Tuesday, March 15, 2016


The rumblings are becoming louder.  The cracks are beginning to give way. Many bank CTOs are worried to face their worse nightmare – things deep down are not robust and many a haphazard bandage is beginning to come off and it hurts when it costs much. Yes we are talking about the Core bank. 

A lot of airtime and money has been spent on Digital – restructuring, renaming and rephrasing strategies and systems to reach out when and where the consumer needs you or even before she needs you. Still, the feeling is there - deep down things are not good.

For those who challenge the norm, disruption comes easy – and why not from within. There has been a disruption in the last few years by the “Sharing Economy”. Companies like Airbnb, Lyft, P2P lending platforms and many smaller players are allowing people to share and monetize their otherwise superfluous personal assets. Notwithstanding their valuations these companies have had a serious impact on incumbents and are causing seismic shift in the consumer services space.

Sharing has been prevalent in the industrial space too where heavy industries such as construction and agriculture sector have been leasing their unused equipment to peers. With the advent of the sharing in Consumer sectors, the concept has suddenly found a niche in the economy. How can we overlook cloud as collaborative space for companies who are trying to tackle common problems in their respective industries. Sharing has also reached the professional services industry where HR houses are exploring new ‘co-optive’ business model of placing “benched” employees of IT giants in smaller peers, sometimes even competitors.

The financial services sector has seen a sharing upheaval in the p2p lending space and for banks to be able to compete with it, they need to explore their own sharing paradigm. An undeniable area where sharing can yield banks immediate results is the Core. We at IDEALINVENT believe that “#ShareTheCore” applies to banks in the same spirit of the "Sharing Economy” these days.

We all understand that most of what the Core does, including payments, is commoditized and the ‘Edge’ that banks have is more on the digital front. So, keeping in mind cost and other capital constraints, it is prudent for banks to look at “#ShareTheCore” as an essential strategy to stay relevant in disruptive headwinds.

Who is #ShareTheCore suitable for?
  • If you are a large multi-country bank dealing with multiple core banks even for similar geographies running huge costs.
  • If you are a bank that aims to reach other geographies or start new business units across geographies with a common platform.
  • If you are a bank that aims to act as an aggregator for core bank for other similar sized banks in your region.
  • If you are a bank that aims to gain from sharing your version of the Core with other similar banks in your country to bring down the TCO manifold.

Why #ShareTheCore is relevant now?
  • A seamless multi-entity, multi-tenanted solution is what you need either on-premise or hosted to reduce your core costs across your units.
  • Core bank costs typically come to 12% of your entire organization cost – it could be higher in highly automated countries (western economies) and lower where manual replacements are at play (South east Asia).
  • #ShareTheCore can bring this down manifold if you are addressing this for multiple entities – either of your own or across banks.
  • Middleware orchestration advancement and API libraries have matured a lot in the past decade bringing down orchestration costs.
  • Digital / Channel differentiation has gained upper hand and the digital layer is on fast track which needs much of your valuable budget.
  • Products have become simpler especially on the retail side - if the customer doesn’t understand your product chances are they wont sell. 
  • Pricing, risk, process and controls are the only edge banks have in an increasingly reducing margin game.

At an operational level #ShareTheCore can be employed as follows:
  • #ShareTheCore can apply for 3-4 similar banks that are of similar size and similar business model in a certain country.
  • It can also apply for a single bank having entities in multiple countries to share a single platform.
  • The core will be the same for all and it will be a single version. However this singular core can handle different bank set ups (either hosted on a community cloud or on-premise).
  • The core will provide service orchestration for each bank to plug in their (digital) customer service layer.
  • Interfaces like KYC, credit scoring, Clearing, Tax - will be made available to all banks as a part of a standard package for a particular country and hence bring down the costs.
  • Compliance reporting to FSA/ Central bank will be standardized and made available to all the sharing banks.

How do banks benefit from it?
  • Banks get a version exclusively for their group. This version will have all the ingredients they need and with the right next generation core banking vendor it will remove the need to buy a universal system at an exorbitant cost – many of whose modules are used.
  • Banks will buy a license or own the code at a shared cost. Banks share customisation for the core – for any regulatory issues, clearing handoff changes, new changes to payments etc. So the entire cost of the core can be spread across participating players.
  • Because there is a single version of the entire set, it makes for easy maintenance and upgrade.
  • With a multi tenanted core the #ShareTheCore concept will allow banks to have complete distinction at the business layer in spite of sharing the underlying core platform. Banks can have a fully independent pricing, risk management and monitoring structures for all their services.

The sharing economy has brought with it a tsunami of disruptive players but it also brings with it a change of mindset that incumbents can embrace and choose to “share” a ride on this wave instead of being overwhelmed by it.

Lets pay heed to the rumblings. Change is difficult – not changing could be fatal.

Tuesday, August 25, 2015

Will Digital Wallets become Relevant soon?

Digital Wallets are everywhere. In the age of the smart-phone, anything that doesn't happen at the click of a button is too much of a bother. Application this very same line of thought is what led to the rise of digital wallets. Several e-commerce marketplaces facilitate payments using a wallet. In some places the usage of wallets is encouraged by offering discounts. Uber has successfully taken the digital wallet to every home. However, there remains a degree of uncertainty as to where this is headed. The relevancy of having a digital wallet is under scrutiny now.

Several independent researches claim that the current digital wallets are not delivering. The research data pointed out the fact that a lower percentage of consumers are currently using the mobile wallets. This maybe because the technology is currently not delivering what the consumers need. There is an ever increasing interest in mobile wallets but the mobile wallet technology that exists today would not be able to hit all the consumer pain points. The wallet technology can surely use a few advancements to make it attractive to the average consumer.

The increase in smart-phone adoption has brought about a rise in the use of digital wallets. Although a quarter of the smart-phone users today use apps that incorporate digital wallet functions, as low as 2% of consumers are using a digital wallet. Also, adoption of digital wallets is up by nearly 70% compared to the previous year.

All the statistics aside, the low rates of adoption of digital wallets can be attributed to several things. The major issue might be the probable misdirected approach of the Digital wallet players. The objective so far has been to offer speedier and simplified payments. However, what the market currently needs is mechanism that allows consumers to spend, save, shop and engage with the retailers of their choice. A debit or a credit card is not too much of a burden to carry around. Hence, if you're focused on making that process easier then this technology is going nowhere.

The real pain point of the consumer arises when they have to carry around a clutter of their coupons and gift cards. Any random consumer surely has several of these loyalty and gift cards with them. The game changer for Digital Wallet technology will be when all of these cards are integrated together in a single wallet. That would solve a real problem for the consumer and indeed hasten adoption. Additionally, you can even add options for ID cards and storage of receipts. Having such a varied range of information complied to a single Wallet location would definitely be incentive enough for the consumers.

Thursday, August 13, 2015

In the beginning… is the Alphabet

 By Premkumar Bhagawatsaran, CEO, Ideal Invent

Google Alphabet

The Alphabet controls information – world information - through Google. No wonder they called it Alphabet. While the markets cheered the creation of Alphabet and differentiation of product lines into revenue generating and experimental ones, a lot of focus is on the new CEO and the path he takes to keep the moolah flowing while steering the biggest information company in the world.

So I pondered over the trillion-dollar question - which one will be successful in the long run - Alphabet or Apple? My bet would be on Alphabet. While Apple specializes in making things easy and practical for billions – and hence the near trillion dollar market capitalization, I would still bet on the Alphabet to gaze into the future and experiment on technologies that would guide us in the coming decades. If one needs to summarize the mission of Alphabet (from the outside), I would say in a rather crude way ‘make people out of machines and machines out of people’.

Take the self-driving car, pioneered by Google research. In the near future, your car will do the driving for you, it will drop you at your office and park itself or run errands or go back home to attend to other errands. Your car will diagnose itself with enough sensors to know that it needs a overhaul, a change in the brake pad or needs a drink (brake oil) and it can drive itself to the garage. It will of course keep you informed days ahead. If this is not making a man out of a machine what else is.

Now take the other end, imaging you are entering a conference attended by Industry captains and Thought leaders - your competition of course is there – all you is need is one glance to know about them. Your glasses (in whatever form it will be available) will capture, collate information, do a facial-recognition match, bring up their LinkedIn profile, face book feeds and in an instant you will know who the person is, which school, company, and even what she was doing the last few weeks. Now take this further and get into the realm of Bionics – imagine all of this was fed into an electronic retina (Google does this now to measure sugar levels) and you just need one glance and know everything. If this is not making a machine out of man what is.

While the market currently rewards its dizzying sales numbers one hopes that Apple does its part to invest into future technologies. Alphabet on the other hand, apparently knows, to quote Churchill, “The empires of the future are the empires of the mind”.

Thursday, August 6, 2015

Online lending marketplaces and the elephant in the room

By Marketing - IDEALINVENT

(Image credit: Guardian)

Peer-to-Peer Lending is an online loan dissemination method that challenges the approach traditional banking institutions take towards credit lending. Instead of extremely time taking procedures stipulated by a bank or a credit institution, you can easily obtain a loan through the P2P platform online. The platform allows, lenders and borrowers to directly interact and discuss loan terms. Typically, the transactions happen between two individuals.

The growth of the P2P sector is largely due to the fact that alternative lenders are offering innovative and competitively priced loans that are easier to obtain. Filling up a simple online form can make you eligible for a loan in just a matter of hours. The high interest yield is now attracting more and more institutional lenders to this field. P2P platforms are seeing a high influx of traditional lenders who are looking to cash in on the attractive interests that this platform can yield. With the availability of both traditional and alternative lenders on a single platform, the definitions of P2P are changing fast. P2P platforms are now more popularly known as Online Lending Marketplaces.

This marketplace is ideal for small and medium business owners and individuals looking for quick unsecured personal loans. SMB owners need not jump through hoops to get a competitive loan anymore. The lenders on the marketplace make use of algorithms to analyze and predict the financial health of the business. Current cash flow statistics and data on the performance of the business goes a long way in judging the potential of the borrower. The USP of the Marketplace lending model, however, is that borrowers can compare and shop for loans on offer from a variety of lenders. This effectively cuts out on of the major problems faced by lenders and borrowers alike, the search costs. Marketplaces generate revenue by charging a small fee from borrowers who are sanctioned a loan.

But what about the elephant in the room? When do the regulators step in?

The Online Lending Marketplace has grown leaps and bounds over the past few years. However, it still has a lot of catching up to do. Traditional lending operations still handle an exponentially higher volume of loans. With the rate at which the Marketplace is growing, industry analysts predict that it will be trillion dollar industry by 2025. This kind of extensive growth may come at a price, some analysts fear. Those who advocate regulations argue that with this model SMB's may become the next sub-prime lending crisis if left unchecked. There is also the question of transparency. Lack of a regulatory oversight means that the online lenders may not be accurate and transparent always.

On the contrary, a majority believes that imposing regulations on the Online Lending Marketplace at this stage might stifle innovation and the progress of the model as a whole. The new entrants are popularly being seen as disruptors who are here to replace an inefficient and outdated marketplace. Early and aggressive regulations at this stage will only serve to cut off the innovative access to funding that SMB's are currently relying on. Traditional banking institutions will tell you how strong post-recession regulations have cut their wings. Banks fear that they may no longer have the competitive edge over the new entrants.  

The Online Lending Marketplace is crucial to the survival of Small and Medium businesses. It is important to sustain this model by giving it ample space to grow. Post-recession times have seen a great number of opportunities open up. And the way that SMB's can compete in this market is by being able to get access to capital when they need it. Innovation and the onset of technology will continue to drive progress in this field. However, not having any regulations is just as harmful as over aggressive regulation. Any central regulatory body that would take up this responsibility would need to try and strike a balance between the two. The Marketplace needs to be given ample room to grow with just the right amount of oversight and regulation.

Friday, July 31, 2015

Six reasons why cloud banking will transform banking in the future

B-SaaS cloud banking platform
Managed services for retail banks and financial institutions

SaaS is the future. It is hard to imagine a future where financial systems can carry on using the outdated legacy systems. The rise of technology and a new generation of consumers has exposed the vulnerabilities of banks and other traditional financial services. Post recession regulation imposed on banks is also another major factor that opened up the doors for disruptive players. Banks are losing a large chunk of their business to these disruptive challengers, and will continue to do so until they do something about it.

Financial institutions are still playing a game of catch-up with regards to technology. This rapid growth in tech has seen software taking over much of the traditional banking operations. The utility of banking is gradually being replaced by software. Banks' apprehension to embrace software has majorly been due their concerns about security. However, this is turning out to be inconsequential to the modern consumer. With almost every retail product only a click away on their smart phone, consumers have began to look for such ease of access in all their interactions. Moreover, no consumer today is interested in a visit to the bank or a personal interaction.

Traditional financial institutions world over are under pressure to be more efficient. Legacy systems are being scrapped for leaner and more snappy offerings. IT spending has to be calculative and efficient. The consumer demand is gradually driving banking institutions towards the cloud. However, most of them are still apprehensive about giving up on valuable customer interactions. Banks need to get over the fact that they are not going to be in control anymore.

At this point, if you are still not sold on the cloud banking idea, let us try and list out the various advantages that arise out of adopting a SaaS implementation.

1. Reduction in costs: This is a bit of a no-brainer. Once you discard the clunky legacy systems, you have significantly reduced your spending on upgrades and maintenance. Cloud operates on a Pay-on-demand model. Having your applications on a cloud lets you bring down IT expenditure and focus the corpus saved elsewhere on areas that require improvement.

2. Flexibility and scalability go up: Volatility in the market has always been a concern for banks. With the cloud model banks can respond to the demands of technology and the consumer almost instantly. Being able to scale up or down rapidly will give banks that competitive edge that they need.

3. Increased efficiency: The standardized operation due to cloud will ensure that integrating new applications and technologies in the future is easier. Banks can now drive out complexity.

4. Faster customer service: Services and bundled products are much easier to develop on the cloud as software/hardware procurement delays are effectively eliminated. Computing power can be boosted to suit the consumers demands and access to data is as simple as logging in from your browser.

5. Client relationships are much more enhanced: The availability of so much data and big data analytics means that banks can now understand their customers much better than before and provide them with products that suit their needs. These valuable insights make customer service much more personalized This goes a long way in generating good will for the bank.

6. Clients are closer to their clients: Payments between sellers and buyers are simplified with transaction banking. Current cross-platform payment inefficiencies are effectively removed by bringing both sellers and buyers on the same platform. 

The customer service metric has changed drastically, consumers no longer judge the services of banks based on interactions. Service quality is purely about providing the consumer easy access to his banking with the least possible interactions. The future of the banking industry is not yet very certain, but the best bet for anyone right now would be to invest some time to look into SaaS. Greater connectivity to banking minus the long interactions and waiting is what disruptive challengers offer consumers. Banks cannot really afford to lose valuable business on something that is in their control to change.

SaaS Banking does give rise to several concerns. Please check out our perspective on these concerns in a previous article on banking on a cloud model.

Monday, February 16, 2015

BIAN – the Banking Industry Architecture Network - A banking language for everyone, by everyone.

BSunay Mruthyunjay, Chief Technology Officer - IDEALINVENT

(Image credit - BIAN)

“The cost of integrating applications is often several times the cost of the application itself”. This may sound like an all too familiar grouse in the IT world across domains. Despite integration costs reducing significantly, it’s still a bank’s significant area of IT cost and continues to also be challenging technically. With the emergence of standard ways of integrating, things are a lot better now than before. From a point-to-point integration, banks have largely chosen and implemented middleware that aids integration via standard protocols like web services, irrespective of the genre of the individual applications.

While the protocols are standardized, the processes are still esoteric and this leads to costs getting driven up depending on the fit of a particular system to the processes prevalent in a bank. Customizations are inevitable but what if they drive up costs and negate a significant portion of the benefits accrued due to standardization in integration?

Is there a magic potion for all these complexities? Are there any well laid out standards defined that can cater to all possible scenarios of different types of banks and their systems. The answer may well lie in BIAN – (the Banking Industry Architecture Network, www.BIAN.org) and its service landscape definition.

From the outset, the BIAN organisation has come together with BFSI stakeholders playing key roles in its deliberations – banks, IT system vendors and system integrators – all deliberating via a single platform to arrive at a commonly agreeable formal description of banking services. Through its well defined service landscape comprising of service domains and grouped into different business domains like Party Data Management, Product Management, Sales Management to name a few, BIAN has drawn up a very comprehensive service directory. Simply put, if all the stakeholders talk the same language, it makes integration a lot simpler. By taking an approach that is focused on services rather than the underlying technology, BIAN is defining a common language of sorts.

For a new bank BIAN standards can help in structuring the business, operations and systems in a well partitioned manner and help it measure each unit’s efficiency easily. It can also help banks to decide what kind of systems are needed to cater to their service requirements, what portions of the services should be supported by external service providers and also define the integration standards that should be adopted – thus making the choice of systems easier.

For banks that already have applications and operations in place, BIAN can help understand the overlaps between business and applications thus eliminating duplicity. It also helps assess portions of the business domains that are under-served and those that are over-served and balance them out with appropriate changes to procedures and systems. While doing all this, if the bank considers its services keeping in mind its end customers, it adds further benefits to such an exercise.

The beauty of BIAN’s service definition is that it focuses purely on semantics while keeping the technical definitions open. BIAN also focuses its definitions keeping in mind inter-application communication. This helps it to co-exist with other standards like IFX, SWIFT, ISO which differ from BIAN as they are more message oriented and focus on B2B communication.

With the pace of adoption of BIAN standards, banking systems could be finally moving towards a uniformly accepted definition of services that will also lead to a quicker and cheaper integration of applications. With new-age systems that are SaaS friendly, BIAN provides a unique opportunity for easy integration with on-premise systems. BIAN has the potential to also become a minimum criterion when banks choose an application which should be welcomed by all stakeholders.

Sunay Mruthyunjay
Sunay brings over 17 years of experience developing IT products for the banking industry into IDEALINVENT. He cut his teeth as a product designer and developer before moving into product implementation and delivery management. Notable achievements include being a key member of the first ever Indian led complete system replacements in one of the largest corporate banks in Japan and has been instrumental in several project implementations of varying complexities in Western Europe including a Payments and Core implementation in a leading Swiss bank.

Thursday, January 29, 2015

Are There Security Risks with SaaS Delivery of Core Banking Services?

BSunay Mruthyunjay, Chief Technology Officer - IDEALINVENT

(Image credit - Cloudvolution)

Are worries about the security of your bank’s data stopping you from considering SaaS delivery of core banking services? Do you feel it’s not worth the ‘risk’ even though the benefits, especially in regards to reduced cost and improved business agility are well proven? As CTO in a company that hosts ‘Banking Software as a Service’, it’s my job to consider and respond to all the perceived negatives of our B-SaaS™ offering and would ask you to consider the following points.

It’s human nature to avoid risk. In our decision making process, many of us consider different scenarios, evaluate risk versus rewards or benefits and then make a judgment call as to how much of risk is appropriate for a certain reward. So in the end, it boils down to balancing the risk and reward and this applies to any rational decision - be it our personal lives or matters related to business.

With this as the background, let’s try to analyse the number 1 perceived risk of a SaaS offering  - data security; This is of course the most significant risk that a bank gets exposed to with SaaS. Data flows through the internet, is stored in a location that is physically away from the bank and the bank cannot really control who gets access to its secure data.

To put this in perspective, let us take an example. Say you got some money; what would you normally do. Probably spend some and put the rest in your bank. It’s your money and you find it alright to leave it with a bank. The reason is, we know that it’s safe, probably also earns interest and most importantly, the bank knows how to safeguard my money better than I do (hopefully and in most cases!). The same money is available to you whenever you need it. You also trust the systems so much that you are fairly sure that your money cannot be withdrawn by someone else - thanks to the authentication mechanisms in place.

This ‘money’ security works - so what’s the big deal with data security?
Firstly, sensitive data of the clients, their personal identities and such others should be secured. Information related to products and pricing are equally sensitive. Last but not the least, the bank's strategic initiatives and goals, control measures and other operational procedures also need to be protected. If in the unfortunate case of a data breach, banks stand to lose a lot – most importantly credibility and that trust factor with their clients which in turn can lead to huge losses in business and revenues.

Thankfully, these fears need not deter a bank from ruling out SaaS. Technology today is well advanced to ensure mechanisms that secure data while being transferred. Complex authentication mechanisms and cryptographic techniques ensure data on the move is not easy to be hacked and deciphered. Data hosted on a public cloud is just as safe (if not safer) than that hosted on a private cloud or in-house on stack servers.

As far as data storage is concerned, a number of preventive measures can be implemented to avoid any data leakage. With a credible service provider, periodic security reviews or audits, third party assessment and certification, implementing ISO standards for managing information security are some of the easy means by which data can be secured in a SaaS scenario.

Having an information inventory with the appropriate risk measure associated with each item on the inventory list can help get a good grip on the information loss risk that a bank deals with from a SaaS point of view.

The other significant risk in a SaaS offering is that of integration. Typically systems that are on-premise have to exchange information between systems that are on SaaS. Apart from the usual complexities of integrating two systems, integration with a SaaS application poses additional challenges of dedicated bandwidth and security. Banks have to ensure that the SaaS application they choose has standardized ways of integrating that can co-exist with the other applications within the bank.

SaaS applications are getting smarter by the day. They allow a reasonable amount of customization to suit your needs without any intervention from the provider. The costs are extremely predictable and controllable. All the upgrades are automatically included and most importantly, the bank can focus on their core business with minimal diversion on IT systems.

Overall banks can reap significant benefits from a SaaS system without compromising on any security risks by acknowledging, assessing and effectively managing them, just as you do with any aspect of your life or business.

Sunay Mruthyunjay
Sunay brings over 17 years of experience developing IT products for the banking industry into IDEALINVENT. He cut his teeth as a product designer and developer before moving into product implementation and delivery management. Notable achievements include being a key member of the first ever Indian led complete system replacements in one of the largest corporate banks in Japan and has been instrumental in several project implementations of varying complexities in Western Europe including a Payments and Core implementation in a leading Swiss bank.