What would the impact be if Amazon launched a retail bank? Amazon posted revenues of $74bn in 2014, which would make it one of the largest financial services companies in the world by revenue.
Amazon would be able to tap into its next generation IT architecture and its endless capacity for innovation to reinvent the retail banking sector. Within this shifting landscape, new software architecture patterns are giving CIOs more options for replacing ageing legacy technology. One company catering to this new landscape is Crane Software.
We caught up with the CEO of Crane Software, Craig Beddis to better understand not only how his company is helping enterprises adopt next generation patterns such as containers and microservice-based architectures, but also how internet giants could disrupt financial services.
Can you give us some background about your company and the problem you are trying to solve?
There’s a big gap between how customers expect to consume technology and the technology experience provided by their banks. They carry an iPhone 6 in their pocket but talk to a legacy mainframe that processes transactions overnight when they’re dealing with their bank. And it’s fair to say that the cracks are starting to show.
At the moment banks are faced with stark choice – rip and replace, starting again integrate slowly letting their technology and customer experience fall further behind.
Today, there’s a range of new technologies such as containers, components, APIs, new architectures which, taken together, mean that it’s much less of a binary choice. CIOs can now start to adopt new and innovative technology without replacing everything in one go.
Our goal at Crane is to help CIOs deliver new and innovative application services alongside their existing applications which they trust. In the future, I don’t think we’ll be talking about a ‘core banking system’ in the way we do now. We’ll be talking about something far more akin to living software - continuously evolving. We’re trying to help retail banks on that path.
Your recent blog about what would happen if Amazon launched a bank has been making waves - can you tell us a little about that?
I used the “What if Amazon released a bank?” statement during a discussion with some of my banking peers to illustrate the brutal reality of time to market. Not only does Amazon have an IT infrastructure that’s the envy of every retail bank (meaning that they can being innovative services to market faster), they’d be well placed to provide a number of benefits, such as Amazon Prime, to account holders.
While retail banks have rightly put a lot of effort into meeting regulations such as BASEL III, Solvency II and Dodd Frank, they’ve been oblivious to the threat of a large competitor such as Amazon outflanking their IT infrastructure.
When you look at our hypothetical Amazon Bank, and apps such as British Airways, Spotify and Netflix, they’re part of a new wave of what we call super applications. They’ve got next generation design patterns such as microservices embedded, they learn from the user, and they pass on genuinely valuable and enriching content to deliver real utility and value.
How can banks pre-empt the impact of new patterns such as microservices?
Let’s be clear - banks have a lot going for them already. Banking is all about credibility, and thus far large retail banks have been able to rely on their heritage and legacy to protect them from new entrants to the market.
But that’s no reason to be complacent – consumers enjoy perks. According to a recent Sagefrog report, Amazon is the most trusted company in America; Visa is the most trusted financial services company in 22nd.
On a practical level, by adopting technologies such as microservices and standards such as BIAN, banks will be able to make isolated updates to core business functions without facing the risk of IT outages.
It’s no longer a matter of debate that retail banks need to move faster and deliver greater customer value - distribution and decentralization of IT is the most realistic path to doing just that.
It’s no longer about ‘owning the core’ - by breaking the core app into component parts, banks will be able to outsource some items, lower technical debt, and bring more strategic resources in house. IT can become a critical differentiator again.
Who are the resources to leverage in this space?
It’s worth following the engineering blogs of the main players in this space:
- All Things Distributed from Amazon CTO Werner Vogels
- Guardian Engineering
- Soundcloud Backstage
- Martin Fowler @martinfowler of Thoughtworks has also written a strong guide to Microservices.
- James Turnbull @kartar, author of the Docker Book
- Adrian Cockroft @adrianco and slideshare
- BIAN - Banking Industry Architecture Network, pushing adoption of microservices into retail banks
Craig Beddis is CEO at Container Orchestration specialists Crane Software. Connect with Craig on LinkedIn here.