BW: Welcome to episode 4 of Banking Blueprints. For this episode, we’re doing things a bit differently. Today we will cover part one of the conversation between our host Dharmesh Mistry, and our guest Leda Glyptis, an icon of the banking industry and the author of Bankers Like Us.
In today’s episode Dharmesh and Leda dive into how to navigate the ever-evolving world of finance, how to tackle the hurdles of legacy systems, and finally, the limitless possibilities of neo core solutions and banking modernization.
Enjoy part one and we will soon be back with Part 2.
DM: Welcome everybody to innovation beyond the core. And this week is my special friend, Leda Glyptis. Hello, Leda.
LG: So good to be here with you today, Dharmesh. Thank you for having me.
DM: And so I mean, look, let’s for the benefit of the two people in the world that don’t know you later, can you give us a tell us a bit about yourself and your experience in banking?
LG: Absolutely. Hello, 2 new friends out there who don’t already know me. I’ve described myself as a recovering banker for a long time, partly because I fell into it entirely by accident and I found my calling in a way that embarrasses me to this day.
And partly because even though I have been outside traditional banking for the last few years, working in the core banking space, sort of on the technology vendor side, I still say we and mean bankers. I even wrote a book called Bankers like us, accepting that my, the way my brain works is still very much that of a, of a, of a banker rather than a service provider.
I think it’s fair to say, and it will touch on some of the things we’re talking about today, that I came into banking at the worst and best time possible.
I actually got my first banking job in 2007 just as the financial crisis was picking up immense speed. And I have only known the industry in the time of crisis. I have only known it in the time of stress, anxiety and profound change. Both positive change like the fintech wave was picking up speed at the same time and frustrating change through challenges, regulatory and market pressures. And it has been an amazing time to be doing technology work in banking.
So, although at the time it felt like the most counter intuitive decision anyone could ever make, it has been an amazing journey since then, having come from a sort of public policy and defence background, falling into an industry that was about to set my transformation journey that actually isn’t anywhere near finished. So, I’ve held some traditional tech transformation operation roles inside banks and then moved to client facing technology and innovation as we called it at the time.
In the last few years, I’ve worked in core banking, which has solidified our friendship Dharm because on top of everything else, we can geek out together.
DM: I mean, look, firstly you made me feel really old because you came in a banking when I’ve been there like 20 years.
LG: It wasn’t my first job though. It would, it should feel, it should make you feel old. If it was like I finished high school and entered banking, it wasn’t that at all. I did work in, as I said in in defence and I did some technology and M&A work in defence, which was mind blowing for all the wrong reasons. And it does, it definitely makes me feel old when the thing that is my second career I’ve been doing for 20 years.
DM: Right, right, right. Wow.
LG: See, see that’s old now.
DM: OK. So, can you say a little bit about your experience in the core banking space itself? You know, because you work with modern core vendors, right?
LG: Yes. So, I would say my experience in core banking is a, is a story in three parts, right? The first part is a tale of frustration because I spent the first 15 years of my career inside banks.
And as you know very well, because you’ve had the same, the same journey, anything you want to do inside a bank, particularly if you’re trying to implement any data first initiatives and no matter how big or small, very, very quickly you will come up against someone senior in either compliance or IT who will suck their teeth and go core can’t do that.
And that’s the end of the conversation, right? Because core replacement core transformation has been such a spectre of career limiting choices for senior decision makers over the years, because historically changing the core has been expensive, has been long drawn out, and it has been career ending for the CTO that signed off on it. So, I spent so many of my so much of my career having to work around the limitations of the core.
And it was an extremely frustrating place to be inside banks where you always had to clip the wings of the ambition of the organization to fit it in the box of our legacy technology, whichever shape that might have been. So, the first phase was one of frustration. So, you can imagine that when I, I got the call to come back to Europe, because I was living in the Middle East at the time, to work in that joint venture between 11 FS and D&B, their biggest bank in the Nordics, to build from scratch blank sheet of paper, a neo core.
I had a million questions in my head about whether that was the best way to go about it and whether that was the best thing for me. But the loudest voice was blank sheet of paper go and I have not looked back.
To be fair, I spent two very happy years at working with DMV and Foundry.
And then as things started shifting with the beginning of COVID, I moved to 10X and got to really scratch that itch of seeing customers go live under sort of my watch and my care.
So, the next phase, phase two is five years of building and, and seeing clients live onto neo cores with all the challenges and, and, and joy that comes with that.
And phase #3 started recently when I left 10X to go independent. And now you have all the scars of both sides of the fence, and you can, because you’re not picking a side anymore, I guess is the, is the reality.
You, you look at the landscape very differently. Still very, very close to my heart. There was a very long answer to a very short question.
DM: No, no, no, but it’s a good answer. And I mean, you know, just on that blank sheet of paper, because I find that bit fascinating is that, you know, when you’re in a bank, you kind of think if we could just start again, you know, and have this blank sheet of paper. But when you’ve got it, it’s quite a daunting kind of task to take on, isn’t it?
LG: It is, it is quite daunting. And the reality is that, particularly if you’ve got the scars of having been frustrated and limited in the past, you, there are a couple of things that you come in and you’re really opinionated about.
You’re really strongly because you know the reasons why the other thing didn’t work. So, I remember we all went in and was like, OK, we know what we want our data architecture to look like. We know what the sort of messaging and event streaming ethos of this thing needs to be.
And we also know that in order to prevent ourselves from becoming a monolith or as one of my clients named it a modulith in down there. A modulith. What a good word, right?
We knew that we had to create the sort of asset agnostic architecture where the Ledger didn’t care if you were dealing insecurities, FX chickens. And we sort of we created the sort of trigger-oriented architecture. Great. But then you come across a whole host of choices that become extremely important that that you don’t have lived experience on.
And there’s more of those than the others, actually. And sometimes you default to going. You know what? Not everything about the way we’ve always done things is wrong. And that’s a big mistake that actually a lot of us make when we’re building something new.
You try to move away from the old ways of working and everything. That’s your why quite a lot of it works. That’s why it’s still where it is.
And then there’s a whole host of things where you’re like, you know what, I don’t have a view on that. I don’t know, I don’t care. So, you have to go out there and do quite a lot of research and find that the market doesn’t care as long as it works.
And that’s where some risk enters the equation, and you make some good choices, and you make some terrible ones. And sometimes the terrible ones you can fix and sometimes you have to live with them.
DM: Yeah. I mean, I’m, I’m a big believer of this thing where, you know, not everything needs to be scratched, you know, otherwise, yes, I’d be redundant by now. But as not being a young man anymore. But anyway, so, so what’s your experience? I mean like when it comes to the implementation side, right? What’s your experience of like core replacement projects? How much fun were they? as they happened?
LG: As they happened, not at all.
DM: Not fun though, right? LG: As they happened, not fun at all, to be honest with you. Which was a very disappointing realisation to make, I think. Particularly as the core replacement project that I’ve worked on were either under duress. So, inside the bank something had gone terribly wrong and we needed to migrate some functionality at least onto a new infrastructure.
And the fact that it was under duress meant that the kind of scrutiny we all had on that work was anxiety laced. And then the go lives I’ve had on the neo side, there’s a lot riding on them because they’re early for the market, they’re early for you.
So, every little thing is again, anxiety laced.
So, I wouldn’t call them fun, but I would say that the journey of implementing a change like that, he’s so rarely or rather the vast majority of the things that you’re worried about and working with and dealing with have nothing to do with the core itself. And it’s all about the organization, the politics, the business priorities, the estate you’re integrating into, the stakeholders that need to be kept informed and comfortable. And depending what situation you’re looking at, that could be a regulator, which is never a set of comfortable conversations, right? Or it could be a board or it could be just business stakeholders.
So, that the yeah, it’s never fun, as it turns out. As it turns out, it was a lot of things fun wasn’t one of them, right, right.
DM: Right, right, and that’s like your is that is that perspective, both from working within the bank and also working for a supplier of a core is that it’s never fun to do these implementations.
LG: Yes, yes, yes.
DM: I I guess it’s not fun.
LG: It’s, it’s brilliant. And once it goes live, the feeling is amazing, particularly if it goes live with nothing or wrong, like the feeling is amazing. Although the reality is you never get that moment of triumph like you see in movies because chance supper the time it’s gone live, you’ve moved on to the next thing.
DM: Yeah. Yeah.
LG: So, you don’t even have the time to celebrate. But I think it’s fair to say that it’s creative, it’s interesting, it’s engaging. You do get an amazing sense of accomplishment. But the stress that goes around it because of everything that rides on it being successful. Fun is in short supply.
DM: I mean, in terms of the implementation, how does it? I mean, how does it vary between is it easier for a small bank than a big bank? I mean, small banks don’t have the resources to do these things. So pretty much reliant on a vendor or a partner. Big banks have all of the resources, right and tons of very smart people. So, you know, is it easier for one and harder for the other or is it all the same?
LG: So, in my experience, the factors that the lived experience of doing something this in a very large global bank is its own animal and doing it in a smaller organization is its own animal. But like harder or easier in my experience so far and it has been a surprise had more to do with why they were making the change and what the nature of the change was rather than the size.
So, for instance, in a very large organization that is launching a new initiative, say on a new call, and I’ve had this experience a number of times, some went live, and some didn’t.
The biggest danger when it’s something new and it’s not something that is already part of the critical infrastructure is that the organization could get distracted.
So, though the organization is big and kind of forwarded and there are a lot of other people around you will, if it’s not on fire and it’s a nice to have or a business enhancement, it is the biggest danger is the organization getting distracted. Whereas a small organization, for better or worse, will not get distracted.
But then I had a project that hasn’t gone live actually, so it’s not public many, many years ago change leadership. So, they didn’t get distracted. They just midway through a project like that, change of leadership and old steam leaves the engine, wind leaves your sails. So, that that is a danger you have in any big organization.
If you’re doing something new, if you’re replacing a piece of critical infrastructure that is already live and running and you have a migration from existing business in an existing geography, then that is not a danger. And then the realities of doing it in a big bank or a small bank are less about size and more about drivers.
So, I’ve worked on a couple of projects that were because of like disaster recovery, failures of a previous system or regulatory pressures.
The minute those words are uttered, it doesn’t matter what the size of the organization is.
DM: Yeah, I mean, you’re absolutely right. And that’s kind of mirrors my experience as well is that worked on the Tier 1 implementation it was really important to the bank that was very clear, right, because of the problems that they were having and you know, the position they were in their market, etcetera, right?
And so, you know, this thing actually did survive three different CEOs, right?
LG: Amazing.
DM: Yeah. I mean, in in five years, I mean, it was, I think some football teams have had fewer managers, right, in that time frame.
LG: Not Birmingham City DM: Not Chelsea, but anyway. So, yeah, I mean, I think I think that’s absolutely spot on. But you know, for a tier one bank, right? I mean, like typically the smaller banks, tier 4-5 banks, you know, they tend to go to a vendor that has the spread of functionality, you know, so that, you know, they’ve got almost one throat to choke as such, right?
But for a tier one bank, any one of them has got hundreds of points of integration. Is it realistic that they’ll ever replace their core? You know, will it ever happen or will they just kind of like build around it and add a new one?
LG: It’s my general view when it comes to any type of tech infrastructure inside a big organization. And I’ll get back to the small organization because I heard a brilliant story recently that you will love.
But in a big organization, it’s a bit like, you know, you have this broom and it’s your grandmother’s broom, but you’ve changed the handle four times and you’ve changed the broom brush 30 times and you’ve changed the binding and the is it still the same broom?
DM: Yeah, Yeah.
LG: And for all intents and purposes, it is still the same broom. And, and I do think that we need to think of technology infrastructure inside banks exactly like that because the reality is there isn’t a single year inside an organization of any size that some material technology change doesn’t happen, but it happens at a pace and in a prioritization schedule that is in line with their risk appetite, their resources and whatever else is going on.
And one of the things I am guilty of and I think all core banking vendors are guilty of, it’s because you’re so deep in this and you know how important it is. You forget that any decision about what you’re going to do with your core is contextualized inside the bank in terms of ambition, other projects, regulatory shift.
So, you see a lot of heightened activity in regulatory jurisdictions that are about to move into the cloud for the first time. You see a lot of activity then what the competitors are doing, but also what other projects are in flight because there are dependencies you want to risk manage exposure, right?
So, why am I saying this? I’m saying this because it would be naive to think of it as a binary thing. Although when you’re inside the vendor, you often do. They either change their core or they don’t. But the reality is they’re constantly changing things and they’re changing them in as big bites as they can take and a smaller bite as they can take at the same time. So, is it realistic that a big bank will
change its core in a big bank? No. And it would be stupid. It’ll be dangerous and they’re not going to do it because they’re not stupid.
Do I think that the vast majority of banks will have a very different core infrastructure by 2020, by 2050? Yes. Do I think they will have it by 2027? No. So, between now and then, I think it will be a case of deliberate, intentional movement in a particular direction. And by the time you get there, is it still the same broom?
DM: Yeah. Yeah. This is triggers broom from Only Fools and Horses. I’ve worked in the organization for 40 years, and I’ve always had the same broom. I’ve had six different handles, but, you know, four different brushes.
LG: Exactly. Exactly.
DM: Yeah. I love that analogy. That’s a great, great, great, great story. OK.
So, is there, is there proven, like is there one approach, a proven tested approach to replacing core that guarantees success?
LG: That’s the million-dollar question, right. I mean, the short answer to that is..
DM: Give it a wait to everyone because if there is, we’re going to make a lot of money.
LG: Yeah, actually there is. And Leda and Dharm can tell you what it is and you have to pay a billion dollars. So there, there isn’t, right? Because if there was, people would have worked it out.
Because the, the magic about core is that it is a utility everyone needs, right? It’s not a niche problem that people may choose to deal with.
Everyone needs to think about what they do here. I think there are a couple of characteristics that successful transformations have and ideally you have all of them.
So, the first one we already touched on is. Leadership continuity doesn’t necessarily need to be the same people, yeah, but it needs to see to be the same business vision. And usually that happens with some continuity in humans as well, to be fair. But you need a clear vision. If it’s an experiment to the side, then distraction is likely.
If you’re only doing it under duress and regulatory pressure, then not going all the way is also likely. So, that continuity of business vision and a realisation of where you’re going as a business helps. The 2nd, which is extremely hard to quantify, but I’ve seen it as the singularly most significant driver in my career is someone in the organization whose personal ambition and their personal view of their legacy or their accomplishment or the proof point for the market is tied to this work.
Someone’s personal life somehow ties to this project is such a such an obscure thing to be looking for, but essentially that organizational directional ambition and someone’s personal ambition need to coexist.
And then the last thing I would say that I see in those successful implementations is a properly calibrated risk management language because you need to have the hard conversations about risk management because you’re migrating data, you’re migrating live customers, you’re making the hard decision to switch things off.
So, you need to have the right language to speak to the risk teams and the compliance teams so that you’re agreeing on what is an adequate level of satisfactory stress tests before you go. OK, I’m flicking it. I’m flicking the switch. I’m switching it off now.
But equally not shying away from the one of the biggest things that I have seen as a thing that failed projects have in common is the attempt to keep as much of the work secret as possible and not bring their risk compliance main organization eyes onto this work till that’s advanced.
That’s possible. I see the urge, I get it. It also comes from years of doing innovation projects like that. So, all new technology was usually nurtured like that.
It does not work when you’re looking to migrate live customers and where you’re looking to touch critical infrastructure.
So, it’s a combination of ambition, people feel somehow personally bound to this work and the properly calibrated risk management from day zero.
You keep the risk and compliance folks out of the room long enough, you’re dead.
BW: Thank you for tuning into Banking Blueprints. We invite you to stay tuned for future episodes. On behalf of our Season one host Dharmesh Mistry and the team here at Zafin, we’re glad you’re here. Thanks again. We’ll see you soon.