Composable banking consists of creating a financial infrastructure from interchangeable building blocks. By breaking down the functionality of a bank into smaller, independent components, the approach enables institutions to build and deploy their core banking systems more efficiently and with greater flexibility.
Furthermore, composable architecture allows financial institutions to reuse existing components and services, reducing the overall complexity of the project and enabling faster time-to-market.
This approach is called progressive modernisation. It allows for optimised capital expenditure and localised, targeted intervention in the technology stack. It enables institutions to replace or upgrade individual components without disrupting the entire system, reducing the risk of downtime and service disruptions or leveraging components where they have invested heavily and have built bespoke business processes. In contrast, monolithic systems are typically more difficult to modify or update because they are tightly integrated and changes to one component can have unintended consequences for other units.
In addition, an ecosystem of modern, Software-as-a-Service (SaaS) solutions such as Mambu’s, can reduce the delivery and operational risk of a bank. With traditional core banking implementations, most of the effort is invested in building and testing code, with numerous deployments and technical debt generated. Such bespoke-code solutions subsequently need to be integrated into the other solutions in the bank, sometimes creating vendor dependency.
However, in a composable architecture, the delivery effort is made on integrating and configuring the individual components, the risk of technical debt is reduced through configurable parameters, and vendor dependency is minimised since these solutions are easily reassembled – akin to a lego puzzle.
Finally, a composable architecture allows institutions to innovate and experiment with new, best-of-breed technologies and services while maintaining the stability and reliability of main solutions. For example, consider a bank that wants to introduce a new digital proposition to its customers. With a composable architecture, the bank can leverage existing components such as authentication, know your customer (KYC) and front-end channels, while developing built-for-digital products on a new cloud banking platform connected with its legacy system. This approach ultimately reduces the time and resources required to build the new value proposition, enabling the bank to deploy it more quickly and with greater flexibility without disruption risk of its other business operations.
In conclusion, a composable architecture offers significant advantages for institutions undertaking technology modernisation. By reducing complexity, enabling reuse and flexibility, and allowing for best-of-breed and experimentation, a composable architecture can help institutions to deliver their core banking systems more efficiently and with reduced risk.
To find out more about composable banking and hear the views of leaders from Deloitte and Mambu, watch our Composable Banking FAQs webinar, where we dispel some of the myths around composable banking and answer the most frequently asked questions.Watch on demand