In the run up to the FinTECHTalents Festival we sat down with Paul Taylor, co-founder and CEO of Thought Machine to find out how cloud adoption can change the entire culture of a bank, why startups should focus on markets that have huge upside potential and are dormant or ignored by others and why ‘wine and pizza evenings’ should play a greater part in technology company recruitment.
What problem is Thought Machine solving?
We are tackling the hardest problem in banking. Everyone in the industry can tell you what it is. Banks are held back by their technology. If you did a tour of the back end of a bank, you’d find hundreds of applications cobbled together, some of them decades old. Cobol, a language dating from 1959, is common. Banks need to modernise but are reluctant to upgrade their current systems for fear of breaking something.
Our solution is a cloud native next-generation banking platform. We wrote it from scratch. Not a line of old code was used. Banks can migrate customers from their legacy systems over to our platform and enter the modern world.
You offer a cloud-based core banking system? How important is the cloud?
Huge. The cloud is a game-changer in banking. Right now, banks run on mainframes. These are expensive and hinder innovation, as you can’t grow without building new data centres. Our platform is cloud native. This is an important term. It refers to applications built to harness the unique properties of the cloud. When demand surges, for example on payday, a cloud native application scales up automatically. When demand falls, it contracts, saving money.
Cloud native software is built on revolutionary architecture principles. Applications are split into chunks called microservices. This means engineering teams can focus on their own microservice in isolation. And cloud native applications are ‘always up’. They can be updated with no interruption in service. Changes can be made dozens of times a day, without taking the service offline. This opens the door to continuous innovation.
Cloud native principles are how Netflix, Spotify, and Lyft service hundreds of millions of customers. We bring the same firepower to banking. When banks realise the difference it’s a jaw-dropping moment for them.
Who is this aimed at? Incumbent banks or new entrants?
We are ideal for Tier 1 banks. Our first client is Lloyds Banking Group. They loved Thought Machine so much they took a ten per cent stake. But we are also perfect for challenger banks too. Atom Bank is an early adopter. And we’ve just announced SEB, the Swedish banking group. SEB has launched an innovation arm called SEBx to explore the future of banking. So Thought Machine was the logical choice for SEBx.
We are building a client roster on all continents. Right now, we are getting approached every day of the week. Banks email us out of the blue. That’s how we know we’ve made it.
Thought Machine’s emergence seems to have coincided with a greater acceptance of cloud within financial services – what are some of your thoughts as to why now?
At first, it’s cost. Tier 1 banks spend billions on maintaining their legacy systems. Migrating to Thought Machine will save them a fortune. But then banks start to grasp that cloud native systems are conceptually different. Upgrades can be launched without taking the system offline. If the change doesn’t work, then you can downgrade in a moment. New products can be launched in days not months.
And collaboration is made easier. Open Banking requires banks to connect customer data with third parties. Cloud native software is API based, so Open Banking comes naturally.
And why now? Challenger banks are putting the squeeze on incumbents. And regulators are playing a big part, urging banks to move the cloud. The governor of the Bank of England is vocal about cloud. He says it’s the best way for banks to embrace AI and automate compliance.
So, it’s a learning process for banks. They start off with practical concerns like cost. Then they twig how revolutionary our product is. We can change the entire culture of a bank.
You use an ‘event’ to aid in your hiring process – why?
We do! We invite candidates to a pizza and wine evening. Totally informal. It’s a way for both parties to learn more about each other. Culture is important for Thought Machine. We want intellectually brilliant people, of course. But we also want people who’ll fit in. We have a lot of fun with away days and Friday parties. We are growing fast, so need people who are adaptable. And it’s useful for candidates. They can see if they’d enjoy working at Thought Machine.
Pizza and wine events aren’t common in tech recruitment. They should be.
What advice would you give startups in this space?
When I started out in 2000 there was next to no advice about how to build a technology company. Now there are some great books, articles and blogs. I would certainly recommend The Lean Startup by Eric Ries, The Hard Thing About Hard Things by Ben Horowitz who co-founded Andreessen Horowitz, Zero to One by Peter Thiel, and anything by Paul Graham or a16z.
Above and beyond that, my personal advice would be to think more about markets than products. Most things in fintech are not that hard from a core technology perspective, so you will probably succeed in building what you intend to. But you need to find a market that has huge upside potential and is dormant or ignored by others.
We have an array of craft beers and independent music at FinTECHTalents. Give us a great song to listen to while we sip your favourite tipple.
Gimme all your lovin’ by ZZ top, Have a drink on me by AC/DC, and I love Las Vegas by Dean Martin. And to drink? Can’t beat a pint of Guinness.
