The 2024 State of Open Source in Financial Services

“For the financial services industry, open source collaboration is a strategically relevant practice” said “The 2024 State of Open Source in Financial Services,” the fourth annual research report by the Fintech Open Source Foundation (FINOS) in partnership with Linux Foundation Research. Over the past four years, this study has aimed to provide concrete industry-wide trends about the state of open source adoption in the financial services industry. “Even in the relatively short time since studying sector trends in open source began, we’ve seen encouraging signals for the financial services industry that there are numerous benefits to realize through increased collaboration at the precompetitive level of technology stacks and that more participants in the sector are coming on board.”

As in prior years, the report is based on empirical evidence, including a global survey, industry data, and insights from interviews with senior finance and IT leaders.

The global survey was conducted in May and June of 2024 and received responses from 249 qualified individuals, — 39% from North America, 28% from Europe, and 29% from Asia-Pacific countries. 58% of respondents worked in financial institutions, and 35% were employed by providers of financial and IT services.

“Altogether, the data and the trends collectively underscore the growing importance of open source in driving innovation, enhancing efficiency, and fostering collaboration. Our findings reveal that financial services organizations are not only consuming open source software at increased levels to achieve a variety of objectives but also contributing back to the community in meaningful ways … For stakeholders from capital markets, retail or private banking, asset management, insurance, or for those fintech leaders delivering innovative solutions for the sector, there’s more reason than ever to participate in open source ecosystems.”

Let me discuss some of the key survey findings.

Benefits of OSS (Open Source Software)

How often does using OSS deliver the following benefits in your organization? Improved productivity - 84%; Business value - 81%; Less development time to market - 79%; Facilitates innovation - 78%; Make the organization a better place to work - 77%; Lower cost of IT operations - 77%; Less vendor lock-in - 77%; Improved collaboration - 75%; Lower cost of software ownership - 74%; Improved security - 70%; Improved productivity - 69%.

The benefits of open source “are pervasive across all aspects of software and standards development, empowering individuals to collaborate and excel, enhancing organizational efficiency and security, and driving industry-wide growth through shared knowledge and collective development.”

Aspects of financial services that would most benefit from open source

Which of the following aspects of financial services would most benefit from open source? Cross-industry collaboration - 30%; Industry standards - 26%; Open data & data sharing - 25%; Improved productivity - 24%; Digital identity - 23%; Core banking (operations) platform - 21%; Innovation - 19%; Common workflows - 18%; Operating cost reduction - 18%; Product development cost reduction - 14%; Regulation and legal compliance - 13%; Risk management - 10%; System interoperability - 9%; Robotic process automation (RPA) - 7%; User experience - 7%; Transparency - 6%.

“There are many well-established industry standards that have collectively contributed to the modernization, security, and efficiency of the financial services industry.” The industry recognizes that open source should continue to be used to explore new opportunities for building common standards and collaboration efforts.

Open source technologies that are valuable to the future of the financial services industry

Which open source technologies do you feel are the most valuable to the future of the financial services industry? Artificial intelligence / Machine learning - 45%; Cybersecurity - 32%; Cloud / container technologies - 29%; Advanced analytics and data science - 21%; Database and data management - 24%; CI/CD & DevOps - 20%; Augmented / virtual reality, 3D simulation, graphics - 19%; Blockchain - 16%; DevOps / GitOps / DevSecOps - 13%; Operating systems (e.g., Linux) - 9%; Edge computing - 9%; Industry standards - 8%; Open data / open models - 8%; Web & application development - 6%; Storage technologies - 6%; IoT & Embedded - 4%; Networking technologies - 4%.

“Financial firms continually strive to enhance operational efficiencies and improve customer experience. To achieve this, technology investments must align with business strategies and must also include assessments of how current technology trends can be leveraged to meet an organization’s strategic priorities. Additionally, this can help firms innovate more effectively. AI, cloud, and security are not new topics within financial services, but they continue to be strategically important.”

Use of GenAI by industry

A McKinsey report, “The state of AI in early 2024,” compared how the use of AI has grown over the past year across a number of industries. The fastest growth occurred in professional services, where the use of AI grew from 23% in 2023 to 57% in 2024; in technology - from 39% in 2023 to 54% in 2024; and in the media and telecom industry - from 21% to 45%. “Financial services is, by far, seeing the most modest growth, with people regularly using the technology having risen from 24% to just 26% over the past year.”

“Despite the interest and excitement that surrounds this technology, the financial services industry has been struggling to adopt these nascent tools.”

Factors limiting GenAI adoption

My organization’s use of GenAI is limited by, or we do not use GenAI due to: A lack of suitable internal governance processes - 45%; Data and / or legacy technology - 40%; A lack of business case and clear ROI - 39%; A lack of in-house skills - 39%; The immaturity of this technology - 36%; A lack of leadership or ownership - 33%; A lack of ideas and applications - 33%.

“In the future, we expect open collaboration to clear this governance hurdle, with adoption likely to increase significantly.”

Areas where GenAI will have the biggest impact

In which area do you think GenAI will have the biggest impact?: Internal developer productivity - 37%; New or enhanced client-facing services - 33%; Business process automation - 26%.

A major factor driving interest in GenAI is its breadth of applications. In financial services, initial case explorations have tended to have an internal focus which inherently reduces risks.

Impact of investment on the use of open source software (OSS)

To what extent would open source use change if your organization invested in the following?: Understanding the non-technical value proposition of OSS - 50%; Improving how we do secure software development - 47%; Improving legal, compliance, or security support - 47%; Using software bill of materials (SBOM) to improve component trust - 46%; Developing a clear and visible strategy of OSS - 45%; Implementing a consistent policy or supporting training and guidance - 45%; Providing automated tooling to support policy - 44%; Implementing or improving an Open Source Program Office (OSPO) - 38%; Improving communication between engineering and application security teams - 36%.

“In the future, we expect open collaboration to clear this governance hurdle, with adoption likely to increase significantly.”

Confidence in controlling and maintaining OSS components

How confident are you in your organization’s ability to control which open source software components are used in a development project?  Extremely confident - 30%; Somewhat confident - 54%; Not very confident - 11%: Not at all confident - 1%.

How confident are you that the open source components your organization uses are maintained and up to date? Extremely confident - 37%; Somewhat confident - 47%; Not very confident - 8%: Not at all confident - 4%.

“Confidence in controlling open source software and making sure it’s up to date is mixed. This indicates that there is still work to be done to improve the management and effectiveness of open source use within organizations.”

“Increasing recognition of the value of open source for financial services is driving a continued focus on consumption alongside greater contribution in open source projects and standards across a growing number of areas,” said the LF financial services report in conclusion. “This greater breadth of collaboration is also benefiting from increased diversity in the community both atthe organization level (record numbers of buy-side interest and new tech companies) and at the individual level. While the contribution trend for financial services is positive and the gap is closing, it still lags other industries when it comes to contribution, which is costly and will slow innovation.”

“We invite organizations to leverage the insights and tools provided in this report and to actively engage with open source communities and initiatives in any way their current level of open source maturity permits. Doing so will enhance operations, benefit employees, and also contribute to the broader industry’s innovation, security, and resilience. Together, we can drive the financial services sector forward, ensuring that it remains competitive and capable of addressing future challenges.”