What's new in Finance ? New "Core Banking Systems"

#247 - Martin Della Chiesa (Skaleet) - From BaaS and SaaS

Aug 11, 2024

My dear readers,

For the sake of efficiency, I've decided to merge my two newsletters and publish in English from now on. This decision is driven by the need to reach a broader audience and engage more effectively in the global Tech’ conversation.

I'm writing these few lines from my beloved Chamonix…

It was time for me to host a player in banking infrastructure to discuss next-gen “Core Banking Systems” (CBS). To shed light on these behind the scenes players, I invited Martin Della Chiesa to join me. Martin is a leader with a very clear vision, who uniquely brings experience from both sides of the scale-up process in Private Equity. He sourced the deal, sponsored the investment in Skaleet and now serves as co-CEO alongside one of the two founders : Hervé Manceron.

In our discussion, we take a deep dive into the “factory”, exploring the modules, integrations, covering critical topics like platform obsolescence risks, local regulatory adaptations to meet reporting requirements and the management of RFPs.

You'll also get insights into the types of clients Skaleet serves through various customer stories.

A clear and very straightforward discussion. I love that !

“Core Banking Systems”

I had the opportunity to work with one of my clients in 2021 on an exciting European internationalisation project. I assisted the firm in navigating operational, regulatory, and recruitment challenges, drawing on my cross-border banking experience and knowledge of ecosystems. This project allowed me to explore various aspects, from the API-driven product architecture to complex distribution channels, as well as the challenges of scaling the platform and integrating new features to meet evolving customer needs. Not an easy game !

CBS are centralised, real-time platforms that manage essential Banking operations such as deposits, withdrawals, account management, loan and credit processing, customer support and many other related services. With the rise of Tech’, these systems have evolved to include online and mobile banking services.

Modern CBS such as Skaleet, Mambu, Tuum or Tought Machine rely on a composable architecture, often connected by APIs, which allows for the decoupling of distribution channels, products and customer data.

Modernising the existing

In 2020, I explored the modernisation of traditional platforms with Finastra, one of the leading players in the field (founded in the 90’s). My guest explained how their cloud-based platform enabled innovation at scale, offering an open development environment, creating new market opportunities and fostering collaborative innovation through the Fusion Fabric Platform.

This process of CBS modernisation presents many complex challenges. The main one, which I experienced as a Banker is dealing with outdated legacy systems, managing complex data migrations, adhering and adapting to moving regulatory compliance and of course. handling the significant costs and resources required.

This inevitable modernisation leads to numerous business realisations, including faster Time to Market for new products or solutions, improved customer experience through composable banking. Modern systems are designed with high availability and reliability in mind, ensuring that banking services remain uninterrupted and secure, even during unforeseen disruptions.

The key takeaway from this discussion : achieving the best outcomes by connecting with the best solutions.

The best of the bold

For certain players like Memo Bank, this issue doesn't arise. Having developed their own CBS and placing the product at the heart of their company, they design solutions and products that address their clients' needs point by point. However, this is rare, as it requires a strong product DNA and highly knowledgeable teams with Banking expertise across all areas, from development to architecture.

As technology allows more players to compete in previously monopolised areas, those with a strong product focus and the ability to innovate (like Memo Bank) can better serve their customers by directly addressing their needs. Meanwhile, traditional banks face increasing pressure to adapt or lose their competitive edge, especially as technology enables quicker money movement and higher returns from alternative financial products. This reflects the central role of outsourcing and innovation in modern banking, where not all institutions have the capacity to internally develop and maintain competitive systems, making the decision to outsource or innovate a critical one.

Leverage on AI

AI is becoming more and more central to CBS, collaborating in general with strong players. Let me provide you with two concrete examples of AI usage in CBS.

Generative AI models like IBM's Watsonx offer advanced capabilities to simplify complex financial concepts. By processing large amounts of data, these AI models can generate insights and present them in a way that is easier for customers and bank employees to understand. This is particularly valuable in financial advisory, where customers often need guidance on complex financial products and services. Here is the application of Watson in Banking : use case.
Customisation : AI models proposed by Personetics (founded in 2011 by David Sosna and David Govri) analyse bank's customer transaction data in real-time and use this analysis to deliver financial management information. The scale-up, located in Israël already partners with leading CBS, such as FIS.

Skaleet

Founded in 2016 by Yves Eonnet and Hervé Manceron, Tagpay developed a versatile solution for (Neo)Banks, FinTechs, PSPs and BaaS platforms. Rebranded as Skaleet in 2021 (a nod to 'Scale it!'), the company now serves over 30 clients and has integrated external providers like Algoan, ComplyAdvantage and Enfuce - who have also been featured on the Finscale podcast :)

I've been in touch with the scale-up (Hi Nicolas Pinto!) for nearly five years now, and I've always found their modernisation efforts very compelling. It didn't surprise me at all when Long Arc joined as investor (EUR 25 million financing round). When I first spoke with Yves about the CBS, it was clear that there were exciting opportunities in modernising and focusing a system that was thriving in Africa but still had room to grow in terms of visibility in France and Europe. What a remarkable journey it has been !