8 Steps for Digital Banking Platform Development

According to Statista’s analysis, the Digital Banks market is poised to achieve a Net Interest Income of US$2.19 trillion in 2024. This underscores the urgency for financial institutions to embrace digitalization to cater to the evolving demands of customers. An effective digital banking platform has the potential to enhance customer loyalty, drive revenue growth, and optimize service costs for your company.

Before initiating the development process, it’s crucial to ensure the legality of your operations by obtaining necessary licenses such as payment or e-money licenses, fintech licenses, MSB licenses, or by partnering as an agent with a BaaS provider.

Let’s explore the 8 essential steps for successfully developing a digital banking platform.

How does a digital banking platform work?

A digital banking platform enables customers to execute various financial transactions via either a website or a mobile app. This encompasses functionalities like online account management, money transfers, bill payments, mobile banking, and other financial operations.

The increasing adoption of digital technologies and changing consumer habits, especially among millennials and Generation Z, who exhibit a preference for digital platforms in financial matters, are pivotal drivers of the digital banking landscape.

Crucial features of digital banking platform

Digital innovations have enabled payment service providers to elevate service standards, while concurrently posing challenges for fintech software development and product refinement.

Here’s a rundown of the key features to pay attention to when building a banking platform:

• Account management
• Fund transfers
• Bill payments
• Mobile banking
• Prepaid card management
• Advanced security features
• Integration options
• Customer support

Considering the indispensable features of a digital banking solution emphasizes the central role of addressing customer needs. Therefore, employing a customer-centric development approach is key to differentiating your banking solution.

Within the subsequent sections, we’ll examine the critical phases involved in developing a digital banking platform tailored to meet the demands of users and businesses. Alternatively, you might consider utilizing a ready-made digital core banking system like Macrobank by Advapay.

Step 1. Set concrete goals and requirements

Setting clear goals and requirements is contingent upon thorough market and consumer research to discern the needs, preferences, behaviours, and motivations of potential customers. This fundamental phase enables you to maximize your solution’s revenue potential and economize time and resources by grasping specific product requirements and user values. Furthermore, you can devise project schedules and financial plans based on documented requirements.

Step 2. Choose the appropriate technology stack

The prerequisites of a digital banking product can significantly influence the technology stack preferred for its development. Given the handling of sensitive financial data in digital banking platforms, stringent security measures are indispensable, necessitating the integration of robust encryption protocols, secure APIs, and multi-factor authentication, which heavily influence technology selection. Selecting a technology stack for digital banking software is contingent upon project requisites, scalability, security, and compliance with regulatory standards.

Step 3. Stand out with a customer-oriented approach

An effective customer-centric approach prioritizes usability, accessibility, and intuitive design beyond surface-level aesthetics. This results in software that enhances customer satisfaction and cultivates loyalty. Make sure to follow the key principles of customer-centric software development:

• Flexibility: the digital banking platform adjusts to evolving customer behaviours and requirements.
• Scalability: the system offers continuous updates and incremental improvements.
• Engagement: banking software incorporates customer insights throughout the development lifecycle.

Step 4. Prioritize security

Security is of utmost importance in the development of FinTech products, particularly concerning the protection of sensitive financial data. Implementing advanced encryption protocols such as SSL/TLS is essential for establishing secure communication between users and the banking platform. Additionally, regularly updating and monitoring the APIs used for integration is critical to mitigate potential vulnerabilities. Conducting regular security audits and penetration tests is imperative for identifying and addressing vulnerabilities. These ongoing assessments are essential for staying vigilant against potential threats and maintaining continuous security.

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Step 5. Regulatory compliance

Despite their innovative initiatives, digital banks are obliged to conform to the same regulatory standards as traditional banks. Compliance with regulations is crucial for enhancing the industry’s resilience against potential threats and vulnerabilities. Financial institutions confront three primary risks: Data privacy, Money laundering activities, and Cyberattacks.

Financial institutions must adhere to specific regulations to protect users from potential threats and data breaches:

• PCI DSS (Payment Card Industry Data Security Standard) sets security standards for entities handling credit card data.
• PSD2 (Second Payment Services Directive) governs electronic payment services within the EU.
• GDPR (General Data Protection Regulation) regulates the collection, utilization, and storage of personal data for companies operating in the European Union.
• AML (Anti-Money Laundering) regulations aim to prevent money laundering and terrorist financing.
• KYC procedures mandate institutions to authenticate the identities of their customers, a subset of AML regulations.

Compliance with local laws is crucial for a successful launch of digital banking platforms due to varying regulatory landscapes.

 

Step 6. Develop the platform

The development of software holds utmost significance in the initiation of a digital bank, forming the structural core upon which the entire digital banking infrastructure rests. It encompasses frontend, backend development, and the seamless integration of data. During this phase, the tangible framework of your product is meticulously outlined. Hence, it is imperative to navigate the development process under the stewardship of adept professionals with a wealth of experience in the fintech arena. You can either utilize an in-house development team or enlist the expertise of a software development team possessing comprehensive technical proficiency in the financial domain.

 

Step 7. Test and release

Thorough testing is essential not only for identifying and resolving issues but also for ensuring a seamless user experience and fostering confidence in your digital banking solution. Employing various testing methods, including functional, security, and user acceptance tests, evaluates the platform’s performance across different scenarios. While the release marks the final step of the development process, it does not signify the end of your duties. Continuously monitoring performance, usage, and feedback through tools like analytics, surveys, and reviews is crucial. Additionally, promptly addressing any issues, complaints, or inquiries and providing ongoing support and guidance to your customers and users are imperative.

 

Step 8. Improve the application

The software launch is merely the starting point for the ongoing refinement of your financial platform. To secure long-term success, prioritize continuous improvement with these steps:

• Implement a user feedback mechanism
• Regularly update the system
• Optimize performance