How enterprise architecture can help the financial sector transform
The financial sector is facing many challenges; the need to deal with a constantly evolving regulatory environment, and the emergence of new technologies such as chatbots, blockchain and even artificial intelligence.
The transformation of traditional banks is centred on customer experience, tech and data.
The powerful forces of digital transformation are shaking up the established order of finance, and the industry is undergoing profound changes with traditional players being forced to adapt to new challenges.
New players with disrupting systems and methods
The banking sector as we know it will soon no longer exist, with rapid advances in digitisation and personalisation. Customers are looking for online solutions that allow them to control and act on their finances at their convenience – anytime, anywhere. In a 2018 EY survey, 85% of banks consider implementation of a digital transformation program as a business priority.
In recent years, the financial sector has been shaken up by the arrival of online-only banks, which have placed customer experience at the heart of their operating models. We can expect to see further new entrants occupy market segments that used to be exclusively reserved for traditional banks.
The ongoing success of traditional banks therefore relies on the standardisation of information systems and the provision of a superior customer experience, giving them the ability to reinvent the bank. In the same EY survey, 40-60% of banks said they will increase investment in omnichannel customer experience, and 60-80% will increase investment with mobile technology.
How traditional banks can change and succeed
Digital banks have been built on information systems that are consistent by design, but they have also created a whole new ecosystem from scratch using a flexible architecture that allows them to grow quickly – making them consistent and flexible, a powerful combination. They can easily integrate new technology as the market evolves while simultaneously controlling investment costs. This new approach enables digital banks to offer an optimal user experience and innovative new services for their customers.
Traditional banks still rely on old technologies such as the Cobol language that was created in 1959, or AS/400, created in 1988. These banks must deal with growing IT maintenance budgets due to legacy systems accumulated over the years. Conversely, their online competitors have basically no legacy assets to manage giving them a significant advantage.
It is not simple or easy for traditional banks to change their model since their systems are proven, established, reliable and stable when it comes to processing large amount of data. The transformation of traditional banks is centred on three priorities: customer experience, technology and data.
(1) Modern customers expect to interact with their bank quickly, easily and anytime, putting customer experience at the heart of digital transformation for the banking sector. Enterprise architects can model the customer experience using customer journey maps. These maps mainly consist of touchpoints between the organisation and the customer, as well as a customer satisfaction index for each touchpoint. By connecting these touchpoints to business process models and improving processes where the experience is low, it’s possible to completely redefine the customer experience.
(2) Banks must integrate emerging technologies faster than their competitors and create new ecosystems based on these technologies. The impact of emerging technologies is so significant that banks must stay one step ahead of the technologies that will one day become used by the majority. In this context, enterprise architects are best positioned to identify new technological trends, but also to understand and analyse their impact. Enterprise architects can help align innovation efforts with business strategy, make strategic recommendations, assess business opportunities and understand their impact on IT systems.
(3) Banks consume a large volume of data, processed by an information system which is of a strategic nature. In a context where personal data is increasingly regulated, it’s also necessary to comply with data protection laws while improving customer experience which requires the use of personal data. Thanks to data modeling, data lineage, and linking data to applications, enterprise architecture facilitates compliance and provides a clear vision of the different transformations that happen to the data.
To compete with new challenger banks in the market, reinforce the quality of their services, improve customer experience, and maintain market share, traditional banks must constantly innovate. This requires a complete overhaul of traditional banks’ information systems in order to support strategic objectives.
Enterprise architecture can significantly help banks tackle these challenges by providing the means to improve customer experience, assess business opportunities of emerging technologies and increase visibility into their data to anticipate the needs of data governance. Enterprise architecture has become an essential instrument for the competitive differentiation of banks and will be the instrument that allows traditional bank to not survive but thrive in our increasingly digital world.
By Gabriel Gomane, product marketing lead at MEGA International
