Banks face ‘death by a thousand cuts’

Oracle has launched the Oracle Banking Digital Experience, which it describes as the end result of a five-year project to build the ‘next generation’ of banking platform. Ashwin Goyal, group vice-president and general manager at Oracle Financial Services, said banks would not have to make “major changes” to their core systems as a result of the new platform.

However, the launch represents a shift away from the product-led business models of the past, towards a new customer-centric reality, he said. This is necessary, if financial institutions are to keep pace with the threat of new non-bank competitors.

“The moment you touch the core, that’s when the brakes come on, everything slows down, costs go up and the time to market is dramatically lengthened,” he said. “The other thing is because the market is moving so fast; you have a short window to deliver. If I am on a 12-month cycle and on month six I realise there is a new requirement that I need to respond to, I am basically 18 months away from responding. But if I am on a two or three-month cycle, I am at worst four or five months away and that’s where the need for agility comes in.”

An important aspect of the Oracle Banking Digital Experience is that it has been built to move away from the concept of silos for activities such as mobile and internet banking. “The problem with almost everything until now was the limited option set banks had available for transformation,” said Goyal.  “There were two ways banks could do it and both are limited. Either they had to build channel silos, for example an internet banking silo plugged into core and the same on mobile, which leads to inconsistency; or they tried to build a model experience and plug directly into the core, in which case it is very hard for a mobile app developer to consume directly.”

The software company said it had created a set of tools that sit in the channel layer, which present a simple application programming interface (API) to the user or developer. That makes it much easier for a mobile developer, for example, to understand it and interact with it quickly to produce a new service or product.“

With this approach, the need for the developer to think about the arcane banking logic is gone. A developer can build services that plug into the core banking platform. In effect, they are talking to the big payload core banking service, but the simple API-based interface we created frees up the designer to build things using HTML5 on a mobile device or on the internet, allowing them to be creative without having to modify the core themselves. In practical terms, that means they can launch new abilities every few weeks, rather than on an 18-month cycle.”

Oracle is trying to position itself as a potential ally to financial institutions in the struggle against nimble financial technology start-ups and non-bank entrants to the financial services market. Unburdened by legacy technology, many of these companies focus on particular niche aspects of banking.Therefore, while no single company is big enough to pose a threat individually, taken collectively they could potentially take a large share of the market from established players.

“These fintechs are eating away at thin slivers of the banks’ business,” said Goyal. “It’s a bit like ‘death by a thousand cuts’ – no one fintech is going to overrun the whole customer relationship, but there are some picking at personal lending, some at mortgages, others at payments and still others at wealth management. Their entire proposition taken collectively is convenience, and as a bank you have to make your business more convenient to compete with them.”