Global banking in the digital age
Global banking is being disrupted from many angles. The COVID-19 pandemic has produced a profound change in consumer habits, fueling the growth of digital banking. For many banks, the legacy technology that once drove business success now inhibits progress due to a lack of flexibility and scalability.
Banks are also are facing challenges around loyalty and a disjointed experience across channels. Other external factors are contributing to these challenges, including the widespread adoption of mobile services, new digital native market entrants, consumer demands for personalization, and critical industry requirements around compliance and regulations.
In the meantime, digital challengers are forging ahead, with the ability to innovate and scale as necessary. Incumbent banks have responded to the new market dynamics in three different ways, with varying degrees of success:
- Build a new digital core. This “rip and replace” option is risky, expensive, and increasingly viewed as old fashioned.
- Build on a greenfield site. Many banks have built digital banks from scratch with the intention of migrating the entire operation in due course. While this does have several advantages including agility of deployment, in the long term it is likely legacy platforms will need re-factoring investments.
- A progressive modernization. This option is quickly gaining popularity as a practical solution. It allows banks to harness the flexibility of modern technologies, including cloud, to pursue a progressive modernization, driven by specific business needs. It also mitigates risk and aligns costs with business success.
In this blog post we describe how GFT supports the third approach using BankLiteX, a modular, end-to-end solution that enables firms to create and deploy a cloud-based digital banking entity. BankLiteX, which runs on AWS, was developed by GFT in collaboration with Thought Machine, an AWS Technology Partner that accelerates the digital transformation of banking platforms by providing a market-ready cloud native deployment of its next gen core banking platform, Vault.
With BankLiteX, GFT has harnessed the power of AWS technologies and Thought Machine’s Vault to build a world-class banking platform for the digital age. BankLiteX offers a framework built on well-architected best practices validated by AWS to deliver functionality through modular ‘blocks’ that accelerate development, testing, and deployment by 40%.
Challenges of digitalization
Digitalization is a major challenge that touches every part of the bank, from core processing to the customer experience. A truly digital bank must be data-driven and offer a digital end-to-end experience. Digital bank transformation is a major undertaking but doing nothing is not a viable option. There are many drivers of bank transformation, none of which can be considered in isolation:
High cost of change. Ongoing maintenance and the high costs and risks of implementing changes on mainframes becomes unsustainable. About two thirds of a bank’s IT budget is consumed running the bank, and time to market for new products is often too long.
Competitive pressure. Newer competitors are unencumbered by legacy technology and benefit from a lower cost structure, modern technology architectures, and greater agility. These challengers directly disrupt traditional business models by offering rapid account setup, no fees, no fines, and financial planning tools at no additional cost. These banks combine a digital-first approach to banking and state-of-the-art business processing.
Customer expectations. Online retailers and e-commerce providers have increased customer expectations and put the customer at the heart of everything. As a result, customers in all industries expect an engaging, personalised experience that is omnichannel, dynamic, and helpful. With these high expectations, customers are intolerant of cumbersome, outdated apps.
Multichannel management. Managing a multichannel approach requires the harmonization of both management technology (databases, analytics, Customer Data Platform (CDP), Customer Relation Management (CRM) platforms, and others) and operational technology (campaigns, messaging, decision management, orchestration). Banks need to mine data from these systems to segment the market and create targeted campaigns with personalized content to be delivered to the customer’s preferred channel.
Changing local regulations. A wave of regulations, such as PSD2 (open banking regulation) and CECL (current expected credit loss) dictate that banking should become more open, competitive, and better prepared to manage risk. In reality, open banking is bringing financial services into line with other industries by harnessing the power of open application program interfaces (APIs) to boost innovation and facilitate collaboration. Traditional mainframes are not suited to the rapidly changing local regulations of this era. To succeed in this environment, technology must also be open.
BankLiteX is GFT’s response to these new market dynamics. Designed to appeal equally to start-ups and incumbent banks wishing to modernize, it offers a roadmap to digital banking success based on proven methods and modern technologies.
What is BankLiteX?
BankLiteX empowers you to deploy a cloud-based digital bank quickly and at minimal risk. BankLiteX is a fully modular system designed around Vault. In practice, it offers a simple and effective solution to many of the challenges explained in the previous section.
Designed as a building-block architecture with pluggable components, BankLiteX is hosted entirely on AWS infrastructure. This enables any bank to create modern, highly flexible end-to-end solutions by delivering capabilities to support a multiple-entity, multi-brand, and multi-currency strategy. The following diagrams show a sample high-level architecture of a digital Bank as a Service built on Vault and the BankLite X modular building blocks.
BankLiteX architecture on AWS
AWS offers access to a world-class infrastructure with zero capital outlay or commitment. We believe there is no easier, quicker, or cost-effective way to launch a digital bank than on a real-time infrastructure that is always available. In addition, cloud economics can lead to a reduction in TCO by around 27%.
BankliteX leverages the power and capabilities of the AWS cloud as it is fully developed with AWS Well Architected best practices. This enables the platform to operate in a secure, reliable, and efficient manner on the AWS cloud. BankliteX is built to operate on the AWS landing zone and meets the security, compliance, and governance requirements expected by regional regulators for financial services. It brings forth the banking SaaS tenets of Thought Machine with the security, reliability, performance efficiency, cost optimization, and operational excellence of AWS infrastructure and services.
BankliteX is built with AWS serverless services, which makes it highly performant and cost effective for customers. The platform’s development on AWS Fargate and Amazon Elastic Container Service (ECS) enables the scalability and elasticity of the compute center of the BankliteX core, which eliminates the need for server provisioning and manages overhead and improves security through application isolation at the architecture design. Customers experience seamless and secure integration with Thought Machine configured with Amazon Virtual Private Cloud (VPC) and NAT Gateway.
AWS AppSync is positioned to improve system performance by automatically scaling the GraphQL API execution engine up or down to meet API request volumes and enable front-end developers to query multiple databases, microservices, and APIs with a single GraphQL endpoint.
Amazon Simple Storage Service (Amazon S3) and Amazon Cloudfront help BankliteX customers host static websites without any need of additional webservers. Amazon S3 also provides 99.9% of data durability of objects over a given year to help customers scale archiving and log management to regulatory and organizational needs.
To support business continuity and resiliency in banking operations, Amazon Cloudwatch and AWS Cloudtrail enable engineering teams to have better control over their applications. Faster debugging, efficient tracing, and quick issues mitigation make BankliteX a preferred choice among competitors.
Finally, BankliteX is fully automated and secure with DevSecOps leveraging AWS Cloudformation, GitLab, and Bazel. These services integrate security validation within infrastructure and application CI/ CD deployment pipelines, which improves organizational agility and enriches features, testing, deployment, and scaling.
The following diagram illustrates the BankLiteX architecture built on AWS.
How Vault works
Formerly the system of record for managing all bank accounts and transactions, in the digital age, much more is expected of the core, including real-time, 24/7 access, support for a growing number of channels and devices, and the ability to ingest and export data securely to meet banking requirements. Thought Machine’s Vault is a direct response to these challenges. It is a cloud-native core build for the digital age, suitable for digital greenfield banks, new products in existing banks, and bank modernization through progressive migration to Vault. Vault offers a roadmap to bank success, based on the cloud. Advantages include:
Security — All data is encrypted at rest and in transit. Vault offers the highest levels of security available, and all customer data is ring fenced with a sophisticated permission system to prevent unauthorized access.
Scalability — Vault can be used with a bank of any size and is equally suited to a startup or incumbent bank. It can be easily scaled and can process tens of thousands of transactions per second.
Costs — Using the cloud means a bank only pays for the hardware it uses. Vault also offers a gateway to highly automated DevOps environment, so all upgrades and testing can be automated. As well as reducing runs costs, Vault reduces the cost of change and enables new products to be launched easily.
Flexibility — Vault is designed to run any type of bank with an unlimited product portfolio. Capable of running the most complex products, it does not impose any restrictions on the operating model of the bank.
High availability — From the outset, Vault has been designed to run as an always-on banking platform. It runs across multiple data centers and will never suffer outages. All upgrades are performed with the system running, so there is no need for any downtime.
BankLiteX, Thought Machine and AWS provide the building blocks of a bank with 40% more development productivity in half the time of almost any other option. You can set up a new bank in as little time as three months then add new functionality as required.
In practice BankLiteX empowers you to build the bank of the future. Today.
Why customers are adopting solutions like BankLiteX
BankLiteX is built on four foundational pillars of banking success. Each of these pillars reflects the flexibility, scale, and economics of AWS relative to on-premises solutions:
- 3x faster time to market — From the beginning, BankLiteX adopts state-of-the art business processes to maintain end-to-end continuity and data integrity.BankLiteX is founded on open APIs, so new components and functionality can be added quickly and easily.
- 40% lower development costs — BankLiteX can be deployed in three to six months from production to launch. With its open architecture, new components and products can be ready to deploy in just days or weeks.
- Greater resilience, lower latency, and integrated security for risk mitigation — With its predefined operating model, BankLiteX reduces the risk of change. All core functionality and third-party integration resides on the same cloud infrastructure.
- Higher productivity and new revenue streams through the platform effect –In the age of open banking regulation, banks must be open to new operating and business models. As a cloud-native, microservices platform, BankLiteX empowers a bank to focus on what is does best and turn these into compelling customer propositions, offered in context.
Streamlining a path to success with Cloud
Beyond the immediate benefits of BankLiteX, we see banks achieve numerous benefits from operating in the cloud, including the following:
- New ways of working. Working with the cloud provides a shortcut to Agile best practice methods and a DevOps/microservices culture so your bank can become more nimble.
- Become data driven. Cloud is the only practical way to delivery customer-centric, data-driven banking. You can harness the power of artificial intelligence (AI), machine learning (ML), and advanced analytics to facilitate hyper-personalised banking.
- Boost developer productivity. Free from infrastructure, engineers can focus on the customer experience. There is no need for surplus development capacity.
- Unlimited business agility. With AWS, you can deploy at an unprecedented pace in a new era of build, test, and deploy. The combination of BankLiteX and AWS frees you to focus on the customer experience.
In this post, we described how banks who are looking to support progressive modernization can utilize BankLiteX, a modular, end-to-end solution, to create and deploy a cloud-based digital banking entity. We discussed how BankLiteX, GFT, Thought Machine running on AWS provide the building blocks of a bank with 40% more development productivity in half the time of almost any other option. You can set up a new bank in as little time as three months then add new functionality as required.
Visit www.gft.com/BankLiteX to request a demo to experience first-hand what BankLiteX can do for your organization.