Future-Proofing Financial Institutions for Next-Gen Banking: Embracing Agility and Innovation

In an ever-evolving banking and financial services landscape, banks are faced with the challenge of adapting and expanding their offerings to deliver superior customer experiences. Mambu, a leading provider of cloud-native banking technology, is at the forefront of helping banks navigate the rapidly changing environment. 

In this interview, Miljan Stamenkovic sheds light on Mambu's approach to composable banking, and the benefits of the partnership between VeriPark and Mambu.

Traditional banks need to adapt and expand their offerings to provide the best customer experience and to compete with new industry entrants. How is Mambu helping the banks to be future-ready and to adapt to a constantly changing environment?

If we look at the competitive landscape of the banking and financial services industry today, it's clear that banks not only need to compete to offer the best customer experience, but also with new industry entrants. Fintechs and neobanks have emerged in the wake of the 2007 to 2009 financial crisis and have been penetrating the market heavily over the last 10 to 15 years.

In the Middle East and Africa, for example, hundreds of new fintechs have emerged in the region over the last couple of years, offering new mobile and digital services and reaching underserved customers mostly. They are challenging incumbent banks, especially in larger markets like the UAE. And it's not just these players - there are also new players in the market trying to take finance directly to consumers globally.

If we look at big tech companies, we see that they are also challenging incumbent players. For example, Apple recently launched a buy now pay later service in the US in collaboration with MasterCard and Goldman Sachs to compete for more than 100 billion dollars in purchases that Americans make. This highlights the need for banks to compete in new ways, rather than relying solely on large transformation projects that take years to complete.

New players need to go to market quickly and generate revenues fast, so building a tech stack and being able to pivot and react to change are crucial. That's where Mambu comes in - having worked with more than 200 digital challengers and traditional organizations, we have built what we call a composable banking approach to build new financial technology stacks and offer new products and services to customers quickly. I think that's where Mambu plays a major role from my perspective.

Can you explain the concept of “composable” or "coreless banking" and how it differs from traditional core banking? How does Mambu's infrastructure differ from traditional on-premise core banking systems?

These are two key concepts: composable banking and coreless banking. Composable banking is something we talk about frequently, and I'll certainly touch on it. 

Coreless banking is also an interesting concept. Over the past five to seven years, I've seen many projects where customers wanted to separate their technology components, solutions, and modules so they could more easily change their technology and respond more quickly to market needs and changes. This allows them to better meet their customers' requirements and keep up with the competition.

When it comes to "coreless" banking, I've often heard discussions about "headless" architecture, which is essentially about decoupling all your components and selecting the best possible solutions for a particular point in time when you need to introduce new products or services to the market, or react quickly to market changes. That's my take on it.

When it comes to composable banking and composable architecture, I would like to emphasize the importance of considering the business models that our customers typically want to set up. If we think about conservative business models, we often see siloed ways of working and legacy infrastructure that are holding these customers back. This makes it challenging for them to react quickly to new customer demands, provide innovative solutions, or deliver next-generation, hyper-targeted digital products and services.

Going back to your question about composable banking, in my mind, it has two components. First, it's about creating a business model that focuses on what matters most to your customers so that you can come up with a minimum viable product and then grow from there.

We've seen a lot of success with digital challengers, such as Neo Banks, that really know how to solve one problem at a time and then grow from there, allowing them to pivot when needed. I think pivoting is also a very important point to consider. Of course, this strategy also needs to be complemented and supported by the appropriate technology architecture, which is the second crucial point to consider.

So, Mambu's unique composable approach allows for the flexible assembly of independent components and systems to precisely fit the needs of your business and customers at any given point in time, enabling you to grow from there. To support this approach, I believe two concepts are crucial.

From a business perspective, speed and time-to-market are crucial for our customers in their highly competitive field. As there are more and more players entering the market, digital challengers really need to rely on short release cycles that Mambu provides to keep up with the constantly evolving expectations of their end users, as well as with the competition.

And when it comes to the architecture again, the second point, I think there are three main areas where Mambu excels. Firstly, to implement composable architecture, it means that you are able to freely swap components without any locking, allowing the best technology selection that we discussed earlier. Secondly, leveraging cloud-native software-as-a-service solutions as much as possible for rapid deployment and scaling, while reaping the benefits of vendor-managed services. And thirdly, easy configuration and use of API-first platforms, such as the ones provided by VeriPark and Mambu, to deliver quick products and have fast rollouts and integrations for your end customer. So that's the overview from my perspective.

Can you tell us about the benefits of the partnership between VeriPark and Mambu? How does VeriPark complement Mambu's offerings in the cloud capabilities for lending, retail and corporate banking?

When it comes to the partnership between VeriPark and Mambu, I remember having my first conversations with the respective teams. The first thing that came to mind was the end user's perspective, rather than the systems and platforms themselves. When I thought about what Mambu and VeriPark offer together, it's really an end-to-end user journey. Instead of building complexity, they offer all the steps necessary to provide a seamless experience for the end customer.

To translate this into more technical terms, consider the customer onboarding and loan application process. It starts in the customer app or web portal, where data and documents need to be captured to support the application before moving through origination, credit decisioning, and underwriting. Once the application is completed, the loan is created and fully managed in Mambu's SAS core banking engine.

While VeriPark handles onboarding, loan origination, and creates a 360-degree view of the customer, Mambu then gets the same 360-degree view reflected in the core system and handles the full servicing side of the loan through maturity. This partnership provides an end-to-end journey and process that two solution providers can offer. The benefit of this is avoiding a monolithic large system that most customers are used to, and instead getting flexibility with cloud-native, API-first solutions that can be easily integrated and provide the end-to-end functionality that both customers and businesses expect.

How do VeriPark and Mambu target similar client profiles? Could you share some examples of the types of clients you work with?

When I think about our customers, I like to consider the concept of "who is our key customer?" that we can provide the entire functionality and coverage that the client would need. When I think about it, the "key customer" that fits the bill here is non-banking financial institutions. While VeriPark and Mambu have various categories of customers, from retail banking to corporate and so on, non-banking financial institutions are a very interesting profile for both organizations.

Looking from a regional perspective, these kinds of institutions typically have monolithic and tightly integrated systems that do not allow them to scale easily. They face various challenges, such as integration, bringing the customer from loan origination to loan management to collection and so on. It is one system, but it's built using different modules, which is typically where the challenge lies. More importantly, when these customers want to build new products and services driven by market changes and trends, it's almost impossible for them to do so, at least not as quickly as they would need to. This is where VeriPark and Mambu can help, by bringing two very modern and flexible technologies that are easy to configure and build new products quickly and deliver them to the end customer.

Which non-banking financial institutions are you specifically talking about? Are they lenders?

Yes, the best fit for both organizations is in the lending sector, specifically for established lenders in consumer lending and purchase finance, as well as for new digital lending companies that want modern solutions like the ones VeriPark and Mambu provide. Time to market is everything for these new entrants, who have investors that expect returns on investment. These two organizations are a good fit for providing the solutions these customers need, whether they are old institutions or new entrants just entering the market.

Both VeriPark and Mambu are cloud native, and API first. Could you explain what this means and how it benefits your clients?

These days, if a tech company doesn't provide cloud-native and API-first or API-enabled platforms and solutions, they will cease to exist. In order to compete, being cloud-native and API-first is now the default. The solutions from VeriPark and Mambu have been born in the cloud, built in such a way that they expose APIs for each and every functionality they offer. They were designed to be deployed in the cloud, integrated through an API, and consume third-party services through an API.

In comparison, legacy solutions are trying to expose their APIs, which is a different ball game altogether. They are reinventing themselves and trying to expose their functionality through an API, which means they are rebuilding their technology with a lot of technical depth. When comparing these two, customers tend to go for cloud-native solutions like VeriPark and Mambu.

Deployment and integration are two aspects that are crucial for customer success in terms of time-to-market and future scalability. Cloud-native solutions can be deployed at the click of a button, without the need for lengthy on-premises deployments that require planning and investment in hardware. Integrability and scalability sit at the heart of what Mambu and VeriPark do. They have designed their solutions with integrability as the top priority, with multiple modern and lightweight integration mechanisms available to support all integration scenarios.

When it comes to the integration between Mambu and VeriPark, using an API-first approach makes integrations smooth and enables both solutions to integrate other third-party services, whether they are provided by the government or third-party solution providers. These aspects are necessary to build the entire tech stack for the customer, and they are relevant for customer success in the end.

How does the partnership between VeriPark and Mambu simplify the buying and decision-making process for clients while using best-of-breed technologies? Could you speak to how clients have responded to this approach?

A good example would be lenders or non-banking financial institutions that I mentioned earlier. However, this is equally applicable to any other category of clients.
When you approach an established organization, the typical issue they face is a legacy solution that can no longer be maintained properly or changed easily to respond to customer needs or market trends. This is just one aspect of the problem.

Bringing in two modern solutions, as we discussed earlier, makes it a no-brainer for customers to choose and continue working with players like VeriPark and Mambu.

But equally important, when speaking to other decision-makers in the organization such as business owners, product owners, and so on, what matters to them is end-to-end functional coverage. However, they no longer want to have a monolithic architecture that held them back in the past.

Our experience so far, when talking to clients in places like KSA and the wider region, has shown us that full end-to-end functional coverage is key. For example, this could mean starting with customer onboarding, moving on to loan origination and management, and finally processing the loan, all while having a 360-degree view of the customer in your CRM.

You really get the best of both worlds: a full functional coverage that, in the past decade, only monolithic solutions could provide, and a composable approach where the best-of-breed solutions can offer an end-to-end spectrum of what your business and IT need. This is especially relevant for established organizations that require a wide range of features and capabilities.

Since partnering with VeriPark as Mambu, we've received a lot of positive feedback about the coverage we provide, and how our cloud-first and API-first solutions can be easily integrated into existing systems.

Could you tell us about any exciting developments or future plans for the partnership between VeriPark and Mambu? How do you see the partnership evolving in the years to come and what benefits do you anticipate for your clients?

When two technology companies communicate with each other, there is naturally a lot of excitement about the features and functionalities that they can offer. As I mentioned earlier, our joint solution portfolio is feature-rich and provides end-to-end coverage, which has received positive feedback from our clients. From my perspective, biased as it may be, it is important to focus on regional markets in the Middle East and Africa, rather than just on product features. Both companies have modern, cloud-native solutions and products in their portfolios.

However, to be successful as partners, we need to focus on specific client categories, such as traditional and non-banking financial institutions that want to rebuild their tech stack, or brand new digital challenges that want to build their technology stack from scratch. This is where both companies excel. In addition, certain geographies require a modern, end-to-end composable architecture that our clients can benefit from. If we can focus on these areas, I believe it will be key to our success going forward.

In a broader sense, what do you see as key trends for 2023 and beyond for the industry?

Personally, and as part of Mambu, we work extensively with digital challengers and neobanks that are disrupting the incumbent players in the market. From a business standpoint, I believe our customers will shift their focus from growth, which they achieved over the last few years, to monetization and profitability. This becomes even more critical in a volatile market with a lot of uncertainty about what lies ahead. Therefore, new players in the market must move away from the growth scenario of customer acquisition and shift towards monetizing what they have already built to become profitable.

Currently, only 5% of new players are profitable, and this number can grow, but some organizations will have to learn their lessons and start becoming profitable. From a technology standpoint, cloud-native solutions will continue to replace legacy alternatives as more organizations embrace the cloud. That's inevitable and we see it everywhere, but particularly in established organizations. We are witnessing that many prominent financial organizations are increasingly adopting cloud-native solutions and signing substantial deals with top-tier cloud providers such as AWS, Microsoft Azure, and Google Cloud. 

The move to cloud-native is inevitable, and it's happening as we speak. However, it also presents a lot of challenges and threats, especially when it comes to cybersecurity. I believe that cybersecurity will become a top priority next year and beyond. It has always been a crucial topic for financial institutions. But in order to protect their customers' financial and personally identifiable information, they must be very selective about working with service providers that prioritize data security and partnering with cloud service providers like the ones I mentioned earlier to support their built technology stack.

Thank you Miljan.