Digital banking: fast, and safe and efficient

Once an industry with low churn rates and little focus on customer experience, today’s world of banking has dramatically changed. Not only has competition from new entrants such as neo-banks radically changed the marketplace, but the expectations of customers have been revolutionised by their interactions with ecommerce, tourism and other historically very customer-centric industries. Customers now (rightly) expect to be at the centre of their banking experience. They also expect tailoring of offers and services and levels of interaction that put significant strain on banking sector legacy IT systems. Today’s Covid-19 epidemic is accelerating the digitalisation process in the banking sector and contributing to exacerbating this strain, as customers that would have relied on physical in-branch interaction are now obliged to stay home and use digital tools to interact with their bank instead.

Recent research shows that around 60% of banking customers use digital channels and that 80% of all customer touchpoints are digital[1]. Anecdotal evidence confirms this, and banks are finding that activities that used to take place in branch or in front of the ATM are now happening across a plethora of channels, 24/7: from querying balance to making transfers and payments, nowadays bank customers expect to be able to access information at the tap of an app. The habits acquired during the current pandemic are likely to further cement this trend.

The growing range of touchpoints used by consumers includes: Instant Messaging (IM), apps, the telephone, the web, emails, text messages and so on.  These mean more engagement with the customer, but also more data to process, both in terms of query volumes and of incoming data. The frequency with which consumers interrogate systems has increased exponentially and continues to do so as even older age groups have grown confident that digital transactions, bank transfers and payments are a safer, as well as cheaper, option. To respond to these interrogations in a timely, accurate and personalised way, banks need new modern front-end systems that are attractive, engaging and fast, putting pressure on the back-end systems they integrate with.

Banking sector legacy IT systems are not just facing the challenge of responding to new customer experience demands and fighting competition, they also need to tackle important regulatory changes. The Payment Services Directive 2 (PSD2), or ‘The Revised Payments Directive’, for example, was designed to increase competition in the EU electronic payments market, provide consumers with more choice, and define rules and regulations for payment services that improve security and efficiency. The Directive also serves as a move towards Open Banking and obliges banks to share some of their customer data with other players. At a technological level, however, there are fears that this will lead to unpredictable peak request periods on banks’ legacy systems causing unnecessary delays and inefficiency.

Like many other sectors, banking also will need to rapidly grapple with introducing blockchain, distributed ledger technology, Big Data, IoT, Cloud computing, AI, Biometric technology and Augmented/Virtual reality without exacerbating the pressure on systems caused by huge new data volumes.

Front end systems in particular, need to be developed within an architecture that offloads pressure from the mainframe ensuring that legacy back-end systems that are often business-critical, are not occupied in low-value machine time instead of their core activities and risk underperforming on their core operations. In addition to this, front end systems need to be available 24/7, while legacy technology requires machine time for core activities and cannot risk losing capacity.

One solution that developers have turned to are Application Programming Interfaces (APIs) and microservices architectures that enable banks to leverage new technologies and additional external and internal data without overhauling their back-end systems entirely.  All these solutions, however, typically interface directly with back-end legacy systems where business critical information is stored putting their line-of-business systems at risk from unpredictable peaks in data queries that could be caused by third parties or partners.

Digital Integration Hubs, on the other hand, provide a new, more efficient design solution. In this architecture APIs read data extracted from a ‘data lake’ which is continually updated in near-real time by the legacy systems with an optimally flexible and efficient ingestion procedure, rather than by calling data up from legacy systems directly. It is thus possible to feed in data from trusted third parties (TTPs), the IoT or Big Data without overloading systems.

Digital Integration Hubs reduce the complexity of the API service layers and decouple them from system of record data and line-of-business environments so that historical as well as new and real-time data can be stored in a single repository. This repository is available 24/7 to APIs in near-real-time.

At the moment there is no end-to-end solution on the market so flexible, intelligent integration is key to ensuring that all the benefits are realised to the full. The banking sector must respond to a number of challenges: better customer experience, data protection, regulation and the need to ensure that its historical systems are protected both from cyber criminals as well as inefficiency. The ideal solution should help protect the back-end while also providing all the required benefits and be speed and data agnostic as well as cloud-ready if not based and provide intuitive ‘Google-like’ search functions. Where banks are unable to design and implement this revolutionary structure in-house, they should be looking to partner with consultants that understand the specific pressures of the sector and provide a fully integrated solution.

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