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Use Case Study

Payments Modernization: Migrating Multiple Legacy Payment Advances Applications from PowerBuilder to a Unified Trade Management System

Overview

API driven Payments Modernization was the need of the hour for a top-tier bank. They were dealing with multiple legacy applications built on PowerBuilder that were in use for purposes ranging from Credit Check to managing Borrower details, and more. The client wanted to cut down on technical debt by migrating, unifying, and automating operations under a modernized Trade Management Platform. They had identified a sophisticated platform for trade management, valuations, reporting, and accounting purposes. However, this also meant building a new application interface and a service layer that interacts as an intermediary with the newly inducted trade management platform.

The ask was to build a new service layer and interface to connect with upstream and downstream groups/teams/workflows. These upstream and downstream configurations are complex as whenever the borrower data is altered, it has ramifications for other teams & processes as well.

Our automated rules-based configurations and use of AI Bots ensure employees do not spend too much time in manually data input and validation for the following:

Credit Check | Capital Stock Check | Borrower Advance Requests | Borrower Advances History | Borrower Related CRM Systems | Interest Rates for Borrowers | Advances Pricing | Advances Restructuring | Creating Exception and Red Flags

  • The client used our expertise in open-source languages, modern coding standards, and hybrid cloud data integration to deploy the modernized application in record time.
  • The bank was able to provide new experiences to member banks by integrating with third-party components and simultaneously meeting compliance needs.

Our expertise has helped the bank incur significant saving for the following teams and advances groups within the bank:

They can be broadly be classified as Short Term (ST), Long Term (LT), and Mid-Term (MT) Advances.

  • Adjustable-Rate Credit (ARC) Advance (ST, MT & LT)
  • Amortizing Advance (MT & LT)
  • Callable ARC Advance (ST, MT & LT)
  • Callable Fixed-Rate Advance (MT & LT)
  • Fixed-Rate Advance (ST, MT & LT)
  • Fixed-Rate Advance with a SOFR Cap* (MT & LT)
  • Overnight Advance
  • Principal-Deferred Advance (MT & LT)
  • Putable Advance (MT & LT)
  • Repo Advance (ST, MT & LT)

Our Solution: Deploying a Service Layer Driven by API-Based Routing & Integration

The bank had decided to modernize and transform the entire advances vertical. The strategy was driven by investing and integrating with a new-age trade management SaaS platform. However, this also required building a new application interface and a service layer that can interact with the platform.

To enable the service layer, our team built the essential architecture to integrate with third-party components.

In this case, it meant the service layer interacted with member banks’ systems and databases to access and update the latest information about the member banks.

We designed the architecture as an intermediary to access and process information related to capital stock, borrower history, credit check, etc.

The service layer consists of three distinct purpose-driven sub layers that include:

  • Integration Layer
  • API Gateway Layer
  • Experience Layer

This service layer serves as the backbone of the unified application that is used by different teams within the banks related to advances.

Challenge

The bank faced numerous challenges related to modernizing applications related to advances, such as payment advances or loan advances. These challenges include both technical and regulatory complexities. Below are some of the key issues:

  1. Legacy Infrastructure and Systems

Compatibility Issues: Many banks operate on legacy core banking systems that are not easily compatible with modern technologies. This makes it difficult to integrate new software for handling advances without significant re-engineering.

Monolithic Architectures: Older systems tend to be monolithic, making it hard to extract specific functions, like advances, and modernize them independently without affecting the entire system.

  1. Data Migration

Data Integrity Risks: Migrating historical data related to advances is complex and error-prone. Ensuring data accuracy, consistency, and integrity during migration to modern platforms can be challenging.

Compliance with Data Regulations: Given the sensitivity of financial data, migrating data while ensuring compliance with regulations under CCPA, AML-CFT, KYC and other financial privacy laws posed a major challenge.

  1. Integration with Third-Party Systems

Complex Integration: Modernizing applications often requires integrating with third-party platforms (like payment gateways or CRM systems). Ensuring seamless interaction between legacy systems and these platforms can be complex.

Real-Time Processing: Banks need real-time processing for loan advances, but older systems may lack the capability to handle real-time transactions, leading to delays and errors during the modernization process.

  1. Regulatory Compliance

Constantly Evolving Regulations: The financial sector is heavily regulated, and keeping up with regulatory changes (e.g., Basel III, KYC, AML regulations) while modernizing applications related to advances is difficult.

Security and Auditing: Compliance with auditing, reporting standards, and ensuring high levels of security for customer data, especially when dealing with real-time financial advances, adds another layer of complexity.

  1. Security Concerns

Cybersecurity Threats: Modernizing legacy applications opens up new vectors for cyberattacks. Advances-related systems need robust security features, such as encryption, secure API gateways, and fraud detection mechanisms.

Fraud Prevention: Automating advances-related processes, like credit checks and loan disbursements, can increase the risk of fraud if not properly secured.

  1. Customer Experience

Maintaining Service Quality During Transition: Banks need to ensure that services, particularly related to advances, remain uninterrupted and meet customer expectations during the modernization process.

New User Interfaces: Introducing modern interfaces or mobile capabilities can disrupt existing customer experiences, especially if the changes are not intuitive or require retraining.

  1. Cost and Resource Allocation

High Costs: Modernizing banking systems can be expensive, requiring significant investment in new technology, human resources, and third-party services. The cost of downtime during system upgrades can also be high.

Skill Gaps: Finding skilled professionals who understand both legacy systems and modern technologies can be difficult, leading to higher training costs and longer timelines for modernization.

  1. Performance and Scalability

Scalability: Legacy systems often lack the ability to scale effectively, which can be a problem when modernizing applications to meet growing demand for advances, especially in times of economic volatility.

Performance Degradation: There is a risk that performance might degrade during the transition phase, affecting the speed and accuracy of processing advances-related transactions.

  1. Change Management

Resistance to Change: Employees and management may resist adopting new technologies, particularly when the changes involve altering workflows or retraining staff.

Training and Adoption: New systems often require employees and customers to learn new processes and tools. Ensuring smooth adoption and training is a key challenge during modernization.

  1. Technical Debt

Accumulation of Technical Debt: Banks may have years of accumulated technical debt, including poorly documented code and outdated technologies, which must be addressed before or during the modernization process.

  1. Time Constraints

Long Development Cycles: Modernization projects often take longer than expected due to the complexity of legacy systems, increasing the risk of project delays and budget overruns.

Maintaining Compliance with Market Changes: Banks need to adapt to rapidly changing market conditions and customer needs while modernizing their systems for advances.

How We Helped

We deployed a new architecture that makes it smoother for borrower member banks to raise requests for and receive advances to manage their capital and interest rates.

  • Enabled direct Payment Advances Requests for Borrower Member Banks
  • Automating Rate of Interest Calculations for Borrower Member Bank
  • Implementing standardized fixed-rate advances the tenure for borrowers to choose from
  • Allowing customization for borrower banks on the loan period
  • Creating and raising red flags or exceptions when advances requests are raised
  • Automating workflows for pricing methodologies and policy implementations
  • Automating processes related to rate and advances restructuring based on borrower credit score
  • Managing borrower member bank credit score based on their borrowed capital stock

The open architecture that we deployed has helped the borrower member banks to access many components of the newly integrated trade management platform

It vastly improved the member bank’s experience and advance process turnaround times by doing the following:

  • Automating exception-based workflows that was manually handled previously
  • Enabling transparency and speed of calculations to show member banks loan repayment schedules
  • Making the whole process of raising advance requests and its process transparent for the borrowers
  • Maintaining all the records related to advances, trade, and transactions with full compliance and audit transparency
  • Automating management and distribution of necessary information to be shared with counterparts in member banks
  • Creating data integrations necessary to feed data from the core engines into the new trade management platform
  • Ensuring accurate data and its availability for the proper functioning of valuations, risk, and accounting calculations

Impact

  • 100% on-time feature release for new payment advances features
  • 5X faster turnarounds for credit check and total borrowing reporting
  • Bots enabling 3X faster calculations for loan rate restructuring
  • Enabled self-service payment advances request option for borrower member banks
  • 50% reduction in service calls and email back and forth for receiving information on advances
API Driven Payments

 

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