OTTO and Intellect: Building a Custom, Composable Lending Ecosystem for E-commerce

Interviewer: Hannah Duncan, an award-winning financial journalist with FF News

HD: You transitioned from a traditional retail model to a hybrid marketplace to unlock growth. Beyond just adding more products, how did this shift redefine your role as a financial intermediary for both your end-customers and your third-party merchants?

Mirko: For end-customers, this shift has led to a more streamlined and flexible payment experience. With the establishment of OTTO Payments customers now benefit from a standardized and clear payment process, regardless of how many different merchants are involved. This also means access to a wide array of payment options, including purchase on account, installment payments, direct debit, PayPal, credit card, and prepayment. 

For our third-party merchants, our role has evolved to offer comprehensive financial support, simplifying their operations on the marketplace. OTTO Payments centralizes all payment processing, eliminating the need for merchants to integrate and manage multiple payment service providers themselves. This significantly reduces their administrative burden and, crucially, removes the risk of payment default, as OTTO Payments guarantees the receipt of funds for their sales. Merchants also benefit from an uncomplicated billing process, with their earnings typically paid out weekly.

HD: As Germany’s second-largest online retailer, your customers expect checkout to be instant. How has moving to a modern core banking foundation allowed you to offer diverse payment options like BNPL or installment plans without adding friction to the user journey?

Mirko: The core banking platform provides the foundation in OTTO Payments for a standardized and seamless payment process for our customers, enabling us to offer options such as purchase on account and installment payments, as well as services like switching from purchase on account to installment payments after the creation of the original receivable itself. 

It allows us to focus on customer-facing functions, while the core banking platform provides the solid foundation for these capabilities.

Rajesh: The fundamental difference here is recognizing the unique needs of OTTO as an e-commerce provider versus a traditional bank. A "one-size-fits-all" banking system would create bottlenecks for a retail marketplace.

• Instead, the headless and composable nature of eMACH.ai provided OTTO with a robust, API-based architecture that is specifically designed to support a growing and evolving customer base. By utilizing this framework, we were able to deliver a custom ecosystem with several key advantages:

• Scalable Credit Solutions: We deployed microservices-based credit solutions that are highly scalable and capable of handling massive transaction volumes with ease.

• Centralized Payment Management: We built a unified, country-based payment hub. This allows OTTO to centrally manage transactions across its customers, merchants, and the broader marketplace.

• Ecosystem Expansion: Crucially, the composable architecture gives OTTO the ability to seamlessly onboard external retailers into their marketplace ecosystem, ensuring the technology acts as an enabler for growth, not a constraint.

HD: In a high-growth digital environment, 'zero downtime' is the only acceptable metric. How does the Intellect platform handle the massive technical load, particularly during extreme peaks like the holiday season?

Rajesh: Handling massive technical load comes down to on-demand scalability. As a baseline, the platform consistently supports over 300,000 credit transactions per day and handles millions of system events daily. However, the true test of this architecture is during major retail events like Black Friday. During these extreme peaks, the platform's performance metrics were flawless:

• Uninterrupted Service: We achieved zero downtime across all services and maintained full compliance with all SLA commitments.

• System Stability: We maintained stable response times despite peak concurrency , and observed absolutely no anomalies in memory, CPU, or database utilization.

• Flawless Execution at Scale: The system processed hundreds of thousands of credit transactions, cancellations, and repayments. We facilitated nearly a million fund transfers and tens of thousands of new customer onboardings.

• API and Event Resilience: Over 3 million API calls were processed flawlessly with zero timeouts or failures , alongside more than 12 million event messages handled seamlessly across our services.

HD: The European regulatory landscape (GDPR, DORA) is incredibly demanding. How does this partnership ensure that the platform remains agile enough to launch new products 'on-the-fly' while staying ahead of stringent financial compliance requirements?

Mirko: The partnership navigates the demanding European regulatory landscape (GDPR, DORA) by focusing on agility and compliance through three core strategies.

Firstly, a flexible solution with APIs and events allows for rapid product iteration and deployment. APIs facilitate quick development and controlled data exchange, vital for GDPR compliance and secure communication under DORA. The Event-driven architecture further boosts agility by enabling independent system component changes, streamlining new product development while maintaining an auditable trail for compliance. 

Secondly, focusing on respective strengths – core banking versus customer-facing features – optimizes resource allocation. Core banking systems, handling sensitive transactions, prioritize robust security and compliance. This specialization allows for agile innovation in customer-facing features, as they are decoupled from the most complex regulatory aspects of the core banking system and interact via secure APIs.

Lastly, encapsulation is crucial for both agility and security. By isolating functionalities and data, the partnership effectively manages specific compliance requirements. This simplifies development, testing, and audits, while enhancing security and contributing to operational resilience requirements. 

Rajesh: To build on what Mirko has shared regarding the architectural strategy, Intellect’s role was to provide the robust technological foundation that makes that agility and compliance possible. We achieved this through a few specific infrastructure deployments:

Compliant, Cloud-Native Infrastructure: We built the platform from the ground up on a heavily secure, GDPR and DORA-compliant cloud infrastructure, ensuring data sovereignty and resilience mandates were met from day one.

Containerized Deployment for Real-Time Scaling: To support the rapid iteration OTTO mentioned, we utilized a fully containerized deployment on AWS EKS with Fargate. This specific setup is what guarantees both cost-efficiency and the ability to scale resources in real-time without compromising the secure boundaries of the system.

Microservices-Driven Speed: Ultimately, our eMACH.ai microservices-based architecture is the engine driving this flexibility. By breaking down the technology into independent microservices, we empower OTTO with the speed to launch new credit products, rules, dashboards, and user interfaces "on-the-fly," safe in the knowledge that the underlying core banking compliance remains perfectly intact.