The Isle of Man's First Cloud-based Core Banking Platform

Max Alexandrovich
 on 
August 23, 2021

Recent fintech developments and the large-scale adoption of digital services seen during the COVID-19 pandemic have transformed the banking sector. Age-old institutions have been forced to quickly switch to a fully digital approach and have rushed to provide the wide range of online services that customers have come to expect from their banking provider. The following are just some of the changes we have seen introduced since the pandemic began:  

1. Real-time online payment systems have been developed to facilitate quick deals and fast payments.

2. Digital wallets and contactless credit cards are replacing cash and eliminate the need to use ATMs and to carry large amounts of cash.

3. Credit cards are being replaced by mobile app-based payment solutions.

4. Crowd-based lending online platforms have removed the dependency on big banks or credit companies to give loans to private persons and small companies.

5. New agile banking start-ups with a mobile-first approach are becoming more popular.

6. Banking and financial institutions are transferring their vast server farms to cloud to become more agile, accessible, and productive.

Driving these changes have been the customer-centric fintech companies and start-ups with whom the traditional banks are now having to compete. In the digital age, the well-established banks are having their market share picked away at by this wave of tech-savvy new entrants. Bogged down by outdated systems and technology, some of the larger banks now find themselves struggling to keep up with the pace of change. Let’s have a look at some of stumbling blocks that are hampering their progress.

The Branch-based Model

Traditional banks were built around their physical branches and this is where customers’ relationships were born and developed; however, the most modern consumers now prefer the simplicity and ease of online mobile banking channels. As a result, traditional bank branches remain almost empty save for small businesses wishing to pay in cash and typically older customers who prefer traditional over the counter service. Branch-based banking is not only expensive, due to the property footprint and the people needed to run the branches, but also on a path to extinction especially due to COVID-19 accelerating the uptake of digital services.  

Outdated IT Infrastructure

Most traditional banks still run their IT systems in mainframe-based networks and have a massive dependency on their legacy technologies. In addition to their legacy software, many are hosting their infrastructure in proprietary server farms. Complex systems and outdated monolith architecture do not allow for proper scaling and have high operational costs. Using older technologies also limits the traditional bank’s appeal when it comes to attracting fresh talent. Suitably qualified and experienced individuals looking for roles in banking development are drawn to organisations operating at the forefront of technological change. They look for exciting opportunities where the technology is impressive and are unlikely therefore to be drawn in by the prospect of working with banks using older platforms.

Close Proprietary Systems

Many traditional banks have a range of services such as banking, loans, investments, and credit cards. In many cases, these products are developed by different departments without proper communication or coordination between them. This is known as the “silo effect”.  The silo-effect does not allow the proper integration of services, which negatively impacts the customer experience. Lacking a unified customer experience drives customers towards competitors who are able to offer a “One-stop shop” where they can make payments, invest, lend etc. – all with a single login.

What Have We Learned from The Traditional Banks?

• Physical infrastructure and branch-based banking are a thing of the past.

• Clients are looking for convenience and integration, so new platforms should offer a wide spectrum of services.

• Adopting modern technologies and agile-iterative methodology is essential.

Capital International Bank - The First Cloud Based Digital Bank in Isle of Man

Due to launch in the next few months, Capital International Bank has been developed for the digital age and can be manoeuvred with ease to adapt to changes in the industry and changes in customer needs. It will operate under a Class 1(2) banking licence and is able to offer accounts to corporate clients and others that qualify under its licence, but not to retail clients as it does not have a depositors’ compensation scheme.  

A lot of the recent disruption in the banking sector has been motivated by companies who adopt the “from the end” approach, whereby they continuously reshape their product offering based on end-user feedback.  

The modern fintech companies are building backwards to meet their customers’ evolving requirements. This means that the direction of their product’s development is determined purely by their existing and potential customers’ expectations and vision.

Capital International Bank is an entirely digital bank that is based on ‘Customer Centric Design Methodology’. The bank will offer a range of banking services including payments and foreign exchange, with the addition of lending against investments planned for further down the line.

The first iteration of Capital International Bank will be released by the summer, all being well, and from that point on, we will be listening closely to our clients and making changes to our banking services accordingly. Essential to facilitating quick changes will be our cloud-based infrastructure. As customer requirements change, our cloud technology paired with our agile methodology, will allow Capital International Bank to be updated quickly. Responding swiftly to the evolving needs of our corporate customers will be key to us maintaining our position at the fore front of the fintech developments shaping the modern banking ecosystem.  

The bank is targeting the fiduciary sector, professional services, family offices and the eCommerce and eGaming sectors. It will be characterised by speedy client onboarding, accounts open within days, great online services and pragmatic local decisions made by the management team in the Isle of Man. Capital International Bank will be the island’s first ever digital-only corporate bank and will be the first bank to be awarded a Class 1(2) licence under the Isle of Man’s Alternative Banking Regime.