Composing Architecture for Growth

[Editor’s note: This is a blog post from Edgardo Torres Caballero, Managing Director Americas at Mambu. Mambu is a gold sponsor at LendIt Fintech USA 2018, which will take place on April 9-11, 2018 in San Francisco.]

Digital technology has changed financial services, demanding institutions be lean and agile enough to meet changing customers expectations. Together with pressure from nimble new entrants, traditional institutions have little choice but to reassess what they offer customers and how they deliver a unique experience cost effectively, while still being able to grow and scale.

But the same technology that is influencing this change is also making it possible to deliver that experience at a fraction of the time and cost it would take with older technology.  This is attainable through a change of thinking and engaging in a digital-first approach to secure long term business sustainability.

This digital approach has considerable benefits.  The right technology can give institutions the flexibility to enhance the customer experience, streamline operations and create opportunities to diversify and differentiate.  This could range from launching a digital banking spinoff to quickly launch products and test new markets, all with the built-in ability to scale and grow.  The technology also provides a quicker time to market and the ability to create and illustrate business value in months instead of years.  These could lead to alternative revenue streams particularly for institutions that have achieved success utilising in-house technology but have reached a point where their ability to grow and scale is now critically limited by that same technology and internal capacity for development.

Leap in Technology

This ‘right’ technology means embracing cloud-based services and an API-enabled composable architecture.  Today, building an architecture is quick and cost effective, particularly through the use of cloud technology.  Rather than having to buy, build, and maintain a collection of poorly-connected systems, an API-enabled composable architecture lets institutions leverage services built on a flexible yet secure infrastructure.

The growth of the use of APIs attests to its utility, they enable the flow of information between applications, giving different business areas the ability to easily access customer data, draw insights and create innovative products tailored to market and regulatory needs.  New products or iterations of existing offerings can be rolled out, integrated and modified at a fraction of the cost and time it would take with a legacy system.

With these tools, specialised IT or technical teams can shift focus from legacy maintenance and ‘keeping the lights on’ to continuous customer and market-driven innovations in products and services. They can concentrate on helping the business to move forward, prioritising and developing differentiated products and services, and create better value for customers rapidly, assuring its place as a champion in a digital-first world.  Initial costs are low and subscription-based with providers managing all upgrades, take the strain off internal resources.

This approach is already being adopted. Dutch banking giant, ABN AMRO recently launched New10, an SME-lending fintech which went from concept to launch in just 10 months.   They were able to build a lean, agile and innovative fintech on cloud-based technology, supported by partners and best of breed suppliers to make the leap from legacy to digital.  By leveraging best of two worlds, the knowledge and resources of ABN AMRO along with new technology, New10 is able to offer new products and a unique customer experience, feeding learnings back to its parent.

Partnering for Success

A composable API-driven architecture is necessary to tap into the full potential of cloud technology. The traditional approach is all or nothing, build an end-to-end solution which relies on a single vendor which would be responsible for the implementation.  But the composable approach embraces thinking that one company cannot focus on everything and be the best at it.  The architecture can be divided in small pieces and managed through life cycles separately and tested, removed or replaced without risk.

Taking a composable approach enables the use of best of breed providers. Each company is focused on a specific part of the architecture from the SaaS engine to chatbots or credit scoring, to analysing customer data insights.  This allows multiple integrations to specialised complementary cloud services. Both the business and IT teams are able to make changes quickly, adopt new technologies or switch providers and services – all without having to depend on an army of coders or consultants for execution and customisation.

Companies looking to adopt this model can do so in two ways, the first is to directly own selection, integration and operation of the various ‘partners’ which gives them maximum control and flexibility.   The second option for companies that do not the internal capabilities to take those responsibilities internally can still leverage most of the same benefits by working with a Banking Platform as a Service (BPaaS) BPaaS provider who packages this up for them.  Banking Platform as a Service (BPaaS) is a flexible take on the legacy ‘bank in a box’ concept and is a combination of SaaS and localized applications and technologies from multiple vendors on one cloud-native API-enabled platform.

Continuous Ability to Change

Apart from flexibility, a composable approach also prepares organisations for innovation and the next market shift.  The digital banking space is dynamic and evolving at a rapid pace.   Biometric identification as part of an account opening process would not have even been a consideration just five years ago, but with software to deliver the new experience it can now be quickly implemented.  It also keeps organisations current with the latest technology through continuous delivery.  Easily interchangeable building blocks mean the smallest change can be delivered directly into product development, and is infinitely simpler than rolling back multiple changes, reducing risk, costs and improving the response to customer needs and competition.

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