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What is composable banking? It’s the approach in banking that involves breaking different services down into smaller units and combining various independent software components to create custom solutions. This enables banks to develop new products and services much more quickly without the need for new, large, and highly complex IT solutions tailored to the specifics of their operations. Let’s delve into this topic more thoroughly.
Table of Contents
What Is Composable Banking? Definition
Composable banking is simply banking with the use of components. This involves dividing the services into smaller units that can be combined with each other. The approach is scalable and easily customisable, enabling you to meet changing market demands and follow current banking trends.
Using components in banking is now a trend in financial technology. Banks recognise the opportunities it brings, so they are increasingly willing to adopt this approach.
The Power of Composable Banking Solutions
As mentioned earlier, composable banking solutions have one main advantage: they are flexible. With them, a bank may develop new systems and services quickly and with minimal effort, meeting the needs of their customers. Moreover, banks don’t need to purchase (or develop) highly complex platforms just to get two or three functions they need, which significantly impacts the costs and simplifies their IT infrastructure. However, these are not the only benefits of adopting this approach to banking. What are the others? Take a look below.
Consistency Across Different Channels
Using the same components for the same purposes on all channels and in all solutions, composable banking allows you to achieve a high level of consistency. This is important for both managing customer experience and unifying the procedures in your organisation.
No Vendor Lock-In
Another important benefit is that your software vendor won’t block you. When opting for a whole banking platform, you risk being unable to integrate it with solutions from other vendors. Still, when using components, you can simply add other software components as you wish and as needed.
Security
How does composable banking improve security? It isn’t more secure than other solutions per se; however, it has one major advantage in this area: consistency. Due to this, implementing security updates is much faster and easier.
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Reduced Costs
Composable banking also leads to major savings. With this approach, you don’t have to spend a lot of resources (including time and money) on developing new services or software solutions. Instead, you can combine the existing solutions to create such services time-efficiently.
This also means that you don’t need IT experts to work on each service, and as we know, their work costs more. So, naturally, using software components makes your operating costs dwindle.
The Takeaway
It is no wonder that composable banking solutions have become so popular since they offer a plethora of benefits. However, you still need to remember their disadvantages. While they may provide a lot of flexibility and customisation regarding component integration, you can’t modify the components ad hoc, which is undoubtedly a downside. Yet, that’s the only con to the solution, so we still believe it’s one of the best approaches to digital banking!
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