altamura giuliano

Banking used to be a sector with low customer churn and, especially in commercial banking, customers would typically meet with their asset finance consultant face to face and only when they needed to discuss funding opportunities.

However, the world of banking is evolving as customer expectations have been completely revolutionised by their interactions with ecommerce, tourism and other very customer-centric industries. This change is also reflected in business customer behaviour and in commercial banking.

The Covid-19 pandemic that is affecting most of the world is contributing to accelerating the digitalisation process in the banking sector by imposing lockdown and therefore making in person meetings impossible. It is also putting incredible strain on smaller businesses and start-ups who will be looking at financing alternatives in droves in the coming months. The Bank of England notes that: “Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies. Such issues are likely to be most acute for smaller businesses.”

Customers, especially business customers, expect to be at the centre of their banking experience. Although the types of loan offered by asset financing institutions are already typically closely tailored to the specific business, customers now expect to be able to access all the information relating to their loan in full transparency, in various formats and across several devices. When combined with the increase in demand expected in the short-term, this new level of interaction could put a significant strain on asset finance providers’ legacy IT systems.

Studies confirm that even before the pandemic ruled out in-person interaction, around 60% of banking customers used digital channels and 80% of all customer touchpoints were digital . Anecdotal evidence confirms this, and banks are finding that activities that used to take place in-branch are now happening across several channels and devices 24/7. From checking conditions for loans or confirming the status of transfers and payments, nowadays bank customers expect to be able to access information across a range of touchpoints: Instant Messaging (IM), apps, the telephone, the web, emails, text messages and so on.

The proliferation of apps certainly allows greater engagement with the customer. On the downside, however, it also provides legacy IT systems with more data to process as systems are queried more and more often, and new data needs to be collected across various devices at all times of the day. To respond to these interrogations in a timely, accurate and personalised way, banks need new modern front-end systems that are intuitive, engaging and responsive.

The Payment Services Directive 2 (PSD2) also signals a move towards Open Banking and obliges banks to share some of their customer data with other players. At a technological level, however, there are fears that this will not only open systems to up to new cyber security risks but also to unpredictable peak request periods. The latter would put unprecedented pressure on bank legacy systems and put them at risk of inefficiency or even downtime.

The banking sector also faces a technological challenge posed by the need to introduce blockchain, distributed ledger technology, Big Data, IoT, Cloud computing, AI, Biometric technology and Augmented/Virtual reality to keep pace with digital transformation in other sectors. All this needs to be achieved without exacerbating the pressure on systems caused by huge new data volumes.

New, customer-friendly front end systems therefore need to be developed within an architecture that offloads pressure from the mainframe. This structure can ensure that business-critical operations in legacy back-end systems are not delayed because the systems are occupied in low-value machine time.

Typical work-arounds include Application Programming Interfaces (APIs) and microservice architectures that enable banks to use new technologies and process additional external and internal data without overhauling their back-end systems entirely. They are only a partial solution however, as they typically interface directly with back-end legacy systems where business critical information is stored, putting their line-of-business systems at risk anyway.

Digital Integration Hubs, on the other hand, are a solution hailed by analysts as a true game changer. They are an architectural solution that allows APIs to read data extracted from a ‘data lake’, which is continually updated in near-real time by the legacy systems, instead of calling data up from legacy systems directly. This means that data from trusted third parties (TTPs), the IoT or Big Data can be fed into the system seamlessly without overloading systems. Digital Integration Hubs reduce the complexity of the API service layers and decouple them from system of record data and line-of-business environments so that data can be stored in a single repository with 24/7 availability.

The market currently provides no end-to-end solution, making integration the only option to achieve this balance between systems. The final solution designed should help protect the back-end from unexpected request peaks while also providing improved user experience to bank customers. It should furthermore be speed and data agnostic, cloud-ready if not based, and should provide intuitive ‘Google-like’ search. Partnering with experienced consultants can help navigate the complexities of building an ad hoc, sector-specific and seamlessly integrated solution.

To read a full whitepaper on Data Integration Hubs click here:

* Giuliano Altamura (pictured) is the business unit manager of financial services at Fincons Group, an international IT consulting and system integration company.