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Banking has become an industry of extremes as it continues to undergo massive change at an accelerating pace. Successful banking models must be able to function at those extremes.

As 2020 showed, banks must be hyper-personalised, extremely agile, and ultra-lean to survive in a world of uncertainty. The amount of change required of core banking systems in the last 12 months has been unprecedented, and IDC expects the rate of change to increase a further 300%–500% over the next several years.

But more significantly, that change must be delivered in weeks or even days; deploying change every few months is no longer acceptable.

Taking a deeper look at modern, fourth-generation core banking systems, IDC has identified 12 core capabilities for banks to succeed at being hyper-personalised, extremely agile, and ultra-lean. At the heart of these 12 core capabilities are the key drivers: being configurable and composable.

Everyone understands what is meant by configurable — it is defining attributes and characteristics, and having the core banking systems tailor their operations using these definitions. We can configure attributes such as currency used, processing cut-off time, language used and so on. And the more configurable core banking is, the less coding is required to make it work.

Fourth-generation core banking is highly configurable while legacy core banking systems are less so.

But what is composable? Composable is orchestrating activities into a workflow similar to composing a musical score using different notes and beats.

It uses a large portfolio of microservices consumed through application programming interfaces (APIs) connecting various systems to execute banking operations. And all of this is done without coding or with very little coding. It uses one set of microservices and APIs to create one system (such as consumer lending) and another set of microservices and APIs to create a different system (such as corporate lending), similar to composing one song using one set of notes and beats, and then using a different set of notes and beats to create another song.

Composability enables banks to hyper-personalise products and processes to individual needs, be extremely agile and adaptive to constant change and new requirements, and to do so very efficiently, making the cost of change ultra-lean.

Limited composability exists in some legacy systems. However, advanced capabilities, including composability using sophisticated and automated orchestration, having a large inventory of core banking vendor-supplied microservices and configurable APIs, and running in a manner of being platform and device agnostic are only available with more modern, fourth-generation core banking systems.

With a year of uncharted territory ahead, there is no option but to become both the composer and conductor of your core banking future using fourth-generation core, tapping in to the capabilities and promise of composability.

I discuss more about core banking composability, how it works, and its benefits in this IDC InfoBrief: Composable Core: Capturing Banking’s Endless Possibilities.

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Steve Shipley
Steve Shipley is the Adjunct CIO at IDC Financial Insights Asia/Pacific. Steve brings extensive financial services business and technology design and delivery experience to IDC’s research and consulting practices. Being a corporate IT consultant, well known for successfully structuring and delivering major change programs, including digital transformation, bank mergers and divestitures, core banking, and cross-industry payment programs with complex data integration and governance requirements, Steve was previously CIO/COO of a fast-growing Gulf bank, a Senior Partner for KPMG, and has held executive and global leadership positions at EMC, SAP, EDS, and IBM.
Steve Shipley