Our CEO Max Chuard live on CNBC TV on Thursday 13 February giving an update on our excellent set of 2019 results and continued growth. Plus insights on the industry’s explosive use of cloud technology, AI and the benefits of microservices.
Max Chuard Video Transcription
Max Chuard, CEO of Temenos, joins us now around the desk.
Thanks very much for being with us this morning.
So we’ve been talking all morning about banks and the transformation that European banks in particular ere undertaking right now.
A huge amount of that involves bringing in new technology, new products.
Obviously, that requires a huge amount of investment.
So what are you seeing? Is there really demand coming through from these European banks at a time
when they’re under such pressure to cut costs?
I mean banks globally, but specifically in Europe are still using, by far very old systems.
So the technology is technology built 50 or 60 years ago, which is not fit for the digital age anymore.
So we see a big transformation that is happening, the need to automate at the back-end to be able to boost the return on equity.
So there’s a very strong demand.
And as a leader in that market, we are best placed to support them.
So we just reported you know, our Q4 and full year results, which were great again.
It’s now five years in a row that we are growing more than 20%, so we’re very pleased with that.
You mentioned that our long-term target that we continue to expect to be able to grow at those rates because there is a trend.
There is a structure to our story where banks need to innovate.
So banks still are using what we call spaghetti software or spaghetti codes, which is a patchwork of lots of different systems put together over the years, which is not fit.
So two things.
They need to innovate, they need to transform, to be able to offer a much more efficient way to operate.
But at the same time, to be able to offer a much more personalized customer experience.
So that’s really what we are doing and we see quite good demand on the banking side.
Max, I was looking at the amount of new wins that you had in the fourth quarter, 33 new clients, and over the course of last year you had 93 new customers, which made me take a step back and wonder, are these banks that are just beginning the journey or are you actually winning bank business, the companies that have already started the journey, not happy with where they’re at with particular operators, and now switching over to you.
How is this playing out?
Yeah, the names that we mentioned were new names, so those will be new accounts, new customers, and could be two things.
Either, you know, a traditional bank that needs to innovate or what we see more and more in some of the traditional banks that are saying it will take me too long to innovate, why don’t I build a new bank within the bank, a greenfield bank.
And, you know, we have a case for instance of Open Bank, which is the digital bank of Santander that said, let’s start from scratch with a very modern system and then over time we will transform the more traditional bank.
So we see those two trends.
I see it’s clear that, as I said, the competition that banks are facing today, because regulation somehow is encouraging innovation and competition with open banking, for instance, and we see more and more of new entrants are trying to get part of the value chain.
And that’s very exciting, but at the same time it means that banks need to transform, they need to innovate.
And today you’ve got technology like AI, you know that allows for efficiency, that allows for hyper personalization.
And this is very exciting. And we do, we put AI in everything that we do.
In banking what is interesting about AI is we believe you need to be able to explain, you know it’s about eXplainable AI, and we’ve got the product that exactly those are, that explain a situation like, if you take Netflix for instance, the way you use AI, everyone uses AI today.
If you use AI to select what movie you should watch tonight, I think that’s okay not to know how the system came to that conclusion.
But if you are a bank and basically the algorithms will decide ultimately
either to allow to give you a loan or not, you need to be able to explain how that decision came.
Max, let’s get some more questions in to you.
Well, I think this is a very fascinating topic, because I think, as you mentioned historically banks had three decisions either to buy technology, build them in-house or rent them.
Initially, they’ve sort of decided to do the building themselves because they have more control, flexibility, etc.
And the issue is that you have layers of technology, because of risk as well it’s quite disruptive to sort of shut the whole thing down and then bring something external.
So how, and also banks have been also trying to build in-house fintech companies to try to look at things within the company and try to adjust and adapt.
But do you still feel the huge amount of resistance to change because of the number one, the huge amount of people involved in maintaining those technology versus bringing something that they don’t necessarily know and won’t be able to trust on day one.
So how long does it take to convince an institution to move to AI and technology compared to the safety of what they’ve been using for the past, so to say 10 years or 20 years.
Listen, for some banks that have been using a system for, you know, 60 years, it is a big change.
But what has changed is technology.
Technology is enabling transformation much faster than before.
I think this is a big change.
Cloud for instance, you know.
Cloud allows for a big change, and if I look at Temenos just in Q4, our Cloud business grew by 160%.
So a huge growth in that side because with Cloud, with those type of technology, microservices, we’ve got a microservices architecture which allow basically to transform piece by piece, component by component, at any time as you want.
So you drive that transformation, Max Chuard.
So I would say that, yes, it is still a big project to transform a bank, especially an incumbent bank from, you know, using a system of 50 or 60 years ago, but technology now enables that transformation much more by step by step.
A very interesting conversation now.
I wish we could speak to you a little bit longer, Max Chuard.
We’ll have to save those questions for next time.
Max Chuard, CEO of Temenos.