Innovation in the banking sector has proven its value to society during the COVID-19 crisis. For example, during times of physical distancing, enabling contactless banking and offering bank employees the possibility to work remotely were particularly relevant. Looking to the future at a post-COVID, post-Brexit world, it’s time to reflect on how the sector has adjusted, the sweeping changes ahead and the challenges those changes present.
The burden of legacy tech
The number of regulators and ever-changing regulations can make the financial services industry a daunting place. Changes must be implemented quickly to ensure compliance and avoid significant fines. This means that IT delivery in a financial institution is often more complex and nuanced than in less regulated industries. Many organizations, particularly the more traditional banks, run on legacy monoliths that aren’t easy to make changes to. Such changes carry the risk of causing outages that can damage the reputation of the bank and can also incur fines. Just last month, Nationwide received negative press because of a payments outage around the time that many get paid and pay their bills.
Can a financial institution risk being left behind by not migrating off legacy systems?
Many banks try to reduce the risk of such outages at critical times of year, usually end of month, quarter, and year, by establishing “frozen-zones” that limit changes to IT systems to only those deemed as essential to the stability of the systems. Additionally, the appetite to replace legacy systems is very low due to the huge complexity and inherent risk involved – often the famous adage applies “if it isn’t broken, don’t fix it”. But you have to ask, can a financial institution risk being left behind by not migrating off legacy systems?
Seeing off nimble fintechs
The pandemic showed how vital digital transformation is for every industry – people needed remote access to services, products, and their jobs. In the financial industry, the consumer-facing part is generally quite far in the digitalization journey, with most customers able to access online and mobile banking. Not so with corporate banking and internal employee access to systems. But according to McKinsey, in the case of remote working, companies moved 40 times more quickly than they thought possible before the pandemic. And the expectation is that the digital transformation journey will continue this acceleration.
In the past, accelerating digital transformation has required large teams of developers working non-stop on a single project for months. The pandemic highlighted that this was simply not sustainable. Tech teams need to be able to juggle between projects, adjusting their priorities as and when required. To do so, they require a different approach to their delivery.
Nine out of 10 IT leaders in financial services believe their firm will need to invest in digital projects over the next two years just to survive in a rapidly changing market.
Low-code provides a compelling answer to this new problem. Low-code platforms enable even the most traditional banks and financial services companies to rival the nimbleness of their fintech rivals. The time to act is now: recent Mendix research found that nine out of 10 IT leaders in financial services believe their firm will need to invest in digital projects over the next two years, just to survive in a rapidly changing market.
The value of low-code
Many banks in Europe have turned to cross-functional, agile teams to provide the collaboration needed to develop the solutions that answer customer needs and drive revenue growth. This requires providing both developers and non-developers with tools that enable them to operate together. And financial institutions that haven’t implemented such agile methods still recognize the value of close collaboration between business and IT.
The Mendix low-code platform is a recognized market leader because it fosters this collaboration by providing two integrated development environments: one for non-technical people, often from the business side, and another for pro developers. This enables non-technical staff to work hand in hand with the development team in creating applications.
Both the technical and non-technical teams use the same visual development language to develop apps, bringing together those that understand the business problems with those that understand the IT landscape, core systems, and services to contribute to the vision of a product. And IT stays in control through built-in governance and guardrails that ensure compliance to the established standards of the organization.
It seems set that low-code will play a vital role in the financial services industry in accelerating digital transformation and increasing the speed of innovation.