Let’s start with some good news.
“The financial services industry is one of the most advanced sectors when it comes to using digital technology,” according to ContentStack, While this may very well be true, unfortunately there don’t appear to be many banking industry C-level execs who feel their digital transformation is going (or has gone) as planned.
Well, no one said it would be easy — and it certainly isn’t. Today’s financial institutions are racing to achieve their digital transformation goals, taking advantage of the most advanced solutions available in their quest to:
- Stay ahead of the competition
- Streamline workflows
- Manage costs
- Maintain regulatory compliance
- Protect PII, and
- Exceed a digitally-savvy customer’s expectations
However, legacy systems and outdated processes are often hurdles to achieving transformation goals. To achieve these goals, banks must replace these outdated systems and processes with future-ready technologies that will create more agile workflows and enhance their tech stack interoperability. Only then can any investment in technology lead to the desired outcome: a real return on investment.
Enter Composable Technology
There’s more good news: composable technology is gathering momentum among banks as they pursue the technologies and systems that will drive revenue and resolve application complexity. Why the momentum? In legacy core banking platforms, a suite of features and capabilities are built into the software by the provider and the organization pays for everything in that suite, regardless of what features it uses or doesn’t use.
To add functionality, the user faces another hurdle: they can only choose vendor-approved, third-party plug-ins. The result? No freedom to choose the ideal solutions for the enterprise as its needs grow and evolve. These monolithic, one-size-fits-all systems, built on a black-box architecture, though feature-rich, are challenging to integrate, update, adapt, and scale.
A composable design solution, in contrast, is founded on the API-first principle, offering a flexible, scalable approach to tech adoption that facilitates rapid, cost-effective development and deployment. In composable architecture, all interactions between applications in the tech stack occur through exchanges among APIs. This maximizes the adoption and scaling of solutions. Complex integration issues can be avoided, and the organization’s entire tech stack scaled more quickly and easily. In short, composable design facilitates interoperability.
Dig deeper into bank technology reads:
- APIs Are the Building Blocks of Bank Innovation. But They Have a Risky Dark Side
- Your Customers Want Everything Fast and Easy. Can Banks Deliver?
- Can Geolocation Unlock Trust in the Next Generation of Bank Customers?
Lessons From LEGO
Merlyn Evans, Advisory Architect, Integrated Strategy & Solutions at Ricoh USA, likens the interoperability achieved through composable design to building with LEGO blocks. Just as LEGO blocks can be assembled in countless ways to create various structures, composable design utilizes a modular approach in digital service delivery and software development. Each block represents a component of the technology infrastructure.
By combining these blocks, a system of complex applications of any size or shape can be constructed. Once the system has been constructed, its various small, reusable components can be easily configured and reconfigured as needed. And because the components in the development process are interchangeable, they can be replaced, scaled, and continuously improved upon to meet evolving business demands.
Each component used during the development process is pluggable and can be replaced, scaled, and consistently improved to help meet business needs. Each component can communicate with one another and “play nice” — regardless of any differences in language or programming code.
How Financial Institutions Use Composable Solutions
Banks need composable tech to succeed. Composable tech design offers the flexibility and scalability that financial institutions rely upon to streamline workflows, reduce manual intervention and improve data accuracy, among other benefits. “This in turn,” says Evans, “will drive their ability to adapt to changing business requirements, handle increasing volumes of data, improve overall efficiency, and importantly, simplify decision making around future technologies.”
By embracing a composable design approach to transforming their tech stacks, banks can stay ahead of the competition and achieve their automation goals while navigating a rapidly evolving landscape of regulatory requirements and improving their overall customer experience.
Matt McGarry is a freelance writer specializing in the financial services industry. He has served as Senior Manager for Financial Services content at Ricoh USA, as well as Creative Supervisor | Writer at Jack Henry & Associates.