By Paul Higins, EMEA Banking Manager, Mendix
The financial services industry has traditionally lagged behind on the digital transformation front, but that is changing. The pandemic, the expansion of challenger banks and changing customer expectations have driven financial services firms to innovate. But, faced with an accelerating pace of change, finance organizations need to carefully assess their digital transformation strategy and optimize their approach to technology.
Digital innovation in financial services is extremely complex. Many financial players are hampered by inflexible legacy core systems, and in such a heavily regulated industry, updating these systems is a painstaking process with high stakes: outages and service interruptions are not tolerated by either customers or by the regulator.
Additionally, digital innovation in incumbent banks typically requires deep pockets and a significant time investment; and let’s not forget the mindset and organizational change needed to fuel innovation – “fail fast” is not in their DNA. So what can finance organizations do to improve their ability to compete in an increasingly crowded marketplace? The answer is low-code development — and three examples of how it’s helping accelerate digital innovation in the financial industry follow.
Another challenge across all industries, not just financial services, is the growing digital skills gap. As the pressure to deliver digital-only processes continues to grow, so does the demand for highly skilled tech workers. Hiring a software engineer is a long and expensive process, and financial institutions find themselves competing with Big Tech, start-ups and others who may be able to offer more attractive places to work. , advantages, etc. Thus, many organizations are considering alternatives to fill the technology skills gap, for example, by running programs to upskill existing staff to take on more technical roles. The downside of these programs is that it actually takes years to become a skilled software engineer. Again, low-code offers a viable alternative.
In a fraction of the time it takes to become a full-code software engineer, business users are empowered to become citizen developers and build apps. Enterprise Architecture and IT Security will be relieved to learn that this is not the wild, organic growth of self-developed applications that banks have experienced in the past, such as applications built in Lotus. Ratings. The Mendix Low-Code Application Development Platform (LCDP) provides an IT and architecture-approved framework with which applications are built to enterprise standards. The main benefit of tapping into the resources of citizen developers – in addition to meeting the demand for skilled technical workers – is that they are experts in their field. Instead of writing pages of requirements documents, it is much more efficient and rewarding for these experts to actively participate in building the solution. Using rapid prototyping, a business expert can create and revise a business process and user experience before handing it off effortlessly to a professional developer. They could continue development without wasting time converting mockups and wireframes, developing the rest of the required functionality. This low-code collaborative approach enabled by Mendix has been proven time and time again to accelerate digital innovation and transformation and create business value far beyond more traditional development methods. To support this claim, let’s look at some examples.
Create a consistent omnichannel customer experience
Thanks to COVID-19, even skeptical customers have discovered the convenience of 24/7/365 banking and have come to trust it. LCDPs help financial institutions meet this demand more easily and quickly across all channels, including native mobile apps.
Washington Federal Bank, a retail and commercial bank managing approximately $18 billion in assets, is an example of how quickly low-code can generate value and significant ROI. The bank’s UX was not meeting its customers’ expectations, competitors were improving, and the migration could take up to 3 years. First, they tried to customize an out-of-the-box solution, but it didn’t meet their requirements and was abandoned after 8 months. They turned to low-code and the Mendix platform, and in just six weeks they had already surpassed what their previous vendor had done in 8 months. Less than a year later, Washington Federal had a low-code online banking portal that seamlessly integrated with its existing APIs and systems.
Another example is Rabobank, whose direct savings bank served over 500,000 people. Customers were having issues with the interface, causing them to leave the platform. Any kind of upgrade would be a challenge. The IT landscape was complex, with different systems in different countries, as well as changing regulations and compliance requirements. With the help of Mendix, Rabobank reduced IT costs for direct banking by 50% while delivering a much better customer experience. They streamlined their customer onboarding process and created native web and mobile versions of their savings portal, which resulted in fantastic scores for customer satisfaction and increased business.
Automate processes with low-code
By using low-code, financial institutions can automate various processes that were once manual, saving time for employees and customers. For example, the Business Development Bank of Canada processes 30,000 loan applications and over $4 billion a year. However, to support modern businesses, BDC also needed to modernize its core legacy systems. Using the low-code Mendix platform, BDC built and deployed a new core lending system in just eight months, with just a third of the labor compared to the originally estimated three years to build it with more traditional development approaches. And by automating its business processes, BDC has reduced its loan processing time by 80%.
Given the uncertainty surrounding the global financial climate, it may be tempting to put the brakes on investment. However, according to Gartner, the total financial services market capitalization increased by $1.9 trillion during the pandemic, but only the top 10% outperformed and saw their market capitalization increase, and 3% saw a decline. Efficiency gains through technologies such as low-code have been the key differentiator for this market separation – which is expected to continue, if not accelerate.