Since the advent of the internet, banking has seen a great amount of change driven by technology. The pace of change quickened after the introduction of the smartphone. The last ten years have brought much more than just mobile banking. Technology changes aided by what was called Web 2.0 capabilities, mobile technology, improved machine learning, and AI, cloud computing, internet connected devices (IoT), and cryptocurrency have resulted in a revolution centered around new customer experiences. The rise of a new breed of tech companies such as Google, Facebook, Amazon, and Apple, has driven customer expectations sky-high for intuitive and personalized experiences.
In large part, banks have responded to these changes by adding more and more technology driven by specific use cases. The smartphone resulted in adding a new modality called mobile banking to complement online banking. As customers began expecting more experiences available through their mobile devices, banks deployed mobile-enabled websites with parallel capabilities available on mobile browsers and computer browsers. Banks deployed separate account application systems by customer segments and products. Deploying parallel use cases resulted in disparate experiences across customer segments, products, and channels.
In the past couple of years, there has been talk about the “platformication” of banking. This term refers to a move towards making financial services platforms that not only serve customers with the bank’s own products and services but extend to services from other providers. However, banks cannot become a platform if their technology environment hasn’t embraced platforms. This, I believe, should be the first step towards platformication.
“As we start thinking about platforms, or wide, cross-enterprise capabilities, we see more and more opportunities”
The age of siloed single case solutions brought separate systems for basic banking activities like identification and authentication, fraud, underwriting, account opening, digital interactions, and many more. The resulting spaghetti of systems behind the curtain requires untangling. Banks are looking to replace redundant systems with platforms that can perform activities across segments, products, channels, etc. One of the first platforms deployed in large-scale is digital banking, replacing online and mobile banking with a single platform. That is a single step towards a digital interaction platform that can also replace a website’s content management system, as well as banker interaction platforms.
As we start thinking about platforms, or wide, cross-enterprise capabilities, we see more and more opportunities. Take for example, underwriting systems. Why can’t we just have one underwriting platform that is leveraged for all use cases? While underwriting an auto loan is significantly different than a commercial loan, the basic steps are the same. Can we deploy a system that can be flexible enough to add more complexity as we move up market? The list of candidates keeps growing as we untangle our systems and those we have purchased from bank technology companies.
There are many challenges ahead. Two of the more difficult ones are the deployment approach and how the banks or their vendors have architected their systems. In the former case, we don’t need to replace all systems at once. We can move a platform to a single use, but always think about extending it to the next use, and so on, instead of standing up a single solution for every case all at once. The latter is more difficult. Some of the capabilities that could cut across use cases are “hard-coded” into a single-use system.
An example is identification and authentication. Banks have deployed digital banking, mortgage portals, wealth management portals, cash management portals, all of which have their own schemes to identify and authenticate customers. As banks look at deploying a single approach to managing identifications, they are saddled with the problem that their existing systems don’t accept a “third-party” solution. The continued adoption of APIs to make integrations easier should address this problem.
While banks continue to focus on improving the customers’ experience in all areas, cleaning up the underlying mess of systems that support those customer experiences is a difficult task. Banks that approach this challenge in the near-term will be in a better position to support coming new customer modalities.