Composable core lets banks build agility, speed and flexibility for MSMEs

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Redefining business models for micro, small and medium-sized enterprises to create solutions that are more inclusive, innovative and resilient to volatile market conditions

Senior executives and heads of financial institutions (FIs) shared their perspective on how composable design enables FIs to better address the needs of micro, small and medium-sized enterprises (MSMEs). They also highlighted the opportunities and challenges of a composable design.

At the discussion were Aswin Phlaphongphanich, chief executive officer of DeeMoney; Edu Trinidad, principal business development manager of UBX, Frankie Wai, business solutions director of Temenos; Prashant Chauhan, associate vice-president of Tata Capital; Ros Sokha, senior adviser for digital financial service, banking operation and technology of SBI Ly Hour Bank; and Srinivasan Shanmuganathan, executive director-enterprise API ecosystem and marketplace of Standard Chartered.

The discussion posited that the future was going to be built around composable designs through interconnected components of microservices that can be assembled and reassembled quickly to go live. The speakers observed that traditional banks must evolve to compete with new market entries amid technological disruption and regulatory changes. To serve smaller-sized MSMEs better, a game-changer in distribution and infrastructure is needed.

Wai pointed out that new players keep raising the bar for customer experience—whenever there is a new positive experience regardless of industry, customers expect the same standards. Sokha noted that most incumbents only look at the top SMEs, which leaves MSMEs behind.

Aswin said that the pandemic highlighted pain points on the payments side where MSMEs were unable to reach their banks for remitting fund transfers within and across borders. They were also facing huge foreign exchanges volatility, which impacted cash flow and liquidity.

Trinidad commented that embedded finance provides quick and specific solutions directly to customers.

Shanmuganathan noted that infrastructure is more about accessibility and not about technology, and that for small businesses, gaining access and speed-to-market is critical. He also said that application programming interface (API) connectivity and fintech collaboration are the building blocks of a self-service model for MSMEs to empower them to choose the services they need.

As far as open banking is concerned, he said that the biggest challenge is that there are many regulatory market restrictions—including how to utilise data—that have not yet been addressed.

To create service and product flexibility at the front end, Prashant shared that for agile capabilities, there needs to be a layer on top of legacy systems, an open network of APIs for various functions. However, he added, in order for this to work, the organisation’s policies and digital mindset also has to shift.

The future has no brand loyalty but only service loyalty; FIs that provide the best service in the cheapest possible way and in the shortest length of time will win the race.

Key discussion points:

  • Greater accessibility to building a platform where services and products come together, having everything in one place
  • New levels of collaboration between banks and fintechs outside the traditional boundaries of banking
  • Creating more agile and flexible MSME business via open banking and API infrastructure is more about access and distribution than technology
  • Strong standard protocols are needed to partner with any fintech company
  • Utilising composable design allows FIs to bundle and cross-sell working capital with other add-on services such as insurance or other loan types such as vehicle loans

Keywords: Composable Banking, MSME, Distributed Cloud, Digital Payments, Financial Inclusion, Baas Saas, Hyper-personalisation, APIs, Ecosystem, Seamless Banking, AI, Machine Learning


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