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Shifting to a high-velocity operating model: what does it mean and why banks should do it.

Covid has further accelerated the critical need for modernisation that financial services in particular is struggling to take action upon. Meanwhile the banking landscape has seen new cloud-native players entering the market: they are service-oriented, API-driven, legacy-unencumbered. In one word: agile.

Is it all over for traditional financial institutions? Or can they shift their IT agenda in favour of innovation? And if so, how?

To achieve short-term efficiency, many legacy institutions have implemented a “two-speed-architecture” - a digital business model where an agile, customer-centric front-end runs alongside a slow-speed, business-focused, legacy back-end. While this gives the impression that they are keeping up with the market, behind the scenes their back-end is struggling to make it happen.

Rather than helping them stay in the race, two-speed architecture is holding traditional institutions back as it creates a technology disconnect, a silos culture that prevents talent retention and therefore impairs agility.

More forward-thinking financial institutions are choosing another path: they are freeing themselves from the constraints of legacy systems with digital-era, purpose-built platforms, overriding the need for a high-velocity alternative. In doing so they apply five key design principles for their methodology:

  1. Constantly re-calibrate the business to customer behaviour and market forces
  2. Free up teams to deliver high-impact innovation
  3. Embrace every tech advancement while eliminating tech debt (re-use and re-configure everything)
  4. Harness a digital ecosystem for continuous products evolution
  5. Adapt and scale with resiliency.

Central to success is ensuring that organisation and culture are aligned to the transformation goals. Traditional financial brands who want to adapt to a high-velocity operating model need to properly evaluate requirements and select the best transformation approach for them based on existing assets, functionality requirements and costs.

Before the switch it’s important to have a robust understanding of the legacy systems in order to ensure continuity, decide how data will be stored during the migration and develop a rigorous migration roadmap documentation with a focus on early-failure-detection and quick decision making. To keep up with the agile methodology approach the roadmap needs to be split into a set of smaller and achievable milestones to help prioritise partial, productive releases and avoid last-minute big-bang implementations. Include failed roadmap attempts, and revised business cases when factoring implementation scenarios.

Built on the principles of an open-ecosystem, composable API-enabled technology sets the groundwork to eliminate IT complexity, reduce operating costs, and maximise flexibility for transformations.

With composable technology powering high-velocity operating models, legacy institutions can minimise complexity and maximise flexibility which, thanks to a constant improvement of the UX layer, gives more control over the customer experience. By breaking down processes, composability also isolates IT complications and expedites reaction times because of the iterative nature of cloud-based platforms. SaaS-based offerings also provide a geographically-agnostic foundation that eliminates barriers to expand into new markets. On top of that, technologies built on a single-code-base can be kept up-to-date with seamless upgrades or changes that help minimise technical debt and business disruption.

Compared to legacy offerings, cloud subscription models have significantly lower costs and require minimal up-front investments, offering transparent and predictable economics with fast monetization because continuous software delivery improves performance through rapid updates and product roll-outs that can be measured in days rather than months.

Mambu offers financial brands the required business agility and flexibility to help ensure transformation success.  As the industry leader in cloud banking, Mambu is already making high-velocity models a reality for more than 200 institutions, banks, fintechs and neobanks - like TymeBank, Itau and LNDDO, supporting over 65 million end users. Mambu customers are 32% more likely to scale and, on average, have 11% higher end-user satisfaction than their competitors.

This is how institutions can migrate to a holistic high-velocity one and keep ahead, however fast the world is changing.

Find out more about accelerating digital transformations and cloud migrations here or revisit our five principles of a high-velocity operating model blog.

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