In the past few years, a series of new technologies and regulatory changes has been transforming Brazil’s financial industry. The concept of blockchain added security and agility to financial transactions. The open banking system being deployed by the country’s Central Bank (BC) allows for platform integration and data sharing -with the user’s consent- between financial institutions. Recently, the launch of Pix, also by the BC, has shaken the market by creating a new payment method that is instant, free for individuals and 24/7.

Since 2018, the startup Bit Capital has been working on the development of 100%-digital financial solutions in the cloud to help its clients adapt to this new scenario in a convenient way, without the need to build an infrastructure for that or hiring different providers. Pix was not the exception.

In less than 3 months, the team was able to build and go live with a solution that can be used by both direct participants (i.e. those with banking licenses granted by BC) and indirect participants (i.e. companies depending on direct participants to offer payments on Pix) through Bit Capital’s platform.

Besides this differential, Pix and the startup’s other solutions are based on blockchain and Google Cloud’s cloud, ensuring greater security, scalability and availability for customers and allowing for an easy integration between Bit Capital’s platform’s solutions and those from other companies.

“Now we have a platform with an API and various microsservices, allowing clients to connect and develop their own financial product without having to start from scratch.”

—Francesco Miolo, CFO, Bit Capital

A robust structure to handle Pix’s high demand

Bit Capital was established with a certain urgency to develop its platform. The idea was well-developed and customers were interested. The fast deployment of Google Cloud’s tools was one of the main factors that attracted the company to use it as a basis for its infrastructure.

“We managed to deliver everything we have today in Google Cloud with a small team. That was another challenge: being able to grow with a few people,” says Juliano Souza, the startup’s head of IT infrastructure. “We sought other cloud partners, but they had a steep curve. We chose Google Cloud because we needed quick, quality scaling.”

The same thing happened when they built the solution for Pix, despite the specific challenges involved. The BC had performance requirements that led the company to spend some time experimenting until they reached the best suite of tools to meet those requirements. The startup wanted to create a unique architecture that could help both large and small customers and be integrated to the platform’s other microservices.

With the support from Google Cloud’s team to answer doubts and make the best decisions, the solution was built in a few months, at a cost about two-thirds lower than other providers.

The solution’s architecture is based on apps running in Docker in Google Kubernetes Engine (GKE), with interconnected microservices. The blockchain system runs on Compute Engine, its rows are managed in Pub/Sub and Dataflow, and persistent data, in Cloud SQL. Cloud Interconnect is used for the connection with BC. Cloud KMS and Secrets Management store the company’s pre-credentials. All of this is supported by Cloud Load Balancing for load balancing and autoscaling.

According to the team, GKE was essential for the solution’s success. Using infrastructure as code in the tool made uploading of a group of microservices significantly easier. Developers are able to help set up this environment, which has helped spread the DevOps culture in the team. Besides orchestrating and integrating apps, GKE also provides an elastic structure to handle demand peaks and visibility to monitor internal components.

“Google Kubernetes Engine was the only way to ensure availability, observability and elasticity for all clients, whether small, middle-sized or large.”

—Juliano Souza, Head of IT Infrastructure, Bit Capital

Nowadays, the solution’s environment has 20 clusters with over 1,500 pods – 250GB in data per month, providing a robust structure to support a service involving periods of intense demand such as Black Friday.

Ease to monitor, fix and improve

Just 10 days after Pix’s official launch date, the company had its first test: Black Friday. This allowed a major e-commerce customer to test the scale and see the success of the architecture that had been built. “It worked great regarding what the cloud could deliver. And we found what we needed to fix very quickly. Operations [formerly Stackdriver], in particular Cloud Trace, showed us clearly what needed to be done to improve performance,” Souza explains.

Using Operations added reliability by putting deliveries into production. Checking Cloud Trace to see if there were any performance issues and the exact point where they were happening became routine for Bit Capital’s developers. Google Cloud’s security tools and Google Safety Center provided the resources needed to monitor and secure the environment, with automatic data encryption at rest and in transit.

“Google Cloud has security as a premise. When we upload any kind of component, like a database or a virtual machine, the drive is encrypted by default. With other providers, you must specify that you want it encrypted.

”—Juliano Souza, Head of IT Infrastructure, Bit Capital

The easy service monitoring and management accelerates product and technology development because the team no longer needs to worry about infrastructure. Automated management allows professionals to spend more time on new projects and the company’s business. Also, the deployment of services in a Google Cloud multi-region impacts on customer experience, providing high availability for their solutions.

In the coming months, Bit Capital aims to ramp up service usage and the creation of new projects in Google Cloud by adding more customers to Pix’s solution and Banking as a Service (BaaS) solutions. Anthos will be incorporated to the tool suite to make it easier to connect apps with the customers’ on-prem environments. And the deployment of open banking has the potential to be a business driver for the company.

“We joke that we’re already doing open banking, because we have various connections with different providers, which allows us to offer an integrated solution,” says Francesco Miolo, the startup’s CFO. “With the arrival of the new regulations, something we are waiting for since we started out, we will be able, through our platform, to take our customers to the open finance ecosystem, enabling the development of disruptive business models.”

Application modernization is quickly becoming one of the pillars of successful digital transformation and cloud migration initiatives. Many organizations are becoming aware of the dramatic benefits that can be achieved by moving legacy, on-premises apps and databases into cloud native infrastructure and services, such as reduced Total Cost of Ownership (TCO), elimination of expensive commercial software licenses, and improved performance, scalability, security and availability.

The complexity of applications and databases to a cloud-centric architecture requires a rapid, accurate, and customized assessment of modernization potential and identification of challenges. Addressing business and functional drivers, TCO calculations, uncovering technological challenges and cross-platform incompatibilities, preparation of migration, and rollback plans can be essential to the success and outcome of the migration. 

These cloud migration initiatives are often divided into three high-level phases: 

1. Discovery: identifying and cataloging the source inventory. Output is usually an inventory of source apps, databases, servers, networking, storage, etc. The discovery of existing assets within a data center is usually straightforward and can often be highly automated. 
2. Pre-migration readiness: the planning phase. This includes the analysis of the current portfolio of the databases and applications for migration readiness, determining the target architecture, identifying technological challenges or incompatibilities, calculating TCO, and preparing detailed migration plans. 
3. Migration execution: where the rubber hits the road. During this phase of the migration process, database schemas are actively converted, the application data access layer is refactored, data is replicated from source to target, often in real-time, and the application is deployed in its determined compute platform(s). 

Successful evaluation and planning phase as part of the pre-migration readiness phase can bolster confidence in investment towards modernization. Skipping or inaccurately completing the pre-migration phase can lead to a costly and sub-optimal result. Relying on manual pre-migration assessments can lead to long migration timelines, reduced success rates and poor confidence in the post-migration state, increased risk and total migration cost.

Some of the commonly asked question during pre-migration include:

1. How compatible are my source databases, which are often commercial and proprietary in nature, with their open-source cloud-native alternatives? For example, how compatible are my Oracle workloads and usage patterns with Cloud SQL for PostgreSQL?
2. What’s my degree of vendor lock-in with my current technology stack? Are proprietary features and capabilities being used that are incompatible with open-source database technologies?
3. How tightly-coupled are my applications with my current database engine technology? Can my applications be deployed as-is, refactored for cloud readiness with ease, or will it be a big undertaking?
4. How much effort will my migration require? How expensive will it be? What will be my run-rate in Google Cloud post-migration and my ROI?
5. Can we identify quick-win applications and databases to start with?

There is a direct association between the accuracy and speed of the pre-migration phase and the outcome of the migration itself. The faster and more accurately organizations complete the required pre-migration analysis, the more cost efficient and successful the migration itself will usually be.  

EPAM Systems, Inc., a leader in digital transformation, worked with Google Cloud as a preferred partner to accelerate cloud migrations beginning with pre-migration assessments. Leveraging EPAM’s migVisor for Google Cloud—a unique pre-migration accelerator that automates the pre-migration process—and EPAM’s consulting and support services, organizations can quickly generate a cloud migration roadmap for rapid and systematic pre-migration analysis. This approach has resulted in the completion of thousands of database assessments for hundreds of customers.

migVisor is agentless, non-intrusive, and hosted in the EPAM cloud. migVisor seamlessly connects to your source databases and runs SQL queries to ascertain the database configuration, code, schema objects and infrastructure setup. Scanning of source databases is done rapidly and without interruption to production workloads.

migVisor prepares customers to land applications in Google Cloud and its managed suite of databases services and platforms such as Cloud SQL, bare metal hosting, Spanner and Cloud Bigtable. migVisor supports re-hosting (lift-and-shift), re-platforming, and re-factoring.  

“EPAM’s recent application assessment update to its migration tooling system, migVisor, will bring a new level of transparency to the entire application and database modernization process”,  said Dan Sandlin, Google Cloud Data GTM Director at Google Cloud. “This enables organizations to make the most of digital technologies and provides a clear IT ecosystem transformation that allows our customers to build a flexible foundation for future innovation.”

Previously, migVisor focused on assessments of the source databases and the compatibility of customers’ existing database portfolio with cloud-centric database technologies. Coming this quarter, migVisor adds support for application assessments, augmenting its existing and class-leading capabilities in the database space. 

The addition of application modernization assessment functionality in migVisor, combined with EPAM’s certification and specialization in Google Cloud Data Management and hands-on engineering experience, strengthens EPAM’s position as a leader for large-scale digital transformation projects and migVisor as a trusted product for cloud migration assessments to Google Cloud customers. EPAM provides customers an end-to-end solution for faster and more cost-effective migrations.  Assessments that used to take weeks can now be completed in mere days. 

Within minutes of registering for an account, anyone can start using migVisor by EPAM to automatically assess applications and application code. Visit the migVisor page to learn more and sign up for your account.

Faced with changing customer behaviors and demands, tightening margins, and increasing threat from digital competitors, financial services institutions (FSIs) will need to meet customers where they are, open up their services, and establish new ways to monetize their products. Doing so will also enable them to build a better profile of their customers, and deliver more personalized user experiences and fast, convenient banking and payment services. Cloud technology plays a big role in this shift toward digital FSIs. 

In Asia, bank branches now account for just 12% to 21% of monthly transactions in the region, with customers turning to digital channels for routine transactions such as peer-to-peer transfers and bill payments, according to McKinsey&Company. Overall customer engagement has climbed from an average 12.7 to 14.9 transactions a month in Asia’s developed markets, and from 6 to 8.1 in emerging markets.¹

Fueled by growing smartphone adoption, the evolving customer behavior and momentum toward digital platforms have enabled digital-first players to snag a growing piece of the banking pie. 

McKinsey estimates that digital banking penetration has grown an average of 97% in Asia’s developed markets, and 52% in emerging markets, with between 30% and 50% of those that have yet to use digital banking likely to do so.

Consumers now are more than ready to make the switch to neobanks, or digital banks. In Singapore, 63% are open to banking with digital-only players, according to a Visa study. On what will entice them to do so, 63% point to bill payments while 56% will use neobank services to make payments at retail outlets. Furthermore, 54% prefer digital banks for the convenience they offer while 52% like the faster service.

Among those who are open to digital banks, 60% will move some services from their current bank to these new players even if the latter have no prior banking experience. One in five of respondents say they are willing to switch all services to a neobank.

The same is true for small and midsize businesses (SMBs) in Singapore. According to a separate survey by Visa, 88% of these companies will consider moving some services to digital banks.

Driven to do so by their frustration over a lack of quality corporate products and control of their banking experience, 55% of SMBs believe neobanks will help bring down overall banking costs. Another 54% say digital banks offer greater convenience, while 53% point to greater ease in paying bills online.

These stats should worry even established FSIs, especially those that have not done quite enough to open up their service ecosystems and drive innovation through APIs.

An API toward new revenue

While most banks have active APIs, the services that some of them currently provide are just functional; they’re the means to an end for partners to obtain their targeted products and services. Without knowing, consumers use these types of APIs indirectly by using their favorite applications every day—a payment processing API will enable them to purchase their lunch, while a loan application API will get them that dream home.

But while banks do not always own the customer journey, they still can find opportunities to sell their products via partners. Many leading banks are leveraging key technologies, such as API management, artificial intelligence (AI), and data analytics to embed digital banking into consumers’ everyday lives, including groceries, travel, entertainment, healthcare, and food delivery. 

When traditional banks open up their APIs to third parties offering broader services that pull in unique services into their own apps, they then become plugged into the broader customer journey. This helps boost usage of their services and embeds them in the overall customer experience. It also provides aggregated data that will help banks build richer consumer profiles, and deliver more personalized products and services.

APIs also create equal opportunities for smaller participants to be involved in the financial services ecosystem, potentially creating micro-segments that previously may not have existed. With insufficient demand within a closed system, to justify the provision of such services, some customers in these micro-segments have previously been left unserved. The APIs, which facilitate collaboration between the different micro-segments so they can be commercially viable, help assuage this problem. 

Some banks are also opening up APIs to allow access to datasets that enable businesses to trigger automated workflows and enhance their operational efficiencies. Others, such as Bank Rakyat Indonesia (Bank BRI) have generated new revenue by leveraging Google Cloud’s Apigee to manage their API lifecycle and identify new revenue opportunities.

Apigee’s monetization feature has helped Bank BRI realize $50 million in revenue and enabled the bank to define its pricing based on API calls and automatically bill based on usage.

In addition, the Indonesian bank uses the data analysis alongside Google Maps Platform to score its customer base of 75.5 million, and identify those who can be recruited as BRILink agents for underbanked areas. These agents are customers who maintain a minimum balance of $800 USD and score high on reliability.

The appointment of branchless agents via the Agent BRILink app has pushed the loan volume from the bank’s branchless business to $26 billion in 2018, up from $15 billion the year before.

How banks can get started with APIs

Clearly, there are new revenue opportunities for banks to leverage the data they already have. Here are some tips to help FSIs kickstart their API journey:

• Align with internal leadership growth initiatives. Leverage executive key performance indicators around growth and cost savings to foster a culture that offers APIs to micro-segmented markets with an eye on cultivating a healthy financial services ecosystem.
• Productize APIs with a strong value proposition. Starting with an API-first approach, stock the shelves of your API shop with new services and a strong inventory of APIs that will entice third parties (i.e., retailers, telcos, etc.) to start using them. This customer-first, outside-in approach will serve as a strong base to build on and enable the addition of more APIs as adoption grows.
• Actively nurture a developer community. A properly trained API manager will ensure constant contact with the developer community, and that partners are provided with case studies to help them identify viable use cases for your APIs.
• Leverage security as a strategic enabler. Security is a key enabler of the API economy, and most API security postures are defensive. By leveraging deep security tooling together with strong identification of developers, banks can better track information and data usage offensively. 

FSIs also need to avoid some common pitfalls, such as overlooking the need to continuously improve their APIs. If no one is using it, the API clearly is failing to provide any real value to third-party developers.

In addition, efforts should be made to market the APIs and let developers know what is available. A common mistake FSIs make is assuming their work is done once their APIs are released and neglecting the need to carry out community outreach and marketing to generate awareness about the APIs.

If you are interested in learning more about this topic, don’t miss our session at the Google Cloud Financial Services Summit on Embedded Finance: The Future of Banking.

^{1. McKinsey & Company. “Asia’s digital banking race: Giving customers what they want.” Global Banking Practice. April 2018.}