The financial services industry is critically important to everyone, but I believe it is broadly underserving its customers because of a lack of innovation. When we look at how companies have innovated and blurred the lines in and between other industries to create services that customers demand—such as Netflix in the media industry with its streaming services and Amazon under the guise of retail—it’s clear that consumers are crying out for new and innovative ways of doing things.

Legacy technology stifles banking innovation

One of the main reasons for the lack of innovation in financial services is that the underlying technologies don’t allow for innovation. Traditional core banking systems are inflexible. But we are seeing new challengers in FinTech that are making significant traction in customer adoption because they can innovate and are not burdened by legacy systems.

The core banking systems in traditional banks were, in many cases, deployed decades ago. They’ve evolved over the years into a spaghetti of technologies that stifle innovation. Banks’ abilities to bring genuine new propositions to market are restricted both by the cumbersome technology and cost. The result: consumers don’t receive the level of service or the offerings that they might reasonably expect from a financial institution.

Discover IBM solutions for banking and financial markets

Banks largely have found themselves marooned in a technological backwater. Vault, the cloud-native core banking system from Thought Machine, can help them address that marooned technology environment.

Next-generation banking starts in the cloud

Vault allows banks to catch up with the industry’s challengers and generate the type of change that other industries have experienced in ways that have not been possible to this point. Thought Machine built its cloud-native core banking engine specifically for the purposes of renewal, deep in the heart of the banks.

Thought Machine and IBM have teamed up in a synergistic relationship to deliver Vault into banks globally. We have a next-generation cloud-native technology that IBM has recognized, and IBM has over 90,000 cloud experts and strong relationships with the banking community across the globe.

Most banks have embarked on some level digital transformation already, but much of it has been from the top down or outside in. They’ve digitized channel access through apps and online banking or digitized several processes within the bank or at branch networks. But they haven’t fully digitized through the full vertical stack. The combination of IBM’s excellence and expertise in the operational understanding of a bank’s full stack and what our technology brings to it means that banks can finally achieve full renewal and digital transformation in the cloud.

Why cloud native is not simply cloud based

Forward-thinking banks today recognize that the move to cloud will generate enormous cost efficiencies and create better customer propositions. In a recent speech, Mark Carney, the Governor of the Bank of England, identified a 30 to 50 percent cost saving for banks that move their applications to the cloud.

There is a world of difference between a genuinely cloud-native, next generation core banking system and simply moving legacy technologies into the cloud, and the efficiencies are materially different from each other. To be truly cloud native, systems need to be built and born in the cloud. By that I mean that they’re genuinely micro-service architected, they’re containerized, they’re deployed through Kubernetes and they have a complete array of all of their external access points in RESTful APIs.

At Thought Machine, we believe we are genuinely taking an industry into its future by teaming with IBM to deliver Vault to the industry. We’re ultimately helping banks create new propositions and new offerings that we can’t even imagine today, much like we couldn’t have imagined an online bookstore becoming a transportation behemoth 20 years ago.

Watch Travers Clarke-Walker discuss cloud-native technology for the banking industry: