Digitalization is advancing in leaps and bounds in the financial industry.
Author: Dominik Liebmann
Neo-banks are setting the standard of digital customer interaction. Traditional core banking systems, with their monolithic architecture, are struggling to keep pace. Avaloq's answer is to rewrite their legacy core banking system on a modern microservice architecture. In the following sections, we will show you the four success factors you need to incorporate the future Avaloq core banking solution into your digitalization strategy.
Today's banks are under digital pressure. Customers expect an always-on bank, which they can reach at any time via all channels (web, mobile, chat, etc.). Regulators are calling for opening up the bank and more integration (keyword: open banking). Only very few core banking systems allow this level of openness and integration.
Avaloq, one of the leading Swiss providers of core banking software, has recognized this development and is converting its core banking system to a microservice-based architecture in the future. This essentially comprises the following components:
In the future, all Avaloq software will be based on microservices running on a container platform (Kubernetes). Avaloq partners are encouraged to run their software as microservices on Kubernetes as well (e.g. Airlock IAM).
Functions provided by Avaloq Front Platform (AFP) will decrease. User interfaces (UI) for web, mobile and other devices will increasingly be built by Avaloq customers and partners.
The business logic of the Avaloq Core Platform (ACP), which was previously created mostly in PL/SQL, will be migrated out of the database. The business logic will now be packaged in microservices.
By switching to the new architecture, Avaloq expects the following advantages for its customers:
Shorter time-to-market and higher flexibility (business agility) through smaller system units (self-contained system)
Greater innovation through reuse of existing functions and self-service
Greater efficiency through the use of standard technologies
Higher quality, availability and releasing through modular architecture
To realize the benefits of Avaloq's new core banking system for yourself, you need to rethink your current integration architecture. Because the implications of this architecture change are enormous and have far-reaching consequences for you:
With this modernization of its application, Avaloq considers itself prepared for the further digitalization of banking. As an Avaloq customer, you need to keep up with the change and train your employees on the new technologies to ensure migration, further development and operation of your core application. The typical Avaloq developer profile is changing from a PL/SQL expert with a data-centric view to a T-Shaped DevOps Engineer who thinks in services and APIs.
In addition to the appropriate skills, the use of microservices requires a suitable integration architecture. This covers the following requirements:
Microservices zeichnen sich durch eine lose Kopplung mittels APIs aus d.h. durch Kombination bestehender Funktionen lassen sich leicht neue Angebote erstellen. Zum Beispiel ein individuelles Finanz-Dashboard für die Konto- und Transaktionsverwaltung durch die Integration von Microservices. Die Orchestrierung der Microservices übernimmt ein API Gateway.
As logic is separated from a monolith into individual services, data is also distributed. It is located in close proximity to the microservices, usually in the form of lightweight databases or caches (e.g. PostgresSQL, Redis). The data distribution i.e. the provisioning of the data is handled by Kafka as the data backbone.
Access to microservices by users and other microservices must be controlled (access management). Otherwise, data can flow freely. This is an unimaginable scenario for a bank that depends on the trust of its customers.
Effective access management relies on modern identity management, which supports the federation of identities. This is supplemented by mechanisms for policy management and enforcement. This defines the conditions under which the microservice may be accessed. For example, asset managers are only allowed to access the data of their own clients. They have no access to the client data of their colleagues.
With the introduction of microservices, the software development lifecycle (SDLC) must be efficient. Previously, it was enough to manually compile, test and deploy applications. With the separation of applications into many individual microservices, manual activities quickly reach their limits. An efficient, automated deployment of applications becomes necessary. This covers both software development with CI/CD and the necessary infrastructure (Infrastructure as Code (IaS)).
The digitization of banking requires new technologies such as microservices in order to be able to serve the growing demands from customers and regulators in the future. However, the successful conversion of previous monolithic systems to the new world is a complex undertaking. It requires broad knowledge and experience in numerous disciplines (service orchestration, data management, IT security, automation). With the right experts, however, you can take the step into the future.