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THE ‘LEGO-IFICATION’ OF BANKING IT AND THE RISE OF DIGITAL FINANCE ECOSYSTEMS: FOUR PRIORITIES FOR BANKS IN 2020

Bank

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.

 

Banking

FOUR WAYS OPEN BANKING AND AI WILL REVOLUTIONISE ACCOUNTANCY

Ed Molyneux, CEO and co-founder of cloud accounting software company, FreeAgent

 

It’s been just over two years since the term Open Banking became a tangible reality in the UK. Since then, the nine largest banks and building societies in Great Britain and Northern Ireland have signed up to take part in the initiative, meaning they must allow regulated businesses to access their customers’ financial data, as long as the customer has provided permission.

Open Banking was imposed by the Competition and Markets Authority to spur competition between banks and make customers’ banking information more accessible to third parties. And this phenomenon has already been transformative for accountancy, providing third-party financial service providers standard ways to access consumer banking transactions, and other data from financial institutions – a seamless alternative to the teetering piles of paperwork traditionally associated with accounting. Paired with other new innovative technologies, including artificial intelligence (AI), Open Banking has the power to change the day-to-day lives of accountants and more broadly, the world of finance.

This article examines the fundamental ways Open Banking and AI can and are already being utilised by accountants.

 

Real Time Insights

Through the use of Open Banking, accountants can have real-time access to their clients’ most up-to-date banking data every single day. This means no more chasing clients for the necessary information that you need to do your usual day-to-day work. This also benefits your clients, as they can continue with their daily workload knowing that their bank transactions are being shared with you directly, accurately and automatically. Suddenly their do-list looks a bit shorter!

 

Adios paperwork

Traditionally, accountants have had to deal with an enormous amount of paperwork, including invoices, expense receipts, bank statements and other important documents. Combined across the profession, this amounts to mountains of paper that have to be analysed and filed. One of the greatest benefits of technology and digital accounting is that it alleviates the stress of keeping important information in physical files. As well as less mess in the office, this means invoices, expenses, receipts can be kept in one place – online. This enables accountants to be more efficient on a day-to-day basis as they are able to easily find documentation by simply typing in what they are looking for to search for it.

Luckily for accountants, and also for the environment, Open Banking and cloud software platforms ensure that important data can transfer seamlessly and safely between your bank and your financial accounts. Already, cloud accounting software makes it possible to have one tidy dashboard that gives an overview of the business in its entirety. As well as being the guardian of files, using technology to set up a bank feed will allow accountants to track incomings and outgoings, link invoices and payments and view interactive charts of all their clients’ accounts.

 

Working from anywhere

The last five years have seen the progression to flexible working increase significantly. Millennials in particular have a desire to work out of the office. A survey conducted with over 19,000 working Millennials across 25 countries revealed their top five priorities when looking for a job, with 79% stating flexible working was a must. Further analysis from BBC 5 Live revealed a 74% jump in the number of people working from home between 2008 and 2018.

As well as the natural increase in the number of people working remotely, accountancy is one of the many professions being affected by the current turbulence being caused by the Covid-19 virus. This month, the government announced everyone should work from home if they can. Now, more than ever, people are away from the traditional office space and working instead from the confines of their own home, with technology acting as the glue that in many cases is keeping their business together. For accountants this means remote access to financial data is an absolute essential.

 

Add consultancy to the equation

With more efficient processes and easier methods of making and tracking transactions, technology and Open Banking will ultimately free up a whole lot of time for the accountants. Clearing up the calendar will make room for new kinds of work and enable accountants to spend more time on consultancy and value-added services, where previously these may have been perceived as a bonus service or from the client-side, a service at a much larger additional cost.

As well as consultancy, these technologies will have other, less direct impacts on the client-side. For example instead of needing a shoebox full of receipts, Open Banking and AI will lead to more confident and self-managed clients. If a client is keeping accurate books themselves, then the accountant no longer has to do all of the numerical admin. Rather, the value add lies in providing higher-level insights around the numbers and offering useful advice such as “it is time to put your prices up, as your profits are lower this year“.

Ultimately, AI and Open Banking are opening the gateway to a more efficient and effective accountancy industry. While benefiting the clients by making new space for consultancy and added value services, new technology ultimately streamlines an accountants’ entire job. Because they are constantly dealing with stacks of financial information, the consequences of misplacement of one document or inefficiently tracking systems hold higher stakes than usual. Luckily there is no need for accountants to grapple with old-school methodology anymore as AI and Open Banking are already readily available and at their fingertips.

 

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Banking

LOW-CODE TECHNOLOGY BOOSTS THE GROWTH OF SPECIALIST BANK

That’s where Netcall’s Liberty Create came in. Create is a new breed of low-code software solution, built for both business users and professional developers

Hampshire Trust Bank (HTB) is a digitally-focussed specialist bank staffed by experts that enable UK businesses to realise their ambitions. Primary operations include development finance, specialist mortgages and specialist business finance (including wholesale, block-discounting, structured asset finance and classic cars). HTB also provides award-winning savings accounts to individuals and businesses. With an ambitious growth target in mind, the bank targeted digital as key to its expansion.

 

A fresh approach to change

HTB was frustrated with relying on external resources for technical developments on tasks that they didn’t deem to be particularly challenging. Results were slower than expected, often failed to match business requirements, and the associated price tags were unreasonable. The team knew the job could be done better in house and began searching for a way to utilise the knowledge within the business without hiring an additional army of developers. Low-code clearly stood out as the solution.

That’s where Netcall’s Liberty Create came in. Create is a new breed of low-code software solution, built for both business users and professional developers. By using its drag-and-drop interface to configure, rather than code, it allows users to build a new app fast. And once the app exists, it can be tested, refined and improved on an ongoing basis.

The low-code platform has enabled HTB to form a small team that can now build the systems the bank needs and manage process improvements easily.

 

Modernising the front office to improve customer experiences

“Our journey with low-code development started because we needed to modernise the front-office application suite, across the business and across all of our products. We invested in Liberty Create initially for our specialist mortgage division, to replace manual processes, improve workflow to drive cost efficiencies, and increase consistency in process execution across the team,” explains David Patterson, Head of Solutions & Delivery at HTB.

The initial mortgage division project was successful and Liberty Create is now driving cost efficiencies and business improvements throughout the organisation. The platforms that have been built by using low-code have become core assets, assisting with vital areas such as linking the bank’s API infrastructure to data services, fraud prevention, credit risk, and Companies House data.

The use of Liberty Create has enabled HTB to focus on the time it takes to serve customers (and serve them well) and as a result, it has positioned the bank for exceptional growth.

HTB’s latest platform a property development finance system, has replaced a host of manual and spreadsheet-based processes that handle client customer and credit-rating data. Low-code lends itself to an agile improvement approach, so the system can be continually enhanced and added to.

“This project has come in at less than one-third of the anticipated cost. Plus, it will be delivered four months earlier than planned. These very short timeframes are enabling us to move towards weekly deliveries of capability enhancement, and with confidence in the quality of delivery,” adds Russ Fitzgerald, CIO at HTB.

 

Delivering – and delivering faster

The delivery model of Liberty Create matches HTB’s agile project approach. Without getting bogged down in the process, the development team utilises the elements of agile that work best in digital transformation in banking, especially for a small bank. Liberty Create lends itself perfectly to that capability.

During its low-code journey, HTB invested heavily in testing capabilities, providing value with an improved turnaround time for any defects. Previously, developers would publish a change, finishing in the evening, then the test team would arrive the next morning and start the test pack, which could run for 3-4 hours, ensuring everything worked correctly and highlighting any regressions. The developers wouldn’t get feedback until lunchtime, therefore losing half a day of development time.

Now, the developers publish an update and leave for the evening. Liberty Create takes 30 minutes to package the release and push it to the test environment, waking up the testing platform automatically once complete and running the series of tests. By 9 am, the test team starts the day with the results and the developers work on any fixes needed immediately. As a result, an extra half a day per developer is gained from every push. This acted as the first step for HTB on its journey to seamless integrated testing and DevOps.

 

Changing the relationship with off-the-shelf for good

Today, HTB’s confidence in front-end building capabilities now influences how the bank approaches new potential suppliers with a clear strategy that needs to work with low-code. By tailoring its own front-end capabilities and utilising API services, the bank can pick the best out of the industry suppliers and create USPs for its customers.

Low-code has also changed HTB’s attitude towards buying tech – with no more front-to-back services that are not delivering value, or slow releases and outdated legacy systems. The bank commoditises its back-end systems suppliers based on the ‘best-in-breed approach’ to build or buy. It has become the cornerstone of HBT’s technology strategy, increasing innovation, flexibility, and creativity.

 

Growing with a trusted vendor

With the introduction of low-code, HTB has moved from being a user of a legacy core banking platform into building out its own capabilities. It has honed its ability to develop systems efficiently, change direction when needed, and react to an industry position or an operational challenge quickly.

“We can definitely say we’ve seen time and cost savings by using low-code to solve business challenges,” says Russ Fitzgerald, CIO at HTB.

Today, the bank sees itself as a five-year start-up. With investment, a new leadership team and many specialist hires, it has experienced exceptional growth and developed thriving specialist lending propositions for SMEs.

“Initially, we worked alongside the Netcall team, which started our delivery and then worked extremely well with us to hand over to our small but very talented internal team. We’ve had very strong engagement with Netcall, from the CTO all the way down – we value this support and attention greatly. For us, it is amongst the highest criteria we look for in a supplier – and there are only a handful of suppliers where we genuinely feel we get that top level of support, plus the ability to feedback, request and input on product road mapping,” adds David Patterson, Head of Solutions & Delivery at HTB.

The HTB Development Team is now building a portfolio for the year ahead. Like any innovative business, the team has more ideas than resources. Reflecting their confidence in using low-code as a front-end tool, the team is considering using it for internet-facing services and a number of digital services to improve internal workflow and processes. “This will become the blueprint for how we do it going forward,” comments Mike Beveridge, Business Analyst at HTB. A number of ‘microservices’ are also on the agenda.

“We’re looking forward to growing our technology capabilities using Netcall’s low-code, adding to our current technology estate and allowing the bank to move towards the next generation of banking technology,” adds Faizal Danga, Project Manager at HTB.

The team aims to utilise the workflow insights provided by Liberty Create in a wider element across the bank to improve back-office efficiency, data governance, data quality, and control, while also improving the operational efficiency of the bank.

 

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