Next-generation core banking systems, Myles Bertrand, CEO, Tuum

By Puja Sharma

A survey by Forbes showed that 63% of banks are either in the process of moving their core systems to the cloud or actively planning to do so. Myles Bertrand, Chief Executive Officer of Tuum discusses what’s driving this shift

Next-generation core banking systems such as Tuum bring a range of infrastructure advantages to the table. First and foremost, they embrace a cloud-native architecture, which is a game-changer in the banking industry. This means they are specifically designed to thrive in cloud environments. It’s worth noting that concerns about cloud security, which were once a major roadblock, have significantly diminished.

Myles Bertrand, Chief Executive Officer of Tuum explained what NextGen core banking systems offer in terms of infrastructure: “Being cloud-native goes beyond just being compatible with the cloud; it means these systems are optimised for performance, scalability, and flexibility within the cloud. This ensures that banks can operate with greater agility and efficiency.

“Another key feature of next-gen core systems is their API-first development approach. Instead of simply adding APIs as an afterthought, these systems are built around robust, scalable APIs from the ground up. This approach makes it much easier to integrate these systems into larger banking ecosystems and allows for a modular, ‘plug and play’ approach when incorporating additional solutions and services.

“Additionally, next-gen systems adopt a microservices architecture, which is a departure from the monolithic designs of traditional banking systems. This approach breaks down the banking application into smaller, independent services, each with its own specific function. This modularity simplifies management, updates, and scalability of different components without disrupting the entire system. “In summary, next-generation core banking systems offer a highly scalable and high-performance infrastructure. They empower banks to quickly deploy new products and services, reduce total cost of ownership, and streamline upgrades and maintenance. Furthermore, they provide a future-proof solution that easily scales to support a bank’s growth.”

The ‘core’ used to be a monolithic structure. Can you detail how microservices provide a better solution?

“Picture a monolithic application as a single massive block where all its components are tightly connected. If you need to make any changes to even one part of it, you’ve got to redeploy the entire application. That’s risky, time-consuming, and can be expensive. Scaling is no different – you must scale the whole thing, which is inefficient and costly. Plus, maintaining and updating monolithic applications is a major headache because any change you make affects the entire system. This can slow down innovation, and updates can take ages to roll out.

“Now, contrast that with a microservices architecture. It’s a whole new ball game. In a microservices setup, the components are like separate puzzle pieces that can operate independently. You can deploy them individually, which means you can scale just the parts you need to, making it super-efficient. If you want to tweak one specific microservice, no worries – it won’t mess with the rest of your application. And here’s the kicker: if one microservice has a hiccup, it won’t bring down the whole ship because they’re loosely coupled. This setup encourages innovation, speeds up the deployment of new features and services, allows for smoother and more frequent upgrades, and boosts overall productivity. “So, in a nutshell, microservices are like the superheroes of modern software architecture, making everything more flexible, efficient, and resilient.”

How are customer expectations driving the development of next-gen core banking?

“Well, it’s all about keeping up with what customers want in today’s fast-changing financial world. You see, traditional banks often struggle to keep pace because they’re still tied to older, clunkier technologies. But customers these days are all about speed and personalisation. “Consumers want their banking experience to be lightning-fast and tailored to their unique needs. They expect to access their finances whenever and wherever they want, whether it’s through a mobile app, a website, or even in person at a bank branch. “This demand for personalisation and easy access is a big reason why core banking is evolving.

Customers want everything to flow seamlessly, and they want banks to know them inside out. That’s where things like data analytics and artificial intelligence come into play. “Next-gen banking systems use these tools to offer personalised services like tailored loan offers, investment advice, and top-notch fraud detection. “But it doesn’t stop there. With the rise of the digital economy, customers are also craving more innovative features like real-time payments and blockchain-based transactions. So, banks are rolling up their sleeves and modernising their core systems. They’re shifting to cloud-based solutions, diving deep into data analytics, and adopting agile methods to boost efficiency, cut costs, and make the customer experience even better. “And it’s worth noting that customer behaviour has changed along with expectations – in the past, people often relied on a single bank or financial institution for all their financial needs. However, nowadays, it’s common for individuals to have multiple accounts with various providers, each catering to specific financial products or services.

This shift in behavior has made customer retention, or ‘stickiness’, a significant challenge for banks so they must change to retain as much of the customer wallet as possible. “It’s all about giving customers what they want in today’s digital age – faster, smarter, and more personalised banking services.”

Does the flexibility of a next-gen core allow for continuous development and upgrading?

“With a next-gen banking core you can tweak, update, or expand just one piece of the puzzle (a microservice) without causing a ripple effect throughout the whole application. It’s like upgrading a single piece of software on your computer without having to restart the entire thing. “This nifty feature is a game-changer because it lets banks keep improving their services without causing major disruptions. It means they can roll out upgrades more smoothly and keep their systems up to date without a hitch. So, yes, the flexibility of next-gen core banking systems is a big thumbs-up for continuous development and seamless upgrades.”

Take up of next-gen core systems is growing fast, what are your expectations for the market in 2024?

“The banking landscape is shifting at warp speed, and the future belongs to next generation banking core systems. These systems are like the engine propelling banks into an era of agility, customer centricity, and cutting-edge technology.

“I expect to see increased adoption of cloud solutions by banks. They’re moving their core operations to cloud platforms to unlock the scalability and flexibility discussed earlier, all while keeping up with the ever-evolving demands of their customers. And, of course, cost efficiency is a big motivator too. “Now, when we peer into the crystal ball, we see even more AI and ML technologies getting cozy with core banking systems. These smart technologies are all about making banking safer with top-notch risk management, supercharged fraud detection, personalisation that feels like a tailor-made suit, rock-solid security, and operational efficiency that’s smoother than ever. “And we will see more collaboration between banks and FinTechs driven by open banking. And guess what? Next-gen cores, especially those like Tuum that are API-first and modular, are like the glue that holds this collaboration together.

“Lastly, new revenue models in banking, like Banking-as-a-Service and embedded finance. will become more evident in 2024, opening new horizons for banks and customers alike. “Banking is evolving, and next-gen core systems are leading the charge into a future where banking is smarter, more efficient, and more accessible than ever before.”