BTL 808 - Composable Banking

 

The Banking Tutor’s Lessons

BTL 808                                                                   27-07-2025

Composable Banking 

Composable banking is a modern approach that allows financial institutions to build and deliver services using flexible, independent modules or components. Instead of relying on a single, monolithic system, banks can combine and reconfigure these modules as needed, similar to building with LEGO blocks. 

Benefits 

Agility and speed: Respond rapidly to market changes, launch new products faster, and personalize services to meet customer needs. For instance, a bank can integrate a new fraud detection module or improve its digital onboarding process without disrupting the entire infrastructure. 

Cost efficiency: Reduce infrastructure and maintenance expenses by paying for only the necessary components. 

Innovation and collaboration: Easily integrate best-of-breed solutions from fintech partners and other third-party providers, fostering a marketplace of services. 

Scalability: Add or remove functionality and capabilities as the business grows and needs change. 

Enhanced customer experience: Provide hyper-personalized services, improve digital experiences, and offer customized products and recommendations.

Improved regulatory compliance: Implement targeted changes to individual modules as regulations evolve, minimizing disruption and ensuring adherence to standards. 

Challenges 

Integration and complexity: Managing and orchestrating multiple components from diverse vendors requires careful planning and the right tools and expertise. 

Security: As the number of components increases, the potential attack surface expands, making it crucial to ensure each module adheres to stringent security protocols. 

Cultural shift: Embracing composable banking requires a shift towards an agile mindset, cross-functional collaboration, and continuous improvement. 

Governance: Establishing a robust governance framework is essential to manage vendor relationships, ensure data privacy, and maintain compliance with regulations. 

Examples - India Post Payments Bank implemented composable onboarding to efficiently acquire 30 million new customers, reducing onboarding times from days to seconds. 

In conclusion, composable banking offers a powerful framework for financial institutions to navigate the complexities of digital transformation, customer expectations, and regulatory demands.

Sekhar Pariti

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