Rethinking modern banking – A focus on platform transformation
The transformation of banking platforms is crucial for banks to meet current and future challenges in the financial sector. In 2023, we have already examined the further development of core banking systems together with Swisscom (Popp, 2023). Concerns were raised regarding the flexibility, openness, and technological relevance of existing systems (Popp, 2023). We identified three main components of further development:
- Openness and modularity: Enables the integration of new technologies and services.
- Cost reduction and usage-based pricing: Ensures more efficient cost structures.
- Real-time data processing and continuous availability: Meets modern customers’ expectations for fast and uninterrupted services.
The modernization of banking platforms is therefore essential in order to remain competitive, optimally serve customer needs and meet regulatory requirements. Banks are therefore demanding APIs for the effective integration of solutions, flexibility for the integration and time-to-market for the introduction of new banking services, cloud compatibility, and banking-as-a-service (Popp, 2023).
CBS and banking platform providers must therefore respond proactively to these requirements in order to secure their market position.
In today’s article, we therefore look at the main components of such a high-level platform architecture and define concrete design implications. The individual components of the platform can be described as follows:
- Digital and traditional banking channels: A seamless customer experience across branches, digital banking platforms, and embedded banking solutions.
- Service orchestration and API management: A central API gateway enables standardized integration of internal and external services while compliance, security, and governance aspects are managed through dedicated layers.
- Data and analytics services: A modern data management infrastructure, complemented by real-time data streaming and analytics services, forms the foundation for data-driven business models.
- Core banking and financial services: Core banking is at the heart of financial processes, ensuring reliable transaction processing, lending, and account management. By decoupling and modularizing financial services, banks can efficiently outsource specialized functions and flexibly extend them via API-based interfaces.
- Developer ecosystem and operations platform: A developer portal and a flexible runtime environment facilitate agile development of new features, while monitoring, audit, and release management processes ensure operational stability.
- Scalable infrastructure: A hybrid, cloud-capable infrastructure enables resource-efficient scaling and resilient IT operating models.
Design Principles for Transformation
- Comprehensive process coverage and flexibility: The platform covers all essential banking processes, including complex cases such as mortgage ranking, and allows the integration of financial and non-financial services to create new ecosystems through modular solutions.
- Two-tier IT architecture and high availability: A stable core banking platform is complemented by flexible front-end solutions that offer individual user interfaces or “headless” approaches to support agile product development. Active-active installations ensure uninterrupted 24/7 operations, which are essential for instant payments and other time-critical applications.
- Dynamic product and data management: No-code tools enable the rapid development of new digital products, while real-time analytics on customer behavior drive iterative product improvements.
- Open interfaces and integration of external services: Open APIs allow the platform to seamlessly interact with third parties and FinTechs, providing personalized real-time financial services. Features such as data lifecycle management and operational data stores enable data archiving, analysis, and targeted deletion in compliance with data protection regulations.
- Use of AI and blockchain for innovative solutions: Artificial intelligence enhances both customer service and back-office processes such as credit scoring and fraud detection, while blockchain technology ensures secure and transparent contract execution and the management of cryptocurrencies and central bank digital currencies.
- User-centric interfaces and tenant management: Specific dashboards for different roles simplify task execution, while secure separation and management of tenant data ensure data protection.
- Automation and process optimization: Technologies such as robotic process automation, workflow management, and AI enhance efficiency by automating repetitive tasks and enabling rapid adaptation to changing business requirements.
- Security, data protection, and regulatory compliance: “Privacy by Design,” “Security by Design,” and Zero-Trust approaches safeguard customer data while ensuring that the platform meets all relevant regulatory requirements. The combination of development, operations, and security management (DevSecOps) ensures rapid, secure releases and stable operational processes on demand.
- Scalable and interoperable system architecture: The platform dynamically adapts to growing user numbers and data volumes, ensuring compatibility with various technologies and existing IT infrastructures.
- Sustainability and flexible deployment: Energy-efficient technologies minimize the ecological footprint, while the platform can be operated cloud-agnostically on leading cloud providers to maximize flexibility and cost efficiency.
Conclusion
The transformation of banking platforms and core banking systems is not just a technological necessity for banks but a strategic step to meet the challenges of the modern financial sector. By implementing open, modular, and scalable architectures, banks can enhance their competitiveness, better fulfill customer needs, and more efficiently comply with regulatory requirements. It is essential that both banks and core banking system providers proactively collaborate to successfully drive this transformation and secure the future of banking sustainably.
Sources
Popp. C. (2023) Weiterentwicklung von Kernbankensystemen. Swisscom.
Development of core bank systems | Swisscom
