Digital transformation has become a watchword in wealth management. The switch to digital has been progressing for several years due to shifting demographics and changing user expectations, with the pandemic significantly accelerating this trend. Behaviour
that would normally take several years to change, moved in a matter of weeks as we were ‘forced’ to adapt to new ways of working and communicating with each other.
Now we’ve all taken that great leap, our expectation is that digital transformation will be a central part of our wealth management experience going forward, leaving providers with the challenge of rapidly transforming their propositions to meet those expectations.
To buy or to build?
In the past, when selecting new technology, the decision came down to a choice between buying or building. Developing your own technology has the benefit of being completely bespoke to your needs, and puts you in charge of your destiny, but it’s often an
expensive and time-consuming option – and it may be difficult to update as new innovations and regulations come along. It often means that launches of new solutions are based on a minimum viable product (MVP) at go-live, with a limited set of STP processes
online alongside manual processes, while you continue to build a truly digital solution that maximises automation. Buying technology means you can take advantage of external expertise and experience as well as sharing in ongoing developments. It’s generally
faster and cheaper to deliver, but more likely to be an off-the-shelf, or less personalised solution.
With advancements and wider proliferation of technology, such as APIs (Application Programming Interface) and microservices, you can have the best of both worlds: you can own your overall digital solution and embed third-party components into it to create
a customised technology eco-system which you can quickly take to market. In particular, a Micro Front-End (MFE) framework allows you to build and control the digital solution, as well as integrate with multiple standalone front-end applications that stitch
seamlessly together to create a single user experience.
Monolith vs Microservices
MFEs are quite a departure from the way wealth management technology has traditionally worked. Even in the digital space, firms generally have monolith systems, where a single solution exists covering data storage, business processes, and user experience.
This limits the flexibility as providers are generally tied to using the same technology stack front to back, reducing the ability to introduce new components, and slowing down innovation.
However, more recently, microservices have started to replace the monolith backend. Using API technology which standardises how different systems communicate with each other, you can build complex technology stacks which are made up of individual microservices,
or pieces of software, that together …….