Core Banking Radar – “Vault Core – a hyper-configurable neo-core banking system from Thought Machine”

In cooperation with the Business Engineering Institute St. Gallen (BEI), the Core Banking Radar of Swisscom has been monitoring the system support of banks since 2017, and analyses the most relevant systems for the Swiss market using a comprehensive assessment model. The latest publication of the Core Banking Radar looks at Vault Core from the U.K.-based company Thought Machine, which aims to adopt best practices in software development from technology companies with a cloud-native platform and give banks the flexibility to develop any product with smart contracts.

This is an excerpt from the in-depth article.

Rapidly changing market conditions are driving banks to make significant improvements to customer experience. They focus on the customer interface and develop strong client interaction services by offering platform services using APIs and forging fintech partnerships. IT transformation in the bank has historically involved restructuring the front architecture separately from the back end. Back-end systems are rarely touched during ‘transformation’ projects; Continuity of processes, a well-integrated backend and high levels of automation deprioritised to focus on the immediate benefit of modifying front-end channels. Ageing core systems may have their functionality slowly supplanted by newer systems, while keeping the older core intact. This naturally increases the complexity of the overall architecture.

Software developers from technology companies, who are looking at a bank’s architecture, can see a lot of potential for improvement in this area:

  • Consistent, efficient support of processes and clean structuring of the back end
  • Rapid introduction of new products by the bank itself, without any dependence on the core banking system manufacturer using Smart Contracts
  • Open programming interfaces (Open APIs), which facilitate the connection (and removal) of peripheral systems, and thus enable a lean and fast core.
  • Continuous 24/7 processing facilitating real-time data and analytics capabilities and dispensing with known, and sometimes error-prone, batch jobs.

 These are the principles which underpin Thought Machine’s neo-core banking system.

Structure of Vault Core

Architecturally, Vault Core adopts a two-layer approach: On the one hand, there is a common platform layer, which is standardised, and available to all clients. This portion of the system is maintained by Thought Machine, running a number of key functions in the engine – including the interface with its APIs, account management functionality, scheduler functionality, and establishing roles and permissions.

The second portion is designated for the configuration of the bank’s products, and is specific to each client. In this configuration layer, which is owned and customisable by the end user, a bank can adapt the system in line with its specific needs by defining its own workflows, authorisations, data flows and build any kind of banking product using Smart Contracts. With Smart Contracts, banks own the product at code level without reliance on Thought Machine and dependence on vendor roadmap.

System Support with Vault Core

Vault Core is suitable for reacting quickly to customer needs and trying out innovative banking products, which would not be possible or would be too expensive with a traditional core banking system. Depending on the business case, it may be necessary to connect third-party applications to obtain further data via APIs.

Vault Core can be used as a platform for the development of a new banking system, or to “collect” applications from banks with architectures that have become increasingly complex over the years, and cover them step-by-step with a modern, clear architecture.

Success Factors

Notable success factors for the use of Vault Core at a bank are, in particular:

  • IT know-how within the bank or its provider
    The bank or its provider must take responsibility for the IT architecture as well as provider management. To ensure a clean merging of the required front and back applications and a uniform, future-proof integration architecture (platform, workflows,…), early involvement of software architects is recommended, as otherwise the “best of breed” approach will initially increase complexity and ultimately also the operating costs.

  • Consistent API strategy
    To make use of the conceptual openness of the system, it must be connected to other systems that have openly accessible interfaces. This aspect also allows the bank to take Open Banking into account in the IT architecture, and to implement it sustainably in the interests of the end customer.

  • Development of role-appropriate front ends
    To ensure the optimal use of Vault Core, it is essential for the bank to develop specific, integrated front ends for customers, for customer advisors and for experts, or to obtain these from third parties.
  • Process expertise
    A high level of process expertise is required either within the bank or via partners to ensure consistent and efficient end-to-end control of its own processes, to ensure autonomy in governance and a good “fit” with Vault Core’s release management while, at the same time, ensuring appropriate harmonisation with other architecture components.
  • Exploiting the potential of the adopted strategy
    By using Vault Core’s product development functionalities to flexibly deliver new services in a timely manner, or by using data in real-time – for example, to reduce process costs, further develop services or provide customised product proposals – it will be possible for the bank to tap into previously unexploited revenue streams.

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Christine Popp

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