By leveraging cloud-native open source databases strategically, data-rich but risk-averse BFSI firms can tap the best of legacy and cloud-native technologies.

In the Banking, Financial Services and Insurance (BFSI) sector, digitalization and the push to build data-enabled business models are helping firms to optimize and capture data as an asset. This brings benefits such as agility, smarter decision making, and lower costs and risks.

Getting there, however, is a major challenge for traditional BFSI institutions as they must overhaul long-established organizational and operational processes, if they are to take advantage of the vast amounts of valuable data lurking within their IT systems.

This is why a growing number of BFSI firms are turning to open source databases such as PostgreSQL, as the latter offer far greater flexibility to unleash the power of data, while continuing to offer the robustness required for enterprise-ready databases.

Let us look at the big picture. The oldest financial institutions in South-east Asia date back hundreds of years. Perhaps in part because of this, they suffer from an image problem with a reputation for being risk-averse, late adopters of technology.

Most will be weighed down by large legacy IT systems and monolithic applications that make change difficult. But the firms persist with this legacy because they feel (with some justification) that re-platforming and migrations are risky.

Slow giants vs agile upstarts

Rising up are new, well-funded fintechs, enjoying the newfound freedoms of open banking. These digital-native players can design processes and technology platforms with a blank sheet of paper. That means they can use the latest tools, build on open-source software, think mobile-first, create compelling customer experiences, and generally move very quickly to make new apps and offers

So, veteran BFSI corporations face a Catch-22 conundrum: how to be nimble without demolishing the underpinnings of processes that have served them for years or even decades?

One obvious way for them to move faster is widespread adoption of cloud technology to access the latest software, gain elastic compute capacity, support mobile devices, shrink hardware cost bases and reduce their IT administration overheads.

Cloud computing is also widely seen as an off-ramp for those aforementioned legacy applications by refactoring to embrace the new in the form of microservices and to shave off risks such as software being no longer supported.

This is far from easy but many take a middle road which sees them deconstruct applications, placing more services in modern environments in an extended iterative process.

But moving to the cloud is an architectural change that has major implications for related infrastructure and dependencies. A key aspect here is the chance to re-evaluate the choice of software that is at the heart of all attempts to digitize, automate and analyze: the database.

  • Most BFSI firms will have deep sunk investments in relational database management systems (RDBMS) and would like to relax that dependency in order to avoid vendor lock-in, reduce costs and gain access to databases designed for the modern world of private and public cloud, Big Data analytics and flexible tooling ecosystems.
  • There are other advantages to re-examining database choice, and many corporations cannot ignore the flexibility, ease of deployment, low-admin footprint and cost effectiveness of database-as-a-service.
  • This is where working with an expert third party can give BFSI firms the confidence that the chosen database is truly enterprise-ready. The rise of open source, in particular PostgreSQL databases, is a signal of that trend.
  • Many firms will trial and run their new databases alongside core databases so risk is minimized, but increasingly PostgreSQL is emerging as the de facto standard for RDBMS requirements, as working with the right partner ensures customers have access to the expertise and reassurances necessary to guarantee open source databases can run mission-critical applications.

From legacy to open source

Fintechs can move nimbly, fail fast and bring a spirit of adventure and innovation to their work but they lack one thing that the veteran BFSI firms have in spades: data. These big firms can look back and across a huge number of interactions to predict customer behavior, identify preferences, perform targeted marketing campaigns, provide tailored portfolio advice and anticipate needs. They can bathe in vast data lakes with myriad data sources and apply data science, AI and MML atop these.

Again, here modern databases with relational stores such as Postgres are an excellent fit.

In summary, adopting modern databases and embracing open source offerings such as PostgreSQL (supported by the right partners) can not only deliver an enterprise-class service. It can deliver a giant leap forward in flexibility and have very significant knock-on effects in driving a culture of innovation and a sense of freedom to try things.