What is Agile Development?
An agile approach to software and product development reportedly came about from the 2001 Agile Manifesto (Manifesto for Agile Software Development). ‘Agile’ is used to represent adaptiveness and response to change during product development. It involves self-organising, cross-functional teams working in collaboration to develop innovative solutions while offering a shorter time-to-market.
While there are multiple principles and implementations of agile methodology, some of the more popular ones include the Kanban method and the use of Scrum teams. The Kanban methodology is particularly useful for business in the middle of their digital transformation process as it allows them to drive change while using existing workflow mechanisms. This method operates on a continuous flow, constantly deploying upgrades and new products without waiting for everything in a set to be complete.
Scrum teams use the agile methodology to boost productivity and efficiency and include a scrum master (equivalent to a project master) and around seven to ten additional members. A smaller team boosts teamwork without straining relationships while also allowing for multiple perspectives to work on the project. A scrum team usually consists of an engineering manager, User Experience Designer (UED), Quality Assurance (QA), Architect, Development Operations (DevOps), etc. in addition to a scrum master or program manager who simply directs instead of managing the individual team leads. Teams work in ‘sprints’ which are fixed time periods to develop and review any product/software.
When it comes to larger, more time-consuming products, the agile framework uses ‘epics’ which breaks down the product into ‘user stories’. Epics help businesses provide constant services and updates to customers as part of a larger body of work, and usually includes multiple teams working in tandem across multiple boards for quicker completion. These teams build a common roadmap and work on finishing and deploying individual initiatives until the final product is ready for customers.
Agile Product Development in Banking
The financial sector is undergoing a revolution across all fronts. Traditional banking branches have given way to digital-only banking alternatives that have gained several million customers in less than a decade. In the last five years alone, 7,500 US bank branches in the US have shuttered their doors. Digital banking demands financial institutions either accept the quick changes taking place in the industry or risk falling behind. We look at why adopting an agile approach can help boost the digital transformation process for traditional banks:
Drives speed in innovation
Adopting an agile framework of development often leads to an increase in innovation as constant, consistent work on the product leads to the development of new and effective solutions which are in sync with customer trends and needs. For instance, given the increasing use of smartphones, customers now turn to their phones to transact instead of stepping into a branch. The 2018 US Fintech Market Report by S&P Global reported that half the respondents used a mobile device to pay at a retail store and 43.7% used mobile apps to pay their bills. Fintechs and traditional banks offering tailored mobile banking services to their customers stand to benefit from this changing trend in digital banking.
Finance companies using an agile approach can capitalize on changing trends quicker, and offer innovative services faster, leading to an increase in customer acquisition. When faced with challenges, agile product & software development teams can work in tandem to find useful, innovative solutions that address the new needs of the customer, faster than if they used a traditional ‘waterfall’ approach.
The agile product development method uses both a constant integration as well as a consistent delivery and deployment system. This means that those working on the software use a central system to share their work-in-progress, allowing for mistakes to be caught quicker and for fewer errors to slip through. In fact, according to Cprime, agile products contain 93% fewer defects. This prevents the team from having to redo their work, saving time and allowing a shorter time to market. In addition, catching such errors can be extremely cost-efficient in the long run, saving both time and money. 44% of companies stated that cost-savings is the most important reason to adopt agile. This approach to product development is particularly useful when banks choose to test their prototypes internally before entering a beta-testing phase with limited customers as it allows for speedy upgrades and changes as required.
Agile development also increases returns-on-investment (ROI) as the products and services are developed and released quicker than if businesses followed the more traditional Waterfall method. In 2018, venture capital-backed financial technology companies raised a record $39.57 billion from investors globally, a 120% increase from 2017. Fintech is booming, and digital banking is an integral contributor to that boom. Adopting agile development is one of the ways that legacy players can execute their digital transformation successfully.
Agile methodology imitates startup culture in the sense that it needs multiple scrum teams to work together to develop the product. This increases creativity as team members work cross-functionally, often gaining invaluable perspectives from one another that leads to innovation. Traditional banks are often bound to the outdated way of working, which includes silo mentality and adhering to hierarchical systems that do not encourage teams to work in collaboration.
Budding fintechs that have adopted the agile approach to development have created dedicated teams for innovative solutions, product growth and development, research etc. that work together to develop new, innovative solutions and offer products with a shorter time-to-market. This allows teams that normally wouldn’t work together to work as a unit, developing cohesive, holistic solutions while offering new perspectives for product and software development.
Agile development takes into account a rapidly changing and evolving industry like finance, anticipating changing needs and flexible priorities. With digital disruption, there are several regulatory changes taking place all over the world, which means both legacy players and new entrants in the financial services market should be able to revamp and rework their product offerings and services as needed. Adopting an agile framework helps reduce the time between releasing new services demanded by customers or regulatory bodies, effectively giving the former no reason to switch to a competitor. 90% of companies surveyed by Cprime reported that agile “improved their ability to manage changing priorities.” Agile development also offers continuous delivery, which allows the business to constantly offer new, innovative services for its consumers, or update its current offerings to match the dynamic changes that have taken place in the market.
The financial sector had been one of the last industries standing against the digital revolution, but with thousands of fintech startups across the globe offering customers easier ways to borrow money and manage their personal finance, the industry is on track to witness major changes in the next few years. Following the agile development method allows teams to validate their models and prototypes quicker, and they are easily able to incorporate any changes to upgrade their offerings.
The future is agile
Customers are drawn towards products that offer them accessibility & innovation, and this is where some legacy players may fall behind. Mobile payments are on the rise, as is the number of customers choosing to bank with a digital-only bank such as Monzo, N26, Atom and Revolut as these neobanks offer innovative solutions that go beyond basic services provided by high-street banks. Capgemini’s 2018 World Retail Banking Report found that only 38% of respondents would recommend their traditional bank compared to 55% who would recommend their fintech providers to others.
Traditional players in finance, particularly legacy players in the banking sector, must adopt the agile development method of working as it allows them to fulfil complex customer needs with ease by delivering new, cutting-edge solutions and deploying them quicker. 70% of respondents stated that agile projects took less time to complete, reported Cprime. An agile approach in finance offers a smoother transition, allowing legacy players to compete with digital challenger banks on a level playing field.
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