Who will be the first bank-in-a-box?
IMAGE: Kevin O'Mara https://www.flickr.com/photos/kevinomara/
- Core banking platforms are becoming more readily available as a service, enabled by blockchain, cloud computing and other applications of technology to traditional financial services
- VaultOS from an ex-Googler has recently launched out of stealth to demonstrate the possibilities this concept will unlock
- We've already seen the rise of common service layers being deployed as outsourced or as-a-service offerings, covering billing, customer service, etc.
- This "multi-speed" technology layering opens the door to "shop front" banking players - ie. if you can bring the customer experience coupled with sales and marketing operations, you can open a new bank built on top of divested core services delivered by external
- We've already seen established banks launch services along these lines built on top of their parent company core platforms (eg. UBank in Australia), but the new back end players will open this sort of innovation to the world of startups
- The net effect is a drastically lowered barrier to entry into the banking space, allowing pure-play digital ventures to enter into an arena that was previously unattainable
- The banking industry will need to brace itself to defend against more nimble, low overhead operations encroaching into their stronghold
- The resulting disruption is likely see a gradual changing of the guard on the global banking scene from large, global incumbents to those who can innovate and bypass the limitations of having to migrate from legacy systems
- Expect to see banking go through a similar disruption - commoditisation - transformation cycle that telcos went through when MVNOs were introduced. The speed and impact of disruption will likely be more drastic for banks as there is less reliance on physical infrastructure than other industries.
Article originally published on TechCrunch:https://techcrunch.com/2016/07/13/blockchain-based-banking-backend-vault-os-from-ex-googler-emerges-from-stealth-mode/
Blockchain-based banking backend Vault OS from ex-Googler emerges from stealth mode
Despite holding the vast majority of the world’s wealth (or perhaps because of that), banks aren’t exactly hotbeds of cutting-edge tech, often relying on decades-old systems for everyday tasks. ThoughtMachine, a company led by ex-Google engineer Paul Taylor, is looking to change that with a modern, fully integrated, blockchain-based banking operating system called Vault OS.The bombastic press release announcing the system’s emergence from two years of stealth development makes a lot of promises: the company “has solved the greatest challenge in fintech;” Vault OS is “100% future-proof,” “hugely flexible,” and “fixes broken banking forever.”Whether Vault OS is able to live up to its own hype is a question that will have to wait (legacy banking systems aren’t replaced overnight) — but it’s hard to deny that the problem is real and the solution, or at least what the company reveals of it, is compelling.
The main job of Vault OS is to perform the core function of a bank: essentially, maintaining a huge ledger. That’s something that a blockchain is uniquely suited to doing, of course, a fact that clearly did not escape Taylor, whose previous work led to the speech recognition software used by Google today.
Each instance of the OS will run its own private blockchain and cryptographic ledger, hosted as a service by ThoughtMachine. Of course, whether banks will be willing to essentially permanently outsource their most fundamental operations is yet another big question.The benefits may be worth it: blockchains are secure, scalable, and versatile, and could conceivably replace legacy systems that limit or delay ordinary operations. Transactions would occur in real time, and are safely and centrally stored, allowing for deep data dives by both bankers and consumers. There’s even an API.Naturally there are a ton of questions that must be answered, and assurances made, and regulations complied with, before any bank will touch this with a ten-foot pole. I’ve contacted ThoughtMachine with several — will they release code or a whitepaper for inspection? How is data migration handled? What’s the timescale for rollout? — and will update this post if they get back to me.FEATURED IMAGE: THOUGHTMACHINE