On-premise versus Cloud vol. 2

Author: Máté Hidvégi, Head of Development at ApPello

 

When your IT colleague starts playing with building bricks.

These days one can hear ever more about microservice architecture – indeed, since Netflix, Amazon and Spotify have switched from their traditional monolithic architecture to this more fashionable solution, the expression is not only raised in IT circles. But what exactly is microservice and what sort of advantages does it offer? Why exactly is it worth using such an architecture when monolithic systems have worked perfectly well up till now? How can an online banking credit platform profit from this? When is it worth switching, and who should do it?

 

Before seeking answers to these questions, let’s first go over the basic definitions and compare a classic monolithic IT system with the characteristics of a microservice architecture.

 

A traditional monolithic IT system, such as, for example, a core banking system, forms an independent entity, it builds on software all written in the same language and all the different layers are closely interconnected. Therefore, its advantage is at the same time its Achilles heel: the entire system can be tested and updated at one time but this may be accompanied by glitches and outages, while a version upgrade halts operations for a time.

Contrary to this, microservice architecture is a software design pattern that consists of separate services that can be easily integrated into the core system, the resolution occurs based on the business processes, that is, a microservice satisfies a specific given business demand. Thus, it is not surprising that they can even be written in a different language and communication with the core system is managed through completely separate channels. Developments and updating happen independently and as such they do not hamper the operation of the overall system.

 

Tuning your car is the easiest way to get more power…but what about warranty?

In order to better understand the difference, let’s look at a more everyday situation: if we were to purchase a car today, the same technology would serve our comfort and safety throughout the entire period of use, the driving experience would not change over the years. However, development in the auto industry, like many other areas, is extremely rapid. What was state-of-the-art in the first year quickly becomes totally standard, or even outdated. In-car monitors are getting larger and higher resolution, there are increasing numbers of built-in intelligent functions, not to mention that the range of clean electric cars is also growing at a faster pace. Imagine a vehicle where every function could be individually replaced: one or two clicks and the monitor could be removed, which could then be switched with a more modern unit offering higher resolution, the body could be retrofitted with various accident-prevention sensors, but let’s go even further and say that a battery with a current range of 200 km could be switched out and replaced with a power unit providing a much greater range. We wouldn’t then have to change cars every 3-4 years if we wanted a better and safer driving experience, it would be sufficient merely to swap the built-in modular elements and straight away we would have more modern technology at hand.

So, what to do?

Whereas for the moment such vehicles built on a modular basis can be considered utopian for technical, or more likely commercial, reasons, we have been able to enjoy the benefits afforded by microservice architecture in numerous other areas for a good few years now. Well-known examples come from tech stars like Netflix, eBay, Twitter or Spotify who went through this transformation years ago. Initially, Netflix built on the monolithic system but today it would be unable to function without microservice. On a daily basis it receives 1 billion streaming requests from approximately 800 different devices – without microservice architecture, the system would simply be incapable of serving this vast demand arriving from such a diverse technical background.

 

Anyone who plays with building bricks, especially Technic LEGO, will see that today, each sub-unit can be modified in a modular way. By moving one or two studs, the chassis and engine of the LEGO car can be removed, it can be upgraded and motorized with either off-the-shelf sets that can be bought separately or with modifications based on descriptions from the Lego community. The principle is similar: make development and building flexible and convenient.

However, returning to the world of software, let’s take a closer look at what exactly microservices do and what benefits they have to offer.

 

As we have already shown, microservice architecture was intended to replace the inflexibility of monolithic systems. Thus more compact, independent and separately installable services can be built on to a larger system. Given their decentralized nature, they are independent of the developers of the core system, even a totally different team can design them and in many instances they are written in different languages. A core system, such as a core banking system, communicates with other databases, such as an external credit rating system, via interfaces. This interface can also be realized through a microservice. This means that if there is any change implemented on the external database, it is sufficient merely to make changes on the relevant microservice. This allows the system to run smoothly, and testing and restarting a single function solves the problem.

The next significant advantage of microservice is upgradability. Since it is easily modified and then easily re-integrated into the core system, the IT platform can always be supplemented with the very latest technology. It is not even necessary to commit to a single technology since different microservices can use different solutions in parallel. Returning to the example of the car, such a microservice could guarantee, for example, the retrofitting of cutting-edge smart solutions into our vehicle.

What happens if a fault is introduced into the system? Firstly, with a monolithic architecture the entire system could shut down, and secondly, it is far harder to locate the error. In microservice architecture, the source of the error can be pinpointed much faster and it is easier to isolate, furthermore, it is sufficient to shut down only the given microservice, which does not disable the operation of the entire system.

Sounds good, doesn’t it?

Like any system, microservice architecture also comes with some drawbacks. For example, if too many microservices are built into the system, the added complexity can actually work against efficiency. Too much cross-referencing can slow communication, complicate and extend testing, and overload the system.

To sum up, there are still many arguments in favour of the new approach. The banking environment is exactly the sort of area where the system is not frequently updated, so any solution that incorporates innovations or new functions without totally shutting down the system will come in handy. The core system can be integrated, but microservices can be used effectively in all parts of the system that require flexibility and upgrading.

ApPello Digital Platform integrates many of these microservices and builds onto the core system. These auxiliary elements guarantee flexibility in operations, development is faster and cheaper, testing is easier, and error detection is simplified. Anything that is outdated can be swapped. If only we could do this with cars…

On-premise versus Cloud

Author: Máté Hidvégi, Head of Development at ApPello

 

In just a few years’ time, the banking sector is set to undergo huge transformation. On the one hand, there is constant pressure on the part of customers, who are spoilt by the high-tech giants with their user interfaces that sweep the board and convenient and hyper-fast administration. On the other hand, new technologies and disruptive business models are having a compelling impact so that banks need to start developing serious strategies if they want to remain competitive.

 

Due to strict regulations and cyber security aspects, the majority of banks are still operating their own server centres and in-house IT systems, with software running on an on-premise basis. That is, whatever application they acquire from an outside developer they purchase the package and then, after thorough customization, they run it on their own IT infrastructure.

 

In contrast, in the cloud solution banks take advantage of the servers of external service providers, data and applications are run on high-end external hardware and software, but even in this setup bank still have to ensure compliance with the relevant legal regulations, fire safety and data security.

It would appear that there is need for a more proactive and courageous strategy in order for a bank to take up cloud solutions, even though this would give access to many innovative extra services and state-of-the-art technology that is more costly to create in a bank’s own IT division.

So, what to do?

This article is designed to help those decision-makers who are just now considering whether they dare employ pioneering solutions in the strictly regulated banking environment or whether, for the time being, it would be more sensible to stick to a tried and tested strategy. Or perhaps a combination of these two approaches would lead to the most efficient operation…

 

Let’s start out on the assumption that in principle, every bank has its own server room and a hefty level of IT infrastructure because the sensitivity of data in a credit institution demands a high-level cyber security protocol. The conclusion that in this way, on-premise is a cheaper and safer solution is self-evident, because the conditions are already given. However, the situation is more nuanced than this.

 

A cloud service provider applying modern technology is capable of serving up to 150 banks at the same time, in the meantime guaranteeing constant monitoring of the system, operational continuity and overload monitoring, all of which requires the involvement of many dedicated IT experts on the part of the bank.
Furthermore, flexibility of use and scalability are other factors in favour of the cost effectiveness of cloud service providers. For those banks where transaction volumes are higher or perhaps they are planning to enter new markets, the issue of scalability is vitally important. For them, the cloud provides a much more flexible and predictable cost construction.

The next question is: CAPEX or OPEX ?

From an accounting point of view, decision-makers have to weigh up whether the CAPEX or OPEX cost structure lies closer to the bank’s financial strategy. Whereas on-premise requires a larger one-off investment, in contrast the cloud solution pay-as-you-go pricing model increases operational expenditure and adapts far more flexibly to the amount of use. At the same time, an unexpected uptick or considerable increase in volume can make the operation significantly more expensive, in other words, success can come with additional costs. We are not going to come to a clear-cut standpoint, instead the right decision depends much more on how well the user is able to judge the volume of the planned project.

 

At the same time, an important factor in favour of the on-premise solution is that a software package run ‘in-house’ can be far more customizable than an off-the-shelf product running in the cloud. The more customized elements there are, the more complicated the testing is, which is why on the user’s side there is a preference for an own operated solution. The picture is further nuanced by the fact that very many apps are developed to be ‘cloud-ready’ so the user can decide how deeply he/she wishes to customize the application.
Software versions of the ApPello Digital Platform are basically off-the-shelf products, despite which they can be highly customized, flexibly developed and can even be complemented with 3rd party components. Although current experience indicates that the banks primarily prefer the on-premise application, irrespective of this all products are accessible in the cloud as well and they can be used in line with the individual demands of the client.

So the winner is…

This brings us back to the question raised at the beginning: whether a client selects an on-premise or cloud application is largely down to individual demands and operational characteristics.

Cloud services are:

    more scalable
  • provide a greater degree of flexibility when volumes fluctuate
  • are cost effective
  • provide state-of-the-art technology alongside significant expertise

 

The on-premise construction:

    can be better controlled
  • more easily made compliant to strict security provisions
  • operates more cost effectively with larger volumes
  • it provides better support for customization

 

Why not use both solutions in parallel or alternating?

Finally, we put forward the concept of a hybrid strategy: why not use both solutions in parallel or alternating?

In other words, weigh up which one to use by project. Hybrid or combined solutions can represent a good transition, providing new opportunities for open-minded and entrepreneurial decision-makers.

A matter of taste – is it possible to please everyone?

Author: Gergely Ambrovics, Head of UX & Marketing at ApPello

 

Banks aim to reach every single potential customer. From seniors to entrepreneurial startups, everyone should be able to find what they are looking for. When they walk into a branch office they are seen immediately and staff know precisely how to treat them, in what way to talk to them and provide them with a service. But what’s the situation on the internet?

Can a single online banking interface meet everyone’s taste, or is this really mission impossible?

As digitalisation gathers pace, the role of banks is increasingly shifting from transactional services towards consumer services. Banks are ever more conscious when it comes to shaping their product portfolios and range of related services. They also aim to follow and satisfy the demands of target groups with their user interface design. The ideal situation would be if a customer logging in online received the same special treatment as somebody walking into a branch office.

Any professional UX designer can instantly come up with a handful of methods for deciphering (in mere seconds) who virtually ‘walked into’ the online bank based on cookies, social media profile or even just the first few mouse moves. From that moment on we could be winners because the interface could be altered to appeal to different customer segments.

Unfortunately, however, we are going to have to disappoint everyone.

Thus, UX designers responsible for the ergonomics of banking product sites are left with no other choice than putting together a ‘one-size-fits-all’ interface that gets the thumbs up from everyone. But it is not really thumbs up that developers are aiming for. Instead, the task is to attain a smooth unobtrusive convenience. Similar to the best referees in a football match: they do the best job when nobody even notices them on the pitch.

But even so, what UX design principles should a developer follow when it comes to filling out a loan application?

Maybe a youthful, buzzy interface with the right visual stimuli, loans selectable by clicking icons, maturity periods that can be fine-tuned using a slider, and a smiley chatbot window can net the creator a design award. Meanwhile, anyone older than the Z generation is turned off by all this glitz. They are the ones expecting a more conservative attitude from banks: forms in black and white, descriptions without frills, precise parameters. No segments can be ignored.

Seen in this light it comes as no surprise that the most successful players on the field are those who play the safety game with consecutive, cautious innovations (for example: Revolut in terms of UI). Only fully tailored innovations are transplanted into tried and tested practice of many years. One such example is the ApPello’s Digital Onboarding & Lending Portal allowing the user to select light and night mode depending on time of day or light conditions.

An online interface should be user-friendly, simple to operate and responsive. The visitor must receive the information that is important to him/her in a way that is convincing and that allows for independent assessment. The younger, urban generation prefers plenty of graphics, icons, micro-interactions, moving illustrations, embedded videos and isn’t bothered by multitask management or shared screens –sometimes they are more interested in using an application then in banking actually. The older generation goes more for clear, textual information rather than video or tutorial pages, finds the written word more authentic, is happy with downloadable, even pdf documents, and doesn’t panic if it takes more than just a couple of clicks to get what is needed – they need clear and forgiving methods because their goal is to avoid any mistake in digital banking. This generation understands linear logic and is grateful for navigation assistance. It includes those who also welcome the network diagram of the menu structure. They’re not bothered by multiple security checks either – while Generation Z has a shorter fuse in this regard.

This doesn’t mean that every website is going to look the same for ever:

Designs move with the times, which means that this profession moves faster than glaciers: have you noticed, for example, that on ever more interfaces you have to click buttons with a red background?

Of course, some well-known red-branded banks, utilities and telecommunications companies have contributed to this change. Whereas earlier, red was always associated with cancelling, deleting, negating, this is now changing: red is a marker of activity, speed and action. Our expertise lies in the fact that this knowledge of ours is not only present subconsciously, but we actively rely on it.

The safest way is the middle of the road. Of course, the developer should also be proficient in financial services, marketing trends, a little psychology and sociology. And, naturally, the client’s corporate image must also be kept in mind. To achieve and facilitate such an approach a flexible and proven banking platform is a must.

Digitalization – What transformations is it bringing to Credit Scoring?

Authors: Béla Vér, CEO ApPello & András Tóth, Head of Business Analysis at ApPello

 

“A couple of clicks, drag a slider here and there, a quick ID check, attach a few docs and bingo, the money arrives!”

 

– this is what users long for.

So what can a bank do to satisfy these desires while ensuring that its deposit account holders sleep soundly at night, too?

Winning over and retaining a digitally-literate generation has placed yet more pressure on banks. Full digitalization is unavoidable and not only because of external coercive factors: online credit scoring saves banks time and money, the assessment processes are made more secure and the client circle ends up feeling more satisfied.

However, digitalization of credit scoring is not merely about transferring procedures that until now had been conducted in person onto a digital platform. The technology also promises new solutions that, in addition to identification and administration, also position the determination of creditworthiness itself on a digital basis.

Data is the new oil, right?

Data analysis has become a global trend in all fields and a whole new profession has arisen in the shape of data analysts and data scientists. So why shouldn’t banks take advantage of this opportunity? Day after day, vast quantities of raw data are generated worldwide, from which it is possible – using appropriate expertise and software developed for the purpose – to mine relevant correlations. Just imagine what the data registered by sensors in our telephones can reveal about us: daily commuting patterns, preferred means of transport, destinations, demographic and health data, shopping habits. From a content viewpoint, our navigation through the internet is also very revealing, and not only our browsing history. There is a lot to be gleaned from, for instance, how quickly we read, how we switch between sites and our data processing style. From the aspect of a data analyst and software developer, these are hugely valuable pieces of information.

It is absolutely inevitable that banks will also draw from this huge data pool, and if they could, they would certainly dip deep with the ladle. However, three factors are currently stopping them doing this:

  1. 1. Legislation
  2. 2. Consumer attitudes
  3. 3. Lack of universality.

Why are utility bills and wage slips the documents that banks usually ask for?

Precisely for the three reasons detailed above:

  1. 1. Because: This is the current legislation;
  2. 2. Because: Consumers have no inhibitions about providing these data;
  3. 3. Because: Almost everyone has these kinds of data and they supply an accurate picture of creditworthiness and standing in the community.

If any kind of change is implemented, it has to meet the above criteria. Still, from time-to-time, ApPello’s well established credit-scoring system is challenged, whether it knows already the innovations one could have read in Wired magazine. Although we follow the trends, we are not willing to experiment for the sake of admiration. At heart, a bank provides a service of faith and trust, it bears responsibility for its customers, particularly as regards their data. Therefore, it is critical to consider the limit where the use of data improves the quality of services provided by banks without too much personal data leading to mistaken conclusions. If a bank involves data lifted from social media into the risk assessment, then it has to have a coherent scoring system. It is obvious that this evaluation process still requires refinement of the models and optimization of protocols. Unlike Big Tech enterprises (Apple, Google, Facebook etc.), banks are not yet in possession of such giant data troves. However, if regulations were modified to allow the above mentioned Big Techs to function as financial institutions, it could result in a totally new competitive situation. They would instantly have a huge advantage particularly in the retail sector as they would be able to provide a much more customized user experience based on the richness of the profile.

The next unavoidable issue is consideration of the rights of the individual. Customers should also weigh up the extent to which they provide authorization for the handling of their own data if this eases or speeds up, for example, the assessment of credit applications. The ‘millennial’ generation, i.e. digital natives, are not so reluctant because they have socialized in a data-driven society where exploiting the benefits inherent in this takes precedence over privacy protection.

Another fascinating topic on the subject of digitalization of credit scoring is the application of artificial intelligence. It would seem obvious to involve AI in data analysis during credit assessment, but there are concerns even on the side of regulators, and not without justification. If banks use a model based on a neural network, it is difficult to point out reasons for any given decision at a later date. This is because AI presupposes a machine learning process in which the system learns to draw the appropriate conclusion from a relevant large sample, but it is precisely for this reason that it will never be able to pinpoint with any accuracy the underlying reason. Obviously, this can result in legal consequences since a customer never receives an objective answer as to why his/her request for a loan was turned down. Every financial institution needs to be particularly prudent because managing the money of customers is a matter of trust that is easy to lose even over a minor mistake.

However, there is no stopping technological development.

Today, the banking sector employs solutions on a daily basis that were not available five years ago, and ten years ago were simply inconceivable. In addition to thoroughly reworking the regulatory background, another challenge in digitalizing the financial sector is to attract trained IT professionals. At the moment this presents the banking sector with a massive HR problem because it is not necessarily the financial sector that offers the most exciting career pathways for the best IT experts and it is far from being the best paying field. On the other hand, as the attitude of banks changes and they become ever more committed to full digitalization, they will inevitably devote greater resources to data processing. The longer a bank puts off learning about what is new in this field, the higher the cost will eventually be.

Top Banking & FinTech Trends Post COVID-19

Author: Mihály Medovarszki, Senior Software Developer, ApPello

Banking Industry has already faced several challenges of digitalization in the past few years but most advisors and sector experts agree that only fully digital banks will be able to survive the next decade. COVID-19 has only accelerated digitization as pointed out my colleague Gergely Ambrovics in his blog recently.  Expanding on that here are my thoughts on how Banking & FinTech world will be impacted post COVID-19.

 

Environment & Sustainability focus of Millennials

COVID-19 has put environment top on the agenda globally, making Millennials’ environmental agenda stronger. Environmental consciousness in banks can go beyond paper-less offices. And it’s not only a nice-to-have, but it’s a must if financial institutions want to attract their youngest customers. The millennial generation act for different values than their parents. Currently most of the available retail and investment products are composed according to the older generation’s taste, simply because they dispose of the greatest wealth. However, this will change in the future so the banks have to prepare for the new generation of clients and their fundamentally different approach to finances.

This shift can be observed on the investment field, where more and more so called ESG products appear. ESG stands for environmental, social and governance, and it’s a kind of scoring framework which can be used for ranking a company’s social and environmental responsibility and attitude. It’s just a matter of time banks start following these trends. Actually, green banks are already out there, but most of them are still smaller than average.

Impact can be achieved through the banks investments, for example by financing environmentally positive projects, and avoiding sectors such as oil & gas or defence. Social responsibility (CSR) is another important tool which can be used inside the organization of the bank to shift the corporate mindset into a positive direction – and alongside with smart marketing, it’s really good for the brand too.

A study published by Augustin Landier of HEC Paris Business School, Jean-François Bonnefon of Toulouse School of Economics, and Parinitha Sastry & David Thesmar of MIT Sloan, showed that investors are willing to pay $0.7 more for a share in a company giving one more dollar per share to charity. The study also revealed that firms exercising a negative social impact were valued at $0.9 less per share than those considered socially “neutral.” It seems the time has come when we can express the “greenness” in dollars, so banks have to adapt to this trend as it become more popular.

Decentralized finance and blockchain based solutions

Decentralized finance (or just DeFi) is currently a niche but more and more important topic in fintech. This relatively new term is connected mainly to blockchain-based distributed services. By DeFi we are talking about the new generation of financial services where there is no central counterpart in the process. Every transaction happens in a distributed way on the network typically by using so-called smart contracts. These smart contracts are small code snippets with a specific purpose (eg.: booking a transaction) where the execution of the transaction is validated by the participants on the network.

Only a few of these solutions have been commercially proven, but the technology is proved its benefits in certain areas and many new solutions are under development. Decentralized solutions can substitute the middle-man in many areas such as clearing houses or can be used for security purposes by preserving data integrity. Though the technology is still not in the spotlight of decision-makers, large financial institutions, like JP Morgan are investing heavily in the research on this field, so we should take it seriously.

“Blockchain is the financial challenge of our time. It is going to change the way that our financial world operates.” – Blythe Masters

Interest rates will remain low for the long term

Interest rates are the cornerstone of the profitability of the banking industry. As the classic approach of a retail bank operates: Bank collects money from their depositors and lends it back to other clients. Both sides of this core business highly depend on the interest rate environment the bank operates in. There is a small margin on both sides, so the bank earns a yield on this interest rate spread during its operation. In a constantly low interest rate environment this spread is shrinking while the operating costs remain on the same level which negatively affect the cash flows of the firms.

As a result of the 2008-2009 financial crisis the world’s central banks had no other option than lowering the base rates to the floor and pumping money to the financial system to keep the economy alive. But with this move they also reduced the profitability of the core businesses of these institutions. After a decade of low interests and ample liquidity the FED started to hike the base rates a few years ago and it seemed the world for the banking industry will return to the normal. Then came COVID-19 and with the necessary bailout programs practically erased the possibility of rate hikes in the foreseeable future.

 ” We’re not even thinking about thinking about raising rates.” – Jerome Powell, 2020 June 10.

So what? Winter is coming onto the banking industry? Kind of. As everything in life, low rates have their positive impact as well, mainly on banks’ balance sheets. Reduction of the rate environment means increased valuations on the asset side of the books which has a positive effect on the income statement. Lower rates also decrease the probability of credit quality deterioration which leads to lower loan loss provisions.

Beyond the accounting part of the game, banks can do something more important: reduces operating costs by digitalization. Transforming their operations fit for future can increase customer experience and satisfaction while their costs per client lower significantly. On the other hand, digitalization is still an easier way on a dense market than increasing substantially the number of profitable bank customers.

Traditional banks going beyond “lipstick on the pig”

Nowadays every traditional bank has an on-line e-bank interface and/or at least one mobile app. Some of them are practical and fancy, but most look outdated and modest in features next to a start-up’s freemium mobile application. With open banking gaining traction, these traditional banks are in pressure to getting their API strategy and execution right. Open banking fintechs like Cake from Belgium are exposing the poor state of APIs traditional banks have. It is only one side of the coin. In the back-office, there are still many areas in almost all institution where the levels of digitalization is – let’s say – natural sloth. The systems are hardly and partly integrated with each other, every business area has its own rote, and the different systems are not working together in a standardized way. This leads to complicated workflows in some cases and this complexity means drag and costs for institutions. Meanwhile each poorly integrated satellite system is a potential killer of any progressive feature on the fancy front-end. Nowadays the divided and legacy layers of banking back-end can’t affiliate the full potential of an up-to-date client portal or application. By using customized 360 degree, microservice -based solution from a vendor for a specific business process, this complexity can be reduced, and the goals of bank customers, back office staff and IT operation can meet.

For more information on how we can grow your business please get in touch with us, schedule a chat!

Core Banking vendor lock-in is slowing banks down

Author: Béla Vér, Founder & CEO of ApPello

In such extraordinary times as these, innovation, digital adoption and speed to market is needed more than ever. The SME segment has been the most effected by COVID-19. Drop in sales, cashflow and supply chain disruption are key concerns for small businesses affected by Coronavirus. Opinium, a UK market research agency, has found about 82% of SMEs in UK alone are concerned about the impact COVID-19 is having on their business. Another survey shows about 76% of UK’s SMEs have experienced a decline in sales, with almost 40% citing cash flow problems.

Making this segment the most in need for faster and smoother access to loans to support their business. European Union and governments are working hard to support the entrepreneurs and small & medium businesses with government backed COVID-19 lending support such as the UK’s Bounce Back Loan scheme. Despite all the good efforts, traditional banks are unable to provide quick loans to the SMEs who are in much need of funding immediately. This is clearly not the intention of these traditional banks, rather it is the hallmarks of vendor lock-in. Simply put, banks lack the flexible digital processes and technology to be able to change their products and services at the speed such times require them. These inflexibilities can mainly be attributed to high dependencies on internal monolithic systems, either built inhouse or supplied by traditional core banking vendors.

Core banking systems (CBS) underpin nearly every major banking process. Think of them as the information technology that runs a bank’s central nervous system—the software and infrastructure that links services to business units, customers, and back-office functions. These systems not only drive the banks’ day-to-day operations but also serve as the core IT platform for new capabilities and growth.

Yet many banks are saddled with underperforming systems and outdated monolithic architectures that barely support key processes, at a time when institutions face renewed pressure to reduce costs and adjust to volatile conditions in turbulent times like these. Traditional monoliths are designed in a way that every change in the process or product needs additional development of the system, resulting in lost time, cost and resources. Slowing down the whole process resulting in servicing the customers in need.

The CBS ecosystem is changing, in recent years, both the IT decision makers’ and the banking executives’ understanding of CBS have matured’. These developments have brought improvements in planning, project management, and platforms. Newer generation of Digital Core Banking Platforms like ApPello are designed more on a micro services principle, providing the highest level of flexibility to the banks to manage their processes and products. Micro services clubbed with open APIs and low code platforms, allows banks to plug in a core banking platform into their existing landscape without the need for rip and replace.

ApPello’s Digital Platform not only helping banks in offering digital services to their customers with less resistance, but also offers a smooth transformation path without disturbing the ecosystem –  without the need for spending high costs in maintaining their inhouse legacy systems. The ApPello platform offers the following value in short to midterm:

 

Smoother & Faster Implementation

Next-generation CBS platforms deploy and integrate with emerging technologies faster, due to plug and play integration within industry leading ecosystem partners. The cloud native platform offer many technology benefits, one in particular is elasticity and high availability, making deployments much easier, smoother and on-demand. ApPello’s Digital Core Banking is on cloud to not only provide the benefits of the platform but also the easy of deployment and change.

Bigger payoffs

Banks and financial institutions need to help their customers in a timely fashion. A digital and omnichannel approach not only results in customer satisfaction, but also helps them increase stakeholder value by reducing the overall cost and improving efficiencies.

Vendor Independence

With a flexible workflow and business rules engine at heart ApPello’s digital platform, banks are able to design new processes, modify existing processes and deploy it themselves, without the need of an ApPello engineer. The low code drag and drop enabled screen design of the platform, helps banks in creating their own channels without the need of an external agency, vendor or IT. Open API integration enables banks to easily integrate their internal systems with other third parties.

Lastly, ApPello’s overall platform is built with different core services across the customer journey being loosely coupled. This is to ensure that they can be used separately without the need of deploying the entire platform or need of using only ApPello family of products for rest of the customer journey. These inherent capabilities make ApPello’s offering extremely vendor independent.

A new digital service, for example a COVID-19 business resilience loan, could be made live in a 2-3 months period. This is the true power of adopting an open digital core banking platform from ApPello.

In conclusion, the advantages of adopting a modern digital core banking platform will not lead banks to a vendor lock-in rather the opposite, it will empower them to serve their customers and stakeholder even better.

For more information on how we can grow your business please get in touch with us, schedule a chat!

European Digital Lending Scene Post COVID – A 1,5 year digital gap disappeared in few weeks

 

Author: Gergely Ambrovics, our Digital Lending UX specialist

Only a few weeks after white-collar crew started to recapture their desks in the downtown offices and a few days after the first international border openings

Many of us try to understand the actual economic situation and predict the upcoming quarter. If we focus on raw data (number of infected people, economic regression, etc), the CEE countries are the unexpected winners of the pandemic in comparison to rest of Europe, but with no reason to celebrate. While the rapid provisions and seriousness of curfew in Hungary and in the surrounding countries stopped the infection from spreading this spring, our economy has slowed down, and there is neither an effective treatment nor herd immunity. After 3 months there is no way to maintain the extreme social distancing. People require to restart private life and the economy as well. With these conditions a second wave of the epidemic can be highly lethal, but most businesses can’t decide which scenario to bet for? There is still a slight chance for V-shape economic restoration (stock markets priced this scenario, fingers crossed), immediate global epidemic with high mortality rate after the summer reopening is also a possibility and of course, many shades between these two extremities.

It has to be stated that our daily life is not got back to normal yet, but we are in time to research and examine the adaptation to the situation of the population. Deloitte Digital has done its great series of Digital Banking Maturity Survey, and last week I had the pleasure to check the 4th edition of this survey (https://www.portfolio.hu/public/portfolio/conferences/presentations/grzegorz_w_cimochowski_deloitte_portfolio-847.pdf) on the Portfolio Financial and Corporate IT online conference.

We at ApPello, as Digital Lending specialists , are always keen on the digital maturity of markets across Europe and in particular markets we are active in. In the last few years we had perceived that from our key markets – Austrian, Czech and Slovakian banks were ahead of the Hungarian banks in Digital transformation and adoption – but the latest survey shows that Hungarian retail bank customer’s behaviour has changed due to COVID. A 1,5 year digital gap disappeared in few weeks with respect to client’s digital maturity.

We strongly distinguish the Retail and SME/Corporate segments from the point of business opportunities of our clients, but there is a related trend in digitalization in these segments.

If we focus on the retail segment, we couldn’t agree more with the Deloitte survey: the percentage of digital clients went up from 45% in 2018 to 81% in 2020. If we divide the digital segment to digital-only and omnichannel bank clients, we can see that the number of digital-only clients are growing significantly, while the number of traditional clients are decreasing and the numbers for omnichannel users remained almost the same. Reading this survey, we would confirm the short-term effect of the global crisis to personal lending and mortgage, but we believe it is more important on a long-run that clients have accepted existence of complex digital lending products during the epidemic. We have to admit, in the last 2-3 years we were a bit sceptical in evolution steps of retail lending:

  • We thought that from UX perspective mortgage is manageable only via omnichannel approach because of its complexity and long-term client commitment.
  • Further expedition of native Banking Mobile Applications is less effective than focusing on responsive client portals

The Deloitte survey strengthen our second concept (4% is mobile-only, while 36% of clients are fully digital and 46% omnichannel), but we could bet that in 2 years digital clients will accept an End-to-End mortgage as a viable option.

Finally, some thoughts on Corporate and SME lending: the technical perspective is very similar like in the retail segment. It is obvious: many employees will stay in their home office, both back office and client facing personnel. These employees will need a fully digitalised banking processes and without doubt their clients as well. ApPello Digital Lending solutions are designed and developed to support exactly these needs, from workflows automation to low code application configuration and development. From as corporate lending perspective – we believe 2021 will show first sign of the recovery of global economy with the emerge of digital corporate loans.

Tech Leads on digitalization and COVID-19

It was a pleasure for ApPello to take part at the Financial and Corporate IT conference by Portfolio discussing the impacts of COVID-19 on the IT landscape.

As Tamás Laufer (#IVSZ) pointed out, in a modern economy 25% of the yearly gross income is coming from the IT sector and its share is about to grow as the digital transformation picks u speed. COVID-19 supported this tendency, putting business continuity, IT security and new communication channels into focus. Procrastinations and long philosophical discussions could come to a quick end as the situation needs fast reactions.

Roundtable attendees representing key players in the Hungarian market (Szabolcs Pintér, SAP Hungary Kft; Zsolt Rakoncza, Dell Magyarország; Viktor Szekeres, Gloster Infokommunikációs Nyrt; Dr. Balázs Vinnai, W.UP) agreed that the last two months have shown that alongside Education and Healthcare sector, the Financial industry could also master the challenges and develop IT solutions to adapt to the changes. As time was little and speed was of the essence, these solutions are not always perfect, but are definitely pointing into the right direction of digitalization with all its benefits. The Genie of Digitalisation is out of the bottle, broke the walls and many trust issues.

As a priority, banks and financial institutions needed to ensure business continuity, seamless internal collaboration and of course attract new customers / maintain the relations with existing customers via digital channels. Péter Fekete from 4iG expects IT projects outside these areas to slowdown, but it does not mean that they won’t happen – investments are foreseen in making the current processes frictionless and more convenient.

ApPello strongly agrees with presenters’ views as we have experienced that banks and financial institutes could handle the challenges of the first 2-3 month of the pandemic situation, both as business partners and employers. We are currently working on projects in various countries without any collaboration issuses as the capabilities of ApPello’s Digital Platform allows rapid and agile delivery.  This makes us optimistic for the future and we are ready to seize the business opportunities arising from further digitalisation of the financial and corporate sectors.

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We are happy to present you our new 2020 video that shows our solution for Digital Lending.

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We are happy to announce that ApPello presents at Finovate Europe 2020 Stay tuned!

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