The Future of Financial Services: The Connected Bank

For many banks, back office systems for such critical functions as deposit accounting, loan servicing, and payment processing have been in place for decades, running on huge legacy mainframes. According to industry analysts, IT departments spend 70 to 90 percent of their budgets managing and maintaining these disparate systems, leaving little left over for new initiatives.

In addition, with poor operational efficiency a barrier to growing revenues, banks have prioritized reducing exceptions, delivering transparency, and improving system interoperability to increase technology ROI.

But it’s not enough to “run the bank” as some in the industry refer to business as usual spending. IT departments also need to “grow the bank”—delivering new products and services to meet customer demand. For example, according to the World Payments Report 2013, customer demand and innovation is driving the global mobile payments market, with volumes tripling over the past 4 years. Much of this growth comes from non-bank providers who have outpaced banks in delivering innovative and customer-centric mobile payment solutions, raising customer expectations. In an effort to keep up, banks are expanding mobile and tablet banking features.

However, rigid, monolithic legacy technology is restricting the ability of banks to meet the demands of increasingly web-savvy digital natives, accustomed to performing transactions instantly, whenever and wherever they want. Whether a bank decides to undertake a major “rip and replace” modernization program or refresh their architecture with newer technologies such as web services, cloud computing, APIs or OpenStack, integration is the key to growing the bank. For example, in order to enhance a corporate mobile banking app with real-time payment tracking, a bank could use a private API to send and receive data to the back-office payment system using web services.  

A next generation connectivity platform enables application integration and drives business value across on premises and cloud systems, web services orchestration and governance, and API creation and management. While integration alone is not sufficient to achieve this value, it does provide the infrastructure foundation on which these initiatives are built. Check out my infographic on how leading financial institutions are becoming Connected Banks.