Fintech
EXCLUSIVE: “The Core Question” – Rajesh Saxena, iGCB in “The Fintech Magazine”
With 329 microservices, 1,757 APIs, and 535 events, Intellect Design Arena’s eMACH.ai open finance platform is transforming the way banks operate. Intellect’s Global Consumer Banking unit (iGCB) has worked with major banks around the world for the past 30 years. Rajesh Saxena, CEO of iGCB, outlines the five key trends that he believes are driving technological change at the heart of banks and how banks can devise a successful strategy to embrace them
THE FINTECH MAGAZINE: What are the main drivers of change regarding core banking technology?
RAJESH SAXENA: Over the last 365 days I have spent a lot of time understanding the needs and ambitions of customers in our key markets. I’ve probably met more than 100 senior bankers. I concluded that while every country and every customer is different, there are some common trends and common pain points
The first trend that is gaining momentum is the rise of open banking and open finance. The wave started with the UK and Europe and is now required by most markets. The Middle East has also seen increased traction in the last couple of years. Integrating an open finance-enabled ecosystem into a bank can deliver contextual and curated solutions and experiences for the end customer. Indeed, iGCB has clients such as Cater Allen in the UK and OTTO in Germany who are leveraging open finance to offer superior banking services to their customers. We have similarly implemented open finance-enabled banking solutions in APAC, Middle East, Africa and Oceania.
The second trend is growing competition from fintechs and other banks. Banks are looking for options to disrupt the status quo and increase their addressable market by moving from a product provider to a marketplace where customers can find a product or service that fits all aspects of their lifestyle.
The third key trend, on which iGCB has been advising banks in recent years, is the use of the cloud, whether private or, in some cases, even public. Cloud technology has matured over the last five to six years, and regulators and large banks are gaining confidence in its security aspects.
A couple of years ago, when we were doing a core banking transformation for a private bank in the UK, we couldn’t take it to a public cloud because the regulator wasn’t ready. Today, the same customer is planning to migrate to an AWS cloud and we are the primary technology partner. I’m also happy to share that we just upgraded the Indian central bank Reserve Bank of India, which is one of our major customers, to next-generation core banking and brought them to a private cloud on VMware.
“Transformation is a long journey and you need to be able to collaborate well with a supplier to make it happen. Cultural adaptation is very important. It can make or break the project”
The fourth trend, found especially in developed markets, is the focus on ESG. Bank customers aim to achieve net zero, with the ability to green/reduce the carbon footprint created by their transactions. Once a feature of a niche product, today it is a fundamental requirement. A report by Alvarez & Marsal says the global annual revenue pool for banks related to environmental, social and governance products and services will reach 295 billion euros, or $300 billion, by 2030. We can therefore see the potential of ESG on a bank’s profitability.
The fifth and final trend is increasing privacy and security regulation that banks must contend with. The most recent one is the EU AI Act. These evolving regulations are also motivating banks to consider transforming into a
more agile bank.
TFM: So banks globally are under enormous pressure to transform. However, banking transformations are never easy. Can you walk us through a successful transformation and what you think needs to be in place for this to happen?
RS: For years banks have been very reluctant to change their core. What most of them chose to do instead was empty it and put systems in place around it that could take care of the parties’ requirements. But banks have now understood that, as a strategy, emptying the core can only provide limited benefits. It may still be phase one of your strategy, but if you really want to transform your bank and compete with new age digital banks, you need to have a global core with the ability to evolve.
Furthermore, what we are seeing now is that banks are adopting multi-core strategies. Let’s take RBI as an example.
We built a bridge between the old RBI core and a new core, so that the bank could use one or the other, depending on the requirements and what had been implemented. This ability to coexist is gaining traction among banks for fundamental transformations. In addition to product and technology, I would also like to highlight the importance of delivery strategy. It might seem obvious, but most delays in implementations occur due to a gap in understanding between the bank and the technology provider
As a partner in the bank’s transformation journey, we not only create a comprehensive plan, but also carry out detailed design thinking sessions with each client to create an implementation plan that focuses on the bank’s stated and unstated needs and prioritizes business impact. We are further building regional delivery teams to work more closely with banks. Strategies like these are further reducing the risk of major transformations.
TFM: So how do you create a powerful core? Are there some architectural principles a CIO should consider?
RS: I strongly suggest that banks invest in a complete core consisting of events, microservices, APIs, cloud, headless architecture and embedded AI use cases. The intellect is the first to bring together all these elements. At Intellect we call it eMACH.ai. We’ve moved our entire architecture to eMACH.ai so that the APIs, microservices, and events are all open. It is completely born on the cloud and this gives banks the ability to integrate, expand and connect with ecosystem players. We have also created a “country-ready” ecosystem for several countries, reducing the go-to-market for banks.
Most of our competitors are now in the process of moving from a monolithic architecture to this type of advanced infrastructure. Our investment in eMACH.ai offers us significant benefits and puts us at the forefront. But it’s not just a question of architecture. Intellect’s sweet spot as a company is between domain and technology. Intellect’s talent comes from deep banking experience, and that really helps, because simply providing banks with a technology framework, as some of our competitors do, is not enough.
We have depth and breadth in the financial services industry. From lending to origination, from savings accounts to checking accounts, we are able to offer a complete platform, built on the same architecture. Furthermore, we co-create and co-innovate with banks, and this also helps in the transformation journey. We have seen significant success with the co-creation and co-innovation model with our clients in Africa.
TFM: You say that one of the things that sets you apart and one of the reasons you’ve been successful in some of the transformations you’ve implemented at various banks is that you only work in this space. Can you give an example of how this helps?
RS: Coming from the banking sector, I know that financial services is not a simple field, it requires deep understanding. Companies that are horizontal in nature will not be able to bring the vertical depth of knowledge needed.
I’ll give you an example that has to do with artificial intelligence.
Today, AI is at the forefront of every conversation, even in banking. When we talk to people about AI, most of them, because they use Microsoft Windows, will have an Azure Copilot bundled with them. But having horizontal AI playing this way isn’t enough. What you really need to know is how to use AI to create, for example, an underwriting use case, an asset use case, or an enterprise use case.
“Intellect’s sweet spot as a company is between domain and technology. Intellect’s talent comes from deep banking experience, because providing banks with just a technological framework is not enough”
Our credit-focused Gen AI solution has created a buzz in the market with its underwriting capabilities. These vertical domain use cases are key and that’s why I firmly believe that companies like ours, with an exclusive focus on banking and 30 years of experience transforming Tier 1 banks around the world, add a significant value.
TFM: This year iGCB is a sponsor of Money20/20 Europe. Can you tell us more about the products you will focus on there?
RS: Money20/20 is a flagship event for iGCB. This year we will focus on three things in particular.
One is our digital engagement platform, which is one common platform for the retail customer, the SMB customer and the enterprise customer. If you’re a Tier 2 or Tier 3 bank with a strong retail business and a moderately sized retail business, you don’t need two portals, because two portals are huge expenses and involve a huge amount of work. So we created a common no-code platform for both.
The advantage of no-code is that the bank itself can make changes digitally, because time to market is very important. We believe the digital engagement platform could be a game changer for banks around the world, including European banks still using legacy digital banking. At Money20/20 we will also show how we can help banks implement dual-core strategy, our Gen AI platform built for banks and our digital lending suite, iKredit 360.
TFM: So, in conclusion, what would be your advice for banks looking to implement a successful transformation?
RS: I can’t stress enough the importance of choosing an open finance-enabled, fully cloud-native platform. A platform will be with you for the next 8-15 years, depending on your appetite, right?
So you definitely need to choose one that has the latest architecture and is completely cloud-native, not just “cloud-ready” or “cloud-enabled”. The second thing I would say is that transformation is a long journey and you have to be able to work well with a supplier to make it happen. So the cultural fit of your organization with the supplier is very important. It can make or break the project.
Finally, in my opinion, transformation must be driven from the top. Sometimes we’ve seen it led by a bank’s technology group. Sometimes it is driven by the corporate group. And sometimes there is friction between these two. But it needs to be both a business and technology agenda. For this purpose all parties must be united. You can have a great product, but if the culture, the team, the agile working and the buy-in from both the business and technology groups aren’t there, it won’t be as successful as it could be.
This article was published in The Fintech Magazine, issue 32, pages 6-7