Create a digital bank

By Rohit Bhosale, Digital Banking Specialist, Persistent

Both established and emerging BFSI institutions face significant technical and business challenges that have prompted many to test new technologies.

It’s a trend that’s largely driven by the need to be competitive and attractive. As challenger banks and financial services providers continue to enter the market, driving customer acquisition and improving CX is a priority – and technology can provide the differentiator.

That said, it is difficult to implement digital strategies as the market is so uncertain. There is great ambiguity as to which platforms are best to implement given an ever-proliferating range of options. Banks also don’t know which financial trends are here to stay and which are only temporary.

This is why it is essential to combine the right technologies in such a way as to provide tailor-made services for target customers, while allowing banks to meet their specific business needs. Having the right guidance to navigate this increasingly complex technological landscape will be essential.

Personalization and connection are more important than ever

Customers are demanding more connected and consolidated experiences that provide them with greater accessibility and allow them to easily manage their accounts.

We also see many smaller “neo-banks” emerging to meet the demands of specific industries, regions and demographics. These new organizations know that personalization is key to taking the lead, valuing the ability to provide integrated experiences with features aimed at niche groups.

The flexibility of the banking infrastructure is essential here for neo-banks. One example is GB Bank, which provides services to property developers in the North of England, where Persistent Systems helped create a bespoke digital banking architecture. By integrating Mambu, OutSystems and AWS (among others), GB Bank has created the right ecosystem of payment and reporting platforms to fit the bank’s needs.

Evolve with customers in mind

Rapidly emerging challenger banks and traditional incumbents will be eager for further expansion, which will drive technological developments.

CX will need to be integrated and simplified so that the selected platforms work in sync. Merging processes will also result in larger financial organizations with a greater volume of customer data to manage and analyze. This will require advanced data analytics and cloud storage for better insights delivered at a faster rate, according to McKinsey research showing 70% of companies want to deploy hybrid or multi-cloud platforms.

The pandemic-related lockdowns have also highlighted the need for comprehensive digital experiences and greater accessibility from home. That’s why organizations are now using BaaS (Banking as a Service) platforms with a wider range of features, including mobile transactions, virtual cards, voice activation, and smart contracts.

BaaS is also intended to accelerate open banking, where applications interface with third-party APIs, allowing customers to pay from a central location.

Challenges facing CTOs

With a growing range of new platforms, choosing the right technology can be a daunting task for new banks and established organizations. The options are vast and often confusing.

Flexible architectures that bring together a combination of tailored features provide the ideal way to meet specific operational and customer requirements. CTOs will be at the heart of this technological transition.

Cost is always a consideration, with research from SRM Europe suggesting that IT costs within finance increased by 80% since 2015it is therefore crucial to have confidence in the capability of the selected technology.

Banks cannot remain locked into a particular technology within such a dynamic ecosystem. It is also important to remain adaptable to new changes, and in a way that is profitable. Many challenger organizations choose to build microservices-based architectures from the start, which reduces future costs when moving to newer, more capable components.

Stack-first CTOs will need to ensure that different platforms can integrate successfully. Achieving this will require adopting BaaS platforms, with APIs allowing third parties to develop functions that integrate with other applications. Some vendors also offer bespoke solutions as opposed to generic vanilla options, which offer greater compatibility with their existing infrastructure.

To finish, cyber attacks are a significant and alarming concern for many vendors, with 86% of security breaches are financially motivatedand over 70% of US banks cite cybersecurity as their top risk according to the Conference of State Banking Supervisors.

CTOs should select technologies that provide resilient end-to-end security that can withstand cyberattacks, ransomware, phishing, and more.

Why Solution Partners Matter

The potential of new technologies is already being realized by some challenger institutions and prompting traditional banks to reassess their existing infrastructure.

Whether you are a new digital bank or a traditional institution, more adaptable architectures are a growing trend. But to take full advantage of it, it will be essential to rely on specialized technological expertise to navigate IT decisions, facilitate third-party relationships and ensure access to cutting-edge technologies and expert product engineering knowledge.

With fintech being so dynamic and rapidly changing, and a growing number of banks operating in niche markets with tailored offerings, organizations need partners who can combine technical knowledge with awareness of new finance trends.

This approach will give banks the momentum and the edge they need to move forward.

Sylvia B. Polson