How to build a neobank from scratch? A practical guide for founders

The banking industry has undergone a radical transformation over the past decade, driven by digital innovation and shifting consumer expectations. Neobanks — fully digital financial institutions — have disrupted traditional banking by offering seamless user experiences, low fees, and innovative services tailored to modern customers.  According to market research there are over 400 neobanks worldwide as of 2024 and the global neobank market is projected to reach $2 trillion by 2030. In addition more than 20% of millennials and Gen Z prefer digital-only banking solutions. This surge presents a compelling opportunity for fintech entrepreneurs looking to establish their own neobank. But how do you build a neobank from scratch? 

Neobank? What's that?

A neobank is a digital-only financial institution that operates without physical branches. Unlike traditional banks, neobanks leverage cutting-edge technology to offer seamless, user-friendly, and cost-effective banking solutions via mobile apps and online platforms. They cater primarily to tech-savvy individuals and businesses looking for fast, flexible, and innovative banking services. Neobanks function entirely online, relying on cloud-based infrastructure and advanced APIs to provide financial services. They typically partner with licensed banks or acquire their own banking licenses to offer core banking functions like payments, loans, and savings accounts. With AI-driven analytics and automation, neobanks enhance customer experiences by personalizing services and optimizing transaction processing.

Differences between traditional banks and neobanks

Traditional banks and neobanks differ in several key aspects. Traditional banks operate physical branches where customers can conduct transactions, while neobanks are entirely digital, eliminating the need for in-person banking. Customer support in traditional banks is typically available through in-person visits or phone calls, whereas neobanks rely heavily on AI-driven chat support and automation.

In terms of fees, traditional banks often charge higher account maintenance fees, transaction fees, and other service costs, while neobanks tend to offer lower or no fees due to their cost-efficient digital infrastructure. Transaction speed is another major differentiator—traditional banks may take longer to process payments and transfers, while neobanks provide real-time transactions.

Furthermore, neobanks focus on a highly personalized banking experience using AI-driven insights and data analytics, whereas traditional banks have limited personalization due to legacy systems. These differences make neobanks particularly attractive to younger, tech-savvy customers who prioritize convenience and digital-first solutions.

Neobanks' costs

Building a neobank is a costly endeavor, with initial investments ranging from $5 million to $50 million, depending on the business model.  To give you a sense of the scale of costs involved, it's worth noting that Revolut raised approximately $800 million across multiple funding rounds before reaching profitability, N26 secured over $900 million to scale its operations and navigate regulatory challenges and Chime - one of the largest U.S. neobanks, has raised more than $2 billion to expand its product offerings and customer base.
Major cost factors include:

Licensing and Compliance – Regulatory approvals can cost millions.

Technology Development – Building and maintaining a robust banking platform requires a high budget.

Security and Fraud Prevention – Investing in cybersecurity is essential.

Marketing and Customer Acquisition – High competition demands a solid marketing strategy.

Operational Costs – Includes customer support, partnerships, and workforce expenses.

Neobanks are not just changing banking—they are redefining financial inclusion and customer experience in a digital-first world. 

- Piotr Hanusiak, CEO of INCAT

Benefits of neobanks

Neobanks offer several advantages over traditional banking models, making them an attractive option for both consumers and businesses:

Lower Costs – Due to the absence of physical branches, neobanks operate with lower overhead costs, enabling them to offer reduced fees or even fee-free banking.

Seamless User Experience – Their mobile-first approach ensures a smooth, intuitive, and fast banking experience.

Faster Transactions – Real-time payment processing, instant money transfers, and early paycheck deposits are some of the core advantages.

Personalized Banking Services – AI-driven analytics allow neobanks to offer tailored financial products and insights.

Financial Inclusion – Many neobanks cater to underbanked populations, offering accessible banking services to individuals and small businesses who may struggle to get accounts with traditional banks.

Integrated Financial Tools – Budgeting tools, automated savings, cryptocurrency trading, and real-time financial insights help users manage their finances more effectively.

Steps to building your own neobank

If you’re considering launching a neobank, here are the critical steps to follow:

1. Define your value proposition

The first step in building a neobank is identifying your unique value proposition (UVP). The fintech market is competitive, and differentiation is crucial. Consider the following questions: 

Who is your target audience (e.g., freelancers, SMEs, unbanked populations)? 

What problem are you solving that traditional banks fail to address? 

How will you monetize your services (subscription model, transaction fees, lending, etc.)? 

Example: Revolut started as a travel-focused banking alternative, offering multi-currency accounts with low exchange fees. Understanding your niche helps guide product development and branding.

2. Secure regulatory approvals 

Banking is a highly regulated industry. Before launching, you need to obtain the necessary licenses, which vary by country. The two primary routes are: 

Banking License: Required for offering full-fledged banking services, but expensive and time-consuming to acquire.

Partnership with a Licensed Bank: Many neobanks initially operate under the license of an established bank to avoid regulatory hurdles.

3. Choose the right core banking system

A robust core banking system (CBS) is the backbone of any neobank. The choice of CBS influences scalability, security, and flexibility. BOS is an ideal choice due to its modular architecture, API-driven approach, and cloud-native infrastructure.

Why BOS? 

Fast Deployment: BOS enables quick go-to-market strategies for neobanks.

Scalability: Handles growing transaction volumes without performance issues.

Flexibility: Supports various financial products, including current accounts, savings, lending, and subscription-based models.

Security & Compliance: Built-in compliance features for international regulations (e.g., GDPR, PSD2, AML).

Example: D360 Bank - a digital bank in Saudi Arabia, leveraged BOS to launch its services efficiently while ensuring compliance with local regulations.

4. Build a seamless user experience (UX/UI)

Neobanks thrive on superior user experience. Your app and web platform should be: 

Intuitive – Simple onboarding and account setup.

Fast – Instant payments, transfers, and notifications.

Secure – Two-factor authentication and biometric login.

Engaging – Gamification and rewards for user activity.

Example: Monzo gained traction by offering instant spending notifications and budget-tracking features  within its sleek mobile app.

5. Leverage open banking and APIs

Modern neobanks are API-first, meaning they integrate with multiple third-party services, such as: 

Identity Verification (e.g., Onfido, Jumio)

Payment Gateways (e.g., Stripe, Plaid)

Credit Scoring & Risk Management (e.g., Experian, FICO)

BOS’s API-driven architecture makes it easy to connect with these fintech solutions, allowing neobanks to build a highly customized ecosystem.

6. Build a Strong Security Framework

Neobanks face increasing risks of cyber fraud and financial crime. Key strategies include: 

AI-Powered Fraud Detection: Machine learning models to detect unusual transactions.

Transaction Monitoring: Real-time alerts for suspicious activities.

KYC & AML Compliance: Automate Know Your Customer (KYC) and Anti-Money Laundering (AML) checks.

7. Plan your customer acquisition and growth strategy

A neobank without customers is just an idea. Effective marketing strategies include: 

Referral Programs – Encourage existing users to invite others.

Content Marketing – Publish educational content on fintech trends.

Influencer & Community Engagement – Leverage social media and fintech communities.

The rise of neobanks signals a shift towards a more flexible, customer-centric banking experience. However, launching a neobank requires careful planning, compliance with regulations, and significant financial investment. With the right strategy and technology, entrepreneurs can tap into this booming industry and create a successful digital bank. If you're looking to start your neobank journey, explore how BOS can be the foundation of your success. Contact us to learn more! 

by Admin INCAT

The Growing Role of Managed Services in Financial IT

The Growing Role of Managed Services in Financial IT

by: Piotr Warszawa

The financial sector is evolving at an unprecedented pace, with banks and fintechs increasingly relying on technology to enhance or improve the productivity, flexibility, security and scalability of their operations. The rapid adoption of cloud computing, artificial intelligence, and automation has made IT infrastructure more complex than ever before. As a result, almost all financial institutions are facing operational or investment challenges to meet ever-increasing demands to streamline operations, reduce or avoid costs and improve time-to-market, etc. To address these challenges, many financial institutions are turning to Managed Services. But what exactly are Managed Services, and how do they revolutionize IT operations in the financial sector? Let’s explore this topic with real-world examples and expert insights.

 The Challenge: IT Complexity and the Need for Specialized Support

Financial institutions operate in a highly regulated and fast-changing environment. They face critical challenges such as:

• Managing IT environments efficiently without overburdening internal teams
• Achieving required or expected operational efficiency while avoiding or reducing potential costs
• Scaling operations rapidly in response to market demands

Financial institutions that already have IT departments and processes in place are trying to keep up with new IT challenges with the resources they have - but do we always have enough space, skills and knowledge, or enough time and money to acquire them?

For fintech startups and smaller banks, these challenges are even more pronounced. Many lack the in-house expertise to handle complex IT systems or the financial resources to build a dedicated IT department.

The dependency triangle

Delivered, deployed and then used IT services are the set of IT processes, technology and IT staff that create an IT Environment that works for a given business and delivers business value to that business. These three elements are: processes, technology and people, and form a kind of 'dependency triangle'. For many modern businesses, the IT Environment can be a competitive advantage and/or make the business run very efficiently and seamlessly. On the other hand, an inefficient, mismanaged, unstable IT Environment can be the cause of many business failures and high operating costs.

To better understand the concept of Managed Services, let's take a closer look at what is behind the terms: people, processes, and technology.

Processes implement business objectives and describe how business and technical (IT) services are delivered. They represent an ordered set of operations (a series of interrelated activities or tasks) designed to achieve a specific business result, solve a specific problem or lead to the achievement of a specific business or technical objective.

Technology is the sum of the IT resources (software / hardware), methods, means and activities related to the processing of information and the provision of technical services that support or perform business services, tasks and activities. Technology in the financial sector includes IT hardware (computers, servers, disk arrays and other tools) and software related to the collection, processing, transmission, storage, security and presentation of information.

People who carry out specific activities, tasks, work within specific organizational structures. A specific group of people are those who carry out activities in the field of IT - implementing or participating in business and technical processes, developing existing platforms and IT systems or IT services, implementing new ones, and carrying out maintenance and repair activities.

What Are Managed Services? A Strategic IT Approach

Managed Services involve the management of IT infrastructure, applications, and operations to a specialized third-party provider. This model allows banks and fintechs to delegate complex IT tasks while focusing on their core business activities.

Typical Managed Services include:

• Infrastructure management (servers, networks, cloud environments, Kubernetes clusters)
• Management of services (based on the SaaS, PaaS or IaaS model)
• Application maintenance and monitoring (IT platforms, middleware)
• Process automation (automating IT workflows, DevOps integration)
• Helpdesk and support services (24/7 technical assistance, troubleshooting)

 Case Study: How INCAT Managed Services Transformed a Bank’s IT Operations

INCAT Managed Services (INCAT MS) as technical operational services have been provided by a specialized INCAT team that managed and executed the list of tasks specified in the Service Catalogue. This approach allowed our client to minimize its involvement in technical monitoring and environmental management. All activities, actions taken, observations and recommendations related to the dedicated IT environment were summarized by the INCAT team in a monthly report to the Client.

1)Scope - INCAT MS have been delivered as a service that provides a management service for a dedicated Kubernetes cluster, the entire BOS (designed by INCAT) microservices installation, as well as the management and execution of day-to-day and periodic technical activities and tasks on infrastructure components.

2) Tools - INCAT MS have been delivered using the following tools based on open-source solutions and commercial solutions such as:

• Kafka
• Postgres
• OpenSearch
• Fluent Bit
• Prometheus
• Grafana
• Kong

3) Deployment and Configuration - INCAT MS has made the deployment and configuration of a dedicated IT environment very efficient and seamless. This has been achieved through the use of:

• Helm Charts
• Gitlab compatible CD scripts
• Terraform scripts
• Grafana dashboards
• Grafana alerts
• Vault configuration as a code
• Logging configuration as a code
• Database configuration as a code
• Monitoring configuration as a code
• Networking configuration as a code

4) Activities - INCAT MS have been provided for management and execution of day-to-day and periodic technical activities and tasks on infrastructure components in the following areas:

• Check list (daily/weekly/monthly)
• Monitoring (permanent or periodic)
• Capacity & Performance
• Logging
• Backup/Restore
• IT DRP
• Management of infrastructure components
• and the like (based on client requirements)

Worth knowing!

Whether or not managed services qualify as IT outsourcing depends on the scope and importance of the services to the company's business. Not every managed service will be treated as outsourcing under the law. The key criterion is the degree of relevance of the service in question to the company's operations. If the services involve critical processes or the processing of sensitive data, they will be considered outsourcing and will require the application of the relevant regulations and the approval of the Financial Regulator.

By leveraging INCAT Managed Services, they:

• Reduced time-to-market
• Achieved cost savings or avoidance in IT operations
• Enhanced availability of business services through proactive monitoring

Our services included:

• Managing a dedicated Kubernetes cluster
• Automating deployments using Terraform and Helm Charts
• Implementing real-time monitoring with Grafana and Prometheus

The result? A fully optimized IT environment that allowed the bank to scale without IT bottlenecks.

The Pros and Cons of Managed Services in Banking

However, these challenges can be mitigated by choosing a provider with a proven track record in banking solutions and regulatory compliance.

***

About the Author

Piotr Warszawa is a highly experienced IT and banking professional with over 25 years of expertise in the financial sector. He has held key leadership positions, including Head of IT Operations in Eurobank SA and Country Chief Technology Officer in Poland within Societe Generale GTS (Global Technical Services) Western Europe, IT Regional Director of IT Office in Bank PKO BP SA, Senior Consultant in INCAT sp. z o.o. and Interim IT Manager at Digital Bank D360 from Saudi Arabia, where he played a pivotal role in driving IT operation processes, digital transformation and IT strategy. Piotr specializes in IT Processes and IT Governances IT Infrastructure Management, and cloud solutions, with a strong focus on IT Operations including Managed Services—helping financial institutions optimize operations, enhance security, and improve scalability. His deep understanding of banking IT ecosystems allows him to design and implement highly resilient, scalable, and compliant IT environments.

Contact the Author: piotr.warszawa@incat.com.pl

by Admin INCAT

Event-Driven Architecture: the future of core banking system design

Event-driven architecture (EDA) is one of the most modern and dynamic approaches in designing information systems. In the case of core systems for banks and fintechs, the application of event-driven architecture can bring numerous benefits and improvements. In this article, we will present the advantages and disadvantages of such an architecture and discuss the best practices that can be applied. 

EDA is gaining significant traction in the financial services sector. Companies within the industry are swiftly upgrading their digital infrastructure to better attract and retain customers.

Numerous financial services firms are implementing EDA to enhance both flexibility and scalability. Consider a cloud-based payments platform, where the demand for person-to-person (P2P) and person-to-merchant (P2M) payments surged dramatically, reaching over 1,500 businesses and 1.5 million users within just two weeks of its launch. The EDA framework effectively managed the burst campaigns and rapid increase in user volume. 

EDA is particularly well-suited for boosting agility and scalability, commonly appearing in microservices-based applications and other systems with decoupled components.
 

What is Event-Driven Architecture? 

Event-driven architecture revolves around the processes of creating, detecting, subscribing to, and reacting to events. An event signifies a change in the state of an object, such as selling an investment. The act of selling initiates an event. 

In contrast, traditional service-oriented architecture handles data in a static manner—by collecting and storing it—rather than treating data as dynamic. In reality, our actions are event-based, whether they are responses to requests from individuals or machines. For example, in financial services, a mortgage application transitions through various stages from submission to approval. Each of these stages constitutes an event. 

Event-driven architecture is crucial because it enables organizations to react to events in real-time. It supports simultaneous processing of activities, allowing related tasks to occur in parallel rather than sequentially. This significantly enhances the speed and flexibility of any given process.

Event-driven architecture is crucial because it enables organizations to react to events in real-time.

EDA in practice 

Just consider the process of loan origination. Numerous checks and balances are required once someone submits a loan application. One person needs to perform a credit check. Another might need to confirm the customer’s bank account balance. Someone else has to approve the application. Meanwhile, the applicant may check back in a few minutes to see if their application has been accepted. Using an EDA architecture, these processes can be managed simultaneously. Events can be created for each step, allowing them to occur concurrently. 

Another example involves onboarding a small business client. Today, the onboarding experience must be entirely digital. If it takes longer than seven minutes, the customer might abandon the process and opt for a FinTech company that offers a similar product in just three minutes. During the onboarding process, with all the questions posed to the customer, EDA enables the simultaneous pre-approval of additional products and services, such as a line of credit, a credit card, or even payroll services.

EDA and the cloud

While it's possible to implement an event-driven architecture (EDA) on local servers, the benefits are far more pronounced when utilizing the cloud. It's important to note that cloud architectures are not inherently event-driven, but the characteristics of both complement each other perfectly. 

Event-driven architectures inherently provide speed, scalability, and flexibility. These qualities align well with cloud architectures, which achieve horizontal scaling by design. Therefore, the combination of EDA and cloud computing is highly synergistic. Additionally, hosting EDA on the cloud allows for AI to monitor for irregularities and respond to multiple events simultaneously.

The benefits are far more pronounced when utilizing the cloud.

For banks, the need to quickly deliver products and services is vital to stay competitive. With event-driven architecture, even large banks burdened with legacy systems can rival online mortgage lenders, offering a wider range of products to customers more efficiently. 

EDA and distributed systems

Today, our work heavily relies on a distributed computing model, featuring distributed services and serverless designs. EDA plays a crucial role in this setup. There are various methods to construct distributed systems. We often face the choice between a request-response architecture and an event-driven model. In many cases, the request-response systems could be more effectively executed within an EDA framework. Unlike the request-response model, an EDA setup allows the system to automatically activate its nodes. This capability enables quicker and more efficient management of bandwidth spikes. In an EDA, servers automatically scale up or down based on traffic demands. Traditional architectures, on the other hand, require manual server activation. The automatic adjustment in EDA not only manages flows dynamically and without manual intervention but also proves to be more cost-effective. 

Why opt for EDA instead of just going serverless? 

With the current wave of migrations, businesses need to align their choices with their strategic goals and desired outcomes. Adopting a serverless approach can certainly boost performance, but undertaking a comprehensive re-architecture can offer even greater benefits. 

Modern architectures are transitioning towards microservices and decoupled designs. Event-Driven Architecture (EDA) is essential for achieving this. EDA provides scalability, flexibility, and the ability to quickly adapt to market changes. 

EDA in BOS System 

BOS's event-driven framework facilitates smooth integration with various systems while offering significant flexibility and scalability. The communication model in BOS employs a publish-subscribe mechanism, where events are generated by producers and received by consumers. This publish-subscribe method ensures effective and scalable interaction between the system's components. 

BOS is equipped with a powerful event processing engine capable of managing a large number of events in real-time. This engine utilizes an internal event bus for simple event management and routing. The event bus directs events to the correct components and ensures timely processing. Additionally, the event processing engine supports the filtering, transformation, and aggregation of events, enhancing its flexibility. 

The event-driven design of BOS simplifies the integration with third-party systems. This model promotes efficient data exchange and sharing between BOS and other systems, ensuring high interoperability. Furthermore, the system's APIs facilitate easy integration with additional solutions. 

Is EDA for your business?  

If your data processes rely heavily on sequential steps depicted in a flowchart, then EDA might not be the best fit for your needs. Additionally, if your system doesn't experience massive bottlenecks during user logins, the shopping server traffic is manageable, and manually increasing capacity by creating tickets suffices, then adopting EDA may not be essential for your operations. 

Examples of the use of EDA in popular fintechs 

I. Revolut 

Revolut uses an event architecture to support its global payments. EDA allows systems to scale effectively, enabling millions of transactions to be processed per second. This allows Revolut to offer fast and reliable services to its customers around the world. 

II. Square 

Square uses Apache Kafka to integrate its various financial services. Event architecture allows for smooth scaling and management of data from various sources, which is crucial for effective transaction handling and data analysis

III. PayPal 

PayPal has implemented an event architecture to increase the flexibility and scalability of its payment services. EDA enables PayPal to respond faster to market changes and better protect users against fraud by analyzing and processing events in real time. 

IV. Robinhood 

Robinhood uses an event architecture to provide its users with instant notifications about stock price changes. EDA enables rapid processing of market data and providing up-to-date information to investors, which is crucial for making quick investment decisions

V. Stripe 

Stripe uses event-driven architecture to support its payment systems, which allows for fast and efficient payment processing. EDA minimizes latency and improves user experience by ensuring seamless transaction processing 

*****

Are you thinking about using EDA in practice? Check out our fully flexible BOS core banking system.
Reach out for details -->

by Admin INCAT

Join us at the financial industry's most anticipated event of the year, Money 20/20 Europe.

🚀 We're excited to announce that we'll be at Money 20/20 Europe, the premier fintech event, from June 4th to 6th!

Money20/20 Europe is the continent’s largest fintech event, offering unparalleled access to the most innovative minds in financial services, payment solutions, and emerging technologies. Money 20/20 is the place where money does business and where the world’s fintech leaders convene to grow their brands, with thousands of attendees ready to explore what’s next in the industry.

Visit us at booth 1H236 to learn how BOS can empower your financial activity and help you create unrivalled financial products with our fully flexible and cloud- native core system.

Don't wait and schedule a meeting with us now! Let's meet and explore what's possible together!

If you need to buy a pass, you can find it here: Money20/20 Europe Passes.

Do not forget to follow us at our LinkedIn channel to stay up to date.

We're excited to meet you in Amsterdam!

by BOS Communications

Banking in the Cloud: why are banking institutions moving to the cloud?

Even though cloud computing is over a decade old, many banks are still on the threshold of this technological transformation. Why? Complicated regulations, data protection and - let's face it - fear of the unknown. However, those who have gone through the complicated process gain a significant competitive advantage. Therefore, in this article we will show what this transformation looks like, what benefits it brings, but also highlight potential pitfalls and limitations.

The transformation of banks to the cloud is a response to the growing needs of digitization, efficiency, and innovation. Banks are seeking to leverage the cloud to increase their competitiveness, improve data security, and ensure better availability and scalability of their services. Transformation to the cloud also enables quick adaptation to changing market and regulatory requirements. Transferring banking operations to the cloud allows banks to better manage data, increase its security, and ensure the continuity of services.

Scalability and flexibility
Banks can easily scale their IT resources, adapting them to current needs, without having to invest in additional infrastructure.

Cost optimization
The cloud model allows you to pay only for the resources used. This reduces the need to maintain expensive data centers.

Innovation
The cloud facilitates the implementation of new technologies, which allows banks to introduce innovative products and services faster.

Examples of successful transformations of banking institutions to the cloud

I. JPMorgan Chase - Cloud investments as an element of strategy

JPMorgan Chase, a banking behemoth with massive amounts of data to manage, has also turned to the cloud. His approach was gradual, based on a hybrid cloud model, which allowed old systems to be combined with new solutions. This transition has become crucial to reducing time to market, improving customer experiences and increasing data security. Over time, JPMorgan is increasingly investing in the cloud, working with providers such as AWS, Google Cloud and Microsoft Azure, which indicates that banks do not have to be limited to one cloud technology.

II. HSBC - Safety first

In the case of HSBC, one of the biggest issues in moving to the cloud was data security and regulation. For this reason, the bank decided on a strategy that protects the interests of customers while using the cloud's potential for innovation and optimization. Working with cloud providers and external consultants, HSBC has developed a regulatory compliance system so that customer data is safe, and the bank can use the flexibility and scalability of the cloud to develop its services.

III. Capital One - Pioneer in cloud adoption in the banking sector

Capital One became one of the first major banks to completely move its IT infrastructure and operating systems to the public cloud. It was not an easy decision, but in hindsight - a very wise one. Their transformation began in 2014, when CEO Richard Fairbank announced that the cloud offered opportunities that traditional data centers could never offer. Thanks to cooperation with Amazon Web Services (AWS), it was possible to transform the way the bank manages data, develops applications, and introduces innovations. Currently, Capital One is an example for other institutions and shows that transferring entire operations to the cloud can be found not only in fintech start-ups, but also in established banks.

Although cloud banking promises lower costs, greater flexibility and innovation, not every journey to the cloud ends in success.

 

Disadvantages of cloud transformation

Although cloud banking promises lower costs, greater flexibility and innovation, not every journey to the cloud ends in success. The cloud migration process is complex and requires careful planning and execution to avoid potential risks and failures. Financial institutions, especially those operating in the regulated sector, must carefully follow guidelines and best practices to ensure the success of their cloud transformation. Here are 2 industry-famous cases of failed transformations (we do not provide these institution data on purpose).

Problems with the legacy system

Bank X, one of the leading players in the Asian market, has started moving to the cloud with the intention of integrating with existing legacy software. Unfortunately, the clash of modern cloud solutions with outdated banking systems has brought more problems than benefits. Difficulties with data compatibility and portability led to long downtime, frustrating customers and causing disruption to the bank's daily operations. Ultimately, bank X decided to return to more traditional IT solutions, losing millions of investments in cloud technologies.

Scaling too aggressive

Bank Z, known in the US market for its innovative approaches, attacked the market with the ambition to be a pioneer of cloud banking. However, their all-or-nothing strategy proved too aggressive. Trying to scale all banking operations to the cloud in record time resulted in operational chaos, performance issues, and a shortage of human resources capable of managing the new environment. Customers complained about errors in services, and the bank was forced to carry out a costly "rescue" operation to restore operational stability.

Among the disadvantages of transformation to the cloud, representatives of financial institutions most often mention:

Data security
Security concerns are a major barrier for banks. However, properly managed cloud is often more secure than traditional IT solutions.

Compliance with regulations
Banks are subject to strict regulation, which means that transferring data and operations to the cloud must meet specific legal requirements.

Supplier dependency
When choosing a cloud service provider, banks must be ready for the risk of unavailability of services or bankruptcy of the provider.

Did you know that regulatory compliance is a critical aspect of cloud adoption in banking? Banks need to ensure that their cloud solutions meet stringent regulatory requirements to protect customer data and maintain trust.

 

In 2020, thefinechtimes.com published the results of a survey in which it asked representatives of financial institutions about the 3 biggest limitations in the transformation to the cloud. According to the respondents, they were:

1. Restrictions on transferring legacy systems:
Many banks have old, no longer supported systems that are difficult to transfer to a modern cloud infrastructure.

2. Organizational culture:
Transformation requires not only technological, but also cultural changes - and these are often the most difficult to implement.

3. Infrastructure requirements:
Large-scale transformations can require stringent infrastructure requirements that are time-consuming and expensive.

The transformation of banks to the cloud is a key step towards digitalization and modern banking. The advantages of such a transition are significant, but the disadvantages and limitations should not be ignored. It is important to remember that the real value lies not only in the technology itself, but in how we use it to create value for customers and how we deal with challenges. A bold and responsible approach is a recipe for success in the era of cloud banking.

*****

Are you thinking about transforming to the cloud? Check out our fully flexible BOS core banking system. 
Reach out for details -->

by BOS Communications

2024 Forecast: The AI Revolution in Fintech

Over the last few years, we have witnessed the transformation of AI-based solutions in fintech industry from experiments and prototypes to full-fledged business applications. However, this year may be a breakthrough.

AI to help fintechs compete with banks

Started a month ago A.D. 2024 will likely be the year when AI begins to completely transform the financial industry, introducing personalization at an unprecedented level. Predictive systems will be able to assess a customer's creditworthiness with increasing precision using unstructured data, emotion analysis, and reinforcement learning. As a result, we will experience an increase in the availability of financial services and, at the same time, their optimization to the individual needs of the user. This trend will certainly continue this year.

Huge changes are likely to occur in process automation and operational efficiency. AI algorithms will be able to automatically recognize and process complex financial applications with increasing precision, reducing the burden on employees and the risk of human errors. This will also open the door for small businesses to compete with large financial institutions. This will be a gigantic opportunity for many fintechs and financial projects that are already challenging traditional financial institutions en masse and are increasingly boldly reaching for their piece of the financial pie.

Synthetic brains in the service of fintech

The real game changer for the industry may be neuromorphic processors, often described as "synthetic brains" - i.e. systems inspired by the human brain that have the potential to change the rules of the game in the field of machine learning.

They are distinguished by their ability to process information in a more energy-efficient manner, using complex connection systems that actually function similarly to synapses. This unique design allows for data processing and learning at high speed and minimal energy consumption, which is crucial for mobile fintech applications where response time and reliability are as important as cost-effectiveness.

This is the moment when artificial intelligence ceases to be just a software function and becomes something bigger - an architecture that mimics our own neurology.

One of the most exciting applications of neuromorphic processors in fintech is their ability to detect and respond to fraud in real-time. Thanks to their ultra-high processing power, these systems can analyze irregularities in financial transactions on an unprecedented scale. Moreover, as machine learning becomes more advanced, neuromorphic processors will be able to predict new types of fraud before they have a chance to become widespread.

Data safety first

However, the development of AI also poses certain threats to fintech entities. The issue of data security is certainly at the top of this list. Fintechs will probably often have to face questions about "How do you protect customer information when algorithms analyze it in the cloud?"

When it comes to cloud data processing, fintech companies will have to focus on transparency and data management principles, including: will have to clearly define what data is processed, how it is protected and who has access to it. An important direction of development will certainly be the "Privacy by Design" and "Security by Design" technologies, which from the very beginning implement security measures at every stage of financial product development. In 2024, using the Zero Trust model - "never trust, always verify" - will become the industry standard, regardless of the location of data (whether on-premise or in the cloud).

Fintechs will probably often have to face questions about "How do you protect customer information when algorithms analyze it in the cloud?"

Cyberattacks

As the fintech industry developed at an unprecedented pace, criminals' keen eyes turned to modern technologies and systems that have become the lifeblood of global finance. In 2024, the scenario of intensified cyberattacks will certainly not be just a dystopian vision, but will become commonplace. Today's cybercrime no longer resembles the simple phishing schemes of years ago. Fully automated and self-learning algorithms using artificial intelligence conduct coordinated attacks that can disable even the most secured financial systems.

This year, fintechs will pay more attention to new solutions, such as behavioral biometrics or quantum cryptography, which may be a response to increasingly sophisticated attacks. The dynamic progress of legal regulations will strengthen the defense against cyberattacks worldwide.

Legal regulations

And speaking of regulations, they will certainly be one of the biggest challenges the sector will have to face. The fintech industry realizes that legislation around the world must keep up with the pace of technology development and is often a barrier to innovation. Employee competencies are also of key importance - the industry needs specialists with an understanding of AI who are able to manage its proper implementation.

It is highly probable that in 2024 we will find out whether AI and fintech are like a developing organism - dynamic, full of potential, but requiring appropriate conditions for development, or rather the opposite. For the industry, investors and users, the key to success is finding a balance between innovation and responsibility. With the right approach, the possibilities are virtually endless, and finance as we know it today can become almost unknown tomorrow. Although challenges exist, with appropriate preparation and regulations, the world of fintech with AI in the main role has everything needed to rewrite the future.

by BOS Communications

The shift to cloud in financial institutions: everything you wanted to know

In recent years, traditional financial institutions have been undergoing a significant transformation by transitioning their operations to the cloud. This shift is driven by several key factors and is reshaping the way banking and financial services are delivered.

Reasons for the Shift

Several compelling reasons are driving traditional financial institutions to move their operations to the cloud. Firstly, cost efficiency plays a crucial role. Cloud-based solutions eliminate the need for extensive physical infrastructure and reduce maintenance expenses. This cost-saving aspect is particularly appealing to financial organizations seeking to optimize their operational expenses.

Another key motivator is scalability and flexibility. Cloud infrastructure allows banks to scale their resources up or down based on fluctuating demands. This adaptability ensures optimal performance during peak usage periods and cost savings during less busy times. It's a critical aspect in an industry where operational efficiency is paramount.

Additionally, cloud adoption accelerates innovation. Financial institutions must keep pace with rapidly evolving customer expectations and emerging technologies. Cloud-based solutions provide a platform for the swift deployment of new services and technologies, allowing banks to stay competitive and meet the changing needs of their customers. This agility is a game-changer in the financial services landscape.

Lastly, we shouldn't also forget about the psychological pressure that often weighs on decision-makers due to the direction and pace of changes occurring in the market. After all, they also observe the market and notice the changes in their surroundings. Regardless of their personal feelings about moving to the cloud, they undoubtedly perceive the directions of change and wonder whether they will be in the right place and time. Since the entire world is moving to the cloud, does it not concern us as well?

Since the entire world is moving to the cloud, does it not concern us as well?

The implementation process

The transition to the cloud involves a series of steps. Financial institutions begin by selecting cloud providers and services that best align with their specific needs and regulatory requirements. The migration process includes transferring data and applications to the cloud infrastructure. It also necessitates adjustments to operational procedures and workflows to align with the cloud environment. From our perspective- as cloud banking system provider - the most rational step is to move less critical services to the cloud and confirm its validity from both technical and business perspectives. This allows for mitigating the risk associated with such a significant change.

Benefits of cloud adoption

Moving to the cloud offers numerous advantages for financial institutions:

Enhanced scalability and agility: Cloud-based infrastructure offers the ability to seamlessly scale resources up or down to meet fluctuating demands, enabling financial institutions to adapt quickly to changing market conditions and customer needs.

Speed of deployment: New features, services, and updates can be rolled out rapidly, allowing financial institutions to stay ahead of the competition and respond swiftly to market changes.

Reduced costs: Cloud computing can significantly lower IT infrastructure costs by eliminating the need for on-premises hardware and software maintenance. Financial institutions can also optimize cloud spending through various cost optimization strategies

Improved security: Cloud providers invest heavily in security measures, providing a robust and secure environment for financial institutions to store and manage sensitive customer data.

Accelerated innovation: Cloud adoption facilitates faster innovation cycles, enabling financial institutions to quickly develop and deploy new products and services to meet evolving customer expectations.

Modernizing core systems is essential to achieving the flexibility, efficiency, and innovation required in delivering financial services in a cloud-native environment.

 

The role of core banking systems 

Core banking systems are at the heart of financial institutions' operations, and their role in the transition to the cloud is pivotal.  Due to the critical importance of such solutions in the financial institution's operations, core systems are often planned to be the last to migrate to the cloud. Nevertheless, modernizing these systems is essential to achieving the flexibility, efficiency, and innovation required in delivering financial services in a cloud-native environment. Cloud-native core banking solutions offer greater agility, enabling banks to introduce new products and services more rapidly. They also enhance scalability, ensuring that the core banking infrastructure can adapt to varying workloads.

The shift to the cloud in traditional financial institutions is driven by the pursuit of cost efficiency, scalability, flexibility, and innovation. While it presents significant advantages, addressing security concerns and managing vendor dependence are critical aspects of this transformation. Additionally, the modernization of core banking systems plays a central role in enabling financial institutions to fully harness the benefits of the cloud and meet the evolving demands of the industry.

by BOS Communications

The rise of BNPL: transforming the way we shop (and how BOS helps with it)

Buy Now, Pay Later (BNPL) services have emerged as a dynamic and continually evolving financial offering, reshaping the way consumers manage their payments. Over the past few years, the BNPL landscape has witnessed remarkable growth and innovation, leading to a surge in popularity among consumers and businesses alike. In this article, we will delve into the evolution of BNPL, highlighting its sustained development and exploring the role of fundamental software solutions like BOS in the creation of innovative financial products.

BNPL, or "buy now, pay later," is a type of loan that allows consumers to make purchases with deferred payment. Under this arrangement, the consumer receives the goods or services immediately or spreads the repayment over installments, usually at no additional cost.
BNPL started to gain significant traction in Europe during the early 2010s. The fastest growth occurred during the Covid-19 pandemic in 2020 and the trend continues. According to GlobalData, the European BNPL market alone was worth €155.79 billion in 2023 and is expected to grow to €300 billion by 2025.

BNPL is particularly popular among young consumers who value the convenience and flexibility of this solution. According to research by Kearney, in 2023 in Europe, over half (57%) of consumers aged 18-34 used BNPL.

One of the notable advantages of BNPL is that it empowers young individuals on their path to financial independence, especially when they may not yet have substantial savings but face significant purchasing needs. This flexibility offered by BNPL allows them to make essential purchases, whether it's for education, setting up a home, or acquiring necessary items, without the immediate burden of a full upfront payment. By enabling responsible spending and budget management, BNPL serves as a valuable tool for young people navigating their financial journey.

The European BNPL market is expected to grow to €300 billion by 2025.

BNPL is mostly used for purchases in categories such as:
fashion,
electronics,
services.

Further places also included:
Home Furnishings - BNPL is often utilized for purchasing furniture, home decor, and appliances;
Beauty and Cosmetics - many users opt for BNPL when buying skincare, makeup, and beauty products;
Travel: some BNPL services allow users to finance plane tickets and travel expenses.

The Buy Now, Pay Later (BNPL) market in Europe is experiencing remarkable growth, poised to become a €300 billion industry by 2025, according to projections by Deloitte. This rapid expansion is driven by:

 increased popularity of online shopping,
a growing group of young consumers who value the convenience and flexibility of BNPL,
technology developments that enable BNPL integration with an increasing number of e-commerce platforms.

It is no wonder that with the growing popularity of BNPL solutions, there is also an increasing growth in IT systems offering tools for creating and managing BNPL solutions. One of such solutions available on the market is BOS - a fully flexible and cloud-native system. BOS incorporates a BNPL module allowing for the creation of credit products with deferred payment. Notable features include:

deferred payments within limits granted by the bank,

application to current and previous purchases,

flexibility in linking to existing accounts or as a separate product.

BOS system incorporates a BNPL module allowing for the creation of credit products with deferred payment.

The BNPL process within BOS comprises six well-defined steps, ensuring a seamless experience for both consumers and businesses: Steps include:

1) transaction authorization,
2) verification for deferral eligibility,
3) offer presentation,
4) client acceptance,
5) micro-loan creation,
6) account funding.

The whole process looks like in the picture below:

Efficiency Consideration

While Banking Legacy Systems adeptly accommodates BNPL functionality, the question is whether BNPL should exist as a separate system arises. It’s crucial to clarify that when referring to a separate system, it pertains to a dedicated platform specifically designed for managing the intricacies of BNPL services. This is distinct from the main transactional banking system, BOS, and even more so from traditional Banking Legacy Systems.

Benefits of a Separate System for BNPL

Scalability

A dedicated BNPL system allows for focused scalability, efficiently handling the growing volume and complexity of BNPL transactions.

Specialized Handling

BNPL systems can cater specifically to the unique characteristics of deferred payments, dynamic calculations, and the nuanced nature of BNPL services.

Optimal Performance

Separation ensures that the BNPL system operates optimally, avoiding potential conflicts or constraints within broader banking systems.

Streamlined Processes

BNPL-centric platforms can streamline processes, enhancing efficiency and responsiveness to the evolving demands of the BNPL landscape.

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If you want to learn more about what the BNPL solution in the BOS system offers, click the link or contact us in order to schedule a demo of the solution.

by BOS Communications

Game changer in banking: the secrets of Event-Driven Architecture

by BOS Communications

13 must-see movies and series about banking and finance you cannot miss

11. Startup (2016-2018)

This TV series explores the intersection of finance and technology in the world of cryptocurrency startups. It follows a group of entrepreneurs, a corrupt FBI agent, and a gang lord, all interconnected through the pursuit of wealth and power.

Trailer: 

12. "The Accountant" (2016)

"The Accountant" is a thriller starring Ben Affleck as a math savant who works as a freelance accountant for some of the world's most dangerous criminal organizations. The film combines elements of finance, action, and intrigue.

Trailer:

... and last but not least ....

13. "Money Heist" (La Casa de Papel) (2017-present)

While not a traditional finance series, "Money Heist" has gained international acclaim for its intricate heists and the manipulation of the Spanish Mint's money supply. It's a thrilling and suspenseful series that combines action with elements of economic strategy.

Trailer: 

These movies and series offer a captivating look into the world of banking, finance, and the dynamics of money. Whether you're interested in financial crises, the stock market, or the pursuit of wealth, there's something on this list for everyone. So, grab your popcorn and prepare to be both entertained and enlightened by these must-see titles. Enjoy!

by BOS Communications