Microservices-based architecture has already disrupted car hailing and media streaming services. Next up? The financial industry.
While banks have been digitizing their services more and more over the years, especially since pandemic lockdowns, the next big horizon is a shift toward a customer-centric platform banking model enabled by microservices architecture.
What is platform banking?
Platform banking enables banks to better serve their customers, foster more trust, and retain loyal customers long-term. Customer data is shared with third parties only when the customer gives consent, which places data ownership squarely in the hands of customers. Platform banking requires streamlined and secure data transmission to third parties through application programming interfaces (APIs), which enhances security.
It may seem counterintuitive that customers will benefit from more data privacy when their information is more easily being shared with more third parties. But it’s true! Learn more about this in my other eportfolio post.
Rebuilding to a microservices roadmap
Microservices architecture promises a better future for the banking industry. Leaning into open banking and platform banking will require a microservices architecture, which may not be an easy transition for the legacy financial institutions who are built on monolithic architecture.
This is because microservice architecture dismantles the tight-knit components of monolithic applications into a set of agile services that communicate via an open API. Because the services are separate, they can be optimized or scaled up individually without reworking the entire enterprise infrastructure. Similarly, if one service has a meltdown, the entire system is not also impacted.
Account-to-account payment solution
Bank of America has made the shift, launching the pay by bank transaction feature that streamlines the online checkout process while increasing security. Transactions happen immediately via a mobile app or website and are contained within the accounts so that no debit or credit card details are shared. Each company that Bank of America partners with to offer the account-to-account payment solution will require an additional microservice to be added to the architecture.
Such tailor-made digital infrastructure does not come without its own limitations and challenges. Maintaining harmony among the sometimes long list of microservices requires a significant time investment and a highly skilled team of developers. Banks with long-established monolithic architectures can make the leap to a microservices set up; however, it will require a phased approach in order to maintain the level of services and data security already offered to customers.
A clear win-win
Customers win with fast, secure, and convenient online payment process that takes out the card processing fees to save them money. Companies win by enabling a better experience for their customers, which will increase customer retention and set themselves apart from competitors who are lagging. Banks will see opportunities to enter new markets, new revenue sources, and enable growth.
As banks, consumers, and trusted third parties see the value of platform banking, the industry will continue to lean into this innovative approach without waiting on government mandates like those active in the United Kingdom.
Bhole, Ketan. Laughridge, Kevin. Nareddy, Ram. (2020.) “Open banking through architecture re-engineering a microservices-based roadmap.” Deloitte. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-enabling-platform-banking-pov.pdf
Pathe, Tyler. (16 February 2022.) “Bank of America Leverages Open Banking To Introduce Account-to-Account Payment Solution.” The Fintech Times. https://thefintechtimes.com/bank-of-america-leverages-open-banking-to-introduce-account-to-account-payment-solution/