New Business Models, Low-Code Development and More APIs

As historian James W. Loewen puts it:  “I’m looking forward to the future, which is a good thing, because it’s coming.”

This is the second of my 2-part blog series where we consider what to watch for in 2021. In today’s blog we move on to operational and technical trajectories – specifically how new business models can meet new challenges, the rise of low-code development, and the ongoing evolution of application program interfaces (APIs). The future is upon us, and I believe there are exciting times ahead.

Platforms & Banking as a Service (BaaS)

The modern platform approach to banking is intuitively appealing: It offers benefits to all parties and supports and sustains the natural evolution of bank digitalization. With the platform model, banking services can be disaggregated, re-bundled and offered in context.

Banking as a Service (BaaS) is a model that provisions a multitude of benefits not only to the platform provider, but also to marketplace participants, and ultimately to customers/consumers. Look for the industry to not only more aggressively adopt BaaS, but also to launch and pilot new concepts and use cases.

In many respects, banking platforms and BaaS offerings are emerging as a direct result of the confluence of open banking regulations, customer demands, technology advancements, new market challengers and a universal demand for bank innovation.

The specific drivers are clear:

• Customer expectations are high – Today’s consumers expect a choice of financial services, offered where and when they are needed

• A shared marketplace empowers banks to provide unique solution offerings across a vastly wider and deeper portfolio of products and services

• Banks acknowledge the need to collaborate with fintechs to compete AND collaborate with Big Tech and challenger banks

• Fintechs need financial institutions to augment market reach, add scale, and more

Benefits will accrue to all parties:

• Hyper-personalization – Products and services can be customized in real-time at the individual level with boutique-type experiences that increase customer engagement

• Portfolio expansion – Plug-and-play and leverage ecosystem partners in full appreciation that your bank can’t always build or buy

• Market penetration – Tremendous ability to reach new customer segments and geographies as well as deepen existing client portfolio relationships

• Process efficiencies and optimization – Reinvent and reinvigorate processes with a customer focus and a modern lens

• Achieve operational synergies working with ecosystem players to optimize performance

In 2021, the time is right for the move to BaaS to intensify. With growing interest in deploying new business models on modern technology stacks, we can expect many more pilots and launches soon.

High Expectations for Low-Code

Low-code software development is the latest evolution of programming. Low-code toolkits provide non-IT users with a visual approach to software development, one that does not require programming expertise per se. The “Low Code Manifesto” seeks to enable the general population to build and deploy innovative and timely solutions; solutions that are built well, add value, and are delivered at speed. This holds promise in many areas, and may well serve to obviate traditional organizational silos that existed between IT and the business, a key factor in promoting continuous and insightful collaboration.  

Gartner research suggests that “citizen developers” within large enterprises will outnumber professional developers 4 to 1 by 2023.* The emergence of cost effective yet powerful low-code development was one of the positive aspects of 2020, when a distributed workforce managed to improve business processes and do new things with minimal IT involvement. Against that backdrop, the advent of the citizen developer is set to take hold and gain traction in 2021.

Low-code platforms are attracting attention (and funding) in many markets as a way to build new capabilities and pump out workflows quickly. But, as always, something that’s low-cost in the short term can become expensive in the long run. Banks must proceed with caution and consider Total Cost of Ownership (TCO) over time. Low-code is a better fit in some areas than others.

So, what kinds of applications are best suited to low-code development? Back office and web applications are the most prevalent initiatives thus far, and this seems likely to continue. Back offices in particular are replete with manual procedures begging to be automated and simplified with purpose-built applications. Back office teams also typically have a deep understanding of business processes and opportunities for improvement – this is a perfect fit for “citizen developers” at your bank who are armed with the right low-code tools. In this manner, banking leaders can empower their teams to drive valuable improvements from the ground up.

Continued API Evolution

While most banks have a technical strategy for APIs, many are still pondering how to monetize them. Furthermore, the design principles and technology behind APIs are growing and evolving right along with digital transformation. 

APIs are fundamental to digital transformation and are the lifeblood of open banking. The ability to access, develop and distribute innovation and to integrate seamlessly via robust published API inventories is monumental – APIs make the journey to digital possible. 

For banks, APIs can offer a shortcut to a better outcome, faster, cheaper and with richer content. This year, open banking is set to come of age.

The Bottom Line

The view here is that 2021 will see many banks achieve digital transformation through real-time banking, BaaS, low-code development and API evolution. All of these initiatives empower banks to deliver a better customer experience, reduce operating costs, and build competitive advantage. With 2020 behind us, and facing 2021 with anticipation, there are genuine reasons to be optimistic. 

* The Future of Apps Must Include Citizen Development, https://www.gartner.com/en/documents/3970067/the-future-of-apps-must-include-citizen-development