Reimagining the Future of Retail Banking through Digital Transformation
By Mike Nitsopoulos, SVP, Strategy, Architecture & Innovation, PNC Bank and Shahir Daya, Distinguished Engineer and CTO Financial Services, IBM Global Business Services
June 7, 2021
Like so many other businesses in the past year, financial institutions have been put to the test amid a global pandemic that changed nearly every aspect of daily life, including how consumers make digital purchases to how small business owners apply for loans. These shifts have further underscored the need for the banking industry to accelerate digital transformation.
Even after COVID-19 is behind us, next generation technology will remain a crucial part of banking in the future. Banks face rapidly evolving customer behaviors and expectations in this increasingly digital world. Touchless payments are here to stay. And according to a recent study by the IBM Institute for Business Value, the continued proliferation of data, heightened compliance requirements, growing security threats and changing workforce dynamics will have a material and accelerating impact on the financial services landscape.
As PNC, the fifth largest U.S. bank, looks ahead toward its expansion strategy, it is competing for customers amid a U.S. banking industry that is expected to consolidate rapidly over the next decade. For PNC to realize its national ambitions, it needs a flexible and agile approach to win new customers. The “super-regional” bank has already embarked on its expansion with new offerings like Solution Centers and the pending acquisition of BBVA USA. However, as this growth accelerates, so too, does the need for the bank to transform and innovate its digital core.
To provide customers with easy-from-anywhere experiences, PNC embarked on a transformation program in 2019 designed to put the Bank in at the forefront of the industry when it came to digitizing products and services. As a result of many mergers and acquisitions over its history, PNC inherited a multi-bank IT architecture with many systems of record powering the Bank’s operations. PNC recognized that it needed an innovative approach to people, processes, and technology platforms to reduce complexity and attract new customers to PNC through streamlined experiences that build and maintain trust.
PNC turned to IBM to partner on the creation and adoption of a next generation, real-time event driven architecture to bring formerly batch data processes that occurred overnight into real-time updates. Giving customers the control to easily make decisions based on real-time data – whether it’s a deposit account balance or credit card payment status – represents a massive change for the banking industry. By strategically employing this technology architecture, every single customer interaction streams into the platform in real-time, regardless of the channel be it at an ATM, mobile app, online, retail transaction or in person at a branch. PNC’s apps can tap into this and take real-time action. This data-first approach to an event-driven architecture, where data is sourced in real-time from across PNC’s systems, created a completely new application integration paradigm.
Through this cutting-edge architecture, PNC is also democratizing data and breaking down application silos to build innovative new types of user experiences that rely on real-time event updates. One example of how this data being applied is in text alerts to notify customers when their account balances reach a certain threshold. Previously, these updates occurred overnight as part of a batch process, but now customers receive a text message immediately. This transparency is made possible only by real-time data.
In addition, PNC employed a full stack development approach – based on the IBM Garage Method for Cloud – which means it builds products with dedicated teams that possess all the skills needed for each new product. This has resulted in improved product quality, higher employee productivity and morale, faster time-to-market and differentiated experiences at lower costs.
Since deploying the new architecture, PNC has introduced groundbreaking new products for customers, like Low Cash Mode™ that helps customers avoid overdraft fees through account transparency to manage through low-cash moments or mis-timed payments. This first-of-its-kind digital offering is a great example of leveraging technology to create seamless experiences for customers. PNC expects that this new product will save customers approximately $125 to $150 million annually in overdraft fees.
The successful outcome resulting from the partnership between PNC Bank and IBM was possible due to the interaction, collaboration, and operation as a close-knit, cross-functional team, built on mutual trust and commitment to the same vision and goals.
As PNC looks to further fuel its expansion, this new next-generation, data-first architecture – made possible by a hybrid cloud approach based on Red Hat OpenShift – serves as a benchmark for the banking industry. OpenShift allowed PNC to modernize its applications and create cloud-native development environments with its most critical data within a secure, private cloud.
Working together, PNC and IBM pioneered an IT architecture that allows the Bank to truly put consumers in control of their financial well-being. Financial institutions that intend to build innovative, game-changing user experiences must not underestimate the essential role of technology architecture and full-stack product team design as the critical underpinnings to any transformation strategy.
SVP, Strategy, Architecture & Innovation, PNC Bank
Distinguished Engineer and CTO Financial Services, IBM Global Business Services