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Top Three Digital Engineering Imperatives for Banks and Financial Services Companies


New-age competition is forcing banks and financial services companies to shed their traditional approach for a start-up mindset. Based on our work with incumbent organizations, we present the top three goals for the digital age and how to achieve them.

The threat to market share posed by fintech innovations is pressuring banks and financial services (BFS) companies to morph into technology companies. By investing in modern digital capabilities, such as software development, these companies seek to improve service delivery, back-office operations and decision-making, and to personalize and modernize the experience they deliver to customers.

This pivot to digital is driving BFS companies to embrace a lean start-up mindset. Agile product teams, modern work patterns and digital technologies are recasting how these organizations conceive, build and deploy software products and portfolios. We call this “digital engineering.”

In our work with BFS organizations around the world, the top three most-common goals we hear for digital engineering are:

  • Retain and attract customers by rapidly introducing innovative features, services and experiences.

  • Reduce or eliminate legacy technical debt.

  • Reduce data center costs via cloud migration.

Let’s take a closer look at these goals and key strategies to achieve them, as we also share how a few successful organizations are advancing on their digital pursuits.

Figure 1

Become a digital leader with cloud-native development

To quickly introduce advanced digital services, BFS organizations require a new technology stack and way of working. The traditional waterfall development process is too slow to keep pace with rapidly changing technology and consumer interests. In the time it takes to introduce a new feature, using waterfall, nimbler competitors can develop an even more complete and innovative offering, conduct market testing and release it to customers.

Strategy: Greenfield product engineering

A greenfield approach to product development provides the benefits of a modern, cloud-native application architecture and platform with microservices, containerization, cloud enablement and API-driven (application programming interface) development. Through training, organizations can adopt modern software engineering practices, such as Agile pods, lean start-up, hypothesis- and test-driven development, minimum viable product (MVP) increments, DevOps and extreme programming.

Real-world engagement: Succeeding in a fintech world

Challenge: To stave off fintech competitors, a leading financial services provider wanted to create a new-age lending platform offering a completely online experience, even for transactions like prepayments and withdrawals. By enabling the vast majority of customers to complete their lending journey from a browser or mobile app, this new offering would create a competitive advantage and also reduce costs. To gain first-mover advantage, the organization needed to move quickly.

Solution: We worked with the provider to understand the customer journey and co-create the experience. The online platform came to life in two parallel tracks. The infrastructure track, which produced a cloud-native architecture, was designed in conjunction with our cloud service provider partners. The innovation track generated ideas for new features, followed by rapid prototyping and user testing to identify features most appealing to customers.


  • Through added automation, the provider closed 20% more loans compared to offline channels in the same time period.

  • The goal to offer a fully online journey was realized, with 70% of customers accomplishing their desired transactions with no assistance, and 20% succeeding with assistance from online help, such as chatbots and co-browsing.

Reduce legacy technical debt

Legacy applications inhibit agility, adding technical debt in several ways:

  • Slow feature introduction. To add a new feature or experience to a legacy application, software engineers need to understand the potential effects on a large, monolithic codebase – a process that can take months.

  • Poor performance. The code is often inefficient because of poor engineering choices that seemed expedient when the application was built.

  • Lack of a reliable knowledge base. In many cases, many or most of those who built the code have since retired or left the organization, leaving behind fewer skilled people to handle critical application enhancements. What happens if the remaining team members retire or leave?

Strategy: Application modernization

Cloud-native applications take far less time to update than legacy applications because they are built from self-contained components (microservices or containers) — often one per feature — that communicate via APIs. As needs evolve, developers can effectively add components and APIs without changing what’s already there. (To learn more, read “Using Containers to More Effectively Manage DevOps Continuous Integration.”)

Application transformation rarely requires a full code rewrite. It’s generally more practical and cost-effective to reshape the existing monolithic legacy application into a cloud-native form (that’s componentized, microservices-based and API-enabled) through a series of disciplined engineering steps. The conversion process, called application transformation or application modernization, typically involves incrementally refactoring and reengineering monolithic code to a cloud-native form.

This process can preserve certain segments of legacy code that need not change to be part of a cloud-native software architecture. An example might be a complex calculation or model.

Real-world engagement: Achieving a competitive edge through modernization

Objective: To compete with fintech start-ups and comply with complex regulations, a financial data provider needed to revitalize and modernize its IT systems and transition to a cloud-native architecture. Existing systems did not scale well and were costly and difficult to update.

Solution: The provider invested in new digital experiences for customers and employees, a cloud-native development platform, and more streamlined and accountable ways of working through digital. The business transitioned to a product-focused engineering team to accelerate application transformation in the U.S. and India. Full-stack engineers work in pods with end-to-end ownership for each feature set, and the organization is implementing a DevOps pipeline across its business lines.

Outcomes: The financial data provider improved its competitiveness and achieved compliance:

  • Phase 1: The organization shifted its legacy applications to a cloud-native architecture and introduced into its practices and culture extreme programming, test-driven development and full-stack engineers.

  • Phase 2: The applications were migrated to a public cloud.

  • Phase 3: The business modernized the transactional data tier and transitioned from traditional relational databases to cloud-aware NoSQL engines.

Reduce data center costs

Until recently, board members regarded the data center as a strategic asset, and CIOs who proposed cloud migration risked being seen as radicals rather than responsible stewards. Today, the same board members ask, “Why haven’t we moved to the cloud?” The CIO is now tasked with spearheading a responsible cloud migration strategy.

Strategy: Lift & shift legacy applications to the cloud

When applications are moved from stand-alone servers to an on-premise or public cloud, their capabilities don’t diminish. When executed correctly, lifting and shifting produces immediate return on investment (ROI) by eliminating the cost of overprovisioning to accommodate peak loads. (The automation tools dynamically allocate server, storage, network and other critical infrastructure resources to where they’re needed.) Moving to a public cloud also gives companies the benefit of “pay as you go” economics for servers and storage.

Real-world engagement: The efficiency of the cloud

Objective: As part of a broad-based efficiency initiative, a large bank and financial holding company needed to modernize its IT infrastructure and applications. Adopting a cloud-first strategy, the bank set a goal to migrate its applications before the deadlines approached to renew its on-premise application licenses and to upgrade the data center’s security architecture.

Solution: To complete the migration on schedule, two workstreams were designed:

  • Make minor code changes (refactoring) to move applications into a cloud-ready state without changing their functionality.

  • Develop the infrastructure and DevOps pipeline for automated cloud deployment to two public clouds.


  • The organization avoided significant software license renewal costs by migrating 300-plus applications within 18 months.

  • Operational expenses are on path to decrease by 20%.

Looking ahead

In the digital era, the advantage goes to organizations whose application portfolio is predominantly cloud-native. The best way for BFS companies to make this journey is by taking a double-lane approach that includes moving legacy applications to a cloud-native architecture, and putting in place the technology platform, people and processes for cloud-native development of new greenfield applications that impart a competitive edge.

To learn more, read Digital Engineering: Top Three Imperatives for Banks and Financial Services Companies,” visit the Digital Product Engineering section of our web site, or contact us.

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