By Oliver Smith on Tuesday 24 March 2020
How coronavirus is leading to an overhaul in the very foundations of banking.
It’s an interesting time to be building cloud-based banking tech, Thought Machine’s CEO Paul Taylor explains via video chat from his home office—a result of the current global coronavirus pandemic.
“Each event like this,” he gestures around him. “Pushes banks further towards realising they really have to get on top of cloud-centric banking once and for all.”
Thought Machine was founded by Taylor along with a senior team of ex-Google employees in 2014 to try and “fix the foundations of banking”.
Core banking, the world in which Thought Machine operates, describes the back-end system of banks which track account totals and transactions—the ledger of the bank if you will.
Unlike some very bespoke systems built over decades and run by most traditional banks, Thought Machine’s core banking system, called Vault, is a modern piece of software designed around APIs and that can be run on Amazon Web Services, Google Cloud or any server in the world.
“We're not tied to physical infrastructure, we're not tied to particular data centres, it's pretty easy to move the systems for an entire bank from one physical location to another. That can be next to impossible in a traditional bank,” says Taylor.
Fixing the foundations of banking isn’t terribly sexy, but the outcome could one day be felt in the lives, and pockets, of millions.
“I'm not really being much of an Oracle saying that banking is going mobile, we all know that. But banking is still stuck, it's troublesome, it's full of friction and it's expensive,” says Taylor.
“People might not see the direct cost, but they still feel it when overdraft fees and credit card fees kick in.”
When the Chancellor Rishi Sunak announced a three-month mortgage holiday policy as a result of Covid-19, Taylor says in a Thought Machine system such a change would be as easy as clicking a parameter to make the amend.
“Now there are people running around in banks with legacy platforms going, 'Oh my god, how are we going to get our mortgage holiday sorted out?”
Clearly Taylor’s position is winning over former critics, Thought Machine’s list of clients has grown rapidly since 2014 with both fintechs like Atom Bank and incumbents like Lloyds Bank and Standard Chartered adopting its tech.
Earlier this month Thought Machine raised its largest round of funding yet, $83m, with new backers including Draper Esprit getting involved.
For Taylor the cash injection unlocks two paths to future growth, international expansion into North America and Australia, a booming fintech hub, and growth into new types of banking.
“Currently we're very much focused on retail banking, but small and medium-sized enterprise (SME) banking is pretty close, so we're looking at that, and then it's private banking and commercial or corporate banking,” Taylor tells AltFi.
Whether or not Thought Machine wins over the world of core banking, we’ll have to wait and see, but the sudden global shift to remote working and mobile banking is undoubtedly a boon for the change Taylor has been championing for the last six years.