|Financial Services Programmes|
Chairman, Intellect Financial Services Programmes
Financial Infrastructure Programme
Financial Infrastructure refers to a complex myriad of systems, networks, applications, servers, data bases, physical storage systems, and end-user computing systems and devices. It is the foundation upon which every function within ever financial institution sits upon and the provision of economically critical banking services is reliant on. It is also the ‘plumbing’ that allows data to flow within and between financial institutions and which informs banks’ risk and lending decisions, as well as decision made by the regulatory authorities.
However, as outlines in a recent Intellect paper, this infrastructure is generally overly complex, intertwined and absorbs 80- 90% of banks’ IT budgets to maintain (estimated). This restricts banks’ abilities to truly know their own operations and their customers; is a barrier to cost effective and timely business change; and as ongoing changes are perennially ‘bolted on’ to already complex existing systems, poses greater risk of future systems failures. By the same token, it is also this infrastructure that restricts the ability of regulators to perform their supervisory role with confidence about the picture of the financial system that banks’ data paints. It is the complexity of existing legacy infrastructure that acts as an obstacle to new entrants to the market and therefore inhibits attempts to increase competition. Ultimately it restricts the ability of banks to better serve their customers, the economy and their own shareholders.
Intellect’s Financial Infrastructure Programme provides a neutral forum for all relevant parties - from banks to regulators, policy makers, academia and technology innovators – to drive cross-industry dialogue around how the financial system’s infrastructure can be designed to not only implement ongoing reforms in a more cost effective and joined up manner, but also allow banks to better serve their customers, the economy and indeed their own shareholders.
The Programme consists of five interconnected groups that will meet on a regular basis to facilitate targeted and insightful discussion and provide the foundation for tangible outputs to drive the mutually beneficial evolution of the financial system. These groups include:
In 2013, Intellect’s Insurance Group will be looking to launch its ‘Insurance 2020’ project.
Through working with external organisations, the ‘Insurance 2020’ project will look to identify some of the key challenges faced by the insurance industry and map the trajectory of technological innovation to them – with an objective of providing a snapshot of what challenges can be addressed over the coming years. In effect, it is a future gazing exercise that will apply the ‘technological art of the possible’ to addressing prominent issues such as fraud, risk management, customer loyalty and pressures on premiums amongst other issues.
It is anticipated that the project will allow the technology industry to gain greater insight into the future drivers and hurdles that the insurance industry is seeking to address and conversely, help the insurance industry gain a more comprehensive view of what the ‘bleeding edge’ of technological innovation can bring to their industry.
The project will undertake a number of speaker-led sessions aimed at drawing out specific opportunities for technology to play a role in enabling the insurance industry to operate more efficiently, more securely and with the delivery of greater benefit to the industry as whole, individual insurers, and their customers.
In addition to the Insurance 2020 project, Intellect’s Insurance Group will continue to look at the critical role of technology has in regulation such as Solvency II, which represents a major factor of change for the European industry in terms of the way insurers collate and analyse risk information.
Capital Markets Group
The emergence of algorithmic trading and, latterly, high frequency trading (HFT) has led to a massive focus on speeds, feeds and the need for minimal latency, or delays, in the way trades are processed and executed. A large global investment bank recently has stated that every millisecond lost results in $100m per annum in lost opportunity. It is a possibility that soon, all markets will be completely electronic, and transaction times will be the ultimate arbiter of who gets the best trade at the best price, with significant commercial opportunities for those technology providers that can shave milliseconds off transaction times.
How regulation deals with the increasing automation of capital markets will determine the City’s future commercial development. There has been a notable shift in regulatory focus in recent months to the role that technology plays in the trading of financial assets – most notably in the U.S. with the Dodd-Frank Wall Street Reform and Consumer Protection Act and in the EU the forthcoming review of the Markets in Financial Instruments Directive (MiFID). Intellect will play a full and positive role in ensuring that, through the expertise of its Members, policy that affects capital markets in the UK is fully informed by the positive role that technology plays.