Forces ranging from technological disruption, to demographic shifts, will change the way banking is done, according to the 2020 Banking and Capital Markets Outlook from Deloitte Insights. The report says that banking will increasingly be more open and transparent, more intelligent and tailored, and more secure and seamless.
Achieving this state of financial services - one in which there is greater internal collaboration and is synchronized to market demands - won’t be without challenges, the report says, pointing to “technical debt, or the lack of technology system modernization, which is a huge impediment to transformation.”
Overcoming these obstacles should start now for the banking sector, as well as for related financial industries including insurance, capital markets, and payment processors, because more aggressive and agile competition shows no sign of relenting. In the age of digital transformation, companies can no longer afford to be tied to building giant-scale monolithic applications, and being potentially locked in relationships with proprietary vendors whose systems don’t support modern container-based, cloud-native development for swift and incremental enhancements.
Customers of software vendors have often been stymied in creating modern, flexible apps because typically, modifications to their services can only be implemented in lockstep with vendor software changes - sometimes on a lengthy release cycle.
Additional effort: the potentially millions of lines of poorly documented code created over time by employees no longer with the organization. Any change – no matter how small – necessitates that IT teams will have to test the whole system again - not an inexpensive task to undertake, nor a fast one.
The microservices advantage for the financial industry
Building microservices-based open-source applications can be a much more flexible, efficient, and cost-effective way for financial companies to proactively position themselves. Developing software the historic monolithic way can slow or stifle innovation, whereas microservices-based development can help enable it.
With microservices, applications are broken into smaller pieces, and changes to them can be made more quickly without necessarily affecting the rest of the system. This provides the opportunity for developers to experiment with app development, introduce new services, and revise existing ones – all in the hopes of building an app that works for customers without dedicating effort towards building the common framework. Microservices allows developers to repeat the process of app refinement and increased utility on an iterative basis, as the financial enterprise pushes digital transformation deeper within the enterprise.
Independence and speed are critical to keeping pace with more digitally demanding customers in a world where there are more financial services options than ever before. Retail customers, in particular, exhibit decreased loyalty to a particular institution, focusing on functionality and convenience. Business Insider Intelligence’s report, The Evolution of the Neobank Market, finds that the top 10 banks in the United States risk losing 11 percent of their customers because of clients’ frustration with their relationships with banking incumbents. That equates to about $344 billion in lost retail deposits and a revenue impact of $16 billion.
Help in harnessing microservices
There is no denying the shortage of skilled microservices developers, and as Kubernetes-based container platforms for microservices evolve, new end-to-end toolchains that can deliver code quickly and with fewer errors are needed to streamline processes.
Red Hat’s recently introduced OpenShift 4.4 platform helps address this: its Service Mesh feature provides an environment making it easier and more accessible for developers to build innovative cloud-native applications that enhance business value. With capabilities for automating the set-up and management of Kubernetes environments, financial services firms can benefit from an acceleration in application development and delivery, enabling simplified and automated enterprise-grade services across the hybrid cloud.
These factors are essential to rapidly meeting today’s ever-growing expectations for enhanced digital services from customers – and for achieving the multiple ongoing changes that will define the business of financial services.
Learn more about the potential of microservices here.