Danny Healy, financial technology evangelist, MuleSoft
The advent of the open banking era and continued emergence of fintech has forced customer experience up the banking agenda. According to McKinsey, of the 50 largest global banks, three in four have now pledged themselves to some form of customer experience transformation.
Understanding the importance of customer experience is one thing, being equipped to deliver a good one is another thing entirely. As banks look to technologies such as multi-cloud and AI to support more sophisticated customer experiences, their IT teams face an uphill struggle to integrate these initiatives with their existing systems. Across all industries, more than four in five (84 percent) of IT leaders claim these challenges are putting the brakes on their organisation’s digital efforts.
To get around this challenge in 2020, banks now need to focus on re-imagining their IT departments in order to unlock their digital capabilities and empower business-wide innovation. Here are four key areas that banking IT teams will need to focus on in the year ahead to make this a reality.
Repackaging IT into reusable building blocks
IT efficiency is crucial to the success of digital transformation initiatives; it’s one of the main reasons why small, nimble fintech companies have been able to steal a march on their more established rivals. As such, banking IT departments are under substantial pressure to deliver more, faster. However, IT can no longer keep up with the demands of the business; little over a third (36 percent) of IT professionals were actually able to deliver all projects asked of them last year.
To get around this growing IT delivery gap, we’ll see IT move away from trying to deliver all IT projects themselves in 2020. The IT team’s role will evolve to changing, operating and securing the bank’s core IT assets along with building and managing reusable APIs, exposing digital functionality that the rest of the business can consume to create the solutions they need. Essentially, IT begins to create new building blocks (APIs) that can empower both the technical and the broader lines of business users to innovate and build new digital banking solutions without compromising the core IT estate. Banks have already been compelled to create API strategies to open up collaboration opportunities with third parties; this year, we should expect to see them apply the same principles internally. Rather than being the bottleneck that prevents banks from launching innovative new products, IT can empower them to digitally transform and innovate faster than ever before, shifting from being an “all doing” to an “enabling” organisation.
A wise investment in AI
Banks are investing more in AI each year, as they look to use the technology to transform traditional banking processes. In principle, AI has the potential to revolutionise everything from credit decisions through to risk management and trading platforms, alongside the capability to offer highly personalised customer experiences. Yet for most banks AI hasn’t yet reached its full potential, as data is locked up in siloed systems and applications.
In 2020, we’ll see banks unlock their data using APIs, enabling them to uncover greater insights and deliver more business value. If AI is the ‘brain,’ APIs and integration are the ‘nervous system’ that help AI really create value in a complex, real-time context.
Harnessing the power of containerisation with APIs
Despite taking a more cautious approach to the cloud than other industries, many large banks are now using multiple clouds to support the delivery of both internal and external services. But multiple clouds are difficult to manage and being able to move workloads between them remains a significant challenge.
This year, we will see banks begin to use APIs in tandem with containers to navigate multi-cloud complexity. APIs will unlock the data and unique functionalities of applications residing in multiple cloud environments, while containers will neatly package up code and all its dependencies, so the application runs quickly and reliably from one computing environment to another. For example, HSBC has built a multi-cloud application network to meet growing customer demand. Turning to the cloud to accelerate IT delivery, HSBC has built and published thousands of APIs that were deployed across multiple environments using containers to unlock legacy systems and power cloud-native application development.
Open banking and the rise of the digital ecosystem
When it first appeared, open banking gave rise to all manner of opportunities for banks to collaborate with third parties on shared services. This year, we can expect to see banks take this further, and experiment with broader digital ecosystems where their services seamlessly fit in with those from other providers across diverse industries. This is the start of a fundamental shift from traditional financial services, where banks look to ‘own’ customer engagements entirely. In the new model, each of these provider will coordinate their financial services across the same ecosystem, without ever ‘owning’ the customer.
Banks will thereby look to extend their own capabilities and customer data to other businesses via APIs. For example, Mastercard has turned many of its core services into a platform of APIs, allowing it to create the Mastercard Travel Recommender, which allows travel agents and transportation providers to access customer spending patterns and to offer customers targeted recommendations for restaurants, attractions and activities. Expect to see other financial services companies take this approach in the year ahead, along with focusing on providing an excellent developer experience around their APIs to drive competitive advantage.
The year of connectivity
Data and digital transformation are both well-established priorities for the entire financial services industry. As we continue into the new decade, attention will increasingly shift towards the connectivity that unlocks the value of data and underpins the success of digital transformation initiatives.
APIs will play the key role in meeting the banks’ new connectivity requirements. By reimagining digital assets as a set of digital building blocks, bankscan enable every stakeholder within the business to contribute to digital projects, democratising the ability to innovate. By doing so, they can transform the IT department from a cost centre into a source of value that will truly help to create the bank of the future.
