How the financial services sector can accelerate its digital transformation by using digital sandbox

By Franco Severini, Chief Technology Officer at Fujitsu

If the importance of technology in society (and especially for businesses) wasn’t apparent in the past, the pandemic made it starker.

Organisations that were already on their digital transformation journey, and indeed, those that were quick to do so when the pandemic began, benefitted greatly. For instance, in Europe, there was a 72% increase in the use of Fintech apps, with one gold-purchasing app in particular seeing a massive 718% rise in traffic.

However, as the economy remains uncertain due to the energy crisis, fears of recession and geopolitical conflict, the Financial Services (FS) sector must continue to find ways to innovate to stay on top of the tide.

Moreover, the events of the past few years have inspired deeper changes to how businesses strategise – projects that used to take months to complete now take mere weeks or days in some cases. This has been made possible through the utilisation of emerging technologies to innovate at pace and meet changing customer behaviour.

But rapid innovation without a safe and controlled environment to experiment in and test new systems/processes can be detrimental to banks. In this piece, I examine how digital transformation within the FS sector can be achieved through a digital sandbox.

The road to evolution

Radical change is always met with some resistance, especially where new technology is concerned. While some pushback can serve as a good measure, it can also prevent financial institutions from harnessing the potential of cloud services and emerging technologies such as artificial intelligence (AI) and machine learning (ML) in good time.

The challenge that large banks have is overcoming their long-established caution when it comes to trying out new technologies. Also, the focus on reducing risk and avoiding failure means their workforce aren’t incentivised to work on new ideas. This is particularly the case when leadership consider new technology to be experimental and unproven.

This has led to innovation and digitalisation being weak spots for some FS institutions – which has allowed digital challenger banks to gain market share. So, to remain competitive, traditional banks must make the best of their move to cloud. Additionally, there also needs to be a shift in thinking from cloud is a nice-to-have, to a focus on swift experimentation and rapid implementation.

A Fujitsu-led piece of research on UK Tech leaders found that 95% say they see cloud as a key component of their digital transformation at a high-level. However, only 35% went on to say they’re getting the return on investment they expected. So, how do we bridge the gap to ensure banks are making a return on their investment in cloud?

Utilising a digital sandbox

Financial institutions are in the business of cultivating trust, both with their customers and shareholders. However, accelerated innovation makes maintaining that trust sound risky. Unfortunately, avoiding risk is the barrier that prevents established banks from becoming as agile and inventive as their Fintech counterparts.

CIO’s understand cloud is the key to innovation, but they have to reassure the cautious layers of governance and risk mitigation officers that their vision will not undermine trust in the institution. With a digital sandbox, maintaining trust while experimenting with new systems and products is possible, which empowers the workforce to act with agility and at pace.

A digital sandbox is a multi-cloud environment that behaves and reacts the same way existing business systems would, while preventing experimentation from impacting the wider organisational infrastructure. As such, it enables new ideas and methods to be tested and developed in a safe, isolated space.

This ensures regulations, strict compliance, and the highest standards of security are maintained, so banks can become adaptive organisation while always remaining compliant.

With the right digital sandbox partner ecosystem, banks can reach out to an array of third parties to trial how new processes or products would work with their legacy applications and technologies – without compromising their security or putting them at risk of disruption. This is vital given that 73% of tech leaders in the UK are worried about cloud adoption leading to increased complexity.

At Fujitsu, we drive internal and client-facing innovation with our digital sandbox, which integrates a wide range of solutions and capabilities, ranging from the major cloud providers (Google, Azure, AWS, Alibaba, etc.) through to innovations from small start-ups.

However, for implementation to be effective, you’ll also need to tackle the inhibitions of the risk averse mindset prevalent in most financial organisations. You do this by:

1. Implementing organisational changes that ensure workers feel motivated to experiment and innovate
2. Providing more pragmatic control and governance processes that ensure the level of oversight is correctly proportional to the actual risk incurred, thus enabling any innovation to proceed without deterrence.

Implementing a digital sandbox

As a technology enabler, a digital sandbox offers a tightly controlled environment where you can learn, experiment, and develop whilst quarantining your activities from the rest of the organisation. It gives you the space to understand the value of new technologies, from API frameworks to AI and ML, as well as try out new products.

Once you’ve proven your point and can show that the right outcomes can be achieved, this can be demonstrated to the rest of the organisation. Then you can move to the implementation stage where the digital sandbox can be used again as a digital twin, mirroring specific areas of the system so further in-depth analysis and experiments can be run. This can be iterated until the new idea or product is ready for launch.

To attain successful results for any innovative solution, it will require good data which is why an investment in synthetic data generation and provision capabilities is vital. Also, ensuring that the technologies the sandbox is built upon can support a modern multi-cloud hosted implementation.

In disruptive times like these, the ability to innovate at pace to bring solutions to market is crucial for the lifeline of banks. Using a digital sandbox is key to doing this successfully and will not only lead to a return on investment but will also enable your employees to work at their best.