Financial services have undergone a huge shift in a relatively short time. Driven by the growth of the World Wide Web and high-speed computing, banks have been forced into leveraging modern software and the Internet to manage highly sensitive data between customers, investors, and employees. While almost all modern banks have implemented some form of back-end application, many of these systems are old or outdated, leaving the bank and its stakeholders vulnerable to data theft or fraud.
What Features Are Provided by an Enterprise Banking Application?
Enterprise banking applications allow banks to integrate multiple aspects of banking through software. Enterprise banking software is responsible for handling a variety of tasks from account management to transaction processing. It’s commonly used in retail banking to connect customers to their accounts, but it can also be used by investment banks to facilitate trade with capital markets.
Core banking facilitates transactions between customers and their bank accounts, including managing loans and mortgages. According to Gartner, core banking applications provide the back-end systems responsible for processing transactions and updating accounts. Core banking relies on an infrastructure that not only connects multiple branches, but that also connects customers with the bank through multiple interfaces such as mobile apps, ATMs, and websites. While core banking has existed for decades, the growth of high-speed Internet has made it possible to perform transactions almost instantaneously.
With core banking, users depend on fast, secure software to safely facilitate transactions. Not only do banks have to respond to these demands for faster performance and more features, but they also have to balance costs, existing (and upcoming) regulatory and compliance requirements, and an ever-changing economic landscape. New, non-traditional competition is arising in the form of alternative payment methods, digital currencies, and big data analysis. Meanwhile, banks have to ensure the integrity and security of user data, providing users with access to their accounts through multiple channels while keeping out attackers. It’s a difficult environment to balance, which is why nearly 96% of the market share for core banking software is shared by only four companies.
Core banking services must be secure, but at the same time they need to allow for flexibility and future extensibility. As banks react to changes in customer expectations, regulations, and available technologies, their core services need to be able to expand and adapt. For instance, with the introduction of SMS banking, banks needed a way to authenticate users through a platform that is inherently insecure. SMS messages are unencrypted, meaning they can easily be intercepted by a third party. However, the bank still needs to build the infrastructure to handle potentially thousands of simultaneous requests, connect to a SMS provider, interpret incoming SMS messages, and authenticate the user to prevent fraudulent transactions from taking place. All of these requirements stress the core banking system while placing additional requirements on top of the system’s existing requirements.
Closely tied to the growth of core banking is the growth of mobile banking. The proliferation of smartphones, tablets, wearable devices, and the idea of constant connectivity has led to a substantial increase in the demand for mobile banking. According to ComputerWeekly.com, over one billion people will use mobile devices to access banking services by the end of 2017. Already, consumers are using their devices to send and receive money, manage loan payments, and even open and close accounts. This trend will continue to grow as consumers expect more features from their mobile banking services.
For banks, managing a mobile solution can be more difficult than it seems. Mobile opens up a much larger potential for data theft, fraud, and data validation difficulties. Not only do banks need to compete for services on smartphones and tablets, but they need to do so while making the platform secure, protecting the user’s privacy, verifying the user’s input, and keeping the service simple to use. Advancements such as mobile check deposit allow customers to deposit checks just by using their phone’s camera, but such a service removes a great deal of control from the bank while inherently placing it in the hands of the user. Since the bank can’t prevent tampering with the hardware, it needs to implement additional validation steps on the back-end to prevent fraudulent checks from processing successfully.
Financial firms also need to adhere to GRC (governance, regulatory, compliance) mandates when integrating mobile services. Mobile introduces the potential for error not commonly found in desktop computers, such as data entry mistakes caused by smaller keyboards and other input methods. Mobile operating systems can be vulnerable to bugs, viruses, and malware not found on desktop machines. Mobile devices also generally have a much broader range of methods for connecting to the Web, from a vast selection of Web browsing apps to Web browsers built-in to various apps. However, since mobile users spend only 14% of their time in the browser and 86% of their time in apps, banks that make use of mobile banking apps gain more control over how their data is transmitted to and from mobile devices. The drawback is that it requires technical knowledge to implement a secure, reliable method of transmitting that data. Mobile banking application development in particular requires a development team knowledgeable in modern security practices.
Compared to retail banks, trading banks have very stringent requirements on the performance requirements of their back-end software. Financial institutions rely on high-performance systems to facilitate the purchase and sale of financial assets. Traders work closely with companies like Arista, Cisco, and Pluribus to continuously upgrade their infrastructure with faster servers, switches, and routers, but the hardware is only a part of the overall system. The ability for investors and traders to make quick decisions is ultimately driven by the underlying software.
Exchange markets handle tens of billions of dollars regularly. In August 2015, the Nasdaq alone traded over $112 billion on a daily basis. Much of this consists of high volumes of small transactions, a technique otherwise known as high-frequency trading. It’s difficult – if not impossible – for traders to compete without implementing their own high-frequency trading algorithms, but both traders and investors need a way to quickly track and respond to market volatility. With enterprise banking software, banks have the means to generate transactions quickly and reliably.
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Trends in Enterprise Banking Applications
In addition to providing security and data integrity, banks are looking towards new and revolutionary methods for improving the quality of their services.
Core Banking System Upgrades
Short of essential security updates, many banks take a “set it and forget it” approach when it comes to their core banking systems. While these systems might work, they put older banks at a disadvantage when compared to banks implementing newer back-end systems. Many of these systems are facing a shrinking pool of developers, analysts, and engineers who are moving on to newer, more versatile systems. This leaves the old systems insecure, vulnerable, and out-of-date.
A banking system designed for today’s market not only integrates with the bank’s existing systems, but helps the bank leverage modern trends in data analytics, cloud computing, and instant connectivity.
Detecting Fraud with Big Data
Big data is a computing trend that analyzes and creates relationships between large quantities of data from various sources. Big data can pull information from a variety of sources including financial history, mobile devices, and social media. For instance, if a credit card customer who makes most of his or her purchases in New York suddenly makes a charge in Istanbul, the bank could determine the charge as an anomaly and alert the customer to potential fraud.
Big data makes heavy use of machine learning, which essentially allows systems to learn and improve through data analysis. Machine learning helps systems detect trends and respond to unusual circumstances more accurately than before, with little to no manual intervention. Implementing machine learning can help banks understand their customers’ needs simply by continuing to provide their core services.
Designing A Platform for the Web
While many banks have adapted to the growth of the Internet, they’ve done so slowly or inconsistently. For example, mobile deposit has been possible in the U.S. as far back as 2004, but was only implemented for the first time by USAA in 2009. By 2013, only 10% of the banks and credit unions in the U.S. offered mobile deposit. Customers expect to do more with their banks without ever having to set foot inside a branch. To accommodate this, banks will need systems that leverage the Internet to quickly and safely communicate with their users.
How Ignite Can Help
Enterprise banking software isn’t just about money. It’s about instilling trust in customers, employees, and investors by providing a secure and reliable platform. Ignite has years of experience leading developing teams and research projects for banking institutions in the Ukraine and around the world.
With Ignite’s offshore outsourcing services, you have access to a knowledgeable and skilled team of developers who can help you expand or replace your existing enterprise banking application. From mobile banking applications to inter-branch transaction processing, we’ll work with you to create a software solution tailored to your bank’s specific needs. This includes:
- Mobile banking application development, which empowers your customers to perform transactions from anywhere at any time.
- Secure inter-branch and inter-bank connectivity, for processing transactions while preventing hackers from intercepting sensitive data.
- Full compliance with regulatory requirements, information security, and risk management.
Let us know how we can help you expand your banking services, integrate your back-end systems, and empower you to become a leading financial institution. For more information, contact us at igniteoutsourcing.com.