Paul Scott, ClearPoint Chief Operating Officer sits with Thought Machine APAC Managing Director , Nick Wilde to walk through the future of banking.
The banking sector has experienced more disruption in the past 20 years than in its entire history. While cheque books and ATMs would have been pioneering and innovative when they launched, providing greater ownership and access to funds for the consumer, the banks still remained in control of many important elements, like access to services and location of branches.
While various sectors have been transformed by the advent of technology (retail and accounting spring to mind), embracing the ‘self serve’ movement with apps providing access to a seemingly never ending inventory of stock and invoicing and payment services in real time, banks found it a little harder to adapt owing to their reliance on legacy core systems.
The monumental change influenced by digital transformation has also paved the way for businesses to move their services and presence from the High Street to apps that provide everything in one place – with the customer barely moving from their couch to fulfil their needs.
With consumer expectations shifting and evolving, challenger banks have seized the opportunity to take advantage of simplified banking solutions that offer a great experience. This disruption, alongside an increasing awareness and interest in cryptocurrencies has equated to a chaotic few years in financial services.
We recently sat down with Nick Wilde, Managing Director, APAC of leading cloud-native platform, Thought Machine. Nick has been entrenched in the financial services and technology sector for more than 20 years’ and is familiar with the many challenges large and small institutions face. He is passionate about going beyond servicing the everyday needs of banks, and is an advocate for using technology and hyper personalisation to encourage financial wellbeing.
Thought Machine’s Vault Platform provides clients, like JP Morgan Chase, Kiwibank and Lloyds, with full control to build and do anything they want. Vault Core is designed to offer choice and flexibility – something Nick describes as: “putting the power back into the hands of the banks”, by using a cloud-native infrastructure to act as a foundation layer in banks’ technology stack.
He said: “Our primary research with IDC indicated that the average age of core banking systems is 20 years’ old and speaks to the high risk, low nature rewards of transformation of legacy core systems. Moving one black box to another again and again traditionally takes a huge investment of time and money.”
This research also reflects the first hand experience Nick has of witnessing banks spending millions on digital transformation – wrapping or hollowing the core with multiple technologies – which isn’t always compatible with the evolving requirements of the bank.
Complex infrastructure is increasing and it is getting more expensive to run and adapt. Combine this with the societal changes we’re witnessing, new entrants on the market, regulators acting as change agents and things like open banking, and finally technology itself – you can see why cloud native APIs and microservice enabled architecture like Vault are being adopted. It can become part of an incremental move to modern tech rather than the dreaded big bang.” - Nick
The black box is often seen as the emblem of traditional banking and although it served a valid purpose 20 years ago, its capabilities are now limited and pale in comparison to technologies like Vault. Although some are introducing options to tweak some of the features, the architecture still puts the control and basic design of the financial products in the hands of the software vendor – something Nick says needs to change.
“We service a range of customers – from tier one to neo banks and challengers, and each comes with a slightly different set of requirements. A truly cloud native platform gives you all the advantages that are propelling the move to cloud: security, resilience, self-healing, scalability, end-to-end automation and cost effectiveness. You can take advantage of the cloud ecosystem – very different from lifting and shifting legacy core containers and a thin layer of Java and APIs.”
Vault has an API enabled platform and the universal product engine within the core encompasses product definitions called a Smart Contract; whether its a credit card, current account or corporate loan, it describes all the financial behaviours of a product and can be completely defined by the bank. Alternatively, they can select a product from one of the many in the library and completely customise to their needs.
Specifically with Vault, you get a platform that allows a bank to rapidly create and continuously evolve unique financial products across the banking spectrum, from consumer to corporate all on a single ledger. This enables financial services product innovation that hasn’t been achievable for years simply because the technology did not allow it.
For example, you can build and modify products in days and weeks and afford to experiment with customer groups. You can create a point of genuine differentiation and deepen the hyper personalization beyond just the channel and back into the products and services – a major bonus for the crowded and competitive financial services market.
Nick adds: “The Vault platform leverages Kafka event-driven streaming so its ideal for integration with AI and machine learning and enabling things like real time insights for the customer – to consider a loan, for example, or gamification that nudges customers to positive financial behaviours and allows banks to engage in financial wellness instead of just offering products.”
With open architecture, banks are able to move away from the restrictive environment of a black box and build their own in-house expertise and take on the innovation themselves. Alternatively they can work with a partner like ClearPoint that provides their own deep IP and capabilities, with technology like Vault to create opportunities banks otherwise might not have.
Vault is paving the way for enormous and positive change in the financial services sector, and as Nick mentioned, attempting to put banking back into the hands of the bank and not rely on what the black box dictates.
ClearPoint is proud to be official partners with Thought Machine and their solution “Vault”, the leading modern core banking platform in the cloud. As Australasia’s only local services company with an established practice and hands-on experience with Thought Machine Vault, we are best placed to build out the future state for banks in New Zealand, Australia and Asia-Pacific looking to leverage the next generation of Cloud Native Core Banking.
Want to find out more? Contact us to book a free demo today.