Microservices: The key to digitalization in corporate banking

Introduction

While retail banking transformed, corporate banking slept. Instead of embracing digital, providing new levels of experience and customer service while reducing costs, the corporate banks kept their focus on preserving revenues from traditional channels.

This means corporate, and business banks tend to also be behind in embracing newer technology. Open banking standards, omnichannel communications, cohesive digital banking platforms and transition to a microservices architecture are largely missing in the corporate banking space.

Now, an opportunity for corporate banks to differentiate themselves exists. They can do this by fully digitalizing their products and customer relations with the help of a specialist corporate banking software platform provider.

What’s gained from choosing to deliver services and manage customer relations in a fully digital, seamless manner? What helps you ensure success on this journey into digital corporate banking?

To discover how we’ve answered these questions while helping our corporate banking partners with their digital transformations, read on.

Why do corporate banks lag in digital banking?

Let’s look at how we got here. While some corporate banks have taken steps toward digitizing their workflows, they’re still a long way from a completely digital experience. Here are some factors that gave rise to that situation:

• Corporate banking services are complex. In contrast, retail banking processes are linear, and services are highly productized. Corporate banking procedures are much more complex, encompassing international financing, cash and liquidity control, and foreign exchange, to name a few. Positions and portfolios must also be monitored and managed regularly.
• Corporate banking has always been more relationship-based than retail banking. This prevented it from converting to a self-serve paradigm, where customers are used to seeing through any action to its end themselves and find it empowering to do so.
• Until recently, corporate banking has not been affected by the demands of digital natives, the millennials and other groups who jumped early into fully digitalized finances. That’s changing. The approach of the millennials, and the like, is becoming the preferred way and ever-more widely accepted.
• Operation in real-time was never a demand upon commercial banks’ systems, so no urgency around overhauling them existed, unlike in retail banking. Additionally, the elephant in the room – denial that updating core banking technology was overdue – helped keep legacy systems in place longer.
• Previously, FinTech entrepreneurs found it harder to make headway in the corporate banking world. This is now changing as FinTech is finding ways to compliment and extend the deep relationships between corporates and their banks whilst also improving agility, cost efficiency, accessibility and customer experience.

Why should corporate banks go fully digital?

Currently, most corporate banking customers are ‘digitally underserved’. Due to this, there’s great potential for improving market position and growth. All it takes is for those in corporate banking to take a step into the fully digital banking world.

This step addresses many of the issues that the earlier stagnation created. The upsides of this include:

• Customer empowerment: Bring the benefits of self-serve banking to corporate customers. Digital transformation involves re-building the industry’s traditions, which allows for a shift away from traditional relationship management to being digitally powered platform players.
• Flexibility: Offer access via multiple channels: Internet, mobile, smartwatch, virtual branch, host-to-host, open API (interface with your bank from within a wide range of other apps and devices).
• Systems unification: Provide integrated access to all products and workflows for customers and the bank team’s back office as well. Seamlessly move the customer and the necessary session data to another channel to better complete a process.
• Anytime anywhere banking: Match the digitalization standards found in retail banking. This is especially important following the 2020 pandemic year when remote service banking was widely relied upon, and adoption by new users grew faster than any time before.

In addition, banking continues to experience a flow of new regulations, new technologies, and changes in customer expectations. Commercial banks are not exempt. Having a coherent, fully digital system allows them to be agile, free to make the most of the opportunities that change invariably brings with it.

What are the main benefits of microservices?

In corporate banking, ‘monolithic’ whole system replacement has a bad reputation. Things have often gone wrong, leaving banks to contend with postponed programs, scaled back, or abandoned with significant consequences; full-blown “rip and replace” ventures that went awry with missed deadlines escalating prices, and unanticipated technical flaws.

Microservice architecture projects effectively avoid pitfalls of this kind and reduce the overall risk of your digital transition.

There are two strategies for introducing all-digital banking when based on a microservices architecture:

1. Entire replacement of the existing platform.
2. Gradual reengineering of the existing platform.

Microservices means both strategies are a manageable prospect. Both require the bank to segment its offerings into separate functional components and prioritize them for development. Still, this process brings significant benefits to it in terms of future evolution. It also ensures each of the new, fully digital services is enriched with open standards support, comprehensive data security, and the inherent scalability offered by the new digital banking solution.

The other ways microservices architecture helps ensure successful transition are:

• Reducing the time required to implement a new solution. In our experience, this falls, from a year or longer, down to 6-9 months.
• Preserving in-house team’s time. On the bank’s side, only 6-7 people at most need to be involved in the implementation process.
• Faster development of future new services. Being ahead of the curve now means you will extend your lead over the rest of the pack. Over 80% of banks are still using monolithic architecture solutions, so they will have a hard time catching up.
• Intrinsic scalability. Microservices architecture is an approach that belongs in the world of cloud computing. Now, your banking service is ready to accommodate even unprecedented future growth and major usage spikes smoothly. Bonus: Microservices architecture projects are already proofed against server outages and downtime.
• Ongoing development. Continuous development can be managed using agile teams and teams sitting outside the developers’ exclusive ‘inner circle’.

Why is a banking software platform important?

Digital transitions in corporate and business banking are complicated. Fortunately, help is at hand.

Thanks to a convergence of technological advancements such as open application programming interfaces (open APIs) and microservices and new approaches like platform banking, banks can take a low-risk, high-reward modernization journey. Furthermore, this journey can be navigated at each bank’s own pace and enables the financial institution to manage change successfully, well into the future. Banking platforms have many built-in benefits and avoid all the risks associated with coded-from-scratch development projects.

• The platform coherence encourages joined-up thinking in the bank’s customer service teams, which customers greatly appreciate.
• Reduction of human errors by 70% from the automation of payment processes.
• Improved customer experience: Typically, a platform replaces around five different front-end client applications with one well-designed interface.

How can banks take advantage of microservices?

Once you’ve chosen to embrace a fully digital future, make sure you pick a technology partner well-positioned to help while adopting a corporate banking platform via either a wholesale replacement of your current banking systems or gradual reengineering. Make sure the platform is microservices-based and has support for open APIs so that you can gain the maximum benefit from your transition, now and in the future.

Conclusion

Thank you for allowing us to accompany you this far in your journey! We hope you now feel ready to make an informed decision on the technology provider, platform, and the best approach to use for your bank’s digital transformation.

If you still have unanswered questions, we are happy to help. Contact us. We will listen and then do our best to address any outstanding concerns you have regarding microservices architecture, corporate banking platforms, and the upcoming transition to a fully digital future.

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