Why banks have been tentative to adopt open source software historically?
Financial services providers have been undergoing increasing pressure in recent years owing to a rapidly changing regulatory ecosystem, heightening customer expectations, technology innovations and relentlessly rising threats around financial asset management. To sustain in this fast-moving landscape, financial institutions must find ways that can give them business growth opportunities. It is also no clandestine that turning to technology or other alternative approaches will require more effort in both monetary and company culture, increasingly playing an important role in a business’s overall strategy.
With given challenges to move towards innovation, financial services now begin exploring open source technology, which has become a mainstream focus of IT companies. Open source allows source code to be available to anyone to use, study, change and distribute the software to anyone and for any purpose.
With open source practices, financial services providers will be able to collaborate to improve all aspects of the industry workflow, such as trading, settlement, payments, risk management, compliance and reporting, among others.
Earlier, banks, especially large ones, have inclined to safeguard all technology as intellectual property and gain a competitive edge, with large-scale engineering teams building all software from scratch. The open source reach to financial services is not new as it has already infiltrated the industry over the years in several ways.
Back-end Solutions: Servers supporting the massive compute landscape, data storage and processing, and trading infrastructure largely run on open source Linux platforms. In recent years, this has become the preferred method as it delivers ease of maintenance, amplified speed of delivery and other advantages.
Engineering: With the large-scale use of open source technology for network communications, workflow management, database storage, web application development and more, financial services software development has been commoditized.
Transparency: With regulatory framework mandating the industry to open up, standardize and become more transparent, payments, account queries and other types of basic banking services enabled by open source model are started providing any institution with the ability to consume the services and data as commoditized implementations and package them into new and innovative offerings. Europe is leading the way with PSD2 and Open Banking in the UK.
The Open Source solution has already reached a certain level of maturity. While a few years ago this model was considered something of computer-nerds, optimists and small startups, today it has become a mainstream tool.
Capitalizing on Open Source
The financial industry is now started capitalizing on open source technology which now runs far deeper than any simple attempts to lessen software licensing costs. Just like blockchain, the model enables banks to ensure buy-in, where all parties should have open access to code and be able to use, develop, maintain and share it openly.
One of the most benefits of open source to drive innovation at an unprecedented pace is collaboration. If financial services want to hold off the likes of big tech firms’ introduction of innovative solutions, they will need to collaborate to innovate out-of-the-box against their deep-pocketed peers.
In a crux, leveraging open source is not about just enabling software development available to everyone, but also about collaboratively working to build infrastructure that makes more sense to the industry to own together against owning individually.