After two years in stealth mode, a British startup run by a gaggle of former Google engineers has come into the light claiming to have solved the greatest challenge in fintech: how to replace core banking systems.
While banks busily build customer-facing technology for the digital era, they are being hampered by underlying software written decades ago which is no longer fit for purpose, says London-based Thought Machine.
The firm cites the Royal Bank of Scotland's infamous IT meltdown of 2012 and the words of regulator Andrew Bailey as he later handed the bank a record £56million fine, warning of a "very poor legacy of IT resilience and inadequate management of IT risks".
Thought Machine's answer is Vault OS, core banking software created for the cloud which uses private blockchain-style technology and has cryptographic ledgers for watertight security.
The company is run by Paul Taylor (pictured) who joined Google in 2010 after it bought Phonetic Arts, the speech synthesis technology firm he co-founded. Taylor pulled in several Google engineers as well as experienced bankers as part of a 50-strong team based in East London for his new venture, which has been in the pipeline for the last two years.
The firm claims that its OS is completely flexible and handles any standard banking functions or business models. "Best of all, it employs smart contracts and machine learning to enable banks to offer a vast array of financial products - or roll out new ones in days. It is 100% future-proof."
Meanwhile, because it runs in the cloud, banks can scale to millions of customers without expensive in-house data-centres and the large operations teams typically employed to keep legacy systems from failing.
When it comes to compliance, every transaction is reported in real time so banks can determine their exact financial position at any moment. These tools are in the core of Vault OS, making implementation of capital-adequacy standards such as Basel III automatic.
Says Taylor: "People have suffered for too long from the archaic software banks are built on and their CIOs stay awake at night worrying if these systems will cope with one more day. It’s time for new ideas, built with today’s technology. Vault OS fixes broken banking and will be the engine for the banks of tomorrow."