One of 10x’s core technology partners is the cloud-native data platform Confluent. Banks who partner with 10x plug into our real-time event streaming platform, powered by Confluent, rather than building their own Apache Kafka instance, which is a highly complex undertaking.
In this blog, Duncan Ash, VP of Global Industries at Confluent, shares his top tips for core banking transformation success.
Before life at Confluent, I spent a long time working in financial services. I’ve seen the size of the challenge that banks are trying to overcome with core transformation projects.
Over the years, as banks acquire companies, more and more tech gets brought into the mix. Complexity is incredibly high, and it’s not uncommon to see banks with hardcoded and hardwired mainframes. If something gets unplugged, you don't know what will be impacted.
In this article, I'll share three best practices that will help to make your core transformation project a success.
#1: Avoid a big bang migration
Changing your infrastructure overnight is hard, and I wouldn’t recommend it. The liberating thing about the cloud is that banks can cherry-pick which services they need to move and modernize. Usually, this can be done one at a time. So long as you have the right platform in place at the start, you can build on your capability and bolt on additional applications as you go.
Moreover, start with something small. Don’t go for the biggest, scariest project first. Take an evolutionary crawl, walk, run methodology. Just make sure whatever you choose has a real-world outcome or benefit that helps you show success. Slowly, work your way through the stack, modernizing applications as you go, making sure you keep regulators sweet in the process (we’ll come back to that later).
#2: Focus on getting your data just right
Banks are unique because they already have so much customer data. They just can’t access it or make it meaningful.
Data is either spread across disparate systems or, by the time it’s been exported, it’s already gone stale. So a key part of a core banking transformation project is bringing the data in from ledgers (stored on mainframes) to a single data platform.
Even though there's quite a bit of work involved in getting this data out and into a platform, there’s a good chance that the second phase of your transformation will use much of the same data. So you don't have to start from scratch each time, but just adapt it slightly as you come across additional elements you need.
If you focus early efforts on getting the data right and delivering a scalable, agile platform you can build on top of, you’re setting yourself up for success. This is where the power of 10x and Confluent comes in: You don’t have to worry about the cost and complexity of building a cloud-native data platform yourself. Plus, 10x bakes in the resilience and reliability that you need and that regulators dictate.
#3: Win over the regulator
I’ve found that if you can prove you are in control of your systems and have good data, you will win favor with the regulator. They usually have questions about your liquidity, risk-weighted assets, or capital. You need to be able to show them you can produce what they want within a reasonable timeframe.
In the old days, pre-financial crisis, sometimes you had more than a day to answer the regulators questions. Then Basel 3 came along, followed by BCBS 248. Both increased pressure on banks and their reporting. This caused people to panic at the time, but it’s a very reasonable question from the regulator: Do you have enough buffers to absorb market events?
They won't expect you to be able to pull a report in minutes, but if you demonstrate that you can, you’ll show that you’re in control and that you know what you’re doing.
To see the power of real-time banking data, book a demo today to see 10x in action.