Financial services: behind the scenes

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Published on: May 11, 2023

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Financial services: Behind the scenes  

As fortunate financial service consumers, thousands of innovative digital platforms cater to our various financial needs. Some platforms offer seamless wealth management and help us automate stock investments. Others allow us to effortlessly split our paychecks into multiple sub-accounts and set daily spending limits with just a few clicks. 

Have you ever recognized how financial institutions provide us with such a diverse range of options and features? Behind the scenes, employees of financial institutions are experiencing a stream of innovation to keep up with their consumer demands. Specifically, SME lenders are growing quickly using innovation because their platforms require and allow them to meet the evolving standards of their customers.  

53% of SMEs find it relevant that a bank/financial provider delivers an easy-to-use digital self-service platform.

Digitally transforming to stay innovative.  

SME lenders are innovating quicky to keep up with these demands. For instance, as SME lenders expand their loan portfolios, their initial setup may not be enough. Thus, they must upgrade their systems quickly to accommodate the growth while keeping the platform flexible. To accomplish this, there are several potential approaches:  

  • Developing an in-house solution by utilizing their developers. 
  • Outsourcing the development to a third party. 
  • Adopting a Software-as-a-Service (SaaS) offering. 

To begin with, creating an in-house solution offers lenders complete control and customization options, but it requires significant knowledge, time, and monetary resources—all of which may be stretched for SME lenders. Additionally, ongoing maintenance and potential time and cost overruns are considerations. 

In contrast to in-house solutions, buying a SaaS solution can streamline processes for SME lenders without requiring extensive in-house development work. It offers benefits such as faster time-to-market, reduced reliance on IT resources, cost-effectiveness, and improved risk management.  

Nowadays, many SME lenders are intending to drive digital innovation from the inside out. They are choosing flexible SaaS front-end and back-end solutions to achieve this goal. In the end, providing consumers with user-friendly platforms offering a range of convenient and intuitive digital services, while utilizing an efficient back-end to allow for this customization.  

How can a financial institution be future-proof with increasing customer demands? 

As users, we benefit from a seamless platform experience when, for instance, applying for a business loan. To create customer-focused experiences, lenders can enhance their platform's front-end features. However, to avoid problems, lenders also need a flexible back end or core banking system. This core banking system can easily adapt to changes if it has the following key characteristics. 

To begin with, the lender needs access to real-time data. Real-time access to borrower data allows for payment and transaction history monitoring, identifying default risk and potential intervention points, such as missed payments. Bank employees can set up event alerts within the system, which are automatically triggered by system changes made into "events". These alerts promptly notify bank employees of relevant occurrences within the system, such as overdue payments, based on real-time access to borrower data. 

Continuing the platform, API calls should be used to retrieve data. APIs serve as a bridge between applications and back-end systems, facilitating communication and data exchange. Proper API documentation and adherence to guidelines ensure a high-quality connection between applications. The API documentation provides instructions on integrating and effectively using APIs, which is crucial for consistent functionality across the system. Well-documented APIs also facilitate collaboration within a lender by establishing a common base for creating functionalities. 

In the past, configuring system functionality required extensive coding and hiring specialized developers and consultants, which was time-consuming and costly. It also limited options for proactive problem-solving. However, modern banking and loan solutions now utilize no or low-code offerings, allowing users to create applications and workflows using pre-built components through drag-and-drop functionality. This enables configuration by individuals with minimal coding skills. 

With these reduced coding requirements, a loan administrator can easily modify the terms of a loan. Since the need to code is much lower, cross-functional teams, including marketing, business units, and IT, can collaborate and implement solutions to customer problems. 

At the heart of it all, orchestration is the key element that combines different components, products, APIs, and services within a system by directing their actions. This can involve establishing rules and policies for data flow handling, defining service-level agreements (SLAs) for performance and availability, or implementing automated workflows for routine tasks. Additionally, orchestration enables seamless integration of APIs and third-party services, such as compliance or fraud tools. Banks and lenders can ensure consistency across their entire system by having a centralized orchestration layer. 

To conclude. 

As users, we enjoy the advantages of financial organizations with a flexible IT system. Thanks to innovation, employees without development knowledge can configure functionality to offer us, the consumer, a seamless user experience.  

Even though the lender's success doesn’t just depend on flexible technology, successful organizations will use it to meet our demands and enable employees to collaborate in fully digital, streamlined settings. 

Core banking systems are the heart of the IT landscape and shouldn’t be underestimated. The ability of a back-end system to adjust to changing demands can enhance competitiveness by optimizing operational efficiency within the IT landscape. 


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