Although a bank's business has basically stayed the same over the last couple of decades, how a bank operates has drastically shifted. The fundamental pillars of a bank, according to Mike Telang, executive vice president and head of enterprise architecture at Wells Fargo, now focus on mostly security, regulation, and innovation.
When it comes to technology trends in the financial services industry, Telang said its impact on a bank depends heavily on where the bank is in its maturity lifecycle.
"I think it depends on the lifecycle of the maturity of where you are as a bank at that point in time and you've got to find a solution for that ... you have a lot of trends like blockchain, you have a lot of trends like security, so we are applying the technology to the use case that suits us best," Telang said during a panel session at VMworld 2019 in San Francisco last week.
Looking at emerging technologies, Telang described the challenges Wells Fargo has faced in adopting machine learning (ML) and artificial intelligence (AI).
"ML/AI, I think the classic examples are around fraud and [anti-money laundering] and stuff like that, that's one of the things a bank is jumping all over; it comes with its own set of problems," he explained.
"I think almost all large banks are being asked now by regulators to go back and identify any ML/AI solution that's brought into the bank because the implication of that is, if the wrong algorithm is being used, you are going to decline credit or you're going to have impact to the customers.
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"It's a bit of a double-edged sword for a bank where you can't go all in and you can't throw all use cases at it, especially the ones that are impactful for customers."
Another emerging technology that banks, including Wells Fargo, have dabbled with but are yet to find a use case for that improves upon existing applications like databases, is blockchain.
"For a long time I think large banks were looking at blockchain and [distributed ledger technology] saying it's a solution looking for a problem, then there was a sense that we don't want to be left behind if the problem suddenly appears," he said. "So I think a lot of banks have invested in blockchain and the obvious use case of payments is there ... and looking at chain of custody etc, but I wouldn't say we've found the game-changing use case just yet."
See also: Is FOMO making enterprises unnecessarily leap into blockchain?
Discussing his organisation's cloud strategy, Telang said there's a trend of using a multi-cloud approach to take advantage of the various capabilities of different cloud providers.
"You're going to pick on the provider who has differentiated themselves and at that point it becomes -- it really has to become part of your strategy to be agile to move that workload across from one provider to the other," he explained.
"When we think of workload we typically think about applications, but for us, I think the value will be in the ability to move our data from one to the other without leaving that data behind. So our cloud strategy, when we think of multi-cloud, we're really trying to kind of simplify it by saying, 'What's our strategy around SaaS, what's our strategy around PaaS, what's our strategy around IaaS' -- where we see the big data go, so we're looking at it that way."
With digital transformation, Telang argued it comes down to the need to understand the culture within an organisation. He said within Wells Fargo, there is a multitude of different lines of business, each with their own approach and own set of customers.
"Really what we have to recognize is the fact that they're all different customers so our challenge is how do you build, how do you get the common factor across these businesses to share the foundational aspects. What is unique in that business that you give them full runway to go with and in the background?
"Historically they had the whole stack, they could buy data centers, they could go buy servers, which is why we have what we have -- and I think the guiding principle we've kind of come to is our differentiator is the customer experience and data; the rest you don't need to own," he explained.
Telang said Wells Fargo has determined that everything else, including software, can be commoditized.
"Because when you think about the basic capability like opening an account -- we have about 300 ways to open an account today, there is fundamentally no reason for that -- but the cultural aspect is so unique ... a lot of an application developer's entity is built around the application they support and introduce themselves. If you haven't noticed, you will now. I support this app, and now you try and tell them you're breaking their app out and commoditizing it -- it is a huge cultural play," Telang said.
Touching on disruption, Telang believes it's only a matter of time before banks succumb to the trend that has hit many other industries.
"A lot of the companies have survived either by acquiring them or by re-emerging differently. I think banks have to do that. I think it's a matter of time," Telang said.
"I think there's a bit of a runway before -- you either adapt to it or I mean, some banks are putting a huge investment focusing on fintechs to see which ones to acquire, which ones they can [partner with] -- so it will be interesting to see the way it plays out, but I don't think it's a problem the banks can ignore much longer."
Disclosure: Asha Barbaschow travelled as a guest of VMware to VMworld in San Francisco.