In their January 2023 article, “If transformation needs to be bold…” 1, EY suggests that transformation is vital but sub-optimal outcomes abound and expounds six key recommendations to enable a bank to succeed. I would like to focus on one of those six recommendations that reads as “Reposition for agility at scale, focusing on core technology, culture, team structure and governance as enablers for rapid change”. 2    

This ability to innovate with agility at scale does not come from just technology or having a team in place. It arises from having a management that allows for failures to happen even as innovation is happening. Although counter-intuitive at first, the ability to fail is critical if we are to succeed at innovation. In fact, high growth companies often fail fast and fail often! This was highlighted by a futurist and keynote speaker, Scott Steinberg at American Express in “The Case for ‘Fail Fast, Fail Often:’ An Ethos for High Growth”. 3 He discussed five tips to help build successful businesses.

Modernization of core systems is, however, an infrequent activity. It therefore becomes essential that the modernization be undertaken to create a core that is essential for doing what it really needs to do: be a subledger and only perform essential account management and interest rate calculations. If that happens, then the ability to innovate happens external to the core but tied back to the core to allow it to perform its account processing functions. This ‘ability to innovate’ will now require teams that can truly innovate and therefore not have to be right every time they attempt change: be it in a new product, new offering, or something simpler as rate setting.  

A culture of experimentation

Externalizing innovation from the core system allows for different rates of change in the two systems. This enables agility in product innovation and industrialization in account processing. This manner of agility comes from an organization that encourages its product managers to ‘experiment’ based on hypothesis testing (inclusive of market research) and adjust rapidly. The systems for product innovation would allow the product managers to configure products in the language of their business while being able to execute them at scale. Further, the institution must be agile in these processes, allowing for rapid failure and adjustment of the product or proposition until successful.  

EY also indicated that, ultimately, cloud technology would unleash the required agility. “Banks will need to establish the technology and data capabilities required to bring their transformation vision to life, which may require significant investment. Modern core banking systems may be required to hasten the integration of new technology that will allow rapid access to key data”. 4

“Banks need a modern technology architecture to transform with agility,” 5 says Raphael Schapiro, Chief Technology & Operations Strategy and Transformation Officer, BMO. “It’s important to have applications in the cloud, but when it comes to product development it’s also important that key workflows are built cloud native. This enables automation and saves significant time”. 6

Leveraging cloud-based technology for product and pricing with best-of-breed integration patterns enables this culture of experimentation.

Captain Kirk?

As commander of the USS Enterprise, Captain Kirk declared that its purpose was, among other things, ‘to boldly go where no man has gone before’. Well, the good news is that a number of CIO’s have already gone there … In terms of product externalization.  

Several case studies talk about how this externalization can be enabled, including the integration patterns that make it work.  At Zafin we empower banks to be bold and help them go the distance so they can succeed at this experimentation. We are that essential first step in modernization. The time is now. Let’s GO!

  1. Source:
    https://www.ey.com/en_us/banking-capital-markets-transformation-growth/if-transformation-needs-to-be-bold-do-banks-have-the-right-tools-for-success
  2. Source:
    https://www.ey.com/en_us/banking-capital-markets-transformation-growth/if-transformation-needs-to-be-bold-do-banks-have-the-right-tools-for-success
  3. Source:  
    https://www.americanexpress.com/en-us/business/trends-and-insights/articles/the-case-for-%27fail-fast,-fail-often-%27-an-ethos-for-high-growth/
  4. Source:
    https://www.ey.com/en_us/banking-capital-markets-transformation-growth/if-transformation-needs-to-be-bold-do-banks-have-the-right-tools-for-success
  5. Source:
    https://www.ey.com/en_us/banking-capital-markets-transformation-growth/if-transformation-needs-to-be-bold-do-banks-have-the-right-tools-for-success
  6. Source:
    https://www.ey.com/en_us/banking-capital-markets-transformation-growth/if-transformation-needs-to-be-bold-do-banks-have-the-right-tools-for-success

Stay ahead of the curve. Join us next month for another insightful article.

Founded in 2002, Zafin offers a SaaS product and pricing platform that simplifies core modernization for top banks worldwide. Our platform enables business users to work collaboratively to design and manage pricing, products, and packages, while technologists streamline core banking systems.

With Zafin, banks accelerate time to market for new products and offers while lowering the cost of change and achieving tangible business and risk outcomes. The Zafin platform increases business agility while enabling personalized pricing and dynamic responses to evolving customer and market needs.

Zafin is headquartered in Vancouver, Canada, with offices and customers around the globe including ING, CIBC, HSBC, Wells Fargo, PNC, and ANZ.