The evolution of the banking customer: How can the banks adapt

28 March 2023 Consultancy.com.au 5 min. read

The landscape around institutional banks and their customers has changed drastically over the past few years. If traditional banks are to survive in this new environment, they must reassess how technology fits into their future, writes Herb Kersten from low code provider Mendix.

Brought on by the rapid evolution of technology during the pandemic, customers are on the hunt for accelerated digital client journeys. They are seeking better e-commerce experiences, greater reliability and more ways to manage risk and uncertainty such as supply chain issues or collection cycles.

Connecting human and digital experiences is more important than ever for Australian institutional banks.

Herb Kersten, Financial Services Lead, Mendix

While rapidly adapting to evolving customer needs is a relatively simple task for digitally led fintechs that don’t have to deal with the burden of ancient systems and processes, the same can’t be said for traditional banks. Legacy banking systems work on a 5-day-per-week business cycle, which isn’t going to cut it in today’s 7-day-per-week world.

In other words, customers want the digital journeys they’re already getting in industries like retail, but banks and their platforms can’t get to that level.

To address this challenge, many banks are working to build slick, mobile-first front ends to deliver constant and instant value. However, this requires connecting to batch-driven systems. Such systems need to complete a range of jobs simultaneously in a non-stop, sequential order which requires middleware, added complexity, and expense.

Evolution of the institutional banking customer

We’re seeing the shift from traditional banking to an online banking approach. As institutional banking clients get more sophisticated, so do their needs. Today’s customers want payment connectivity through application programming interfaces (APIs), due to the ease they can be integrated with their software of choice. APIs are great for initiating, tracking and monitoring, with all of it feeding back data which can be retrieved immediately.

Real-time payments require not just a real-time processing system but also new ancillary systems and processes to address and prevent fraud risk. Having the software infrastructure to support all that is a considerable rarity, even for major banks.

Connecting through technology

As banks work to outpace the needs of their customers, their focus should be on updating their technology. Most of the industry is built on mainframes. While mainframes can provide a lot of power, they are unable to scale up or down to current needs.

The future state of banking isn’t batch-driven monoliths. Instead it should be a disaggregated ecosystem of microservices. This means utilising automation to increase agility, capability and composability by central processing units working on the programs, functions and systems.

For example, Uber, which receives small dollar payments at a high volume, uses API-connected systems to deliver payments and value to Uber immediately, not at the end of the day. That’s what the customer demands, and anything else puts organisations behind the competition.

Tying everything together with data & analytics

Banking revolves around handling data. However, legacy systems often lack basic data field validations (garbage in, garbage out) and the systems themselves were created with the idea that the line of business was the centre of the world instead of the customer. The solution to this has been to create data “lakes”. Data ‘lakes’ allow structured and unstructured data to be stored in a centralised place where it can easily be retrieved.

New advancements such as cloud-native technologies, strive to handle the data stored in “lakes” quickly. This is most effective when coupled with a microservices architecture delivered via APIs, thereby reducing the effort required to connect to internal and external systems. With all those pieces, a bank’s tech stack is starting to look less like a bunch of siloed systems and more like a thriving, connected ecosystem.

Turning trends into solutions

The future state of enterprise software is cloud-native, produces reliable, actionable data, and integrates microservices and APIs. It’s also one trending toward composability and ecosystems, which low-code does really well.

Further leading: Low code emerging as the core technology for digital transformation.

While technology will undoubtedly make meeting customer needs easier, it also means that financial institutions must enable continuous changes across the enterprise at an increasing pace to stay competitive. To achieve this requires shifting roadmaps and improved communications between departments.

This is where the concept of the ‘fusion teams’, enabled by low-code technology can connect siloed departments. Fusion teams can be multi-disciplinary, made up of developers, users, and business leaders with little to no coding experience, yet can build applications with IT approved technology. Having great tech without the right people and processes, or vice versa, misses the mark. This is where the citizen developer comes into play, bringing together those who understand the customer with IT.

Institutional banking’s paradigm shift

Banks need to understand their customers’ challenges and act decisively to satisfy them. Technology and people are both essential to solving this issue. Banks that harness all this can shift their conversations from “here’s what we’d like to do” to “here’s what we’ve done”, which is a powerful place to be when looking towards the future of banking.