How banks and large enterprises can de-risk global expansion

When the boards of banks meet to assess the operational risks of global expansion, it’s seldom that one would find software development as part of the agenda. However, many financial service providers are discovering that making the right choices means they can upgrade their systems to deal with new regional regulations, while ensuring no disruption to their existing partners and customers. 

Around 50% of respondents to a Risk Management Association survey said they spend 6-10% of their revenue on compliance costs, while larger firms reported that the average cost of maintaining compliance is around $10,000 per employee. While these figures are for companies operating in the US, one can imagine that when banks expand into new territories their budget must skyrocket when it comes to ensuring their systems meet all the new regional regulations and reporting requirements. 

Delivering on significant system changes in the best of circumstances can require months of planning and often considerable disruption. For banks and other financial service organisations, this is simply not an option. 

Some regions are more complex than others especially for challenger banks

The face of banking has forever shifted with the introduction of transformative challenger or neobanks. These low-fee, direct financial service institutions which operate exclusively online, are challenging the status quo. Neobanks, while sometimes offering limited services, often offer above average interest rates and are appealing to the younger and more digitally savvy demographics. 

According to research, the global neo and challenger bank market, which was estimated at $18,604 million in 2018 and is set to record a CAGR of nearly 46.5% to reach around $395 billion by 2026.

While this makes the growth of transformative banking understandably attractive, the challenges of operating neobanks in regions with complex regulatory requirements, like the Middle East, can be prohibitive, even for traditional banks looking to deliver new online offerings. Fortunately, initiatives like those from the Dubai International Financial Centre, which has set up sandboxes to test new products of financial and banking startups offering services in the region, is making it easier. 

However, even though this is helping, we're seeing from work we're doing with banks in the region, it would be far more challenging if not using a very iterative approach. 

Most recently, we also saw a South African company expanding into Australia and New Zealand encounter just how complex the system requirements of new territories can be - which required re-architecting their technology to be more appropriate for their new multi-region future.  Of course each region has unique requirements that require work, but building resilience into the architecture meant they could not only safely trade in Australia, but as they grow their global footprint, with the Middle East lined up next, the work required in future will be far less onerous. 

Microservice architecture and managed services can significantly de-risk regional expansion, with minimal downtime for financial service organisations, especially in complex operating regions.  

Microservice architecture delivers rapid results 

Microservice architecture enables the rapid, reliable delivery of large, complex applications through a collection of small, autonomous services. By breaking down large software projects into smaller, more manageable parts, our teams are able to quickly deploy new features and also quickly isolate and fix unforeseen issues. The smaller codebase and scopes enable faster deployments. And, since services are separate, you can more easily scale the most needed ones at the appropriate times, making work a lot more efficient and flexible for an organisation’s operational requirements. 

In addition, using the DOMA (domain oriented microservices architecture) design pattern means teams can better manage changes for enterprises which often have thousands of microservices working together at the same time. This technology approach allows for multiple teams to work autonomously against the bigger goal, without breaking the code base.  

By utilising a fully managed service, you can remove many of the common delivery issues and risks associated with refining systems to deal with new regulatory and demanding market requirements.

This approach allows you to get systems up and running alongside daily operations. An iterative approach, using test-driven development, means resilient code can be created and deployed in a safe, low-risk environment. Which, for an organisation like a bank, is mission critical, most especially as they take their first steps in a new region.