The future of finance belongs to open source

At the Open Source in Finance Forum (OSFF) in New York City, the Fintech Open Source Foundation (FINOS) Dec. 8 announced the results of its 2022 State of Open Source in Financial Services Survey. The results were — to no one’s surprise — that financial companies are now largely embracing open-source software.

While crypto-currency pushes blockchain technologies’ limits and makes the headlines, financial services companies are known for their conservative approach to software development. 

That doesn’t mean they’ve been unfriendly to Linux and open source. It’s been quite the opposite. For example, high-frequency trading was born from open-source software in the late 2000s, and in the same years, the world’s stock exchanges moved to Linux. What’s been changing more recently is that the world’s money managers are now creating as well as using open-source software.

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One reason for this shift is that, as Broadridge CTO Roger Burkhardt put it, between inflation and recession, “financial companies need to save money and open-source development helps them do that. … Open source becomes irresistibly attractive to developers and IT decision-makers who are being asked to do more with a whole lot less.” 

Oh, wait! Burkhardt said that about the 2008 housing bubble financial collapse! My point is when times get bad, open source works best.

Another major reason for open source’s success is its promotion within companies has become more organized. Companies with Open Source Program Offices (OSPOs) are more than twice as likely to encourage open-source consumption, and nearly three times as likely to encourage open-source contribution. 

So it is that financial services software committers have increased by 43%. Financial open source, however, isn’t quite like the rest of the open-source programmer world. Just over half of financial services code is written in Java. In the rest of GitHub’s open-source programs, Java accounts for only 11%. That’s because financial services firms have been tried and true Java users for decades. They aren’t going to be dropping Java — or COBOL — anytime soon.

So it is, said Gabriele Columbro, FINOS’ Executive Director, that open-source adoption is continuing “laying out the necessary building blocks for an organic, growing, and sustainable open community in the industry. While we know there is still a lot of work to do to reach full maturity, we’re extremely proud of the major role that FINOS played in opening up financial services to the disruptive innovation benefits open source can deliver to this sector.”

Part of that work is that compared with other sectors, such as IT, science, and telecom, financial service companies lag behind in encouraging open-source contribution. Still, more than half (54%) of respondents say contributing to open source improved the quality of the software they are currently using. In addition, active participation in open source was cited as a key factor in recruiting and retaining IT talent.

Of course, there’s still the bugaboo that open-source software is less secure than proprietary programs. Still, even this delusion is slowly passing away. 

Also: Open source security fears are fading away

Still, it’s good that 77% of those surveyed agreed that organizations should be actively contributing to open source in an effort to improve security. In fact, in the aftermath of the Log4Shell security disaster, the financial services industry reacted more swiftly and efficiently than any other industry.

On another side of the financial industry, the venture capitalists have decided open source in finance is a big deal. VC-backed commercial open-source fintech startups, such as Moov, OpenBB, and a16z, now see fintech as the next industry that open source will disrupt. 

From what I saw at the conference, 2023 will be the year when the financial sector once and for all becomes not merely a star open-source user, but a champion open-source developer as well.