EXCLUSIVE: “Bring it On!” – Erich Gerber, Temenos in ‘The Fintech Magazine’
Temenos has demonstrated the reliability and scalability of its open platform for composable banking, freeing banks from their traditional business model to explore a new future, says Erich Gerber, President & Global Head of Field Operations
A decade of seismic change in financial services, driven by a maelstrom of ever-advancing technologies and regulatory shakeups such as open banking, has torn up the traditional banking model. So nuanced has it become, in fact, that we can now legitimately ask ‘what is a bank?’.
The answer to that question, according to global banking technology company Temenos, is any business that wants to offer financial services. Temenos is one of the most established providers in the business – its banking platform keeps the wheels on the financial systems in countries across the world (155 out of 195 at last count).
But, during the almost 30 years it’s been around, customer demand for financial services and how and by whom those services are delivered, has changed so completely that this year it set out a vision to become ‘Everyone’s Banking Platform’. That’s everyone as in whoever is providing the banking service and however they choose to provide it. So confident is the Geneva-HQ’d company in the flexibility of its offer that Prema Varadhan, its chief product and technology officer, declared to delegates at its recent Temenos Community Forum(TCF), in London: “We’re absolutely sure we are ready for any business model you care to adopt.”
The platform allows customers to slot software components in and out, depending on their needs, and to update them very quickly. While that seems a fast and fun way for any institution to override the limitations of legacy systems, the technical challenge has always been ensuring interoperability, as those systems have become more complex and layered over time. Temenos’ approach handles that.
At the heart of its open platform is the ability for its customers to compose services, for example a buy now, pay later solution, using an open API-driven, plug-and-play ecosystem. Other key attributes include slick data migration, multi-entity processing, embedded explainable AI (XAI) services, hyper-personalisation and an extensibility framework. It allows any customer to bespoke their own version of banking-as-a-service and/or banking-as-a-platform, based on third-party products and/or distribution channels, while also catering to the traditional model of product development and distribution through a bank’s own channels to its own customers.
Varadhan said at the TCF that several other characteristics set the Temenos platform apart from its main competitors in the white-hot as-a-service marketplace – characteristics such as using a single code base for all clients; encompassing a design philosophy so that composability goes deeper, technically, and allowing clients to reuse Temenos code when developing an ecosystem in the Cloud.
“Every dollar we invest in our products and technology, we make sure we can reuse that investment for all our clients, no matter if they are a Tier 1 or a smaller bank,” she added. “That’s what sets us apart from our competitors – we don’t duplicate capabilities, we don’t confuse.”
Temenos has invested more than one billion of those dollars in R&D to create what it sees as the most open and secure Cloud-native platform for composing, extending and deploying banking capabilities at scale. In fact, Temenos Banking Cloud on Amazon Web Services (AWS) recently. exceeded 100,000 transactions per second (TPS) – a new high-water mark,
demonstrating the capacity to process the entire world’s banking transaction volumes in a single Cloud environment.
The improvement in TPS per core also allows banks to lower their carbon footprint, matching the performance and scale of mainframe-based systems but, by using public Cloud, at a fraction of those systems’ environmental and financial cost. Such performance, it says, shows the Cloud-native platform can successfully support emerging banking business models such as banking-as-a-service, as well as traditional banks.
“If you run a bank these days and you just try to front-up fintechs, saying ‘we’ll go all competitive’, then you probably haven’t understood the mechanics and dynamics of the market”
Erich Gerber, who joined Temenos as president and global head of field operations about six months ago and who has a background in large technology and Cloud services companies, says such capability is testament to the partnership approach.
“We need partnerships,” he stresses. “It doesn’t work in the IT industry these days to just deliver everything by yourself.”
Referring to the recently announced collaboration with AWS and Temenos’ ongoing relationship with Microsoft Azure, he says: “When you’re talking about millions of customers – hundreds of millions of customers, even – and what that means in terms of transactions per second, you need to rely on partnerships to support infrastructure availability on the Cloud.”
Gerber thinks that same partnership principle applies to banks’ relationships with other financial service providers.
“If you run a bank these days and you just try to front-up fintechs, saying ‘we’ll go all competitive’, then you probably haven’t understood the mechanics and dynamics of the market,” he says. “It’s a bold statement, I know, but it goes without saying that you’ve got to take advantage of the more agile fintechs, because they don’t have to carry all of that legacy that you, as a bank, do.
“So partner with them, would be my advice – to be fair, most of the bigger banks are doing that – but also integrate them as third-party solutions.”
That’s where the key advantage of the openness and composability of the Temenos platform lies, he says, as its flexibility allows it to suit a large legacy bank down to a fintech startup.
“The larger banks, the traditional financial services institutions, have invested in IT by way of their own units – in fact, you often hear this term, ‘we’re a technology company with a banking licence’. Those big banks want the Temenos toolbox, so they use our platform but do the build themselves.
“If you’re a smaller bank, the chances are that you want to focus on your core business, which is banking, and are looking for a turnkey solution. So, we would go in with a composable banking approach, but we would use the toolbox to assemble complete banking solutions on your behalf.
“Then you have the startups – the new kids, the fintechs – who, usually, don’t want anything that is on-prem; they would want to consume it all as-a-service on the Temenos Banking Cloud. So, that’s where the power of composable banking comes into play. You can use composable banking in a way that suits you.”
Temenos Exchange, the ‘marketplace’ where third-party solutions are positioned for others to reuse, is where Gerber gets really passionate about the opportunities presented by that
model. The pre-integrated solutions on Temenos Exchange help banks to accelerate innovation and time-to-market for new products, he says.
“I’ve been consuming services from my banks that are pretty traditional and nowhere near the experience you have when you order food, a taxi, or a book, and that’s what we’ve all got used to.
“I’ve had a lot of conversations with CIOs of banks who say ‘hey, we have digitally transformed!’, but when you are a customer of these banks, OK, you may get a great app that allows you to do some fun stuff, but if you lose your credit card, you get drawn back into the system of the bank that gives you all its ugliness.”
And that, he believes, is where a fundamentally different approach – composable banking and a partnership mindset – will win out, even to the extent that banking players will, ultimately, collaborate to provide services over a single platform.
“Eventually, you will have few-to-no ‘we do it all’ sort of banks, because their ability to compete is just going to be reduced,” says Gerber. “They need be intellectually honest with themselves and say ‘OK, this is what we do well and we double down on this, and the rest we use partners for, because someone else is doing that better than we do’.
“This is without a shadow of a doubt something that the financial services industry is dealing with as we speak, and will be dealing with increasingly, over the next five-to-10 years.”
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