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Technology decisions can make or break a digital bank

24 Mar 2021

Article by Mambu A/NZ general manager Kristofer Rogers.

As the world’s economies slowly begin their recovery from the COVID-19 pandemic it is becoming clear that industries everywhere – and especially the banking and financial services sector – have experienced a phenomenal digital transformation, well ahead of the expected schedule.

In fact, some industry commentators believe that the pandemic-accelerated digital banking revolution has resulted in transformation in the ANZ region that would otherwise have taken another five years.

This rapid transformation has seen both legacy banks and challenger banks launching new products and services, re-evaluating their central business priorities, and attempting to take their existing customers on an educational journey… into the future of banking.

But while transformation strategies were already in place, the speed at which change has unfolded has meant that some decisions were made on the fly. Many banks struggled with this new rapid pace of decision making and change, particularly large established banks built on monolithic core banking technology systems.

Challenger banks and new lenders, unhindered by cumbersome legacy technology, were better positioned to respond quickly, address customer needs effectively and take advantage of the disruption brought about by the pandemic.

Many established banks, on the other hand, were slower to react, weighed down by their existing core banking systems, and unable to deliver the speed-to-market required to capitalise on the changing financial services landscape.

Banks used to be built to last. Now they need to be built for change

While the transition to digital was going to happen anyway, the speed at which it occurred has shocked many within the industry.

In the banking world, the need for a truly agile approach has never been higher. Senior banking leaders across Australia and New Zealand are facing a serious challenge right now as they grapple with the best ways to enhance their core banking systems so that they align more effectively with the digital world.

In Australia, 2021 is the year that many legacy systems approach the end of their life cycle, opening up opportunities for banks to explore new cloud offerings that will position them more effectively to respond to the continuous change that the future undoubtedly holds.

Gold star digital transformation: a gradual renovation rather than a knock-down/rebuild

The ‘gold star’ approach to digital transformation sees established banks evolve progressively, changing systems over time, with less upheaval on the organisation and, most importantly, its customers. Rather than implementing a wide-scale ‘knock-down/rebuild’ of entire systems, individual areas are targeted for transformation with pinpoint precision.

Taking what is known as a ‘composable banking’ approach allows legacy banks to invest in lean, flexible technology that can enable a faster response to changing market dynamics, while also encouraging greater innovation as the bank moves into the cloud in a staged response. This approach also comes with an inherently lower risk, by maintaining control of the legacy infrastructure while new systems are introduced.

Composable banking

In a composable banking approach, functions are separated to allow for the rapid and flexible assembly of independent, best-for-purpose systems, which enables banks to truly adapt, react and thrive in the new era of digital banking. Composable banking relies on strong ecosystem partners and plug and play API connectivity to quickly and efficiently add new technology, enabling rapid transformation that is simply unattainable with legacy technology.

New product launches or pivoting into different service areas become quick and simple exercises, and banks can maximise their chances of delivering optimal customer experiences and meeting their business objectives, while minimising risk and cost.

Adapting to change used to be a bank’s biggest liability. Now it can be its biggest asset.

Kristofer Rogers the A/NZ general manager for Mambu, the only pure SaaS digital banking platform.