It’s time for Singapore banks and insurers to recalibrate their IT and business strategies.
That much was clear when Ravi Menon, the managing director of Singapore’s financial regulator Monetary Authority of Singapore (MAS), introduced the next version Financial Services Industry Transformation Map (ITM 2.0). His reason: the recent pandemic and macro factors have changed the business fundamentals.
The focus areas of the new ITM 2.0 are resiliency and sustainability. It enables banks and insurers to adjust their business and IT strategies as they face constant disruption and competition. Against this backdrop, there is a hidden expectation to deliver enterprise apps quicker.
So, how are Singapore banks and insurers coping? And what are they doing to map their business strategies as they lubricate their enterprise application delivery pipelines to deliver faster to market demands?
These are some questions that a Cxociety roundtable, sponsored by Mendix, explored. Participants, who included IT and business leaders from Singapore-based leading banks and insurers, acknowledged the struggles and opportunities as they balanced legacy core banking demands with new digital banking expectations. They also highlighted a growing interest in low-code development as a solution.
Framing the low-code interest
Early in the discussion, participants shared why they thought low-code platforms, which have existed for a decade, are coming into fashion.
The major one is that it allows companies to quickly build and deliver enterprise apps without overloading the IT or DevOps teams. It also equips banks and insurers to meet shifting expectations led by market digitization and catch up with new digital startups.
Mendix, which is focused on speeding up enterprise app development, understands this well. Instead of taking the high-code route with coding, it proposes a low-code alternative that allows businesses to get new apps ready faster.
“Gartner expects enterprises, including banks, to have low-code platforms, not just one. Instead, it sees several of them working together with different focuses,” said Paul Higgins, EMEA industry lead for banking & financial services at Mendix.
Higgins very early pointed out the difference between low-code development and low-code customisation. “There are other low-code platforms that aren't necessarily for application development. They're for customization of some of the services that they offer. So that's maybe a differentiation. And that's also why you would probably see three, four, or five local platforms in an organization.”
However, many participants admitted that while they see low-code advantages, they’ve yet to take the first steps. Many are still debating the value propositions, although the pressure to adopt one is also getting higher by the day.
Sachin Salva, the chief information officer at Manulife, who comes from an application development background, said that the low-code vs. high-code debate is not new. With the need for faster time to market, there is a growing interest in the feasibility of low-code development platforms.
“I saw a few use cases. And I'm quite interested to know how this can be possible with low-code. My architecture team and engineering leads want to try this out and see what we can bring to business,” he added.
Mendix’s Higgins explained that banks and insurers need to see low-code as the next step from high-code programming languages like Java. It all “comes down to the level of abstraction” and considered low-code development the next step beyond Java.
“With Mendix, there isn’t any code generated. Instead, it's an interpretation of the model that you're designing. What that means is, from an IT risk and security point of view, you can analyze the model, understand how it works, and create an application or a module that has gone through the approval processes and is reusable.”Paul Higgins
Overcoming the legacy baggage
When it comes to modernising IT development, participants felt technology debt is the elephant in the room.
Many legacy systems still run banks’ and insurers’ core systems. Migrating to a cloud-native environment has been arduous and fraught with challenges such as a lack of talent and regulatory hurdles.
Several participants noted that much of the financial IT innovation has occurred at the front office. And digitalizing the middle office and back-office automation has been a tougher ordeal.
However, Mendix’s Higgins noted that new use cases show that this could be done. He cited his company’s work with Rabobank as an example.
“There are some excellent examples of how they've transformed from an older system into this sleek, digital experience for customers. Customer onboarding is another one where we see a lot of success. And then he explained that moving on to automating business processes, where the Mendix platform can work together with RPA,” he explained.
“Another good example out of Canada is Business Development Bank of Canada (BDC). They were able to build a loan processing engine in about eight months,” he added.
Rafal Kowalski, head of data plane and cloud architect at DBS, understood these advantages. Coming from designing the bank’s data platform, he intimately understood the challenges in building software and working with APIs.
“If you develop the software in-house, you have full flexibility, but it comes at the cost of developing it and maintaining it,” said Kowalski. He noted that this is one reason banks and insurers turn to the cloud. It allows them to provision resources “within minutes.”
However, when it comes to the actual development of the software, Kowalski admitted that low-code has many advantages. “Because you can quickly do a proof of concept, run it as a pilot for a limited number of customers, and see if it works. Then you can go into production quickly.”
Nicholas Chee, executive director for group transaction banking at UOB, looked at it differently. “If you ask me generically, from a software development standpoint, the most important thing is sustainability.” He noted that this extends beyond coding and should include managing talent “because people come and go.” And the real issue is the lack of local talent and working with foreign ones goes into human resources challenges in Singapore.
Fighting low-code misconceptions
While supporting low-code innovation, DBS’s Kowalski highlighted two challenges he felt high-code development trumps.
The first is portability, which is one reason why DBS uses containers. The second is observability, allowing complete code visibility based on key metrics. “From my experience, I found it's easier to maintain these two aspects when you have high code development,” he pointed out.
However, Mendix’s Higgins argued that the company designed its platform to address these issues. “Both of these things you mentioned, I actually see them as a strong point of low-code over high-code,” he replied.
“What often happens is you've got your developers who will build your application, and then it gets handed over to operations. And then you have things like change requests to make updates, patches, etc. The visual way that low-code works makes it much easier for an [IT operations person] to look at the application and understand very quickly what's happened,” explained Higgins. He also noted that it is one reason why large banks have internal DevOps teams “but not everyone has one.”Paul Higgins
“Specifically, that's one of the USP [unique selling point] of Mendix; you can deploy it anywhere. And it is completely 100% containerized,” he added.
Another participant raised the issue of source code escrow clause. This is the deposit of the software source code to a third-party “escrow” agent to ensure the software is maintained when it becomes abandoned or orphaned by the third-party developer.
In its Technology Risk Management Guidelines 2021, MAS recommended software escrow as an essential component of the project management framework.
Higgins clarified that in low-code development, “the IP is owned by whoever develops something on the platform.” Meanwhile, in terms of software code escrow, he noted that the issue comes up when you are dealing with startups.
“And I think it's important to state that Mendix is backed by Siemens and not by some venture capitalists who may sell the company. So, backing offers stability there. And if you need to exit for some reason, we have an exit strategy we can develop with you,” said Higgins.
The soft benefits of low-code
Another area that a low-code platform offers is enabling better communications between business and IT development teams.
As mentioned earlier, the rising gap in expectations between IT and development is becoming a cause of concern. Business expects IT and development to empower them to be agile and responsive to business needs. But on the other hand, IT and development teams are overloaded and need to prioritize. And when it comes to budget, companies also have to finely balance cloud-based development and keeping the lights on for their internal core systems.
“It is no longer about low-code or no-code versus a high-code. At the end of the day, it is about having a platform that brings the business users together with the IT and development,” said one participant.
Here, a low-code platform can help business and IT closer and in line with new business goals. Such a platform also allows tech-savvy business teams to develop prototypes quickly.
“It encourages the development of citizen developers. They can do a prototype which is better than giving a design diagram to a programmer,” the participant added.
Low-code development platforms also help to build a more agile-minded culture. Mendix’s Higgins noted that it allows business users to gain knowledge about agile development and build a company culture around it.
From the conversation, it’s clear that low-code development remains high, especially in aligning current software development with dynamic business strategies.
While many of the participants continue to look for use cases for moving from high-code to low-code development, the business needs and regulatory landscapes are changing. With neo-banks, insurtechs, and non-banking financial institutions (NBFCs) gaining market share, incumbent players must find a better solution to remain agile and responsive to market needs. Meanwhile, banking and insurance customers are ready to switch to a more convenient digitalized approach after tasting it during the pandemic lockdowns.
Many participants noted that a hybrid approach is best as regulations catch up and they better handle legacy core applications. “It is going to be a mixture to a hybrid of some sort. The key is that return on investment, or the cost savings, must come in right for the business,” explained UOB’s Chee.
But one thing remains clear: it is not an “if” low-code development will become the mainstay of banking; it is now a matter of “when.”