25 February - 10 March 2020

At recent business breakfast roadshow events in Frankfurt, Vienna and Zurich, co-hosts Capco, digital-first platform provider Backbase and cloud core banking platform specialists Mambu, shared their perspectives on building a digital bank from scratch as a strategy to ensure the continued competitiveness of traditional banks. 

The banking sector faces major challenges when it comes to building – and in some cases retaining -market share and protecting their profitability. Today’s incumbent banks are increasingly seen as expensive, inflexible and slow. The only way out of this dilemma is through a reassessment of current operating models, which requires investment in new technologies and a clear focus on ensuring a very customer-centric approach. 

Building a digital bank from scratch – as opposed to attempting to build out or ‘bolt on’ new capabilities to existing operations – can allow banks to meet those objectives. 

Keynote speakers at the roadshow events included Backbase’s Stefanie Grimnitz, Head of Business Development Germany, and Giovanna Rasche, Business Development Manager Germany; Mambu’s Irena Pauls, Business Development Manager EMEA and Corstiaan Kuijvenhoeven, Senior Account Executive DACH; and Capco’s Partner Oliver Geiseler and Consultant Christoph Dimanski. 
Mambu and Backbase have partnered with Capco to respectively provide back-end and front-end elements of innovative digital bank packages. 

Mambu is a global SaaS banking platform for traditional financial institutions and fintechs that adopts a ‘composable banking’ model. As Corstiaan Kuijvenhoeven explained, composable banking follows three simple principles. The first is a cloud banking engine, “which enables the rapid creation of financial products, such as transactional banking, deposits and so forth with powerful transaction capabilities.” The ‘process orchestrator’ allows banks to quickly integrate their IT landscape - or ‘compose’ it – via integrations and business processes without the need for additional code. Ecosystem integrations, the third principle, “allow banks to select and integrate the technologies they need, or choose from pre-integrated and managed connectors to best-for-purpose fintech".

For its part, Backbase is focused purely on digital platforms, and employs a solution architecture based on a stateless, decoupled set of microservices. The front end of the solution uses a set of decoupled widgets, covering banking functions such as bill payment, that can be reused across channels. The platform also includes many features aimed at enhancing the user experience, such as ‘soft login’ (e.g. via Facebook or Twitter) and a Facebook-integrated banking app (which includes payment functionality). To allow banks to use financial technology innovations, Backbase also has an open banking marketplace, which offers banks direct integrations with fintech companies providing complementary capabilities that can scale to a large client base.

Following a live demo from Mambu and Backbase, attendees addressed what a digital bank operating model might look like. This was illustrated via the example of the creation of a new product, its administration and how it would be used via a smartphone on a daily basis. 

The Mambu team highlighted how personally tailored products can be quickly and cost efficiently created, while their Backbase counterparts focused on the customer experience, demoing the set- up of a savings plan.

This section was followed by a presentation by Capco’s Christoph Dimanski, who explained that process relevance, flexibility, costs and time to market must be the key parameters for both determining the strategic direction of such projects and defining what combination of bundled software and custom software can achieve the desired results. 

"We see the future to be software vendors offering hybrid solutions," Christoph stated. The benefits of this hybrid approach include the flexibility to define differentiated offerings, and the ability to limit the total costs and to make data management easier.

In a conversation after the event, Capco’s Oliver Geiseler explained that banks will have to work hard to remain relevant: “Banks need to evolve their operating models to become more customer focused and services oriented organizations, combining traditional banking with non-banking offerings.”

The key steps for setting up a digital bank from scratch:

1. Instead of creating each service in-house or integrating with third party providers, it is possible to take advantage of a proven platform that has pre-integrated key features and is available as standard. Leading challenger banks like N26 have outsourced their core technology through BaaS (Banking-as-a-Service) partners like Mambu and Backbase. 

2. Focus on customer centricity by defining tailor-made and segmented products adapted to different life spans, assets, objectives and approaches.

3. Rethink operating models, moving away from optimizing legacy systems to reduce time-to-market and towards implementing vendor packages as small and flexible mini-banks in their own right. 

4. Assemble a digital banking platform that will form the backbone of your architecture as follows: 
a. Front-end - a ‘thin’ presentation layer of information that consumers see, such as an app
b. Back-end - a product layer, in which the core banking system, customer data and back-office related processes are located
c. Middleware - an intermediate layer that orchestrates the information between the presentation layer, the product layer and the API layer.  

5. The most important building block of a digital bank is the core banking system - the heart of a bank - or the engine behind the creation of accounts, balances, transactions, loans, interest rates, journal entries as well as the storage of customer data, receipts and reporting tools. Cloud-based Mambu provides these digital services on a monthly subscription basis.

6. In addition, a modern, flexible and scalable IT base - appropriate for technology stack - is required to support and host the services as well as protect the network and sensitive data. Outsourcing the management, security and maintenance of IT infrastructure reduces complexity and implementation time. Mambu additionally provides full IT and hosting support. 

7. Another important part of the infrastructure is the middleware, which is installed as an add-on to the back-end or core banking system infrastructure and, as a system orchestrator, connects all layers, ultimately reducing the need to involve the core banking system in each and every customer interaction. Mambu offers such middleware or operating systems, including for main products and functions (such as payments, card issuing, real-time notifications, etc.), based on pre-defined products or functions.

8. Such platforms allow the implementation of white-label front-end solutions like Backbase, to provide a relevant set of features (e.g. login & security, accounts & transactions, card management) as well as a mobile and web front-ends with a certain level of customization and a connection to the core banking system.

9. The main advantages of implementing BaaS platform solutions are the speed and flexibility of using complete, ready-made and fully compliant products. 


Oliver Geiseler | Partner
M: +49 172 131 8328