Building a digital bank

By Rohit Bhosale, Digital Banking Specialist, Persistent

Both established and emerging BFSI institutions are facing significant technical and business-related challenges that have prompted many to trial new technologies.

It’s a trend that’s being driven largely by the need to be competitive and appealing. With challenger banks and financial services providers continuing to enter the market, boosting customer acquisition and improving CX are a priority — and tech can deliver the differentiator.

That said, it’s difficult to put digital strategies into place with the market being so uncertain. There’s a large degree of ambiguity as to which platforms are best to implement given an ever-proliferating range of options. Banks are also unsure which financial trends are here to stay, and which are merely temporary.

That’s why it’s vital to combine the right technologies in a way that will deliver tailored services for target customers, while allowing banks to meet their specific business requirements. Having the right advice to navigate this increasingly complex tech landscape will be key.

Personalisation and connection are more important than ever

Customers are demanding more connected, consolidated experiences that grant them greater accessibility and enable them to easily manage their accounts.

We’re also seeing many smaller ‘neo-banks’ emerging to address requirements relating to specific industries, regions, and demographics. These new organisations know that personalisation is key to taking the lead, valuing the ability to provide integrated experiences with features catering to niche groups.

Flexibility in banking infrastructure is critical here for neo-banks. An example is GB Bank, which provides services to property developers in the north of England, where Persistent Systems helped to create a bespoke digital banking architecture. By integrating Mambu, OutSystems and AWS (among others), GB Bank has crafted the right ecosystem of payment and reporting platforms to scale with the bank’s needs.

Scaling with customers in mind

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

CX will need to be integrated and simplified so that selected platforms function in-sync. Merger processes will also result in larger financial organisations with a greater volume of customer data to manage and analyse. That will require advanced data analytics and cloud storage for better insights delivered at a faster pace, with McKinsey research showing 70% of firms want to deploy hybrid or multi-cloud platforms.

Pandemic-related lockdowns have also highlighted the need for fully featured digital experiences and greater accessibility from home. That’s why organisations are now using BaaS (Banking as a Service) platforms with a wider array of functionalities, including mobile transactions, virtual cards, voice enablement, and smart contracts.

BaaS also stands to expedite open banking, where apps interface with third party APIs, allowing customers to pay from one central location.

The challenges facing CTOs

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

Flexible architectures that bring together a combination of bespoke functionalities offer the ideal way to meet specific operational and customer requirements. CTOs will sit at the heart of this technology transition.

Cost is always a consideration, with research from SRM Europe suggesting that IT costs within finance have increased by 80% since 2015, so confidence that the selected technology will deliver is crucial.

Banks can’t remain locked into a particular technology within such a dynamic ecosystem. It’s also important to remain adaptable in the face of new change, and in a way that’s cost effective. Many challenger organisations opt to create microservices based architectures from the get go, which reduces future costs when switching to newer and better components.

Those CTOs favouring stacks will need to ensure that different platforms can integrate successfully. Achieving this will involve the adoption of BaaS platforms, with APIs enabling third parties to develop functions integrating with other applications. Some vendors also offer bespoke solutions as opposed to generic vanilla options, which offers greater compatibility with their existing infrastructure.

Finally, cyberattacks are a prominent and alarming concern to many providers, with 86% of security breaches being financially motivated, and over 70% of US banks naming cybersecurity as their main risk according to the Conference of State Bank Supervisors.

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

Why solutions partners matter

The potential of new technologies is already being realised by some challenger institutions, and it’s prompting traditional banks to re-evaluate their existing infrastructures.

Regardless of whether you are a new digital bank or a traditional institution, more adaptable architectures are a trend that is gaining momentum. But to take full advantage, drawing on specialist tech expertise will be key 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 fast-moving, and an increasing number of banks operating in niche markets with tailored offerings, organisations need partners who can combine technical knowledge with awareness of new trends within finance.

This approach will afford banks the much-needed pace and edge required to get ahead.