This was my 13th such event with Temenos and by far the most exciting since my first when I was wide-eyed with enthusiasm for Temenos Transact, which back then was the centerpiece. We’ve had many great events in the intervening years but this is the first one to excite me in the same way as that first one way back in 2007.
Here are some of the highlights:
Core Banking Microservices:
Temenos announced a whole range of new micro services covering accounts, deposits, loans etc. This is the next generation of our core banking system Transact and I firmly believe will be universally welcomed. As always Temenos hasn’t sacrificed any functionality with new technology enhancements and this is again the case with this (r)evolution.
Why is it important? Well there are two very obvious applications for it.
1 – For #challengerbanks this gives the perfect combination of rich functionality, the flexibility to implement in any order and the ability to build an ecosystem of third parties if the business demands. However, banks should always bear in mind the procurement and regulatory overhead of managing multiple vendors. This is particularly true when regulatory changes, such as GDPR, can impact all vendors, and they will have differing abilities to meet those regulatory deadlines.
This micro service approach enhances the Temenos proposition for neo and challenger banks. The new fintech vendors cannot match our depth of functionality. They rely on the ecosystem for this, which may give them great flexibility but it also brings additional challenges including regulatory compliance and vendor risk – not necessarily immediately but further down the road.
As new banks evolve their propositions from manufacturer to distributor, or more likely a hybrid of both, Temenos enables that flexibility through its open architecture, rich functionality and an extensive Marketplace of complementary software and service suppliers. For many fintech players, the ecosystem approach is the only option as they have very narrow functionality and do not have the size, resources or capital to develop these services. Indeed, I predict that many of these vendors will ultimately be acquired by banks or other vendors, and we’ve already seen some of this with banks buying significant stakes in fintech vendors, which of course means they have a major influence over its roadmap.
2 – Established banks continuously struggle with the need to replace legacy core systems, often 30-40 years old, that are just not designed to meet the challenges of the digital age. Many strategies have been attempted with varying levels of success but always taking longer than expected and costing far more than budgeted. This is often not the fault of the vendor but results from the spaghetti of legacy applications and hugely complex cross integrations. It’s hard to deliver value early and banks lose patience or commitment.
Many banks have employed the tactic of creating a new “digital brand” (Bo, Marcus, Pepper). Initially these brands are digital and “new to bank”, but with the idea of migrating all customers from the legacy at some point in the future. To date none have succeeded on this journey even though the digital brand may have achieved standalone success. The strategic vision is sound but the execution is complex due to the level of legacy integration needed until the migration from legacy is complete.
With Temenos Transact Microservices a new approach is now possible. For example, the bank can stand up a single line of business, e.g. deposits (probably in the cloud) and, using standard (ideally open banking based) APIs, integrate with legacy applications. A prerequisite is probably that there is API connectivity to legacy but most banks, in Europe at least, have had to build this for PSD2/Open Banking. The journey then becomes a series of migrations but with the integration being a fraction of the complexity and cost. Temenos Transact comes with literally hundreds of published APIs and the tooling for the banks to create their own.
For me the big challenge has always been the customer experience i.e. how do you minimise disruption, continue to offer a single customer view (internally and externally) and avoid multiple logins and other complications. The size of this challenge will depend on the sophistication of the existing digital banking apps offered.
Temenos Infinity – And Beyond!
This leads me to the other big announcement at TKO. This is the next generation Temenos Infinity. In 2019 Temenos announced the complete separation of front office into a new offering called #Infinity and core banking called #Transact. At the end of 2018 Temenos acquired the onboarding specialist vendor Avoka and in September 2019 acquired Kony inc., the leading digital banking vendor in the US. Our 2,000 digital specialists have now merged these products with existing Temenos IP to create a phenomenal new stack. This is so much more than just a digital channels solution, of which there are many on the market. Temenos Infinity is the complete Front Office for the bank, both internal and external. It covers everything from digital marketing, experience APIs, our data lake for real-time and embedded analytics and uses sophisticated AI and explainable AI to deliver the ultimate personalised, truly omni-channel, banking experience.
Since 2019 Temenos has been able to offer banks the opportunity to start a renovation /replacement in their front or back offices. Temenos Infinity can sit on top of any core(s), and allow banks to offer a best in class digital experience to all users and channels. If the bank has its own digital apps these can be retained and integrated through our experience APIs.
The highlight of this part of TKO was the “battle of the demos” where we saw nine fantastic demonstrations of different Infinity digital banking deployments from every corner of the world. These were truly impressive.
Temenos Continuous Deployment (TCD)
Another feature of legacy systems, and many of the established core vendors, is their monolithic nature, both at the application and database level. There are many challenges that come with this “all or nothing” architecture. In the packaged vendor world the common one is upgrading to the latest release. This becomes a major exercise, especially in relation to SIT (integration testing) and can take a long time and be expensive, so banks defer it and it becomes a vicious cycle.
For some time Temenos has offered TCD to alleviate this. With TCD banks can continuously take the monthly releases that are issued and test and deploy them as often as they like in a Devops manner using CICD, automated testing etc. This removes the need for big periodic upgrades.
With the new micro services architecture we get to the Nirvana of packaged software deployment in that each micro service can be upgraded independently. Combine this with continuous deployment and upgrading has the potential to become almost a “non-event”. And to keep the regulator happy, this involves zero downtime!
The BIG Cloud
We’ve been running core banking in the cloud since 2011 and today manage the IT operations for over forty-five financial institutions around the globe. Today Temenos is Cloud Native, Cloud Agnostic and Cloud First across everything we do.
In every major project access to on-premise environments can be a huge challenge. With TCD we can provide unlimited environments, and spin these up in minutes. This has enormous cost and time benefits for these projects.
And the big announcement in Madrid was the launch of a pure SaaS offering, aimed at neo and challenger banks with the benefit of a 90 day implementation and a pure SaaS / Opex commercial model. This includes our country model compliance and the commitment to maintain this on an ongoing basis – a unique offering in this arena. There are many new fintech vendors in this space but they don’t have the capital or resources to be able to make this commitment, and evidence suggests they are explicitly staying away from it. That leaves the bank to carry the burden of this maintenance, which they do not have the time or resources to do. They want to focus their capital in building their brand and their businesses, not writing software!
So Temenos really did GO BIG this year and it continues to be a privilege to be part of making banking better. We’ve set the bar high in 2020 so I wonder how we’ll top it in 2021. Still, we will spend more than $250m on R&D in 2020 so I’m confident there are even bigger things ahead!