Banking transformation in unpredictable times

We are currently living through the most unexpected circumstances that many of us will experience in our lives. There is no doubt that these experiences will leave us permanently changed and that the lasting impact will be felt throughout our industry — by businesses large and small.

In many ways, fintechs are well prepared to cope with this powerful shift of reality. Most are built to be agile, with cloud-native technology and a mobile workforce that allows for operations to continue anywhere and to scale with demand.

For traditional banks that were already pushing toward digital transformation, increased consumer need for online banking services will make digital innovation efforts even more critical. The challenge is executing rapidly and effectively. This is where traditional banks can learn from the fintech playbook.

Because Mambu’s cloud banking platform serves fintechs, lenders, and traditional banks, we see the obstacles that banks overcome as they digitally transform. There are four major challenges banks typically face:

1. Upgrading legacy systems. Replacing legacy technology is a major part of digital transformation. These systems are complex, expensive to operate and slow to manoeuvre. They need to be replaced, but reaching a decision on how to do so can stall digital transformation.

2. Risk aversion. Building and maintaining credibility is a core responsibility of every financial institution. This has led banks to perceive any large-scale change as risky.  Yet it’s now evident that in a world of constant change, not evolving with the market also carries elevated risk. This creates a challenge for banks – how can they de-risk digital transformation? 

3. Skills gap. You may not think of financial institutions as lacking in resources. Yet a Capgemini report revealed that 77 per cent of companies consider missing digital skills as the key hurdle to their digital transformation. 64 per cent of respondents in PwC’s 2019 Annual Global CEO Survey indicated that their organisation are unable innovate effectively because of a skills shortage.

4. Creating an environment for experimentation. Fintechs have been able to build much better customer experiences because they create an environment for constant iterating and improvement. No digital transformation project will get it 100 per cent right the first try – and even if it did, customer demands change frequently. To succeed, banks need to create a technology stack and a team culture that enables experimentation.

While these challenges can make digital transformation seem almost impossible, there are success stories from major banks such as ABN AMROand Santander UK. Mambu has worked with many of these institutions to take a new approach called composable banking.

Composable banking brings the concept of the tech-driven companies such as speed, agility and innovation to the banking and fintech sector. It creates an environment for experimentation that reduces the risk of ripping out and replacing monolithic legacy systems as it endorses building new technology outside the old, or in parallel to the old technology.

Composability is all about combining the specific components you need to deliver a new service with a great customer experience. With composable banking, you can avoid spending months manually building integrations, and instead use stateless APIs to build new products and services. You can avoid vendor lock-in and instead build a commodity infrastructure that scales with your customer demand.

What does it take to enable composable banking within your organisation?

Fortunately, far fewer resources than you may think. Composable banking increases developers’ productivity and reduces the technical debt that drives so much IT spend. 

The last few months have clearly taught us that no one can predict the future with any degree of confidence. But few doubt that the pace of change will continue to increase. To learn more about building digital banking solutions we invite you to download our Core Banking in a Cloud Worldwhite paper or contact our team to discuss your specific requirements. 

For more information, please download our whitepaper here.

About Elliott Limb:

With more than 20 years in banking and fintech, Elliott has a unique and rounded view of the market. He held senior technology and business roles at large global and regional banks, business head roles within leading fintechs and ran a global boutique consultancy focused on building digital banks, helping fintechs grow, and building collaborative (shared value) eco-systems. Named one of the most influential people in fintech, he has also been an entrepreneur running several businesses across multiple sectors, sitting on advisory boards and investing in technology start-ups. At Mambu, Elliott is focused on a customer-centric approach to doing business, growing revenue at an ecosystem level and helping banks build flexible and scalable solutions for an unpredictable future.

© Business Reporter 2021

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