Digital banks are disrupting the financial services model, building responsive offerings readily available through apps. It's a threat to traditional banking, but digital banks are also subject to fintech challengers. Nimbleness is required.
In the next three to five years, digital capabilities will "stop being exotic," according to a 2020 PwC report on financial services technology.
Financial services organizations have the same burden as other IT-heavy companies; legacy technology stacks grew through acquisitions. Introducing more technical flexibility allows organizations to prioritize digital in an environment where change is constant, PwC said.
Though a digital company, Ally Financial had legacy technology in its stack. Before Sathish Muthukrishnan, the bank's chief information, data and digital officer, joined the company, Ally migrated off its mainframe to a modern architecture.
There were more than 300 interfaces across Ally and 72 systems that had to be addressed, Muthukrishnan told Industry Dive. It had around 100,000 test cases, all of which required testing when the company wanted to make a change.
Now the company has a modern platform that is easily configurable and allows for quick product iteration. The infrastructure and network teams are critical for resilience, driving continuous development and assisting with speed.
That way, technology can focus on building customer-facing applications without having to address underlying infrastructure, Muthukrishnan said.
In response to COVID-19 and stay-at-home orders, Ally could, within two days, launch an application letting customers apply for forbearance. Once a customer enrolled, it automatically connected to all the back-end financial systems. It was all done over a weekend, Muthukrishnan said. That is the level of nimbleness mainframe modernization enables.
It's also what banking customers have come to expect and need in an uncertain economic landscape.
The digital demand
Muthukrishnan joined Ally in January after serving as chief digital and information officer at Honeywell Aerospace and working as an executive for American Express. Muthukrishnan's role requires balancing long-term strategy with quick wins.
Reporting to CEO Jeffrey Brown, Muthukrishnan's responsibilities bring together the data and digital organization, along with digital transformation and traditional technology delivery (including the security organization).
In many cases, IT is run like a utility rather than a "strategic" part of the businesses, Robert Naegle, research vice president at Gartner, told Industry Dive. It's up to CIOs to understand the needs of the business and tailor response to underlying needs.
It's "not just enabling technology" but business outcomes, Naegle said.
If you look across the financial organization, design and security are often separated from tech, said Muthukrishnan, whose role creates end-to-end technology visibility. The long-term strategy of the company provides a charter and roadmap for personal learning, so he can apply past experience, he said.
The challenge is, how can you build tech advancement that creates products and services across the financial life cycle with speed and efficiency, Muthukrishnan said. Ally has to accelerate its strategy and be "four or five steps ahead" by anticipating the demands of internal and external customers.
The speed of execution is a priority, particularly as the economy changes, competitors spring up and the pandemic disrupts business plans.
COVID-19 "forced a reprioritization of work," centered around business outcomes, Naegle said. It decelerated technology's more speculative transformation activities.
Ally needs to operate at a speed it hasn't before, Muthukrishnan said. It requires bite-size chunks of innovation, offering modifications or enhancements in closed loops. With small iterations, there is less risk, and businesses start to see returns.
Application programming interfaces become critical for enabling speed and time to market. Ally is focusing on searchable APIs so it has a centralized repository. The goal is not to relearn something Ally employees have already figured out, Muthukrishnan said.
Muthukrishnan has established pillars for technology operations:
Building an always-on, digital organization: Digital and data capabilities are Ally's key assets, which the financial services company needs to protect internally and externally.
Separating platforms from products and services: For example, Ally can build an end-to-end data platform and wait for use cases to go to market.
Simple customer experience.
Collect data and insights to understand performance, and ensure product and platform security.
Execute, by driving infrastructure and cloud for scale. This includes adoption of DevSecOps, agile, bot technology and automation.
Enable technology through talent and culture.
In the near term, the company is focused on creating a centralized data platform underpinned by open-source technology, which can democratize analytics.