Venkateshwaran Srinivasan, Senior VP and Global Head, TCS Financial Solutions (TCS BaNCS)
Financial services have traditionally led change and invested ahead of the curve in technology for several decades. But in the last few years, the rise of tech giants and the speed of adoption of technologies like Cloud and AI, seem to have left the tech savvy financial institutions thinking. Industries like retail have upped the ante, and there is a lot that financial institutions in general and banks in particular have been left to think about, as they look at the disruption, which is largely tech driven, that is now at their doorstep.
Some of the major paradigm changes being brought about from outside the industry which is influencing the thinking in banks around the world are: (a) Platformification, (b) Cloud adoption at scale, and (c) High leverage of data and analytics in real time, to name a few.
What this has meant for FIs is that, they need to reorient and equip themselves with the right tools and technologies to offer compelling value propositions to consumers who are now used to a different paradigm of engaging with enterprises, thanks to the apps and the underlying technology which powers differentiated business models. Exploiting the power of cloud platforms to achieve elastic scaling, the ability to change (i.e., deploy code) rapidly and without risk, and to orchestrate capabilities drawn from a variety of sources are all key to emulating customer success, which other industries have shown and organizations like an Amazon or a Netflix exemplify to derive competitive advantage. Foundational to enriching customer experience is the ability to leverage data and obtain timely and relevant insights which help sell and/or fulfill a service more efficiently, creating an element of customer convenience & delight.
When we think from the vantage point of a core system provider, we believe that our customers need to approach their modernization agenda with an alternate model of core banking enabled by our technology. We believe this will have the following pillars or foundational tenets:
Cloud nativity: This is where the most significant disruption is coming from, resulting in a ‘Domino Effect’ in terms of the adoption of technologies such as microservices and AI, which enable new paradigms like composability and so on. The rapid adoption of the public cloud by financial institutions globally has also contributed to the investments being made by the providers themselves, spanning various building blocks, including containers, databases, AI/analytics workbenches, and API backbones. Each cloud provider is rolling out cloud native propositions, which can potentially lock financial institutions onto their platforms but are also creating an upside in terms of the technology differentiation they afford.
Microservices-based architecture: Customers today want a highly convenient and intuitive interaction with a bank, irrespective of the device or mode, that gives them a way to accomplish their goals and in a fast and secure manner. With the rise of new business models, products and customer expectations, the adoption of a microservices architecture, a software design paradigm, has become critical. With its key emphasis on delivering smaller and independently deployable business capabilities, existing core banking applications are prioritizing decomposition into microservices. Promising many benefits that come from their lightweight and easy-to-deploy approach, when orchestrated and choreographed (read event-driven) in the right manner, they engender reusability, efficiency, scalability and resilience. These microservices are self-contained and responsible for specific business capabilities and leverage the benefits of container deployments. The independence dimension also includes associated data ownership. Their ability to interact/integrate with any system, be it in-house or third party, via APIs and events is what creates symphony. The light weight and independence aspects ensure a fair amount of risk reduction and enable agility as they help compress testing timelines.
Composability and orchestration - Financial institutions spend a lot of effort in integrating applications and automating processes and the number of processes/interfaces and the changes needed to meet new requirements are increasing rapidly. In such scenarios, having to rely on fresh coding and customization, can result in delayed rollouts. This is where a self-service, low code integration platform can empower financial institutions and give them the agility and self-reliance they are looking for.
Composing or orchestrating processes and interfaces becomes simplified using API and event catalogs with a composability layer. By combining complimentary solutions (for instance KYC, fraud monitoring, document management, financial planning, etc.) from a partner ecosystem, financial institutions gain the ability to curate the right solutions as well as the right and timely experiences aligned with a specific state or need. This DIY approach, with the ensuing benefits of flexibility, can help financial institutions transition towards being much more customer centric.
Intelligence: Given that any core transaction processing engine generates terabytes of data, the banking world has reasonably leveraged analytics both to increase operational efficiency and improve customer experience. The application of AI is a work in progress, with big strides made in the AML and fraud detection perspective. However, given the largely black box approach to AI, its adoption in back-office operations has been cautious, but it has permeated the client servicing side with chat bots and many other use cases. The real breakthrough of the application of AI in banking would be in the controlled use cases in back-office operations.
Co-existence: The evolution of core transaction processing systems into a truly cloud native microservices based system is a gradual process. Financial institutions have spent decades in developing and maintaining legacy core applications. The overall technology strategy and architecture should therefore consider and enable co-existence across the microservices architecture and legacy system in terms of both business processes and data strategies. Such a migration strategy would consider decommissioning small and specific aspects of the legacy system to be replaced by microservices progressively while reducing business and operating risk.
Composability is an IT philosophy, and microservices and APIs comprise the backbone of its realization. Apart from ushering in flexibility and adaptability, it can help organizations make sense of their data and use it to ‘fast forward’ the creation of enriching customer experiences.