Plataforma de banca moderna FIS
Haga avanzar su banco con una plataforma central moderna.
Marvin W. Foest | VP Retail and Commercial Banking Solution Architecture | FIS Global Banking Solutions
September 03, 2018
This white paper explains why the time is now for banks to pursue targeted modernization strategies and embark on their tailored modernization journey. Topics discussed are Market outlook, along with trends, challenges, and accelerant opportunities. We will explore how componentized strategies for core banking modernization enable banks to modernize and innovate in a low risk incremental approach, while preserving their strategic IT investments.
This white paper is first in a series; a set of core banking modernization topics will be published, including Deeper Understanding of Core Modernization Patterns, Enterprise Product Pricing Elasticity and Optimization to Achieve Profitability, The Next Level of Customer Experience 2.0, and Responsible and Traceable Sales & Servicing Business Practices.
Key catalysts shaping today’s banking industry include Open Banking — the federation of the value chain in banking — as well as demanding and tech-savvy customers who expect and require great digital experiences . Continuous rapid change is one of the few constants, and achieving business agility is one of the key challenges. Banks and their technology teams need to address this situation in an environment characterized by low margins; the “good old days” of great margins are unlikely to return.
Most financial firms are transforming their application landscapes, and core modernization is becoming the norm . These transformations take time: Those planning to start in 2018 expect the incremental modernization to be fully realized in 6 to 7 years (i.e., by 2025 at the latest). The typical model allows 6 to 12 months for planning, preparation, and pilot programs, and 2 to 5 years for implementation. Banks will be modernized and digitally transformed by 2025, or risk dying an analog-business death. The good news is that while the overall process takes years, the benefits of an incremental modernization journey accrue every step of the way.
A flexible core system built on modern technology can mean the difference between success and failure for many financial institutions . All banks, regardless of size and geographic location, need to be able to quickly launch new products, address the increasingly demanding needs of customers and regulators, and operate as efficiently and cost effectively as possible. Effective and innovative strategies, planning, and execution are a must.
Today’s core banking market is adapting to these changes in the banking industry, especially digital banking. The leading trend in establishing these critical capabilities is componentization, and FIS™ is a market leader in this regard . Improving on the traditional monolithic banking solution approach, the next generation banking solution offers smaller components with discrete functionality and ultimate flexibility. Componentized modules and latest fintech capabilities expand real-time digital processing enablement and the promise of compelling banking modernization opportunities – while continuing to feature the established hallmarks of outstanding core banking product innovation, processing power, security, reliability and performance.
Targeted core replacement initiatives are now viewed by many banking firms as the pathway to the future. Some institutions view core replacements as a necessity that can no longer be ignored, while others (especially those in growing markets) recognize that targeted replacement initiatives may be key to capitalizing on new opportunities.
Few banks today contemplate a “big bang” replacement of core banking systems, primarily due to the high cost and associated risk levels. Bank leaders seek investments for which payback is expected in the same year. Highly-targeted modernization initiatives can achieve this, with bottom line benefits driven mostly by front office digitization and regulatory requirements, but also by corresponding cost savings and operational improvements. While bank IT budgets are mostly tight, they are typically adequate for an incremental improvement approach.
Common motivations for core banking modernization include business agility, compliance, and channel enablement. The dominant trend in banking technology is targeted modernization, providing the ability to carry out targeted business outcome investments accompanied by essential maintenance and repair of IT assets.
Accelerated business capability
Enriched capabilities in "bit-sized" modules with rapid deployment and immediate impact
Fully digital-enabled APIs and core/SOR-agnostic design enable bank-wide user experiences
Modern technologies and intentional framework design improve CapEx and OpEx, and future-proof investments
By leveraging the inherent benefits of intentional component design, financial institutions are better able to align their core modernization strategies into incremental micro-phases that have direct impact to delivery on their most pressing business objectives and needs. Simultaneously, the banks are progressing forward with capabilities that offer short-term impact and long-term viability. Due to the more focused nature and smaller footprint of components, deployments occur in a timely and cost-effective progression which brings immediate business value, while also establishing long-term foundational capabilities for sustained growth and success.
The most effective, efficient, and valuable financial services core components can be deployed universally bank-wide – provided that there is a core- and SOR-agnostic architecture and fully exposed API-enabled design. This not only brings accelerated business capabilities to a specific product line of business (LOB), for example retail deposits, but also creates horizontal institutional impact by expanding their applicability across all product LOBs and areas of the financial institution (e.g., retail, commercial, deposits, lending, wealth, insurance, etc.). Further, such enterprise-class core components can be deployed in an incremental use case-driven manner specifically aligned with each financial institution’s unique needs, objectives, budget, and vision.
Successful core components leverage new and universally accepted technologies that are open, digitally enabled, understood and supported by ample workforce resources. Cloud-ready solutions maximize deployment and scalability capabilities, and typically yield significant costs savings for the banks. Core modernization through componentization is a highly efficient and beneficial transformation strategy that produces impactful and measurable short-term business benefits, while aligned with long-term business vision and strategy outcomes.
The FIS Enterprise Product Organization (EPO) has proactively been executing a corporate component-based strategy and architectural approach to core modernization for the financial services market for the past 5 years. Our component-based architecture features easy-to-configure components in lieu of functionality typically embedded in “silo” channel applications across the enterprise. This approach allows banks to preserve existing IT investments, freeing up capital for innovation and improvements that attract and retain customers for the bank.
This component-based approach to core modernization is designed to facilitate the incremental adoption of enterprise capabilities based on the objectives and challenges of the bank. Its purpose is to facilitate customercentric, dynamic business processes; to overhaul product and servicing offerings and related pricing; and to preserve the bank’s IT investments. It moves legacy core solutions from a monolithic core architecture to a component-based architecture. It is the smart strategic alternative to the risky and expensive proposition of pursuing a “core replacement first” approach.
With this model, the capabilities in the legacy core solution naturally deprecate as components take their place (also referred to as “hollowing out the core”). The transitions are transparent to customers, and bank operations are improved throughout the process. The widest range of options remains available to the bank throughout the transformation, including the choice to retain the legacy core.
Architecture and functionality enable a financial institution to:
The componentized approach provides a reduced-risk targeted modernization path for financial institutions, and alleviates dependency on the legacy core platform. As part of the approach, functionality in Retail and Commercial banking solutions are utilized by harvesting and leveraging technology already in place. This allows clients to follow a robust upgrade path with delivery certainty.
Continued regulatory pressures related to Open Banking, GDPR, PSD2, and CMA are representative examples of the banking market challenges that are driving the need for core banking modernization. To address the challenges that are in play, banks are investing in core components to transform and modernize legacy applications to deliver API/Open Banking payments and digital products and services.
Bank brands are at risk of becoming commodities in today’s world of abundant choices. Core banking modernization can help in the mission-critical task of protecting your bank’s valuable brand.
As more transactions become digital, many customers no longer make conscious decisions about which mechanisms they use for an increasing proportion of their transactions. This relegates the FI to the status of a commodity: If the brand of the merchant or wallet is central for the consumer, the importance of the bank’s brand becomes diminished.
Financial institutions face the risk of disintermediation on a variety of fronts. The examples are already abundant. As payments become more and more embedded in the commerce experience, tech and fintech firms are finding ways to remove payments from the payment card rails and reduce their cost of acceptance. Online lenders have made a substantial mark on small-business lending, and now have their sights set on consumer lending. The rise of varied forms of prepaid accounts means many consumers no longer feel that they require traditional banking relationships.
Technology and regulation are also increasing the risk of commoditization. This situation is front and center in Europe, as regulations designed to increase competition threaten to reduce banking services to a set of commoditized utilities.
Banks recognize that core banking transformation is needed to effectively and sustainably respond to internal business imperatives, such as growth and efficiency. Internal modernization challenges include:
Core banking transformation is also driven by the need to respond to external business imperatives, such as regulations and competition.
While tactics may differ, banks of every geography and asset size are modernizing, and they are experiencing gains in customer satisfaction from their modernization initiatives. These transformations continue to be fueled by NextGen Componentization and Digital Enablement.
Credits: DBR Research © December 2016 The Financial Brand; DBR Research © February 2017 The Financial Brand; MIT Sloan & Deloitte Digital © January 2017 The Financial Brand – www.thefinancialbrand.com
IT plays a significant and foundational role in whether banks will succeed. Adopting multi-speed IT – while incrementally and strategically hollowing out the core on the way to true digital banking enablement. Modernizing in this manner will help banks grow cost-to-income ratio and increase return on equity; banks can continue sharpening their focus both on delivering a relevant customer experience and managing continuous business innovation which powers that experience.
Two big existential questions will play out for banks in 2018 and beyond. First, will tech firms be able to manage the burden as they increasingly undergo direct regulatory scrutiny? While there are many reasons that banks are traditionally slow to evolve, regulation is certainly one of the top two factors (legacy technology being the other). Second, will banks be able to overcome their technology hurdles and more nimbly leverage two of their greatest assets – customer data and customer trust? Not all banks will be able to do so, but those that do will not only survive, but truly thrive.
FIs need to change, and the time is now. This requires fundamental shifts to mindsets, business models, and operating models. Banks must be equipped and prepared to fight for the modern consumer — consumers who, because of technology, have a whole new set of expectations. Today’s modern consumer has little regard for traditional branch banks, they want to quickly and easily complete transactions whenever and wherever they want, typically on their mobile devices and always in real time and on-demand – any day, any time, anywhere.
As more banks embark on the journey to transform, large FIs especially may launch digital-only subsidiary banks, partner with or acquire fintech companies, and hire strong technology talent outside of the banking industry to gain technology leadership. Forward-thinking FIs are recruiting talent from the digital giants to help accelerate this process, though merging these two disparate cultures is not always easy.
Tier 1 banks are investing in core components to transform and modernize legacy applications to deliver API/Open Banking payments and digital services. Regulations/Risk/Compliance remain a drain on resources.
Tier 2 banks are focusing on digital payments technology, advanced analytics, open banking APIs, and navigating compliance and regulations to compete with larger banks.
Given an environment where consumers increasingly expect experiences that are convenient, engaging, valueadding, and quick, a bank’s customer experience must be unique and compelling. This requires a core banking platform with the agility, speed and cost structure to enable winning digital business models and deliver a frictionless customer experience.
For example, digital-ready core banking can enable a bank to:
Most banks recognize the severity of the situation: It is time renew and gain control over the entire core to quickly digitalize the business and focus on the modern customer. This is the pathway to navigate a successful future. Choosing to move forward rather than “staying the course” has profound implications for the bank’s market share, the relevance of the bank’s brand, and overall sustained success.
No single repository for customer and product information accross the enterprise
Inconsistent product information presented across channels
Creating product variants, bundles, packages, and proposals require major changes to underlying systems
Product and bundles that do not fully address customer requirements negatively impact sales and onboarding
|Customer and/or product information coded in multiple systems||Negative impact to the customer experience||Need to create and measure new revenue streams that existing cores do not cover||Banking is not personalized|
|Unable to manage all product variations on existing core||No single "source of truth" for product & pricing information||Product information spread over multiple applications||Disappointing customer experience|
|Product catalog embedded in individual systems||Disconnect between channels and product systems results in higher operational costs||No single "source of truth" for product & pricing information||Sluggish onboarding|
|Negative impact on speed to market launch||Customer and product data that is is siloed within lines of business prevents the institution from having a holistic view of entire customer relationship||Multiple cores charge separately||Lost incremental revenues|
|Dependence on core system experts for configuration and coding||Dependence on core system experts for configuration and coding||Missed opportunities|
|Regulatory compliance and fair disclosure constraints-need to expose uniform catalog of products/offers to channels (CMA9 initiative)||Negative impact on speed tp market launch||Customer loyalty jeopardized|
Core Banking Modernization is a complex topic that is intermixed with many aspects of how banks are positioning to modernize their core banking architecture. A flexible and digital-enabled core system built on modern component technology can mean the difference between future success and potential failure for many banks in today’s market.
Any path forward for banks begins with re-structuring core IT systems to create a more agile and innovative way to grow and compete. Capitalize on core banking IT architecture that is able to respond swiftly, efficiently and effectively to market fluctuations and other dynamics.
Banks can then address omnichannel, APIs, micro-services and all other aspects of their IT architecture by integrating additional best-of-breed technology applications from trusted third-party providers into the core. Now able to upgrade single pieces without uprooting the whole, banks can create an open core ecosystem and move more rapidly – adapting, going to market, and responding to consumer demand quickly and with acuity.
FIS works together with our banking clients to jointly build an integrated tailored road map that provides incremental business capability, targeted on achieving the bank’s business priorities, with the tangible benefit of refreshing the underlying technical architecture. While most banks typically have a similar starting point of “opening the integration framework” of their core, each institution is unique, so a single modernization road map doesn't apply.
Each FI will have individual strategies, objectives, and unique perspectives regarding their banking modernization approach and priorities. Likewise, business priorities and investment options will drive their need for, and timing of, modernization. In the case of FIS, local account teams work in partnership with each client to create a customized modernization playbook to personalize and showcase our collective ability to enable the bank’s modernization initiatives. Each Core Modernization story is different, and client-specific tailoring allows clients to protect their investments while being efficient on timeline and costs. The playbooks are built with the current and future architecture landscape of the single specific client in mind
Many banks accelerate their progressive journey to hollowing out the core by establishing a “digital attacker” sub-brand. With this strategy, banks look to differentiate themselves in the market by being a first mover in a specific digital capability. Banks can keep the sub-brand separate from their existing core system and run it on a next generation core. This approach progressively moves capabilities to the modern core over time, with limited disruption to the bank. In many cases the sub-brand is created via a Banking as a Service (BaaS) model where the application and operation support are outsourced, allowing the bank to focus on customers rather than the underlying technology buildout.
Banks can conduct these actions in a staged manner rather than all at once. This allows the institutions to take advantage of multi-speed IT to move forward with the targeted modernization progression while also effectively managing the normal day-to-day banking business operations.
A trend toward componentization has been growing in prevalence in recent years. Full "big bang" or "rip and replace" deployments are too risky for most banks, especially the largest ones, and this risk prevented many from moving forward with needed core system replacements. Componentized solutions, however, enable institutions to take a less risky, more phased approach to replacement by first replacing systems/functionality supporting areas of the bank with the greatest levels of urgency. Through a progressive implementation, financial institutions can roll out their new core solutions in logical phases: Some choose a single branch, while others roll out in phases or based on vertical domains or departments.
The figure below depicts a common 5-step approach for Targeted Business Enablement:
The first sequence of modernization ( 1 ) focuses on enhancing the core’s integration capabilities.
This opens access to the bank’s first-party data residing in different SORs and effectively extends the core’s capabilities by digital enablement.
The next sequence of steps ( 234 ) are based on the business value and priorities the bank wants to achieve.
A foundational suite of selected enterprise business components are assembled and sequenced to solve for the business need(s). A rich set of APIs are natively available for each enterprise business component, providing pre-integration in backend SORs, and an API platform provides exposure for channel integrations to enhance Sales and Servicing capabilities.
FIS enterprise business components leverage state-of-the-art technologies that support cloud implementations and Open API integration capabilities. All enterprise business components are API-enabled with open access to FIS solution/service capabilities via Code Connect , a managed and monetized API gateway complete with Developer portal. Code Connect offers a great opportunity for banking clients to accelerate the introduction of channel and core-facing RESTful services.
The next logical sequence of modernization ( 4 ) is to introduce the next generation Component Core.
At FIS this is founded on a Common Arrangement Processing Engine (CAPE) in conjunction with vertical layered LOB implementations of Banking Product Processors (e.g., Deposits, Lending solutions), simplifying development, deployment, and testing. Banks benefit by being able to “plug and play” pre-integrated components to modernize and become digitally-enabled according to their own schedules and business requirements.
With a flexible and extensible architecture, the next generation core supports multi-tenancy, multi-currency, multiplatform, and multi-time zones. Banks can configure the next generation core with differentiating products while offering real-time transactional run-time capabilities; integration with additional components can be leveraged across solutions (for example, Enterprise Customer Management, Enterprise Product Catalog & Optimized Relationship Pricing, Customer Behavioral Analytics, and more).
The NextGen Core channel integration ( 5 ) can be with existing bank channels or via DIGITAL ONE™.
The DIGITAL ONE platform allows a bank to enable a particular channel and leverage an advanced channel architecture. This platform delivers the convergence of digital banking channels onto a single platform with common channel digital APIs that promotes a new model of customer engagement. By providing one platform across assisted and unassisted channels, DIGITAL ONE provides a unified experience across all customer touchpoints.
FIS has real-world examples of client banks that have implemented a single component, or a combination of a channel solution in conjunction with an enterprise component such as Enterprise Customer or Enterprise Product & Pricing, and opening the core integration. The slim but full stack approach is often a pragmatic start that enables the required business use cases that achieve the desired business goal(s).
Depending on the bank’s priorities, the 5-step modernization approach described above is tailored and sequenced according to the bank’s specific revenue growth and cost efficiency prioritized goals.
Digitally Enabling the Core – Open Enterprise Integration to Core Data
Each bank will improve and innovate their banking capabilities with a sequence and timeframe aligned to their own business and technology drivers. However, opening the integration framework and access to the core’s first-party data is a critical first step to modernization. Each integration approach will be bank-specific and based on the core’s underlying technology. FIS has made extensive investments to facilitate this by opening access to FIS solution/service capabilities with a managed and monetized API gateway (FIS Code Connect).
This plug-and-play platform allows multiple point solutions to connect and interact with each other, creating and exchanging value to help banks define what “core” means to them. Effectively FIS is redefining the core and supporting enterprise business components that make up Banking as a Platform. Code Connect opens up the complete ecosystem of FIS solution capabilities.
As previously stated, the first step to digitally enabling the core is opening up access to the bank’s first-party data. FIS has founded its componentization strategy around three key data domains: Customer, Product, and Account. These three domains exist in all FIS and non-FIS core banking solutions.
Introducing targeted integration capabilities such as web services and an API platform allows the bank to externalize specific business functional capabilities outside the core and into enterprise components. A certain level of core integration currency is required to benefit from these integration capabilities, but the bank’s investment is protected with the ability to quickly leverage key foundational enterprise business components and pre-integration into the next generation core banking platform.
The addition of REST and SOAP-based services exposes functionality without sacrificing the security of the core. These services also ease the burden of real-time integration with core banking applications, leading to a shorter time-to-market. Institutions have the ability to not only create their own web services, but also to customize and tailor the extensive inventory of web services that FIS created.
One of the most significant aspects of enabling the enterprise components was developing a single point of integration. For the past few years, FIS has worked to move business logic and functionality into an enterprise business layer to ensure data accessibility and to ensure standard formats across our banking cores in order to eliminate brittleness of point-to-point solutions. This provides a low-cost architectural data access layer which reduces complexity and supports new data structures and data definitions as they’re added. Additionally, the architectural data access layer provides access to data for the configurable reporting and analytics environment that builds on top of this application data layer. Having access to customer, product, and account data enables users who may be less familiar with data science to build and deliver meaningful reports quickly, yielding improved business insights and reduced operational costs.
Extended enterprise business components leverage a combination of externalizing tactical data (such as account transaction data) and enough customer and product-level data to allow consumption of this data into the enterprise business components. Components consume the data from the core, allowing the bank to externalize the business logic from the core. The business logic and complexity now resides in the enterprise component that spans multiple LOB core processing engines (e.g., Deposits, Lending, and Mortgage platforms). The benefits of an agile platform that is founded on configuration-based business rules and policies is realized by speed to market for new product introduction, enriched customer experience during sales and servicing, enhanced customer interactions across any channel, and the real-time capability to determine customer insights and opportunities during both digital and person-to-person conversations.
With today’s focus on the customer centricity, FIS offers pre-integrated component bundles that consist of the following next generation components:
The customer-centric suite of components allows banks to optimally understand their customers via relationshipcentric banking and behavioral life event analytics, utilizing this information to establish stronger relationships, optimized pricing, and customized products and services across all customer channels. By being able to recognize life events and consumer behavior, the bank can present targeted, relevant, relationship-based offers at any point of interaction that would be most compelling. These next generation banking capabilities are fully aligned with the mission-critical business objectives of achieving increased customer satisfaction as well as bank-defined revenue and profitability goals.
The result of all these market changes is a highly competitive vendor and fintech landscape that drive core banking solution renewal – a market that emphasizes business agility as an overarching priority, but also closely scrutinizes the capacity of vendors to deliver over the long term. FIS is strategically positioned to deliver modern componentized core banking solutions, tailored to our clients around the globe, with a proven capability to provide industrialized and creditable transformation program management and the necessary implementation resources.
Our next generation componentized solution represents a significant evolution in the highly successful FIS core banking systems. Banks can incrementally adopt componentized modules and latest fintech capabilities to expand real-time processing enablement and the promise of compelling banking transformation opportunities.
The capability of easy-to-configure enterprise business components and a next generation component core banking solution provides increased simplicity in terms of delivering business agility. In certain markets, standard support of regional regulation and local requirements is becoming a key capability for global retail core banking.
FIS’ strong financial viability – a decision point that was largely overlooked in prior core banking renewal efforts – now bears significant weight in the decision matrix, as well as in the product viability assessment that determines whether a product will survive an acquisition.
The established FIS next generation strategy continues to be Invest, Evolve, Transform, Componentize, and Acquire solutions and product portfolio with the aim to grow an ever-stronger market presence. We work for our clients’ success, ready to lead your bank on the pathway to the future, Core Banking Modernization with FIS .
Marvin W. Foest VP Global Banking Solutions, Retail and Commercial Banking email@example.com
For further information, visit our website at www.fisglobal.com