Buoyant Banking: Lean and agile transformations

While incumbent banks still rule the financial services industry globally, it would be a mistake to assume they are comfortable sharing the space with up-and-coming fintechs.

The cutting-edge technology used by swiftly scaling fintech companies that are being granted banking licenses is popular with the younger generation of customers who appreciate fast service, constant connectivity, and mobile app convenience.

In order to compete with the rise of fintech, banks must transform from their traditional systems and embrace the new era. It’s expensive, requires considerable disruption, and takes time. But adopting lean and agile principles as part of the transformation process is also a large part of employing Business Intelligence practices.

Lean and agile teams in finance

According to Tim Carmody, CTO at IPC, it is the fintech industry’s ability to adopt new technologies and embrace emerging business models quickly that has led to the sector’s considerable success.

He says lean and agile development has allowed the space to dramatically accelerate and increase the rate of technology adoption – an aspect that traditional banking has struggled to implement.

“Historically, financial institutions would embark on massive development projects, typically using waterfall, which would require many months or years to scope, develop and implement. Now, we can deliver minimum viable product features quickly and iterate frequently.”

This change, says Carmody, has enabled fintechs to “push the envelope and rapidly evolve”. And the proof is in marketplace performance. “IPC has embraced agile software development for years, and this has significantly decreased time to market for new features and technology adoption.”

But what do the terms ‘lean and agile’ actually mean – and how exactly do they improve performance in financial institutions? Steve Strickland-Wright, CTO of Fluent Money Group, explains the concept.

“It’s a good idea to remember what the terms ‘lean’ and ‘agile’ stand for,” he says.

“Going back to basics, ‘agile’ is focused on software and the delivery of value into a business. In the agile manifesto, you can see just what it represents: collaboration, focusing on value, and delivering to appropriate standards. It’s about avoiding verbose, heavy documentation, and not over-thinking. And for ‘lean’, it’s all about optimisation, delivery, and production.

“For me, the impact of these two things is an industry seeing fewer drawn-out projects following a waterfall delivery model, over-speccing and over-analysing.”

Lean and agile technology

Cloud technologies have been massively instrumental in creating a lean and agile environment. With real-time data transfer, aggregation, secure storage, and more, these services, which are available to all businesses, have cut the fat from time-consuming, labour-intensive processes in the financial services industry.

Carmody explains, “Cloud service providers, like many fintech providers, have built entire development and support models around Lean / Agile and DevOps. This has not only decreased time to market but also created an inherent focus on what is most important for the industry.

He says lean and agile principles provide an opportunity to pivot more quickly. “This was the driver for the recently launched IPC Agility, a transformational application platform that simplifies development and deployment of tools, applications and new technologies alongside mission-critical Unigy trading systems. IPC Agility provides the same ability to quickly innovate and pivot without risk to the primary trading system.”

Strickland-Wright agrees. He believes the cloud has played an essential role in developing the fintech sector because they enable companies to streamline products, pricing, and collaborations.

“Cloud service providers are making systems available to engineers and product teams that enable concepts to quickly be proven.”

He elaborates, “We’ve done this a few times at Fluent Money in the last 12 months, rolling out a number of projects, quickly spinning up a platform in Azure, assessing how it works, testing and proving a concept. It’s costing us very little and takes very little time.”

Forming digital partnerships

Traditionally, incumbent banks have been self-contained entities, handling their own data storage, aggregation, and technical requirements in-house. However, fintechs take a different approach, and rather than blowing budgets on high-cost technology systems, they outsource to expert partners, creating what is now described as the fintech ecosystem. This ability to reach out and form collaborations when required is part of the lean and agile mindset.

“Outsourcing and in-house both have their place in a development strategy, and in many ways Lean / Agile actually makes this even more true by creating more frequent checks and balances,” explains Carmody.

Although he isn’t averse to in-house development – he says that in this current climate, it has its place. “In-house development is best when developing fundamental core competencies or ‘special sauce’. Outsourcing is helpful when your team does not have (or need) the technical or domain expertise and spike capacity. But this is only successful if you bake this into your work culture predictably and from the outset; otherwise, it is very challenging to maintain product quality and corporate morale.”

Lean and agile banking trends

The past two years have seen momentous changes being ushered in terms of the digital transformation of financial services. But much more is to come, and 2022 to 2025 will see massive shifts being made by incumbents to keep up with the trends.

Carmody says, “Agile will continue to become even more distributed; this is particularly true in COVID times where collaboration tools and remote working have been adopted.”

He believes this trend will further motivate the need for agility across the entire organisation and not for development purposes.

“Lean concepts will also permeate further across other processes and not just R&D. These philosophies will extend to project management and ultimately selling motion. IPC sees this happening ourselves and at our customers with the need to support new trading paradigms and rapid technology adoption aided by API First design, Open Platforms and solutions such as IPC Agility.”

However, Strickland-Wright says the biggest shift occurred a decade ago when fintech first drew breath.

“I think this revolution was 10 years ago. It’s been and gone, and now people are looking at where delivery goes next.

“The stand out for me over the last two to three years is having a development or engineering function that is split into platform-based teams.”

The types of tools available, he points out, are also a game-changer. “I think back 10 years when I was working on a project for a greenfield system. It was a blank piece of paper. We cherry-picked the tools we wanted to use. Now we see cloud service providers getting together and building multi-tool solutions for folk like us.

“We’ve now got things like Azure Dev Ops, which is all of these things, all rolled into one but only one budget line and one vendor rather than multiple. It accelerates development.”

The future for incumbents

In a world that is constantly changing, only those that evolve will survive. Incumbents will have to develop to stay relevant. That much is certain, concludes Carmody.

“There is no one simple answer that covers obsolescence of legacy systems, but it is happening. Legacy systems continue to naturally fall away. IPC has already seen some of our competitors that are not able to adapt quickly enough get left behind.”

He adds, “Moore’s law has already been slashed multiple times, and the second derivative of fintech development continues to increase. It is only a matter of time that legacy systems will become obsolete, and IPC is poised with agility for the long haul.”