Composable lending brings flexibility to a changing market

4 min read

Composable is a word that has started to crop up a lot. Why should business lenders take note?


(And what about configurable, modular, componentised and microservices,which sound like they all mean the same thing?)

Composable lending, and the wider concept of composable banking, is all about flexibility, so you can respond quickly to shifting markets, new opportunities, and new banking technology.

It divides lending systems into manageable parts that are then put together to deliver processes or features. Each part can be improved or upgraded independently, and – crucially – can be rearranged to create new functionality, as Deloitte and Mambu (the leading cloud banking platform) point out. If you cut something into parts that can be reassembled only in the same way, you’ve not gained much.

Gartner describes it like this:

“Incorporating composability into digital business enables the enterprise to change and grow despite persistent uncertainty.”

“Composable business is a natural acceleration of the digital business that you live every day. It allows us to deliver the resilience and agility that these interesting times demand…architecting your business for real-time adaptability and resilience in the face of uncertainty.”

Most of us have more than enough uncertainty to deal with, so something that enables any form of growth and resilience is worth having.

What is a composable system?

A composable system is made from the manageable parts mentioned above - modules, components or microservices. (Preferences vary about the exact meanings of these terms.) Each module does a task or provides a feature, and is self-contained, so can be updated or improved independently of any other module. Each one also needs to be able to work with other modules. A highly composable system is one where the modules can be put together in many different ways. Some modules are configurable – they have settings that can be adjusted.

The system can be a product, such as a car or mobile phone, or an organisation such as a company. You can upgrade the components (get new tyres / update an app / reorganise a team) without having to rebuild the whole thing – and, in the case of software, without needing to upgrade the whole platform. The same can increasingly be done in banking. (It’s sometimes referred to as non-linear banking.)

Why are composable systems relevant to business banking?

Banking systems have traditionally been monolithic. If you wanted to introduce a new process or product, or just found a gap in what the system needed to do, the whole platform would need updating. It would be a big project, and you’d not want to do it again in a hurry.

But a composable system is flexible and adaptable to uncertain circumstances. It’s much easier to make changes – which means a better RoI for both cost and effort. You can iterate, so if a particular product really takes off and needs scaling, or you think of an improvement, you can scale or improve just the relevant modules (and even sell them as individual modules). Because you can change one module at a time you may not need big capital budgets. You have more choice – you don’t necessarily need to use one supplier, but can pick the best in class for that particular product, feature or process. You don’t depend as much on individual suppliers. And this all leads to a better experience for customers.

As Gartner says, business leaders turn to composability as a defence against disruption, or to actively engage with greater risk, using the flexibility that composable systems provide.

We think composable banking will up-end business banking.

“We can make capabilities composable, and the bank that specifies the best modules as part of the best optimised process will do it better than everybody else.”  - Martin McCann, CEO, Trade Ledger

How do you get these benefits?

Composable lending breaks down the lending process into its constituent parts, such as customer relationship management (CRM), loan origination, KYC/AML and so on. Each is run independently, and is optimised for the precise tasks that deliver the required outcome. They communicate using APIs, which transfer data between systems securely (see more on APIs below).

The lending platform that Trade Ledger offers to banks and alternative lenders is composable. It can support lines of business that slot in beside your existing operations, as it does with ScotPac, providing asset finance. Or it can be used to update an existing line or product, for example if you want to digitise or automate processes. If you use a cloud banking platform, the Trade Ledger platform can be overlaid to provide business lending. Or the Trade Ledger platform can support processes, such as origination for invoice finance.

So the platform provides composability for lending – and it too has been constructed in a composable way. Its modules for tasks like data ingestion, document generation, and risk and collateral management module, are all composable. We can bring in third-party suppliers to deliver best-in-class functionality, such as DocuSign for digital signatures, or credit reference agencies. There’s no point us reinventing products that others have already done better than us – where appropriate, we buy instead of building.

The platform also offers great flexibility, providing connectors to existing systems such as Microsoft Dynamics 365. We provide beautifully designed screens, or you can feed our APIs onto screens you design, giving you control over your customer experience.

Here's how it works at a high level.

Why are APIs and webhooks important?

We’ve mentioned the modules, and their independence. They communicate and swap information viaAPIs.

APIs provide communication links. They can enable websites to take payment using specialist ecommerce providers, or to display store/office locations by bringing Google Maps into a window on a webpage. You don’t need to leave the webpage to make a payment or view a map – the web page sends a request via API, and the payment or mapping service sends back the information required via API.

For a payment, APIs take care of validating your identity, contacting the ecommerce provider which then contacts your card provider, swapping data between all the parties involved, and providing the security needed to keep the data private.

APIs are also used behind the scenes to enable systems to swap information. APIs aren’t essential, but, because they provide a standardised way for systems to communicate, developers and engineers know what they’re dealing with.

So we’ve got the modules, and they communicate using APIs. Putting them all together is the process orchestrator built into the platform.

What does it mean for your lending operations?

Let’s explore that together. Every lending operation is different – get in touch and we’ll listen to what your situation is, and your ambitions for the future. Ask about our APIs, too.

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