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Rodney Farmer

Rodney Farmer

Founder at Realtime Transactions
Message Message me Posts: 0 Comments: 8
Bio A twenty-year banking and payments professional with experience in US and European banking markets. Past 15 years have been in senior leadership positions with global card issuing/acquiring and banking organizations.

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How Open Banking will blow core systems out of the water

  We can all agree that PSD2 Open API is not easy to integrate to old CBSs.  And, both speed and security must be maximized in the process.  Each bank has its own way of integrating to the CBS and regulatory guidelines for integrating to the world....with the expectation of publishing their interface specifications.  The killer app will be the application of Stronger Customer Authentication in a realtime interface using Open APIs to perform SCT-Inst transaction originated by millions of devices that are not necessarily known to the bank by regulated providers also not known to the bank.  A new industry is developing around this effort.  In the meantime, banks will be cautious and PISPs will have limited success.   To your point about the customers' interest in using Open Banking, the customer is not likely to know if he/she is using Open APIs or not.   As for replacing the CBS, the product/functional silos of these systems are being re-written with each day that passes.  Incumbents are breaking apart their Universal Banking Systems in order to look like micro-services that can be license function-by-function while others are starting from the ground up building new banking systems with modern architecture, data structures, coding techniques, etc.   The cost to do either have reached an equlibrium where many challengers are attempting to build from scratch rather than implement a UBS from an incumbent.  Creating micro-service farms that can rationalize the functions and interdependencies of existing UBSs is the challenge. Time will tell if it is even possible, much less, can they deliver the features in a distributed fashion where best-in-class services are bought and sold among banks and vendors to service targeted customer segments.  But, the march to replace the the UBS has begun.  More interesting is to determine what, if any, CBS functions are really needed any longer.  The Millennials appear to be saying they do not care about the nuanced features we perfected and used to differentiate or products from the competition at a time when life was not digital.  They just want an account with basic core functions.  Differentiation is handled on the front-end with service levels like nothing we have seen since the days of personal, customer care in the bank branch while interacting with the world's best CRM tool, our local banker.  With technological/digital focus on customer care and mobile devices to deliver the goods, only now, we can expect to be fully satisfied by the level of care provided by FIs in the digital age.  Technology is no longer about the cost/income ratio but  rather digital customer engagement and lifetime customer value.  Eventually, the CBS services will be distributed micro-services delivered by highly specialized teams/systems capable of flexing and scaling their product(s) to the demands of the consumer.  Banks will specialize and segment the markets in order to cut costs and up their game for "their" target customers.   My guess is 10 years to reach the tipping point and another 10 before today's CBS is fully retired.