Partnering with next-gen core banking providers to transform financial services

Incumbent financial services institutions (FSIs) are currently in the midst of a generational shift in enterprise technology toward cloud. These institutions are making a bet that cloud can help accelerate their digital transformation journey and give them the speed, agility, and scalability needed to compete with fintech. A foundational piece of this transition is around modernizing legacy core systems (mostly mainframes), however FSIs have been slow to act given  the time, cost, and risk associated with transitioning from decades-old, mission-critical legacy systems to modern cloud-native solutions. And while the legacy systems generally perform well in terms of resiliency and availability, they are increasingly expensive to maintain and difficult to support (e.g., talent pools for COBOL developers are ever shrinking). They also struggle to meet growing market demands around delivering data-driven, personalized engagement in near real time and to be agile enough to support open banking and embedded finance ecosystems that hinge on API-enabled microservices (e.g., BNPL financing for your favorite consumer product).

As these limitations become more apparent and acute, momentum is building across the industry to make progress on core modernization and FSIs are exploring a number of different approaches to minimize risk and maximize time to value. These approaches range from “ripping and replacing” by doing a wholesale replacement of core systems to a more phased option that focuses on “hollowing out” the existing core by progressively thinning it. This latter approach starts with prioritizing a set of customer journeys and rebuilding them as cloud native microservices while slowly deprecating legacy services in parallel. This approach can also now take advantage of new technologies like Google Cloud’s Dual Run that enables customers to simultaneously run workloads on legacy and cloud based services, allowing them to perform real-time testing and quickly gather data on performance and stability with no disruption to their businesses. 

Another common approach focuses on launching a greenfield bank in a targeted area that’s powered by a new, cloud-native core banking provider. This approach allows FSIs to get immediate value from the modern tech, albeit at a small scale out of the gate as it is typically only focused on new customers. 

One increasingly popular approach is to combine the “hollowing out” of your legacy core along with launching a greenfield bank on a cloud native core at the same time. FSIs who choose this path, are able  to test and learn with new core technology in a contained manner, while also continuing the heavy lifting of gradually replacing the legacy core. 

Whichever path to modernization an institution chooses, it needs a robust ecosystem of technology partners to deliver an end-to-end banking solution that covers both traditional transactional functions and newer ways of reaching customers and managing regulatory requirements, security, and risk. 

To that end, Google Cloud has been investing in and building such an ecosystem of fintech partners and our own services that provide open-cloud, best-in-class security, and data capabilities to banks. Our goal is to support the financial services industry as it evolves through this period of disruption and accelerated digital transformation.

“For too long, banks have been consigned to their slow, inflexible core systems,” says Paul Taylor, CEO and founder of Thought Machine, which offers Vault Core, a cloud-native core banking system that allows banks to run their core technology in the cloud, as well as build and deliver highly personalized banking products. “Pairing Thought Machine’s next-generation core-banking capabilities with the scale, security, and open cloud ethos of Google Cloud has been nothing short of transformational for our customers.” 

Cloud-native core banking systems like Thought Machine, Mambu, and Finxact leverage Google Cloud technologies like Apigee (API management), Google Kubernetes Engine (GKE), and Security Command Center to provide highly secure, scalable, interoperable, and extensible services to their customers.

Mambu, for example, moved the core of its workloads to GKE to make it easier for customers to integrate Mambu’s services with their legacy systems and multiple clouds for flexible interoperability. GKE also offers high availability and resiliency out of the box, helping Mambu meet customers’ stringent SLAs across 65 countries. Compute Engine, with its wide range of VM hardware, allows Mambu to provide the speed and latency customers need.

“Security is critical,” says Fernando Zandona, Mambu’s Chief Product & Technology Officer. “With Google Cloud, we can ensure all our data is encrypted [and has] access restrictions that are managed from a service to a network level. By building on Google Cloud’s global, secure infrastructure, we can also provide local data residency for countries that require it.”

Frank Sanchez, founder and CEO of Finxact (and now vice chairman of Fiserv, which acquired Finxact in April 2022), says the scalability and data capabilities of Google Cloud provide profound value. “Banks don’t have to look into a crystal ball and build for a worst-case volume scenario,” he says. “They can launch products and markets with more fluidity and not have to outlay huge capital expenditures.”

Finxact provides an advanced System of Record for financial institutions that require high velocity transaction processing against multi-position accounts. “We’re a reliable, scalable, and secure engine for banking as a platform, which integrates with the rest of an ecosystem to deliver an end-to-end solution,” says Sanchez. “We feel cloud providers have a lot to say about what that ecosystem looks like. Google Cloud is making the biggest commitment in the vertical. Their AI/ML and data services integrated with our APIs provide a robust solution for our customers.”

In addition to partnering with next-generation core banking platforms like these, Google Cloud has developed its own frameworks and partnership-driven solutions for advancing more secure, innovative, and data-driven banking practices. Some of these include:

• An Apigee-based industry solution for powering embedded finance/open banking   
• Anti-money laundering (AML) services that are powered by Google Cloud AI/ML 
• A BigQuery-based regulatory reporting solution that streamlines and automates how financial and risk data are managed and configured to support reporting needs

The comprehensive Google Cloud financial ecosystem provides a one-stop shop for banks needing to modernize their technologies, but the benefits extend far beyond the seamless ease of procurement, management, and support on Google Cloud. (Though avoiding red tape when testing a new solution and streamlining how you manage your tech stack are no small things.) 

Storing data in Google Cloud means the assurance of highly resilient, globally scalable infrastructure. With hybrid and multi-cloud flexibility, your cloud strategy won’t be locked down. And because of Google Cloud’s commitment to innovation, your institution will keep pace in today’s open playing field with AI/ML helping to drive customer experience personalization, new product development, and operational excellence. Lastly, deploying on the cleanest cloud in the industry helps you to drive your sustainable finance and other ESG objectives.

Learn more about Google Cloud’s ecosystem of financial services partners and retail banking solutions.