012 on social media trends across verticals, including banking, a key finding highlighted that B2B companies often lag behind their B2C counterparts in terms of driving social media adoption. The report also found that organizations that leverage social media networks to share best practices and identify appropriate resources enable them to increase productivity and improve knowledge sharing.

Li-May Chew, associate research director, Asia/Pacific Financial Advisory Service, IDC Financial Insights, noted that as solutions mature, she “expects social media interactions to be increasingly tracked, captured and mined by banks, with predictive analysis and behavioral modeling applied to the data for gaining competitive advantage.”

Leveraging the hype and potential solution

The financial service industry invested more in IT than any other industry in 2012, using standardization to reduce costs and increase efficiency consistently ranked as their top IT goals.

Chief Information Officers (CIOs) and IT departments value the flexibility, performance and quality of open source solutions, while the cost savings releases resources that can be targeted on innovating and meeting the rapidly changing demands of their businesses, today and tomorrow.

Open source software, coupled with commodity hardware, has a proven record to meeting these goals. An example is the Stock Exchange of Thailand (SET) , one of the top markets in Southeast Asia. SET sought to upgrade and enhance its clearing and settlement systems to meet growing needs of the customers.

The new system not only had to meet current demands but also to expand its business and product offerings, and connect and carry out transactions with other clearing houses worldwide.

SET chose Red Hat Enterprise Linux and Red Hat JBoss Enterprise Application platform to cope with these volatile demands. Red Hat powers more than 50 percent of the world's trading volume and SET is one of the global exchanges that is benefitting from this technology.

The growing relationship between banks and big data

Big data is not a recent concept for banks and the finance industry. With the amount of data increasing exponentially, investment of organizations go through different stages that starts from knowledge gathering and strategy setting.

This investment consists of time, trials and experiment or proof of concept, to first deployments. Over time, operations start to rely on the outcomes of these deployments and implementing systems are sustained and managed.

For the financial services sector, information and delivery is a critical function and data is a key factor in making intelligent decisions. The deployments carried and implemented by these organizations are considered “game-changing”.

As such, businesses should make sure that they are familiar and educated about big data opportunities within their industry to ensure that they are getting value out of their investments.

¹Gartner survey reveals that 64 percent of organizations have invested or plan to invest in big data in 2013, https://www.gartner.com/newsroom/id/2593815

²IDC press release: IDC study reveals emerging social media trends across vertical markets, July 2012, https://www.idc.com/getdoc.jsp?containerId=prUS23688012

³Asian banks to raise stakes in social business tools: IDC, InformationWeek, May 2013, https://wwww.informationweek.in/bfsi/12-05-29/asian_banks_to_raise_stakes_in_social_business_tools_idc.aspx

⁴Red Hat in financial services cases studies, page 7, https://sg.redhat.com/rhecm/rest-rhecm/jcr/repository/collaboration/jcr:system/jcr:versionStorage/0ada97680a0526012926e9d38e078e3e/1/jcr:frozenNode/rh:pdfFile.pdf?sc_cid=70160000000brQPAAY

⁵Stock Exchange of Thailand selects Red Hat for its integrated clearing and settlement system upgrade, Nov 14, 2013, https://sg.redhat.com/about/news/archive/2013/11/stock-exchange-of-thailand-selects-red-hat-for-its-integrated-clearing-and-settlement-system-upgrade

⁶Why Red Hat? https://www.redhat.com/about/whoisredhat/redhat.html