Shanker Ramamurthy, General Manager Strategy & Market Development—Industry Platforms at IBM, talks with Global Finance about the breathtaking speed of today’s technologies and what it means for financial services and businesses generally.
Global Finance: One hears a lot these days about exponential technologies, technologies that are not just growing fast, but exponentially fast.
Shanker Ramamurthy: When you have something growing exponentially, the implications of that at some point become very profound. Think back to 1969, the year man landed on the moon. A computer equivalent to the cell phone that you’re carrying around in your pocket today would have cost billions of dollars, because chip capacity—in accordance with Moore’s Law—has roughly doubled every 18 months over the past 50 years. That’s a performance increase of 230, approximately a billion times.
Today, there are at least four technologies which by virtue of their exponential growth are having a material business effect. Cloud technology, both hybrid and public, impacts us now and will be an increasingly important factor in every industry, including financial services. Artificial intelligence (AI) recently transitioned from narrow AI to broad AI—where AI can solve a broad class of relatively complex problems—is close behind. Blockchain technology is just starting to get on that S curve in terms of commercial impact, but in the next three to five years it will be huge. Quantum computing is still in the research and development stage; it may be three to five years before it has any commercial impact.
GF: Can you talk about the bank of the future?
Ramamurthy: The way a financial institution interacts with its customers will fundamentally change. The last, best experience that a customer had will be the minimal experience that customer will expect from you.
Operations will change dramatically, too, becoming increasingly automated. The need to insert a human into the process will become the exception, not the rule. Many of our clients’ interactions with customers are now being handled by machine learning; 30%—40% of the calls coming into their call centers are handled through a digital agent.
GF: The largest banks are surviving in this brave, new world?
Ramamurthy: Six years ago, everyone said the rise of the fintechs was going to make it extremely difficult for the established financial entities. What happened, though, was the large incumbents figured out how to take advantage of these new disruptive technologies themselves. They co-opted the fintechs, and today they’re designing for ‘no operations’ and developing incredibly smart and rich uses of interface, taking advantage of what technology can offer. Many of these ‘incumbent disruptors’ are stronger than ever today, especially in the U.S.
GF: You also talk about banks looking to use platforms to grow their businesses. A bank like Singapore’s DBS for example extending their value chain beyond traditional financial services?
Ramamurthy: Platform models are going from experimenting to scaling, meaning more banksare figuring out how to scale these new business models.
Innovative banks such as DBS in Singapore, SBI in India and many others are creating platform based business models. For example to extend beyond traditional financial services such as mortgages to provide a market place for real estate listings. Or moving beyond a fully features financial services super-store, to a marketplace for shopping and address other life style needs.
Platform models require a move from products to services; employees to have both analog AND digital skills; collaborating in marketplace eco-systems; and greater focus to achieve required scale. Banks are accelerating their transformations to win in the platform world of today and tomorrow.
GF: You mentioned blockchain as an exponential technology. There has been so much hype about blockchain. Where do things stand today?
Ramamurthy: Blockchain as a technology has been evolving extremely rapidly. You tend to under-estimate how much work has been done. It’s like an iceberg. Most of the work that has been done is under the water line, and then once blockchain networks reaches a certain scale, you begin to see the power of what’s been created.
Areas such as trade finance, cross-border money movement, banking processes such as KYC or AML, digital identity and several others will increasingly adopt this technology to achieve significant efficiencies, reduce cycle times and drive substantially more volume and revenues.
IBM is a leader in this space and has been investing in blockchain for the last few years to lead innovation, contributing to the open technologies to drive standards, building networks such as TradeLens to address global trade digitization, FoodTrust to address efficiencies in the farm-to-fork process and scaling our services capabilities to address our client needs in this fast evolving area.
GF: Does technology make new demands on today’s business executives?
Ramamurthy: When I think about my time in consulting—I started about 25, 30 years ago—you always started with a business strategy, and technology was really a servant to the business strategy. Increasingly, technology is starting to drive business strategy. Successful executives in financial services today need to be ambidextrous in the sense of understanding their industry, but also grasping how technology is changing the industry landscape and business models.