Three Finnish banks, one core IT platform

There are times when it makes sense for several different companies to share resources. This happens quite frequently in the car industry, for example, in which components and even entire sub-assemblies may be common to cars from different manufacturers.

Usually, although not always, the individual companies in such projects are all subsidiaries of a single, larger organisation. Even when they’re not, it often makes sense to avoid reinventing the wheel, as long as the wheel isn’t central to the business’s unique selling point.

Resource-sharing isn’t the exclusive preserve of manufacturers, as demonstrated by a project in Finland in which three banks are to share a single core IT platform. The three banks in the scheme are Säästöpankki (Savings Banks Group), Oma Säästöpankki (Oma Savings Bank) and POP Pankki (POP Bank Group).

Cooperation between these three Finnish banks isn’t a new concept. They previously shared resources with a common core platform, but that had been in use for almost 40 years, so a change was well overdue.

The new platform, implemented by IT services company Cognizant and banking software firm Temenos, will be based on Temenos T24 Transact and Temenos Payments Hub.

What drove the decision to use the same core platform for three different banks? “Digital technologies, as well as changing customer expectations, are significantly disrupting the banking landscape,” said Kaushik Sarkar, vice-president and head of Nordics at Cognizant.

“As such, there’s an increasing demand for innovative, plug-and-play, multi-channel and easy-to-use solutions that can be easily customised and implemented across the banking system.”

Tero Niemi, chief operating officer at Säästöpankkiryhmä, said: “Overall, the core systems are becoming less of an advantage to any bank, and hence a standard solution that is maintained and developed as a banking-as-a-service model seems to be developing as the future standard in the banking market.”

But if core systems are less of an advantage to any bank, where does the advantage now come from in competitive banking? According to Niemi, customer experience is becoming the key differentiator. “Traditionally, banking has been seen as finance (reallocation of funds and risks); in the future, it’s instead becoming a service, which emphasises the importance of the customers.”

To revert to the car analogy for a moment, customers may be unconcerned about the finer details of chassis construction, gearbox manufacture and spark plug design, but will certainly consider fuel economy, safety and interior trim in their buying decisions.

In the same way, banking customers may have little concern for the underlying system that processes their transactions – as long as it remains stable, secure and reliable – and more focused on banking services, loan rates and financial flexibility. Even so, from the perspective of a potential customer, the idea of a bank’s core platform being shared with others may at first sound a little risky.

What about the concern that an error in one system affects the others, or that the platform may somehow become compromised and allow users from one bank to access the account of another? In reality, it’s not three banks running on one system: the code is shared, but the installations are not.

“We will have layered architecture,” said Niemi. “All banks will share generic, country-level and the three banks’ common code base. On top of these, the banks have their specific code. The code base for the three layers are the same, but the software installations are separate. The setup is tailored to minimise the bank-specific development needs while still allowing some flexibility.”