The Financial Services Industry Has Evolved - and Open-Source Is More Relevant Than Ever

Roy Aston, CIO, Barclaycard
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If you rewind the financial services industry by 20 years, the CIO’s software choices were confined to a short list. Half a dozen major vendors offered different on premise solutions, which took a period of six months to several years to implement. As with all software, technical challenges might occur, and the way to address them was very simple—by speaking directly with the vendor in order to rectify the issue. These software solutions delivered huge value, because they were suitable for the credit card consumer of the time—individuals who balanced their check book each month, and learned about their credit card through monthly statements or phone calls to the issuers. The idea of a major financial institution embracing software offered via open-source, editing the source code directly, would have seemed bold, if not reckless.

  ​Most organizations maintain a healthy mix of both proprietary solutions and open-source software   

Today, all of that has changed.

The modern consumer of financial services is a different beast from 20 years ago, or even five years ago. Now, credit card customers can apply for a new card with just a few taps on a smart phone. The flow of information has grown exponentially: customers will check their balance immediately after a purchase, and carefully track their airline points. Meanwhile, the credit card has become central to the world of e-commerce. This has put intense pressure on credit card issuers to achieve a greater degree of agility and flexibility if they want to stay competitive.

To achieve this agility, open-source software has not only become an option for the financial services CIO, but in many ways it has become central to the technology operation. Open-source technologies such as Spring, Angular and Spark are flexible and customizable in a way that allows a modern CIO to rapidly adapt and upgrade tech architecture to adapt to the changes in customer priorities. Spring, for example, allows customizations of almost any aspect of the framework. As a result, new technologies can be added quickly with a "plug-and-play" approach, rather than requiring major time investment to integrate them. In operations, software like OpenStack, Chef, Go.CD, Jenkins etc. offer functionality such as build/deploy pipelines along with automated provisioning and deployments. When technical glitches do happen, the IT team can now go directly into the code to better understand the issue more quickly, or better still, make changes to it, in order to ensure that the technical challenge doesn’t slow down the business in pursuit of its goal: to provide a frictionless financial services journey to the consumer.

Part of this is about survival. Consumer demands are not the only thing that has changed in recent years. Regulation has also grown stricter since the financial crisis, and the need for privacy in the vast flows of financial data is paramount. The sector has also grown more competitive, with the birth of an entire financial technology industry, with innovative start-ups bringing new approaches to the market.

But open-source software has also opened up new possibilities for major institutions. Barclaycard’s priority is in understanding and maximizing the value of the customer journey, leveraging the data we have on our customers. Using traditional software, the approach to this was centered around complex data warehouses, where the data was carefully structured in the way it was expected to be used. Open-source options such as Apache Spark and Hadoop HDFS allow the storing of unstructured RAW data from the sources in a “data lake.” Once a business need has been established, the data is simply mined using clusters of machines working together to get the data necessary to drive the business. Real-time needs can also be met using streaming data processors like Apache Spark for analysing things like fraud patterns.

Open-source does require a new mind set for IT teams in major organizations. The nature of open-source means, that your options with a particular piece of software are tied to the growth of the software’s ecosystem, rather than being driven by a large-scale vendor. Culturally there is a challenge as well, requiring a willingness to adopt a start-up culture and pace of work within a major organization, embracing the innovation while bearing in mind that the solutions have to be scalable across a multibillion dollar organization.

None of this is to say that traditional software vendors do not have a part to play. Most organizations maintain a healthy mix of both proprietary solutions and open-source software. Many new companies also are being built out of open-source software, providing support and further evolving the projects for enterprise needs while maintaining the core open-source product.

Both the positive and negative for open-source software in financial services boil down to the same essential point: flexibility. Financial services CIOs looking to drive their businesses toward their objectives and goals must get comfortable with the idea of combining open-source with proprietary, and be willing to update and rethink continuously. The market will reward the creative solutions.

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