As businesses get digitalized and the era of "Everything Real-Time" kicks in, transaction banking needs to change. More and more banks are aligning their internal systems and processes to address the changing demands of the customer. Corporate Treasury is now looking to play a strategic role and are looking forward to their banks to provide them with decision making insights.D2C Business models necessitate banks to provide customers with Real Time Payments and Liquidity Management. User experience continues to be a focus area as more and more corporates look forward to immaculate customer experience.

Thus, transaction banking is witnessing transformation across channels, middle office document checks/assessment as well as back-office transaction processing.

Some of the key initiatives that are running in global banks today -

1. Trade Back Office Modernization - Legacy to Microservices

2. Lending Consolidation - Application Rationalization

3. Liquidity Management Platform Transformation

4. Product Implementation

5. Trade Process Automation - Straight Through Process

6. Workflow implementation - Pega/Others

7. Portal Modernization

8. As a Service Models

For channels, there is increased focus on consolidating multiple integrations and channels into a Digital Engagement Platform that would become a single point access for multiple channels. This ensures standardization of connectivity and experience across multiple channels and aids omnichannel experience to customers as well as staff. Banks also look forward to personalized, role-based dashboards to provide insights to customer and bank staff.

When it comes to middle-office, we see AI, Workflow and APIs automating multiple people intensive activities. And finally, back-office is being transformed from legacy to microservices architecture.

In this context, a decision to build or buy becomes imperative and a right decision combined with immaculate implementation is key to successful initiative.

A careful analysis of the current application estate and understanding the goal of transformation are the pillars on which the target state solution is defined and a call to build or buy is taken.

Key considerations for build vs buy

1. Budget

2. Ownership of code

3. Flexibility & Scalability

4. Functional breadth and overlap

5. Vendor product fitment

6. License/Subscription Fee

7. Platform Monetization ambition

8. Open Innovation requirements

9. Appetite for risk

10. Time to market

11. Product fitment

And then it also depends on the application layer that we are trying to modernize.

Consider portals; older COTS products offer reasonably long list of features and good user experience. However, newer players that have the advantage of having built the platform on modern technology offer great user experience and flexibility. There are cases where the bank would want to replace only one part (say Trade Finance) of the portal while retaining the existing portal for other functions.

In case of middle-office, it might be a "BUY" as far as the workflow part is considered. The workflow tools available can be configured to match any process for any product line. There would of course be some building/integration involved to connect various steps/teams.

The back-office layer is where the decision becomes difficult. If the feature list is huge and diverse, it would be unlikely that a single off-the-shelf product would help the bank. Thus, bank may want to consider build + buy where one or more components are built in-house and while bank goes shopping for others.

The age of system being replaced also influences the decision. Older systems typically carry a huge technical debt and a fair bit of customization. Some of the processes are non-standard and typical to the bank or products they offer. The fitment for COTS in such cases may be 50% to 60%.

There are instances where bank does not need a full-fledged platform as their business is in specific areas (say only Sweeps/Notional Pool but no Investment Sweeps/Virtual Accounts).

And what does the trend say?

There are no clear trends. For example, two of the top three Trade Finance banks have taken the Build approach, while the third has gone in for multi-country, multi-year COTS implementation.

In all three cases, the legacy platform was servicing the global trade finance requests for close to three decades.