Integration holds banks back from digital transformation

The rapid ascent of fin­techs star­tups took almost every incum­bent finan­cial insti­tu­tion by sur­prise. Ini­tial­ly dis­miss­ing these upstarts as lit­tle threat to their long-held cus­tomer bases, lega­cy banks thought they could keep up with evolv­ing con­sumer expec­ta­tions through incre­men­tal changes and some new dig­i­tal assets like mobile bank­ing.

But by tun­ing into exact­ly what peo­ple want from banks in the dig­i­tal age, fin­techs have stolen cus­tomers from incum­bents at a rate that few in the indus­try could have pre­dict­ed. Per­son­al­i­sa­tion has rewrit­ten the rules of bank­ing. Where­as pre­vi­ous­ly con­sumers gen­er­al­ly desired a one-stop shop of finan­cial ser­vices from one or two major banks, now they are more like­ly to select whichev­er firm offers the best dig­i­tal expe­ri­ence for each respec­tive prod­uct.

“Fin­techs not only pro­vide their cus­tomers with a finan­cial ser­vice but also per­son­alise the expe­ri­ence to their sat­is­fac­tion and new expec­ta­tions,” says Allen Ter­leto, field CTO at next-gen­er­a­tion data plat­form com­pa­ny Redis. “While tra­di­tion­al insti­tu­tions focus on cross-sell­ing across a port­fo­lio of prod­ucts, a fintech’s entire exis­tence is often to serve its cus­tomers in just one domain. This spe­cial­i­sa­tion and hyper-focus gives them a com­pet­i­tive edge over tra­di­tion­al banks weighed down by their mas­sive oper­a­tional scale and the inher­ent risks of trans­for­ma­tion.”

With so many fin­techs zero­ing in metic­u­lous­ly on the indi­vid­ual domains that form part of what a large bank offers, col­lec­tive­ly they have become a major threat to the large finan­cial insti­tu­tions which have dom­i­nat­ed the sec­tor for decades. See­ing they were not dig­i­tal­ly trans­form­ing fast enough to com­pete with the kind of inno­va­tion con­coct­ed at cloud-native, agile star­tups, bank­ing execs have had to make big deci­sions on how to remain rel­e­vant.

Some have opt­ed to repli­cate the fin­tech mod­el by build­ing inno­v­a­tive start­up enti­ties with­in their organ­i­sa­tions, giv­ing them the right peo­ple, process­es and tech­nolo­gies to com­pete. Oth­ers have sought to fast-track dig­i­tal trans­for­ma­tion by acquir­ing star­tups. Hav­ing ini­tial­ly ignored them, banks are now forced to engage with the fin­techs as peers.

Whether they are spin­ning out new dig­i­tal assets through their own start­up enti­ties, or through acqui­si­tion, finan­cial insti­tu­tions are now seek­ing to evolve into tech­nol­o­gy com­pa­nies. How­ev­er, this pos­es major chal­lenges, par­tic­u­lar­ly when it comes to inte­gra­tion.

“Let’s say a bank acquires a new fin­tech that is cloud native and pro­vides a great per­son­alised expe­ri­ence,” says Ter­leto. “But the bank’s entire port­fo­lio still oper­ates on-premis­es cen­tered around a main­frame. How does it enable cross-func­tion­al­ly, cross-sell­ing oppor­tu­ni­ties, or a uni­fied cus­tomer expe­ri­ence?

“The last thing it wants is for exist­ing cus­tomers to reg­is­ter with the new ser­vice siloed from the rest of the port­fo­lio and serve as a con­stant reminder of the con­trast between their expe­ri­ences. To avoid this, the cloud-native tech­nol­o­gy stack, skills and agile process­es must align and inte­grate with the lega­cy oper­a­tions of the exist­ing archi­tec­ture.”

Redis Enter­prise, an in-mem­o­ry NoSQL data­base plat­form, enables banks to over­come these inte­gra­tion chal­lenges and dig­i­tal­ly trans­form at a greater speed. A tra­di­tion­al finan­cial insti­tu­tion whose oper­a­tions are still most­ly on-premise but which wants, for instance, real-time per­for­mance in its mid­dle­ware can use Redis Enter­prise to deploy on top of its pri­vate cloud, vir­tu­al machines or even bare met­al with­out any impact on core oper­a­tions.

If the same insti­tu­tion acquires a fin­tech start­up that is based in the cloud with end-to-end real-time per­for­mance, and it wants access to that infor­ma­tion on-premise and with­out los­ing any of the ben­e­fits of its cloud-native capa­bil­i­ty, Redis also facil­i­tates that inte­gra­tion.

“For an inte­grat­ed expe­ri­ence across the prod­uct port­fo­lio, banks can cre­ate a hybrid deploy­ment mod­el between their on-premise oper­a­tions and the cloud with active-active repli­cat­ed Redis data­bas­es,” Ter­leto says. “In this mod­el, banks can match fin­techs in time-to-mar­ket and busi­ness agili­ty, with­out com­pro­mis­ing and adding risk to their exist­ing on-premis­es oper­a­tions.

“It’s the best of both worlds and cre­ates an on-ramp for insti­tu­tions that have near-term plans to progress along their cloud jour­ney. They can migrate at their own pace in align­ment with their gov­er­nance, risk and com­pli­ance poli­cies, and risk appetite.”

For more infor­ma­tion, vis­it redis.com

Pro­mot­ed by Redis