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CORE BANKING – SAAS
he explains. To enable this, FIS provides and manages a fully integrated banking and payments platform for Atom, through an outsourced delivery model enabled by its UK datacentres.
Jennings adds: “Atom is a new entrant with no legacy and a clear vision about what they want to do. I think this will become more common as the drive towards open banking APIs happens.”
Meanwhile, OakNorth is another UK challenger bank. It provides loans to small firms, although it also has regulatory approval to accept deposits and offer saving products. In a bid to get to market quickly and ensure flexibility, the startup is using Mambu’s SaaS banking platform.
OakNorth came to Mambu having discussed its needs with traditional vendors but wanting to try a different approach, says Danilkis. “They wanted to be faster and more nimble than traditional banks.”
Challenger banks are also increasingly implementing SaaS business intelligence (BI) solutions to manage their growth. Bank BI offers this type of solution to financial organisations by integrating Mambu’s platform. The firm’s CEO, Graham Goble, explains: “Mambu has an architected API interface that we can integrate to. It’s running in Amazon [cloud] and we can put it into our BI system.”
As a result of using this method, the bank doesn’t need to run any data on premises on a server. “It’s a process we can run for them; it’s the best of both worlds. If you are a small bank, this is worth its weight in gold because expenditure is much lower.”
Obstacles
SaaS for core banking might be taking off in the challenger sector, but a number of obstacles prevent its wider adoption across the industry. Security tops the reasons why firms don’t use SaaS for banking-specific applications.
Jennings comments: “There’s no doubt in anyone’s mind, paranoia around securing banking infrastructure is huge. Ultimately the buck stops with them – and this has created a real drag in the larger banks. It’s that end point security: the more complicated the architecture, the more end points, so the onus is on the platform providers to demonstrate they are as secure as banks.”
One of the classic worries is: “Do we know where the data is?”, notes Barrows.
Another barrier is that moving to cloud can be more complex for larger organisations. Barrows explains: “If you are a big bank and you want to move anything, the migration from A to B is a massive thing. If you are small, your customers are in the hundreds of thousands; big banks have millions.”
Therefore, moving core banking architecture is a multi year and expensive programme. “It’s integration rather than transformation: the more transformation required, the longer and more expensive it is.”
In addition, standarisation can be an issue for bigger banks: the larger the bank, the more ‘unique’ it is, Jennings explains. “A large bank services every single segment in the market. When you look at what they do and how they do it, they are division-based. Multiple stake holders have to align and that’s really difficult.”
Due to technology adoption over a long period, larger banks are held back by what they implemented previously, says Jennings. This means creating a “generic service that everyone standardises on” is difficult. “Therefore, there comes a point where the concept of SaaS stops at a certain level, in terms of how close you get to the customer.”
There is also the difficulty of getting a sponsor at boardroom level. This is on top of the argument that banks are too busy with regulation and compliance to think about innovation and modernisation. At the same time, however, regulation can drive transformation, with forward thinking digital banks believing that
www.ibsintelligence.com © IBS Intelligence 2016
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