Why Banks Need Flexible Tech Architecture — and How to Build It
J.P. Morgan Payments, Cross River Bank and PayPal are some of the largest users of the "MACH" architecture for building state-of-the-art software — and keeping it that way using composable banking techniques.
By Holly Hall, managing director MACH Alliance
Financial institutions that deliver digital experiences through older, monolithic technology platforms could be in a tricky spot when it comes to exploring generative AI, personalization and future innovations. Rigid technology can lock down a technology team’s ability to incorporate modern features, prohibiting consumers from, say, using a 24/7 chatbot that delivers personalized banking advice.
To operate and launch the banking experience of the future, banks and credit unions must implement "MACH" and "composable" technologies that allow digital teams to take advantage of future-proofed, in-the-moment innovations.
Composable technology stresses a modular approach that enables organizations to obtain the best options for their needs in each aspect of their tech, all options working together regardless of the source. MACH — I’ll get into the details below — is an approach to achieving composability.
Many institutions, including J.P. Morgan Payments, are finding success in MACH, leveraging the technology framework to build solutions that are more resilient, connected and interoperable. J.P. Morgan Payments has said MACH principles enhance its commerce capabilities for online payments, in-store and omnichannel payments, as well as fraud protection. Other banks and credit unions are implementing composability to automate and improve internal workflows and to create faster customer onboarding processes, like identity verification and compliance checks.
Companies that don’t build a company culture around flexible, composable tech could get left behind.
Defining MACH Technology for Banking
More than 40% of financial institutions are running legacy or monolithic architectures, according to a global study by MACH Alliance, a not-for-profit body that supports education around MACH principles and how companies can develop more composable technology frameworks.
Companies still operating a legacy tech framework can have a hard time getting new solutions off the ground smoothly. Newer banking features like a transparent digital payment system, increased protection against online fraud, and even 24/7 online chatbots using natural language processing to personalize banking advice need a flexible, sustainable tech backbone. A MACH tech stack, and composable banking, support innovation.
The alliance report also notes that the financial services industry is running behind others fields such as manufacturing, but 43% of banking and other financial companies are increasing their budgets to explore MACH. Considered a more modern approach, MACH is a standard way of building technology that enables organizations to develop a flexible enterprise tech stack in which each component is modular, scalable and easily replaced. MACH technologies must be microservices-based, API-first, cloud-native SaaS, and "headless," in which the customer’s front-end digital experience is decoupled from the back-end programming.
Companies that leverage a composable approach using MACH principles can prepare for future innovation through a more resilient and modern tech stack. (MACH standards are administered by the MACH Alliance, a nonprofit organization.)
Read more: The Future of Banking Requires ‘Composable’ Solutions
Benefits of a MACH-Driven Technology Infrastructure
The advantage of a MACH architecture includes being able to select modular, best-of-breed solutions to integrate into the overall tech stack, while ensuring each of the pieces work together seamlessly. But where can a financial institution start?
Here’s an example: A bank can start to rebuild its tech infrastructure by integrating a headless commerce solution to manage digital transactions, and then work with a completely different company to manage how content gets uploaded to a site or on the mobile app. That content management system vendor, also following MACH principles, works easily alongside the commerce tool, product information management system, and onward.
The components are interchangeable, too. For example, the bank can remove the legacy content management system and add in a new one. Or it can supplement with additional applications to further innovate, such as a generative AI program to automate web content.
Other benefits of a MACH infrastructure include:
• Built to evolve — Financial institutions running a MACH architecture can access new technologies and tools as needed, integrating innovative trends such as connected commerce as they arise.
• Updates are ongoing — Because all the technology lives in the cloud, different solutions can roll out updates in real time to keep companies at pace.
• Scalable infrastructure — Components that aren’t locked together make it easier for a bank that might be experiencing a peak in web traffic during a specific season to adjust and scale to handle the influx of activity.
Read more: Chase’s AI Chief Explains Why the Biggest Banks Will Win the AI Race (Probably)
Financial Services Institutions Are Exploring Composability
Advocating for this MACH approach is J.P. Morgan, which joined the MACH Alliance as a supporter member, a category for leading organizations to share insights and innovations within composability, and actively contribute across the MACH Alliance.
J.P. Morgan Payments, processing nearly $10 trillion in payments daily, has spent the last several years modernizing its tech stack around MACH principles aiming to enhance its commerce capabilities. This underscores the payments organization’s commitment to helping its clients provide seamless and secure experiences for end customers in a rapidly evolving landscape.
Specifically, API-first connectivity within the MACH technology stack helps support automated business processes, while cloud-native pieces within the architecture provide more security.
Other examples include:
• Cross River Bank has been powering digital banking and fintech innovation through its modern tech stack. The bank’s digital experience is API-based. This enables compliance-ready banking services to reduce fraud, digital lending, and payment solutions, among a range of benefits.
• PayPal is a supporter member of the MACH Alliance, like J.P. Morgan, and is leveraging composable components for its digital payment services. Through MACH, PayPal can more easily integrate its platform into other composable fintech partners such as BigCommerce and Bold Commerce.
From a broader view, banks and credit unions are increasingly looking to composable banking because of the ability to integrate a variety of payment gateways, produce localized payment methods, and collaborate with technical partners for smoother ways to route transactions. Interoperability — the ability for technology solutions to communicate with one another — enhances the digital experience and allows for financial institutions to innovate in ways they never could before.
Financial services companies can develop customer-facing applications and experiences with more agility and more sustainability. Banks and financial services companies can manage multiple projects at once — commerce enhancements, security measures, marketing campaigns, and more — when working from a composable architecture.
