How Serverless and Functions As A Service (FaaS) Can Help Impact The Digital Customer Experience In Financial Services

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Financial Services in 2020 – An Industry In Flux 

The banking industry’s younger customers are Digital Natives. Younger consumers are highly comfortable with technology and use mobile apps such as Google, Facebook, Uber, Netflix, Amazon, Google, etc almost hourly in their daily lives. As a consequence, these customers are neither loyal nor emotion with Banks and their services. The most important criteria for them are a similar seamless & contextual experience while engaging with Banks over digital channels.

Established Banks then have a dual fold challenge – to store all this data as well as harness their internal processes to take advantage of real-time insights. And then to perform this in a way that is constantly feeding internal marketing & sales.

On the other hand, young companies such as FinTechs (or new Age financial industry startups) offer enhanced customer experiences built on product innovation and agile business models. They do so by expanding their wallet share of client revenues by offering contextual products tailored to individual client profiles. Their savvy use of segmentation data and predictive analytics enables the delivery of bundles of tailored products across multiple delivery channels (web, mobile, Point Of Sale, Internet, etc.). Like banks, these technologies support multiple modes of payments at scale, but they aren’t bound by the same regulatory and compliance regulations as are banks, who operate under a mandate that they must demonstrate that they understand their risk profiles. The best retail banks will not only seek to learn from, but sometimes partner with, emerging fintech players to integrate new digital solutions and deliver exceptional customer experience. To cooperate and take advantage of fintechs, banks will require new partnering capabilities. To heighten their understanding of customers’ needs and to deliver products and services that customers truly value, banks will need new capabilities in data management and analytics.

The Digital Experience In Banking 

With the evolution of online banking, consumers are able to access their accounts from their phones, tablets, laptops, and through many other mediums. However, each of these experiences is silo’d, with different capabilities across different platforms, frustrating banking customers. The digital customer experience can be improved by offering the following five key capabilities:

The digital customer experience in Banking can be improved by offering the following five key capabilities:

1. Unified Account View: Customers need a consistent and unified account view with the ability to leverage features similarly at a branch or through mobile banking. Minimally, banks need to be able to support four common channels or modes of interaction: Branch Banking, Phone-based banking, an interactive  Website, and Mobile apps. The mobile app is the central point that provides a wealth of account & product functionality, relevant financial information over a few clicks/swipes.
2. Enabling paperless Account Opening for a range of loans & services: Consumers are used to instant fulfillment of an online gital purchase, and this expectation is now set in banking. Real-time or instant (and entirely digital) prequalification for simple products such as checking/savings accounts and credit cards is required to meet the needs and demands of today’s banking customers. While it is understood that more complex products, such as mortgages, will take more time, the digital era has set the expectation at days, not weeks & months.
3. Provide Seamless and Easy Navigability between Channels: Customers should be able to start, pause &  continue transactions from one channel to the other pursuant to sign on and other security requirements. For example, if a transaction was started on their phone, they should be able to pause it for completion on their tablet. 
4. Real-time Service Changes: Detect changes in customer demographic information – such as address & monetary status (e.g. account balance) and other customer data (e.g. feedback on products) using analytics. Then use this data (with the customer’s permission) to drive product/service interactions and to simplify the engagement for the customer.
5. Provide value-added tools: Consumers are looking to simplify and consolidate their own vendors. Financial institutions should offer complementary areas such as Auto & Life Insurance. While all of the above products can be offered standalone, leading banks will build a network effect which will make switching harder resulting in higher customer retention and thus, revenues.

Why Banks Need to Move to a ‘Hybrid Cloud First’ Strategy

Large banks have experimented with “Bank of the Future” models which emphasize their role as a financial information advisor. However, in as much as physical branch design matters in certain key zip codes, the ability to sell higher-value products & services largely depends on IT capabilities. Retail Bank IT has been dominated by mainframes and monolithic systems for decades. The mainframe provides a range of core banking services and transaction processing capabilities. Monolithic systems, on the other hand, host a mid and back-office Book of Record applications. The first step in any IT redesign has to be to reinvent the core or at least parts of it that are customer-facing. As a blanket rule in this era, Retail Banks need to move to a “cloud-first” strategy starting with their greenfield deployments.  To be compliant with regulatory mandates such as GDPR, a private cloud should be the first step and then a move to a hybrid cloud.

I have written extensively about serverless and faas this year at the below link –

Knative Components & Architecture: Kubernetes Based Serverless Application Framework

Hybrid Clouds can deliver five key capabilities that will improve the quality of services banks can deliver.

1. A virtually unlimited pool of computing, storage, and network with provisioning times that run from minutes to hours as opposed to weeks to months of lead times & procurement cycles.
2. Efficiencies in application development, deployment and changes.
3. Open architectures that are not locked into any one vendor.
4. Clouds offer a panoply of software services in addition to pure computing capacity. These include Big Data, AI, Stream processing, Mobile backends as a service etc.
5. Substantial Cost savings in terms of higher hardware usage, lower system administration costs.

How Serverless helps Banks disrupt their IT 

Serverless computing based on open standards can help developers in Banks overcome issues in working with legacy applications and infrastructure. Support new business functionality, as well as the DevOps cycle for existing applications, are now accelerated. Serverless divorces from long infrastructure provisioning cycles.  

At their core, Serverless functions are about running pure business logic or ‘functions’ inside a container.  These functions could be anything that makes sense to a business application.

Some common examples in financial services include all those that can be adapted to an event-based model – 

• Payment Processing as part of legacy architectures or as part of the greenfield with API driven mandates such as Payment Services Directive (PSD2)
• Running a Credit Risk or Market Risk Models 
• Cyber Security Alerting – sending an alert to a Security Ops Console 
• Stream Processing – Enriching a message with customer information & sending it to a partner system for a loan application
• Running a credit check on a customer 
• Raising an insurance claim
  
  

Serverless computing can help Banks enhance their Digital customer experience in the following ways: 

1. Enable Banks to move to a just-in-time infrastructure model where they only pay for what they use
2. Allowing a high degree of agility in application architectures by allowing developers to update, add functionality to applications in a cycle that takes hrs instead of weeks or months
3. By leveraging the hybrid cloud, bringing the agility of a FinTech to Bank IT 
4. Around specific use-cases as highlighted above 

Key Takeaway

Serverless architectures have come into industry prominence with the emergence of Kubernetes. Serverless platforms such as Platform9 Fission enables Banks and Insurers to run business functionality instantly, anywhere, reduce IT operational overhead and accelerate adoption and time to value with containers.