Is time running out for legacy payments technology used by banks?

A need for core cloud-native payments

Like core banking a few years ago, there is currently a lack of cloud-native cloud technologies at its core in payments, with only cloud-native wrappers sitting in front of significant legacy, said Taylor.

“Payments is a brutal business, with multiple people sitting on top of multiple people, and everyone takes their cut. In our system, there is only us, Mastercard and the bank. Mastercard is just there for the protocol, its technology is not needed. This make it far easier and speeds things up.”  Visa compatibility is expected next year and multiple card networks will be added in due course.

The system takes care of all the authorisation as well as card limit and PIN checking, and then sends the payment to the merchant’s bank.

Beyond the simplicity, Taylor said security is one of the advantages of reducing the number of systems involved in processing a payment, adding: “Payments must be secure, you cannot have stray messages and back doors.”

He said that while most payment systems are fine, the more third-party systems that payments go through, the more at risk a payment is. “It’s good for the bank to have a single piece of software that does the whole thing,” he added.

Payments Vault has been built using the same Google inspired methods as Thought Machine’s core banking technology, put together from scratch in around 18 months.

“We had wanted to do this for a few years, but we have been so busy with the core banking engine that we didn’t have the capacity. But we decided to do it and went all in,” said Taylor.

Existing customers of Thought Machines core banking technology would have to sign up for this separately for the payments technology, which will add other payment rails over time.

Taylor said payments was a major endeavor and the company has no plans in the next two years to do anything else, although he said: “Many parts of the banking stacks are just not that good, so we are happy for another fintech to come in and partner us.

“What I want is for banks to have a cloud-native and really well-written banking stack, but we think we have many years in core banking and payments before we have to address anything else.”

Taylor is heavily influenced by Google following his time at the internet giant. He previously set up two companies – one of them, Phonetic Arts, was acquired by Google in 2010, which became the text-to-speech system behind its driving directions and voice search. Thought Machine now has 70 people in Singapore, 35 in the US, nine in Australia as well as 450 in the UK.

Gareth Lodge, analyst at Celent, said the cloud has changed everything: “Correctly designed microservices allow for much better scale and resilience, making them more attractive to the bigger banks. This isn’t just for cost, but agility as well. As such, the landscape is changing rapidly both in adoption and supply.

“But at the same time, it’s getting harder to win too – because there are more providers, and banks often assume cloud means lower cost, et cetera. I think the landscape may look very different in just a few years, and it’s likely to get even tougher for providers, so flawless delivery will be key,” he said.