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Emily Steele, president of Temenos in North America talks to us about strategy,
digitisation and partnering with the banks to lock in customer loyalty

Bill Boyle
Senior Editor

At the end of last year Temenos announced five major deals in quick succession of its Core Banking platform. The software provider sold the solution to Israel’s largest credit card company Isracard and Banque de I’Habitat in Tunisia. In September last year it closed deals with Greece’s challenger bank Praxia Bank and Australia’s Judo Capital also selected Temenos T24. It has been a busy period for Temenos as it also closed the acquisition of Avoka, a US-headquartered SaaS vendor. The acquisition was originally announced last year.

Emily Steele joined Temenos with its acquisition of Akcelerant in early 2015. Prior to taking up her present role, Steele was COO of Temenos in North America where she oversaw all day-to-day business operations for several divisions and market segments, including customer management, delivery, software development, compliance, data centres and IT. She was also responsible for the sales organisation for the Lifecycle Management Suite.

Steele acknowledges that things were going well for terminals but said that they were not taking anything for granted. She says: “Consumer behaviour, particularly in the US and North America, is driving the demand for a far more personalised service than banks have been able to provide in the past. What was mere futuristic thinking in the past now has to be turned into reality by banks very quickly. The consumer expects the highest levels of personalisation from the banks. This means that all banks have to be planning to be fully digital while in the process have to keep agile and increase their speed to market with new products no matter where they are in that process.”

Steele says that the pace of change was increasing, and new projects were throwing up new demands on the company. She quotes the case of Canada’s Equitable Bank (EQ) to prove her point. According to Temenos, within hours of EQ’s launch, thousands of customers were logging on and signing up. The bank has no branches, offers savingsonly accounts with online access, and deals with customers purely online so its technology has to work all the time. By being branchless it can also promise higher interest rates for savers – currently 3% compared with less than 2% for similar accounts in Canada.

Steele says: “The smart banks are not getting hung up on the fact that their technology is ageing and creaking at the seams. They have a lot of alternatives to ditching their legacy kit. The bigger banks that know they have to digitalise more of their customer-facing functions have a choice to make, because ultimately making digitalisation work in the long term also requires modernising their old core processing systems.

“Banks have two choices: they can adopt a ‘front to back’, approach – that is, from the customer-facing function and gradually replacing the old legacy core – or they can move from ‘back to front’, upgrading the legacy systems core and moving that change first so that it can help to bring customers the digitalised services they want. While it’s both a tactical and a technological choice, in practice often the shifts may need to coincide very closely.”

At the largest banks, technology has grown from within, and the legacy systems are crawling along on old programming. The banks make no bones about the fact that increasingly modern interfaces continue to be built on top of very old foundations such as COBOL, Fortran and PL/I. Temenos’ primary market in the US is the top 120 banks, though it intends to move into the $1-$15 billion market over the next year and a half. Steele says there is a big push to digitalise because banking systems, in both the larger institutions and in their integration with third-party software and systems, have too many integration points. That means that making new approaches work, even during a conversion to new systems, takes a vast amount of hard graft. “Those banks pursuing a ‘front to back’ strategy recognise that they have to get to the ‘back’ pretty fast,” she says.

Steele says that one big bank that Temenos is currently involved with in an ongoing conversion had more than 1,000 integration points in its original system, simply in the deposit processing area. In cases like that one, she explains, undoing layers of old programming means sorting through code “that’s just spaghettied together”.

Temenos has been working on an alternative to devising all the solutions US banks will need by itself. This is called the Temenos Marketplace. The marketplace consists of applications –there are currently more than 80 – offered by Temenos’ fintech partners.

“The new world we live in is one of personal recommendations where people phone up their friends and ask them where they get the best service and that now includes banks,” Steele says. “And in this era of excellent service from internet providers, we all want that quick personal experience. Banks of all sizes now have to provide that experience – they have no choice. The other main consideration that Temenos has to have at all times is that the loyalty to one brand, whether that is a bank or a mobile phone provider, has gone forever. If you lose that customer, you may lose them forever. As the banks look for partners there are a number of things that make Temenos unique and we intend to capitalise on those.

“We point out to our partners on the banking side that they have choices – our approach is quite simple. You do not have to rip and replace your entire Core Banking system. The best way to do it is in small steps, changing small parts of your technology as you go along. That means taking a single problem and starting from that problem and building a solution. We advise banks to be careful, take things step-bystep, and evaluate their progress at every step of the way. Within the bank you have to seek out the individual that is focused on products. Then it’s all about collaboration, providing the strategy and putting a proper strategic plan in place. This is our approach in North America.

“The history of tech vendors in North America is not a very pretty one. Many of them arrive and produce failed projects. We have found over the years that partnering and collaborating closely is the way to achieve success, this has been based on close examination and having a clear view of the bank’s needs and their customers’ needs, coupled with robust processes for the project. Banking is the last industry to go through this disruption process and the vendor and a financial institution have to be on the same side of the job to achieve full digitisation. Both the vendor and the financial institution have to walk together; if things don’t go to plan then [it is no good] pointing the finger. The secret is to plan properly, execute carefully and collaborate in detail all the way. The most important word in this process is ‘collaboration’, and only if vendor and bank work together closely will they succeed. And success for us is now a regular occurrence.”

Stelle says that Temenos aims to take the fear out of the Core Banking conundrum: “It is a front to back problem and needs to be peeled back slowly. Start at the front but get products to market quickly because if you just fix the front-end it will fell apart just as quickly.

“We are not the cheapest vendor on the market and cutting our price to win deals would mean that we would fail. We believe in open architecture and not vendor lock-in. Open architecture allows us to bring the best fit to the marketplace and to the customer. We have a huge marketplace of APIs – it is almost like an API supermarket. The US has been slow to adopt Open Banking but the pace is picking up now. It’s all about finding the right partner and being very honest with them.” Steele believes there has been distrust in banking since the crash of 2008 and it is only by providing an excellent customer service that the banks are going to move forward, increase their customer loyalty and win over the millennials who like hopping around between financial institutions. And Temenos is helping the banks on that journey.

by IBS Intelligence