Many banks’ business strategies focus on customer-centricity and embrace personalization. And that’s a good thing. In parallel, banks put a similar focus on customer-centricity when designing and implementing their new application architectures. This is also a good thing. Today, a bank’s business is mostly embedded in software, and products and services are mostly virtual in nature. Where it starts going wrong is when banks don’t accept that customer- and product-centricity are not opposites and that product design and configuration are a vital aspect of customer-centricity and personalization. Application architectures in banks cannot afford to treat product-centricity as a stepchild but need to focus on it as much as on customer-centricity.

Don’t get me wrong: I don’t suggest returning to the dark ages of pure product-centricity, but I believe that banks need a virtual central product element in their application architecture that supports four key goals:

  • Establishing a single architectural point of banking service and product design, configuration, and pricing
  • Supporting individualized product and services configuration and bundling (representing one major aspect of personalization)
  • Determining customer-context-specific product and service pricing (as one more flavor of personalization)
  • Contributing to a solid and stable foundation for customer experience and engagement solutions on top while fostering continuous transformation

This will help banks drive efficiency in product design, avoid inconsistent and overlapping product definitions, enable personalized pricing and bundling of banking products and services, and decouple “product design” from the “product factory.”

Certainly, if a bank’s application landscape is homogeneous, if current/savings accounts and lending systems come from a single banking software vendor, this is not a huge challenge (at least if the vendor’s software is worth its money). Unfortunately, the situation is typically more complex. Often, banks will have multiple product processors that likely went live between just recently and a few decades ago: Their technologies and architectural sophistication will differ significantly. And banks may want to add further product processors over time and switch off others — this is one key aspect of transformation, after all.

The good news: There is a solution on the horizon. Leading banks have started establishing an architectural building block (some may say a key architectural layer) around products and services. This layer externalizes product and services data via a canonical data model that represents products and services from all product processors. In an endgame situation, this will allow a bank to reach the four goals and to deliver personalized products across its product processors more efficiently and with better customer experience. Product externalization has arrived as a key supporting element of customer-centricity and personalization.

Forrester is currently researching this and is keen to speak to banks experimenting with or working on this topic. If you’d like to discuss your bank’s approaches, please let us know.