The core banking systems used by financial institutions (FIs) are evolving as the banking landscape does. These systems’ architectures play a key role in the way banks manage their data and interact with customers. The choice of architecture can impact everything from innovation to scalability. Let’s explore the various types of core bank architectures to see what they have to offer.
Monolithic architecture: the Traditional Framework
Monolithic architecture is the traditional approach in the world of modular banking core systems. All functions are combined into a single codebase. Everything, from payment processing to account administration, is integrated into a single system. Monolithic systems may be relatively easy to test, develop and deploy but they are not flexible or scalable.
SOA: Modularizing to Flexibility
Service-Oriented Architectures (SOAs) take a big step forward in breaking down monolithic structures into discrete services. Each service is an independent unit that communicates through standard protocols with other services. This modular approach offers greater flexibility and integration with external systems than monolithic models.
Microservices: Granular, Scalable
The modularity of microservices architecture is taken to the next step. This model breaks down applications into smaller, independent services that each handle a specific task (such as managing customer profiles or processing payments). These services are autonomous and communicate through APIs.
Composable banking: the future of agility and innovation
Composable Banking is the next step in core banking architecture. Composable Banking allows banks to deploy services based on their needs, rather than relying upon a rigid framework or predefined modules. Imagine a customized system of banking where applications are coordinated by open APIs and functionality can be added or deleted based on the need. This architecture offers several distinct benefits:
- Composable Banking allows banks to quickly update or remove services, without disrupting their entire system. It is important to note that the market today is a fast-paced and customer-driven one.
- Customization: Banks are able to mix and match their services in order to cater to different customer segments. This creates a more customized experience for every user.
- Innovation: The bank’s culture of innovation is cultivated by the ability to quickly deploy new features and experiment with various services.
- Composable Banking can save money by reusing services and using cloud-based solutions.
Composable Banking: A Game-Changer
Composable Banking is not just a buzzword. It’s also a response for the growing demand of flexibility, speed and innovation. Composable banking is a dynamic and adaptable alternative to traditional modular banking systems that require predefined configurations. Open APIs and interoperable service allow banks to quickly respond and integrate new technologies. They can also stay ahead of their competition.
Conclusion: Selecting the Right Architecture to Future-Proof Bank
When financial institutions review their core banking architectures they need to consider how quickly they are able to adapt. Some monolithic systems still work, but are becoming increasingly outdated. Microservices give you more control of individual services. Service-oriented architectures are flexible, but they also offer flexibility. Composable banking, however, is the best option for banks who want to future-proof their business.