As 5G continues to roll out across the country, there’s no doubt that in combination with advancements in technology, the world of banking is set to change. With smartphones and tablets, customers are granted instant connection from almost anywhere at any time.
The way in which customers typically engage with their bank has become outdated, no longer is it a goal to drive consumers to the physical location of a branch, as online banking becomes the sole destination for customers across the country.
The consumption of banking products from FinTechs, including unsecured lending, peer-to-peer payments, merchant payments, and business credit, is on the rise. Providers like ANZ Bank and Macquarie Bank are fast, simple and digital-first. Simply put, they engender customer satisfaction.
To keep up with competition, many banks have embarked on digital transformation journeys in an effort to transform their customer experiences.
Additionally, the Red Hat Global Customer Tech Outlook 2019 found that 35 percent of Red Hat customers surveyed are looking to introduce new business models or new digital products and services in the next 12 months, and the financial services industry (FSI) is leading the pack in this.
However, while many banks have – to some degree – a maturing “front end”, their middle and back offices are often made up of fragile and inflexible applications and data systems.
Since such systems limit the bank’s ability to scale and adapt to change quickly, it prevents the front office from running efficiently, which in turn hinders banks from delivering innovative customer journeys.
As net interest margins will likely stay very slim, the continual pressure to make these middle and back-office systems operationally efficient is becoming a higher priority in CFO’s targets.
What are we seeing in the middle and back office in banking?
Prioritising the modernisation of back-office applications, databases, and platforms in order to be agile can help re-engineer the customer journey and lower business as usual operations and change management costs. To achieve that, banks need to focus on the following areas:
- IT infrastructure modernisation: As most banks are still running on legacy IT systems that were deployed in silos. With business functions isolated from one another, it can be difficult for banks to deliver a seamless and consistent customer experience across various channels and services.
- Digital process-driven application modernisation: Many banking processes still rely heavily on manual or clunky processes to ensure compliance with policies and historic procedures. Credit adjustments, credit disputes, loan approvals, case management, fraud event management, for example, require human reviews and hand-written approval signatures. When coupled with KYC (know your customer) as a principal operating model, integrating this into manual or clunky processes is a must-have for improving customer experience.
The keys to improving operational efficiency
Taking the application and infrastructure design lessons learnt from the digital front-end services – such as being API-oriented, able to be deployed on a Linux container architecture like Red Hat OpenShift, can scale horizontally, and have updates delivered rapidly through a microservice architecture – and applying them to the middle and back-office systems can help deliver the desired operational efficiencies.
Most banks, however, have decades of IP, rules, and processes hardcoded deep into the system, or have multiple clunky expensive business process management middleware workflow tools, each with their own proprietary extensions and interfaces. As such, modernisation can be a difficult task, especially when they don’t know where to start.
As applications are modernised with APIs and a microservice application architecture, they are often deployed on Linux containers.
For the product and customer support managers in the bank looking for ways to make constant variations to their systems, having these systems running as small componentised microservices gives their IT team the ability to roll out updates to their system without taking down the entire application.
This can give the bank a higher degree of agility, while helping to save cost because it can take significantly less time and fewer people to release an update.
To give you some sense of the type of speed and lowering of cost and effort, Macquarie’s Banking and Financial Services Group speaks to that loud and clear.
By moving to the cloud with Red Hat OpenShift Container Platform and other Red Hat solutions, Macquarie improved developer productivity by more than 50 percent and reduced time to market for new features and updates from hours to minutes.
With these capabilities, the financial institution is able to constantly enhance its online banking platform and deliver good customer experiences.
Ultimately by enabling unparalleled customer experiences, Red Hat is driving the decision makers for many banks to revolutionise their digital experiences beyond flashy user interfaces. It is likely that APIs, microservices, and other open source solutions can indeed improve back-end processes that are integrated and modernised.
But with more effective back-office operations, banks both here and overseas are better equipped with the infrastructure to help deliver a seamless and contemporary user experience for consumers, that they have not only come to recognise, but ultimately expect.