Q&A with Nick Wilde, MD of Thought Machine Asia-Pacific


Thought Machine

Hi Nick! How is Thought Machine progressing in Singapore?

It's an incredible time for us. We opened the Singapore office in late 2019 and have been busy building both the business and our team. Today we are 25 team members, and will be up to 40 by the end of the year including opening offices in Sydney and Melbourne. And next year we'll be expanding into Indonesia, Philippines and Vietnam, followed by Japan, South Korea, and Taiwan. We are building really, really fast.

Why so rapid?

The demand is there as banks are realising they need a modern core banking engine. We conducted research with IDC recently and found over 90 per cent of banks in Asia are using out-dated second or third generation core banking technology. On average core banking technology in Asia is close to 20 years old which is painful as this causes cost-to-income ratios to increase by 3 to 5 per cent whilst a low ability to automate processes and decisioning adds another 4 to 7 per cent to the ratio. Thought Machine offers the ideal solution, a  truly Cloud Native core banking engine, purpose built from scratch with battle tested open source technology, the same as Google, Amazon, Netflix and other leading tech companies use.

Moving core is a big project. What convinces banks, which may have been delaying a decision for years or decades, to give the green light?

Good question. Costs are only part of it, the big inhibitor has been risk and the question of return on investment. No-one undertakes core transformations lightly. They are notorious for overruns in both cost and time and in many cases after herculean efforts and significant investment there is a real question of was it worth it? Did it significantly transform my banks’ ability to serve its customers or reduce costs and complexity. Often the answer seems to be more along the lines of “thank goodness we survived, let's move on”.

Certainly the customer rarely, if ever, sees a significant change directly tied to core transformation. Most customer experience transformation has been focused on the channels and achieved by “hollowing out” the core to try to make up for its monolithic nature and the barriers that presents. Banks collectively have spent billions of dollars on this approach and digital banking has evolved very rapidly first with web and now mostly with mobile platforms. However, of late it is harder and harder to pick the differences between the digital offerings of banks. This includes the Neos who in most cases run the same back end technology and have to resort to the same marketing techniques as the incumbents to attract customers such as offering special rates and/or low fees.

This is largely because whilst the “front end” of the digital infrastructure has evolved fast and is increasingly agile, the back end is slower to change due to age and complexity. Covid for many banks was a case in point where they and their vendors struggled to be able to rapidly and easily change offerings to support their customers with things like payment holidays.

With the advent of the cloud and associated technologies though core transformation becomes a much more manageable proposition. With Vault Core being a realtime, fully API and microservice enabled platform, it can be setup alongside the existing core to offer enhanced digital banking products and services. Migration can be conducted in a phased manner to avoid the dreaded big bang. The back end of a bank's infrastructure can now be as agile as the front end which is what the market demands with increasing competition and the rise of open banking and ecosystems.

So is there a need for urgency?

My argument would be yes. Even with the power of cloud and cloud native technology like Vault Core, transforming a bank to meet the demands of becoming fully digital ready is likely a multi-year journey. It requires not just new technology but also new skills and processes at Strategic and Operational levels.

Whilst people have been predicting the death of banks for many years and it hasn’t happened yet, that doesn’t mean a wave of change isn't coming. Banks have spent billions of dollars on technology but that isn’t the same as being ready for a digital world. Disruption looks like what Napster/Spotify have done to music, Netflix has done to entertainment and Amazon/e-commerce has done to high street shopping. There is no reason to believe banking will avoid a similar disruption.

Why hasn’t it happened yet? As Ernest Hemingway said about going broke, it happens at two speeds, at first very, very slowly, and then very very fast. If its going to take you multiple years to fully transform and disruption is hovering in the future then the best time to start was yesterday, the next best time is now.

How can Thought Machine Vault Core help banks innovate?

Vault Core offers a host of advantages, not least financial products as code. The ability for a bank to not just configure or compose vanilla products but to design and develop financial products to uniquely meet their target customer’s needs and to do it at speed using agile engineering & management disciplines. The ability for those products to be dynamically aware of each other and be grouped so that the financial “package” you offer your customer evolves with their needs.

As an example, an Australian bank I've been talking to wants to change the way it thinks about lending. Regulation mandates banks lend responsibly, so this bank has flipped their thinking and said rather than view it as a regulatory requirement, let's see if we can make it a competitive advantage. Create a single picture of each customer, for example, I could be assessed as being able to manage AU$100,000 of credit. The bank can then offer me a family of products, such as a debit card, credit card, personal loans, unsecured loans and so on, and I can use them dynamically and inter-changeably as my life demands and my credit line runs across all my products. It makes perfect sense. Right now the bank can't do it. Customers need to apply individually for each product. Certainly there are regulatory factors to be managed but also because the bank, like many, is selling digitalised 19th & 20th century products on 20th Century technology. It's why I say banking is ripe for disruption.

If banks in Asia adopt Thought Machine Vault Core what help can they expect?

As discussed above digital transformation is bigger than just our piece of technology, as leading edge as it is. We are therefore working to build a network of world class partners to make the transition easier. Organisations such as Publicis Sapient, McKinsey, Deloitte, Synpulse, Oliver Wyman and others. These are all organisations that have to be objective on technology to provide the right advice and services to their customers so getting them educated and enabled on our technology requires significant effort. Our relationship with the cloud providers, Microsoft, Google, Amazon & IBM is also key. We are at the stage where banks who work with Thought Machine can rest assured the migration process, and the wider logistics of adopting Vault Core, will be well supported.

For additional reassurance, we can point to the success of our current clients. Mox is now live in Hong Kong. Atom is live and SEB is close to going live. And our Series B round of $125m is tremendously reassuring for potential clients. Our rapid growth means we are attracting not merely bold early adopters, but more conservative organisations who will only work with mature technology providers.

Are there any misconceptions you'd like to correct around Vault Core?

The battle of “marketechture” over architecture. Lifted and shifted cloud resident legacy code partially enabled with retrofitted API’s is an entirely reasonable strategy and certainly of value in some cases. It does not however make you cloud native nor fully API/microservice enabled and depending upon your requirements this is a critically important factor.

How do you define success for your mission in Asia Pacific?

To be a default inclusion for core banking transformation across the region; whenever there is a selection process we are on the list for consideration. That is clearly not to say we will win every single contract, but I will feel we have succeeded when we are invited to every core transformation RFP and win a disproportionate share.

How can banks get in touch with you?

Either through my email nickw@thoughtmachine.net or LinkedIn. If you want to learn more about cloud-native core banking and what it can do for your organisation I'm ready to talk.

Thanks Nick!

My pleasure!

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