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History Of Banking Part 3 – Coins And Religion

When it is the question of money, everybody is of the same religion. – Voltaire

In the last part, we looked at the rise of civilization and the emergence of writing as the contributing factors towards the growth of banking. In this part, we will look at two other major factors that drove banking in the early parts of human history.

Minting of coins

As communities grew larger, people of different types began to stay together. In these communities, barter was not practical. What if two people could not agree on the value of the items to be exchanged? What if we could not find a person who required what we had to give in return?

Humans solved this problem through the idea of standardized money. The earliest forms of standardized money that were used by humans were salt, tobacco, bitumen, seeds or even cattle. But cattle can die, grain can rot, and stone can be reduced to dust.

By 1,100 BC, in China, these old forms of currency were replaced by miniature replicas of the things the people used in their day to day life. But it was not easy to handle such miniature tools. These miniature replicas gave way to square coins, but they were also not easy to handle. Imagine cutting your hands handling the square coins with sharp edges9. Those times, vaccinations to prevent further infection were also not available.

However, it was not too far away that the first minted coins came into existence. The place was Lydia (now western Turkey). Around 600 BC, Lydia’s King Alyattes minted the first coins. These coins were made from electrum, a naturally occurring mix of silver and gold.

Some argue that kings liked their pictures or the pictures of their kingdom’s symbols in the hands of everybody and hence coins were minted. But coins helped the trade to flourish. In fact, the Lydian kings became very wealthy after the introduction of coins. Coins also helped money to be stored in a more convenient way. This led to the growth of banking.

Ancient India also is known to have had coins in circulation around the 6th century BC. China also has records of using money during these times. Since that time, coins have been the most universal embodiment of money.

Most coins are circular, but some were rectangular. Also, a lot of coins, especially in China had a hole through the center so they could be tied on to a string.

Coins and all such money reflected the period in which it was used. But, apart from that, coins also helped translate the intrinsic value of an object in a simpler way. Knowingly or unknowingly, coins helped speed up and ease larger transactions – a necessity for banks. Coins, in addition to being a propaganda item, also helped the rulers of the earlier times control the flow of money through the economy helping banks achieve better control over the economy.

The growth of religion

 

Along with politics and money, one of the three most important things that have driven the history of our human race and continues to shape its future has been religion. Many nations have flourished, some have been decimated, many people became leaders, several more lost their lives – all in the name of religion.

While the interlinkage between the three is strong even now, we can safely assume that it was needed for keeping money safe that drove people to temples.

Ancient houses did not have the benefit of the most secure locks; hence they deposited their money at the temples. Temples had the continuous presence of priests and saints and hence there was an added sense of security. Temples were also chosen for one more reason – they were near the city center as cities grew around temples. Temples, like banks, stored hordes of money and this was also the reason why temples were ransacked during a war. As the money supply grew, temples not only acted as places of storage but also lend out money and probably charged interest for that.

As religions grew, they realized the need to play a key role in the economic landscape. Interest was the cornerstone of banking these days and hence religions decided to create rules for interest.

In Christianity, usury, or interest was banned by churches, which were under Roman influence. It is interesting to note that once the economic benefits of banking were well understood, the definition of usury was relooked at. In fact, In the middle of the 13th century, groups of Italian Christians, invented legal workarounds to nullify the ban on Christian usury; for example, one interesting method of effecting a loan with interest was to offer money without interest, but also require that the loan is insured against possible loss or injury, and/or delays in repayment. The Christians effecting these legal fictions became known as the pope’s usurers and reduced the importance of the Jews to European monarchs. The rise of Protestantism in the 16th century weakened Rome’s influence, and its dictates against usury became irrelevant in some areas. This was a key in the development of banking in Northern Europe and the rest of the world.

In Islam, it is strictly prohibited to take interest or riba as the Quran strictly prohibits lending money on interest. The prevention of charging interest coupled with the creative mind of humans led to the development of innovative developments in the 20th century that led to the development of Islamic banking where no interest would be charged, but banks operate for profit through charging for loans or through different ownership models. I must point out that, in India alone, more than USD 1,500,000,000 is unclaimed as even taking an interest on bank deposits is considered as haram.

As per the sacred texts of Hinduism, charging interest was considered as a sin. The sacred texts also forbade people of different castes from participating in usury. By the 2nd century AD, usury seems to have become an accepted norm. This dilution of concept has remained today also and usury, in India, refers only to interest charged above socially accepted ranges.

While the above three religions had strong views about usury and charging of interest, the rules defined for Jews helped them play a critical role in modern-day banking. Jews were forbidden to charge interest on loans made to other Jews but could charge interest on transactions with non-Jews. In the early 11th century AD, when trade grew, and kingdoms wanted more access to credit for expansion, Jews, who were not allowed to do many other jobs, found an opportunity in the field of banking. To add to this, as Manfred Lehman has about the Jewish law Torah that ‘the Torah, before any other code or law, set down strict rules for commercial honesty and public-mindedness, so that a Jewish banker was always more trusted than other bankers’. 11 Who knows, Mayer Amschel Rothschild, the founding father of international finance would not have been a banker had the rules been different.

The role of religions in the evolution of banking cannot be undermined. Religion and its key stakeholders understood the importance of banking in the past itself. Kings also understood the role of religions in further enhancing their economic agenda. The fact that the earliest banks were temples is the prime example of this close relationship. Several of the practices followed by the banks have been a result of the freedom given or control established by the world’s religions. Islamic banking would not have evolved without the religious beliefs and practices of Islam. Jews would have played a prominent part if not for the rules on usury. In short, religion, along with the economy and politics played the most important role in shaping the world of banking.

In the next part, we will look at the factors which made the growth of banking from a national industry to an international industry.

History Of Banking Part 2 – Civilization And Record Keeping

Books are the carriers of civilization…They are companions, teachers, magicians, bankers of the treasures of the mind. Books are humanity in print. – Barbara W. Tuchman; Bulletin of the American Academy of Arts and Sciences

In the last part, we looked at an overview of the different factors that shaped the world of banking. In the second part of the blog, we will talk about two factors in detail – how the rise of civilization and the emergence of record keeping helped in the growth of banking.

The dawn of civilization

The act of banking is said to have originated in the Mesopotamian Civilization in the region of Sumeria.

Around 12,000 years back, humans still lived in small communities, probably around 50 people formed a community. Everyone knew each other. During hard times, if Raul needed fifteen goats, he could always ask Pepe. Pepe gave Raul fifteen goats and he trusted Raul to give back those fifteen goats soon enough.

Trust and cooperation between individuals were the keys here.

As humans grew ambitious and smaller communities became larger communities, it was impossible for everyone to know every other person. Probably the neighbor was a stranger. Still, Raul would have needed fifteen goats in times of need. If he asked Pepe, how could Pepe be sure that he will get back the fifteen goats. Trust and cooperation were still essential, but how can one combine trust and cooperation with the inherent risk that was obvious in the above situation.

Humans found two ways to cater to this difficult situation – record keeping and interest. Record keeping gave rise to contracts and contracts gave birth to the practice of charging interest. While we will talk about record keeping a bit later, let us talk a bit about interest.

As pointed out by Goetzmann in Money Changes Everything: How Finance Made Civilization Possible[i], linguistic evidence gives the clue to the rise of interests.

Around twelve millennia back, livestock was money. Cows, goats, sheep – everything was of value. Barter was the heart of the economy. If one had fifteen cows, he expected it to become sixteen or seventeen in a years’ time, accounting for births and deaths and not accounting for natural disasters or diseases. So, it was natural for Raul to expect his fifteen goats to grow to sixteen even if he gave it to Pepe.

In the Sumerian language, the word for interest, mash, is also the term for calves. In ancient Greek, the word for interest, takos, also refers to the offspring of cattle. All these terms point out to the fact that interest rates came from the natural multiplication of livestock.

So, if Raul gave Pepe fifteen goats, he now expected to be repaid with more than fifteen goats, obviously with the offspring of the fifteen goats. The interest rate also depended on how well Raul knew Pepe. Knowing someone led to the personalization of interest rates also.

In the great settlements of these times, like Mexico, China, India, Iran, there has been evidence of banking when civilizations grew.

Just as the greatest of the earliest civilizations grew on the banks of rivers, the rise of civilizations were the first rays of sunlight for banking and the greatest component of banking – lending. The rise of civilization provided banking with the biggest platform that every industry needs – transactions between people. As civilizations prospered and empires were formed, banking rose to become a behemoth.

The act of record keeping

Everything between the bank and its customers is a financial contract. Our relationship with our bank is a financial contract that the bank will pay back our money when we ask them.

When the German archaeologist Julius Jordan discovered the Inanna temple precinct in the Uruk region in present-day Iraq, along with precious artifacts, he and his team discovered curious little tokens. While they were forgotten for a large period until Professor Denise Schmandt-Besserat found out that these tokens were a system of accounting. These tokens were a period of 4,000 BC to 3,000 BC. Each of these tokens had a different shape and represented a different item. These tokens were stored inside hollow clay envelopes called bullae. It was a curious thing indeed as these clay envelopes had to be broken to see the contents inside them. So much for the trust!

Once the writing was invented through hieroglyphics and later progressed to more structured forms, banking took off as more contracts were created that were more complex and this helped create a wider variety of financial products and services.

The capacity of the human mind to remember details is high, but to recover these details at the right time is tough. Record keeping made the recovery easy. Trust was now on a clay tablet or a piece of paper that could stand the test of time. We believe it is safe to argue that writing formalized trust between our ancestors.

As communities grew larger, people of different types began to stay together.  In these communities, barter was not practical. What if two people could not agree on the value of the items to be exchanged? What if one could not find a person who required what he had to give in return?

Humans solved this problem through the idea of standardized money. The earliest forms of standardized money that were used by humans were salt, tobacco, bitumen, seeds or even cattle. But cattle can die, grain can rot, and stone can be reduced to dust.

By 1,100 BC, in China, these old forms of currency were replaced by miniature replicas of the things the people used in their day to day life. But it was not easy to handle such miniature tools. These miniature replicas gave way to square coins, but they were also not easy to handle. Imagine cutting your hands handling the square coins with sharp edges[ii]. Those times, vaccinations to prevent further infection were also not available.

However, it was not too far away that the first minted coins came into existence. The place was Lydia (now western Turkey). Around 600 BC, Lydia’s King Alyattes minted the first coins. These coins were made from electrum, a naturally occurring mix of silver and gold.

Some argue that kings liked their pictures or the pictures of their kingdom’s symbols in the hands of everybody and hence coins were minted. But coins helped the trade to flourish. In fact, the Lydian kings became very wealthy after the introduction of coins. Coins also helped money to be stored in a more convenient way. This led to the growth of banking.

Ancient India also is known to have had coins in circulation around the 6th century BC. China also has records of using money during these times. Since that time, coins have been the most universal embodiment of money.

Most coins are circular, but some were rectangular. Also, a lot of coins, especially in China had a hole through the center so they could be tied on to a string.

Coins and all such money reflected the period in which it was used. But, apart from that, coins also helped translate the intrinsic value of an object in a simpler way. Knowingly or unknowingly, coins helped speed up and ease larger transactions – a necessity for banks. Coins, in addition to being a propaganda item, also helped the rulers of the earlier times control the flow of money through the economy helping banks achieve better control over the economy.

While these two factors played a great role in building the banking industry, in the next part, we will look at the factors that took it to the next level – the ability to mint coins and also the rise of the driving factor behind banks – religion.

 

References

[i] Goetzmann, William N. Money Changes Everything: How Finance Made Civilizations Possible. Princeton, NJ, and Woodstock: Princeton University Press, 2016.Print

[ii] The History of Money https://www.investopedia.com/articles/07/roots_of_money.asp

History Of Banking

History is for human self-knowledge … the only clue to what man can do is what man has done. The value of history, then, is that it teaches us what man has done and thus what man is. – R.G. Collingwood; The Idea of History

It takes a moment for the life of a person to change; nearly four years for an engineer to graduate; or decades for a civilization to establish supremacy. And it has taken 12,000 years for the banking industry to become what it is today.

Today, the banking industry is a global behemoth comprising of global banks, regional banks, community banks, digital banks, fintechs, and a lot more companies that play a very integral part in all our lives.

In an 11-part article, we explore the factors that led to the rise of banking in becoming this behemoth that we see today.

While 12,000 years may look like an exceedingly small-time compared to a million, the importance of banking in today’s world cannot be understated. Much less the fact that it also has the power to make or break the destinies of corporations and nations across the world.

No one knows exactly where banking started. Or which was the first bank? Banks do not have a founding father either. But the wise men say that banking is clearly the third oldest profession in the world[i].

Twelve millennia ago, when a merchant of Uruk, in present-day Iraq, who had foresight beyond his generation, thought of storing his hard-earned money in a temple and obtained a clay tablet in return for the stored money, he may have just set the ball rolling for the banking industry behemoth.

The history of banking has been intertwined with the history of finance, history of money, and the history of humanity. We may never know when finance began because some of the financial contracts are as old as writing. As William N. Goetzmann[ii] points out, ‘writing seems to have been invented to record financial contracts.’ Was not trust the biggest deal 12,000 years ago also?

Before we proceed further and explore various facets that shaped the bank of today, if there is a chance to dissect banking into different eras, we can classify them into these three phases – the Germination Phase which starts from the earliest forms of banking to the period till 1000 AD; the Sapling Phase which starts from 1100 AD when the earliest forms of banking in the current form was established to 1950 AD, and the Rapid Growth Phase which starts from around 1950 and has been going on till now. Needless to say, this third phase has been characterized by the exponential use of technology.

In fact, the word bank has come from the Italian word banco, meaning bench. During the 12th century, Jewish merchants, who were probably the pioneers of banking in the Sapling Phase, sat outside the marketplaces beside benches from where they did their banking. Not just the word bank, but also the word bankrupt owes its existence to the Italian word banca rotta, which means a broken bench. If a banker lost his money in banking, then mercy be upon the poor soul, for his bench was broken into pieces.

As we mentioned before, the history of banking has been intertwined with the history of finance, history of money and the history of humanity. Finance necessitated banking and banking necessitated the evolution of money.

But the greatest interlinkage of the banking industry was with humanity itself. As humans moved from caves and formed small settlements, barter was necessitated. These became the first financial transactions. As small settlements became larger communities, the need to write down the terms of transactions became necessary. Bob from one community may not have necessarily known Rick of the same community. This necessitated the first financial contracts, some of which have been recorded. As communities became states, central authorities came forward who built storage areas where money – whether it was grain, coins, or cattle – was stored. Places of worship became de-facto banks because people trusted these places of worship to hold their money and these places of worship were also the most secure. This was also the reason that temples were the first places to be ransacked when armies ran through cities to gather the spoils of war. The practice of lending money also started during these times and temples acted as the first lenders.

Soon states became nations and banks stepped out of the walls of temples. The kings and the heads of nations began to take note of the power of banks and leveraged these banks to get money for their lavish lifestyle and satiate their desires for war. Banks became organizations with a focus on profits. They became the focal point of trade and economy. As nations became empires, banks fuelled this journey of the empire nations. Wars were fought, and banks again became the channels for pumping in money. As the age of technology dawned on humans and as nations continued to flex their muscles through technology, banks also embraced technology as if they were born to do it.

Across this wonderful journey, not just colorful personalities like the intelligent merchant of Uruk we mentioned before or the Rothschilds or the Morgans, but several social, economic, cultural, political, and technological aspects have shaped banking. One or more of the facets that we mention in the next few articles have always been present in the history we had outlined above.

The 10 factors that we believe contributed to the rise of the modern banking were – 1) The dawn of civilization; 2) The rise of record-keeping; 3) The use of coins and currencies; 4) The growth of religion; 5) The expansion of trade; 6) The rise of the colonial empires; 7) The occurrence of wars; 8) The increased use of paper money; 9) The industrial revolution and globalization; 10) The rise of technology

As we outline the facets that shaped the banks of yesterday over the three phases of banking – germination, sapling, and maturity, let us keep in mind that this is also a brief history of humans and how trust has evolved.

In the next part, we will start from the beginning – how the dawn of civilization helped set the stage for banking.

References

[i] The Origins of Money – Chapter 2 – Money and Evolution of Banking; Martin Armstrong; Armstrong Economics

[ii] Money Changes Everything: How Finance Made Civilization Possible; William N. Goetzmann; Princeton University Press

What Financial Services Firms can Learn from Big Tech Customer Experience

The move of Big Tech companies into the financial services sector brings both risk and benefits to consumers and banks alike. Technology firms such as Alibaba, Amazon, Facebook, Google and Apple have grown rapidly over the last two decades. With a data centric business model focused on direct interactions with a large number of consumers, these firms are using their power to venture into the financial services sector, offering payments, money management, insurance, lending and much more.

For these firms, financial services may still only be a small part of their business globally (11% according to Leonardo Gambacorta, head of innovation and the digital economy at the Bank for International Settlements) but the potential is huge given their size and customer base and they will continue to fuel rapid change in the financial industry.  With their fiscal capital, customer data, strong brand loyalty and presence in consumers’ everyday lives, big tech companies have the firepower to drive innovation, and in doing so, pressure the traditional banking model further. So how can banking as we know it, survive the onslaught of tech companies and what do they learn from them?

The answer lies in co-operation and partnerships

 

According to a KPMG report, 26% of financial institutions are already partnering with one or more technology giants, and an additional 27% report planning to forge such partnerships within the next 12 months.

Big Techs derive their strength from the fact that they have deep expertise in analytics, big data, AI and creating customer centric experiences, which in turn help them to develop services that reach their existing users in no time through their channels.

But the thing to note is that the banks have an advantage in a few areas over the Big Tech companies  – their ubiquitous presence in every aspect of life of its consumers (compared to siloed but in depth experience of every individual Big Tech company); the consumers’ trust in banks for all financial matters and the vast experience they have in the industry.

This scenario makes for many opportunities of partnerships between banks and Big Tech companies globally for example, Apple recently launched a credit card with Goldman Sachs. Last year, Australian lender, Westpac partnered with Assembly Payments to launch a payments platform for its business clients. In China, tech companies are influencing how consumers spend their money with mobile wallets from Alipay and WeChat Pay. With the drive to adopt Open Banking by banks and fintechs, the potential for partnerships and innovative product offerings are becoming increasingly possible.

 

Embracing Open Banking

Open Banking helps banks advance their features to meet consumers’ changing needs, enhance their revenue and at the same time increase customer engagement using differential and personalized experiences. By treating personalized propositions as a commodity, banks can begin providing the personalized customer experience that helps retain customer loyalty. Banks can also go beyond their typical scope, increasingly becoming links in the value chain, for example, to help customers buy a vehicle rather than just give the loan. Leveraging customers’ data with the offerings of an agreement will give banks the opportunity to build business beyond their traditional financial products and actively look at integrating third party trusted products to deliver value to the customer.

Partnerships like this can help commercial banks become more inventive and nimbler, digitizing their processing, systems and customer experiences to create new ways to meet the needs of their customers and form new income streams. With Open Banking, the banks’ partnership with fintech companies and other third-party providers is driving technology innovation to help traditional banks stay atop in today’s digitally-centered world.

Winning the digital race

 

As banks embark on their digital transformation journey in an effort to hold onto market share and capitalize in the digital economy, the industry will need to reinvent itself, driving the creation of more customer oriented, hyper-personalized services. Banks will increasingly become links in the value chains that will also contain non-financial services, meaning suppliers will join their digital ecosystem to offer a one shop stop for customers banking and other needs.

A fundamental change in the financial services sector is taking place as banks begin applying strategies to stay ahead of the curve. Financial institutions are prioritizing digital transformation of their ecosystems to achieve optimum efficiency and customer-centered experiences. Open Banking is quickening this move, making banking truly digital by establishing an interconnectedness that we currently see in the ecommerce industry.

With their size, analytics capabilities, capacity to appeal to huge, loyal userbases and revenue models, tech giants are strengthening their position in typical banking services at a fast clip. The competitive challenge that tech companies bring to the financial services sector presents a threat and/or an opportunity for banks to defend their market share by transforming their digital capabilities to deliver superior digital services that satisfy the demands of increasingly connected customers with growing expectations.

In a data-centric and customer-centric world, banks need to transform and work hard to retain customer loyalty and market share if they are to survive.  As more technology firms move into financial services it could make the sector more dynamic and efficient, but it also introduces risks for existing players. By embracing new technology, adapting to customer’s needs and learning how the tech giants are owning the customer experience, traditional financial services firms can transform, or they face the risk of becoming extinct.

The article was initially published in Finance Derivative on 13th November 2019, Read More 

Madhur Jain

Madhur is SunTec’s Senior Vice President and Heads the Global Solution Consulting team which addresses our client’s business challenges through aspects of solutioning, product mapping, and business process definitions. With over 20 years of experience in pre-sales, solution architecting, and client engagement, Madhur brings strategic thinking and global vision into this role.

What is Cloud Deployment?

The integration of software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS) into the cloud, to act as a solution that allows users to access data is known as cloud deployment. There are many kinds of cloud deployment models used by businesses, enterprises, and even banks. These are private, public, hybrid, or community models. The models are built based on different factors. Businesses choose a cloud deployment model based on the needs of the user or consumer and the needs of the organization.

Banks and other financial service providers are also incorporating cloud deployment into their systems. A cloud-native platform for banks allows them to centralize many of the services they offer to make it more convenient and user-friendly.

Different Kinds of Cloud Deployment Models

As mentioned above, four different kinds of cloud deployment models are used based on the needs of the organization. The banking infrastructure has changed and evolved into an open banking platform with the use of cloud deployment and use of APIs. The different kinds of cloud deployment models are:

  • Private cloud model: A private cloud model refers to the cloud used by a single company. The software system used in this kind of model is based on security guarded by various firewalls. This model provides more control over the company’s data and its management.
  • Public cloud model: This model is used by companies based on a subscription. The systems and services used in this model are more easily accessible by the users and are commonly used by companies with minimal privacy concerns.
  • Hybrid cloud model: A hybrid cloud model integrates private and public cloud models into a singular model. Tasks that require higher security are performed using the private model, while tasks with lower security risks are performed using the public model.
  • Community cloud model: This model supports different organizations by sharing resources and data that belong to one community. With similar software used in private models, a community model differs only with its sets of users. More than one organization belonging to the same community can access the data in this model.

What Are the Various Approaches to Cloud Deployment?

Based on management of responsibility for deploying different solutions, cloud deployment has two different kinds of approaches. These are:

  • The cloud is deployed by a third party, used in the community, public or private cloud model.
  • The cloud is deployed by a single entity, as is used in the private cloud model.

SaaS cloud deployment can be used either in the public cloud model or private cloud model. However, when a singular entity manages a hybrid cloud model, the SaaS deployment can also be used. There are virtual private clouds that function in the same way as private clouds do but in a public space. This means that only trusted entities can access the cloud. These virtual private clouds also use SaaS deployment.

Vulnerabilities of Cloud Deployment

With any kind of software used to store data and resources, there will always be certain kinds of threats, vulnerabilities, and risks. Some of the threats and vulnerabilities of using cloud deployment mode are:

  • Less transparency: Using a cloud-based system for different kinds of assets and operations can lead to a loss of control and visibility. This results in little to no transparency from the users’ perspective. This is due to the shift of responsibility from the organization, bank, business, or company to the cloud provider.
  • Unauthorized use of cloud services: With the self-service feature that many cloud providers provide to the users, there is an increased risk of using unauthorized services. This can be done by the organization’s personnel with the organization’s IT department’s lack of permission. The low cost accompanied by the easily implemented PaaS and SaaS products from the cloud providers increases unauthorized use.
  • Compromised internet-accessible management: The application programming interfaces that are used by the users to access or manage the cloud services have many kinds of vulnerabilities that can be used to compromise data or resources.
  • Stolen credentials: Once attackers get access to the cloud; they can easily steal the data and credentials stored in the cloud. This can lead to larger access to the organization’s systems as well as data, which could be catastrophic.
  • Lost data: Any kind of suspicious malware leaked onto the cloud can lead to the accidental loss or deletion of important data. Loss of data can also occur when users forget the encrypted key to encrypted data. The inadequate understanding of the storage model used in the cloud may also result in the loss of data.
  • Incomplete data deletion: Because of the lack of transparency with some cloud models, the deletion of data by users can remain incomplete. This is a result of the lack of knowledge of the actual location of where the data has been stored.

How to Avoid these Threats and Choose a Cloud Deployment Model that Suits Your Business?

While deciding which cloud deployment model is best for a business, many considerations have to be made. Further, to select a cloud deployment model that will suit a particular business the most, it is crucial that the cloud service models are taken into consideration.

  • Platform-as-a-Service, or PaaS: This allows the deployment to take place easily. This service is used for authentication, payment gateways, data access, creating and maintaining an infrastructure for efficiency and scalability, etc. The cloud infrastructure manages processing, memory, and storage, which makes it more convenient for developers. The process of developing an application is also done by PaaS.
  • Software-as-a-Service, or SaaS: The services offered by SaaS are online. This allows many users to use this service. The software used to provide the services are managed centrally, while the services and applications can be accessed through the internet. The centralized management of applications allows software upgrades, patches, security, etc., to be taken care of by the provider or the user. SaaS can be used in an e-mail, helpdesk services, support services, logistics tracking, monitoring progress in sales and marketing domains, financial services management, customer relationship management, etc.
  • Integration-as-a-Service, or IaaS: This provides the infrastructure for provisioning of servers running several choices of operating systems and customized software. The services, such as the delivery of resources, provision of dynamic scaling, pricing model based on utility usage, support for multiple users, etc., are available for on-demand access. IaaS is most suited for businesses and organizations that lack the capital to invest in hardware but need rapid growth for scaling.

Cloud deployment models are created based on the service models or infrastructure detailed above. Based on the service model that suits their needs the most, businesses or organizations can decide on the cloud deployment model that will provide all the required services.

Benefits of a Cloud Model

Cloud technology has been gaining a lot of traction over the last few years. This is primarily due to the advantages it offers over the traditional approach. Some of the standout benefits of using a cloud model are:

  • Scalability and flexibility: The connection to multiple servers by using a cloud-based infrastructure offers banks the ability to access and process data easily without the need for additional capital. Banks can stay relevant in a competitive environment with the scale computing capacity to keep up with customer needs.
  • Cost optimization: Banks can reduce capital spending with the help of cloud models. This is because these models reduce the need for additional software or hardware, or personnel to manage and maintain servers.
  • Increased efficiency: Banking process and the delivery of services have become more streamlined with the adoption of cloud-based models. Different services and tasks can be accessed or performed on a cloud-enabled platform making it more efficient and convenient to use.
  • Agility and innovation: Streamlining processes and the incorporation of new technology provide customers an innovative way of accessing services provided by banks. The cloud-based models allow quick and easy access to software and multiple kinds of services.

Cloud technology has emerged as a preferred option for various sectors in the last few years, and the trend is expected to continue in the future as well. Easy scalability, cost-effectiveness, and better control make cloud deployment a suitable option for businesses looking to scale their operations in an extremely competitive market.

Everything You Need to Know About SaaS

Enterprises today are looking to minimize their costs wherever possible to maintain their competitive advantage. One of the most important steps in this direction is to move the IT operations from physical infrastructure to virtual infrastructure. This allows them to further improve the efficiency of their operations and, at the same time, reduce the costs significantly. SaaS is today empowering businesses globally.

In the last few years, the popularity of SaaS platforms has increased manifolds, and it is quickly becoming the preferred option for businesses looking to virtualize their operations. Earlier, it was believed that the SaaS model is meant only for small and medium businesses as big corporations prefer in-house IT infrastructure. But as the benefits of SaaS have become known, even the big corporates are adopting SaaS as their preferred deployment model.

What is SaaS?

SaaS or Software-as-a-Service is a cloud-based technology that enables software developers to deliver their products and services over the internet. With SaaS, you need not go through the hassles of downloading software and installing it before being able to use it. SaaS platforms allow the users to access various types of software over the internet with any compatible browser. This allows the users to access their data and files from anywhere, allowing completion of the required tasks from anywhere and at any time. Here are some of the essential features of cloud-native SaaS solutions which will certainly catch your attention:

  • SaaS is a completely cloud-based offering, i.e.; there is no physical infrastructure involved.
  • SaaS products come ready to use, i.e.; you simply need to log-in to your online account on the enterprise SaaS platform.
  • SaaS products are updated automatically, i.e., every time you access the software, you get the latest features, updated by the vendor.
  • There is no need to be present in front of a particular computer to access the software. SaaS allows you to access the software from any device anywhere and at any time.
  • There is no huge capital investment, as SaaS platforms offer periodical subscriptions, i.e., monthly or yearly.

Difference between Cloud and SaaS

Cloud Computing is an extremely broad term that encompasses almost everything that is running on the internet. In other words, every service running in the cloud is covered under the ambit of cloud computing. While cloud computing has been around for some time, it still forms the backbone of modern technology. By this definition, SaaS products are a part of cloud. As a matter of fact, not only SaaS, IaaS and PaaS are also covered under the ambit of cloud computing. Usually, many users tend to confuse cloud computing and SaaS, as they have many features in common, but it is not the case. There are some inherent differences between SaaS and Cloud Computing, which you must know:

  • Scope: Cloud computing is an extremely versatile technology that is used by application developers, software developers, IT departments, and avid computer users. SaaS is a finished software product that allows the users to access fully-formed end-user applications.
  • Cost: Cost of accessing cloud computing is highly dynamic as it depends on your requirements and usage patterns. When using SaaS applications, you know the cost upfront as you are charged a specific subscription fee for allowing them access to the application.
  • Users: SaaS products are targeted specifically at end-users; they can be individuals as well as corporates. Cloud computing has a broad set of target users, including developers, coders, programmers, supper-service providers, etc.
  • Access: When using cloud computing, it is entirely your choice as to which infrastructure you are using for running and developing the applications. With SaaS, this decision rests entirely with the provider – which open-source SaaS platforms are being used.

Why is SaaS Offering a Great Choice for Complex Business Needs?

 In addition to being extremely competitive, the business environment in the present times has become extremely complex as well. There are various stakeholders that are involved in the decision-making process, geographical boundaries are being obliterated, technology is upgrading at a rapid pace, and several other developments are making it extremely challenging for the businesses to maintain their competitive advantage.

This is where enterprise SaaS platforms have emerged as a savior for modern-day businesses by allowing them to leverage the many benefits offered by SaaS. The SaaS business model offers some really interesting advantages for the businesses, such as:

  • Managing software versions: Under SaaS, software versioning is entirely the responsibility of the provider. You just need to apply the updates at your end, and the customers will access an updated version of the software. Bid adieu to costly on-site updates at every customer site.
  • SaaS is scalable: SaaS applications are scalable, i.e., they can be programmed to handle high volumes of data and information in a seamless manner. This enables access to up to date reports for informed decision making.
  • Minimal infrastructure cost: There is no need to invest significant time and resources for upgrading the physical IT infrastructure. With a cloud-based SaaS platform, software installation and updating can be completed in a matter of minutes.
  • Flexible licensing: SaaS-based platforms come with various subscription options. Users have the choice to pay monthly or annual charges for the services. This allows one to ascertain the exact cost of availing the services well in advance.

Benefits of a SaaS Solution

Whether it be a SaaS product for baking or any other industry, there are numerous benefits that the users can avail themselves through this option. Some of the noteworthy benefits of ready-to-use SaaS solutions are listed below:

  • SaaS solutions offer excellent flexibility as the users can access the application from any device at any given point in time. As such, users can access their data and files, even when they are traveling.
  • SaaS solutions enjoy a high degree of transparency. Users are informed well in advance regarding the subscription charges which they need to pay for accessing the application. It allows for the allocation of necessary financial resources for the same.
  • SaaS solutions are pocket-friendly. Users get access to the latest updates and features of an application without incurring any additional cost on infrastructure updates. The ongoing cost of software development is included in the subscription fees.
  • The resources required for SaaS deployment in terms of time and money are much lower as compared to traditional infrastructure. Cloud-based SaaS applications can also be deployed across a wide geographic region simultaneously, enabling big corporations to ensure uniformity in their operation.
  • Users have complete control over SaaS applications. They can add or remove any features or services as and when required. Separate user IDs can be created for different users as per requirement.

Considerations for a Successful Transition to s SaaS model

An increasing number of businesses are transitioning from on-premises software solutions to SaaS applications. If you are also considering joining the bandwagon and aspire for a successful transition to a SaaS-based platform, then here are some considerations that warrant your contemplation:

  • Plan a SaaS strategy: You need to have a proper transition strategy in place when you are migrating to SaaS applications. You must fully understand the implications of the decision on the short-term and long-term prospects of your business. Study the various SaaS strategies available and then choose one which meets your requirements.
  • Understand the implications: Do not opt for SaaS just because everyone else is doing it. Make sure you spend some time understanding the implications of this decision on the short-term and long-term prospects of your business.
  • Manage the costs: While the initial cost of SaaS applications is much lower than traditional applications, this can change soon. As your organization grows and expands quickly, you must have adequate provision of funds for meeting the additional expenses on new subscriptions. Investing in an enterprise SaaS platform and then running out of money for the same will be detrimental for your business.
  • Technical Expertise: As the SaaS applications are usually updated at a rapid pace, your personnel must be able to keep up with the pace. You should therefore make adequate arrangements for training and upskilling of your staff when you are migrating to SaaS.
  • Choose a reliable provider: While outages on SaaS applications happen rarely, when they happen, the provider must be able to address the issue immediately. Go through the service agreement thoroughly before you make a decision.

The excellent potential of SaaS technology platforms is beyond any doubt as the benefits being offered to the users are extremely attractive. You should also contemplate migrating to SaaS applications to leverage these advantages for your business. Though, before making a final decision, weigh all the important factors to avoid any hassles later on.

Why Goal Based Banking is the Future? Part – 3

Like I pointed out in my last blog, for many banks, the journey has already begun, yet it is still in its nascent stages. In the last of my series of blogs on Goal Based Banking, I outline the key steps banks should take to succeed in this journey.

A bank, like any organization, is built up of four components – people, process, technology, and customer. Each of these components will have to undergo a radical change to make sure that banks are truly aligned to the goals of a customer, and do not focus on the transactions alone. To achieve this, banks will have to focus on the following four aspects.

Put the customer at the center

Today’s banks are product-centric. To cater to the unique needs of each customer, banks have a huge number of products and services in their product catalog.  It is not uncommon for banks to have more than a thousand varieties of their products and services listed on their website. These banks are mostly product-driven, and they focus mostly on the benefits of each product. I am sure you would have seen a home mortgage that is catered to working professionals, ladies, retired people, entrepreneurs, government officials, ex-pats, non-resident nationals, couples and so on which highlight the benefits they offer, especially the rate of interests.

To understand the goals of their customers, or ‘why’ any customer makes any transaction, banks should put the customer at the center, and not the products. To put the customer at the center, banks need to understand the customer more and be cognizant of the fact that the needs, aspirations, and goals of a customer will change over his/her lifetime.

While many banks have invested heavily in each product and the analytics associated with it, very few have spent time or money to understand their customers in detail. For example, plenty of banks can derive the lifetime value of a customer, measure each customer’s spending patterns and make personalized offers, but they would also ‘carpet bomb’ the same customer with multiple offers because either they are not able to derive insights from this data or do so in hope of believing that at-least one offer will click. As PwC mentions in their report, ‘few can analyse a customer’s deposit account, see that his salary deposit has increased, and send a note congratulating the customer on his or her promotion together with an offer of a premium card and a higher credit limit.’[1] In short, the banks are not customer-centric. It is an irony while 61% of the banks say that a customer-centric model is especially important, only 17% are prepared for it.[2] And I feel that to become truly goal-driven, banks will have to start focusing on the evolving lives of their customers.

Focus on the processes, not the siloes

A product-centric view and a complex product lifecycle has caused a siloed organization, in which products and departments do not talk to each other. I have personally experienced scenarios in which I had to disconnect my call to customer care because they could not transfer my call from one department to another department. I can quote many instances where my customer care representative was not able to provide me with a 360-degree view of the relationship I have with my bank because the customer care representative was from another ‘department.

This siloed mentality is preventing the banks from being able to bring out their collective power to their customers.

The level of silo mindedness across the banks is at such a level that the different LOBs in banks are run as different businesses altogether. Sometimes, the heads of different units even forget that a collective effort is what it takes to achieve the best result for the customer. Sometimes, the siloes are not between products only. The siloes happen between channels also. For example, the team for the online channel is normally not aligned with the team for direct sales.

Because of this misalignment, there is a huge disconnect across each product line and supporting line. If the bank were a matrix, it would seem that the bank was disconnected at each cell level. This disconnection drives complexity across all the levels and the ultimate impact is felt by the customer.

The cost of a siloed organization is huge. Because of the complexity, decision making is not quick, and innovation happens at a slow pace. There are several instances where organizations had to lose out because of their siloed mentality. For example, in Sony, three different teams had built products that could have successfully replaced Sony’s successful Walkman, but Apple, through its single-minded focus and simplicity walked away with the prize through its iPod.

A customer interacts with his/her bank through multiple products or services, and if the bank does not move out of the siloed mentality, they will not be able to map the interactions across the lifetime of a customer.

Create a customer obsessed culture

The current workforce of the banks is focused on helping a customer process a transaction, not find an answer that leads to their goal. For example, if I call the customer care of the bank asking a query regarding using my debit card for a transaction at an online retailer, the focus of the customer care is right now in helping me solve the transaction. But, would it not be better if the customer care representative understood my purpose of making the transaction and helped me find the best way to make the transaction – even if it meant using the credit card of the same bank (which would mean another silo) or using another mode of payment from another institution. (Ever heard of the story when a Zappos customer care executive recommended a shoe from a competitor because it was better for the customer).

This misalignment happens because customer experience is seen as the accountability of one department and not as the primary responsibility of everyone in the bank.

Banks, to become, truly goal-driven, will have to make sure that customer obsession is part of everyone’s job. The banks will also have to ensure that their people develop a superior customer understanding and a culture of customer obsession along with deep knowledge about the profile of each customer.

Become digital native, not digital-driven

A recent survey by Bain and Research Now shows that while people trust their primary banks and banks in general to handle their money, technology firms like PayPal and Amazon are catching up. But, if we dig deeper, younger customers, who are more tech-savvy, but may or may not be digitally savvy, are willing to buy financial products from tech companies.[3] Along with the big tech giants, a new breed of companies has taken genesis in recent years – fintechs. Fintechs do not satisfy new needs. They just perform to the four basic functions banks have been doing for several years, but they do it faster and in a more cost-effective way and give a greater customer experience.

These technology companies and fin-techs use technology to create a superior customer experience which helps them related to the true purpose of the customer. While there are gaps, companies like Amazon, Google, Facebook are using superior algorithms to understand the purpose of each of my transactions. For example, if I search the prices of a flight from my hometown to Mauritius, then these technology giants, based on my search history and browsing pattern, are quick to understand that I am planning a vacation and hence show ads that are relevant to my needs in the vacation.

What technology companies do is not rocket science. They just use algorithms. Algorithms help turn data into insights. Banks can leverage algorithms along with the latest technologies such as big data analytics, machine learning, artificial intelligence, banks can map distinct data points and transactions to create a better picture of the customer.

Banks also need to become digitally native in their internal operations as well as customer touchpoints to enable each transaction in a digital way. Digitalizing the transactions will surely enable the banks to understand the goal of each transaction in a far better way.

If my bank knows me better, then I am sure it will provide me with a product that is more relevant to me at any point of time, rather than a product that was relevant to me two years ago. If my bank offers me a more relevant product, then I will certainly trust my bank more.

How can banks cater to the above statement? What can they do to understand the purpose of each transaction and deliver personalized goal-based banking to its customers? In my next article, I will list out an action plan that banks can leverage to become truly goal-driven.

I believe that the true purpose of any organization is to cater to the needs of their customers. Banks are no different. Helping their customers achieve their goals should be the one true purpose of every bank. To be true to this purpose, the banks will have to undergo a total transformation – from a customer, process, people, and technology point of view. Banks that cater to the goals of a customer will not only create a better customer experience, but also create an increased market impact, and help build more trust. And only organizations that operate on trust will finish the long race. I am sure that banks will definitely win this long race. So that they can help Mark and Sara achieve their goals.

References

[1] Retail Banking 2020; PwC https://www.pwc.com/gx/en/banking-capital-markets/banking-2020/assets/pwc-retail-banking-2020-evolution-or-revolution.pdf

[2] Retail Banking Strategy 2020; The Financial Brand https://thefinancialbrand.com/56988/retail-banking-strategy-2020/

[3] How Banks Can Defend Against the Threat From Big Tech http://www.bain.com/infographics/bank-loyalty-2017/

Amit Dua

Amit Dua is President and Global Head of Client Facing Group at SunTec Business Solutions. Based in London, he leads Sales, Business Development, Client Engagement, Alliances and Industry Solutions functions for SunTec globally. Amit has over 26 years of experience and brings a proven track record of providing executive level sponsorships to the clients and evolving the business model to partner with banks that are going through business and technology transformations. He has strong experience in identifying, planning and executing on those business strategies and has successfully led the launch of next generation core banking and revenue management solutions in various markets.
Let’s

Why Goal Based Banking is the Future? Part – 2

Why are Banks the Best Equipped to Understand these Goals?

From time immemorial, people have trusted banks for the following – 1) Storing their money safely; 2) Facilitating monetary transactions for their daily life; 3) Helping grow their wealth, and 4) Providing access to an easy credit system when needed.

Over the last few years, like a trusted friend, banks have also added one more dimension to the relationship it shares with its customers – becoming an advisor who will help them meet their financial needs.

The role of the banks in these five dimensions means that the banks are present across an exceptionally large part of their customers’ lives. This also puts the banks in an enviable position – they are aware of what transactions their customers make, more than any technological giant, telecom operator, or retail institution.

Plotting these transactions over a customer’s lifetime can help the banks create a wonderful insight-propelled view of why a customer makes any transaction.

In addition, the banks also have two more facets which make a strong case for them

  1. Banks are the proud owners of tonnes of data that was generated by their customers over several years, most of which are present in their legacy cores – something I will come back to, later;
  2. Banks are a part of the digital payment revolution, which has created a scenario in which banks and other financial institutions can be aware of even the tiniest of transactions.

Hence, banks are better placed than anybody else to understand the true ‘goal’ of each of the transactions that a customer makes.

If banks can leverage this inherent advantage, they will no longer sell products to customers but will participate in their customers’ lives in an invisible, immersive, intuitive, and integrated way to co-create experiences that will facilitate their lives and help them achieve their goals.

Are the Banks Ready to Fully Align themselves to the Goals of an Individual?

Some of the banks around the world are beginning to realize the importance to think beyond transactions and understand the true purpose of each transaction. This can only happen if they are part of their customer’s lives in an invisible, immersive, intuitive, and integrated way.

Let me share two examples to highlight this transformation.

DBS Singapore, a leader in the banking industry, over the last few years, has focused on making sure the banking experience they provide helps their customers focus more on their lives and not on banking.

ICICI, one of the largest banks in India, has understood that owning a home, an aspirational need, especially in a country like India, is the true purpose people buy a home loan.

Most banks have already begun this journey towards goal-based banking. In fact, a simple google search would show you that while banks have really caught up on the world of goal-based banking, the initiatives they are taking are still at a nascent stage.

So, what should the banks do to succeed in this journey? In my next article, I will outline they key actions bank need to take to make sure they are fully aligned to their customers’ goals and aspirations.

Amit Dua

Amit Dua is President and Global Head of Client Facing Group at SunTec Business Solutions. Based in London, he leads Sales, Business Development, Client Engagement, Alliances and Industry Solutions functions for SunTec globally. Amit has over 26 years of experience and brings a proven track record of providing executive level sponsorships to the clients and evolving the business model to partner with banks that are going through business and technology transformations. He has strong experience in identifying, planning and executing on those business strategies and has successfully led the launch of next generation core banking and revenue management solutions in various markets.

Why Goal Based Banking is the Future? Part – 1

A normal human being thinks rationally. The human being’s mind processes more than 50,000 thoughts per day along with a multitude of actions and decisions. Many of these are conscious and some are subconscious. But, all these actions, thoughts, and decisions have something in common – they all lead to a goal.

This fundamental truth – goals drive actions – will be the key to any organization’s success in the future. This will be true for transaction-intensive industries such as banking. Through a series of three blogs, I would like to point out why I think that Goal-Based Banking is the future.

Let us step back and start with the example of Sara. Sara goes for a jog daily and meditates every alternate day because she wants to be healthy. Or let us take Mark. He enrolls in an online full-stack developer course because he wants to get a better job. Being healthy and getting a better job are the goals that drive Sara and Mark to decide and take action. Or in other words, these actions, thoughts, or decisions form the building blocks for their goals.

The banking industry, with a rich history of more than twelve thousand years, is no different. Just like these actions and thoughts, billions of transactions form the foundation for the banking industry. In fact, a study by Capgemini and BNP Paribas points out that more than 500 billion monetary transactions are made every year. This means that more than a whopping one billion transactions are processed per day, many of them not even digitally.

The Story of a Transaction

The transaction, in common parlance, is an act of buying or selling. Each transaction has a unique story to tell. Parameters like the value of transaction, place and time of the transaction, the point of sales at which the transaction was made, the items and/or services purchased, the mode of transaction – all come together to tell the story of the transaction in detail. While each transaction in isolation will provide a wealth of information – there is a lot more to the transaction than what meets the common eye!

Customers perform each transaction to achieve a goal. Just like jogging and studying, the acts of buying a mortgage or swiping a card at an outlet are done with a goal in mind.

Let us go back to Mark and Sara. Sara takes a home mortgage, not because she aspires to take a house loan, but because she aspired for a home. Owning a home is probably one of her lifetime goals. Mark uses his card to buy a laptop, not because he wants a laptop, but because he aspires for a better job, and the laptop will help him achieve that goal.

An individual can have many goals – Owning a house, providing a good education for one’s kids, experiencing the joy of a vacation every year, ensuring a worry-free retired life, buying a dream car.

These goals are the customer’s ‘aspirations’ which drive her/him forward and the transactions that each customer does are because of these goals. The transactions are ‘what’ customers do to achieve their goals. Just like Simon Sinek says in his book “Start with Why”, it is not the “what” motivates us to jump out of bed and do something, it is the “why” that leads us forward.

If each transaction is put in the perspective of these goals, then the transaction will hold greater meaning.

It is a matter of fact that most of these transactions involve a medium of exchange in lieu of the products bought, or services availed and this medium of exchange in most cases happens to be money. No one understands the business of money more than banks. If you take a moment and think, the presence of a financial institution in most of our transactions cannot be avoided. Hence, I believe that banks are the best equipped to understand these goals and act upon them.

In my next blog, I will outline in detail why I believe that the banks are best equipped to understand these goals and how they can become invisible, immersive, intuitive, and an integrated part of their customers’ lives.

Amit Dua

Amit Dua is President and Global Head of Client Facing Group at SunTec Business Solutions. Based in London, he leads Sales, Business Development, Client Engagement, Alliances and Industry Solutions functions for SunTec globally. Amit has over 26 years of experience and brings a proven track record of providing executive level sponsorships to the clients and evolving the business model to partner with banks that are going through business and technology transformations. He has strong experience in identifying, planning and executing on those business strategies and has successfully led the launch of next generation core banking and revenue management solutions in various markets.

Three simple steps to modernise legacy banking systems

The advent of technologies such as artificial intelligence (AI), machine learning and the internet of things (IoT) have transformed the way in which the world operates. Customers now demand personalised experiences and firms that haven’t digitised their businesses must transform in order to compete in this new world. One industry which has found it more difficult to adapt is banking, as many banks are saddled with rigid and core legacy application systems.  Large banks and financial institutions continue to remain slow to adopt these emerging technologies which is preventing them from delivering an optimal customer experience, driving growth and keeping themselves relevant in a dynamic market.

Banks must modernise their legacy banking systems in order to compete in this evolving marketplace.  A strategy that can help banks modernise their operation is adopting a modular approach to enable an easier digital transformation. While there are many options to modernise core banking systems, success will be elusive unless the legacy infrastructure is broken down into smaller manageable logical parts. This three-step approach focuses on simplifying the core from the outside-in:

Step One: Examine and detail high-velocity customer journeys: Banks should start by listing out all customer journeys that have high velocity interactions with customers. Detail the journey from start to finish through all impacting applications. They should then evaluate the journey in terms of value it delivers to customers, revenue it generates for the bank, level of complexity within the middle and back office and the risk involved. This helps get the scope defined and rated based on the dimensions.

Step Two: Identify what part of these chosen journeys can be moved from the back-office to the reimagined “middle-” (digital) office: For each journey, identify the business logic that needs to move from the back office to the new enterprise middle layer; the digital core. Analyse and evaluate the change in the legacy core for the business logic simplification/hollow out. As a final stage, deliver the scope backlog by looking at the journey, the risk and revenue.

Step Three: Pilot these middle-office operations to select journeys and pilot within a smaller group before rollout: The pilot can be rolled out to internal bank users or a limited set of customers identified to help fine tune through the launch and the change.  Certain complex back office logic which may be far too tightly integrated can be de-risked by identifying workarounds.

This modular approach allows banks to execute the fundamental steps of core architecture modernisation in a seamless manner, without any unexpected surprises along the way. It uses an intermediary layer to provide the required connectivity, and scale successfully to integrate systems and applications across the enterprise using existing core platforms. The result is the ability to simplify and modernise processes by enabling rapid, continuous change without impacting routine operations.

Benefits of a modular approach

Segmenting applications to drive personalisation is one benefit of a modular approach as banks need deeper insights into the impact of various applications aligned to different stakeholders in order to transform their core systems and become truly digital. In fact the feedback from leading banks that have adopted an intelligent middle layer such as Xelerate Digital core, has been largely positive with the bank being able to dissociate the customer experience from the system of records. These banks were successfully able to move from a manufacturing architecture to an assembly architecture with the ability to quickly adopt new technologies, add more functionality and capabilities, offer customised products and enhance the customer experience.

It works by helping banks segment their applications landscape and by acting as an intelligent middle office that integrates core back office systems with customer interfaces and external partner ecosystems.  The result is centralised information on products, services and pricing across segments and business offerings.  When coupled with real-time analytical capabilities, the middle layer enables banks to analyse every customer instantly by synching historical customer data with current patterns to create truly personalised offerings.

Risk mitigation and change management are another benefit. The middle layer allows banks to gradually replace the legacy core system in a phased manner, decoupling engagement channels from systems that store data and records.  This keeps the data and key information secure and central, driving increased business agility, and reducing risks associated with core technology transformation.

Revamping core back office systems requires intelligence to interface with new-age front-end applications.  The digital middle layer uses built-in intelligence to orchestrate business logic, workflows and processes across multiple systems to drive superior value through increased customer wallet share, as well as to help phase out complexities of legacy core systems.

Creating an agile and customer-centric bank for the digital age

Deploying a modular and flexible middle layer that acts as the digital core helps create a truly open ecosystem that fosters collaboration and innovation, without the cost or challenges of completely modernising the core. The transformative intermediary layer ensures that the core platform remains strong and resilient, while handling the connectivity and processing required of an intelligent and responsive organisation. The outcome: banks can easily transition from being a ‘financial services provider’ to true customer owners for sustained growth and success.

This article was originally published in ITProPortal, Read More – https://www.itproportal.com/features/three-simple-steps-to-modernise-legacy-banking-systems/