Gearing up for the bargain battle

As it seems to do every year, the festive season is sneaking up fast. No sooner had summer (such that it was) ended than Christmas items started to appear on our supermarket shelves, luxury advent calendars popped up in our social feeds and advertising for festive events gained pace. But all of these pale into insignificance in comparison to the Black Friday and Cyber Monday sales. That time of year when bargains are sought – needed or not – and the credit card gets a bashing.

Can financial institutions keep up with the demands of modern banking… and shopping?

One of the many theories about how the name “Black Friday” came about, is that in the 1950s this was the time when shops in the US shifted from losses (in the red) to profits (in the black). This phenomenon, which started in the US as an annual one-day sale, is now a global event, often spanning the month leading up to Black Friday. For retailers, this is a bumper opportunity to improve their fortunes. For financial services, it is a time of unprecedented transactional volumes. For consumers, it can be both a blessing and a curse.

While it is easy for all to see that Black Friday and Cyber Monday are a massive logistical exercise for retailers both high-street and online, those who work in the financial services know it is an equally daunting challenge for financial institutions and fintechs supporting the huge volume of transactions processed through their systems. Not only is it volume, but also the pace of transactions. A truly savvy shopper intent on grabbing bargains will juggle multiple windows to maximise their online shopping “savings” opportunities – often waiting in queues to access overloaded shopping sites.

Poor experiences with credit cards and apps are magnified under this time pressure.

Indeed, Black Friday has brought down services for some Goliath institutions. In 2023 alone, both HSBC and Chase had mobile and online outages during the Black Friday sales. The outrage from customers was understandable, with 52% of shoppers aiming to do at least a portion of their Christmas shopping during the Black Friday sales, banking with an institution that can’t take the strain is a showstopper.

In reality, the chaos of the Black Friday sales simply magnifies the challenges that financial institutions face all year round. Can their systems handle spikes in transactional throughput? Are their systems operating with real-time data? Can they help their customers plan and manage their money so that they can still afford their rent or mortgage at the end of the month? This is where cloud-native data-driven core banking technology really shines.

Can they handle the heat?

Banks with on-premise servers or relying on old tech virtualised into the cloud, have limitations for throughput. In the lead-up to Black Friday there is, no doubt, much angst in the infrastructure teams who are tasked with ensuring the servers can cope with the spike in volume without committing to ongoing costs for those servers during the quieter times. For those virtualised in the cloud, the scalability of the cloud removes some of these headaches but, at the end of the day, they are still using old ledger architectures not designed for these levels of transactional throughput.

By using cloud-native architecture, patterns such as Command Query Response Segregation (CQRS) and event streaming technology, core banking can now deliver lightning-fast transactional throughput and vastly improved scalability at a fraction of the cost.

By adopting the same types of technologies that have enabled the streaming giants such as Netflix to bring movies to our devices, we can now ensure that financial institutions can keep up with the demands of modern banking – and shopping.

Keeping it real

The truly gifted shopper will be able to complete multiple purchases in quick succession in the pursuit of Black Friday bargains and this is where some older systems can come unstuck. For core banking systems that rely on shadow ledgers, there is a very real risk of people spending more than they actually have in their account. Shadow ledgers are, in effect, keeping a copy of the latest balance in an account and it is this copy that card systems will call on to confirm that funds are available for a purchase. The shadow ledger then communicates back and forth with the ledger – it’s a timing risk that just doesn’t need to be taken now that more modern technology can deliver real-time data.

That same real-time data can be harnessed to deliver customer experiences like push notifications for authorising purchases but also further contextual message to let the customer know if they are nearing their credit limit, exhausting their account balance or have exceeded any self-imposed spending limits.

Buyer’s remorse

Such is the fervour of Black Friday and Cyber Monday; it can be far too easy to overspend without thinking about the long-term impact. Those exquisite £400 boots won’t seem appealing if you can’t pay the rent or buy groceries. This is where wallet functionality can save the day. By ring-fencing money into separate wallets for essential spend and disposable income customers can ensure they are not swept away by the moment. They can also place time locks on balances to ensure time to think about the purchase in advance.

An international affair

For those going global with their Black Friday shopping, wallets can also be incredibly helpful. Allowing the customer to take advantage of favourable exchange rates when they happen, in readiness for big purchases in foreign currencies, rather than settling for the exchange rate at the time of the purchase.

When the dust settles

Black Friday is not only a time of huge transactional volumes but also an opportunity for financial institutions to gather a huge amount of data to better understand the habits and needs of customers.

For example, if the data shows that a customer made a number of US transactions when the pound was weak, a message can be sent to the customer to offer FX wallets in preparation for future purchases. If the data shows that the customer was dangerously close to falling below the balance needed to pay their known Direct Debits, suggestions for wallets could be sent or possibly information about how to set up push notifications to communicate this in the future. With these types of warnings in place it doesn’t take long for customers to rely on this information, deepening the relationship beyond simply product.

Helping customers keep on top of their finances builds loyalty and reduces churn.

It doesn’t have to be open heart surgery

For challengers, choosing new cloud-native data-driven core banking from SaaScada is a no-brainer but for financial institutions running on legacy tech, the fear of change can be huge.

SaaScada’s research showed that 77% of UK bank innovation leaders say challenging the status quo can put careers at risk. But implementing a new core to build new products can de-risk the process. Adopting a coexistence model, running a new core alongside legacy provides a cost-effective and speedy path to innovation. New products can be built, tested and launched in a fraction of the time needed with legacy and, when the time is right, existing accounts can be migrated in a controlled way. This whole process is further streamlined by SaaScada’s unstructured real-time data, which enables the provision of data in whatever form is required to fit the existing business reporting.

The entire process can be done without the need for a large migration team or external consultants – and more importantly without disruption to customers.

Sponsored by SaaScada, a data-driven core banking engine; born in the cloud, using cloud-native architecture.

SaaScada has been designed to make it easier, cheaper and faster to bring new offerings to market. Not only does SaaScada power new entrants who want to reduce their time and cost to market, but we also make it possible for existing banks to innovate at speed alongside their legacy technology.

Instead of costly product modules, SaaScada offers all product features from day one making it easier to create, test and pivot. Open APIs enable best-of-breed ecosystems, so innovators big and small can create a full suite of feature-rich products and services without barriers. Better yet, SaaScada’s CQRS architecture and event sourcing provide real-time data for reporting, customer insights and exceptional customer experiences.