Pillar 4 of the Customer OS – Modular Banking

A new raft of digital capabilities is driving ever more sophisticated sales and service experiences. Modern front ends, intuitive customer journeys, surprising products and services – all are there for the taking. Fast-moving fintechs and agile big techs are wasting no time in using these capabilities to differentiate themselves, and as part of this, have turned traditional banking on its head.

It’s all possible

It really is all possible, but such dynamic creativity requires a pretty malleable back end. Supporting systems and architecture must be able to handle all of this dynamism. Legacy coding and monolithic central banking systems are just not designed for all of this. In fact most banks are busy pumping resources into maintaining the status quo. Rather than dreaming up new digital offerings, they are grappling with reams of spaghetti code and pouring resources into system maintenance. Keeping it all running is tricky enough, but constantly changing features or functionality to keep pace with changing customer demands – that is often a bridge too far.

Think Lego not legacy

The problem here is that banks are missing out on one of the most crucial building blocks of a strong, future-proof Customer OS – the ability to move fast. The inflexibility of the existing architecture means they are sorely lacking the agility they need to compete. Simply throwing out the old and bringing in the new is not an option, but the good news is that’s not necessary. It’s still possible to win with digital, by bringing in a digital orchestration platform and thinking Lego rather than legacy.

When a company like Google wants to introduce new features for its customers, huge deployment efforts are not needed. They simply pick from a selection of Lego-style building blocks to create and alter processes, products or channels as needed. They can do this because they have a flexible, modular architecture in place. Incremental changes are easily made, by small business teams, with minimal impact on the business. Component-based system design allows the same modules to be shared across processes using standardized exchange principles. Modules are created once, reused and infinitely combined, creating a fluid structure that can be used to respond to the latest customer demands.

Banks have started to decouple the bank end from the front end, which is a step in the right direction. In a digital competitive environment however, they need an architecture that makes them agile enough to track customer needs, respond quickly, and change on a whim.

Agile processes

Customers don’t want to travel to a bank branch, or fill in a collection of forms, yet they are often forced to. Employees should not have to enter and re-enter data, but they still do. There is actually no need for any of this, it can all be automated. Dynamic case management uses smart technologies to assist human operatives by speedily handling the intricacies of each customer case. Dynamic forms can be used and reused to consistently deliver relevant, common sense customer journeys, via any channel. Process digitization, working in tandem with technologies like Blockchain gets everything done on-screen, in real time. This has an incredible impact – mortgage applicants can, for example, get approval within days, rather than weeks.

Agile production and distribution

The Googles and Facebooks of this world frequently introduce clever new features, quickly and at almost zero marginal cost. It’s all low risk, so they roll out new offerings, then scale up or down instantly. The impact this has had on their competitive advantage is already clear. It’s not only about new features either, distribution channels can also be adapted, deleted or added as the market demands.

From fixed costs to variable costs

Modular architecture and the agility it brings impacts on costs too, in a positive way. It’s cheaper to work off a modular architecture. The fixed costs associated with traditional production and distribution formats become replaced with the lower variable costs of streamlined, digital-ready channels. Resources are then freed for continuous improvement and added value. Banks can then focus on what matters to customers, save money, and boost revenues.

Modular banking is essentially ground zero in a digital area. It is, without doubt, a crucial factor in any efforts to create a future-proof Customer OS.