Driving greater agility in the financial service industry with smarter databases

By Julian Moffett, CTO BFSI at EDB

Digitalisation and the desire to build data-enabled business models is sweeping through the Banking, Financial Services and Insurance (BFSI) sector. And, as with other verticals, those organisations that can best optimise and capture data as an asset will benefit from agility, smarter decision making, lower costs and minimised risks. Getting there though, is a major challenge for traditional BFSI institutions as they must overhaul long-established organisational and operational processes, if they are to take advantage of the vast amounts of valuable data lurking within their IT systems. It is why a growing number of BFSI companies are turning to open source databases, such as PostgreSQL, as they offer far greater flexibility to unleash the power of data, while continuing to offer the robustness required for enterprise-ready databases. Let’s look at the big picture…and it’s pretty stark.

Our oldest financial institutions date back hundreds of years: in the UK Lloyds Bank and Aviva have their roots in the 18th century; Coutts and Barclays go back a further century. Perhaps in part because of this, they suffer from an image problem with a reputation for being risk-averse, late adopters of technology. Most will be weighed down by large legacy IT systems and monolithic applications that slow them down and make change hard. But they persist with them because they feel (with some justification) that they are hard to re-platform and dangerous to migrate.

But their world is being shaken up by new, well-funded fintechs, enjoying the newfound freedoms of open banking. These digital-native players can design processes and technology platforms with a blank sheet of paper. That means they can use the latest tools, build on open-source software, think mobile-first, create compelling customer experiences and generally move very quickly to make new apps and offers.

So, BFSI veterans face a tricky Catch-22 conundrum: how to be nimble without demolishing the underpinnings of processes that have served them for years or even decades. One obvious way for them to move faster is widespread adoption of cloud technology to access the latest software, gain elastic compute capacity, support mobile devices, shrink hardware cost bases and reduce their IT administration overheads. Cloud is also widely seen as an offramp for those afore-mentioned older applications by refactoring to embrace the new in the form of microservices and to shave off risks such as software being no longer supported. This is far from easy but many take a middle road which sees them deconstruct applications, placing more services in modern environments in an extended iterative process.

But moving to the cloud is an architectural change that has major implications for related infrastructure and dependencies. And a key aspect here is the chance to re-evaluate the choice of software that is at the heart of all attempts to digitise, automate and analyse – the database.

Most BFSI firms will have deep sunk investments in Oracle, Microsoft or IBM relational database management systems (RDBMS) and would like to relax that dependency in order to avoid vendor lock-in, reduce costs and gain access to databases designed for the modern world of private and public cloud, Big Data analytics and flexible tooling ecosystems. There are other advantages to re-examining database choice too and many will enjoy the flexibility, ease of deployment, low-admin footprint and cost effectiveness of database as a service. This is where working with the right expert partner can prove beneficial to give BFSI companies the confidence that the chosen database is truly enterprise-ready.

This is what we are seeing with the rise of open source, in particular PostgreSQL databases. Many customers will trial and run their new databases alongside core databases so risk is minimised, but increasingly we are seeing PostgreSQL emerge as the defacto standard for RDBMS requirements, as working with the right partner ensures customers have access to the expertise and reassurances necessary to guarantee open source databases can run mission-critical applications.

The veteran’s ace card

Fintechs can move nimbly, fail fast and bring a spirit of adventure and innovation to their work but they lack one thing that the veterans have in spades: data. Big BFSI firms can look back and across a huge number of interactions to predict customer behavior, identify preferences, perform targeted marketing campaigns, provide tailored portfolio advice and anticipate needs. They can bathe in vast data lakes with myriad data sources and apply data science, AI and Machine Learning atop these. Again, here modern databases with relational stores such as Postgres are an excellent fit.

In summary, adopting modern databases and embracing open source offerings such as PostgreSQL supported by the right partners will not only deliver an enterprise-class service. It will deliver a giant leap forward in flexibility and have very significant knock-on effects in driving a culture of innovation and a sense of freedom to try things. If BSFI veterans can unleash the potential of the data within their organisations, they can capitalise on a significant advantage over their younger, upstart rivals: now they need to find the right data store.