The Next Wave of Profitable Digital Banking

Speaker A: Digital banks have certainly gotten volume like the revoluts of the world, but they still haven't cracked the profitability and the uh, revenue per, uh, user from a lending perspective, because lending, getting my home loan from a bank, like I need a level of trust and I would much rather trust the bank that I've had the relationship with. That's out for me as an individual. But I definitely think that consumers don't want to be forced to choose between having the bank that I trust and having the inconvenience of a bank that I can only operate with from 9am

Speaker B: to 5pm welcome back to the Ishua Academy. In today's episode, we're peeling back the layers of the payments and banking world to look at what's really driving the next revolution is IT infrastructure and banking as a service. And leading the charge are, uh, two people who live and breathe this change. Firstly we have Keerthi Iyenga, chief, uh, operating Officer at Constantinople. Welcome Kirthi.

Speaker A: Thank you.

Speaker B: And our very own Jeff Parker, CEO of Pavementology. Welcome to the Issuance Academy.

Speaker C: Thank you.

Speaker B: Let's start off with setting the scene a little bit so when we look at the rise of Banking Infrastructure 2.0. Keerthi, Constantinople story starts in Sydney, but the problem you're tackling is truly global legacy systems, complex compliance processes, fragmented operations, they all slow down innovation. As a coo, you sit at the heart of execution and delivery. Can you tell us what inspired the creation of Constantinople and what gap you saw in how banks were really running their business?

Speaker A: It's definitely a global problem, as you mentioned, across the banking industry. When we started the company, one of the first things we realized as a gap is that nearly every bank, when you look inside how they operate and how they work, they spend so 80% of the time in management and board meetings discussing a lot of the operational challenges of running the bank. When you take a step back and you think about why banks have been so fundamental to society throughout our history, they've really been foundational to the economy because A, they have a real connection into the community, they have a real contribution into the community, B, they sort of run your, you know, the actual, uh, thing that is, uh, closest to people's livelihood, their financial livelihood. And it's really important that banks sort of maintain their brand, their community engagement, their how they construct their products to meet the financial needs of their customers and also how they manage their treasury, their liquidity, their balance sheet, their risk management. This is, these are the things that, you know, has really stood the Test of time for banks. However, as I go back to saying, 80% of the time ends up being spent on the operational challenges or the technology challenges, which are all leading to all of these incremental point solutions. You know, a CIO that needs to move parts of their systems into cloud to reduce their, uh, issues in their data center, or the person in charge of risking compliance that, you know, needs a better system to, you know, manage or automate some of the controls that they run. So we really looked at this as a whole of bank problem as opposed to a creating yet another point solution on how to solve one of those, uh, challenges. So one of the key gap that we saw was, you know, should banks really be vertically integrated in the way they are today? Is that really the best construct about how the industry should be created? And we thought there's definitely an opportunity to rethink the construct and create out a new category per se of banking infrastructure platforms that focus across the technology, operations and compliance of the bank.

Speaker B: Yeah, and we were having this debate banking as a service, uh, or platform as a service. Right. I think what Constantinople has done is really built this modular platform that banks can leverage to say, where are we struggling, where are we having issues? Which part of this kind of platform do we really need to build our business? Which is so interesting. Perfect. Let's now look at the market. The question is why now and why here? Uh, you're operating at a fascinating intersection, a mature banking market like Australia. Right. But one that's also become the launchpad for global banking innovation. So when you look at it, Keerthi, what's driving this demand right now? Why do you think banks, from mutuals to mid tier, uh, institutions, why are they suddenly so ready to modernize their entire infrastructure stack?

Speaker A: I think to answer that question, you really have to go back in time and look at 20 years ago. 20 years ago there were probably, at least in Australia, there was probably around 300 mid tier banks in Australia. Today there's a bit over 50. And in the next five to 10 years that's, you know, with all the mergers that are happening right now, that could sort of go down to 10. Now that has not been, I think, to the benefit of consumers. I think consumers actually can benefit from having a stronger sense of attachment to the banks that serve each of those communities. But the reason why this has happened is because banking is a scale game. And when each of these banks are created as vertically integrated businesses again, it comes back to that challenge of the customer expectations are increasing. And that has been increasing for the last 10 years. But that is going to, that, that's going to be dwarfed by what we're about to see in the next five years. On top of that, regulation is increasing because the sophistication of financial crime, sophistication of scam insight and the level of controls that regulators are going to expect from banks are going to increase. And banks currently have to almost choose between a, uh, do I modernize and can I afford to modernize and where do I modernize? Do I modernize around the customer? Do I modernize around my operations? Do I modernize to create more cost to income ratio benefits so that I can compete better on price? We're already seeing, you, uh, know banks in the UK see up to 70% cost to income ratio benefits from leveraging AI in every part of their business. So that disruption is happening. And I think the reason why, to your question, why there is such an unprecedented amount of talk about doing something different is because the, there has to be an alternative to consolidation. And I, uh, really think that a platform like Constantinople has the potential to actually create all of the benefits of mergers in a synthetic way around all of the operating aspects of the bank without banks having to compromise on what makes them unique, that is their brand and how they connect with each of their communities. There's no sense in my mind of having a bank that is, you know, potentially bonded to a particular industry, say healthcare, and another bank that is bonded to a particular geography, say South Australia coming together, uh, and continuing to have that same value proposition for their members. I think there's a real opportunity at this point in time to really do something different. And I think that can benefit all Australians. And I know I've talked about Australia so far, but I think the same thing applies globally as well. There's you know, 4,000 credit unions in the US that has exactly the same challenge, let alone globally. Right. So I think Australia certainly presents an interesting opportunity to, to prove the case. Uh, but definitely the opportunity is global.

Speaker B: Absolutely.

Speaker C: I think you mentioned it quite well there, Kurti. I think we've got these kind of two dichotomies happening. We've got customers that uh, are demanding a much more personalized digital experience that uh, tailored towards their specific needs. So that's around loyalty and rewards, etc. They want data to be used to serve up to them offerings which are genuinely useful to them. And on the flip side you've got these traditional banks who are operating on legacy technology which is 20 or 30 years old. And I think the only inevitable is that technology is going to break at some point and it's impossible to build those configurable digital tailored experiences on that legacy technology. So when consumers are choosing, I think we're at that inflection point now where they're choosing your revolut experience or your chime experience or your block experience. And for a tier 2 or 3 bank, if they can't reinvent themselves and start to bring that value to their customer, they're going to die. I mean, the customer's going to go somewhere else. And so I think, um, what you're doing at Constantinople is hopefully game changing for these organizations. It gives them in one whole kind of holistic swoop, the ability to reimagine their entire banking stack holistically and start to compete with those modern players. It's pretty exciting.

Speaker A: Yeah, definitely. I think, you know, wouldn't be saying time to throw in the towel towel by any stretch of the imagination. There still continues to be that aspect of profitability like the digital banks have certainly gotten volume like the revoluts of the world, uh, but they still haven't cracked the profitability and the revenue per uh, user from a lending perspective. Because lending, getting my home loan from a bank, like I need, I need a level of trust. And in some way, you know, I would much rather trust the bank that I've had the relationship with that knows that's out for me as an individual, whatever I do for my living or where I am as a community. But I definitely think that consumers don't want to be forced to choose between having the bank that I trust and having the inconvenience of a bank that I can only operate with from uh, 9am to 5pm through a telephone experience or a branch experience. I want that 24, 7 instant response for everything that I want to do. I definitely think we can see the tables turn quite a lot if we level the playing field. And I think that's really the, the objective for us. We want to level the playing field so that everyone has a fair chance.

Speaker B: Exactly. And give banks, you know, that ability to actually challenge the more digital players. Right. Because if you can allow them to, you know, innovate without compromising on the customer experience while you, like you said, create operational efficiencies using AI and really building a foundation layer for them, then yes, they can innovate at scale. They can really challenge, you know, these new players coming in. And I think that's what's really exciting because when you look at banking, banking is hereditary. Right. I bank with the same bank that my mother banked at. Right. And that is where I'll go to get my home loan. That is where I'll go to do vehicle and asset finance. It's just a reality of it. But at the same time, you know, after Covid, everyone wants everything now. They want data, they want everything to be hyper personalized. So it's great that you're actually bringing those two worlds together, allowing these banks to transform. Incredible. Jeff, to you, how do you think this moment in the market feels different? You know we've seen digital banking transformation. Everyone's been talking about it and it comes in waves. How is this wave different?

Speaker C: I think Kurti's ended up quite well. I think phase one is what you've seen over the last five, ten years or so is around, I'd almost say putting the lipstick on the pig in some ways in terms of, I think we've tried to do. Traditional banks have tried to just look, focus on the, the mobile app and the experience but they don't have the modern architecture underneath to actually be able to deliver long term sustainable, personalized solutions to customers. And then on the, I guess the Neobank side of things, it's all been about growth at all costs without profitability. And I think there's now this kind of, I guess coming together of you need to prove that you have the right unit economics. And I think digital banks start from a strong place because they don't have the legacy infrastructure, the banks, the high cost so they can start to compete um, on price but they need to start to show their business model actually works. And I think we're seeing a number of those kind of players fall by the wayside. And then I think we're starting to see an expansion of the product portfolio. So I think a lot of people started with interchanges of revenue model. It was around cards, debit and prepaid. I think we all know that the banks make money through lending and I think these digital banks are starting to have to compete directly in the lending space and that's why we're seeing them move from things like an EMI license to full banking licenses. And so that blurring of the lines I think between what's a digital bank and a traditional bank I think is going to start to happen more and more. So I think it's an exciting time and I think that's where the proposition that Constantinople offer uh, is super exciting because that is how do I bridge that gap? How do I give these traditional tier 2 and 3 banks the opportunity to modernize cost which is accessible and then to start to compete on the experience base.

Speaker A: And I think Jeff also, uh, it's an extension of what you just described is also within a bank they're often faced with exactly this challenge around how do they show up as a bank to their different segments. They've got sort of their older segments, they've got their mid age segments that tend to be more in that mindset of I'm about to save for my family and I've got the next 30 years to build my superannuation and then you've got your younger segment that are very much leaning into everything needs to be instant. Yeah, the concept of a branch doesn't make any sense to them. So I think the banks are almost having to deal with this dual operating, I wouldn't call it dual operating model but how do they create a digital bank that allows them to have the flexibility to shift their operating model as their customers preferences shift as well without having to compromise on an experience. There's so much of banking that is just a commodity infrastructure layer. Uh, no one says I uh bank with HSBC because I just love the quality of their reg reporting or no one says I uh bank with DBS because I just love how they do end of day reconciliations like absolutely critical that these things get done.

Speaker B: Yeah, they just work.

Speaker A: And they have to work well.

Speaker B: Exactly.

Speaker A: And they, they have to work in a way where it doesn't become that 80% of things that the management is talking about in the bank.

Speaker B: Exactly. And I think this comes back to how new digital banks and platforms like Constantinople are using data to create that hyper personalization at a segment level. Jeff, something that you said that was really, really interesting is you know what's different now? And it's that revenue piece. In the beginning when we first looked at digital banks it was very much about cost of acquisition, cost of onboarding new customers. Now it's very much the reverse. What is the revenue that each consumer is going to bring. And you're right, the fact that they're starting off with revenue driving products like credit like bnpl, all of these things are helping to create a more sustainable way of creating digital banks. And even in you know, T2 and T3 banks they're now saying they can create a revenue model which is still, you know, highly personalized. It's you know, created on a strong foundation which allows for greater innovation. That is definitely, you know, a massive ah, driving point. I want to now look at democratizing access to modern banking Right. Because one thing that really stands out about Constantinople and Paymentology is the mission to democratize access to top tier, uh, banking capabilities. Because this is what, you know, tier 2 and T3 banks who are looking to go through this digital transformation, that's what they need access to. Right. And right now, Kirythi, you're helping smaller banks and mutuals achieve cost to income reductions of up to 80% and bring them, you know, bring them to full service banks within 15 to 18, 18 months. This is absolutely extraordinary. Firstly, so congratulations. But the question is from an operational perspective, how do you make that possible without compromising on security or compliance? And what types of institutions are you know, adopting this model?

Speaker A: Well, actually the, the last bank that we just went live with took us five months to get to market, so.

Speaker B: Five months.

Speaker A: The same point I think holds and I think a big part of this is that innovation for these mutual banks is about having access to orchestrate either the data or the services at the experience layer. However, when it comes to the layers below and actually the, the critical operations of the bank, we operate that as a single code base across all our client banks. We operate that as a SaaS service. We leverage platforms like Paymentology, which has Global operations run 50 billion payment transactions a year. Like, you know, we leverage a best of breed set of providers where it matters and that allows us to really operate a uh, business and a platform that could be stood up very quickly. Now of that five months, you know, I would say probably, you know, a few weeks is what it takes to actually stand up the infrastructure and the platform itself. And a lot of the rest is actually how do we work with banks to implement their specific credit policies, risk settings, the way that they, you know, want to stitch those experiences together and actually show up in market with their voice, their brand, you know, how they want that to be configured. And that is actually the most important thing. I think the technologies are becoming more and more commodity. It's all around how you differentiate. So I think getting to a tier one bank set of capabilities I actually think is not the end, um, state. I think it's the starting point because I think from there it is how do you create those integrated journeys, experiences with the communities, those are the things that actually matter much more. How do you reduce your cost to income ratio? So you know, as a member owned bank you can actually pay back dividends to your members or as a for profit bank you can pay back dividends to your shareholders and contribute back into the economy or how do you manage your risk better so that you can lend to those customers that maybe traditionally you didn't lend to, but you now have access. You know, one of the banks that we work with uses all of their payments data to do their business lending. And while that is not a sophisticated way of doing lending, the performance of those lending products are so high because of how well they understand their customers.

Speaker C: I think that concept of democratizing access is probably one of the most important and probably the one that's not spoken about enough. If you look at legacy banking propositions, they really target actually are quite a small narrow segment of the market because they're the market which gives them the right return kind of unit economics because of the legacy kind of the significant cost. To your point, 80% of that cost is all the operational complexity. If you build a platform as a service layer which can, is effectively configurable and can be scalable and can serve multiple use cases, it allows you to serve multiple sectors of underserved parts of the market. And even in developed countries, you'd be amazed in Australia or in the UK how many, maybe not unbanked, but uh, how many underserviced or underbanked people there are. And when we start to go into the emerging markets like where we operate in Palmatology, South Africa, Asia, Latin America, America, um, it's almost the vast majority of the population is, is under serviced. And so being able to, to take that platform layer and start to actually create unique propositions to service those individual segments is very powerful because that starts to bring financial inclusion to people that have never had access to products and services before. And that's how we grow the economy in the world and we help to raise standards of living across the board. So there actually is quite a powerful message here about actual kind of social

Speaker B: contribution I think, and a real world impact to create real financial inclusion. Right. Because we often talk about inclusion as a product challenge, but increasingly it's an infrastructure one as well. Right. So if you uh, and we talk about, you know, if the Rails aren't modern inclusive products just can't reach the right markets, you know. So Kirti, how do you see, you know, touching on Jeff's point, how do you see platforms like Constantinople changing that equation to help banks, you know, really reach these underserved communities and you know, are we looking at how do they launch lower cost financial services in these markets?

Speaker A: I actually see big aspect of serving those communities as about increasing their financial acumen as well. And part of it is creating like, you know, if you actually create a very good Banking experience. That means that as a customer you actually really understand your financial situation really well. I uh, think that's one of the things that we really value about partnering with SaaS, companies that are API first and event driven. And I like because the reason is if you can provide all the things like real time notifications of spend, you can provide all the things like spend analytics. If you can create savings goals, auto sweeping, you know, like help coach and guide, leverage AI as part of the, you know, the, the assistant that is embedded into the mobile banking or web banking experience that allows you to create those goals and manage towards those goals. Integrating partners like wealth management partners. We don't see ourselves as building all of these businesses and things, but we see so much of the segments and markets that our client banks tend to serve are the ones that can really benefit from understanding their financial position and their financial literacy. Better loyalty, uh, points is another one of those examples. Right. Like I think if you create personalized loyalty suggestions and offers that really links back to who they are and their particular segment. And these, you know, a lot of these mid tier banks, because of their specialist nature, either they're specialist in a product and by product that could also mean that that product only serves a particular age demographic or something or their specialist in a community which could be part of a, uh, you know, an industry like healthcare, or it could be part of a geographic community. They have access to so much data through their partners that are beyond banking. And I think it's all of this coming together. You know, we probably haven't had as much experience as you as working, you know, in countries like South Africa around underserved segments. But I think the concept could equally apply on building the financial acumen of some of those segments as well.

Speaker C: I totally agree. I think that education piece is huge and I think to your point, being able to provide the right tools and learning mechanisms through things like USA, your wealth management, your data analytics, etc. I think is very, very powerful. And I think we're probably going slightly off topic here but I mean there's a whole separate podcast around how the curriculum at school should change to help service this around. There's lots of different examples because if there's anything more important than teaching the next generation about finance and how to invest safely, I don't know, I don't know what it is personally and I think we should be doing that. And I think tools that you've just spoken about then I think can be very powerful for again for the social good.

Speaker B: Absolutely. I think Financial literacy is one of the most important causes in our entire industry. Right. And you know, we've had some really amazing. Yes, actually on the podcast, who have written books about financial literacy. How do you teach your kids from a young age how to spend, how to, you know, really think about, do I really need to spend in this way? How else can I benefit? And it goes back to simple things that we can do ourselves. So, for example, building out a child card where, you know, like you were talking about spend controls, you can only use your card between, you know, 5:00pm and 7:00pm and it can only be used on the PlayStation store. Right.

Speaker A: Well, that would suggest the opposite of that. I don't want my kids to have the.

Speaker C: Yeah, exactly.

Speaker A: No, but definitely, yeah.

Speaker B: You know, we can actually shape the way the next generation looks at funding and how they manage their money. And I think, Kirti, this is really important because the fact that Constantinople is taking away all of the kind of operational burdens from these banks. They can start to look at these more innovative tools to really bring in the younger generation around. What is financial literacy? M. And not just the younger generation. I mean, if we look across apac, if we look across Africa, lack of innovation and financial literacy have to go together. Otherwise the adoption of the new products would just. It's never going to work. So it's up to all of us to really build out that literacy. And as you can see, I'm very passionate about it.

Speaker A: Well, you had a great point before also about, you know, that intergenerational wealth and you know, that you would bank with the banks that, uh, you know, your parents banked with. I think these, these moments matter quite a lot. You know, teaching, uh, a parent about the power of compounding interest if you were to save for your child's education. And, you know, I can't remember what the math was, but I think it was something like 500. A, uh, month that you put away can lead to $150,000 with, you know, within a 6% interest rate or something like that by the time your kids are 18. So, like even just like those types of things as a parent, and then as you have your, you're teaching a child about, so savings habits, savings goals, and you know, also giving them access to spend money with the, uh, right level of controls, like merchant category codes, to manage that in a, in a safe way and still have that access. I think all of this is really going to very quickly become table stakes.

Speaker B: Yes, absolutely.

Speaker A: And I think again, I go back to the brands that have the trust have the power to trans, to really play a role in transfer, transferring intergenerational wealth as well as intergenerational financial wisdom and knowledge. And I think that is ultimately the path to becoming the bank that manages your wealth versus the bank that you use as just because you can do a uh, digital onboarding and then make some payments and that's all I'll use it for.

Speaker C: I have three daughters, two seven and nine. Two's a bit too young to do the financial literacy piece, but we just spent last weekend designing their first ever prepaid card. They uh, got delivered through the post and then going forward they get, they're going to get pocket money and then on a weekly basis they can decide whether to spend that or whether they almost keep it. Uh, and we're trying to teach them about interest and if they want to do things like treats like watch tv, they have to pay some money to actually watch TV and they can choose to where they wanted. What's the trade off between keep the money and get interest or you know, spend it on watch TV etc. And the concept, you know, we'll see how it works is that uh, over time we can, we can teach them those things around you. Right. Compound interest and how uh, that moves. But it'll be, it's important I think that we have these conversations.

Speaker B: Brilliant. That's really impressive. I think this is something we need to roll out throughout pavementology. You know, have a, you know, how much your kids saving. That's really, really cool. Jeff. I want to look more into the processing perspective because obviously Constantinople and palmatology work really closely together but building for agility, I think this is something that is really, you know, a lot of our, our listeners are really, really keen on hearing because Jeff, you've seen firsthand how legacy infrastructure holds back innovation. Right? From your vantage point of paleontology, how are you seeing the same infrastructure revolutions play out?

Speaker C: I think it follows some of the themes that we've, that we've talked about already. I think the reality is that legacy infrastructure is typically on, on prem. It's typically slow in terms of your ability to um, create unique or tailored user experiences. You know, if as a business you're trying to future proof and think about the future, it's no longer possible just to I guess tinker at the top level, which is kind of the mobile app or the uh, the first layer, you can do so much with that. But in terms of actually building long term sustainable kind of agility, I think it just doesn't happen. And so we're encouraging people to really think about redesigning the whole stack because actually if you can, it's the underlying infrastructure, which I guess historically has been seen as the, the boring part, which actually is what's driving the ability to innovate going forward. And so, you know, I think a similar concept to what Kurti was saying is that a paintology, it's a single code base across a single platform that operates across all of our 65 different markets. Uh, a company can integrate into that once and then from that they can either move into new markets if they have expansion opportunities, or they can start to configure the platform in ways to deliver some of those customer experiences. So whether it's a child who you want to provide certain spend controls or limitations, or whether it's a spend management platform, it's all done from, I guess, the same core base. I think the message to people is actually almost look deeper than maybe you have done previously. Look at the underlying infrastructure actually, because that's what's actually going to drive, uh, I think some of the exciting opportunities in the future.

Speaker B: Yeah, and I think when you look at it, Constantinople and Pavementology both have very similar ways of working. Right. Single code base, cloud first. So really looking at taking your platform as a service, but also the underlying technology to, to power it. And as long as you have the same, you know, vision and goals for how you want to achieve innovation, it's really good. That foundation is the same we haven't

Speaker C: talked about, but I think is important as well is that I, uh, don't think you need now to have the trade off. It's not global or local. Yes, you can do global and local. So if you've got the right infrastructure layer, uh, that allows you to kind of be standardized, you know, there is still very specific localized market needs. And so I think, Kurt, you talked about potentially Australia versus the U.S. yeah, like similar markets in many ways, but also very different in many ways as well. So you need a technology that enables you to still deliver a proposition which, which talks to the people in those communities. And we're the same. At Palmatology. You, uh, know, providing a card program in the Philippines is quite different potentially to a card program in, in Mexico. Um, you know, we've just launched a credit product which has, you know, credit is very different in different markets in terms of interest calculations and billing cycles, et cetera. But fundamentally the same proposition of credit is credit. And so you can build 90%, I guess, standardized, and then you can do some, some Localized localization on top.

Speaker A: I think there's a few just benefits from having a modern SaaS model that shouldn't be overlooked. I think the first being actually that anything that you build for any particular bank or client or market gets leveraged by everyone else.

Speaker C: Yeah, agreed.

Speaker A: I think that fundamental premise of maintaining that single code base allows you to ensure that innovation is shared across the whole client base. I think the second is also that you can create efficiencies and not efficiencies isn't always about costs but efficiencies is about creating instant experiences and um, that those instant experiences can be created again across the platform because everything is built as software first. And the final one is almost because the SaaS because, because you're a SaaS business, you're just. Your DNA is around deep configurability. Your DNA is around ensuring that the clients that you work with are always able to differentiate by, through your infrastructure without having to be locked in to say you must use our infrastructure in this particular way. And that requires a lot of thought about what does it actually mean to differentiate. Yeah, you're not differentiating based on, you know, which availability zones in AWS you're using.

Speaker C: Right.

Speaker A: You're differentiating based on the APIs that you make available that allow you to create very specific experiences. But then you're also creating that confidence that from a stability and scalability perspective that's, that is your remit. Right. And I think that's, it's a factor of why businesses that have been built in the, you know, in the generation of cloud or in that cloud native way can be built in. That concept like sticking a SaaS label on a legacy technology like doesn't allow you to do those fundamental things even if you can have subscription licensing. You know, I think that's actually a really important aspect of it's. It's hard running a business in with all of those things, but I think it's definitely the benefit that the clients benefit.

Speaker C: And actually Pamtology and Constantinople are probably quite similar in that we're these B2B infrastructure businesses and I think our mere existence relies on customers using our platform and being enabled by our technology. And so obviously we've been doing quite a lot of work recently about how do we define paintology in our brand and M, what does it stand for? We spend a lot of time coming up with um, what's the right metaphor kind of to use. And we came up with the term the launchpad because effectively actually we're only successful if we enable our Clients to, I guess to, to grow. You know, our platform really should be the launchpad for their success. And, and whether it's an expense management business or a, you know, a NEO bank or a international remittance business, they need to be able to configure the platform to your point Kirti, to then deliver the experience which, which they need to, to help them grow. And so, you know, if you have the mindset of we only exist and will only be successful, our clients can use uh, our platform to do what they want to do. It kind of, I think it sets that mindset around deep configurability and everything you just talked about.

Speaker A: Yeah, definitely. I think that's a really important culture from our companies as well around, you know, the growth of our clients is the number one priority. And everything that we're doing in terms of our roadmaps and what we create, what features we develop is all keeping that mindset in mind about how do we help our clients grow. And I'm sure, you know, I know your team has a client success team, similarly we have a client success team. You know, their job is basically to sit down and go well, how can we help the bank grow? I think that, that, that sort of DNA of the company is a super important aspect of running a SaaS business versus a traditional legacy licensed software business.

Speaker C: And I think you said like the technology is increasingly uh, I'm loath to use the word because it, it could be thing but potentially is increasingly becoming commodity. And it's actually, but it's how do you bring that technology together and how do you add value to your client and the way you can add value to your client is actually driving insights and helping and helping them grow. Yeah, being a trusted, a trusted partner and I think, you know, there's so much more that we can do as a business. You know, there's always things we can do better. One of the things that we are looking to implement this year is very much creating this kind of customer advocacy board where we bring our clients from m around the world together to actually share ideas. Because the digital bank, you know, in the Middle east versus a digital bank in Latam versus Digital bank in Europe actually there's, they're not really in direct competition, but actually I think there's lots of learnings that they can bring and actually part of the power of working with a cloud native kind of SaaS business as clients globally is to actually bring some of those learnings together.

Speaker B: Especially when you look at some of the markets that are very similar like for example customers in or, or banks in the US can really learn from banks in Australia. Right. And so when you look at the advocacy board, that's really what I think is going to start to change the game and again drive innovation, but drive innovation through flexibility and optionality. And I think that's what both of you have been talking so much about, is really giving Cust being the enabler, uh, to power customers to say look, you want to differentiate, sure. We're not building something bespoke. You have all of these options already available, configure it in the way that you want, that your customers want. And you know what, if it doesn't work that's fine, we can very easily just change the configuration. And that's the beauty of SaaS, that's the beauty of having a platform that is so agile that you can say this didn't work, let's do something better for our customers. And I think that's our joint goal.

Speaker A: Right.

Speaker B: And touching on that point, let's look now at collaboration or competition or over competition. Let's say that Kirti, your model is very much built on collaboration, right, where you partner with ecosystem providers to create something that is bigger than the sum of its parts. Why is collaboration such a critical part of new banking infrastructure models?

Speaker A: Yeah, I mean I think there's two lenses to that. There's one lens is that to extract the full value out of a uh, someone that provides a specialist service. Really it needs to be considered in the sum of some of its parts when it's fully integrated. So I use a good example. You know, a lending uh, capability only makes sense if it's integrated all the way across the lifecycle and into the core and where you can use the data to provide insights to your client banks, to provide things like where a customer is dropping off in the origination journey and you know, what are the things that we can do to nudge them, um, nudge the customers along the way, which then links back into the marketing, which then links back into how you communicate with the customer, which then comes back to the personalization. So just, you know, the use of a single provider in isolation doesn't extract the full value potential. So I think that integration has a huge amount of value. The second part though is having specialist organizations where their mission and goal is to drive one thing and one thing only means that you can rely on them as a partner to do that thing very well. And you know, historically you always had this tension between leveraging a best of breed architecture versus the Integration, complexity and where you now have partners that are cloud, native, API first, it's far easier to make that choice and get the benefits on both sides. Like, I think one of the reasons why our architecture works so well is because we're very thoughtful on choosing partners that all API driven conform to a common data model. Uh, no customizations, everything is event based. So when it comes to managing all the data inside our data lake, which we make available from, in terms of data democratization directly to our client banks, that is not a separate piece of work that needs to be done after the fact with all of these transformations that need to happen afterwards. Right. So, and I use that as a very small example, but that extends all the way through. And I think that you know, uh, the, the more you can leverage that focus and that innovation, the more you're constantly going to be able to be evergreen. And I think that's an accountability that now we all share. You know, at contentinople, our mission and goal is to manage all of that operational complexity and then help our client banks grow. And if one of our providers isn't meeting that same mission, purpose, goal, then that allows us to hold that provider, uh, accountable for that as well. And I think that, you know, the benefit of that ecosystem ultimately goes back to the end customer.

Speaker B: Yeah, absolutely. I think we're all in this together so it's good to share the load, but at the same time drive innovation in each part of the business and each part of the ecosystem. That's really why I think partnerships work really, really well. Looking ahead, the future of bank building, always very interesting. You know, let's look at five years from now. Kiriti, what does banking look like in 2030? Will most banks be running on platforms like Constantinople, which uh, are modular, uh, cloud first and interoperable?

Speaker A: I think the banks, I think as an industry, I think that we are charting a new category of software for banks and I think that it's going to benefit the industry. I think the real proof point that we hope to achieve is that we help grow the mid tier banking market share by threefold. That is sort of our goal and our mission in the regions that we work in. And I think that the more players that potentially enter into the market with a business model like ours, I think the better it is for the banking industry. Uh, I really think that we're sort of at the, if I look at 2030, I almost want to look back at the last 10 years and say, you know, I remember a time when every bank said we will Never move to the cloud. And you know, that was, and now, you know, any bank that is left that hasn't moved to the cloud, you know, in a desperate race to do that. Right. So I think the how infrastructure and the idea of vertically integrated businesses that owned all the way through to their data centers got transformed from a platform business that owned infrastructure. I think that same concept can really help transform the financial services industry.

Speaker C: I mean, from my perspective, if I was going to answer your question as well, not a chance. I mean I think it would be amazing if more of the legacy banks had moved to modern infrastructure. I think at this point in time there's still too much friction and nervousness around it. So I think, you know, the CEOs or the CTOs of especially the larger banks, I think they still feel at this point in time there's too much risk for them to make that decision. And uh, I think it's the type of decision, if you get it wrong, you lose your job. It's the type of decision, if you decide to stick with what you've got, you get away with it. And so I think that the risk and reward isn't quite there yet. Will it change? Yes, it will. 100% change. Will it change in five years? I'm not quite so sure. For me there's a few trigger events that are going to really drive this. I think we've talked a lot about the digital experiences and I think consumers will start to demand and I think their fee or their actions will make them move. I actually genuinely think in places like the UK and I'm not sure about Australia at the moment, in the next five years, your revolut, your monzos are actually going to start to take a meaningful share. So I think that will make people stand up and take notice. I think the legacy technology that some of these banks are on has a lifespan. It's going to break. I don't think it's a question of if. It's when. As 400 cobalt, there are only so many of those engineers left to do it. So that has to change things in our industry like MasterCard getting rid of the 16 digit card number for tokens. Lots of these core banking platforms or card platforms are orientated around the 16 digit card number. So the customer identification number, the statement, it's all built around that. So when that goes, they're going to have to do something. And they're the type of triggers I think that will make them move to a Constantinople. I think there's a really big opportunity for The Brave Tier 2 and 3 kind of mid market sized banks to take a leap on this. And given that The TAM is 90% legacy, even a slight shift creates a huge market opportunity for everyone. So I don't think it'll happen in five years. There'll be a shift within five years. But I think it's probably going to be unfortunately a 15 year journey before you actually get everyone there. But that's still pretty exciting for everyone.

Speaker A: And I think the modernization challenge also was previously predicated on, you know, how do I move my legacy and transform my data. I think how much that's being shifted from use of AI to drastically reduce the cost, the complexity, the need for subject matter experiments, experts to be involved in every part of the problem. I think migration is not as scary as it would have been 10 years ago.

Speaker C: Totally agree.

Speaker A: And I think compounded with the choices faced ahead, the biggest risk I see is the legacy increment, the incremental initiatives, the very, very small point problems that each person looks to solve. I totally agree that, you know, it sort of falls off the back of it and says I missed that last bit.

Speaker C: Yeah, yeah, 100%.

Speaker B: I think that it's feel the fear and do it anyway. Because if you don't do it now, you're going to either get left behind or you're going to be forced to do it later on when you don't necessarily have the capacity or the people.

Speaker C: And it's scary because you're potentially cannibalizing some of your existing business. It takes a brave person to kind of make some of those decisions.

Speaker A: Definitely. Yeah, definitely. But it's that, it's that consider the totality of the problem.

Speaker B: Yes.

Speaker A: And of course make the choice if incremental initiative creates value. But consider the totality of the problem first.

Speaker B: Absolutely. And Jeff, from you, one piece of advice for new founders while looking to modernize.

Speaker C: I think what you need to do as a business is understand your customer. And I think what's the problem you're trying to solve for your, for your customer and your customer can, you know, we've talked about it can be a different market, can be a different segment, different age demographic. When you understand that customer, then you look at how do you solve that problem. And I think that there are already a number of use cases where modernizing is the best outcome for the customer. And increasingly that shift will come. And I think, you know, I think, and I think to Kirsty's point that the barriers to entry almost day by day getting lower and lower and lower. Yeah. And so I think as you look at that, ah, I think it would. I can't see many scenarios where it is the best decision to not modernize. It's just that, you know, the human brain often finds the negative things to focus on and so it requires a big, a big jump and a big commitment. But I think the benefits are there for us all to see.

Speaker B: Absolutely. Be brave. Keerthi Final thoughts. What advice would you give to new banks looking to modernize?

Speaker A: I'd say zero base your transformation and don't be technology led. I'd say zero base being, you know, really think through just all your bank strengths and unconstrained what could be your growth potential and also zero base your cost and your operations and you know, what is it that is going to actually help you shift the needle the most? You know, create your bookends and then make the technology decision? That would be my advice.

Speaker B: Brilliant. I love that both of you are so customer centric. And unfortunately, that is a wrap. On today's episode of the Issue Academy. Companies like Constantinople and Paymentology are showing when banks get their foundation right, they can innovate faster, include more people and deliver experiences that truly last. A huge thank you Kirti and Jeff for joining this episode of the Issuo Academy from our side. We'll catch you next time. Thank you.

Speaker C: Thank mhm you.

Speaker B: That wraps up today's episode of the Issuo Academy, Pavementology's podcast to innovate, scale and provide impact. I hope you're leaving with fresh insights and actionable strategies to help you revolutionize your card programs and drive true impact in the world. If you've enjoyed today's conversation, please leave a review to help us reach more pioneers like you. Also, be sure to subscribe and follow us for more inspiring episodes and behind the scenes content from Pavementology. Until next time, I'm Merusha Naidu. Keep innovating, keep scaling and keep striving to make an impact.