Foundation for the Digital Journey of a Bank
Published on : Thursday 04-08-2022
Conversational banking will feature a rapid growth in coming years, predicts Utpal Chakraborty.
Digitisation journey of a Bank starts with building Digital Skeleton, and one of the most critical aspects of it is building an effective API Ecosystem. And when I say Effective – it starts with a holistic integration strategy, a robust architecture that caters to security and regulatory requirements, a governance model that not only addresses current requirements but can be extend to the future needs.
APIs are the digital glue holding the IT systems of an Enterprise hence API Economy plays a significant role in the digitisation journey of a Bank. It is instrumental in integrating Banking IT ecosystem with various internal and external systems and the digital channels. Banks that create and maintain a true API Economy can exploit significant competitive advantages.
The advent of the API economy has essentially revolutionised the way banks and FinTechs work within the financial services industry. While API technologies are not new, but the disruption in the financial industry that started recently compelled the banks and finance industry to gear up for the API Economy and Open Banking revolution. Some big banks that are frontrunner in the digital journey have made themselves equipped with a very good integration strategy and infrastructure but there are a huge number of small and mid-size banks across the globe still figuring out the optimal path to reach there.
Although APIs are a great way to connect one system with the other, but the story doesnt end there for a highly regulated institution like bank. It needs some more ingredients to build that robust and extensible API ecosystem.
APIs can be considered as effective multipurpose tools that enable the implementation of a true Open Banking Ecosystem. Open banking APIs are valuable assets to the banks and financial services, since these allow them to:
1. Improve service offerings
2. Enhance customer engagement, and
3. Create new digital revenue channels.
An efficient API infrastructure enables the legacy banking systems to transact with the external world and expose variety of products and services to their customers through different digital channels. In this way, the banks can even leverage the innovations of the FinTech startups and move beyond the traditional definitions of banking. With open banking API strategy, banks can give the opportunity for FinTech startups to create innovative solutions and plugin to the banks IT ecosystem. I feel its a best way of encouraging innovation and creating business value from the same.
In this entire landscape, just to organise the things in a better way, an Enterprise Service Bus (ESB) or an API Gateway essentially plays a crucial role. ESBs can be defined as software architectural patterns used to develop and implement communications among software applications that are mutually interoperable within a service-oriented architecture, SOA. An ESB is an architectural pattern in which a centralised software component (an ESB product) enables the integration of applications. The architecture supports some core features like – Application Integration, Data Integration, and automation of business processes in orchestrated manner. The ESB is a standardised integration platform combining Messaging, Web Services, Data Transformation, and Intelligent Routing for reliable connection and coordination of interactions between large numbers of heterogeneous applications. An ESB platform is also expected to maintain transactional integrity while performing such functions.
With the emergence of ESBs, there is a way to integrate Web Services and SOA in a meaningful architecture to complement applications and services into a core which extends the extended enterprise at a wide scale. The overall purpose of applying technologies like SOA, EAI, B2B, and web services is to build an integration architecture that can be omnipresent throughout the extended enterprise and beyond. A Unified Connectivity Platform leverages SOA principles and the features of ESBs to enable truly reusable, service-oriented business architectures, which deliver agility and ease of development that an enterprise like a Bank need to remain competitive in today’s landscape.
Technically, integration components within the ESB are abstractly decoupled from one another, and connected through the bus as logical endpoints which are exposed as events driven services. Banking applications can plug into the bus when needed and are capable of having visibility and sharing data with any other applications or services plugged into the bus.
For a bank, an ESB is an efficient way of exposing internal applications to their peers without building a point-to-point integration. This approach addresses many of the challenges that are obvious while doing an integration project in a Bank.
It is the API Economy of a bank which makes possible the ambitious initiatives like customer 360-degree analytics, ML based personalised recommendations, rendering products and services in variety of digital channels and many such projects that keep buzzing around now a days. So, it would not be wrong if we say API Economy is the core of digital transformation of a Bank.
Download full whitepaper – https://whitepaper.allieddigital.net/FinoAllied
(Views expressed above are personal opinions of the author.)
Utpal Chakraborty is Chief Digital Officer at Allied Digital Services Ltd. A former Head of Artificial Intelligence at YES Bank, he is an eminent Data Scientist, AI researcher and Strategist, having 21 years of industry experience, including working as Principal Architect in L&T Infotech, IBM, Capgemini and other MNCs in his past assignments. Utpal is a well-known researcher, writer and speaker on Artificial Intelligence, IoT, Agile & Lean at conferences around the world.
His recent research on machine learning titled “Layered Approximation for Deep Neural Networks” has been appreciated in different premier conferences, institutions, and universities.
