Ex-Google engineers aim to solve one of bankings biggest pain points

By July 15, 2016Bitcoin Business

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A bank’s core system is the back-end technology that enables it to process transactions as well as manage accounts and coordinate interactions between those accounts.

Thought Machine, a UK startup founded by ex-Google engineers, has developed a new core banking system called Vault OS that leverages blockchain and cloud technology to carry out these functions. It is being tested by a high street lender and a private bank in the UK.

Here’s where Vault OS plans to help banks: Unreliable core systems. Many high street banks rely on core banking systems that were created by patching together many generations of software — some of which date back to the 1970s. In the UK, these systems recently suffered a number of significant outages — in 2014, RBS had an outage that lasted four weeks and resulted in a £56 million fine from regulators, for example. Vault OS is designed to replace existing solutions made up of multiple systems with one streamlined system.

Core systems can’t keep up with new regulatory requirements. The number of regulatory publications, changes, and announcements that financial firms have to act on increased around 500% between 2008 and 2015. But legacy core systems weren’t built to handle this volume of requirements and struggle to keep up. Vault OS has built-in risk and compliance systems that are automatically updated with new requirements. It can also automate regulatory reporting.

Core systems are expensive to build and maintain. Over 70% of banks’ IT spend goes toward maintaining legacy systems, according to Citi . These systems also require extensive in-house infrastructure, which is a particular problem for challenger banks that don’t have the resources that legacy institutions do. Vault […]

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