In today’s digital world, traditional banks must find new ways to compete while controlling costs. Digital business models have become essential to offer a truly personalised service, provide a multichannel customer experience, and to harness the power of modern technologies, such as artificial intelligence and machine learning.
Many banks are investing heavily in digital innovation while others have partnered with fintechs to accelerate progress. Delivering a compelling user experience is crucial to increase customer engagement, build loyalty and meet rising customer expectations.
Most banks recognize that building an open and agile digital banking platform enables faster implementation of new services and offers a superior customer experience. But one of the greatest obstacles on any bank’s digital transformation journey is how to integrate core legacy processing systems. A full-scale “rip and replace” approach is rarely practical and the core cannot exist in isolation. Is there an alternative?
Building a bridge – Mediated APIs
The good news is that it’s possible to run a new, digital architecture alongside a legacy processing core. Mediated APIs are at the heart of this solution, acting as a bridge between the old and new applications.
While this may seem like compromise, the approach is proven to control costs, mitigate risk and shorten time to market for new products and services. In practice, it offers the best of both worlds: processing takes place on a robust, established platform, while innovation can adopt the latest methods and technologies. With many financial institutions facing similar challenges, this approach is gaining popularity and is commonly known as a “two-speed IT architecture.” So, how does it work?
One size fits nobody
Mediated APIs offer a firm foundation for any digital business and are an implicit recognition that not all data objects are created equally. Many data objects need to be modified to enable integration and to harmonise processing across platforms.
A two-speed IT architecture that uses mediated APIs can help banks develop their customer-facing capabilities quickly while decoupling legacy systems for which software release cycles continue at a slower pace. Mediated APIs introduce three crucial components to a two-speed IT architecture:
Pace of change: Mediated APIs allow for focused, multi-speed change delivery. This recognizes the need to consume IT at different speeds throughout the business and to balance pace with large-scale traditional delivery.
Architectural clarity: Mediated APIs allow for the decoupling of systems of engagement (channels) from systems of record (customer records) through rethinking and separating underlying technology architectures. This allows change to be delivered into the business in a coordinated but non-synchronous way.
Dynamic support: Mediated APIs offer flexibility in both the operating model and infrastructure, which can include cloud technologies. This enables more dynamic, automated support for change delivery and release.
In practice, a two-speed approach can leverage the strengths of each solution. There are sound reasons to decouple customer-facing solutions from the core processing engine within any financial institution. Purposeful design and intentional integration patterns, such as digitally enabling the core and Mediated APIs, allow the digitally advanced front-end to forge ahead, while better utilizing the legacy back-end system’s strongest assets – data and stability.
Over time, it becomes possible to extract business logic, services and capabilities from the legacy back-end solution and import into modern enterprise components. A middle tier API gateway strategy facilitates business transformation and innovation at an optimal pace, driven by business needs. Mediated APIs have become a critical success factor in any bank’s digital strategy.
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Tags: Digital Innovation, Technology