One change which the future will require is in the way we think about technology in relationship to business and organizational models. Traditional information technology skills and infrastructure such as networking, database management and internet access are more important than ever. However, organizations must shift their focus from IT as a utility—basically confined to a single department in a business—to informatics as a capability. 

IT as a Utility to Informatics as a Capability

Informatics as a capability is the strategic ability of a company to consider the impact of business decisions on their technology needs, as well as the impact of technology decisions on the entire chain of value from concept to production and maintenance. This means that each person in the company must have at least a conversational ability—if not fluency—in top technologies which impact their business. For example, in many companies marketing and branding departments were the first business units to begin to bringing their own technology savvy to bear on their work, sometimes in accidental or intentional conflict with existing IT policy. Whether through third party vendors like agencies, or because they choose to hire their own technologists, marketing and branding departments have shown us that IT cannot be limited to a ‘come and fix it’ utility within the business. 

For platform-centric businesses to be successful, every person involved must be fluent in the technology decision-making process on a strategic level. 

Taking Risks with Innovation: the Castle and the Sandbox

Renowned technologist and financial services innovator Kosta Peric (former head of innovation at SWIFT, now at the Gates Foundation) summed up the challenge of innovation in conservative companies quite well in his book The Castle and the Sandbox. He suggests that regulation and stability bias institutions towards safety. As innovation is, almost by definition, a risk-taking activity, he posits that organizations should relate to their core business, which must not stray from its commitment to reliability, as a castle—a fortress which is to be protected and which can be depended on. But in the sandbox, the younger, newer ideas play and grow up into something which could, in the end, contribute to the larger whole of the castle. 

One way that large companies can do this is by keeping their eye on innovative startups and acquiring them “as-is” once they’re stable. BBVA, Spain’s second-largest bank, recently acquired US online banking startup Simple. This merger allows for Simple to continue to operate independently, preserving the unique culture and customer-friendly offerings which made it a success, while giving Simple access to the regulatory expertise and resources for international expansion which have been a hurdle for the smaller company. BBVA, in return, benefits from the innovations that Simple has pioneered in user experience and little-data-informed iteration—innovations which are difficult if not impossible for big banks like BBVA to attempt or even identify at their scale of operations. 

Data diplomacy is another way in which big, established companies can participate in sandbox innovation—making data available to startups for testing concepts or driving innovation which they would not have access to at scale. These information-sharing partnerships can result in future acquisition or collaboration as smaller companies bring their innovations to market. 

The Difference Between IT Enablement and Digital Financial Platforms

IT-enabled financial services are often comprised of a few key groups: financial institutions and their users, both of whom generate and use data. This set of interactions predated digital technologies. When IT was first implemented, it was to support existing business needs by use of computerized tools like networks and databases.

As those systems grew, supported by their IT infrastructure, the complexity level increased exponentially.  

Such systems, having not had the luxury of being designed from scratch, reflected analog business paradigms and were shaped by the presence of multiple incompatible legacy systems. Because of their vulnerabilities and how difficult they were to understand, these systems were closed to each other, proprietary and difficult for end users to access and manipulate. These limitations meant that IT was applied to accelerate analog business offerings, but did not create opportunities for new, digital-enabled value.

The major opportunity for technology to create new value in the financial services industry lies in creating and expanding digital platforms. Digital financial platforms enable multiple, interlocking systems to connect with each other. In their overlap and interconnection we can see entirely new opportunities to create value—along with new implications for technology tools and business decision makers.

In the financial world, players might include end users, reselling agents, banks, regulators, reputation data, APIs (application program interfaces), open source software and hardware, app developers and even smart currencies.

New digital financial platforms allow organizations to quickly provide or tap into crowdfunding, credit scoring, payment systems, individual data profiles (or little data), big data (the collection of all that little data), risk management, adjacent opportunities (like cross-selling related products much more effectively, or highly-automated investment of cash float), social media listening and conversation, social identity schemas and reputation management. Each could be its own piece of content, but it’s important to see how so many of them stem from—and then drive—digital business.

This combining and splitting allows new parties to take advantage of their strongest innovation capabilities, be that branding, or gathering new users through community-building, or process and data optimization—letting other parties take on the other important parts of value creation, like stable, scalable back-end systems and legal or regulatory evolution.