Enabling Next-Generation Banks to

Succeed with a
Transactional
Database for
the Modern Era

Digital Technology is Changing the Banking Industry

Digital technologies are changing many industries and dramatically impacting

customer expectations. Nowhere is this mega-trend more pronounced than in
the banking industry. “For every bank — and there’s no exception — we have to
master technology just in order to increase the customer convenience,” according
to Standard Chartered Bank CIO Michael Gorriz. However, to meet this goal,
building the right technology stack is essential.

As the role of technology moves from the back office to defining how a bank
operates, a generation of banking upstarts, “neo banks”, are emerging. In some
cases, these neo banks are brand new businesses, others are spin-offs or digitally
native efforts from existing banks. Brand new players include WeBank, N26,
Monzo, and Starling Bank. And new initiatives from existing banks include AiBank
(China’s CITIC and Baidu) and Simple (Bancorp and BBVA).

The digital native banks are leveraging the most modern technologies to deliver
fundamental differentiation from their traditional competitors. Bypassing
legacy technologies enables them to deliver new products more quickly, support
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WITH A TRANSACTIONAL DATABASE FOR THE MODERN ERA

highly agile operations, maximize customer value, and most importantly, deliver
an entirely new level of customer experience. However, to do this, these next-
generation banks demand rock solid technology infrastructure. Any downtime is
Banking, at its heart, is hugely problematic.
about transactions, and Maximizing the impact and benefit of the latest technologies is central to the
the database that stores, success of these new banks. Without the benefit of a large existing customer
validates, and manages base and the inertia of decades in business, better utilization of new digital
technologies is their competitive advantage. The technologies that enable next-
them is at the core of the generation banks include the following; the cloud, a state-of-the-art software
software stack. stack (microservices, containers, Kubernetes, and full virtualization), better
security/data protection, and next-generation user interfaces.

One of the most important components of the software stack for a digital bank
is a next-generation transactional database. These future-ready databases
eliminate many of the limitations of legacy databases while providing the latest
technologies and capabilities. Having this optimized technology is essential, as
the database is the foundational technology for modern banking. Banking, at its
heart, is about transactions, and the database that stores, validates, and manages
them is at the core of the software stack.

The Right Infrastructure Answer for Neo Banks & New Digital Banking Initiatives;
Distributed SQL – a Transactional Database Designed for the Modern Era

The foundation of the software stack for both legacy and digital banks is the
transactional database. A next-generation database platform that merges
the best of the legacy designs and infuses the platform with the most modern
features provides the foundation for digital banks to flourish. Moving beyond the
limitations of older database technology is how this new generation of banking
entities gains a substantial part of their advantage. Without the presence of
technical debt, they can start with the latest distributed SQL databases that
deliver tremendous advantages. These include:

  ombining the best of SQL and NoSQL databases – Modern databases,

C
such as NuoDB, combine the ACID data consistency, SQL logic, and SQL
database abstraction of traditional RDBMS with scale out, support for
cloud/containers/virtualization technologies, and zero downtime capability
of NoSQL solutions.
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  nhanced reliability – When the transactional database experiences

! downtime or outages is also essential to preventing data loss or corruption.
In a recent survey by
Deloitte on Industry
4.0 readiness, Michelle
Parmelee, Deloitte’s
Chief Talent Officer
E
downtime, the impact on customers is dramatic. New distributed SQL
offerings can eliminate downtime and improve reliability. Protecting from
Even with small “hiccups”, it is quite possible that data is lost or corrupted.
  on-stop functionality – To deliver the “always on” capability that banks
N
require, the transactional database must be designed to deliver non-stop
functionality. To do this requires a multi-node/cloud design that ensures
system availability. Traditional service level expectations are no longer
enough. Some CIOs may accept 99.5% uptime SLAs, but the reality is that
level of service translates to nearly two days of downtime during the year.

noted, more than half
(55 percent) of CXOs
(51 percent of CIOs) cite
a significant mismatch
between current skill sets
and future needs.
  ull support for ACID guarantees – ACID stands for atomicity,
F
consistency, isolation, and durability. ACID ensures that database
transactions are processed reliably. Some of the NoSQL offerings
cannot deliver ACID guarantees, and without this they are poor choices
for transactional financial systems at a bank. A modern distributed
SQL database is designed to support ACID guarantees. Many senior IT
executives demand support for ACID and believe it is mandatory for
mission critical applications.

 True scalability – Nearly every transactional database offers scalability to

some extent, but the requirement for a new digital bank is not only much
more substantial “scale out” capability, it is also necessary to scale quickly.
Designed for deploying in multi-node/cloud deployments and removing
database silos or inconsistencies, NuoDB’s distributed SQL solution
provides improved scalability on both counts.

Another important benefit of the next-generation distributed SQL database is

that it doesn’t demand a rare or “unicorn” IT skill set to operate and administer
it. Distributed SQL databases are managed and administered similarly to existing
legacy databases. There is enough commonality that it is relatively easy to
find “plug and play” IT staff. This consistency makes it much simpler to find
competent staff with the right skill sets. One of the most intractable problems
of new and unique technologies is the extreme difficulty in finding competent
staff to hire. In a recent survey by Deloitte on Industry 4.0 readiness, Michelle
Parmelee, Deloitte’s Chief Talent Officer, noted more than half (55 percent) of
CXOs (51 percent of CIOs) cite a significant mismatch between current skill sets
and future needs. With the ability to leverage a substantial population of skilled
IT professionals, the new digital banks won’t have their progress limited by the
inability to find individuals with rare skills.
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WITH A TRANSACTIONAL DATABASE FOR THE MODERN ERA

Another benefit of the distributed SQL solutions, compared to NoSQL, is that

no data management code needs to be implemented in the application layer.
Certain data management tasks, such as optimization, are done automatically by a
distributed SQL database. This helps to reduce the time required and complexity
when making changes.

There is also a substantial TCO benefit that distributed SQL databases provide,
particularly when compared with legacy SQL solutions. One of the most
important is that, unlike legacy databases, the distributed and elastic nature
of these modern offerings means it is no longer necessary to over-provision
the underlying hardware to meet expected peak workload demands. The
modern distributed SQL database allows the IT team to spin up cloud resources
as needed to meet any spikes in demand, and only pay for the capacity that is
used. Given the importance of the transactional database, legacy products may
demand substantial over-provisioning. Some IT operations managers’ report
that when using older SQL databases, they need to overprovision by 25-40%
to feel confident they can meet unexpected spikes in demand. In addition,
the distributed SQL databases eliminate the need for provisioning dedicated
hardware infrastructure for disaster recovery (DR) and eliminating the cost of
“hot standby” capacity.

NUODB HELPS HONG KONG’S FIRST HOMEGROWN VIRTUAL BANK

When a Hong Kong Digital Bank
was granted a virtual bank license
by the Hong Kong Monetary
Authority (HKMA) to deliver a
cloud hosted bank to provide an
improved customer experience,
one of the key technology vendors
they turned to was NuoDB. This
digital bank is recognized as one
of the Top 100 Fintech companies
in the world by KPMG. NuoDB,
working together with Temenos,
the banking software company,
delivered a single logical SQL
database across a multi-cluster
Kubernetes environment deployed
on multiple cloud providers.
This technology allows the new
digital bank to revolutionize the
banking experience for Hong Kong
customers and deliver innovative
products and services to them.
The NuoDB distributed SQL
database, using Temenos’s T24
Transact core banking solution,
can be deployed in an inter-cloud
environment using Kubernetes,
enabling the new digital bank
to deliver their solution to
market quickly while meeting
new regulatory requirements
for deployment across more
than one cloud provider. This
solution enables the virtual bank
to enjoy powerful scalability,
enhanced reliability, and high
performance, while providing a
database operational environment
that is like what the IT team
already knows. NuoDB’s cloud-
agnostic SQL database allows core
applications to be deployed across
multiple cloud platforms, yet
remain a single logical database.
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NuoDB’s Distributed Database Delivers for Next-Generation Digital Banks

NuoDB’s distributed SQL database is a next-generation solution that integrates

critical SQL technologies along with native support for cloud, providing the ideal
foundation for a bank’s mission critical software stack. The NuoDB database
combines the scalability and “always-on” nature of the cloud with transactional
consistency and durability necessary for a bank’s foundational database platform.
One of the Combining the most important functional capabilities of legacy SQL databases
primary design and the new generation of NoSQL databases is the starting point of the NuoDB
design. This provides a “best of both worlds” solution. Strict transactional
goals of the NuoDB
consistency from legacy SQL databases is maintained, yet banks can take
solution is to ensure advantage of scaling across nodes and utilize modern technologies such as
availability and the microservices, containers, and container orchestration tools.

eliminate downtime. One of the primary design goals of the NuoDB solution is to ensure availability
and eliminate downtime. The ability to offer a single logical database but spread
over multiple nodes and even across multiple cloud service providers, changes
the game for reliability. The failure of one set of hardware infrastructure no
longer impacts all database instances. Another problem this multi-cloud approach
eliminates is lost or corrupted data due to an outage, a major concern for financial
services organizations seeking to move to the cloud. The NuoDB design mitigates
these issues.

Finally, NuoDB is not a “bleeding edge” technology solution that demands

customers hire rare “unicorn” operational experts that are far more difficult and
costly to recruit. Banks can leverage the large pool of existing knowledgeable
IT professionals who already know and understand SQL database technology.
Removing the need to hire hard-to-find talent lowers costs, reduces time to
completion for projects, and simplifies IT staffing issues.

Key Takeaways

Digital and neo banks leverage state-of-the-art technology as a critical element of

their competitive advantage. Among the most important technology components
is the transactional database that underlies the bulk of the bank’s operational
activities. The benefits of starting with a next-generation distributed SQL
database are so substantial that, by itself, it delivers significant benefits.
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The elimination of downtime and associated data loss or corruption is one of the
most important benefits of new database solutions, such as NuoDB’s distributed
SQL database. In addition, the efficiencies from this cloud-native SQL database
meet the demand for low operating costs that are central to a modern digital
bank. The scenario is quite straightforward. There is no way to build a modern
digital or neo bank with legacy technology products. Ignoring this reality will
result in brand new banks burdening themselves with technical debt that will
impact them for years to come.

For more information about NuoDB’s distributed SQL database, please go to:
www.nuodb.com/nuodb-financial-services