Nearly everything that defines banking has changed over the past decade with the introduction of digital and open banking, but most banks rely on core technology from a pre-digital banking era. Regulation has accelerated open banking, embedded finance has become mainstream, non-banks are participating in financial services and less loyal banking customers have easy access to a plethora of financial options for any financial decision. At the same time, the cost pressures are ever-increasing and financial crime, ESG, data centricity eat up time and budget to name a few.
To provide answers for today and tomorrow, banks need to be able to provide financial services in an agile way, be able to create new business opportunities, push efficiencies and optimize cost management. Moreover, these needs have accelerated in recent years as banks have learned that the ability to respond quickly and efficiently to new market dynamics is key to remaining competitive.
And here banks with authenticated core technology struggle to meet demands: Their ability to combine trusted, best-of-breed capabilities to quickly respond to the market with secure, resilient, scalable, and differentiating financial services is close to non-existent, while new entrants and non-banks use these capabilities to rapidly provide innovative banking services and compete through embedded finance and banking-as-a-service.
of IT executives at banks report that incorporating the cloud into their organization’s products and services will help them to achieve their business priorities
The Economist Intelligence & Temenos Capturing Value in the Cloud 2021 Report
With a cloud platform approach, banks can create differentiating services without the complexity and responsibility of running each capability that underpins their financial solutions.
That might not be remarkable on its own, but the ability to easily plug in a capability, change a capability for a specific situation, innovate next to legacy, or serve a niche, is a game-changer compared to the well-known monolithic approach that supports much of banking today.
Recognized as composable banking, it will mean different things for different organizations: Some banks will increasingly build their businesses on partner services, whereas others use separate in-house services, and some banks will adopt a cloud strategy to pursue success, while others will run their platforms in-house.
Overall, a more modular technology landscape is beneficial to deliver financial services rapidly from the best fitting services: It will provide the optionality to embrace modern services, to compose financial services quickly and efficiently, for the right channels and new distribution models that shape banking today. Seamless SaaS services are key to meeting the required scalability, efficiency, and resilience to fit increasingly more digital societies where banking services are expected to work around the clock, at any moment, in any digital journey.
What is composable banking? Banking’s new business models are about spinning up new products and bringing them to market rapidly. Composability, where services are broken down into specific capabilities, enables this. It maximizes freedom, speed and flexibility, while connecting with an ecosystem of third-party offerings that further increases choice and boosts innovation.
Composable capabilities can be accessed and assembled from multiple sources to create your ideal service or solution. They could be taken individually and integrated into a broader technology landscape, pre-packaged into banking services like Buy Now Pay Later, or grouped into vertical front-to-back solutions like Business Banking.
For incumbent banks, the adoption of a modular and composable approach enables the creation of a pathway for progressive modernization of the core technology landscape.
To sum it up, a platform approach provides options to run cloud-delivered services next to existing technology and progressively decommission existing functionality in existing systems.
Take control today to create a gradual renewal path, where speed, resilience, and safety can be provided through trusted and scalable banking services to win in a new world of banking.