An Insight into Digital Banking Architecture

Digitalization has transformed every area of our lives. Digital banking has also become a very common concept and everyone is highly familiar with its functioning. There are many aspects of digital banking architecture that are not known to a lot of people.

Types of Architecture

Digital banking architecture is mainly of four types. Let’s learn about them.

Monolithic Architecture - This architecture is built as a single, unified system that handles all the digital banking functions such as user authentication, transaction processing, and data storage. It is a traditional architecture and is still used by some banks.

Service-Oriented Architecture (SOA) - SOA is a modular architecture that breaks down the digital banking system into smaller, independent components called services. Each service performs a specific function, such as user authentication or transaction processing, and communicates with other services through standard protocols.

Microservices Architecture - Microservices architecture is similar to SOA but takes modularity to a more granular level. Each micro service is a small and self-contained element that has a specific function and communicates with other microservices through APIs.

Cloud-Based Architecture - Cloud-based architecture is becoming increasingly popular in digital banking. It leverages cloud computing services such as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). The digital banking system is deployed on the cloud, and the bank pays for its computing resources. Cloud-based architecture is flexible, scalable, and cost-effective.

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Requirements to Design a Digital Banking Architecture

Security

Security is paramount in fintech app development services. The architecture should be designed with multiple layers of security to protect sensitive user information from cyber attacks, data breaches, and other security threats. This includes implementing encryption, firewalls, access controls, and monitoring tools to detect and prevent unauthorized access and fraudulent activities.

Scalability

The architecture should be designed to handle increased demand as the user base grows. This includes the ability to add more servers, databases, and other infrastructure components as needed. It is important to consider not only current demand, but also potential future demand and the ability of the architecture to handle it.

Performance

The digital banking architecture should be designed to provide fast and responsive service to users with minimal downtime or latency. This includes optimizing database queries, reducing network latency, and using load balancing and caching technologies to improve performance.

Availability

The architecture should be highly available, ensuring that the digital banking system is always operational and accessible to users. This includes implementing redundancy and failover mechanisms to ensure that the system can continue to operate even in the conditions of hardware or software failures.

Standardization

The architecture should comply with relevant regulations and standards, such as data protection laws and industry standards for security and privacy. This includes implementing data protection measures such as encryption, ensuring data privacy and compliance with regulations such as GDPR and CCPA, and complying with industry standards such as PCI DSS.

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Integration

The architecture should be able to integrate with other systems and platforms, such as payment gateways, third-party services, and legacy banking systems. This includes implementing standard interfaces and protocols to ensure inter-operability with other systems.

Flexibility

The architecture should be flexible enough to accommodate changes and updates, as well as new features and functionality. This includes designing the architecture in a modular and scalable way to allow for future expansion and implementing agile development practices to allow for rapid prototyping and testing of new features.

Cost-effectiveness

The architecture should be designed to minimize costs, such as hardware and software expenses, maintenance costs, and licensing fees. This includes using open-source software, implementing cloud-based solutions, and designing the architecture to minimize unnecessary complexity.

Agility

It refers to quickly and effectively adapting to the changes related to financial software development. For example, it is required for the architecture to function properly while an increase or decrease in a system’s capability to handle the load of heavy workflow.

Risk management

It is a very important requirement for any banking architecture. A bank must be able to manage the risk, as it has to face many of them. This ensures that the bank can effectively manage the situation during times of high risk and will not become vulnerable in such conditions.

Maintainability

The digital banking architecture should be maintained to get modified according to future needs and requirements. Digital platforms must be able to provide users with the rapid deployment of new features. This continuous software development is highly required in a digital banking architecture.

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Features to Include in Your Digital Banking Architecture

While you are building your digital banking architecture, you need to add some features to it. Following are some popular digital banking features that you can add to your architecture. Let’s learn more about them.

User Authentication

User authentication is the process of verifying the identity of a user or entity who is trying to access a system or resource. It is a critical aspect of information security that aims to prevent unauthorized access, data breaches, and other malicious activities that can compromise the confidentiality, integrity, and availability of sensitive information.

Having a strong user authentication system is essential for businesses that collect and process customer data, such as financial institutions, healthcare providers, e-commerce websites, and social media platforms. Without proper authentication measures, attackers can easily impersonate legitimate users, steal sensitive information, or conduct fraudulent transactions, leading to reputational damage, financial loss, and legal liabilities. Two-factor authentication (2FA) is one of the most common methods of user authentication that involves the use of two different factors to verify the user's identity. This can include something the user knows (such as a password or PIN) and something the user possesses (such as a security token or mobile device).

Secure Data Storage

Secure data storage is a critical aspect of any digital banking system, as it ensures the protection of sensitive customer data. Robust security measures are necessary to safeguard this information from unauthorized access, theft, and other potential security threats.

Encryption is one of the most essential security measures used to protect customer data in digital banking systems. This technique involves converting data into a code that can only be deciphered with a specific key. This means that even if a hacker gains access to the data, they will not be able to read or use it without the encryption key. Additionally, firewalls are used to prevent unauthorized access to the system and to protect against various types of cyber attacks. Ensuring secure data stored in a digital banking system requires a combination of robust security measures, regular audits, and proactive measures to identify and address potential vulnerabilities.

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Multi-channel Access

Customers expect to be able to access their accounts from a variety of devices and platforms, and banks need to meet these expectations to remain competitive in the market.

Mobile banking apps are becoming increasingly popular, and customers expect to be able to access their accounts and complete transactions using their smartphones and tablets. These apps should be user-friendly and offer a wide range of features, including the ability to view account balances, transfer funds, pay bills, and deposit checks. Desktop access is also important, as many customers prefer to use their computers to manage their finances. The online banking portal should offer a similar range of features as the mobile app, including the ability to manage accounts, pay bills, and transfer funds.

Account Management

Account management is a core component of any digital banking platform and custom software development. Customers expect to be able to access and manage their accounts online, and banks need to provide a user-friendly and comprehensive system for this purpose. In addition to viewing account balances and transaction history, customers should be able to perform a range of account management tasks through the digital banking platform. This can include transferring funds between accounts, setting up automatic payments or transfers, and managing account preferences and settings.

Bill Payment and Transfer Capabilities

Customers expect to be able to complete their transactions quickly and easily, without having to visit a physical bank or use other payment methods. Digital banking platforms should offer a wide range of bill payment options, including one-time and recurring payments. Customers should be able to pay bills using their bank accounts or credit/debit cards, and the platform should provide clear instructions and guidance on how to complete the payment process.

Similarly, customers should be able to transfer funds between their accounts or to other individuals with ease. The transfer process should be simple and straightforward, with clear instructions and guidance provided throughout. There should also have a range of transfer options, including immediate transfers, scheduled transfers, and recurring transfers.

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Personalized Services

Personalized services are becoming an increasingly important aspect of digital banking platforms. By leveraging customer data, banks can offer personalized recommendations for financial products and services, as well as customized savings goals and plans. For example, a digital banking platform may analyze a customer's spending habits and offer recommendations for credit cards or loans that could save them money. The platform may also suggest savings goals and plans based on the customer's income and expenses, providing guidance on how to reach these goals. By offering personalized services, banks can build stronger relationships with their customers and provide added value beyond basic account management and transaction capabilities.

Integration with Third-party Services

Integration with third-party services is an important aspect of digital banking platforms. By working with other financial service providers, banks can offer customers a more comprehensive and personalized financial management experience. For example, a digital banking platform may integrate with an investment management service, allowing customers to view and manage their investment accounts through the same platform they use to manage their checking and savings accounts. Similarly, integration with insurance providers can allow customers to manage their insurance policies and claims through the digital banking platform. This can also help banks to attract new customers and increase revenue.

Customer Support

Customer support is a critical aspect of any digital banking platform. Customers should be able to easily access support services through the platform, whether through chatbots or live support.

Chatbots are a popular customer support option in digital banking platforms as they provide immediate responses to customer inquiries and can assist with simple tasks such as resetting passwords or updating personal information. Additionally, live support can be provided through phone, email, or chat, allowing customers to speak with a real person if they have more complex issues that require further assistance.

Digital banking platforms should provide comprehensive online resources such as FAQs, knowledge bases, and tutorials to assist customers with common issues or questions they may have.

Fraud Detection and Prevention

Fraud detection and prevention is a critical component of any digital banking platform. Banks should have robust measures in place to identify and prevent fraudulent activity, including monitoring customer transactions for suspicious behavior and implementing security protocols to prevent unauthorized access to customer accounts. There should also be tools and resources to help customers protect themselves from fraud, such as two-factor authentication, alerts for unusual activity, and education on common types of fraud and how to avoid them. Moreover, banks should have a dedicated team to investigate and respond to incidents of fraud, providing customers with prompt resolution and support.

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Analytics and Reporting

Analytics and reporting are important features of digital banking platforms that can help customers to better manage their finances. By providing insights into spending patterns and financial behaviors, banks can help customers to make more informed decisions about their money.

Moreover, banks can use data analytics to provide customers with personalized financial advice and recommendations. For instance, a bank may analyze a customer's spending habits and suggest ways to save money or increase their savings rate. These are important tools for digital banking platforms that can help customers to manage their finances more effectively and improve their overall financial well-being.

Popular Examples

• PayPal
• BBVA
• Liv.
• Monzo
• Nubank
• TMRW
• TymeBank

Wrapping Up

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Fintech software development has provided so much ease to everyone. Customers can easily make their payments without any worry about a shortage of cash availability. The businesses have also benefitted from this as they can easily manage their income and track their payments. It helps everyone to move to online platforms and step into the digital world.