Regardless of the industry, there will be challenges for any initiatives investing in new technology. This article focuses on developing software for the banking sector.
Recent years have seen exponential growth in the adoption of Software-as-a-Service (SaaS), cloud technologies, and modern toolkits resulting from large traditional banks wanting to maintain dominance in the industry.
Sticking to old legacy systems offers poor web experiences and lowers the barrier for smaller and more nimble players to disrupt the system. Even with these advantages, all financial sector players grapple with significant software development challenges.
We’ll go over the most critical of these challenges here.
The Top 5 Challenges Banks Face in Developing Software
We now look at the major issues banks must square up to when developing software that meets customer requirements and supports operations.
#1 – Data Security
The generation of massive volumes of sensitive data and information makes the banking sector a prime target for theft and breaches. It's important to highlight that banking data and information are of exceptionally high value.
Banking software developers must ensure that customer and company data are safe and secure, without any risk of manipulation or theft. It's crucial to avoid the slightest compromise of production servers.
Application security is a continuous exercise, which makes it necessary to adopt DevSecOps. It’s an approach to security that engages the developers of the software. Tools are available to help developers monitor security vulnerabilities within their code and promptly fix them.
To control data flow, redact valuable data, and assess vendor-mitigation efforts in handling sensitive data, R&D managers need to have appropriate tools. These tools should have relevant certifications such as SOC2 and feature role-based access control (RBAC).
#2 – Legacy Systems
If you seek an industry to locate legacy systems quickly, it's the financial industry. These systems are critical and central to business applications. A principal challenge is the security risk of these systems. As you might expect, they may not be as efficient at supporting modern software applications.
While it’s probably thinkable to consider replacing legacy systems with modern ones, the process isn't as straightforward. It's unreasonable to ask large institutions to switch to new systems in the twinkle of an eye. The more realistic response is to develop software that works both in the cloud and on-premise.
Banks have a culture of working with vendors with a great appreciation of the complexities of migration and are eager to assist.
#3 – Cloud Technologies
Most banks previously developed software to be on-premise. But, there’s a shift in this regard lately. The pandemic is helping to nudge banks towards modernizing operations on all fronts. As such, legacy systems are quickly leaving the building in favor of newer tech such as cloud, containers, and microservices.
The reality is that adopting new tech in implementing new software solutions is not a straightforward exercise. Digital transformation is an exercise that takes years at best. And there’s still much investment in legacy infrastructure that it’s best to approach migration to newer systems using a piece-meal approach. Anything else will surely break the system.
However, banks typically hire the best software teams to attend to their IT infrastructure. They understand the future of technology and its benefits but will instead march forward in an intelligent and safe way.
#4 – Debugging
Uneasy lies the head that wears the crown. So it is with the developers building any banking application of note. The type of data in question is the reason for the intense pressure around developing software for this sector. Risk management and compliance are imperative, making it more challenging to build acceptable software for this industry.
A single bug in banking software can lead to millions of dollars in losses – it's that expensive. Developers themselves must debug across a wide range of environments, including monolithic, distributed, and microservice architectures.
While debugging critical apps with non-trivial architectures, as much as $300 billion and many developer hours go down the drain per year (across the industry). Therefore, modern debugging solutions are available on the market, allowing for live application debugging, no matter the environment.
Debugging software on the fly in the cloud and on-premise is a crucial element of successful banking software development.
#5 – Third-party Integration Challenges
Standalone software products are the exception among modern banking software. It makes third-party integration a real headache for banking software engineers. A developer needs to be aware of and understand multiple software solutions to build one that plays nicely with them. Otherwise, they would have difficulty identifying suitable third-party applications that fuse well with the one they are building.
Imagine a bank’s software development team building a financial management system or FMS. They may need to use a third-party payment application or library. These third-party entities will ensure that users of the FMS can conveniently make or manage payments.
Developers need to understand how these third-party software work to integrate them successfully into the financial management software.
Developing software for the banking sector is never 100 percent smooth sailing. There are significant challenges at every stage in the process. One might argue that this is a fact of modern software development, but it makes a good case for why banks and other financial institutions only hire or outsource more experienced software engineers and software testers.
Banks also need top-of-the-line computer systems to run the modern software their developers are building effectively.