Introduction to Open Platforms and Modular Software Applications
Introduction Imagine a world of banking or trading software. Imagine if each functionality in such software was designed, controlled, and managed by different entities, and not necessarily by one company that built the software. For example, imagine portfolio analysis being managed by one person or company, while the trading screen is managed by another. This is the essence of open platforms and modular software applications.
Imagine a world in which, as an organization, you could easily plug each functionality into your enterprise or consumer software directly and flexibly. You can modify it, break or switch functionality with ease, and you do not need to write complex APIs or maintain them. These are the features of composability. This essentially is the basic principle behind the fundamental open platform of the future.
Open platforms and modular software essentially fit the bill of how you will create great customer experiences and innovate fast. For banking as well as trading software, the overlapping concepts can be brought forth with enterprise versions, which essentially cover most of the modules or an organization’s enterprise functions.
Each modular function has a different capability, a different level of risk exposure, different levels of data security, and a different price point associated with it. The list of modules can range from trading, selling, insuring, lending, liquidity management, integration, payments platform, and more. Essentially, anything that we understand the bank does can be a constituent part of the modular list.
Each function independently has the capability to manage data, control user access, ensure legal and compliance requirements, and so on. For instance, each trading module could be a brokerage, a market service function, or an algo trading system. Alternatively, it could also be a gaming platform. Assurance and reinsurance management could also be a function or module in the enterprise software ecosystem.
There are essentially two fundamental components that are required to work together to unlock virtually unlimited potential for global banking and investment.
Benefits of Open Platforms and Modular Software Applications in BFSI
The open parts can make companies within the BFSI industry even. And by using resources and sharing them, you’ll be able to update. It doesn’t really matter how large or powerful your data repository is. Corporations are aware that rather than promoting a “one-size-fits-all” approach, they can provide an array of effective and complementary apps that their hand-picked third parties can include in their goods and services. Companies can be more diverse and scalable. Solutions that leverage the worth of data to enhance consumer experiences and offerings that split up a financial institution’s applications into small, simple output “modules” are necessary to establish open platforms.
To satisfy consumer requirements and produce meaningful growth, today’s companies within the BFSI industry must leverage the advantages that open platforms and modular applications and services can offer. They are proving their potential. A&F extends across various industries and technologies, often using their pioneer’s mindset to lend strategies, assets, and relationships that link a vast range of users and purposes. Innovating with BFSI organizations’ open ecosystems and third fourth years and fintechs rather than ignoring ‘safety nets’ or replacing them all with a variety of terminals. Maintenance inside will enhance the consumer’s daily live chatbot encounter, as well as enhance call center professionals’ experience, and will make it simpler for parties to discover what they need. Banks have reps, and regtechs have press releases.
Challenges and Risks in Implementing Open Platforms and Modular Software Applications in BFSI
Challenges and Risks with Open Platforms and APIs:
Developers are constantly updating apps and APIs; however, new code or updates may open vulnerabilities. Vulnerabilities in third-party apps are a strong point to attack for bad actors, often leading to data breaches. The BFSI sector internationally works with personal and potentially sensitive data and has to comply with strict data privacy regulations. Integrating third-party apps into existing software systems often represents complex change management processes. A software provider, our interviewees said, would be hard-pressed to prove that they have everything under control, thus triggering the irreversible trust loss by respective clients. Given strict reporting standards, importing and showing custom data from possibly malicious third-party APIs in internal software can be accompanied by the added risk of audit glitches. There are also risks related to enforcing new or breaking existing regulations. Regulatory and legal requirements can change over time, creating a need to adapt your back-end software to new third-party offerings. This situation is aggravated if your existing software vendor does not adapt their software to new, possibly breaking changes. Facing risks of potential lock-ins by software vendors in a proprietary setting, a relevant strategy here could be to limit the number of third-party software or to not buy into them at all. This, however, involves spending resources on potentially inadequate in-house software development or riskier custom software development projects. This tradeoff highlights a potential opportunity with open platforms if lock-in can be mitigated. Additionally, a heavy concentration of integrations can lead to more widespread effects on your business, for example through third-party data breaches.
Case Studies in BFSI Sector
While a number of companies across various sectors have reaped the benefits of agile transformation made possible by open platforms and modular software applications, the next two sections focus specifically on applications of these concepts in the field of banking. Two distinct use cases are showcased here: one in the domain of digital banking using an API gateway. Although a common application domain, these case studies capture the pains of legacy IT systems and the impact of SME outcomes at business scale. All banks today depend on reliable IT systems to conduct their business. According to a 2017 study by Digital Banking Agenda (DBA), 37 applicants were shortlisted for their annual DBA awards, of which 10 were banking technology firms and the rest were early-stage start-ups. Four of the ten big names are from the open platform category.
Future Trends and Innovations in Open Platforms and Modular Software Applications for BFSI
Open platforms
One aspect of the BFSI to possibly watch and invest in the future is open platforms, a distribution-shift strategy. Open platforms have indeed achieved significant growth in number. Open platforms are arising as one avenue through which more innovation can be unlocked. Open platforms are significant because the competitive advantage is accruing to open platforms compared to other distribution types. Open platforms differ from the traditional distribution largely in that open platforms have a win-win rationale. Consumers, suppliers, and the platform operator all benefit from the outcome. As the open platforms continue to scale, long-tail value propositions of more services and better prices are pulling in even more customers. Elsewhere, the scope of the economic coordination within open platforms is widening.
Modular software applications
The momentum supporting modular software applications in the banking sector appears to be gaining traction. Adopting modular applications can enhance in-house IT capacity as external developers regularly update the applications, providing a broader range of expertise. If an API business model is being used, a logical step to consider for strategic fit would be to wholly own the two applications. This assumes that the chosen acquiring bank is already engaged in some degree of platform activity. By doing so, there may be a wider range of platform integrators to consider, leading to innovative products or services through increased R&D. The strategic investment in integrating these applications into other mainstream banking systems offers clients a higher strategic potential. The integration of applications is expected to increase profits and streamline operations.