Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- BFSI firms should move away from point-to-point integrations and adopt composable systems to become more agile and emerge winners amid increasing competition.
- By enabling assembly and reassembly of packaged business capabilities, composable systems facilitate the creation of customer-centric offerings.
- With composable systems, BFSI firms can launch a range of embedded products and services through an ecosystem of cross-industry partners, paving the way for transformative growth.
Why composability matters
Composable systems infuse agility in business operations while ensuring superior service delivery and customer experience.
The 2022 Gartner® CIO and Technology Executive Survey* found that only 7% of banks and investment firms were following the practices of a highly composable organization. So, why should organizations care and why is composability becoming important for their future growth?
Banking, financial services, and insurance (BFSI) firms are democratizing financial inclusion across both formal and informal sections of the society. This is also improving access and affordability of digital solutions across industries such as healthcare, insurance, ecommerce, travel, and capital markets. BFSI firms are, however, navigating a very challenging market dynamic. At one end, they face competition from fintechs and insurtechs, while on the other, non-financial entities across retail, electric mobility, and ecommerce are slowly targeting their customer base.
To spur agile innovation, respond quickly to changing market demands, and mitigate threats to their business models, BFSI firms should reimagine monolithic technology architectures and move away from point-to-point integrations. This is where composable systems have a key role to play in not just reimagining the technology architectures and enhancing customer experience, but also orchestrating an ecosystem.
Breaking it down
To understand composability, look the Lego way.
Composable systems enable the assembly and reassembly of packaged business capabilities, which work as fully functional Lego-like blocks. From a technology perspective, the characteristics of a composable digital core include:
- A microservices architecture to enable modularity, flexibility, and fault-tolerance
- Cloud-native applications to facilitate resilience and scalability
- An API-first approach for seamless sharing of real-time data across organizations
- Headless framework including low code, no code platform that decouple front-end presentation from back-end logic
- In-built domain intelligence that provides contextual relevance and predictive insights
Proving the concept
Composability can be enabled across multiple layers, including infrastructure, data, enterprise, front-end and business applications.
Let us look at a few examples where the BFSI industry creates interchangeable building blocks that can be leveraged across an extended ecosystem.
Banks and financial services firms are adopting open banking to improve market penetration and ensure their offerings reach the unbanked population. Buy now pay later, integrated payment gateways, real- time payments, credit scoring for loan approvals, and request to pay are all examples of composable applications that have been possible because of a modernized digital core. Banks and financial institutions are keen that these innovations get repurposed by other industries. The ecosystem is reusing these pre-verified integrations to provide frictionless experience to end users.
The insurance industry is looking to expand its coverage to underrepresented segments like gig workers and blue-collared workers. They also want to personalize their products and expand their customer reach through other industries. Innovative concepts like embedded insurance, micro-insurance, and pay-as-you-go models leverage composability-first principles. While these can be offered by an insurance provider, they can also be easily bundled by a travel, retail, or ecommerce firm through enterprise APIs, and distributed to a larger customer base.
Healthcare is on its way to becoming personalized and seamless because preventive care, financing options, and remote home care, all will work in tandem through shared digital platforms and open APIs. Adopting and integrating composable APIs from BFSI products into healthcare processes will ensure greater innovation in the ecosystem, empowering healthcare professionals to make focused assessments, enable affordable payment options, and accelerate treatment decisions at the point of care.
Ecommerce and retail players are making the best use of BFSI composable applications at scale. Be it buy now pay later, extended warranties, real-time payments from financial services or embedded insurance, they are providing services in an integrated value chain to the end consumer. Banks and financial services firms are keen to ease the flow of working capital or lending across B2B ecommerce supply chains, and composability will allow them to make these processes more ordered and seamless.
Travel and transportation companies are becoming travel plus experience organizations. They can utilize some of the innovative composable APIs from BFSI enterprises to offer embedded insurance, multiple financing options, personalized shopping experiences at airports, and even orchestrate live events for travellers.
Exciting times ahead
Composable systems will facilitate the creation of purpose-led ecosystems and customer-centric offerings.
While BFSI firms are providing composable building blocks for other industries, they are embracing plug-and-play capabilities for their own offerings. They are, for instance, using existing building blocks for account verification, text banking, push notifications, biometric identity authentication, and compliance risk. They can choose to create these building blocks in-house, leverage specific ones from partner APIs, or substantially reduce the time to market by taking advantage of an established industry product.
Using composable systems, BFSI firms can launch a range of embedded products and services through an ecosystem of cross-industry partners, paving the way for transformative growth.
*Gartner, The Top Strategic Technology Trends in Banking and Investment Services for 2022, Nicole Sturgill, Moutusi Sau, 29 April 2022
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