The future of banking

Tagit is a Singapore-based, award-winning, omnichannel, digital banking solutions provider. Tagit’s CTO and Head of Product Development, Parresh Timbadia, discusses the future evolution of banking with IBS Intelligence

In addition to working with Tagit’s executive team on product and technology direction, Parresh Timbadia also provides guidance to Tagit’s customers on their strategic digital transformation journeys. So, what is his concept of next generation banking?

“Next generation banking is really a relative question. In early 2000, internet banking was termed next generation banking. Prior to that the ATM was next generation banking. When Apple released the iPhone in 2007, it set in motion what has become a full ecosystem of mobile apps that started with iOS, Android, Blackberry, Windows, and Java devices. This represented a next generation of banking. While the market has settled to predominantly 2 mobile operating environments, digital banking is experiencing another generational shift with the inclusion of artificial intelligence and machine learning technologies to support not only the apps but new channels such as chatbots.

“There are very few banks globally that do not have a digital presence today. For many banks, ‘next generation’ banking is really about several key attributes:

A true digital omni-channel experience: Many banks originally deployed solutions for Internet and Mobile from multiple vendors and this has meant for some banks an inconsistency across these channels in terms of functionality. It is important to have consistent customer experiences regardless of the channels from which a customer journey starts.
A modern and intuitive UX design: Many banks have initiated complete overhauls to their customers’ digital experience. Customers expect their bank’s digital services to be easily accessible as part of their everyday experience.
A full ecosystem of financial services: Next generation banking requires banks to provide financial services to their clients across bank partners, i.e., insurance, brokerage, etc.
Meaningful engagements: Lastly, customers expect banks to better use the information they have about their customers to enable more insightful engagements in the form of better product offers and predicted interactions.”

QUESTION: What are the benefits to the bank of opting for modular architecture in banking software?

“From the perspective of a vendor that delivers digital banking products, a modular architecture approach to building digital applications has multiple benefits to the bank:

It provides a stronger foundation for defined extension and customization techniques, which allows the vendor and/or the bank to extend the functionality with minimal impact to other parts of the application and maintains the core base for upgradability for future product releases
A modular architecture will also reduce testing when changes are made, enabling a faster deployment to production when enhancements and defects are implemented.
If deployed using a micro-service architecture, it allows the bank to selectively scale the areas of the application when demands are higher.

“A modular architecture provides advantages across all lines of business where technology solutions are deployed to support market trends and business initiatives; retail and corporate. It allows banks to scale specific parts of their offerings during peak usage hence maintaining a consistent user experience for the bank’s clients.”

QUESTION: Is next generation banking synonymous with banking on the cloud?

“No, but they are related. Based on the attributes above, it is important to develop next-generation banking using cloud native technologies. This then enables them to be deployed on-premise or on the cloud. Several banks are considering moving from their traditional Capex model for infrastructure to an Opex model using cloud providers or a hybrid approach. I think several factors must be considered when moving in either direction, e.g., cost benefit analysis between Capex vs Opex operating models, speed to scale, skill set availabilities, where does data need to reside based on regulatory requirements and the complexity of integrating to the bank’s existing system of records.”

QUESTION: How do you allay any potential concerns regarding service availability and data security?

“If you consider what it takes to deploy digital solutions and maintain the high level of availability required by customers, this is a combination of the infrastructure environment setup to support the level of availability required by the bank (either cloud or on-premises) combined with an application architecture that supports 24×7 operations.

“The same approach applies to security. There are a set of security requirements that must be implemented at the infrastructure layer and a full set of requirements that must be supported by the application layer, i.e., device security, encryption for in-flight data and PII data at rest, etc.

“One factor that the industry has yet to fully come to terms with is the need to continually upgrade the entire software stack to address the ever-changing vulnerabilities. This includes patches for the OS layers to the libraries used at the application tier regardless of open-source libraries or third-party proprietary libraries.

“When the bank works closely with the technology provider and the infrastructure provider to view availability and security holistically across the digital eco-system, measures can be put in place to minimise risks and alleviate concerns. Regular monitoring of this environment is mandatory to ensure continued compliance to the security policies and standards.”

QUESTION: What are the key challenges banks face in moving to a cloud-based offering?

There are 3 key areas that need to be addressed when moving to the cloud:

Does the bank run applications that are cloud ready, meaning they are ‘cloud native’ in their architecture. If the underlying application architecture is not ready, then basically the bank would deploy a strategy of lift and shift of the on-premises VMs (most banks use virtual machine technology) to the same configuration on the cloud. This only addresses costs and possibly availability enhancements.
Does the bank have the IT skills to support cloud-native applications or is the bank moving to managed services with vendors who can provide these skills?
It cannot be assumed that for all banks, moving to the cloud will improve infrastructure costs. A thorough understanding of the costs associated with cloud services must be put together. For larger banks, it is not an either/or decision to move to the cloud, but a hybrid approach to on-premise and cloud is the better option.”

QUESTION: What are microservices in banking?

“Microservices is an architectural construct that can be combined with specific infrastructure deployment technologies that will allow the bank to better scale their applications, meaning a more efficient use of the infrastructure. Microservices are domain focused on the scope of the functionality they deliver and are fully API enabled.

“However, it should be noted that large scale deployments of solutions that are purely microservices based will also increase the complexity of managing these applications. See the response on challenges of banks moving to the cloud.”

QUESTION: Are we going to see banks that opt for API-based microservices inevitably opt for open banking solutions?

“So, 2 different issues in this question. API-based solutions do not have to be microservice-based solutions. For most banks today, the systems in their IT eco system are already API enabled, even if they are not deployed as microservices.

“Open banking, which is very much API-based, provides a set of services, functionality, and data from third party providers that will allow the bank to provide a more holistic view to the customer of their financial status, even when all the financial relationships are not with a single bank. While open banking has been around for a while now, it’s slower in adoption than originally predicted. Banks know they must maintain their primary relationship with customers and will be selective in what third party data they will provide.”

QUESTION: What is your vision of the bank of the future?

“The mobile device has significantly narrowed the gap for access to banking services between urban and rural population through mobile banking apps. The bank of the future, at its very foundation, will have scalable technologies in place, alongside flexible business processes, which allow it to shift as its target market shifts.

“The bank of the future will also have one other key attribute. Based on its target customer base (retail, corporate, etc.), it will focus on holistic customer journeys for how its digital properties are deployed. This, combined with flexibility, means the ‘bank of the future’ is not really a destination, but in fact, an on-going journey. Very much like how we have seen the concept of next generation banking evolve since early 2000…”