by Jan-Willem Ophof, Financial Services Global Program Manager, Microsoft Services
The banking industry has changed almost beyond recognition in recent years, however the digital transformation thus far experienced represents a mere fraction of the shift yet to come. Microsoft Services fundamentally believes that we can navigate this period of change by collaborating effectively across the financial services field—from fintechs and traditional banks to other technology vendors—so that the digitization of banking is seen for what it is: an exciting opportunity to change the industry and open the door to new business models, rather than for what it is not: an unconquerable challenge that threatens the future of financial services.
Banks, fintech providers, and technology vendors are facing a variety of challenges brought about by digital transformation.
Financial services is more competitive than ever before—new entrants are boosting customer expectations for streamlined, instant services delivered through frictionless technology platforms. Meanwhile, traditional banks continue to operate on expensive, archaic, legacy technology developed in a pre-internet era. As a result, banks are struggling to keep up with the pace of innovation, experiencing technology outages, and suffering damage to both revenue and reputation
- Fintech providers
Fintech enterprises are built on flexible cloud-based architectures, giving them the flexibility to respond quickly to the fast pace of banking digitization. But what they often lack is the credibility, experience, rigorous regulatory backing, and core infrastructure to operate directly without the support of a traditional bank.
Though the industry is beginning to enable and encourage collaboration between banks and fintech providers, particularly through the integration of banking APIs, there remains a lack of standardization across APIs, limiting collaboration.
- Technology vendors
Despite the level of expertise and innovation within technology corporations, 65% of a bank’s IT budget is still spent solely on integration costs. If not for this resource burden, banks would have the means to realize the full potential of these technology vendors’ solutions. Vendors must show how they are helping banks reduce the cost of integration and align to a long term roadmap and vision.
Microsoft Services promotes the standardization offered by the BIAN model and collaborates with the industry to deliver innovative products that enhance the customer experience.
Service landscape simplified
The BIAN model is based on a service-oriented architecture that defines the standard business capabilities that constitute a bank, such as payments, loan offerings, or trading facilities. These are defined by service domains. By identifying the information dependencies (known as service operations) between these standard business capabilities, BIAN is building a simplified, yet comprehensive solution to overcome legacy banking technology issues—sorely missing from the industry despite many past efforts in messaging layers and data models. The BIAN model is a business architecture, not a systems architecture, and is pitched at the level of a business design or requirements specification. The BIAN model specifications describe actions and business information content in a “spoken business language” form.
Microsoft Services can use the BIAN model to assist banks in improving their architectural maturity and implementing their digital banking initiatives. For example, when banks around the world implement large scale “born in cloud” applications, they use a microservices-based platform such as Azure Service Fabric. Benefits of microservices include a simpler business functionality, allowing you to scale up or down, test, deploy, and manage independently. One important benefit of a microservices approach is that teams are driven more by business scenarios than technology.
For developers, this translates to being able to create applications across public and private clouds that support massive scale with high performance, high availability, cost effectiveness, and independent lifecycle management.
By combining technologies such as Azure Service Fabric and BIAN standards, Microsoft Services envisions that banks will be able to make isolated updates to core business functions without facing the risk of IT outages. Microservices are an application revolution powered by the cloud; combine this with the BIAN model and you are ready to:
- Build and operate a service at scale in order to reach customers in new geographical regions.
- Deliver features and capabilities quickly to respond to customer demands in an agile way.
- Reduce cost through improved resource utilization.
Microsoft is a founding member of BIAN and invites financial institutions, software vendors, system integrators, and technology partners to join the association and other industry leaders to play a collaborative role in defining, building, and implementing next-generation banking platforms.