What are the Advantages of Agile in Financial Services Software?

In recent years, the Financial Services Industry has experienced increasing pressure from regulatory agencies and the market to improve their quality of services. Advances in the capabilities of technology and Agile software development practices have proven highly effective in helping financial entities meet their regulatory requirements while retaining their competitive edge.

Agile development creates software in short cycle iterations with open collaboration between developers and the financial institution. Having short cycle iterations is key to cost-effective software development for an industry that is greatly affected by change.

The Emerging Finance Landscape

Advances in cloud computing and device capabilities continue to change customers’ expectations in engaging with financial entities. A growing diversity of consumer devices with enhanced functionalities creates a need for faster, more sophisticated processes that must meet regulatory standards.

Engaging the Modern Customer

The diversity of devices has expanded beyond smartphones as tablets become more prevalent. A recent study by Pew Research Center found that 45% of U.S. adults own a tablet device and growing[1]. The ownership of desktop or laptop computers has been declining from a high of 80% in 2012 to 73% in 2015[2]. The widespread popularity of mobile devices allows customers to be more connected to digital services, requiring more robust data infrastructures and databases.

Stringent Federal Regulation

Since the recession of 2008, the finance industry has experienced more regulation from federal agencies than ever before. In response to the recession, the Dodd-Frank Act was passed to create new tasks for existing agencies, as well as new departments to manage vulnerable financial sectors[3].

One major outcome of the Dodd-Frank Act is the establishment of the SEC Office of Credit Ratings. The office has oversight over the integrity of credit ratings exchanged by the entities they evaluate. The enforcement of provisions set by the Dodd-Frank Act are still largely in development. But the effects of the act are well observed as acting as a catalyst for financial entities to adopt more comprehensive analytical programs and tools, offering investors greater risk management over the performance of their financial instruments[4].

With changes in the market and regulation still maturing, the finance industry should look to Agile software development to create responsive products that meet the needs of its time.

Stay Ahead of the Competition with Agile methodologies

In an industry emerging challenges, financial entities need software engineers who are flexible to market changes and develop software well the first time. Agile methodologies provide clients with the flexibility and risk management needed to ensure the success of their investment.

Gain a High-level of Transparency

Agile methodologies emphasize an iterative process where clients collaborate with the development throughout the software lifecycle. This allows clients to provide direct feedback on the functionality of the product for a fully customized software solution.

Other popular methodologies, like Waterfall, offer little visibility on the inner-workings of the development team. Having a closed-off process with minimal opportunity for changes until after the product is finished is a large risk. Regulation standards and customer expectations will continue to change overtime. Developing software in a vacuum can lead to an obsolete product that will need major revisions before deployment.

Manage Risk with an Iterative Process

The biggest advantage to software engineers who practice Agile methodologies is the use of an iterative process. Software that is built from conception to deployment may require additional time for coding revisions, otherwise known as Technical Debt.

Software that is developed using Agile methodologies addresses revisions with each iteration, minimizing the amount of revision needed at deployment. This leads to a higher-quality software that is less vulnerable to bugs and glitches, allowing you to the product to market faster.

Waterfall methodologies doesn’t address the Technical Debt until after the software is completed. This can be problematic as early programming issues can compound into major problems at the end of development[5]. If the issues with programming are too large, it can push deployment to market back several months.

While the finance industry is experiencing many challenges, advancing technologies offer new opportunities for financial entities to maintain a competitive advantage. Financial entities should invest in developing new technologies with software development team that practice Agile methodologies. Agile provides all the benefits of collaboration between engineers and their clients, with minimal financial risk.

At Tiempo Development, we are making the business of software development easier and more affordable with a unique combination of a nearshore business model, agile methodology, and advanced talent management. Tiempo’s proprietary agile product lifecycle management framework called Tiempo Quality System or TQS is composed of principals and best practices that ensure productive client and team interactions and as a result, efficient software development. To learn more about our expertise in software development, Read our Case Studies.

[1] Monica A. “The Demographics of Device Ownership”. Pew Research Centerhttp://www.pewinternet.org/2015/10/29/the-demographics-of-device-ownership/

[2] Ibid.

[3] “The Dodd-Frank Act” Morrison & Foerster. http://media.mofo.com/files/uploads/images/summarydoddfrankact.pdf

[4] Jacobius et al., “Assessing the impact of Dodd-Frank 5 years later”. Pensions & Investments. http://www.pionline.com/article/20150727/PRINT/307279981/assessing-the-impact-of-dodd-frank-5-years-later

[5] Jim H. “The Financial Implications of Technical Debt”. Jim Highsmith. http://jimhighsmith.com/the-financial-implications-of-technical-debt/