Part 02: Building Agile Methodologies into Banking App Development 02.

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1 Part 0: Building Agile Methodologies into Banking App Development.

2 Can banks lead the new wave of software innovation?

3 In the second part of our series we ll begin to address the practical ways in which banks are attempting to achieve added agility in the way they deliver new applications - both in terms of software delivery and human resource. Banks need to take a much more agile approach to software delivery if they are to satisfy both consumer and business demands for innovative services. Agile development is an uncomfortable concept amongst traditional banks where digital innovation has been slow; data is famously siloed and IT architectures are a tangled web of middleware and legacy systems, isolating some of the world s richest repositories of customer data. Continuous development and fail fast agile approaches tend to go against the risk averse culture of traditional Financial Institutions, which have tended to use more protracted waterfall methodologies to get a fully finished product to market without any glitches. Whilst waterfall methodologies may have been well-suited to one-off banking app development projects, they re much lesssuited to capturing requirements and getting software to market quickly as a Minimum Viable Product (MVP). Banks are also hindered by the lack of inhouse development resources - a problem which is set to become magnified by the implementation of API based platforms and the tidal wave of development demands that will accompany them. As much as enterprises have expanded their internal app development teams and resources, only 6% adopt an in-house only approach, whilst mixed sourcing has grown to 55%. This figure reflects Gartner s prediction that the demand for enterprise mobile app development is growing at least five times faster than the capacity to deliver. 1 Mixed Sourcing and Agile Teams A recent survey by CSC and Finextra revealed that 78% of banking professionals claimed a lack of inhouse resources was the key factor in why banks took so much time in getting applications to market. Mixed sourcing can take on a number of forms, but one strategy which will see strong growth is the insourcing of specialists from digital agencies, whereby banks bring in the the most talented UX Designers and Researchers to work as agile teams. Advancements in all things digital, and a general up-skilling of tech talent means that across-the-board, cost-based outsourcing of development projects is starting to wane. As a consequence, specialist talent is starting to shift from agency-side to clientside, to a point where the actual acquisition of digital agencies by FIs is a growing trend. Nevertheless, banks still exhibit a huge skills gap, especially when it comes to specific user-centric design talent. In addition, internal teams lack the kind of agile cross-functionality demanded for effective application design; digital agencies such as Orange Bus remain the best way of addressing this deficit, constantly developing their skills base to stay ahead of the game. As much as challengers have the digital vision and nimble core platform from which to continuously develop and enhance customer experience, demand for app development will often outstrip their capacity to deliver. New banks won t necessarily have access to a complete pool of UX talent, due to natural budgetary constraints and once again a mixed sourcing approach to development could be the most effective strategy

4 API Platforms for Increased Agility For both traditional and challenger banks, API (Application Programming Interface) based platforms are high on the agenda, particularly at a time when the latest European Payment Services Directive (PSD) seeks to give legitimacy to Third Party Payment Service Providers (TPPs) accessing consumer bank accounts through Banking APIs. APIs can effectively decouple a bank s legacy IT system from the front end application. They can be implemented as open APIs inviting third party development, or on an internal level. If open data standards materialise in national legislation, and Access-to-Accounts (XSA) rules are granted, Banking APIs will open the door to disruptive fintech firms acting as Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs); banks must respond by creating a considered and strategic API suite, and begin preparation for endless amounts of software development. 6 Whilst the new European laws are designed to provoke competition through open APIs, banks should also be looking to harness their own internal API platforms for increased agility. According to a recent report, 88% of banking executives believe in the essential value of internal APIs, (which we ll look at in further detail in the following section). Interestingly, they also envisage 60% of their entire API suite as being made available as a development platform for third parties and partners. 3 By removing the burden of the legacy core system, API platforms are far more amenable to agile development methodologies and the kinds of responsive design which can capture market trends. Through APIs, banks should be seeking to design apps which actively reach out to every dimension of your life where transactions occur, rather than being linked back via a new set of third party payment service providers who will seek to use the banks as a way to plug-in their own services. Gartner had formerly predicted that... 75% top of the50 will have an API platform at some point this year in a move which will go some way to segregating ageing core systems and providing an alternate platform for agile innovation. 4 BANKS Microservices for Agile Development On an internal level, software developers in banks and legacy service oriented enterprises are often tied to a monolithic application architecture. The term microservices describes how internal APIs can be used to increase the agility of these monolithic applications. Monolithic applications can struggle with two demands, particular to the current theatre of application development: 1.. The upscaling required to meet a growing digital user base. Building updates and revising features of existing products. So for banking software development teams looking to upscale mobile applications, or simply as recognition that the mobile app development ethos in 016 demands constant build and revision, the term microservices outlines some vital architectural ideas. The exponential growth associated with the Internet of Things (IoT) and mobile has exposed the monolithic application to unprecedented degrees, bearing in mind that by 00, it s projected that there ll be 5,00GB of data for every person on earth (much of it produced by machine-to-machine communications). Remember that Facebook in 016, is bigger than the entire internet was in the middle of the last decade, so it s easy to see how banks and enterprises which have straddled both eras may struggle to upscale monolithic services. The microservice method effectively breaks an app into fine grained services, using language agnostic APIs - meaning that any redesign or update can be applied much more nimbly, without a laborious and complete overhaul. The use of internal APIs as core building blocks has given rise to API management concepts such as Mobile Backend as a Service, which emphasises the changed development dynamic brought about by microservices and APIs. Specific agile development teams can focus on autonomous/decentralised projects using the best tools available for the platform on which they re designing, whilst separate enterprise IT staff deal with backend issues

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