A new banking ecosystem is evolving, thanks to the fintech boom. Quantum leaps in technology like robotics, artificial intelligence, cognitive technology, machine learning, natural language processing, Big Data driven real time analytical capabilities, mainstreaming of API and microservices, Cloud, cryptocurrencies, Blockchain, etc., are bridging the gap between an ambitious idea and a realistic and game changing value proposition. Financial institutions are adopting various strategies including mimicking (creating an internal fintech organization), collaboration, and even acquisitions to stay relevant.
Customer behavior and demand for ease and cost-effective ways to consume banking are also forcing banking and finance services players to re-jig their offerings. Focus on customer journey, high degree of mobility – anytime/anywhere access, consistent cross channel experience and enabling ‘Do-it-Yourself’ are high on the radar for most institutions. Regulatory bodies on their part are also pushing the needle with new directives and regulations to protect customers, and ensure safety and security amidst the market commotion.
Evolving market dynamics open up a plethora of new ways to offer and consume financial services in the most convenient, secure and cost-effective manner. Business models in banking are being redesigned to respond to the disruptions in the industry.
Digitally robust open banking
Almost all players – traditional banks, hybrid digital banks and digital-only financial institutions are attempting to offer experience-based value propositions to their customers. A new ecosystem based on specialization is emerging. Banking is being broken down into modular functions offered by entities specializing in that function. Need for interoperability between different entities has become paramount in this redefined ecosystem. Moving towards digitally robust open banking is a key approach by the industry towards interoperability and collaborative value delivery.
While such business model disruptions are widely observed across the sector – their adoption, especially by large incumbents, is hindered by humongous baggage across business and technology. Legacy core, once the strong engines that offered differentiations like reliability and scalability, have now become burdens for large banks and inhibit them from delivering on the digital age demands.
Two speed banking powered by Emerging Core
‘Two-Speed Banking’ – enabled by a new 'Emerging Core' – holds the key for traditional banks to overcome their legacy inertia. Two-speed banking or bi-modal banking enables banks to operate with digital efficiency and speed while warding off major impact to their legacy cores.
A lightweight, robust, responsive and agile middle office in the form of a new and emerging core effectively bridges ‘high speed’ digital and open banking requirements with ‘slow speed’ legacy core system capabilities – by leveraging next generation messaging and storage capabilities including API, microservices, Cloud, etc. (See Figure 1)
Business models in banking are being redesigned to respond to the disruptions in the industry.