Composability: The Key to Digital Transformation in Banking
Here’s how composability and proactive adapting can enable digital transformation in banking.
Digital transformation is not just about digitalizing processes and adopting new-age tech like AI or blockchain. It is also about providing compelling experiences on demand. It is about what the customer wants, as well as when and where, discusses Shobhit Mathur, senior director and category head of banking financial services at WaveMaker. Customer loyalty is fickle, and in many cases, there are a number of competing options, so the right experience delivered at the right time can hugely influence market share.
IT leaders across the world are turning to cloud-native, innovative technologies to boost revenue and growth and to stay ahead of the curve. The post-pandemic era is seeing change happening in faster and shorter cycles, which means organizations are keen to harness the powers of the digital transformation juggernaut.
Digital transformation is not just about digitalizing processes and adopting new-age tech like AI or blockchain. It is also about providing compelling experiences on demand. It is about what the customer wants, as well as when and where. Customer loyalty is fickle, and in many cases, there are a number of competing options, so the right experience delivered at the right time can hugely influence market share.
We see a clear example of this phenomenon in the financial services sector. While new-age fintech and digital banks armed with the latest technology and innovative products are gaining market share at a faster rate, traditional banks encumbered with legacy tech are trying to turn the tide in their favor.
However, incumbent banks face a few hurdles on the way.
The Challenge in Transforming Traditional Banking Systems
Over the years, traditional banks continuously added features and functionalities to their legacy systems. ISVs catering to these well-established banks have repeatedly been heeding those demands, resulting in heterogeneous but exclusive solutions around primary legacy offerings. But the looming risks of technical debt around existing systems are not going unnoticed.
Staying nimble and flexible requires encumbered banks and software vendors to encourage innovation by forming meaningful ecosystem partnerships. The choice of a development platform, for example, is a decision that requires forethought and strategy. The right approach and the right tool can act as a catalyst for a winning strategy.
When it comes to choosing a development platform, financial software vendors and banks need to select a platform that can help them gain control of the digital transformation process and enable them to deliver value to their clients faster with every periodic upgrade.
Development platforms built on the strong foundation of composability can help them achieve this seamlessly.
See More: Top 8 FP&A Tech Trends for 2023
Why Is Composability the Mantra for Faster Digital Innovation
Composability as a concept was first introduced by Gartner, who defines a composable application as a collection of autonomous packaged business capabilities (PBCs). Each of these blocks is developed and delivered like a separate product, ensuring continuous improvement and innovation in application experiences.
This effectively means that IT teams in the banking sector can create reusable components and then easily integrate, combine, replace, customize, and reuse functional banking components to compose new banking applications in a manner reminiscent of LEGOTM blocks.
This also ensures that software providers and banks can integrate best-of-breed financial products and services and offer a variety of options to their customers. This is a notable improvement over the past when products were confined to the realm of self-owned and proprietary offerings.
Additionally, the modernization of legacy tech with a composable approach ensures no disruption to the business, as functionalities and features get replaced component by component—a hugely beneficial strategy when compared to the “big-bang” practice of re-architecting the entire system.
A composable experiences platform that enables all this and more can propel banks and software providers—even fintech organizations—to quickly transform the digital landscape into one that addresses the customers’ immediate needs.
Composable Banking – A Basket of Options
For years, established banks have depended on disparate services by multiple providers, leading to complex integrations. With composability, banks and ISVs now have the option to hand-pick the experience they want, extending their capabilities and providing a richer portfolio of services to their clients.
1. A wide range of integrations
Open APIs and an extensive list of vendors in the market offering niche services provide banks and ISVs with a multitude of options. Not only is there an exhaustive list of providers, but banks can also pick and choose best-of-breed vendors to provide the best experience possible.
2. Scaling with components
Banking applications built from these components can be quickly scaled up or down based on the functionalities required, giving developers far more freedom and flexibility than with traditional coding.
3. Working at the speed of need
A dynamic market with dynamic customer expectations requires functionalities to be added or customized fast. A composable architecture allows developers to make changes to the software at the speed of need and achieve faster time-to-market.
4. Personalized user experiences
Components can be customized and tailored to suit customer needs. From color, style, font, brand-specific themes, localization, insight-based notifications, and personalization, user journeys can be customized to meet customers’ unique needs.
Benefits of Composable Experience Platforms Powered by Low-code
While there are many more advantages of adopting a composable approach to banking software, the choice of a development platform is pivotal to the concept of composable banking.
Here, acceleration and flexibility are the key differentiators. Instead of developing, for example, an AI credit scoring system or a video KYC from scratch, what if you could create visual and functionally rich components over best-of-breed APIs that offer these solutions in an accelerated manner? And what if these components could be easily dragged and dropped into your application canvas?
That is exactly the scenario that a composable experience platform can make possible when it’s powered by the acceleration that a low-code platform provides.
Financial organizations using a composable experience platform powered by low-code can do the following:
-
- Create an internal marketplace: Create new UI experiences on top of best-of-breed and orchestrated APIs with the help of out-of-the-box widgets provided by the low-code platform and store them in an internal marketplace. FIs can then quickly compose whole new apps and experiences by assembling custom functional components by pure drag and drop and minimal configuration.
- Modernize incrementally: Use the reusable components to modernize incrementally, replacing core functionalities in a phased manner, with zero disruption to the business. Low-code platforms that enable this provide a higher degree of flexibility to integrate with existing systems and allow new components to co-exist with older systems.
- Customize for clients: Implement customized solutions for each client faster and absorb greater market demand. Low-code platforms typically come with features that enable developers to customize and configure these functional components for style, UI, brand, locale, and logic. This propels a faster go-to-market with quick modifications to suit customer needs.
- Provide a custom studio: Empower banks with everything they need to manage customizations and enhancements themselves and enable self-service by providing them with a custom studio on low-code with brand-specific components. Minor customizations and changes can then be implemented by the customer themselves instead of waiting for solution providers to implement the same.
To Sum It Up
It is imperative that encumbered banks and their software providers move fast. Composability can provide the momentum required for transforming aging processes and systems into modern experiences. Along with embracing the cloud and the latest technology, banks and software vendors have to find a faster way of creating new experiences and leveraging the experience and expertise of their various teams.
Low-code platforms that enable composability can help incumbent financial service providers to do that and deliver customized, personalized experiences to transform their archaic systems in a cost-efficient and scalable manner.
What are your thoughts on composability in banking? Share with us on Facebook, Twitter, and LinkedIn.
Image Source: Shutterstock
MORE ON DIGITAL TRANSFORMATION IN BANKING
