Banking technology: striking the right balance of configuration capability
Why do so many financial institutions aspire to 100% configurable technology? In our experience, it’s the appeal of maintaining ownership over their platform and the promise of cost savings. But going down that path may actually end up costing more and putting an unbearable maintenance burden on the business.
Here we draw from the combined wisdom of four Sandstone Technology executives, as they shed light on the realities of configuration management in banking systems.
When Sandstone delivers our clients banking self-configuration, we’re giving their employees the ability to make changes in their technology platform, often customer-facing changes. The features we develop depend on the institution’s operational workflows, their business rules and requirements, and the way they interpret banking regulations.
“One high-impact use case would be interest rates in lending. Our Configuration Manager tool allows bank employees to go into the backend and publish the new rate as it gets pushed out, without having to rely on us to do it for them. In effect, we’re giving them self-service tools.”
- Sandstone's Chief Customer Officer, Jen Harris
It’s a critical differentiator, given every hour or day of delay is costing the bank potential earnings from an increase in rates. On the flip side, when interest rates come down, the ability to move quickly can provide a competitive advantage in the market with price-sensitive customers.
Other use cases include new product releases, fee changes and regulatory updates, including amendments to first home buyers’ scheme. Serviceability buffers are another example. With the recent changes in interest rates, it is crucial the FI can make these adjustments in a timely manner. For every day a rate increase is delayed, can cost the FI hundreds of thousands of dollars based on their volumes.
Text or images that appear on users’ screens as part of their digital banking experience can be updated by the bank.
According to Head of Client Portfolios, James Morrison, who regularly runs product demonstrations for Sandstone customers, “Bank staff can re-configure the tone of voice in copy, they can adjust branding, and re-skin the look and feel.” (Note that this is different to customer-facing configurability, or personalisation, which Sandstone also provides, enabling end users to do things like change their profile name, re-order their accounts using their app, etc.)
We often create modules that can be turned on and off as necessary. Within those modules, there may also be smaller subsets of features they want to be able to enable or disable. For example, the ability for consumers to reorder their accounts, change background images, or select quick links to make their overall customer experience not just more efficient, but highly personalised.
Clients can also instantly re-configure aspects of their workflow management including task assignment. This is useful in the scenario where staff are taking on new roles or helping other teams with busy workloads. As Sandstone’s Head of Business Development, Nam Vuong points out, “applications should work based on the structure of your teams, not the other way around. Because those structures can change over time, they need to be configurable.”
Sandstone products are designed for a range of non-technical users. Marketing, sales or content marketing people can easily be trained to use our production systems and make branding changes. If it’s deemed too risky for those employees to make the changes, which is common in banking, then it’s typically IT staff doing the updates driven by the marketing or business teams.
Where interest rates are being changed, it’s usually the pricing/product team. When it comes to manipulating the serviceability calculators, credit risk teams will usually be responsible for changing the weightings for income, and the levels of expenses that are used for serviceability assessment rates, etc.
Importantly, the way Sandstone has set up our configuration tools means that changes made won’t result in outages in the customer platform. All the changes are codeless, so developers don’t need to be involved at all, and all are auditable and controlled, with strict permissions and tracking through an audit trail.
The most obvious benefit of configurability is money saving. Every day an FI delays the application of a new interest rate, as an example, it can affect revenue.
Configurability can also reduce turnaround times for changes from 10 days down to a matter of hours. Our clients are putting the power in the hands of their staff who can change an interest rate, a fee or a product, on the fly in real time, rather than having to make requests of their vendor. They’re creating efficiency and better productivity, instead of adding another step to their workflow.
If they have a re-brand in progress, configurability allows them to adjust their market positioning so it’s consistent across channels. They can go to market quickly with their new look and feel.
Speed to value is critical when looking at configuration in banking technology. Whether you are talking about launching new products to market for consumers, or making back-end system changes to reduce friction in workflows or maximise operational benefit, the best solution is empowering your staff and providing them with the tools to make it happen.
The configuration management we offer allows our FI customers to control certain aspects of the workflow or the system. It exists within a set of guidelines or rules that apply within the Sandstone product. As Nam says, we rarely build full configurability because of the complexities involved in our digital banking and loan origination platforms.
“You really need to understand all the nuances of every component of a platform. If you change one area, what happens downstream or upstream? Making one change on the spot can impact a lot of other areas.”
- Sandstone's Head of Business Development, Nam Vuong
Institutions like Australia’s Commonwealth Bank, or NatWest or Barclays in the UK, are set up to do everything inhouse. They own it all, they can configure everything. But they have billion-dollar budgets and large teams.
Many FIs don’t have the budgets or teams to match their ambition. “They don't have the capacity to do it all, to maintain systems and support the infrastructure, technology and underlying software, to be on top of every change that’s made, to keep up with industry best practice,” Jen says.
Also bear in mind that if an FI does go down the 100% configurable path, they’re essentially building a custom solution based on their vendor’s platform. “What happens when components come to end of life? Are teams set up for success to do that ongoing? Forget the first 24 months, 36 months - what happens in five years’ time?” Jen says.
There’s also the testing that needs to happen, and the change management. What about documentation – is there an audit trail, and how will that be managed? Not to forget the security element, as James points out. Every change made might be compromising another part of the solution, opening up potential for a security breach or risk in other parts of business.
And if they do have extensive configurability, what happens when staff members leave? New staff will need to be trained in the entire system which slows things down considerably. And with those ‘set-and-forget’ features that FIs won’t change often, like branding elements – when the time does come around to modify them in the backend, often the knowledge you need to make the relevant change has often been forgotten.
As Jen says, “Ultimately there’s a belief within FIs that they will save money by doing it themselves. But what we see is that within a couple of years they realise there was no cost saving. That in fact, it is costing them more to support, service and maintain the platform, and keep that level of training going constantly.”
“And after being in the business for 30 or so years, we know that even when the client pays for us to build lots of banking technology configuration, a lot of it they never use,” she adds.
FIs understand the banking ecosystem in great detail, as they should - it’s why they exist. But they’re not technology companies. Some of the larger banks may employ teams of technical people who contribute vast knowledge and experience; but others don’t have the capability inhouse to understand what it means to put these systems in place and support them ongoing.
Sandstone Technology’s primary goal is to reduce the cost to maintain and the cost to serve; to help FIs run their businesses as efficiently as they can.
Our platforms are extremely configurable; we can give clients the ability to do anything at their end. But it’s our responsibility to find the delicate balance between the standard practices and a level of configurability that’s manageable within the product framework.
The way Sandstone works with our clients - conducting initial conversations and information gathering sessions to assess their needs - ensures they’re satisfied with the level of configuration we deliver. They can manage their BAU activities, things they need to be highly reactive to, and be able to push to market very quickly to avoid revenue impact or risk.
Our solutions come pre-built with features already set up and ready to go, and often it just requires some tweaks here and there to suit specific workflows. Further down the track, there may be change requests from the FI relating to fundamental ‘set-and-forget’ features, but that’s perfectly normal.
With Sandstone providing configuration management, FIs don’t have to worry about the cost and stress of additional FTE. They don’t need to expand their in-house teams exponentially and support an entire system for the indefinite future, or acquire knowledge proven in market, or control multiple touchpoints involving multiple staff.
Where there’s a system outage or other issue, there’s no requirement for technical staff to be on site to isolate the problem. We know our systems intimately: we’re the first people to know if there’s an outage and we can resolve it within minutes because we know where to look.
As Jen says, “What we tell clients is, let Sandstone Technology do what we do best with systems proven in market, so you can spend time doing the things you do best, servicing the customer.” By working with us, FIs are getting the benefit of our combined learnings in market and applied experiences from working with many, many FIs globally over three decades. We can bring things to the table an FI may never have considered otherwise, we can take on a lot of the burden for our clients, and in the long term, they’re maintaining a cheaper cost of ownership.
To find out more about the configurable features that could save time and money, contact Sandstone Technology here.