Ann Schlemmer, CEO at Percona.
If you want to understand what is happening, follow the money. For banking and financial services, this points to a long-term shift in how we think about and use money. Boston Consulting Group this year flagged a long-term trend concerning money, payments and financial services moving from traditional banking to new fintech services. The report estimates that fintech services will jump from 2% of global financial services revenue to 25% by 2030, which equates to $1.5 trillion in annual revenue.
To build these applications, any supplier has to meet stringent security, privacy and availability requirements. When you are dealing with cash, payments or other financial transactions, there is no excuse for unplanned downtime. Companies have to look at where they can build reliable services for customers. Their trust is hard to gain: According to Forrester, more than half of U.S. customers said they had low trust in their financial services provider, while NetApp (via Finextra) found that 60% of U.K. customers did not trust their bank to protect their data.
Delivering Reliable Services
To succeed here, you must be reliable from a technology standpoint and meet expectations around quality and speed while understanding how people react to your service. This is based on a combination of factors ranging from the emotional response that you create based on your design to technical aspects like uptime and performance.
These implementations have to be cost-effective to be financially viable as companies start out and look to scale up. As the CEO of a company that offers open-source database software support and services, I’ve found that many companies address this need by looking to open-source.
In the financial services sector, implementing open-source software can be an effective route to getting new services up and running quickly. For those entering the market, they can build services at low cost and then scale up effectively, especially when they also use cloud computing services. Open-source software includes some of the most popular options in the market for solutions like databases, and banks across the world use open-source software for multiple applications across their estates.
As part of any deployment, consider how you’ll ensure your services are running at all times. Application uptime and availability are key factors for customer satisfaction, so you will have to look at high-availability deployments for your key application components. After all, it is pointless to invest heavily in customer awareness and acquisition programs if your applications then crash or your services become available. This can heavily impact the retention of those customers that you have invested so much time, effort and budget into acquiring. In this architecture, your back-end database infrastructure is a fundamental component for delivering a high-performance, dependable application that ensures customers have access to financial data whenever needed, with no downtime or outages.
Open-source software can often deliver on your needs around availability and reliability. Open source is proven at scale: Sites like Facebook use MySQL for data management while serving millions of users every day. Banks are already transitioning some of their mission-critical systems to run using open-source options to reduce costs and improve developer experience for their teams.
Understanding Your Options
To build the applications of the future, you have to understand what your options are today. For new companies entering the fintech market, building with cloud-native services can get you started far faster than implementing your own data center. However, this ability to use cloud services is also a risk for long-term cost management. Being tied to a specific cloud service that is only available from one provider is a form of lock-in, and while you may be happy to accept that as a price to pay at the beginning, it may lead to much higher costs over time.
Using open-source software can prevent lock-in, as you always have the option to move to another provider that can support the same open-source database or move to your own location if you have the resources. Similarly, if you are not happy with your open-source software provider, you can find support from another organization that meets your needs better. This ability to switch providers should improve the relationship between providers and customers, as all sides have to see value in a transaction.
Building new financial applications and services has to start with a firm foundation. With open source, areas like databases can provide reliability and performance for applications. Depending on the functionality that you want, there are multiple open-source databases that can be suitable to use. To choose the right one, look at your existing team and their skills with the databases and software options you’re considering, as well as how easy it is to recruit more people with those skills if you need to expand your team.
Alongside looking at open-source software deployments, you should also look at where you can contribute back to the open-source community. Setting up an open-source program office, or OSPO, like Lloyds Banking Group did can help you manage your software use and improve how you contribute to the community. Banks and financial institutions have experience in hardening and securing their software, and this experience can be extremely valuable to the wider community.
In the future, I believe fintech will take on more of the transactions that we currently rely on banks for. The growth of open banking could take this further, making data from our financial transactions a valuable product in its own right. Using open-source software to build these services can enable fintech companies to iterate and create market fit faster, while banks can also work to improve the security of open source more generally.
In following the money, we can see that open source has a role to play in building, developing and maintaining services around cash, payments and savings. To go back even further, we can ask, “cui bono?” which means, “who benefits?” From looking at how open source can support banks and startups in delivering the future for fintech, the answer, if it is used correctly, should be “everybody.”
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