Modernizing Banking Technology Through “Composability”
- Modernizing tech presents a formidable challenge
- Sheer volume is a primary obstacle
- Many FIs face the issue by relying on outdated legacy technology
In a recent discussion with BAI.org, Carlos Lopez, Strategic Initiatives Analyst at Jack Henry addresses the challenges financial institutions face when it comes to modernizing their technologies. As we all know, FIs are prioritizing the ability to harness the power of the data within their systems -- described as the "lifeblood of a financial services organization."
As noted by Mr. Lopez:
The sheer volume of data that financial institutions are collecting now is much larger than it's ever been. And that requires developing and evolving a data strategy: How are we collecting data? How are we managing our data? How are we cleaning it?
However, even though FIs possess this vast amount of data, there are still concerns regarding how the data is being collected, its quality, and how the data is being managed.
Achieving Technology Goals Through "Composability"
There are myriad benefits for FIs that efficiently manage their data stacks, including:
- Greater personalization
- Better fraud mitigation
- More targeted loan offers
- More precise cash-flow forecasting for clients
Unfortunately, many FIs are facing the issue by relying on outdated legacy systems. To overcome this, Mr. Lopez proposes the principle of "composability" -- the ability to combine different technology modules to create more flexible, scalable systems.
With these next-generation core platforms, it's no longer necessary to rip and replace your entire core system at once. You have modules for each function, such as a module for payments, a module for lending and a module for wire activities. The payoff is that it allows you to adapt quickly with the pace of innovation. It improves speed to market. And there's less risk because if you put in one additional module and something breaks, you can roll back that one module instead of an entire system to figure out what went wrong.
This approach is certainly one that we see more and more within the banking industry. Core platforms, service bureaus, fraud detection platforms, and many others are evolving their systems to be composable, allowing a plug-and-play strategy. FIs are able to take advantage of the latest innovations and technologies -- like AI and machine learning -- to perform analysis of vast amounts of data and automate processes as required in check processing.
Additionally, there is greater appeal for a new generation of account holders -- as FIs can incorporate these technologies to offer the digital options they are looking for.
FIs are now empowered to easily transition from legacy systems, create more data, and harnessing the data to modernize their operations.