SaaScada: Why Finance Needs A Core Banking Revolution
Banks have an innovation problem. Facing increased pressure to transform, financial leaders are hindered by restrictive and immovable legacy core banking systems, deep-rooted cultural risk aversion, and complex and lengthy procurement processes.
The result of these multiple challenges is very real.
According to a recent report from next-gen data-driven core banking engine SaaScada, 80% of UK banking leaders say that barriers to innovation have impacted their business on a wide front, including talent attraction and retention, competitive edge and loss of wallet share.
SaaScada’s research, covering 150 UK banking innovation leaders, sets out the extent of the problem.
It finds that, despite a desire to innovate and keep pace with the industry – more than two-thirds of those surveyed say pressure to transform and launch new products has increased over the last year – banks are stuck between a rock and a hard place, particularly when it comes to core banking migration and new product testing.
“Banks typically spend months deploying new products and services to either existing or new customers and that’s no good – months are a lifetime in a sector like finance”
These aren’t new challenges, says SaaScada’s CEO and Co-Founder Nelson Wootton. Rather, they are at the heart of why he and Co-Founder Steve Round originally founded the business.
“We just didn’t feel that core banking architecture or delivery was fit for purpose,” he says. “Banks typically spend months deploying new products and services to either existing or new customers and that’s no good – months are a lifetime in a sector like finance.
“We’re in a rapidly changing world, where organisations need to respond quickly and effectively to changing circumstances around them all the time. It’s near-impossible to do that if you’re using older legacy technology and have a risk-averse mindset when it comes to changing it.”
Core banking as a barrier
According to SaaScada, 62% of leaders say that core banking software – the foundational technologies and platforms that manage essential operations from account management and transactions through to customer data – has a chokehold on their ability to innovate.
“Banks have vast amounts of software,” says Nelson. “Customers see some of that in mobile banking or online banking, but an enormous amount of technology sits beneath that on different layers.
"Under the surface, you’ll have CRM systems for customer records, document management, know your customer and anti-money laundering processes and more.
“Underneath this are multiple layers, including risk and underwriting decisioning software for origination processes, a product engine that effectively delivers all the products to a bank’s customers, ledgers and integrators to local payment systems, then other integrations that depend on activity – typically things for international payments, card processing or exchanges that bring other assets into core banking.”
- Testing delays and stifled experimentation: 82% want a safe and cost-effective way to experiment and test products.
- Compliance red tape and risk-averse culture: 71% think innovation is impossible when risk-averse culture and red tape kill experimentation.
- Restrictive core baking technology: 65% say their outdated core banking tech is a competitive deadweight.
Source: Test More, Fear Less: The case for Safer, Smarter Banking Innovation – SaaScada
The complexity and scope of this technology result in two core problems, says Nelson. “The first is around reporting. It typically takes six to eight weeks to get data out of core systems to deliver reports that inform decision-making and innovation. It means you’re effectively a month behind the reality of what’s going on.
“Banks are inherently risk-averse, which slows down innovation, but ultimately the underlying technology is the main problem,” he says.
“Once you have your report, you spot an issue and need changes to your core banking, getting it done can take up to nine months by the time you’ve factored in dealing with the core banking vendor, then making and testing the change. What we try to do at SaaScada is create a more agile environment for making these kinds of decisions.”
Innovation and risk
Architecture of core banking software makes testing cumbersome and sluggish, with banks facing limited ability to experiment, complex sandbox environments and expensive RFP processes – SaaScada’s research finds that 63% are concerned about making changes because of cost and risk, while 82% want a safer and more efficient way to experiment and test products.
Existing core banking software uses a silo architecture model, within which each product has its own set of code. “That may seem logical,” says Nelson.
“The challenge is you have a huge stack of software with all your products running in this code base. If you need to make a small change inside a particular code base, you have to test all of the products within it to make sure none are broken.
"It doesn’t matter where it is within one of your stacks, you literally have to test every credit product, every loan product and so on. That takes time and money.”
“Core banking replacement is akin to open heart surgery whilst the patient is walking around”
SaaScada offers banks a unique and more innovative approach to unlocking innovation. It provides a cloud-native, data-driven core banking service that uses modern, not legacy, technology and delivers real-time data and true product agility to banks.
“We solve the testing and development challenge by breaking everything into individual blocks within our platform,” Nelson explains. “We then allow customers to stack those blocks together to launch any kind of product.
"For any new product or feature that needs to go into the product engine, we create a block and simply add it to the platform. It takes two or three days and avoids significant testing time and cost.
Because core banking deployments for legacy core banking vendors can often run into multi-year projects, SaaScada is trialling a way of allowing customers to buy core banking as a service in much the same way a company uses an AWS or Azure service.
“It’s a much lower risk and more manageable way of transitioning your business,” Nelson says. “Otherwise, core banking replacement is akin to open heart surgery whilst the patient is walking around.”
Data and the future
Real-time data, a key part of SaaScada’s service offering, can also help banks to be more agile. “Unlike some, we process and store things like transactions as unstructured data, and there’s a real wealth of knowledge there as we move in the era of agentic AI, agentic banking and machine learning,” says Nelson.
“Banks are inherently risk-averse, which slows down innovation, but ultimately the underlying technology is the main problem”
“The APIs we provide to our customers are built on that unstructured data, but we can also base things like management and regulatory reports on the data,” he adds.
“That’s incredibly powerful for banks, and also a big driver of innovation. Anyone that’s doing anything exciting or new, it’s all data-driven.”
The need to innovate won’t slow down for banks. SaaScada’s research reveals that pressure grows, spurred by customer demand, competitive threats from new players, economic uncertainty and customer retention challenges.
“There’s a few things banks can do,” says Nelson. “Culturally, there needs to be a move away from internal siloed structures in order to be more agile and innovative. Building cross-functional teams will help do that.
"The technology side can’t be fixed overnight, but I’d encourage all banks and financial organisations to seek out companies like ours offering new approaches and build, test and try out. Do that and you’ll see how agile your business can really be.”
Read more from the latest FinTech Magazine edition HERE.
