Software provider Fiserv and the founder of ‘digital-only’ lender Atom Bank have launched a software as a service platform aimed at overcoming a major barrier to new entrants in the UK banking sector – IT costs.
Despite recent government efforts to open up competition in the retail banking sector – such as reduced capital requirements and improved access to payments systems for new entrants – the 28 banks currently applying for UK licences are required to make significant investments in reliable IT infrastructure.
The collaboration between Fiserv and Atom Bank's Thomson aims to provide easier access to the necessary banking systems without requiring a large initial outlay, which can typically reach tens of millions of pounds, and require significant in-house support.
“It is great that there are 28 applications with the regulator to become banks but they all face one insurmountable hurdle, the creation of IT infrastructure to support a bank,” Atom Bank’s Thomson said at an event in London yesterday evening.
Dubbed Agiliti, the cloud platform offers the software functionality required to support a range of financial products – from current accounts to loans, mortgages and small business services – through volume-based pricing.
“The ability to pay on a ‘pay-as-you-grow’ basis means that organisations from very large to very small can come into the banking market. We are going to see more new banks like Atom, and new credit unions, and this is what will facilitate that change,” Thomson added.
Thomson will serve as a non-executive director for Agiliti, which has been set up through a subsidiary of Fiserv, while Atom Bank – which sells itself as the first bank to offer only digital services – will also be a customer. Another user of the service upon launch will be Manchester-based financial services firm Think Money.
The platform itself will tie together a number of elements of existing Fiserv software, such as the Signature core banking platform, already used in the UK by Tesco Bank.
It will also support a variety of channels as part of a modular approach. This includes branch, call centre, back office and ATM operations, as well as mobile and online banking, which will be available through Fiserv's Mobiliti service.
The service is aimed at enabling lenders to focus on the job of being a bank, rather than a technology firm, said Fiserv’s EMEA managing director, Travers Clarke-Walker.
“Although there is a lot of talk about differentiation in the banking market, a lot of that differentiation happens at the customer experience level,” said Clarke-Walker, who formerly led digital initiatives such as Pingit at Barclays.
"95 percent of anything that is in a bank is utility."
He added: “What Agliti allows banks to do is focus on the job of banking, and that is the quality of the service and the layers of innovation you have above the banking part – such as bringing other services like loyalty and reward.”
The Agiliti service will be available through a SaaS model or a traditional outsourced, hosted approach through the tier 4 datacentres run by provider Blue Chip.
The price will vary depending on the number of customer accounts, starting at around £5 per year for a customer with just a savings account, to around £25 per year for multiple accounts.
Cloud model benefits
According to Ovum chief analyst for financial services technology Daniel Mayo, the service “makes a lot of sense” for new entrants, but the cloud economic model will put pressure on Fiserv, which has invested in setting up the service but will receive revenues slowly from SaaS customers.
“There are a lot of risks and costs involved in creating your own IT system infrastructure so most new banks would want to go down the SaaS route, particularly as Fiserv are offering volume-based pricing,” he said.
“In all, it is a good idea. The main issue is that the vendor bears a lot of the upfront investment risk, which is why others have been reluctant. But Fiserv has the experience and financial fire-power to make this bet.”
He added: “There is only room in the market for two, max three players really, so there is advantage here to being first mover."