Information Technology Hot Topics 2019 Maine Bankers Expo April 11, - PowerPoint PPT Presentation

Information Technology Hot Topics 2019 Maine Bankers Expo – April 11, 2019 Michael Flynn Examination Specialist - IT

Agenda/Objectives ▪ IT Industry Trends ⬧ Banking Trends ⬧ Emerging Technology ⬧ FinTech/Partners ⬧ Cloud Services ▪ Cybersecurity ▪ Resources ▪ Q&A 2 FEDERAL DEPOSIT INSURANCE CORPORATION

Traditional Banking 3 FEDERAL DEPOSIT INSURANCE CORPORATION

Banking Evolution Digital Transformation Involves the use of digital technologies to remake processes to become more efficient or effective. 4 FEDERAL DEPOSIT INSURANCE CORPORATION

Emerging Technologies Emerging technologies are commonly seen “transforming” the following areas of financial services: ▪ Credit (marketplace lending, crowdfunding, linked credit products) ▪ Retail deposits (offering deposits without brick and mortar) ▪ Payments (P2P, international transfers, currency exchanges) ▪ Investment Management/Personal Finance (aggregation and or so called robo-advisors) ▪ Back Office/Processing (distributed ledger technology ▪ Capital Markets (trading and settlement, etc.) 5 FEDERAL DEPOSIT INSURANCE CORPORATION

Banking Evolution Customer Expectations ? 6 FEDERAL DEPOSIT INSURANCE CORPORATION

2019 Retail Banking Trends Surveyors believe the combination of evolving consumer expectation and technology trends are impacting the banking industry more than ever. As more banking interactions are completed on digital devices, increasing amounts of data are being collected and analyzed in real time. 7 Source: Digital Banking Report Research – The Financial Brand FEDERAL DEPOSIT INSURANCE CORPORATION

2019 Retail Banking Trends Digitalization and innovation initiatives are driving the top 3 trends and predictions for 2019: ▪ Real-time intelligence data integration through the use AI, advanced analytics and cognitive computing (54%) ▪ Customer-centric perspective and the elimination of friction from the customer journey (50%) ▪ Use of APIs for the transformation to an open banking platform (37%) 8 Source: Digital Banking Report Research – The Financial Brand FEDERAL DEPOSIT INSURANCE CORPORATION

Trend in Delivery Channels 9 FEDERAL DEPOSIT INSURANCE CORPORATION

Phygital Delivery Channels ▪ Increasing Digital Customer Base ▪ Redefinition of Convenience ▪ Mobile 10 Source: The Financial Brand FEDERAL DEPOSIT INSURANCE CORPORATION

IT Industry Trends 11 Source: The Financial Brand FEDERAL DEPOSIT INSURANCE CORPORATION

Emerging Technology ▪ Artificial Intelligence (AI) ▪ Machine Learning ▪ Application Program Interface (API) 12 FEDERAL DEPOSIT INSURANCE CORPORATION

Artificial Intelligence (AI) AI: The scientific understanding of mechanisms of underlying thought and intelligent behavior and the process of making intelligent computer programs and machines. ▪ Recent increased focus: ⬧ Availability of big data ⬧ Advances in computer programming ⬧ More powerful/faster computing ▪ Applicable in almost every area of financial services 13 FEDERAL DEPOSIT INSURANCE CORPORATION

Machine Learning Machine Learning: The automated detection of meaningful patterns in data; allows computers to learn from data and experience. ▪ Banking/financial services applications: ⬧ Credit Underwriting/Credit Scoring ⬧ Fraud Detection ⬧ Cybersecurity ⬧ Chat Bots – Customer Interface/digital assistants ⬧ Suspicious Activity Monitoring ⬧ Back Office: Financial Reporting/Recordkeeping 14 FEDERAL DEPOSIT INSURANCE CORPORATION

Application Program Interface (API) API: An API is a software bridge (connection) between two or more software components: ⬧ Any two discrete software applications that need to communicate with each other require an API. ⬧ An API may create interfaces for web-based systems, operating systems, or database systems, whether hardware or software. ⬧ APIs may be “open” (published and available for free use), or licensed. 15 FEDERAL DEPOSIT INSURANCE CORPORATION

API Uses/Functions - Overview APIs can be used in the financial services industry to facilitate: ⬧ Access to a company’s systems and/or company-held data, which can either be: • Personally identifiable information (PII), such as information about the customer or account/customer transaction, or • Non- PII, such as information about the company’s products and services ⬧ Transactions between two parties. 16 FEDERAL DEPOSIT INSURANCE CORPORATION

API Uses/Functions - Examples ▪ Mobile Banking Applications (Apps) ▪ Alliances/Partnerships ▪ Device Integration ▪ Public/Open APIs ▪ Social Media ▪ Data Analysis 17 FEDERAL DEPOSIT INSURANCE CORPORATION

FinTech ▪ FinTech: Financial Technology describes a business that aims at providing financial services by making use of software and modern technology. 18 FEDERAL DEPOSIT INSURANCE CORPORATION

FinTech Partnerships ▪ Background: ⬧ Why partner? ⬧ Bank Capabilities ⬧ FinTech Capabilities 19 FEDERAL DEPOSIT INSURANCE CORPORATION

FinTech Partnerships ▪ Oversight: ⬧ Business Alignment / Strategy ⬧ Vendor Management Program/ Due Diligence ⬧ Regulatory Responsibility ⬧ Board Involvement ⬧ Ongoing Monitoring 20 FEDERAL DEPOSIT INSURANCE CORPORATION

Cloud Services ▪ Cloud Services: describes a variety of established business strategies, technologies, and processing methodologies. In general, cloud computing is a migration from owned resources to shared resources in which client users receive information technology services, on demand, from third-party service providers via the Internet “cloud.” ▪ Examples: • SaaS – Software as a Service • PaaS – Platform as a Service • IaaS – Infrastructure as a Service 21 FEDERAL DEPOSIT INSURANCE CORPORATION

Emerging Technologies ▪ Challenges: ▪ Risks: ⬧ Strategic ⬧ Operational ⬧ Due Diligence ⬧ Compliance • Risk Assessment ⬧ Legal ⬧ Resources ⬧ Strategic • People ⬧ Other???? • Operational ⬧ Oversight • Polices & Procedures • Reporting ⬧ Other???? 22 FEDERAL DEPOSIT INSURANCE CORPORATION

FFIEC/FDIC Directors IT Guidance & Resources Director IT Resources https://www.ffiec.gov.htm https://www.ffiec.gov/cybersecurity.htm https://www.fdic.gov/regulations/resources/director/video.html https://www.fdic.gov/regulations/resources/director/risk/it- security.html 23 FEDERAL DEPOSIT INSURANCE CORPORATION

Questions Michael Flynn Examination Specialist - IT mflynn@fdic.gov 24 FEDERAL DEPOSIT INSURANCE CORPORATION