Digital Banking:
The Operational Backbone

A must for becoming truly digital

Published 24 June 2019

"The simple truth is that a truly digital bank must also have a digitized backbone to ensure scalability and resilience." In Digital Banking: the Operational Backbone is a must.



Jukka Salonen
Chief Portfolio Officer

The Financial industry is playing ‘catch-up’ in the age of digital disruption, and banks are investing heavily to build up their digital services. But becoming truly digital is about more than just being able to provide digital front-end services.

Over the past four years, the MIT Center for Information Systems Research (CISR) has studied digital transformation in several companies across different industries. These studies claim that to become end-to-end digital, organizations must both digitize their operational backbone and combine that with a digital offering platform. This way, the backbone provides efficiency, while the front end provides innovative customer experiences.

This sounds simple enough; however, while many banks have put a lot of effort into their digital offers, the same can’t be said for fixing their legacy backbone platforms. Why? Because backbones are difficult to fix! The simple truth is that a truly digital bank must also have a digitized backbone to ensure scalability and resilience.

It all starts with customer experience

Customer experience is the key to the digital world. Customers want to access services that are easy to use and reliable, anywhere and anytime. Banks are being challenged in the market by newcomers with flexible banking solutions and speed. Naturally, banks have reacted to this by developing net banking and mobile banking solutions that aim to fulfill customer expectations.

Customer experience is not only limited to the interface that customers see. Behind that, in most cases, lie complicated processes that run manually or in old legacy systems. Every manual step perpetuates slowness, and each legacy system increases the risk of downtime – ultimately impacting customer experience. Great digital customer experiences require end-to-end digital processes.

Digital Banking: the Operational Backbone is a must

Banks with legacy core platforms have started to realize that transforming to end-to-end digital requires a new type of operational backbone. For a traditional bank, there is no easy fix, but not doing anything is not an option.

Options include building a new core platform in house, buying a package or getting the backend as a service. All these options take time to finalize, especially for banks with a complicated legacy. The good news is that digital banks need a simple out-of-the-box type of backbone – a tailor-made solution is simply a waste of time and money.

Building an end-to-end ecosystem

Equally important to the digital operational backbone is the digital ecosystem as a whole. Because of PSD 2 and ‘open banking,’ many banks have already established the first phase of a new ecosystem with the help of partnerships – fintechs and bigtechs – to broaden the scope of services to further improve customer experience.

A similar kind of ecosystem is also a solution for several components in the operational backbone.  This way, partners can provide production services in the niche parts of a bank’s business. In fact, a truly digital bank is actually an ecosystem.

Call for a new culture

Moving from a silo-based legacy financial institution to an end-to-end digital ecosystem bank requires a fundamental change to both cultures and structures. The change should start from the top. Executive leaders must learn to lead ecosystems rather than continue to lead hierarchical silo ecosystems. This change can take longer than any technical change – and therefore should be started now!


Importance of a mobile banking app within a bank’s multi-channel strategy

Thomas Winandy

Head of Mobile Banking Apps
Commerzbank AG