The next evolution of the finance industry, sometimes referred to as Banking 4.0, has been aptly described by Brett King as “banking everywhere but never at a bank.” As in most sectors, this future state for Fintech and Banking 4.0 seems reliant upon digital transformation and cloud adoption. Digital Transformation involves refactoring, re-architecting cloud-native solutions, or replacing cloud-native components; whereas Cloud Adoption means Digital Migration via re-hosting, re-configuration, or re-platforming applications. But another strategy is trending across banking and insurance IT architecture that deserves consideration: Digital decoupling architecture.
Digital decoupling architecture is an adoption culture, not a technical pattern. It helps financial organizations implement modern technologies and architecture to handle applications and data while realizing the benefits of digital adoption faster. By enabling quick wins, it both helps the short-term goals of individual teams while bolstering the business’ overall confidence in moving forward with future programs.
Digital decoupling enables accelerated progress with low-hanging fruits such as microservices adoption, Agile DevOps integration, data lake solutions, API adoption, and open platforms. Hence, it is best suited for the Fintech industry to accelerate IT adoption of digital architecture.
Key to digital decoupling’s success is empowering enterprises to choose digital architecture based on benefits in total cost of ownership. Whereas digital-transformation paths sometimes involve large and costly IT transformations, digital decoupling improves agility in the IT landscape and leads to exponential IT solutions and easier digital adoption.
Some common patterns of digital decoupling architecture are:
- Decoupling data and application architecture: Adopt a solution to decouple the data architecture into Reference Data (Regulator restricted/Cross-border sensitive/Data sensitive) and Transactional Data. The reference database can be on-premise in legacy IT systems and applications, with transactional data moved to cloud.
- DevTest adoption to cloud: On an average, Development and Test (DevTest) environment usage is 40-60% per year. Adapting these environments to the cloud makes them ‘pay per use’ and optimizes costs in DevTest infrastructure and monitoring, helping to reduce the ‘run the bank’ costs of Fintech IT.
- Data lake adoption: Creating a cloud-based data lake solution for reconciliation, regulatory reports and batch job processing is an important consideration for Fintech leaders to meet changing customer expectations and manage competition from other providers.
- Agile DevOps: Automating the toolchain process in build, deploy, test and review reduces the manual effort required for ‘change the bank’ activities and improves overall lifecycle agility.
As large Fintech industries – particularly in the Securities and Capital Markets, Retail Banking, Insurance, and Investment Banking sectors – pursue transformation and adapt digital architectures, several key trends have emerged that will disrupt the banking landscape:
- Cyber Risk and Financial Crime (sometimes called CyFi)
- Data Integrity and Analytics
- Digital/Emerging technologies
- Enterprise agility to improve ‘time to market’
- Leveraging platforms and monetizing data more effectively
- Orchestrating across the eco system
Digital Decoupling architecture tends towards the cloud for scalable, reliable and maintainable application architecture. As such, it relies on multi-faced boundaries for technical and functional components, as illustrated in the Fintech diagram above. Components go through the cloud-adoption journey based on core and non-core functional applications. This keeps the adoption roadmap flexible and cost-effective while ensuring the existing application landscape is not disturbed.
With these components providing a pattern for the digital-decoupling architecture, enterprises can build a Fintech application landscape that’s cost-efficient, delivers a positive user experience, and gives clear direction for the People (governance model), Process (architectural decision) and Technology (foundational blocks of the architecture) involved in the industry’s ongoing evolution.