Fintech, Digital banks, Banking as a Service, Banking as a platform
Fintech
Companies that aim to improve, streamline, digitize, or transform traditional financial services using software and technology.
Technology and finance are giving startups and service providers the ability to offer streamlined financial products and services that were previously only available through highly regulated, traditional financial institutions. FinTech startups are poised to revolutionize the banking sector and outpace traditional banks: Companies that seek to improve and automate the delivery and use of financial services by expanding financial inclusion and leveraging technology to reduce operating costs.
Digital bank
Online-only financial institutions that resemble banks. A neobank's offerings are usually limited compared to traditional banks - sometimes there is nothing more than a basic checking and savings account. Thanks to the slimmed-down model, neobank customers often enjoy lower fees and higher-than-average interest rates.
From a customer's perspective, a Neobank may be nothing more than an app that lets you manage your money and make decisions.
Fintech companies that offer apps, software and other technologies to streamline mobile and online banking. These fintechs usually specialize in specific financial products like checking and savings accounts. They also tend to be more flexible and transparent than their big-bank counterparts, although many of them partner with those institutions to underwrite their financial products.
The big banks have recognized the demand for neobanking products and have started to introduce similar offerings in order to compete.
Banking as a service
End-to-end process that ensures the comprehensive delivery of a financial service, delivered on-demand via the Internet and managed within a specified timeframe.
The underlying infrastructure-as-a-service is provided by a "traditional" licensed and regulated bank.
This bank-as-a-service is joined by decomposed banking services and an ecosystem of fintech startups and service providers.
But dynamic developments in the FinTech world have made this model obsolete. The reason: tech companies like Solaris provide the middleware of bank-as-a-service, but at the same time hold a license to operate as a regulated bank. This means they no longer need the foundation of a traditional bank.
Banking as a platform
Allows third-party developers to build products and services for bank customers. Developers can extend platform functionality using APIs, while the platform itself manages data exchange and monitors authentication and compliance.
It's a potentially groundbreaking concept that provides a universal technical interface to connect banks' core banking systems and banking apps from a vast ecosystem of FinTech companies.
Provides a universal technical interface that connects to a bank's core banking systems and allows software developers to create various service apps. The idea is to enable third-party developers to create a wide range of useful and secure applications that offer users tangible benefits compared to traditional online or mobile banking systems.
Open Banking is accomplished, all bow to Open Finance
Open Banking provides third-party financial service providers with open access to banking data, transactions and other financial information through application programming interfaces (APIs).
This has been the basis for the creation of digital banks such as Revolut that use banking infrastructure providers.
Open Banking is only a step on the road to Open Finance
While Open Banking APIs allow users to share their bank account information, Open Finance goes a step further and allows data to be shared from various sources, such as accounting and billing platforms.
Connecting to accounting and invoicing platforms is especially important for corporate and SME banking customers, as they form the basis of corporate financial data. A bank statement can provide insight into how much money a customer has deposited into their account over a period of time, but accounting data can provide a much more comprehensive view of a customer's financial situation. Access to more robust data gives financial institutions and fintech apps the freedom to offer personalized services, from insurance to mortgages and loans.
APIs not only enable open finance, but also allow fintech companies and established institutions to build additional banking services into their product without investing time and resources in API development. In this way, they can quickly offer new services to their customers and gain a competitive advantage.
Open Finance will transform a plethora of products and services in financial services and beyond.
Mortgage and loan approvals will be instant and fully digital, with access to data on assets, liabilities and net income. Pension switching will be automatic based on current and projected portfolios.
Financial advice will become much more individualised and powerful thanks to improved data access.
Small and medium-sized enterprises will be able to make their cash flow information available to multiple potential lenders to easily obtain the most favourable loan rates.
Microservices distilled
My knowledge of microservices summarized :)
Microservices
- approach to software development
- microservices architecture consists of a collection of small, autonomous services.
- each service
- self-contained and should implement a single business capability.
- separate codebase - can be managed by a small development team.
- can be deployed independently.
- responsible for persisting their own data
- communicate with each other by using well-defined APIs.
- don't need to share the same technology stack, libraries, or frameworks.
- team can update an existing service without rebuilding and redeploying the entire application.
Management (Orchestration)
This component is responsible for placing services on nodes, identifying failures, rebalancing services across nodes, and so forth. Typically this component is an off-the-shelf technology such as Kubernetes.
Gateway
Entry point for clients. Instead of calling services directly, clients call the API gateway, which forwards the call to the appropriate services on the back end.
- decouples clients from services. Services can be versioned or refactored without needing to update all of the clients.
- can perform other cross-cutting functions such as authentication, logging, SSL termination, and load balancing.
Advantages
- Agility - microservices are deployed independently, it's easier to manage bug fixes and feature releases. You can update a service without redeploying the entire application
- Small, focused teams. A microservice should be small enough that a single feature team can build, test, and deploy it. Small team sizes promote greater agility.
- Small code base. In a monolithic application, there is a tendency over time for code dependencies to become tangled. Adding a new feature requires touching code in a lot of places. By not sharing code or data stores, a microservices architecture minimizes dependencies, and that makes it easier to add new features.
- Fault isolation. If an individual microservice becomes unavailable, it won't disrupt the entire application, as long as any upstream microservices are designed to handle faults correctly.
- Scalability. Services can be scaled independently, letting you scale out subsystems that require more resources, without scaling out the entire application.
- Data isolation. It is much easier to perform schema updates, because only a single microservice is affected.
Challenges
- Complexity. A microservices application has more moving parts than the equivalent monolithic application. Each service is simpler, but the entire system as a whole is more complex.
- Lack of governance. You may end up with so many different languages and frameworks that the application becomes hard to maintain. It may be useful to put some project-wide standards in place.
- Network congestion and latency. The use of many small, granular services can result in more interservice communication. Also, if the chain of service dependencies gets too long (service A calls B, which calls C...), the additional latency can become a problem.
- Data integrity. With each microservice responsible for its own data persistence. As a result, data consistency can be a challenge.
- Management. To be successful with microservices requires a mature DevOps culture.
- Versioning. Updates to a service must not break services that depend on it.
- Skill set. Evaluate whether the team has the skills and experience to be successful.