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Are Banks Ready for Blockchain?

Balazs Fejes

SVP, Banking & Financial Services, EPAM Switzerland
Blog
  • Financial Services

Balazs Fejes, EPAM's SVP & Co-Head Global Business, shares his thoughts on blockchain, a new buzzword in the financial technology domain, and a need for an agile culture within banks, following a recent Sibos event.

Every year the Sibos conference brings together thousands of business leaders, decision makers, and topic experts from a range of financial institutions, multinational corporations, and technology partners. This year’s conference was one of the biggest ever, and in my opinion, one of the most groundbreaking.

I was most surprised by the popularity of several digital finance topics that, in the past, lingered on the outskirts of discussions, never really forcing their way into the heart of these conferences. One topic in particular, the blockchain, seemed to be quite popular. The blockchain—not to be confused with bitcoins or cryptocurrency—has many deep, long-lasting implications for financial institutions. Blockchain has the propensity to transform the cost base of a bank’s back offices, not to mention cases for distributed ledger capabilities and smart contracts that can be embedded into the blockchain.

Balazs Fejes, SVP & Co-Head Global Business, EPAM, outlines how people understand blockchain technology and how financial institutions have to adapt for blockchain and APIs to be successful.


As these disruptive technologies continue to change digital finance, C-level executives are seeking advice on how to deploy them. I find that banks are largely falling into three categories:

1. The Non-Believers: In their view, there is no available money to implement new technologies such as the blockchain, but it’s not really needed. These banks have been around for hundreds of years executing transactions “the old-fashioned way,” so there is no threat to the current system. They will be around for the next hundred years doing exactly the same thing.

2. Digital Transformation Now: These financial institutions range from having a sense of urgency to total panic mode when it comes to adopting new technologies. A few are looking to transform the culture so that banks effectively become technology companies themselves, while most others are becoming concerned with both FinTech startups (Square, Kickstarter) and the giants (Google, Facebook, Alibaba). The focal point is figuring out how and where to increase their share of the customer’s wallet.

3. Platform Play: Here we see full adaption to Application Programming Interface (API)-based banking. These institutions fully embrace the PSD2 regulations and see themselves as a technology company that happens to do banking. As a matter of fact, many banks are straddling the line between Digital Transformation and Platform Play.

Darren Starsmore, Account Director, Head of APAC, EPAM, outlines the barriers to digital transformation and how to overcome the challenges faced when implementing change.


Interestingly, in each group it is the business leaders who are taking charge of inciting change (or limiting it)—traditional IT is not leading the charge. That’s because many emerging banking technologies like the blockchain have an immense impact on the way the bank functions, and promise to become more deeply woven into the fabric of business processes.

The most important conclusion, however—the one thing that everyone agreed upon regardless of where they fell on the categorical spectrum—is that there is no cookie-cutter approach. No single solution promises universal success: Those who desire success will need to adapt and adopt different approaches that best address business challenges.

Moving forward, the most essential element for banks will be an agile, forward-thinking internal culture. Failure is imminent, but those who are willing to fail fast and learn from mistakes will accelerate their rate of innovation. Though I’m a technologist, the final point in this blog is not a technical one, but a cultural one: It’s all about agility. Banks (or any organization that can embed agile principles into the culture) that are agile will not only survive—they’ll thrive.

Mike Jessick, User Experience Director, EPAM Empathy Lab speaks about the bank’s role in addressing customer needs in developing digital services and how a service design approach can help.

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