How will financial institutions drive innovation in tomorrow’s digital world?
Towards digital Integration
Open source innovation is becoming more widespread with financial institutions focusing on the power of the crowd and making their APIs available for new FinTech players and API developers. The contemporary bank will benefit largely from the shareconomy where external technology players contribute in the design, development and testing of new business added value services – ultimately creating app stores – on top of the existing reliable commodity services using the bank’s digital integration framework and run-time platform. Whilst some of the legacy systems do not possess modern integration capabilities, phased approaches are desired, with gradual enhancements using non-intrusive digital solutions. With increasing transaction frequency and complexity, the need for new data management techniques like smart caching and in-memory data grids without imposing yet another data model becomes more important, limiting calls to back-end systems and exploiting high value data that is locked in the legacy systems.
The importance of real-time customer journeys
The ongoing digitalization of the banking IT landscape is largely oriented towards technologies enabling real-time omni channel customer journeys across applications. FinTech solutions are entering the market of digital banking providing these ready-made journeys within specific functional domains like PSD2 or Personal Finance Management (PFM). These journeys can be used as delivered but also customized or extended to meet more specific needs. Once these event driven journeys are connected using integration accelerators in the connector layer the bank is ready to fully include them within their global services offering. Event handlers manage the streaming and propagation of events to facilitate a seamless interaction with peripheral systems for example customer intelligence, risk, compliance, business activity monitoring, telematics. These real-time event based journeys can initiate cross- and upselling via centralized client information and transaction behavior, geolocation or ongoing actions of the client on any channel.
Core asset = client
The starting point of virtually all digital transformation is the ever-increasing client appetite for user comfort and efficiency. Knowing your customers and their behavior mainly lies in centrally using data coming from the different legacy systems and making it actionable for the employees and self-service channels that serve customers. Most core banking platforms have, mostly for historical reasons, product centric architecture organized in silos with typical verticals for payments, credits, account management, client management. As a result, clients are too often perceived as an assembly of accounts and banking products without consistent customer-centric views and engagement for products and services. Gluing these reliable legacy systems together, while adding external data and services providers, in a digital integration platform allows centralized 360° views and end-to-end processing with consolidation of for example retail and SME/corporate banking activities, for an individual customer or part of a household or company structure, for credit payments and security trading within the same customer journey.
Common goal: offer innovative digital services
Opening the banking IT landscape to enable new innovative business added value services in a fast and cost effective way has become the real challenge of the bank of tomorrow. The demand for PFM and business finance management (BFM) solutions has urged with multiple FinTech companies creating fierce competition for traditional banks, for example Mint which started in 2007 now holds >10 million users. The switch from traditional, robust banking IT landscapes to flexible digital transformation platforms is happening now!
An open API platform allows integration to state of the art market solutions for big data analytics, dynamic prizing, decision rules engines, invoicing and billing, cyber security, banking of things (BoT) like IoT, wearables, alerts and notifications via apps (receive personalized message when budget is exceeded), task and follow-up management for brokers, available 24×7 and in real-time.
Knowing the customer’s location through geolocation services can significantly aid the bank in fighting fraud (red flag when multiple payments attempts from other side of the world) or offering supplementary value added services like personalized messaging (“Welcome to Tibet, the price for a meal/taxi is x RMB”), activate credit card, offer overdraft when abroad, or offer travel insurance.
Regulatory changes like PSD2 and GDPR demand fast adaptations across applications like payments, client and account management and consent management. Banks often lack the capacity to actively manage consent and third parties (required for PSD2) and interactions with prospects not yet known in any back-end system, and need a centralized IT solution providing the strategic placeholder to solve these shortcomings. PSD2 is more than just a next payment directive; it’s a fast-moving evolution towards the future of digital payments and banking in general. What’s next in PSD3?