Designing the Enterprise Architecture of the New Era in Banking

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With the acceleration of digital transformation in banking, banks of all sizes are being forced to rethink the backbone of their digital efforts – their enterprise architecture. But what does a new-age enterprise architecture look like? Cedar Management Consulting experts outline some of the key things to consider.

Digital transformation requires a high degree of adaptability and integration within banking operations, which is a challenge for banks working with legacy enterprise architecture.

Traditional enterprise architecture frameworks available for reference, such as Zachman, Australian Government Architecture AGA, TOGAF, DoDAF, MODAF and FEAF, provide guidelines for defining architecture building blocks and integration between them ; most of them recommend customizing the enterprise architecture design method based on the organizations goals to achieve transformation.

Key pillars of a new era enterprise architecture

New era enterprise architecture shifts the focus from technology to business, customers, fintech, digital and data.

Business focused: Traditional enterprise architectures were IT-centric and addressed IT needs rather than business needs. Business team members often view enterprise architecture as a technical area, which is not the case. Rather, it defines how the various business needs will be addressed by the technology and requires IT to explain it in very simple language.

New era enterprise architecture should focus on the culture, management, and business strategy of an organization. The business team must be able to operate independently, without being dependent on the technical team for day-to-day functions such as daily reporting and getting answers to first-level system clarifications.

Customer oriented: In traditional enterprise architecture systems, the emphasis is on stability and security, while the new era enterprise architecture focuses on creating value for customers. Customer needs should be inferred and indirectly observed, without disrupting natural customer behavior. Enterprise architects need to help bridge the gaps between what the customer expects and what companies provide.

The customer expects value at all stages of the customer journey: before a purchase, during a purchase and after the purchase.

Fintech friendly: Today’s bank operates in a collaborative environment of fintech ecosystems, integrating with fintechs specializing in niche areas such as chatbots, blockchain, artificial intelligence and loyalty engines to n’ cite just a few. Established companies usually aren’t able to build apps like fintechs do.

Thus, companies should welcome such apps by providing fintech app integration to enhance their offerings by partnering with fintechs. Several digital banks provide vendors with a sandbox environment where fintechs can record, integrate, and test real-world use cases.

Further reading: Indians are the world’s largest users of FinTech products and services.

Digital transformation: This enables key features such as straight through processing, paperless businesses, self-onboarding, e-KYC, instant payment transfers and alerts. The enterprise architecture design accommodates all of these features with minimal or no human intervention. Legacy enterprise architecture can support all of these features, but will likely require significant customization, and the effort it would take is unlikely to survive a clear cost-benefit analysis.

Data Driven: Businesses expect data-driven design and analytics. Data has become a key asset for understanding customer behavior, exploring new revenue opportunities, cost leaks and security vulnerabilities. To build an analysis on data, the data must be available. New-era enterprise architecture identifies all possible opportunities to capture customer and staff behavior data, and designs ways to analyze this data to provide insights to management.

Fundamentals to consider in design

New age architectures are “scalable by nature”. The scalable architecture has no end state and is based on the concepts of continuous integration and continuous development, allowing architects and developers to continue building and integrating various components without affecting the building blocks.

Minimum Viable Architecture (MVA): The new enterprise architecture design methodology should initiate architecture design as an MVA and continually improve the architecture over time. Working in this way avoids the expense of “build and burn”. The MVA is enough to launch a product or service.

plug & play: The Open Group’s Open Agile Architecture framework provides guidelines on the plug and play features of the new enterprise architecture. Companies must design the components they need, integrate them into the current architecture, upgrade or replace them at any time. The collapse of these components has no impact on the business as a whole, which continues to function with other functionality.

Modularity: New age enterprise architecture must think modular, loosely coupled, with continuous integration and continuous development. It should be loosely coupled and modular, to help the business respond faster than traditional approaches. Modularity will help end legacy systems over time. Modular components are self-contained, independent, service-oriented architecture building blocks.

native cloud: The cloud-native enterprise architecture is cloud/technology independent and can be mapped to all cloud platforms such as Microsoft Azure, Amazon AWS or Google Cloud. Microservices within a native cloud platform help build and deploy smaller, independent services. Microservices interact with each other through APIs.

Interdependent microservices and their APIs are bundled and shipped as containers. Docker, Kubernetes, and OpenShift are popular container image formats. It also offers immense operational and financial flexibility through the “pay-as-you-go” infrastructure model and the ability to scale up or down in seconds. Such flexibility allows banks to prioritize and focus on the design aspects of enterprise architecture rather than worrying about security and configuration.

Very nimble: The current enterprise architecture development methodology is a linear and sequential approach, while the new age enterprise architecture adapts to an incremental and iterative approach of building, using, building incrementally, of use, etc. The front-heavy design can prevent small components from plugging in and adapting to quick changes.

Emerging technologies and products deployed in the enterprise have shorter release cycles and allow the enterprise to be flexible enough to rapidly deploy such components.

In 2020, The Open Group released The Open Agile Architecture (O-AA), an enterprise architecture framework designed to support businesses through dual agile and digital transformation initiatives. O-AA provides guidelines on the key components of new era enterprise architecture frameworks and is an ideal head start for companies beginning their journey into the new era.

Other frameworks companies should consider when designing their enterprise architecture frameworks include TOGAF (The Open Group Architecture Framework), SAFe (Scale Agile Framework) BIAN (Banking Industry Architecture Network), and DevOps.

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