By Chae An, CTO, IBM Global Financial Services Sector

Ask anyone who’s spent more than a decade in the banking and financial services industry and they’ll tell you that one of the most common misconceptions about their field is that it is stagnant, old school, and passed over by the incredible innovations happening all around us. In fact, having watched the industry grow and evolve over the years I can state that it’s quite the opposite.

The intense level of competition, coupled with mounting regulations in financial services today require that all banking systems – including core infrastructures – be reimagined to address the needs of today’s real-time consumer and banker. As digital technologies transform global financial markets, the reimagination of banking systems must happen quickly and – with minimal disruption. The transformation must be comprehensive, secure and transparent to a customer base with evolving demands and expectations.

The most innovative financial services companies are leveraging their existing core infrastructure in new ways to address these demands – while securely and efficiently processing trillions of dollars of credit card transactions annually.

Expanding the protective cryptographic umbrella

Sophisticated banking requires sophisticated systems. It’s recognized that 92 out of the world’s top 100 banks rely on the mainframe because its ability to process huge volumes of transactions remains still unmatched.

The most significant re-positioning of mainframe technology in more than a decade, the IBM Z can run more than 12 billion encrypted transactions a day. IBM Z dramatically expands the protective cryptographic umbrella of the world’s most advanced encryption technology and key protection. The system’s advanced cryptographic capability extends across any data, networks, external devices or entire applications – such as the IBM Cloud Blockchain service – with no application changes and no impact on business service level agreements.

These new data encryption capabilities are designed to address the global epidemic of data breaches – a major factor in the $8 trillion cybercrime impact on the global economy by 2022. Of the more than nine billion data records lost or stolen since 2013, only four percent were encrypted, making the majority of such data vulnerable to organized cybercrime rings, state actors and employees misusing access to sensitive information.

Encryption is a part of strategy

A recent study found that extensive use of encryption is a top factor in reducing the business impact and cost of a data breach. The encryption value becomes clear when one considers that the average cost of a breach is $3.62 million and the average probability of experiencing a material breach is 27.7 percent in next 24 months.

For most systems, however, encryption is a time-consuming and expensive process. The latest mainframe technology has been specifically designed to allow banking operations to encrypt everything, covering both data in-flight and at-rest with no application changes required. This capability is integrated with dedicated cryptographic co-processors and a key management system certified to the most stringent professional standards.

It is no longer necessary to decide what to encrypt, and what not to encrypt. The mainframe delivers a vastly enhanced level of security which is critical in the always-on battle against cyber-criminals.

Reimagining core banking in a digital age

Due to advances in mainframe technology, core banking operations are poised to do a lot more for banks and their customers than simply execute greater volumes of transactions. They could instead be looked as generators of top-line growth through new insights, a vault for critical data and processes, and a means for improving both IT and business efficiency.

To extract full value potential from your core data using the full power of the mainframe platform that’s already in use:

• Use in-line, in-transaction analytics to achieve greater accuracy and speed in both customer loyalty improvements and fraud reductions, as well as saving costs incurred by copying data for offline analysis.
• Maintain customer trust by limiting movement of critical data and fully utilizing pervasive encryption.
• Improve core systems efficiency through consolidation of what is differentiating, and connection to that which is not in a hybrid cloud configuration.

When was the last time – if ever – that core banking was viewed as strategic? The time has come to re-evaluate the role of core systems in delivering profitability to your bank.

Chae An is the CTO of IBM’s Global Financial Services Sector, and has worldwide responsibility for the technical strategy and architecture for business solutions for IBM’s customers in financial services.