Core Banking Radar – «From Modularbank to Tuum – a core banking system that’s not only for banks»

Since 2017, the Core Banking Radar has regularly analyzed the most common as well as emerging core banking systems in Switzerland using a comprehensive assessment model[1]. The latest publication highlights the Estonian neo-system Tuum and shows success factors for its use. The Core Banking Radar is a joint project of Swisscom and the Business Engineering Institute St. Gallen.

This is an excerpt from the full article.

Tuum, which was until recently called Modularbank, was founded almost 3 years ago by banking experts and IT professionals in Estonia who had been working together on core banking systems for years. Tuum combines the API-first approach with the goal of offering not only the core, but complete banking functionalities wherever possible. In particular, their financing functionalities are used by other industries besides banks. 

As the original name suggests, Tuum offers loosely coupled functionality modules that can be combined or used individually depending on the needs of the customers (e.g. card management, credit suite, …).

In 2021, the functional scope of Tuum covers the areas of account management, payment transactions, deposits and financing for both private and corporate banking.

In the area of payments, Tuum covers different payment methods (cards, SEPA, SWIFT). In addition, it supports e-wallets as well as the exchange of data storage media for the secure transmission of payment data between companies and banks directly via ERP.

Thanks to its embedded finance use cases, where financial tools or services are used by non-financial providers, Tuum is also positioning itself in other sectors. Tuum’s banking core module, for example, processes the transactions of the 700,000 registered loyalty card users of a Nordic retail group and allows the allocation of an overdraft limit, which customers can repay by invoice at the beginning of the month.

Tuum, which can be installed and used both in the cloud and on-site, tries to keep the need for integration low despite modularisation by aiming to cover a large number of bank functions. What’s more, Tuum wants to be able to offer its functions to all of its customers in different countries. To achieve this balancing act, Tuum needs a high degree of standardisation, i.e. the products and processes are predefined to a certain extent, yet customers can create new products themselves based on product templates and by combining them (similar to the SaaS products in extensive use, such as Salesforce or SAP). Standardisation makes customisation more complicated, but it reduces the complexity of the IT developer skills required within the bank.

Success Factors

Success factors for using a neo banking system like Tuum at a bank are, in particular:

  • Integration and openness of the current system manufacturer
    The connection of individual modules requires the provision of open interfaces on the system side of the bank, which the existing system manufacturer may not always be motivated to do, as this could result in a loss in licensing income. 
  • Role-based frontends
    A specific frontend has to be integrated for customers, customer advisors and experts, and banks often want to continue using their existing frontend. 
  • Cultural change
    Promote the willingness of employees to deal with agile projects as well as ongoing project adjustments in an international context. 
  • Distinction in terms of potential for standardisation
    Differentiation between elements that follow Tuum’s standard and elements that are market-differentiating for the bank and cannot, therefore, be standardised further (see also next point on helvetisation). To keep Tuum’s standards as high as possible and the system efficient, the processes of other products should be adapted in line with those of Tuum as far as possible when they are introduced. To this end, an understanding of how to handle standards must be promoted and enforced among employees. 
  • As little helvetisation as possible
    Integrate products that are necessary in Switzerland, such as QR Bill or OASI statements, through peripheral systems; otherwise, do not “bend” the given templates if possible and avoid helvetisation in order to keep the need for integration low.

Universal banks that opt for Tuum will generally pursue a modular strategy[2] and first connect individual or several modules, such as card or financing modules, to their existing system via Open APIs (based on their requirements), in order to generate quick wins in the form of a fast time to market for innovative products. Based on customers’ experiences with Tuum and Tuum’s continuous introduction of new functionalities, the addition of further modules of Tuum up to the booking engine is conceivable.

In fact, we also see potential with non-bank customers that want to offer financial options (e.g. payment in instalments) themselves, as Tuum is a lean solution with an intuitive user interface.

At the moment, and perhaps also in the future, the needs of Swiss banks when it comes to using new systems, especially in the area of investing, must be solved with peripheral systems. Only time will tell whether Tuum will start to offer wealth management coverage that is interesting for Swiss banks, or whether it will set its priorities differently.

[1] The assessment model is detailed in German in this article.

[2] You can read more about the strategies “Core”, “Front-to-back” and “Modular” in the penultimate issue of the Core Banking Radar “Satisfaction of banks with their core banking system: An area of tension?”.

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