There is a craze sweeping Europe, and rippling across the world—and no, I’m not talking about the next British Invasion. Open banking is a trend that’s significantly altering how banks work with fintechs and maintain agility in the global marketplace.
A main enforcer is PSD2, a piece of EU legislation that sanctions access to personal banking data. It’s resulted in an explosion of EU banks providing public application programming interfaces (APIs) for fintechs to develop with. The implications aren’t limited to Europe; many banks all over the world are looking to PSD2 as a baseline, forcing some tough evaluation of how financial architecture should adapt.
Banks are also under consumer threat to evolve or get out — a 2016 Accenture study found that 78 percent of respondents would bank with a tech firm such as Amazon or Google.
As banks transition into savvy software providers due to market pressure, one thing is certain: they must adopt agile software development strategies that streamline the deployment and maintenance of these services. In other words, banks must adopt a DevOps philosophy to maintain a market advantage.
Open Banking Evolves Bank Architecture
The bank has become programmable. Many banks are now required to allow third-party authentication and access to payment, account information, fee details and other data. This involves support for various integration methods; SDKs, APIs and OAuth for authentication, as well as documentation, sandboxes and other developer tools. Whether they like it or not, banks are now SaaS providers.
It should be noted too that open banking is not limited to the European Union. The UK’s open banking standard is the Competition and Markets Authority (CMA), and Australia, Japan and other countries are making similar inroads with regulating banking data. The excitement has also encouraged North and South American players to open up.
The new bank APIs help bypass traditional methods, saving a ton of time. In an article in American Banker, BBVA noted that online e-commerce system Dwolla was able to slash the typical three-day to six-day deposit time frame using their payment APIs. “We’re allowing that all to occur in real-time,” said Chad Ballard, director of mobility and new digital business technologies at BBVA Compass.
Letting FinTechs focus on web UI development helps banks focus on their core competencies: banking and authentication. Establishing connections via API-driven microservices is also a safer alternative to screen-scraping.
Why DevOps for Banking?
Banking Exchange defines agile banking as “the future of retaining relevancy for banking as a whole.” For open banking to be successful, the platform must be tested, monitored and secured for fintech consumers. Sounds a lot like the hallmarks of quality DevOps practice.
Popular services Google Maps, Uber, Stripe, Twilio and others have adopted an API-as-a-product mentality. These programs adhere to best practices, iterative feedback and agile development methodologies to excel. Similarly, for banks to remain competitive, they must treat their platform architecture and public gateways with the same tenacity.
For banks, uniting iterative development with stability testing—essentially the Dev + Ops mantra—for their APIs, microservices and frameworks will go a long way to help reach open banking goals and maintain future regulations on API performance standards.
A DevOps mindset is crucial to consider early on in the open banking journey, as it can impact how banks address:
- Iterative development and testing: By tying in iterative development with stability testing, organizations can surpass the time limitation often incurred between shipping versions between development teams and testing teams.
- Continuous monitoring: Many tools are available to monitor the CI/CD pipeline, helping banks respond to issues and improve uptime.
- Versioning strategies: DevOps in banking will see the larger picture, working in the REST mantra to build on the scale of decades to avoid breaking change.
- Transition to microservices: As enterprises dispose old monolithic architectures, bitesize services are arguably more appropriate for modern banking; however, they come with unique caveats that DevOps can address.
- Collaboration between silos: By pivoting to more point-to-point, collaborative processes, banks can reduce friction to meet the responsive expectations set by FinTech, who are becoming new public faces for banking.
An end result of DevOps is to increase agility in an organization. Especially for large banks, this signifies drying up the traditional “waterfall” development life cycle known to stigmatize the corporate approval process.
Case Studies: How Banks Are Utilizing A DevOps Cycle
Many banks have been vocal about what they are doing to ignite positive technological innovation alongside third parties. For example, Capitol One’s DevExchange recently announced a new initiative called experimental APIs. “They are designed with the goal of getting early feedback from the community around API desirability and design before the product release,” the company noted in a blog post.
In this experimental setup, operational cues inform development. Getting the two sides to talk and respond to community feedback is paramount for DevOps to succeed.
For banks to adopt an agile makeup, Manfred Bortenschlager, Red Hat’s director of Business Development for API-based Integration Solutions and API Management, recommends what he calls an “agile integration.” This involves a distributed integration for greater flexibility, containerization for the ability to scale better and managed portals for reusability.
Another interesting effort is that of CIBC, a Canadian bank that is responding to the open banking movement with a responsive microservices framework the company has developed using open source components.
What’s evident is that many banks already acknowledge DevOps principles as key for innovation in their sector. Through the the use of iterative testing, innovative tooling and automated workflows, banks can achieve greater operational efficiency.
Open Banking Must Follow Software Development Practices
A result of the open banking movement is that banks must keep technological pace with fintech. Especially with regulatory pressure, banks must consider how best to approach new technological initiatives.
DevOps is a way to mitigate concerns. As a philosophy for uniting technical procedures with responsive operations, it’s a prime strategy for banks to consider when readdressing their technology.
In defining what “agile” embodies for banks, Steve Williams of Cornerstone Advisors said: “The idea is you need to start taking the management and operations of a financial organization and start adapting some of the things that have made technology companies viable.”
American Banker echoes this, believing that “banks should be more like software companies.”
Now prodded by open banking, it’s high noon for luddite banks to embrace contemporary software development practices; that means incorporating DevOps into the open banking agenda.