Intelligent Composable Business in the finance industry

Intelligent Composable Business (ICB) is a powerful tool that empowers financial professionals by breaking down business functions into units that can be easily rearranged or replaced.

This modular approach not only allows them to promptly respond to emerging market trends and customer requirements without system overhauls but also gives them a sense of control and confidence in their operations.

For instance, a bank could introduce a loan origination system as a component that is seamlessly integrated into its existing infrastructure.

Understanding Intelligent Composable Business

The idea behind Intelligent Composable Business (ICB) involves an approach to running a business, enabling companies to quickly adjust to shifting market conditions and customer preferences.

This translates to establishing a dynamic framework capable of swiftly adapting to new opportunities, technologies, and regulatory changes in the sector.

Businesses harness cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), and cloud computing to establish an agile data-focused business ecosystem. This strategy is vital for institutions seeking to remain competitive and address customers' changing needs in a digital landscape.

Need for Intelligent Composable Business

In the last few years, we have seen many events that have had an impact on the geopolitical arena. These include pandemics and wars in some parts of the world.

These challenges have prompted businesses to explore new avenues, ensuring that their operations remain functional, either in full or in part, despite the circumstances.

Businesses are proactively preparing for the possibility of disruptions in their global operations, understanding that some parts of their business may face temporary shutdowns.

However, they are also leveraging advancements in AI and other technologies to meet the evolving demands of customers for constant innovation and reinvention.

Businesses are now faced with the dual challenge of ensuring their resilience in the face of potential disruptions, while also possessing the agility to swiftly launch new business lines.

During pandemics, we have seen stories of a garment/cloth merchant who turned his business to masks as the other garment business was almost shut down.

Similarly, some chemical companies diversified their operations to produce soap and sanitizer, demonstrating the value of flexibility and preparedness in times of crisis.

Smart businesses transitioned to a more modular structure, resulting in the formation of a composable business.

This resilience, which prepares organizations for multiple futures such as changing market conditions, evolving customer preferences, and unforeseen disruptions, ensures business executives feel more secure and prepared for future uncertainties.

Now, the ability to launch new business lines by repurposing existing functions or adding new businesses without disrupting the current company is becoming a crucial skill for all businesses.

ICB is an approach to business management that enables companies to promptly adapt to changing market conditions and consumer preferences.

This adaptability, or agility, is the core of Intelligent Composable Business (ICB), making financial professionals feel more flexible and agile in their response to market changes.

What is Intelligent Composable Business

Composable business is the process of establishing an organization from interchangeable building elements.

In response to external (or internal) factors such as a sudden change in supply chain or materials, a shift in consumer values, or the introduction of a new regulatory requirement, the modular setup allows a business to reorganize and reorient as necessary.

Imagine it as the business equivalent of constructing with LEGO blocks.

Just as you can build different structures by rearranging and combining LEGO blocks, composable business uses 'business LEGO blocks' to establish an adaptable, rapid-transforming company.

These 'business LEGO blocks' are the interchangeable building elements that make up the modular setup, allowing companies to capitalize on market opportunities, adapt to disruptions, and improve their resilience.

This mode of thinking allows a business to endure and even thrive during significant disruption.

The more these composable business concepts are integrated into your business model, the greater the flexibility and agility of your organization. This translates to a more consistent execution and a quicker response time for this novel business model.

Organizations that have adopted and continue to adopt the principles and building blocks of composable business have been able to leverage their existing digital investments effectively and, in the best-case scenario, accelerate their investments.

Critical Components of Intelligent Composable Business

 1. Integration and Interoperability:

Smooth integration and interoperability play pivotal roles in ICB implementation. This entails utilizing APIs and open banking frameworks to facilitate communication and collaboration among systems and applications.

Interoperability allows financial institutions to use providers' top-notch solutions and integrate them into a unified system.

2. Decision-Making Based on Data:

Data plays a role in adaptable business practices. Financial institutions analyze volumes of data to understand customer behavior, market patterns, and operational efficiency.

Sophisticated analytics and AI tools transform this data into insights, empowering more informed decision-making. For instance, real-time data analysis can assist banks in identifying transactions and implementing preventive actions.

Technologies Supporting Smart Adaptable Business

1. Artificial Intelligence and Machine Learning:

AI and ML are the backbone of ICB, providing the intelligence for automating processes, analyzing data, and forecasting outcomes. In the finance sector, these technologies are instrumental in areas such as customer service chatbots or predictive analytics for investment planning, significantly improving operational efficiency and customer service.

2. API driven Architectures:

ICB relies on APIs (Application Programming Interfaces) as its foundation. These interfaces enable software systems to communicate with each other, promoting smooth integration and interoperability. API-driven architectures support ICB's approach by allowing financial institutions to swiftly onboard technologies into their systems.

3. Cloud & Edge Computing:

In the realm of technology, cloud computing provides the scalability and flexibility for institutions to adjust their operations according to demand. 

On the other hand, edge computing focuses on bringing computation to where data originates, thereby reducing delays and enhancing performance for time-sensitive applications.

4. Blockchain and Distributed Ledger Technologies:

The finance industry greatly values blockchain and distributed ledger technologies for their ability to enhance security and transparency.

These innovative solutions ensure transactions that cannot be tampered with while offering an audit trail. They are especially beneficial for applications like border payments and smart contracts.

Practical Applications in the Financial Sector

1. Tailored Financial Services:

Banks and financial organizations can use ICB to offer personalized products and services by analyzing customer data. This enables them to customize offerings like loan options, investment guidance, and insurance packages to suit preferences.

2. Streamlined Regulatory Compliance:

Meeting standards poses a significant hurdle for financial entities. With ICBs' integration of AI and automation, compliance procedures are optimized for efficiency and accuracy, ensuring institutions comply with regulations effectively.

3. Instant Fraud Detection:

By merging real-time data analysis with AI capabilities, financial institutions can swiftly. Prevent activities. This proactive approach helps minimize losses and bolster security measures promptly.

4. Adaptive Risk Management:

ICB equips institutions with tools for risk monitoring and management. Leveraging analytics and AI-driven insights enables risk evaluation, enabling institutions to make well-informed decisions while proactively addressing potential threats.

Automating compliance procedures can ease the workload for compliance teams and ensure that organizations stay compliant. However, creating and implementing these automated solutions can pose challenges.

5. Managing. Shaping Organizational Culture:

Employee Training: Implementing an Integrated Compliance and Business (ICB) model involves training staff to use tools and embrace processes. This can be a task in larger organizations.

Cultural Transformation: Embracing an ICB model often necessitates organizational transformation. Employees must be receptive to work methods and collaboration approaches, which may sometimes be met with resistance.

Future of Intelligent Composable Business

Emerging trends and advancements in the sector are influencing the future of ICB, which holds promise for enhancing its capabilities and broadening its adoption.

Rising Use of AI and ML:

Advanced Data Analysis: AI and ML will deliver data analytics, enabling financial institutions to examine customer behavior, market trends, and operational effectiveness more deeply.

Personalization: These technologies will facilitate tailored services, enhancing customer satisfaction and loyalty.

Expansion of Open Banking:

Open banking initiatives are set to transform the finance industry by fostering partnerships between institutions and fintech firms. This collaborative network will drive the innovation of novel financial products and services, enhancing customer experiences and expanding the reach of financial services.

Empowering Customers:

Customers will be empowered to manage their information and access personalized services catering to their requirements.

Many finacial institutions want to launch new business model with Decentralized Finance (DeFi).

DeFi platforms along with Smart Contract will streamline financial transactions, reduce reliance on intermediaries, and improve overall efficiency.

Financial institution are toying with the idea to run pliot programs on DeFi, to take advantage of this technology, without disrupting their current business. 

Reimagination of payment system with Digital Currencies:

Introduction of Central Bank Digital Currencies (CBDCs): Banks' adoption of CBDCs is set to revolutionize payment systems, resulting in more secure and inclusive transactions.

The increasing recognition of Digital currency as an asset class will fuel advancements within the finance sector.

Financial institutions want to recompose their payment systems well as wealth system, with these new technologies. 

Examples from Industry 

Analyzing real-world instances of institutions that are effectively implementing ICB models can offer insights and lessons.

1. Banking Sector:

Many banks like JP Morgan Chase, BBVA embraced a banking strategy by partnering with fintech partners to introduce financial products and services. This approach helped them  attract clientele and expand its market presence.

2. In the insurance sector:

AXA utilized a data-focused ICB model to streamline claims handling and enhance customer support. By employing AI and automation, AXA decreased processing times and elevated the customer experience.

Allianz used an ICB platform to unify its range of insurance offerings, creating a better customer experience and boosting operational efficiency.

3. Within the investment sector:

BlackRock integrated an ICB model to refine its investment management services. Through analytics and AI technology, BlackRock was able to provide investment guidance and enhance portfolio performance.

Vanguard introduced a platform to offer investors access to various financial products and services, increasing customer interaction and satisfaction.

Conclusion 

In conclusion, the intelligent composable business model reshapes the finance industry by enabling flexibility, efficiency, and innovation.

Despite facing challenges during implementation, the advantages it brings make it a valuable investment. Financial institutions can effectively harness cutting-edge technologies, promoting a culture of innovation and forging alliances.

They can operate ICB models, ensuring sustained growth in an ever-evolving market landscape.

The outlook for ICB in the sector appears bright as new trends and advancements are poised to improve its functionality and increase its use in industries.