The emergence and success of new entrants in financial services has forced established institutions to reassess both their customer experience and operating model. The best way to secure long term sustainability is to change thinking and embrace a digital-first approach.
The right technology allows the creation of completely new opportunities like launching an independent digital banking spinoff to compete with challengers. A spinoff is an agile speedboat from the large and heavy cruise ship that is the bank. It combines the best of worlds; the resources and market experience of an incumbent with the technology and culture of a modern agile organisation. Spinoffs have significantly lower operating costs, are able to easily respond to customer demands and regulatory requirements and deliver better results in a shorter period of time, presenting new sources of income. This helps drive the established institution’s transformation journey and long term strategy.
Speed to Market
Spinoffs represent a fundamental shift in the culture, operational approach and technology used by incumbent institutions, and can be launched in as little as six months. Building the architecture on which to launch a spinoff is quick and cost effective. ABN AMRO’s newly launched fintech New10 went from concept to launch in just 10 months.
The right technology means embracing Software-as-a-Service (SaaS) and cloud-based services. Rather than having to buy, build, and maintain an IT infrastructure of poorly-connected systems, SaaS allows companies to leverage services built on a flexible yet secure infrastructure. Initial costs are low and subscription-based with providers managing all upgrades. Applications are usually cloud-native and run on application programming interfaces (APIs) which enable the flow of information between applications, allowing business areas the ability to easily access customer data, draw insights and create innovative products.
New products or iterations of existing offerings can be rolled out, integrated and modified at a fraction of the cost and time it would take with a legacy system.
Build a Composable Architecture
SaaS and APIs are defining characteristics of new entrants, enabling the iterative nature of their approach. The aim is to learn from each iteration and use it to create a better product quickly, one that is more closely aligned to customer, regulatory and market needs.
A modular or composable API-driven architecture makes this possible. The architecture can be divided in small pieces and managed through life cycles separately and tested, removed or replaced without risk, using best of breed providers.
Prepared for Change
Apart from flexibility, this composable approach prepares organisations for innovation and the next market shift. The digital banking space is dynamic and evolving at a rapid pace. Easily interchangeable building blocks make change and flexibility possible, instead of having an architecture built in stone. Institutions are able to identify opportunities, then quickly align products and services to capitalise on this opening, helping them navigate an ever evolving market.