Francois Zimmermann

Building a Digital Innovation Platform for Bimodal Banking (part 1)

Blog Post created by Francois Zimmermann on Jul 22, 2017

Traditional-vs-Contemporary-Banking-Image-HighRes-a5.jpeg

I've recently moved from Horizontal Platforms to Vertical Solutions and I feel it might be a good time to revisit one of my old posts (Can we please stop telling Digital Enterprises to “act like a startup”?) and look at how this applies to one of my core customer segments: Retail banking.  Specifically, let's look at how their business differs from the Fintech startups and how to apply the three Digital Innovation practices (Infrastructure Modernization, Digital Workplace and Business Insight):

 

Practice 1: Infrastructure Modernization - "How can I run my apps more efficiently and deliver innovation faster?"

Retail banking needs to provide a full portfolio of services to its customers and not all of these are profitable.  By comparison, Fintech startups can choose to offer just the profitable services (e.g. Payments).  In order to stay in business these banks are forced to think about their applications in two categories:

  • Run the Bank (Core Banking systems and Mode 1) - These systems are important to the bank's reputation and their customer's experience but the services that run on them are not highly differentiated or very profitable.  These apps are often scale-up, fragile and changes are tightly controlled.  Core IT looks for opportunities to reduce costs by improving efficiency while still ensuring service levels are maintained.
  • Change the Bank (Digital Banking and Mode 2) - This is where LOBs focus their incremental investments.  These systems are focused on delivering new digital experiences to customers that will help the bank compete with the Fintech startups.  The focus here is on innovation and speed of time to market and the apps that run here are designed using modern scale-out web-ready methodologies.  These systems are resilient, auto-scaling and secure by design as they need to be able to face off to an unpredictable set of end user devices, third party providers and external threats.

There are good reasons to ensure strong isolation between these two parts of the bank.  The legacy systems are just not designed for the unpredictable workloads and volume of read/query activity associated with digital banking.  Mode One workloads are typically protected by perimeter security whereas Mode 2 workloads face off to a variety of end user devices, third party systems and external threats - the digital systems will therefore implement micro-segmentation and a variety of techniques to guard against DDOS, for example.

 

But there is another element that is often missed when rethinking the platform to support Bimodal Banking: the Data Integration layer.  Both of these sides of the bank still need to fit into a joined up multi-channel strategy and provide a seamless experience to the customer.  Both sides of the bank will form part of the customer 360 / KYC picture that the bank needs to implement.  Furthermore, the data in Mode 1 systems is often fragmented and these systems need to be insulated from unpredictable workloads and threats and so Mode 2 systems will typically implement a separate caching layer or operational data store.  The Data Bridge between Mode 1 and Mode 2 systems is therefore a key success criteria that will determine how rapidly the bank can deliver new experiences to their customer base.  We therefore see this as a key part of the Digital Innovation Platform.

 

...In the next part of this blog I will look at the next two practices: Digital Workplace and Business Insight

Outcomes