For many Australian financial institutions, their core banking system is, as the name implies, central to their operations. For ‘neobank’ 86 400, however, it’s “just a ledger,” according to CEO Robert Bell. “It's not where the smarts happen.”
“Everyone else is sort of looking at it from, ‘What's the right core banking system that gives us the right products?’” says Bell. 86 400 was after an efficient, cost-effective core banking system with good API support and a vendor that was happy to work with the neobank, the CEO says, eventually settling on Data Action.
86 400 is a subsidiary of payments processor Cuscal and describes itself as a digital, mobile-first bank. At its heart — where “the smarts happen” — is its Customer Experience Engine, according to chief information officer Brian Parker.
The bank’s platform is built on an interlocking (and heavily redundant) series of cloud services stitched together with APIs. The CX Engine is the bank’s key IP and Parker says it goes to the heart of 86 400’s mission to be a “digital bank” rather than just an “Internet bank”
“Building a digital bank is a very different than building an Internet bank,” according to the 86 400 CIO. In the late ’90s Parker was the CIO at ING Direct, involved in launching in Australia what he describes as an “Internet bank”.
“An Internet bank has a whole set of problems with it that are associated with the browser, the type of customer that you’re after, and the breadth of product you’re trying to deliver,” he says. The team at 86 400 has built a bank “that is really purely aimed at the digital, mobile-only experience.”
The CX Engine is designed to deliver to account-holders a “very personal view of their finances”. With most banking apps or Internet banking platforms, the only difference from customer to customer is the balance shown when an individual logs on, Parker says.
“There’s no personalisation there. It doesn't really respond to your banking, your behaviour; it’s just giving you what I’d call a ledger view of your banking,” he says, describing it as a “very bank-centric view”.
“For some people, that works,” Parker adds. “They're accountants or they have that sort of mindset. That’s how they want their information to be displayed to them. But we think that's changing and that people want to actually have a view that is very personalised to the way that they bank and what is impacting them on a daily basis.”
That personal view could range from making sure they can expect to have enough money for regular expenses in the coming week or to meet an upcoming annual or quarterly payment, in order to help an individual manage their money more effectively. Another example the CIO gives it letting an account-holder know how they can maximise the interest on their account by making sure they meet criteria for bonus interest.
“So the digital experience is very, very different than what I'd call the Internet-banking experience,” Parker says. “It is tuned to you; it's responsive to what you do every day.”
Another example of the difference is the security architectures, Parker says, which are “completely different”: For example, 86 400 can use device binding as part of its authentication process.
In general, ease of use and simplicity are key goals for 86 400. The bank is launching with a “small, focused product set” to start with, Parker says. “We're not trying to be a Big Four and have thousands of products to support: Very simple to understand, very easy for you to operate from day one.”
Development of the 86 400 app took a “lot of work,” says Bell, adding: “The app is not the bank; the bank is the digital Customer Experience Engine we built.”
“That's where we invested our money, because without that we can't deliver a different experience through the app,” the CEO adds.
The CX Engine runs in the cloud; 86 400 is completely cloud-based and doesn’t own any infrastructure, Parker says.
The CX Engine is at the heart of the interlocking web of services that 86 400 sources from third parties. That includes payments courtesy of the bank’s parent, Cuscal, the Data Action core banking platform, as well as a number of additional service providers that deliver other core functionality such as Know Your Customer and credit assessment capabilities.
“What that means for us as a technology shop is that we have to be really, really proficient in the use of APIs,” Parker says. “And you know, I've never seen an API that is appropriately documented or tested or actually works the way it's intended. So one of those core competencies is how to work with APIs and how to bring them together to deliver something quite different.”
86 400 is not wedded to any individual technology and can “chop and change” as required, he adds.
Last year the Australian Prudential Regulation Authority (APRA) issued updated guidance on the use of cloud computing by regulated entities. It outlines a scale of risk for the use of cloud services to deliver different banking functions, as well as considerations before adoption of any particular technology or outsourcing arrangements.
Among the considerations are the “ability for the APRA-regulated entity to avoid a significant impact on business operations and meet obligations regardless of technology, people, process or service provider failure”.
Under the regulator’s outsourcing standards, banks must “develop contingency plans that allow for the cloud computing service to be provided through alternate means if required (e.g. transitioned to an alternative service provider or brought in-house), if required.”
“We use multiple cloud providers, and that's in part due because APRA has this concern about getting too tightly wedded to any particular cloud provider, and making sure that we have strategies to be able to move our technology to another platform if that's required,” Parker says.
The bank has placed an emphasis on provider redundancy. The CIO gives the example of the bank’s source-code repository: It primarily uses Atlassian Cloud, but also employs Google Cloud Platform to store code. Microsoft Azure is also employed by the bank. Parker says 86 400 has “lots of cloud providers all performing either a particular function or acting as a backup for another cloud provider.”
The CIO says that means that 86 400 has considered what it would do in the case of “absurdly remote risks like Amazon disappearing off the face of the planet”.
86 400 has headcount of about 80, with half of them working as part of its technology team. It uses a blue-green deployment model that can enable changes to be pushed out to production quickly, Parker says.
86 400 (named after the number of seconds in 24 hours) last month was granted a full banking licence by the APRA. The 86 400 app will be “coming soon” to Apple’s App Store and Google Play, the bank said following APRA’s announcement,