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Banking business architecture is the foundation for transformation

Banking business architecture

Banking business architecture is the foundation for transformation and is a strategic imperative for banks to survive and thrive. 

Banking business architecture starts with banking business capabilities model, and it is the basis for the digital transformation that banks the world over are embarking on.  Banking and banks have been around for eons, most of them anyway, accumulating a lot of legacy stuff along the way, primarily due to the constant merger and acquisition activity.  With the low-interest rate environment, margin compression, general customer dissatisfaction, intensifying competition from established players and upstarts, 

There are several drivers for transformation such as the advent of the digital paradigm, rising customer expectations, low-interest rate environment, margin compression, general customer dissatisfaction, and the intensifying competition from established players and upstarts.  

The digital transformation of banking has brought to the fore the plethora of inefficient processes, inaccurate data, and a labyrinth of applications resulting in a complex IT landscape.  So instead of bolting on a few more widgets, a la trying to cure a broken bone with a band-aid, it is time to adopt a structurally sound and internally coherent approach to transformation, driven by business architecture and capability modeling. 

So, how does business architecture for banking looks like? Of course, like enterprise business architecture in any other sector in general, but with banking and banks, Capstera team has developed an accelerated and lightweight business architecture approach, with several accelerators to reduce the time to value. 

We will assume that the business architects at the bank has already made a case for business architecture and has been able to secure the backing, funding, and tools for business architecture. 

Building Banking Business Architecture in Seven Steps:

1. Adopt a lightweight Business Architecture Framework:

Whether it is internally developed, or adapted from an industry framework, or from a vendor, a straightforward and lightweight content model or framework will come in handy in coalescing the business and technology teams around a common cause. The business architecture framework can also provide a broad set of guidelines about the content and the deliverables that the team needs to create. 

2. Understand the Strategy of the Bank:

Capture the future state vision, mission, and strategy of the bank and how it relates to the operating model and the IT enablement model. 

3. Develop a Business Capabilities Model for the Bank:  

A common refrain in banking is that building a capability model takes months and years. Of course, if it is a mega bank with multiple lines of business, the sheer size, complexity, and political landscape will make compiling a capability map a difficult exercise. However, for most other players in banking, a building a business capabilities model should not take that much time, given that the core functions of banking are well-known and well-document. (In our biased opinion, you should start with a pre-built and customizable business capability map for a bank.)

4. Identify and Map Essential Banking Value Streams:  

Capturing a range of items that constitute the “Flows” of the bank are a critical success factor. The traditional banking value streams such as “Application to Loan” which are flows from a stakeholder point of view are one of the “Flow” deliverables. Others could be a customer journey map, which captures the journey, not just the steps. And of course, a detailed process model that captures both the happy and unhappy paths. 

Banking business architecture is not easy, but assuming a pragmatic charter, simplified deliverables, and an agile and accelerated methodology, building bank business architecture is possible and feasible within a reasonable time frame and budget. 

5. Generate a Bank-wide Capability to Systems Matrix: 

Compile an inventory of all the applications/systems that proliferate the bank’s IT landscape. And then map the capabilities to systems to understand the footprint of which banking applications realize what capabilities.  This intricate spider-web of capability and application footprint provides a compelling visual artifact to drive the need for an application portfolio rationalization. 

6. Align Bank Transformation Needs to Capability Clusters: 

Let’s assume the bank is reframing the teller experience or online banking experience. So, what are the changes required in capabilities, value streams, and processes? Document these details and align them to appropriate capabilities so that the future state operating model needs are expressed as changes/evolution required in various capabilities. 

7. Translate the Capability Changes Required to a Roadmap: 

Assign priority and sequence the capability changes needed into a high-level roadmap.  Then, create a Gantt chart of the capability transformation roadmap and the intended business outcomes. 

In addition to the bank transformation roadmap, a few other valuable views and viewpoints can be a part of the business architecture effort. Typical artifacts in this regard are strategy-to-capability mapping, capability-to-value stream mapping, customer journey-to-capability mapping, and capability-data mapping, 

Banking business architecture is not easy, but assuming a pragmatic charter, simplified deliverables, and an agile and accelerated methodology, building bank business architecture is possible and feasible within a reasonable time frame and budget. 

Capstera business architecture consulting services can help your bank in building a practical and actionable business architecture. In addition to the domain knowledge of financial services and banking, our team can accelerate the business architecture development process by leveraging our frameworks, templates, and sample business capability models

 

 

 

 

 

 

 

 

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