1

April 2016

Digital Innovation in Banks

IT Infrastructure Modernization Accelerates Progress

In this issue

Finding New Sources of Innovation in Banking 2

Research From Gartner:

Digital Disrupters and Customer Demand
Force Bank CIOs to Find New Sources of
Innovation 4

From Intel:
Solving Banking Challenges with Modernized
Infrastructures 12

From Red Hat:

Accelerating Application Delivery 15

About Intel & Red Hat 18

 2

Finding New Sources of Innovation

in Banking

Banks today face an onslaught of challenges,

spurred by the latest technology advances and
rising customer expectations, highlighting the
need for IT modernization and digital innovation.
Those banks that run core business processes
on traditional infrastructures are discovering
that fast-moving challenger banks using cloud-
based infrastructures are becoming a serious
competitive threat. Another challenge is arising
from disintermediators, non-financial institutions
offering services that compete with long-standing
bank operations, such as providing consumer and
commercial credit.

The push toward IT modernization in banking is

driven by other factors, as well. New regulatory
requirements mandating real-time payments and
the pressure to provide value-added customer
experiences underscore the need to update
delivery architectures and to ensure secure
support of traditional and mobile browsers, as
well as native and hybrid mobile technologies.

To enable improved customer experiences and

create more competitive infrastructures, fast
application development and efficient delivery
are a key part of any IT modernization effort.
Establishing a standard operating environment
(SOE), consisting of proven hardware and software
components based on open standards, simplifies
the design, development, and deployment of new
banking products and services. Intel and Red
Hat have collaborated on developing optimized
hardware and software—tuned for performance
and maximum reliability—that can span
modernization initiatives, from modular upgrades
of traditional infrastructures to new, agile
infrastructures based on the latest technologies.

As is the case in most strategies originating from
Gartner’s bimodal model, striking a balance between
stability and agility is essential. The future of IT will
include both hybrid cloud architectures and bimodal
capabilities, in the view of most analysts and CIOs.
More about Red Hat’s vision for an open hybrid IT
architecture can be found at www.redhat.com/en/
explore/infrastructure/na. Intel offers guidance
and resources for digital transformation through
Intel® Network Builders (networkbuilders.intel.com/
ecosystem), an ecosystem for accelerating SDN
and NFV deployments, and Intel® Builders Program
(builders.intel.com), accelerating solutions to drive
data center innovation.
The following Gartner research notes—covering the
topic of Digital Disrupters and Customer Demand
Force Bank CIOs to Find New Sources of Innovation
3
—explore prospective areas for banking innovation
and the need for agility in creating new customer
experiences in the digital realm, using an approach
to modernization based on a bimodal model. Red
Hat and Intel agree that modernization efforts
can selectively improve the capabilities of the
traditional infrastructure while taking advantage of
modern virtualization technologies, software-defined
networking (SDN), and network functions virtualization
(NFV) to achieve greater flexibility in provisioning,
rapid deployment of applications and new services,
and centralized management of IT resources.
In the overview to the research notes, Gartner
stated, “Rapidly changing technology and customer
environments are forcing bank CIOs to be more
agile and constantly create new digital banking
capabilities.” The following sections address
some of the important considerations driving this
transformation.
Source: Red Hat / Intel
 4

Research From Gartner

Digital Disrupters and Customer

Demand Force Bank CIOs to Find
New Sources of Innovation

A series of high-profile acquisitions highlights

the critical need of banks to support digital
banking functionality. Bank CIOs should develop
an ecosystem of partnerships and in-house
services to offer these capabilities to customers
and other financial institutions.

Impacts
■■ The urgent need to improve customer
experience is driving bank CIOs to acquire or
partner for design and customer experience
development.

■■ Rapidly changing technology and customer

environments are forcing bank CIOs to be
more agile and constantly create new digital
banking capabilities.

■■ The increasing commoditization of existing

products, as well as disruption from banks
and nonbanks, are leading bank CEOs and
CIOs to create new sources of innovation
and revenue.

Recommendations
■■ Bank CIOs should consider acquiring
customer engagement expertise from
providers outside of the financial services
sector.

■■ Bank CIOs upgrading or replacing online and

mobile banking solutions should evaluate
those digital banking providers that have
architectures that support traditional and
mobile browsers, as well as native and
hybrid mobile technologies.

■■ Bank CIOs should update their delivery
architectures to separate customer-facing
presentation from bank transactions and to
support delivery of functionality to any device or
browser.
■■ Bank CEOs and CIOs should use Gartner’s bimodal
IT framework to segment IT’s management of
demand for operational efficiency and digital
innovation throughout the bank.
■■ Bank CEOs should consider expanding the CIO’s
role to understand what startup disrupters offer
as potential partners and technologies to support
digital innovation. CIOs should start to play a role
in their banks’ merger and acquisition activities, as
well as in venture capital and accelerator projects.
Analysis
Customer Demand and Competitive
Disrupters Drive Financial Technology
Acquisitions and Digital Innovation at
Banks
Banks worldwide recognize the importance of
providing a digital banking experience that is
comparable with what their customers have come
to expect from their digital interactions with other
industry verticals, notably retail. This recognition is
reflected in a series of recent acquisitions of financial
services technology providers, including:
■■ Capital One’s acquisition of Level Money,1 a
startup aimed at young consumers seeking easy-
to-use mobile financial management tools, in early
2015 (following its 2014 acquisition of the design
consultancy, Adaptive Path2).
■■ Commonwealth Bank of Australia’s acquisition
of Take Your Money Everywhere (TYME),3 a South
African startup that develops digital banking
platforms for banks and mobile network operators.
5
■■ BBVA’s 2014 acquisitions of Madiva Soluciones,
a big data company, and Simple, a startup that
provides a digital front end for banking services.4
■■ Fidelity Investments’ acquisition of eMoney
Advisor,5 a wealth management software
company. The acquired company provides
account aggregation and financial planning tools
that support collaboration between advisors
and clients. It is designed to appeal to younger
customers and to help advisors better compete
with emerging “roboadvisors,” such as Personal
Capital and Wealthfront.
These events point to an emerging trend in the
strategies of bank CIOs — supporting digital
technologies initiatives that position banks to fight
new market entrants and other disrupters, improve
customer service and create new sources of revenue.
Bank CIOs are shifting their focus from buying
technology solutions or developing them in-house to
leveraging acquisitions to address emerging disrupters
and to improve the digital customer experience.
This trend is unmistakably driven by the industrywide
shift toward digital banking. A digital bank requires
a broad range of technology-centric capabilities
that enable new methods of interaction and service
delivery to augment the customer experience — and
potentially transform the business. These capabilities
must be supported by a robust, dynamic and
accessible digital infrastructure, as well as a truly open
banking system. Digital banking represents nothing
less than the creation of new business designs that
blur the boundaries between the digital and physical/
analog worlds. It achieves this by the convergence of
three core elements:
■■ People, who execute business activities
■■ The business activities they execute
■■ Things — “smart,” Internet-enabled objects
6
The digital transformation of banking will not be
accomplished by a single app or application for a
new channel. Success in digital banking will result
from more than copying functionality from an existing
channel into a newer one.
Banks that honestly and realistically assess their
digital maturity, and create a digital strategy based on
such an assessment, will concentrate on developing
capabilities that facilitate digital services, rather
than automated services. These capabilities require
that banks move away from their traditional focus
on simply delivering automated transactions toward
offering a comprehensive digital customer experience
that may include multiple transactions or services.
These capabilities fall into a set of broad categories —
identity, access and delivery; location and context; and
data and intelligence.
For all these reasons, Gartner has developed a set of
impact statements and associated recommendations
(see Figure 1) to help bank CIOs and their direct
reports identify the challenges and opportunities that
leveraging new digital technologies and providers — in
the banking niche and beyond — present.
Figure 1. Impacts and Top Recommendations for Banking Innovation
Source: Gartner (March 2015)
Impacts and Recommendations
The urgent need to improve customer
experience is driving bank CIOs to
acquire or partner for design and
customer experience development
Simply offering existing banking services through
online and mobile channels does not improve the
customer experience. While some customers may be
satisfied with that experience, this view of the mobile
customer experience is too narrow to accommodate
the diversity of mobile apps, devices, and customer
behaviors on mobile devices. This narrow view of the
customer experience is made more difficult because
the customer’s online/mobile banking experience
is typically driven by transactions, not by customer
data or customer-specific use cases. Many bank
IT organizations have essentially replicated the
capabilities of their banking websites in a full-service
mobile banking app. The poor customer experience
is borne out in lower user ratings of bank full-service
smartphone mobile banking apps, compared with
those of narrowly focused banking apps.

Online banking has been available for more than a
decade in developed markets, but consumer usage
is highly uneven. In a 2013 Gartner survey, 86% of
consumers who transferred money between accounts
used online banking on a PC to do so, and only 53%
used a smartphone for the same task. More than 50%
of those consumers who opened accounts used online
banking, but just 11% used a smartphone. However,
as more customers buy smartphones — and become
accustomed to using them for more types of digital
interaction — their customer experience expectations
and demands will increase sharply. The same Gartner
survey showed that ownership of a smartphone
increased the likelihood of a consumer using mobile
banking by 40%.6
Bank CIOs and other key decision makers are well
aware of the increasing number of customers using
smartphones as well as customer dissatisfaction
with their currently deployed mobile banking apps.
For this reason, customer engagement has become
a key part of IT initiatives to improve the customer
experience, as well as customer acquisition and
retention, with improved mobile and online banking
applications. The importance of design and customer
experience is evident in a long series of recent bank
hiring decisions, technology initiatives and technology
provider acquisitions.7 A key aspect of most, if not
all, of these initiatives is a stated intention to improve
or transform the customer experience through better-
designed mobile apps and functionality. These banks
and services not only increase competition with
traditional banks that already offer online and mobile
banking, but raise the stakes by changing the design
and customer experience across both channels.
7
The challenge for bank CIOs is that in typical mobile
and online banking solutions the customer-facing
experience is tied closely to bank transactions. Bank
IT personnel or business analysts may be free to adapt
an interface to the bank’s branding requirements,
but they cannot alter the workflow — and still less
the design of the customer’s experience — to reflect
current digital design trends. In larger financial
institutions, this challenge increases radically in scale.
In such banks, even products that appear to be in
the same line of business have separate processing
platforms, customer authentication methods and
data architectures. Some of these banks may not
even own the processing and servicing of all of the
products they support. Improving the customer’s
digital experience may be easier with a digital banking
platform, but it will still be challenging in terms of
managing line-of-business and IT owners within and
external to the bank.
Recommendations:
Bank CIOs:
■■ Embrace a more expansive view of digital banking
that delivers more experiences across a wider
range of customers.
■■ Align your IT strategy with the bank’s and senior
management’s approaches to digital banking.
■■ Acquire customer engagement expertise from
providers outside financial services.
8
■■ If your bank is upgrading or replacing online and
mobile banking solutions, evaluate those digital
banking providers that have architectures that
support traditional and mobile browsers, as well
as native and hybrid mobile technologies.
■■ Update your delivery architecture to separate
customer-facing presentation from bank
transactions, and support delivery of functionality
to any device or browser.
■■ Update existing mobile banking apps to facilitate
ease of use — for example, by enabling customers
to remove mobile app functionality they do not
want, or enable customers to use voice commands
to perform existing transactions.
Rapidly changing technology and
customer environments are forcing bank
CIOs to be more agile and constantly
create new digital banking capabilities
Gartner inquiries reveal that many banks that are
in the process of replacing or upgrading online
and mobile banking are also seeking to improve
the customer experience and deliver competitive
differentiation. They often attempt to do so by
the comparatively simple means of copying their
online banking solutions’ well-understood current
transaction capabilities for use in full-service mobile
banking applications. IT and business organizations
often support these systems in isolation from
each other, which can prevent creating new digital
banking capabilities. A number of banks have, for
example, begun projects to test and gradually roll out
existing transaction capabilities to wearables, such
as smartwatches and fitness bands. Bank CIOs can
expect their business organizations to request similar
initiatives. However, these transaction capabilities
by themselves will not deliver transformative digital
banking. Bank CIOs must support the organization
in developing capabilities that use transactions in
conjunction with data and with other services that offer
forms of digital innovation.
Bank IT and business organizations rarely consider
whether certain online banking functionality is
particularly suited to a smartphone app. This is
because of the way smartphone features (for example,
cameras) are used. True innovation is likely to start
when IT and business organizations focus on developing
apps that consider what functionality might be useful
to customers in an app that leverages device, software
and transaction capabilities. Hundreds of U.S. banks,
for example, support the deposit of checks using the
customer’s smartphone. Some banks, however —
including BankMobile in the U.S. and Telenor Bank in
Serbia — use the same capabilities to capture customer
identification in the account opening process. Bank of
the West, another U.S. bank, uses the smartphone’s
camera to capture invoices, so that customers can
create new payers for bill payments. These capabilities
have traditionally been completed via online banking or
at a branch.
Bank CIOs must increasingly balance the need to
deliver ongoing enterprisewide support for current
bank services and operations, customer-facing and
internal systems, as well as applications, with the need
for digital transformation and innovation. According
to Gartner’s 2015 CIO survey, financial services CIOs
are primarily focused on maintaining operations.
Consequently, CIOs will find it challenging to acquire
and prioritize the resources to meet these competing

demands. To do so, they and their organizations will
need to embrace the architectural and organization
model that Gartner has designated as bimodal IT.
This model comprises two modes of IT, each designed
to develop and deliver information- and technology-
intensive services in its own way.
■■ Mode 1 is traditional, emphasizing safety and
accuracy.
■■ Mode 2 is nonsequential, emphasizing agility and
speed.
Each mode must have the resources — people,
budgets, skills, partners, structures, cultures,
methodologies, governance, metrics and attitudes
toward value and risk — that its operation requires.
New investments are deployed through one of the two
modes, depending on the balance of needs. When the
balance changes, existing investments and operations
move between the two modes.
Recommendations:
Bank CIOs:
■■ Create digital banking capabilities that take
customer behavior and device capabilities into
account.
■■ Use Gartner’s bimodal IT framework to segment
IT’s management of demand for operational
efficiency and digital innovation throughout the
bank.
9
■■ Focus operational efficiencies and cost-cutting
measures on Mode 1 activities, and new
investments on innovation initiatives managed on
Mode 2.
The increasing commoditization of
existing products, as well as disruption
from banks and nonbanks, are leading
bank CEOs and CIOs to create new
sources of innovation and revenue
Bankers have long used mergers and acquisitions
(M&As) to grow their businesses, and many
have created and acquired bank-related software
companies. However, the demands on bank CIOs
to manage current operation, as well as innovation,
challenge them to view acquisitions and software
companies with a new perspective. Therefore, bank
CIOs must understand what startup disrupters offer
the bank business and IT, and start to play a role in
the M&A process.
Capital One’s Adaptive Path and Level Money
acquisitions are examples of such new perspectives.
Capital One does not necessarily have to integrate and
dissolve the companies to realize value. In fact, it is in
Capital One’s best interest to maintain the Adaptive
Path group and its well-known brand. Capital One can
use Adaptive Path internally to facilitate innovative
customer experiences through the bank. Level Money,
with its personal finance and “mobile first” approach,
targets the younger customers that more-traditional
banks, such as Capitol One, are seeking to attract.
Its acquisition offers the bank brand recognition as
well as an opportunity to attract and retain younger
customers.
10
Financial technology acquisitions can also help
financial services providers compete with disrupters.
Fidelity Investments’ acquisition of eMoney Advisor is
an attempt to compete with disruptive roboadvisors,
such as Personal Capital and Wealthfront, and to
support its own financial advisors with more up-
to-date tools that enable collaboration with, and
personalization of, digital services for their clients.
BBVA’s acquisition of Simple — while it offers
capabilities similar to Level Money — also offers the
bank nontraditional, disruptive thinking about how to
offer banking products and services.
BBVA’s acquisition of Madiva Soluciones goes against
the grain of traditional bank acquisition strategies.
Madiva Soluciones is not a bank-related company,
but focuses on big data generally. However, the
company will be well-positioned to help BBVA address
the technical issues involved in leveraging big data
internally, within its complex data architecture. It
may also support Mode 1 (improving operational
efficiencies) and Mode 2 IT (creating innovative digital
products and services that bring together several
processes).
Acquisitions can also be used to generate revenue
by enabling a bank to offer digital services to other
banks that may not be in a position to make similar
acquisitions or partnerships or otherwise innovate.
Commonwealth Bank of Australia is clearly positioned
to do this with its acquisition of TYME, which builds
and operates digital solutions not only for banks, but
also for mobile network operators and retailers. The
Adaptive Path acquisition also positions Capital One
to offer innovative design and customer experience
services to other banks, credit unions and community
banks. The bank can leverage Adaptive Path, Level
Money and innovations developed in Capital One’s
lab to build and offer technical, design and customer
experience services and product development services,
not only for its own use, but also for other banks. In
essence, this will allow Capital One to be an innovation
partner for banks that cannot afford to innovate in-
house.
Some banks are already doing this. Fidor Bank in
Germany has already made its API-centric technology
available to other banks as fidorOS APIs that can be
used for payments, accounts and communities. Fidor’s
technology enables banks to more easily and quickly
become more open in creating capabilities that meet
customer and internal staff needs. Similarly, BBVA
will be well-positioned to leverage Madiva Soluciones,
Simple and its own internal labs to test, create and
deploy innovative services for itself and to offer to
other banks.
Some banks are taking the next step in creating
innovation and revenue. They are creating their own
disruptive financial-services-related startups. For
example, in 2014, BBVA and the Stanford Research
Institute (SRI) launched the startup Kasisto with a
virtual personal assistant that enables consumers to
use natural language voice or text to ask questions
that are answered by an artificial intelligence program
equipped with voice recognition.8
Recommendations:
Bank CIOs:
■■ Expand your CIO role to understand what
startup disrupters offer as potential partners
 11

and technologies to support digital innovation, representative samples. In the three emerging markets
and start to play a role in the bank’s merger and (Brazil, India and China), Internet penetration is lower.
acquisition activities, as well as in venture capital These samples were representative of that country’s
and accelerator projects. online population, but likely represented a more
upscale, urban and educated population than would
■■ Monitor adjacent emerging technologies related be found in the country as a whole.
to Gartner’s banking taxonomy — identity
management, location and context, data and 7
Capital One’s recent hiring of Dan Makoski, formerly
access. head of design at Google, as vice president of
design, as well as its acquisition of Adaptive Path.
■■ Identify opportunities to monetize IT’s capabilities Both Google and Adaptive Path have a design firm
— internally and externally developed — for digital and consultancy that provides clients with customer
banking. experience and design services. Further, new digital
banks that tout better consumer banking experiences
Evidence have emerged including Hello Bank (France),
BankMobile (U.S.), Fidor (Germany), mBank (Poland),
1
Capital One acquires Level Money.
Telenor Banka (Serbia), and Bluebird and Serve (U.S.).
Nonbanks, such as Moven and Simple, are examples
2
Capital One acquires Adaptive Path.
of digital customer finance-centricity and services
front ends to bank products and services. Plans are in
3
Commonwealth Bank of Australia acquires TYME.
the works for several digital banks in Canada (Koho)
and the U.K. (Lintel, Starling, Atom). Disrupters exist
4
BBVA acquires Madiva Soluciones and Simple.
in the commercial banking and wealth management
areas of banking as well. From startups like Oiivoy and
5
Fidelity Investments acquires eMoney Advisor.
Holvi, which provide tax or banking services to small
and midsize business customers. Standard Treasury
6
Gartner surveyed 9,421 online consumers aged
and Seed provide mobile and online business banking.
18 to 74 in Australia, Brazil, Canada, China, France,
Germany, India, the U.K. and the U.S., balanced
8
SRI announces Kasisto as a spinoff company and
across gender and age. The study was conducted
collaboration with BBVA.
from October to November 2012 among consumers
who personally accessed the Internet or online
services during the past three months. The data was Source: Gartner Core Research Note G00274087, Stessa B Cohen,
24 March 2015
weighted to represent online consumers aged 18 to
74 in each country. Variables for weighting by country
included age and gender. In the six developed markets
(Australia, Canada, France, Germany, the U.K. and
the U.S.), Internet penetration is high enough (75%
or greater) to consider these generally as nationally
 12

Solving Banking Challenges with

Modernized Infrastructures

CIOs and IT teams in banks face a number of

challenges in adjusting to the digital disruption
taking place in the industry, as described in
the Gartner research notes in this whitepaper.
From an Intel perspective, among the many
challenges faced by banks today, payment
systems represent an important issue, both
from a competitive standpoint within the
financial services marketplace and from the
perspective of customers, whose expectations
have risen with the growing availability of
services that are mobile-based, very fast,
and personalized. The 24x7 availability of
the Internet and the rising popularity of
smartphones as the major channel for reaching
the Internet have created an environment in
which consumers expect real-time gratification
of online transactions, not only for purchases,
but for transferring funds. This level of
responsiveness and the demand for real-time
payments cannot be supported efficiently on
traditional IT infrastructures.

Confronting Digital Transformation

Investment banking has been a leader in digital
transformation and has already modernized
much of their infrastructure. Low-latency
trading requires responsive, high-performance
systems and connections. This factor has
spurred adoption of many of the most
advanced technologies available within this
sector of the financial services industry.

Retail banking, however, often still relies on
classic architectures and must confront steeper
modernization challenges. These challenges include
determining how to effectively modernize the
traditional systems with the functionality to stay
competitive and serve customer demands. Replacing
these systems overnight is not practical, but it’s
also not to the benefit of these banks to be running
applications that may be written in languages over two
decades ago by programmers who may have retired
or, sadly, passed away. Outlining an approach to
modernization that can preserve core infrastructures
while removing the steepest barriers to efficiency,
interoperability, and performance is paramount.
A second problem in modernization efforts is
extracting and integrating data from traditional
systems into new, modernized infrastructures. Big
Data and analytics technologies can help meet the
challenge of personalizing customer experiences by
detecting patterns and trends based on individual
behaviors. But until communication between old and
new systems can be established, a hybrid approach
is needed to migrate data to more agile platforms to
create innovative banking products and servers. An
incremental approach is needed to bridge the stable
existing infrastructure with a system based on a
modern architectural framework.
13
Competitive Drivers
Modernization of payments represents a substantial
challenge for banks. Banks locked into traditional
systems find it difficult to modernize quickly enough
to compete with fast-moving challengers, including
banks using cloud-based infrastructures, such as
Currency Cloud, and disintermediators that are cutting
into established markets, such as providing credit, and
siphoning off business that used to belong solely to
traditional banks.
Regulatory mandates are also driving digital
transformation in the industry, particularly in Europe
where the revised Directive on Payments Services
(PSD2) will impact all major global banks that
continue to operate in the EU by 2018. The directive
addresses issues such as security, protection of
financial data, access to account information,
and the processing of electronic payments. The
directive is likely to spur intense competition among
banks and will be a major incentive to modernize
existing infrastructures to effectively meet the PSD2
requirements. The banks that will be impacted
most dramatically are those with older payment
systems. The need, as part of the directive, to
create an Application Programming Interface (API)
linking merchants and banks, as well as consolidate
account information through a single portal, will
make it especially difficult for banks that have not yet
modernized IT infrastructures.
14

Similar mandates are under discussion in other Another, Perseus, provides a variety of services,
jurisdictions around the world, including the US, and including trading, worldwide high-speed connectivity,
meeting their requirements will be another factor and precision time services, also based on an Intel
driving the need for IT modernization. architecture framework using SDN/NFV components,
as documented in this whitepaper (http://www.
Modernizing using Intel and Red Hat Solutions intel.com/content/www/us/en/communications/
engineering-a-financial-services-infrastructure.html).
The hardware architectures designed and built by
Intel provide a strong foundation for modern banking
From the research conducted by Gartner and the
and support the essential technologies necessary for
corollary industry experiences of Intel and Red
meeting key challenges faced by the banking industry.
Hat, banks must act quickly to launch digital
The Intel® Open Network Platform (Intel® ONP) provides
transformation initiatives, if they have not already
a blueprint for building a highly flexible infrastructure
done so. This is the time to engage with vendors with
that supports software-defined networking (SDN) and
the expertise and appropriate technologies to support
network functions virtualization (NFV), streamlining
modernization programs.
the development of proven platforms that scale
effectively to massive enterprise demands and simplify
provisioning and deployment of network resources. Red Source: Intel
Hat collaborated extensively with Intel on ingredients
in the software stack, including Red Hat® Enterprise
Linux® and the Red Hat® Enterprise Linux® OpenStack
platform. Numerous pilot projects and real-world
deployments have demonstrated the effectiveness of
this architecture. For example, in the financial services
market Intel has worked closely with numerous
companies who are trendsetters in the financial world.
One, Lucera, provides an Infrastructure-as-a-Service
targeting connectivity across the financial services
industry, based on an Intel® architecture framework
and SDN/NFV components. View the full success
story here (http://www.intel.com/content/www/us/
en/communications/engineering-a-financial-services-
infrastructure.html).
 15

Accelerating Application Delivery

Red Hat offers a number of solutions and

provides flexible technologies for addressing
the banking industry challenges described by
Gartner. Many of these technologies provide
a means to link classic infrastructures with
cloud-native IT, offering a bridge between
Mode 1 and Mode 2 of Gartner’s bimodal IT.
The proven combination of Red Hat Enterprise
Linux running on a hardware platform powered
by Intel® Xeon® processors, or, where analytics
are a big factor, the Intel® Xeon Phi™ product
family, deliver the reliability, performance, and
security vital to banking operations.

As Gartner noted, responsiveness is a key

aspect of improving the customer experience
in banking. As an example of Red Hat
capabilities in this area, an engagement
with MUFG Union Bank N.A., Red Hat used a
slate of solutions—including Red Hat® Cloud
Infrastructure, Red Hat® CloudForms, and
Red Hat Enterprise Linux—to modernize the
bank’s IT infrastructure. The new infrastructure
made it possible to automate application
deployment, streamlining processes from a
previous 8 to 12 weeks to just a few hours. The
private cloud infrastructure developed during
the engagement also significantly expands
the capability of scaling the IT environment
as demands increase, taking advantage of a
virtualized environment that can be centrally
managed. The 700 virtual machines used to
support this environment required less than two
months to deploy. The full case study is available
online: (http://www.redhat.com/en/files/
resources/en-rhcf-union-bank-12308517.pdf).
16

DevOps as a Way to Automate and Accelerate Gartner views DevOps as a bridge helping Mode 1 IT
Application Delivery organizations transition to a Mode 2 orientation, as
stated in a research note:
As banks pursue modernization initiatives to stay
competitive and adapt to regulatory mandates,
efficient application development will be a key factor
in their success. In situations where application Mode 1 IT organizations
development is being accomplished on modernized,
virtualized systems, DevOps helps streamline IT should look to DevOps
service delivery and connect a diverse range of
IT environments, bringing better connectivity and as a bridge to a Mode 2
information exchange to banking operations.
orientation by continuing to
DevOps depends on a culture of collaboration and
a means by which open-source tools, automation,
assess where other patterns
and platforms can provide an opportunity to speed
the pace of software development. As banking
and practices of DevOps
institutions move forward on digital transformation to can enable a Mode 1
provide better customer experiences and responsive
interactions on web and mobile devices, DevOps environment to deliver better
makes it possible to increase the rate at which product
features and services are delivered. service to customers.
Tools that are part of a typical DevOps workflow Gartner Research Note G00276470 “DevOps is the
Bimodal Bridge,” Cameron Haight, George Spafford,
include code repositories, container development
03 April 2015
tools, IDEs (integrated developer environments), CICD
(Continuous Integration/Continuous Delivery) software,
automation (such as Ansible), Platform-as-a-Service
(such as OpenShift), and more. Red Hat can provide
guidance and consulting in support of DevOps, giving
banking institutions a fast, effective way to capitalize
on open hybrid cloud technologies and modernize
traditional infrastructures.

The Importance of Security and Trust
Red Hat Enterprise Linux is the IT foundation in
some of the most regulated and sensitive industries,
including numerous deployments in the financial
services industry. Open source security advances
have been incorporated in predictable, consumable
ways. These same processes and practices apply
across hybrid cloud infrastructures as the role of
the operating system evolves and expands to include
new capabilities like Linux containers. Components
are reused in the form of microservices and other
loosely-coupled architectures that interact using
APIs. Maintaining trust in the provenance of those
components and their dependencies (when making up
applications) becomes more important, not less.
Red Hat’s focus on security is both broader and
deeper than even significant investments in product
technologies. Helping customers operate secure
environments and processes also means having
ongoing expertise in upstream projects, implementing
reproducible build and testing systems, delivering
packages securely, and responding quickly and
effectively to vulnerabilities.
17
Embracing Digital Transformation
There are many aspects to digital transformation
in banking and no magic bullet. CIOs and decision-
makers need to assess where their institution is today
and create a roadmap, planning the incremental steps
that can deliver specific business value. This value may
come from modernizing existing infrastructure and
applications, evolving to a cloud-native environment,
integrating and securing multiple aspects of IT,
or (most likely) some combination of all of these.
Whatever roadmap fits a bank’s business model, Red
Hat can help implement these plans in a way that’s
efficient and effective.
Both Intel and Red Hat have the solutions and
technologies that can make IT modernization more
effective and accessible, whatever the scale and scope
of the modernization effort.
Source: Red Hat
18

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