In 2016, we talked a lot about the future of banking and how the industry can prepare for the changes ahead. But the truth is, the future of banking is here. The industry has been thoroughly disrupted, and organizations that are not on top of their game are now playing catch up.
A colleague of mine recently shared an interesting Tweet that had me thinking on this topic.
Whether you agree or disagree, you have to admit that the question makes you stop and think.
To stay competitive, many banks are looking to adopt next-generation, cloud-based infrastructures that increase agility and the ability to move into new markets and grow the business with agility.
In theory, this journey can be taken in several clear steps. But in practice, banks tend to be driven by a unique mix of four main priorities:
Reduce operational costs while staying compliant
- Create a superior customer experience
- Grow revenue
- Modernize older core systems
The focus can, and frequently does, shift. New management with new business strategies, changing regulatory challenges, upstart competitors and shifting consumer preferences – these factors all play a role in redefining the path of transformation.
But one powerful way to chart the course is by following a four-layer reference architecture:
- Interaction: This layer includes front-office channels for interaction with customers, regulators and other financial intermediaries; ATMs; mobile apps; and Web-based systems.
- Applications: At this layer are systems of record, middle- and back-office systems, core transaction systems, governance platforms, risk systems and analytics.
- Information: Data is one important asset that banks have – and new startups lack — so the ability to monetize data is crucial.
- Infrastructure: This layer includes, not only the typical IT architecture, but also governance layers, systems management and policy management.
Referencing these four layers, a bank can determine its priority goals and figure out the right series of steps to take to achieve them.
For example, if your top goal is to reduce operational costs, then you would do well to start with infrastructure layer and then move on to interaction. To create a superior customer experience or generate more revenue, start with the interaction layer, then move on to applications.
Banks equipped with the right tools across all four layers can make dramatic and successful transformations, and we’ve seen it happen for our clients.
We recently helped a global Europe-based bank design and implement a next-generation cloud-based architecture that features on-demand scalability and a pay-for-use cost structure. The goal? To shave as much as 50 percent from its run-rate costs, and then shift a portion of those savings to fund change-the-bank projects. By helping our client achieve this, we also put them on a clear path to future success.
Now’s the time to get going or get serious about your digital transformation. Hopefully this four-layer reference architecture will help guide you to the right strategy for the year ahead.
Read more in the white paper, “Digital Banking Creates Opportunities for Customer-Focused Finance.”
V. Balasubramanian is chief technology officer for the Banking & Capital Markets industry at CSC. With experience working in the United States, UK, Germany, Switzerland, Australia, India, Singapore, Hong Kong, Taiwan and China, Bala helps to define the solution strategy for the industry, leads subject matter expert teams across industry issues, and helps set the technology direction for solutions.