As the world rapidly digitizes, the banking, financial services, and insurance services (BFSI) sector is experiencing monumental change. Technology has graduated from being a tool utilized for achieving specific outcomes to a driving force behind innovation and growth, often exceeding the rate predicted by Moore’s law. Especially in the BFSI sector, this evolution has significant implications and that’s why platform engineering is here to beat these implications.
Upon closely observing the BFSI industry, we have discerned six key factors that obstruct the transformational initiatives taken by institutions:
- An excessive reliance on external partners, which impedes internal capability-building
- A disproportionate emphasis on short-term cost reduction
- Technological upgrades often merely beautify inefficient business processes
- Knowledge management challenges like overdependence on key individuals holding intellectual property of legacy systems and processes, and low re-use of knowledge across the organization
- An overreliance on commercial-off-the-shelf (COTS) products
- A slow response to competitive (fintech) or regulatory changes
Navigating a sea of change with platform engineering
Now more than ever, BFSI institutions grapple with an intricate and swiftly altering regulatory environment. Many have suffered crippling regulatory audits and penalties due to system failures. Consequently, they are exploring means to mitigate partner and external solution-related risks, including developing in-house competencies and acquiring proprietary tech assets.
But striking a balance is critical for future scalability. Alongside nurturing internal capabilities, BFSI entities need to decide where to leverage trusted technologies and external partnerships to benefit their customer base. Investments in early-stage companies with a view to acquiring their tech assets and active experiments with advanced technologies are becoming increasingly common.
Moreover, BFSI companies are aggressively recruiting tech talent from fintech firms and startups. The battle for skilled engineers is fierce, and to attract potential hires in a highly competitive market, these organizations need strategies for both talent acquisition and retention.
Market and technology forces have induced major challenges that BFSI institutions often struggle to overcome. This article delves into these hurdles and offers recommendations for tackling them.
Triad of challenges impacting the BFSI industry
Challenge 1: Leadership & talent management
Sourcing and retaining top executives from fintech and digital native companies alone isn’t sufficient to establish an efficient engineering ecosystem. BFSI organizations need to prioritize hiring executives from such companies to enhance their software engineering abilities and foster an environment conducive to innovation. A case in point is Goldman Sachs, which recruited Marco Argenti, a former executive at Amazon Web Services, to helm its technology division. The results were transformative.
However, hiring talented executives is only one aspect of the puzzle. For organizations to truly thrive, they need to cultivate a conducive structure, processes, and culture that bolster software engineering excellence. They must invest in technology infrastructure and resources and provide their software engineers with ongoing training and development opportunities.
Rather than relying solely on individual talent, organizations should focus on building strong teams and transition from a project-based approach to a product-based one. Failing to prioritize these efforts may result in losing ground to competitors and missing opportunities for growth and innovation.
Challenge 2: Modernizing legacy systems
Despite substantial investments in technology and software engineering, BFSI entities often fall short of achieving their transformation objectives. Organizations like Deutsche Bank and HSBC have had to lay off significant numbers of employees, indicating a struggle to realize the desired outcomes of their investments.
The primary reason is that while software engineering represents a significant investment, there’s still a lack of understanding of how to integrate these practices effectively into organizations. Ineffectively deployed technology talent and resources can lead to wastage, prolonged wait times for approvals, challenges in information discovery, and repeat efforts across departments.
Organizations need to understand system complexities early and create an appropriate framework to support system changes. They should invest in new technologies and design approaches that align with their organization’s business goals, improving operational efficiency, reducing costs, and enhancing the customer experience.
Challenge 3: Developing modern testing strategies
The BFSI sector has become increasingly complex, which poses significant challenges in modeling the impact of stress scenarios. In the face of added risk, many financial organizations have found themselves subjected to systemic failures that have led to tighter regulatory action.
To address these risks, organizations should invest in technologies that allow them to view their operations as a complex, interconnected system and to identify potential risks. This understanding is crucial in devising safeguards to mitigate such risks and ensuring smooth operations.
Mapping the future trajectory
BFSI institutions need a holistic approach that synergistically combines internal capabilities with external partnerships and technologies to navigate these challenges successfully. Key focus areas include robust risk assessment, aligning software engineering efforts with business goals, attracting top tech talent to foster an innovative ecosystem, building strong teams, and adopting a product-based approach.
Our solution, platform engineering, partners with leading BFSI providers to address these challenges. The framework focuses on six areas to help identify waste, friction, and drive the impactful, lasting change needed to overcome industry challenges.
Propelling forward with platform engineering effectiveness
By prioritizing these six elements, BFSI institutions can successfully navigate the challenges, achieve faster time to market for digital products, improve productivity, enhance predictability of outcomes, and reduce regrettable attrition.
By adopting actionable strategies like engaging the engineering workforce, staying abreast of technology changes, managing innovation risk, and integrating new and legacy systems, BFSI organizations can lead in the digital era, delivering superior customer experiences, operational efficiency, and sustainable growth. The time to seize the opportunities offered by digital transformation is now, securing a promising future in an ever-evolving landscape.
