Microsoft and partners: enabling the digital economy

New technologies are empowering financial firms to generate innovative business models, deliver new kinds of value and create unique customer experiences

Jacqui Griffiths
By Jacqui Griffiths on 16 November 2018
Microsoft and partners: enabling the digital economy

This article was originally published in the Autumn 2018 issue of The Record.

Digital technologies are changing the way people think about what they consume and how they consume it. For financial services institutions, competing with new, digitally-powered market entrants to meet consumers’ changing needs where and when they occur demands far-reaching transformation. Financial firms are being challenged to step outside their traditional boundaries and visualise new business models that create value for tomorrow’s consumers.

Microsoft calls this digital transformation ‘the art of the possible’. But according to David Cox, executive director of Worldwide Financial Services at Microsoft Digital Transformations, many organisations – especially in the financial services – have yet to fully capture its true scope.

“When a bank considers digital transformation, they generally limit their thinking to their current business and apply digital technologies to aspects like account opening, loan application, payments or other traditional banking functions,” Cox wrote in a recent Microsoft financial services industry blog. “In other words, they focus more on improving what they have always done rather than imagining what they could also do. While this can be valuable for a bank and their customers, it falls short of their complete opportunity. Because digital transformation transforms actions, decisions, money, and intelligence into data, traditional assumptions about who does what evaporate.”

But the evaporation of assumptions, empowered by new technologies and the capabilities they bring, is already transforming some sectors of the industry. In payments, for example, the entry of non-banking organisations to provide payment services – offering personalisation and born-in-the-cloud agility that incumbent financial organisations can struggle to match – has blown the field wide open. In their whitepaper, International payments: accelerating banks’ transformation, BCG and Swift note that as the world increasingly transitions away from cash and the volume of international payments grows, digitisation is defining new expectations for simplicity, transparency and instantaneity. Alongside these new expectations, the rise of global marketplaces has blurred the frontier between payment and purchase processes. “These forces are driving the industry towards a profound transformation, one based on the use of advanced technology to integrate payments with clients’ business processes, develop new offerings and reduce the burden of compliance,” the authors say.

Temenos’ Microsoft Azure-based Payment Hub is one example that illustrates how digitalised, cloud-enabled technologies can enable financial firms to tap into evolving markets, providing the flexibility to create innovative, customer-centric offerings. As a fully embedded component of the Temenos Core Banking platform, the solution can enable banks to transform their payments offerings at a much lower initial investment, in turn providing better value to customers. But it can also run as a standalone payment processing engine, giving banks a single solution for processing low value, high value and instant payments. 

Other areas of the industry are also becoming scenes for transformation. Cloud-based artificial intelligence (AI) capabilities are changing the game by addressing business needs in real time. AI bots are already taking care of routine and repetitive tasks to free bank staff for more valuable activities. And with the power to securely engage with multiple data sources and derive actionable insights using predictive analytics and machine learning, AI is enabling bankers to meet customers where they are – on social media, online or on site. With AI, bankers can instantly understand the history and profile of the customer they’re talking to, get an accurate view of their needs, and create tailor-made solutions for them in collaboration with non-banking organisations such as retailers, real estate agents or car dealers.

Blockchain, too, is emerging as a huge enabler for the digital economy, empowering financial firms to provide secure and efficient solutions that simplify the lives of their customers. For example, global professional services firm EY has worked with Microsoft, network security expert Guardtime, blockchain technology provider R3, and global shipping giant AP Moller-Maersk to create Insurwave, the world’s first blockchain platform for marine insurance. Running on Microsoft Azure, the platform provides a secure, scalable distributed database that offers simultaneous access to a single version of the truth to all participants in speciality insurance. In doing so, it simplifies the complex business of setting marine insurance premiums – a process that involves coordination between insurance company, state department of transportation, state police and state and federal regulatory agencies, as well as factors such as different cargos and border crossings. 

Ultimately, Microsoft’s Cox writes that the ability to harness the power of data with scale, speed and agility reduces friction for the consumer, blurs the lines between different industries and makes new, agile business models possible. “In this way, technology transfers power from corporations and institutions to smaller scale business entities and individuals,” he writes. “In the process, the economy itself transforms.”

As financial firms step up to enable the digital economy, stepping outside their traditional boundaries is no longer optional. It may take time for the industry to fully capture the art of the possible, but as organisations around the world continue their digital transformation journey, brushstrokes of are being applied to create new, dynamic and customer-focused business vistas.

Exactly how the industry will evolve remains to be seen. But as global events like Sibos 2018 reflect intense industry focus on enabling the digital economy, the scope of the art of the possible is starting to emerge.

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