Future of Finance


10x lowers the cost of curiosity about digital transformation

A transcript of the Future of Finance interview with Leda Glyptis, now Chief Client Officer at 10x.

0.14  Hobson: Hello, I’m Dominic Hobson, Co-founder of Future of Finance. My guest today is Leda Glyptis, Chief Client Officer at 10x, the provider of a Cloud-based digital banking operational infrastructure. Founded by former Barclays Group CEO Anthony Jenkins, the mission of 10x is to deliver an operating system to banks that makes them by design, customer-centric rather than product-centric. It’s an ambition nobody is better qualified to fulfill than Leda Glyptis, who has held digital innovation roles at BNY Mellon, Qatar National Bank and consultants Sapient. But immediately prior to joining 10x was CEO of the 11FS foundry, which also developed a digital banking technology. Leda, thanks for joining us.

Leda Glyptis: Thanks so much for having me and for the amazing introduction.

1.03 What is the story of 10X, including the founders and the funding?

1.03 Dominic Hobson: Without wanting you to repeat everything I’ve just said, what is the story of 10x, including founder Anthony Jenkins, yourself and the other colleagues and indeed the funding of the business? What’s the story of 10x?

1.16 Leda Glyptis: 10x is, as it says in its name committed to making banking 10 times better, not a little better, but 10x better. And the intent when Anthony founded the business was to build the technology he wishes he had when he was running Barclays and, and before that the institutional business. And I think there is something unique in a business built by ex-practitioners. I am, as you described, an ex-banker myself. I held roles in operations and technology growing up before moving into innovation and from there into FinTech. But to a much smaller extent, I have experienced the challenges and frustrations of big traditional banks that are constrained by the investments they have made in their existing technology; by the commitments they have made to existing clients that they can’t just switch off and shift; regulatory commitments; complexity of an estate that has grown over time across geographies through acquisitions – just very real, very complicated constraints in the here and now. So when these banks face into their digital ambitions, the changing landscape of regulatory requirements and new competition, they have to shift all of that legacy at the same time, without compromising reliability, without compromising resilience, without compromising security, and retaining the ability to service existing business and grow. It’s an exceptionally complicated space. And frankly, most of the challengers trying to do core banking better try to start small, solve small problems and start moving up the complexity scale. 10x is different in that we tried to start at the top end of the complexity scale. If you solve these challenges for the most complicated and most demanding institutions, whose resilience, reliance, security, infrastructure scale, is the most demanding in the industry and you do that well, doing things that are less complex will be a much easier journey than doing it the other way around. And coming with credentials of knowing exactly what those problems look like, Anthony was the uniquely qualified person to lead this effort. Our clients think that. We’re currently live with Chase here in the UK and with Westpac in Australia. We’ve just signed some more work with our partners, Westpac, and we’re working with a couple of more clients in other geographies that I’m not allowed to talk about yet. But all of those clients obviously bind to that vision, as do our investors. As you say, we have an incredibly impressive but, more to the point, supportive cap table. Chase and Westpac, our clients, were foundational investors. But we also have Ping An with us on the journey, the Voyager [Capital] Fund from the get-go. And more recently, CPPI [Canada Pension Plan Investment Board] and BlackRock sitting around the table being very nurturing investors, but also giving us immense credibility on our cap table. That was a very long answer to a very short question.

4.31 Dominic Hobson: Yes, and you put a lot into that about scale, about legacy, about wanting to work with established institutions, and you are working with two new entrants, both of which are very well established financial institutions JP Morgan Chase, and Marcus, owned by Goldman Sachs. 

4.48 Leda Glyptis: Marcus is not one of our clients, Westpac Banking as a Service (BaaS) is.

4.53: Dominic Hobson: Okay, I don’t know where I got Marcus from. Forgive me.

4.55 Leda Glyptis: I mean, I would love it. They are more than welcome to give us a call. But they are not one of our clients. I believe they’ve actually built their own infrastructure, but I’m not sure.

5.05: In working with 10X, how important is not having a legacy?

5.05 Dominic Hobson: Right. Okay. Well, let’s hope they give you a call after they watch this. But in working with 10x, how important is that legacy problem? That’s the one we hear so much about that actually moving from – and we’ll talk about the TSB debacle in a minute – you know, moving from what you’ve got to where you want to be is not a risk that many banks want to take. Obviously it’s easier if you don’t have a legacy but the sort of clients you’re trying to work with are going to have a legacy, aren’t they? So how big a barrier is that?

5.35 Leda Glyptis: First of all, I think it’s important to take a moment and say legacy is an indication of past success, right? The industry talks about legacy like it’s a bad thing, because it constrains and complicates what you do next. But legacy equals continued financial success for a sustained period of time. It equals clients, and a balance sheet, and profit. All of those things are actually really good things. They come with things, they come with systems, people, organizations, buildings, but the reality is that, if you have legacy, you also have a thriving business. So, wrapped up in this legacy is the concern to not disrupt the life of your clients, the communities you serve, your investors, and to carry on doing what you were doing while also doing the next thing. And that’s where legacy starts becoming a challenge, because it’s very often expensive and cumbersome to maintain, and so different to the technology you need for the future, that it’s next to impossible to future-proof it. You have to replace it. I think there are a couple of things that are changing that conversation, because ten years ago, it wouldn’t have been possible and in fact, [it was] very common for decision makers inside a bank to say, `That’s too much. That’s too far. That could be career-ending. We’re not touching it.’ But there are three things that have changed inside and outside organisations. And I think that is changing both the options and the mindset when it comes to legacy. The first is regulation. The regulators, particularly in the more advanced environments, such as the UK, the European Economic Area, Australia, Singapore, those areas where the regulators are really forward-thinking, the regulator is setting a path and setting a tone and setting a pace. That means that your COBOL-based mainframe will not be acceptable soon. And we’re hearing more and more regulators having conversations with incumbents saying, `You’re going to need to uplift your estate.’ So the expectation of the market is shifting and is rising and the regulator is very much setting a tone. That means that the legacy systems are not just a preference; they will be an unacceptable component at the same time as the entire economy [is] becoming digital and your legacy systems [are] being non-viable. If you’re trying to service a digital, real-time economy with a batch-based COBOL mainframe, you will not be able to. You’re just not able to. It’s not that you won’t do it well. You won’t be able to. So the combination of the economy moving faster than some banking institutions and the regulator being forward-thinking means that very, very soon it’s a requirement; it’s  not an option. So your choices will be about how; who with; and when, rather than if – and I think that’s a pretty big shift. The second shift is leadership. In the last ten to 15 years, the people who are young and getting started and curious about technology, and fearless about transformation, are now in decision-making positions. That ten to 15 years have seen a generation that are much more comfortable with rapid change graduate to the next set of decision-makers. The people we think of as sitting around the table are not the same as they were 15 years ago. There’s some overlap for sure. But there’s a set of decision-makers and talent that are much more au fait with what we’re talking about, and we are seeing them make different decisions. First and foremost, the BaaS moving in Westpac, or Chase moving into the UK with a purely digital play, is a leadership decision. And that leadership wasn’t there 15 years ago, perhaps but it very much is now. And then the third piece that I think brings it all together is that people like us, people like 10x, but also other players in this space, are looking at how we can reduce the barrier to entry and the cost of curiosity. What used to be a Big Bang, big, monolithic system, switch it off, migration to a new monolithic system, all the risk, none of the reward for five years – nobody operates like that anymore. Things are much more incremental, step-by-step, smaller pieces, early wins, managed risks. And I think those three things coming together makes the transition away from legacy both inevitable but also much less terrifying.

10.32: Established banks have up to this point mostly “faked” their digital offerings. Is that no longer an option?

10.32 Dominic Hobson: What you said there about banks being COBOL- based and batch-based prompts a thought in my mind that up to this point banks – I’m talking about the UK, I’m talking about my own bank, among other things – have kind of faked digitisation. Faster Payments is a good example of that, where actually the banks remain on risk, everything is still netted and batch-processed through the RTGS system. So, in a way, we have this sort of fake digital payments system. Are you saying that we have now run out of road with faking it? So you’ve actually got to do this for real now in digitising your offering?

11.09 Leda Glyptis: I love that question. And I need to be careful how I answer it because I might have [inaudible] firebombing my house if I say RTGS is fake. I think you’re absolutely on the money, saying that we as an industry have spent a very, very long time putting up … I wrote a piece a couple of years ago calling it, `I want my bling where I can see it.’ Spending our time, money and effort on highly visible nuggets of digital capabilities mostly centered around UX [User Experience]. So apps and web interfaces that didn’t necessarily go all the way down, as you rightly point out. You may have a set of digital capabilities. But if the clearing system is crank-operated, then you’re not fully digital. Or if certain exceptions or certain conditions or certain currencies actually are not part of your estate, then you’re not fully digital. So I think we have definitely been driven by a need to spend little and show a lot.  Actually it wasn’t a [inaudible], it was a preference. Because there was so much else to do that digital efforts were for a long time tied, very tightly coupled, to UX apps. So people didn’t really think, `Well actually, if I have an app that isn’t plumbed all the way down, do I really have an app? Or do I have just complexity?’ I think the limitations of that have become apparent in truly jarring user experiences. And then more complicated offerings that we just can’t support because they don’t need an app, they need real time digital connectivity. I think the ability to put your money where you can see it and not invest in the plumbing is gone. Have we run out of road? I think we’re definitely rapidly running out of road both because, as I said earlier, the regulator is much more nuanced in what they expect to see. But also because the next set of capabilities can’t be dealt with, you know, the whole idea of the duck gliding serenely, but pedalling like crazy underneath. You can’t do that if you want to have embedded finance. You can’t hide the fact that under the surface, your infrastructure is older than me. You need to have capabilities that do everything in real-time. So in terms of the next level of evolution, there is no road. You’re absolutely right. You can’t pick and choose if you want to have an embedded digital solution, all of it has to be digital or it won’t be embedded.

13.48: Do the financial market infrastructures (FMIs) have to digitise their platforms as well or can banks digitise their offerings without taking FMIs into account?

13.48 Dominic Hobson: And what are the implications of that for the public infrastructure? By which I mean, in the case of payments, the RTGS system and the case of securities [infrastructures] like the central securities depositories, and so on. Does the public infrastructure need to be in place? You can’t simply, as a bank, change your own infrastructure and then find yourself inter-operating with batch-based systems still. Do these public and private infrastructures need to move in lockstep?

14.15 Leda Glyptis: Yes, they do. And I think that was part of the complexity, that people tried … Well, actually, there are two layers to the complexity. One is people didn’t know where the line between utility and proprietary value, additive digital capability, lay, right? So nobody wanted to do as a utility what might turn out to be competitive. But I think we know where that line is now. So utilities is important. It has to move in lockstep. That doesn’t mean coordinated to the second but it means that in the next years – that will have to be two to five, not five to ten [years] – all of these components have to move in tandem, or we’re as slow and fragile as our slowest and most fragile component.

15.11 Are challenger and neo-banks – banks without a technological legacy, but possibly also without customers as well –  attractive as clients for 10x? 

15.11 Dominic Hobson: As you pointed out, the great thing about having a legacy if you’re a bank is it means you’ve got revenues, you’ve got customers. So that is an advantage. Does it make sense for you as 10x to work with neo-banks, challenger banks (that covers a very wide spectrum of, of institutions – I think the Bank of England has authorised something like 19 different banks in recent years, so I know it means different things)? And I guess those start-up banks have to work with whatever the infrastructure is – the public infrastructure is – when they start as well. It’s probably a constraint for them. But are they attractive clients to you – a bank, which has no legacy but also no customers?

15.55 Leda Glyptis: 10x is solving a problem at its most complicated. That means that the less complicated version of the problem can also use the same solution. So a bank with no legacy and no customers doesn’t have as complicated a set of technical problems. It will get them when they get to full expression, multi-geography, complicated transactions. So we’re solving the problem at that end. Could we service a neo-bank? Yeah, of course we could. Are they more attractive to us? They are not more attractive for two reasons. One is we actually really do see that where you can have the biggest impact on communities and societies is where people are actually genuinely using a service in anger. So the banks that are dealing with consumers in great numbers are more pressing, and therefore, a more rewarding set of complex problems to solve. The second is that, as a start-up, the challenge that they’re all grappling with is, `What does the business model of a neo-bank need to look like to become profitable without needing to look exactly like an old bank?’ And nobody has really cracked that yet. So we’re happy to service anyone who’s going on that journey. We don’t work with any traditional neo-banks yet, but we did work with Chase who had no customers and no legacy. So for us, it’s the nature of the problem you’re trying to solve. And we’re there to help whether you start with zero customers other than your beta users, or you start with an established book that you need to migrate.

17.44 How big an obstacle to genuine digital transformation is the TSB debacle? Has it reduced the appetite of banks to risk changing their core systems?

17.44: Dominic Hobson:  Now I said I’d bring up TSB, so I’d better do that. And my question here is as follows. You can go into a well-established UK retail bank, and you can say, `Well, it’s not just us who want to put you onto a different paradigm. Technologically, it’s your customers who want it and even the regulator wants it now.’ How often do you hear people say, `Well, we watched, you know, TSB. They tried to move on to a new operational infrastructure and look what happened to them. It was disastrous for the customers. They got fined and the regulator was upset and it was a reputational disaster for them.’ How often does that – this is far too risky for us to do – actually come up in these conversations?

18.23 Leda Glyptis: Well, I’ve been doing a job similar to this for the last 20 years, right? So a lot. And it’s not just TSB. It’s a long list of technology swap-outs that didn’t go well in the last 50 years. And it tends to be the most recent one that is top of mind. Increasingly, however, we hear it less and less. Because the reality is that there are a whole host of things that you need to do from a regulatory perspective that you can’t do on the old systems. And there’s a whole host of things that you wish you could do from a competitiveness perspective that you can’t do on the old systems. Let me give you an example. When COVID started – this is my favorite example – every single major bank had a clear instruction from the government to create payment holidays for mortgage payments for homeowners. These were optional, but they had to be available to everyone. And they essentially had some tweaks to the repayment schedule. So you needed to create an option, you needed to roll it out to everyone, but make it optional to opt in. And you needed to change the repayment schedules. On a system like 10x. making that change takes seconds to type it in, minutes to have it approved by the right people. In a COBOL-based mortgage system, it took most banks six to 12 weeks of labour from a team of engineers of varying sizes, who in some cases had to be brought out of retirement because COBOL is not taught at universities anymore. That is not just the cost of doing business. That is the gulf between what is expected and possible, and what our existing systems can do, which creates some regulatory exposure, which completely cripples banks’ time-to-market, which also means it cripples its time-to-value. So, increasingly, it’s becoming a no-choice journey. You can’t stay with a system that binds you that way in a world that is real-time. So everyone is talking about embedded finance now. But you know it as well as I do that, if you have a reconciliation system and a post-reconciliation system that works to a 48 hour SLA [Service Level Agreement], you can’t do embedded payments, because your systems can’t do end-to-end, digital, real-time awareness and visibility. So all of the things you’ve talked about tied together, we are an eco-system, we’ve talked about the eco-system for so long, referring to how the start-ups would play, but the idea is, `We’re all an ecosystem.’ Money travels through so many institutions in order to do a full circle from money-in-your-pocket to investment, pension, government funds, sovereign funds, and back again. All of it needs to essentially keep up with the economy. I think that is the biggest thing. For a very long time, banks were looking at as digital capabilities as options for a savvier toolkit. But the reality is, in the last 15 years, while banks were playing around, as you said, in pockets, the economy has become digital. So it’s not as much of a choice anymore, as it is an absolute essential requirement.

22.12: Are legacy systems of incumbent banks the main reason Open Banking has failed to grow as fast as expected?

22.12 Dominic Hobson: Now, you’ve mentioned embedded finance more than once. You haven’t mentioned, I don’t think, Open Banking yet. I suppose embedded finance and Open Banking are arguably different facets of the same phenomenon. But the main reason that these things have not progressed as fast as they should have done is these legacy systems. As you’ve just said, banks have no choice about adapting to this world now. But up to this point, they have been obstructing progress in that world simply because they are not technologically capable of delivering the potential of those.

22.46 Leda Glyptis: I don’t disagree with you. I have a slightly more optimistic view, which is that embedded finance, banking-as-a-service, is resting on a tripod. One leg of the tripod is the regulation, which has taken, I would say, the last 10 years. The CMA [Competition and Markets Authority Report] was what, 2013? PSD2 [the second iteration of the Payment Services Directive of the European Union (EU)] a couple of years later? No, it was 2008? So we’re looking at 15-20 years almost, about [a] regulatory journey that CMA, PSD2, Open Banking, Open Finance – regulatory pieces building up on top of each other and maturing. And that, I don’t think could have happened any faster. Because both the regulator and the market had to wrap its head around what all of those bits mean. So if the tripod has three legs, one is the regulation maturing and that has taken ten to 15 years. The other leg is that becoming data-driven, API-first institutions took quite a lot of thinking around data schemas, data governance, how to build it, how do your old systems, but more importantly, your old products, move to the new world? How do you price them? How do you distribute them? So that piece has also taken a good ten years to be built. Most banks now are quite API-savvy. The third leg is the imagination to know what to do next. So though I agree with you that technological constraints have held us back, I think that the biggest constraint is that banks were looking at these new capabilities and couldn’t quite work out how to monetise them. Whereas the last ten to 15 years have taken us on a journey of maturing technology, both in the economy and inside the banks, and maturing an increasingly sophisticated regulation. The final piece – the third leg to the tripod – is people coming together inside banks and across banks and their partners and saying, `Okay, I understand the technology; I understand the letter of the law; but also the regulatory intent. I understand platform economics. And now I understand how I can actually do something creative with this.’ And I think that’s why, after all this time, we’re beginning to see banking-as-a-service come to the surface – embedded payments, and the sort of holds for sale space, embedded insurance –  because that third leg to the tripod is finally coming together. People going, `I have the kit, I need to do some more uplift. But I know which way I’m going, I understand the regulation. And now I know how to make money doing this.’

25.30: What does “data” mean for a clients of 10X – have banks changed their views about the value and use of data compared to, say, ten years ago when they were all envious of Facebook and Google? 

25.30 Dominic Hobson: You’ve brought up data, and you’ve brought up platform economics, and a lot of what we’ve just been talking about – embedded finance, Open Banking, for example – are really about the data flows. Yet you’re dealing with banks, legacy banks, traditional banks, which don’t just have legacy systems, they presumably have lots of data silos. Actually getting this data, let alone transmitting it to somebody through an API, is actually a very considerable challenge for them. So if I asked you, on the basis of your experience with these clients, and what you talk to these clients about when it comes to data, how does that conversation run? What does data mean to the client and so what does it mean to you, as 10x? It could mean something simple like, `We get a single view of our customers.’ It could mean lots of different things. 

26.17 Leda Glyptis: Yes. It can and it should and it does. And actually, we have a white paper out on exactly that topic that I’d love for your listeners to download and read and give us some feedback. I would say for a very long time, again, it’s been an evolution, right? And although nothing is moving as fast as you want it, we are definitely seeing that evolution. Ten years ago, when banks thought about data, they had this attitude of, `I have it, I should be able to make money with it, but I don’t know what questions to ask it.’ And then the next set of problems was, `It sits in a data lake. Do I need to migrate all of it? Do I need to structure all of it? Do we start doing our sort of, excuse me, go forward data strategy, where we just take a hit on everything we had up until now? Because where do you even begin?’ So these were overwhelming questions that have been, again, resolved by osmosis and evolution because the regulator has been very active in making it very clear which data is the banks’ to use, which data is not the banks’ to use at all, and which data the bank can be informed by but not use. The second thing that’s shifted is that banks had this view that they will have a look back to look ahead on data because that’s historically how they had done it. You look back at the numbers and inform your view on what you do next. But one of the things that we can do now, thanks to digital capabilities, thanks to companies like 10x, is have a real-time view of everything from your clients. Position and preferences and location to your corporate clients’ liquidity needs – real-time treasuries – something that wasn’t possible a while ago. So the power of data in the moment is what banks are beginning to tap into. And that’s where moving away from legacy to do something that isn’t a little different, a little better, but it’s so radically transformative to your business is how the risk and discomfort of going from what you have to something new that you you’re not familiar with, is actually managed because businesses are not looking at a system that’s end-of-life and you have to go through all the pain to get something that’s a little better. Businesses are looking at the possibility of doing things that sound like magic, compared to the systems they currently have. And that is the biggest motivator. So for me, going from this static view of data lakes that you could potentially query if you thought of a clever question, versus real-time views of your liquidity position, your treasury position, your credit position, as a consumer or a business. This is transformative, and it’s mind-blowing for someone who has been working, you know, with green screens and [inaudible] 30 years ago.

29.32: You are working with Westpac in Australia. How much does the opportunity there owe to actions by the central bank (namely, the New Payments Platform) and the government (namely, the Consumer Data Right Act)?

29.32 Dominic Hobson’ Yes. So it’s not just about the user experience, it’s actually about running a bank better as well. Can we talk a bit about Australia? You mentioned you’re working with Westpac. Now Australia is very interesting, because it seems to be more innovative on the banking front than some other jurisdictions we could think of. The Reserve Bank of Australia has built this New Payments Platform (NPP), which is capable of doing real-time payments for real rather than, like Faster Payments, sort of faking it. But they’ve also passed this Consumer Data Right Act, as part of the long-term strategy to make consumers owners and controllers of their own data, which in my view, is a potentially revolutionary development. It will kind of move us away, in a sense, from the platform economics of the likes of Facebook towards something which is much more consumer-driven and will force banks and indeed all institutions to start responding to what customers want rather than parking products and services in front of customers saying, `You never thought you’d want this.’ But what are you doing with Westpac? And how far is it driven by the New Payments Platform and the Consumer Data Right Act?

30.40 Leda Glyptis: First of all, let me say that it makes me chuckle every time you say `We’re faking it,’ but I can’t argue with you, I can’t disagree with you. I’m a huge fan of what the Australian regulator is doing. I think it’s visionary. And I really like the fact that they’re taking a stand as to what they would like the future to look like for consumers. And I am seeing some of that from the FCA [Financial Conduct Authority, the UK securities regulator]. I’m seeing that some of that from the PRA [Prudential Regulation Authority, run by the Bank of England]. I like that. I actually like an opinionated regulator, who says, in a changing world, and in a truly digital economy, the way I protect the consumer isn’t just by giving you checklists like the way I used to do, but by having a much more effective dialogue about what good looks like. So I’m a big fan of that. And I agree with you that they’ve taken a highly informed and measured view that will eventually take us to a very different place with a much more informed and empowered consumer. What we’re doing with Westpac is we’re the engine under their very ambitious banking-as-a-service (BaaS) platform that was launched last year, working with third parties, working with exciting entities such as Afterpay and SocietyOne and there’s a whole host of new partners coming in the next few months, creating a rich customer-first set of solutions that in some ways compete with the traditional bank and in some ways enhance it. So it is in every way a business move. But it’s also a technology move because they build a completely different stack with us and some other partners, which now they can go, `Okay, I’m looking at my institutional bank, and I’d like to be able to do all of those really cool, real-time, informed solutions for my clients. I know how to do that now.’ And that’s what I meant by saying you lower the cost of curiosity, and then you unlock a whole host of capabilities for your customers. So our partnership with Westpac in Australia is super exciting for us, because we get to work in the context of one of the most enlightened regulators in this but also I think we get to work in a context that sets the tone for what will come next. Because we are seeing that every major regulator around the globe is looking at Open Finance and moving in that direction. I wish they talked more to each other. Because in the detail the provisions are not actually identical so you don’t have portability of solutions. If, say, Australia and the UK decide that they will extend their Open Banking regulations to each other, you’ll have to rebuild certain bits in the detail, but as a direction of travel I find … As a consumer and a practitioner of digital finance, I find this the most exciting time to be working.

33.43: 10x is working with Westpac on transaction banking as well as retail banking-as-a-service. Is what you are doing with Westpac a single digital platform in embryo, spanning both wholesale and retail business?

33.43 Dominic Hobson: I think I’m right to say you’re also working with Westpac on their transaction banking business as well. And if that encompasses, for example, the securities business which also has legacy systems, legacy processes, legacy procedures and indeed legacy market infrastructures – although as we know the ASX is trying to build a blockchain-based CSD there as well. Now that speaks to me of a great deal of flexibility in your core platform. If it’s adaptable to retail banking on the one hand, and wholesale transaction banking on the other, or are these … What does this tell us about where Westpac is going to end up? Is it going to end up with a very flexible single platform spanning everything that it does? Is that the long term [ambition]?

34.29 Leda Glyptis: Minefor sure. I would love to be the single partner for Westpac and we will absolutely do everything in our power to continue giving them every reason to have confidence.

34.43 Dominic Hobson: I was thinking there’s something about your proposition, you know, what I said at the outset, of being customer-focused rather than product-centric?

34.48 Leda Glyptis: There are two aspects to your question. One is, what do we do to make that possible? And the second is what the bank’s journey is to get to that decision. And you’re right in that 10x is highly extensible. There is a high degree of modularity and re-use. Now, there are certain things that are very, very different when you do transaction banking to retail. But actually there are certain things that are very similar, and there is no reason to build two separate things like a traditional provider would do. You just need to understand what you’re solving for. And that’s where having a lot of ex-bankers in the team really, really helps – knowing what it is you’re solving for, so you don’t have to replicate anything. But equally, you don’t … You know, when something is a distinct difference. So I would say you’re absolutely right. 10x brings a lot of extensibility, flexibility, modularity, so it could – and has absolutely the vision to be able to – support any of our clients across their entire universal banking set of services. It means the world to us that our partners look at the work we’ve done, the delivery, the client relationship, the quality of the platform, and say, `Yes, we will do more with you.’ There is nothing that gives us a greater jolt of joy than an existing partner continuing to have faith in us. Obviously, it’s early days on our work with the transaction bank, but we’re very excited. As you know, that’s the space I grew up in. So I’m very excited to be back in it. But more widely for 10x is that it is a fantastic piece of work. And look, from our point of view, we will do everything in our power to be the partner of choice for the entire bank for every bank we work with.

36.36: Is the transition to a new digital operating platform of the kind delivered by 10x a gradual migration or a Big Bang?

36.36 Dominic Hobson: Can I ask you how these transitions actually work? You said at the outset that most people approach digital transformation in a sort of cautious way and say, `Well, we’ll try and digitise this bit. And if we’re lucky, we’ll be able to digitise some adjacencies or discover some other things we could digitise.’ The 10x approach is actually to look at the problem from the other end of the telescope and say, `Well, let’s start at the top and totally transform your bank.’ So if you’re Westpac and you’re looking to move from your present operating platforms onto this one or two new operating platforms, do you gradually sort of migrate the clients across over time? Or is it a sort of Big Bang, that you detonate when you’re ready to go?

37.15 Leda Glyptis: Banks will fundamentally have different risk appetites in this. The Big Bang detonation approach has been how most banks have historically done it, and I am yet to see one that worked. Westpac is a fantastic example because what they’ve done with banking-as-a-service is proven a new business model and a new technology stack simultaneously. So if you think of this, not from a technologist’s perspective but from a risk and compliance practitioner’s perspective, it’s all about risk mitigation, right? It’s all about knowing known risks and allowing for the unknown risks and how you sequence and manage them. Westpac, by saying, `I will go into a brand-new business, banking-as-a-service services and a new P&L vertical, and do it in a new tech’ … Excuse me, it doesn’t touch any of the existing technology, but proves out the technology. So all your resilience, performance, scalability – all of those risks are green, tick, and nobody’s worrying about them by the time you think about migrating the first user from either the consumer bank or, when it comes to that, for the transaction bank. So what we’re saying to our customers is the Big Bang approach was the only way we could do it then but we don’t have to do it like that now. Balance risk and reward is the first one. It’s not just about risk mitigation. It’s all about the upside. If, say, you bring 10x into the mix, because you want to start having [a] flexible credit offering, tied to people’s behaviour and performance and, sorry, behaviour and preferences, right? So you launch that service. And it allows you to test different solutions, go to market with differentiated offerings that don’t cost a lot to maintain because this is digital and the cost of service is lower. So you start having the upside of speed-to-market, speed-to-value, higher customer stickiness before you say, `Okay, now I will migrate all my credit customers, because I have proven that technology. And also I’ve got a bit of upside.’ So risk-manage, risk/reward balance. And then the other side of risk is, `What am I worried about?’ Bundle it and slice it so that you do it in smaller increments faster, because everything moves faster when you’re doing something in a truly digital fashion. And you will be done sooner than you would be if you did as it a Big Bang, net/net, from start to finish. And much less will have gone wrong, because you won’t have done any guesswork because if somebody says, `What could go wrong on year five of a seven-year migration?’ the answer is you don’t know. Whereas if somebody says, `What are your risks if you migrate your dormant account, and your people who are under witness protection in the next three weeks,’ you know exactly what can go wrong.

40.21: It is said that banks spend 80 per cent of their technology budgets on running the bank and 20 per cent on changing the bank. How big a constraint is that for 10x which is, after all, advising clients to change the bank?

40.21 Dominic Hobson: I’m going to talk about … I’d like to get down to the nitty-gritty here. And I have three things in mind here. One is budget, you know, where does the money come from? And other is the IT department – whether they’re a friend or a foe of what you’re trying to do. And the third is the other people working in the bank, by which I mean the sort of digital talent they have available. I don’t want you to talk about all those three things in one go. Perhaps we could start with the budget. Most banks are spending most of the budget patching up and maintaining their existing systems. I looked at some data which suggested banks are spending anywhere between 70 and 90 per cent of their IT budgets just keeping the show on the road, leaving very little room – 10 or 30 per cent of the budget – for actually changing the bank. My first question is, how big a problem is that for you, as you’re going in there saying it’s time to change the bank?

41.09 Leda Glyptis: I wish I could tell you that it wasn’t a problem. But it is. And it is a problem because it’s a handy excuse. It’s not a reason; it’s an excuse. If anything, spending 90 percent of your budget on something that is falling over is the biggest driver to change it. But it’s a handy excuse ..

41.31 Dominic Hobson: Your COBOL developers coming out of retirement  … 

41.35 Leda Glyptis: Somebody  – a client – told me recently that some of their senior architecture meetings looked like a ZZ Top where you couldn’t stop laughing. But yes, COBOL developers coming out of retirement, right? And that’s not a joke. That’s happening in every jurisdiction I’ve ever worked in. So spending 90per cent of your time and money on something that keeps falling over, where the death of your engineers is a risk that is being tracked by your compliance team – and I’m not making this up – if you say that this is a reason to not change, that’s an excuse, right? So it’s a leadership failure. So we hear it, but what we hear when we hear that is that this particular leader is not courageous enough, or not informed enough, or not the right leader for the business. Can we take them on the journey? Yes. Is it more likely to happen when there’s a change in leadership? Also yes. What we are seeing a lot of is that that leadership shift that I was talking about earlier means that those guys – the new generation of leaders – don’t want to spend their time patching something that’s falling over, don’t want to spend their time telling the business, `No.’ They actually have a different kind of ambition. And what we’re seeing is either they go after a new business opportunity, like the banking-as-a-service space in Westpac, and then they say, `Well, now we’ve proven this and it works. Let’s use it for other things.’ And that’s a different way of tackling the budget. The other is that we have an evergreen platform, so you never need to upgrade 10x. 10x upgrades itself for you. We’re extremely unusual in that and I think it’s an honest thing to offer your clients and the right thing, and I’m staggered that nobody else is doing it. But the reality is, if you’re one of the traditional vendors, you will reach a moment where a very expensive upgrade is coming up. And you’re going to be looking at a bill of 30 to 50 to 100 million to end up in a place that is not too different to where you are. That’s always a good moment to think about it. We find people go, `Okay, our system X is coming to end-of-life in the next few years, let’s talk.’ And then the third is places where the competitive landscape is heating up and people go, `Okay, my competitors, or a neo-bank is offering these highly nuanced products. I can’t do it on COBOL.’ So the budget may come from different places in the IT department, to answer your question.

44.28: How much resistance do you encounter from Chief Technology Officers (CTOs) when trying to persuade a bank to change its operating model?

44.28 Dominic Hobson: Well, I’m thinking here of your chief technology officer (CTO), you’ve got 5,000 people working for you, your bank’s promotion and remuneration structures are geared to how many people work for you. And even if you didn’t have all those problems, actually you quite like having 5,000 people working for you. Are you going to be an obstacle?

44.42 Leda Glyptis: Sometimes. Sometimes for sure. Our biggest competitor is bank CTOs thinking they can do it themselves. 

44.53 Dominic Hobson: Right. Okay. It is worse than I thought then. 

44.55 Leda Glyptis: Yes, it is worse than you thought. And it’s staggering that it still happens. And it happens – definitely in smaller numbers – but it still happens. And you are right on the money. These folks have been rewarded for being siloed, for having an army of people for creating bespoke capabilities. I was speaking to a friend – I won’t name the bank, but a very big American bank – who have taken Splunk – you know Splunk – and created their own version of it that is not talking to the outside world and has about a tenth of the functionality. So they spent all the money to get the Splunk licence, and then they spent money and time to make it less useful. And that happens a lot in big banks. So, you are right, the traditional IT department might look at us and go, `I can build it myself.’ My view is, `Off you go. I’ll be here in five, six years, when you realise you can’t, and you can’t because it’s complicated. And it’s difficult. And it’s not even the thing you need. It’s the utility to get to the thing you need.’ And if you spent six years thinking about this, you haven’t spent six years thinking about what you’re giving your customers. New customers are not going to wait for you. That said, not every IT decision-maker is like that. We’re increasingly seeing people who go, `I know what I need, so I know how to choose a partner. But I need you to take that away, and do it for me, so I can do the high-end, highly competitive, highly differentiated stuff for my clients.’ That technical decision-maker is a friend. The technical decision-maker who’s ambitious and wants to move fast and therefore wants to partner with third parties that will accelerate – that’s a friend. The technical decision-maker that knows that they want deep, narrow expertise, and they shouldn’t have an army of people, that’s also a friend. 

47.01: How big an obstacle to the digital transformation of a bank is the question, `What are we going to do with all the people whose jobs are replaced or displaced by the new operating platform?

47.01 Dominic Hobson: My third nitty-gritty point was it was about the people and in a sense you solve one problem for them: they don’t have to go through the soul-destroying business of trying to persuade talented developers and data architects and others to come and work for a big fat boring bank. But, on the other hand, they have got all these people working there, who are basically employed by the legacy technology to do manual links between … to cover the gaps, I suppose, between the legacy systems. You referred at the outset to these banks being built by acquisitions. They’ve got thousands of different systems, and basically the way they are hooked together is by people, most obviously, with reconciliation clerks. What happens to those people? How big an obstacle is the fact that you got all these people, either to be made redundant, or to be upgraded, upskilled in some way to work with a new platform? How often does that question come up as a problem for the banks you’re talking to?

47.54 Leda Glyptis: Never. And I wish it did. Because you are very right. These people hold the banks together. And I feel very passionate about the fact that people think of bankers and they think of traders but actually the vast majority of bank employees are, as you say, reconciliation clerks and people chasing corporate actions around and cashiers and people doing bond coupons. The vast majority of banking isn’t high-end, Gordon Gekko sell/buy, greed is good. It’s actually people keeping things together, people keeping things running in jobs that are highly skilled, highly specialist, not necessarily well remunerated and not necessarily sighted of how the world is changing.  The question of how do we upskill and retrain these people? [The question of how] do we leverage their knowledge and their ability and their willingness to find solutions is one I feel very strongly about. It’s not one that comes up. I live in hope that as these digital propositions mature and gain traction, they will come up more. And they will find the whole 10x family willing and able to help without thinking because some of the most valuable skill sets in banking, but also some of the most valuable attitudes and behaviours are in those people. I wrote an article a couple of years ago called `Friends in low places.’ And it was all about how I’ve achieved some pretty incredible things inside big organisations. And it was always because someone pretty invisible to senior management helped me navigate some weird and wonderful obstacles. And without them, banks would fall over. But I don’t know how … Okay, I know that senior decision-makers are aware of it in the abstract, but they’re not aware of it in the detail. It doesn’t come up. I hope that it will start coming up as the digital capabilities we’ve been building take root, and we’re moving to the next phase where they’re no longer the new thing, and they become the main thing. That’s when we need to make sure we don’t lose these people. And we don’t let them down. And we don’t leave them behind because they kept us going all this time. I remember many years ago in a bank, that, you know well, that I worked at when we met, there was a major outage of a third-party system. And the team did all European NAVs, all European net asset valuation calculations, by hand over a weekend, because it was unthinkable to them that the clients would be left wanting. And then they did a manual reconciliation when the system was up and running to make sure that nothing was missed.

50.53 Dominic Hobson: I even remember the vendor. Yes. August 2015. You’re right. It was remarkable to discover who your back-up system was.

51.03 Leda Glyptis: Yeah, a team sitting in Cork, Ireland. No.

51.07: Are banks still reluctant to move to the Cloud?

51.07 Dominic Hobson: Anyway, obviously something worth thinking about, that – how you adapt the people side of things. You’ve given us an idea there for Future of Finance to follow up with. Now just to talk a little bit, penultimately, about the Cloud. You mentioned a minute ago that the platform is sort of self-updating, self-healing, if you like. Is Cloud adoption … If you had gone into a bank ten years ago and said you’ve got to move to the Cloud, they’d probably have thrown you out of their office. Is it still an issue?

51.37 Leda Glyptis: Increasingly not. So you’re right. Ten years ago, I remember my CTO saying, `This will never catch on.’ Okay! That is no longer an issue. We see very senior proponents who are deeply knowledgeable inside banks taking their own organisations on a journey, because from a regulatory and compliance perspective, you’re looking at and for different things. So we’re seeing that maturity. We’re also seeing and we’re speaking to a couple of really visionary potential clients at the moment, who are sitting in jurisdictions where the regulator is either about to okay Cloud for financial services or has done it. And they are chomping at the bit to be pioneers in a way ten years ago they wouldn’t; they would have wanted someone else to go first. So we’re seeing that shift for sure. There’s definitely still a little bit of a journey. But it’s a journey that I’m finding people more willing to go on both from the regulator side (`So what does resilience look like on the Cloud?). The first obstacle was getting to the place where we all admit that what we looked at isn’t what we need to be looking at. So the regulator is thoughtfully having the dialogue, I’m seeing more and more clients having the right teams inside to have this dialogue. And I’m seeing entities that are willing to go first. That said, I have spoken to a number of very large banks, mostly in North America, who were like, `I’ll pay you to build this on prem[ises]’. And I like money. It is tempting, but that’s not our product. And I would say the last bastion is the really big banks in North America. Not all of them. But the really big ones seem to be like, `Yeah, but that’s not how we do it.’ Everywhere else – and it’s a combination of regulatory maturity as well as banking maturity – the Cloud is a given.

53.56: Are regulators helpful or unhelpful in encouraging the banks to move to the Cloud?

53.56 Dominic Hobson: You mentioned the regulator there. I detect regulators … And you said earlier in this conversation, that actually regulators are very pro banks digitally transforming themselves because they think the risk of them carrying on as they are is too high. But they’re also alive to this risk of moving to the Cloud. They kind of like the Cloud, because it means things are less likely to fall over. But on the other hand, if they do fall over, it’s likely to be catastrophic. Is that regulatory … schizoid approach by the regulators helpful or unhelpful to you as you have these conversations with banks. Are some of the regulators kind of in favour of you doing this or not?

54.30 Leda Glyptis: I would definitely say not all regulators are created equal, right? Not all regulators are there. But the world is more connected now than it was ten years ago. So I’m finding that in places like the UK or Australia, the regulators are the best advocate for the type of technology we do. Now, they anticipate to have a very clear view of what we do and have conversations with us – even though we’re not regulated, we’re part of the of the plumbing. I think they need to be comfortable. So you’re having conversations with the regulator that ten years ago, an entity like us wouldn’t have, and it’s absolutely the right thing. But regulators who get it, who push for Open Finance, Open Data, Cloud First, are the best allies we could have. Because they are accelerating the advent of the world we want to be in. We’re also finding that in places where the regulator isn’t there … We have particularly one jurisdiction at the moment, [where] we’re working with an incredibly talented group of people who want for their country what they’ve seen in others. So they’re working with their regulator to get to a place that says, `This is what it would look like for us.’ And that dialogue is absolutely brilliant. And we’re seeing more and more of that. The US is complicated by the fact that you’re not dealing with two or three regulators like you would in most other places, but 100s, because of the multiple regulatory bodies, and then the multiple layers at federal and state levels.

56.12: How concerned are banks about competition for their business – are they afraid of losing their business, not just to the digital arms of established incomers and neo-banks and challenger banks, but even to telecommunications companies and social media platforms?

56.12 Dominic Hobson: I’m going to ask you shortly what your what your vision of the digitally transformed bank actually looks like. But before I do, can I just ask you one second from last question, which is, how keenly do banks feel the competitive pressure? Are they terrified that they will lose their business, not just to incomers like Chase in the UK or to these neo-banks, these challenger banks, but actually even to telecommunications companies or social media platforms? How keenly do they feel that hot breath of competition on their neck? Is it a big incentive for them to change or not?

56.53 Leda Glyptis: Again, a very thoughtful question. I think the answer is always, they think about it, they talk about it, but I think their understanding of it has shifted dramatically in the last few years because for the last, let’s call it ten to 15 years, banks have talked a lot about disintermediation. They talked as if they understood that the biggest danger was not that you wouldn’t need banks anymore, but that the most profitable parts of the banking food chain would stop being as profitable. So they looked at start-ups as potential threats to that sort of fatty bits of the value chain. And they looked at telcos and they looked at big tech. Disintermediation was the name of the game. But they didn’t – although they talked about it a lot and thought about it a lot – necessarily pin their colours to the mast. They didn’t necessarily go, `This is what I will do differently.’ And there was undeniably a case of feeling that you wouldn’t necessarily get to choose whether you would do this but you would get to choose when you would do this. So, that feeling, that banks and financial institutions controlled the timing of this journey was definitely there and it coloured the way they thought about competition. That is gone now. The realisation that that is no longer the case, and the timings are set by the market, the regulator and your clients, has hit home now. And I think everything we’ve talked about is also informed by that. The second piece is that some of the challenges are coming of age. More to the point, some of the incumbents are hustling. Maybe you weren’t scared when Starling [Bank] broke even, but you’re definitely scared now that Chase is going gangbusters, right? Because it has all the flexibility and agility of a challenger, and the seriousness, credibility and depth of pocket and, and, and end … of a Chase. So if you – and I would have said that you wouldn’t have been right to dismiss Starling – thought Starling isn’t worrying, you can’t not be worried about Chase. Equally, when a giant the size and shape of a Westpac enters the banking-as-a-service game … If you look around, banking-as-a-service has been something on the edges. You haven’t got another big, big bank, saying, `Yeah, I’m going to do this. I know how to do this. And I’m gonna do this.’ So I actually think the biggest thing that will set the cat amongst the pigeons is the visionary incumbents who go, `Oh, I’ve got this.’ And that is now scary. Because you have the challengers. You have the regulator who wants better. You have an economy that is moving faster than you. And now some of your competitors are streaks ahead. If that doesn’t focus the mind, I don’t know what will.

1.00.03 What does the transformed bank of the future look like?

1.00.03 Dominic Hobson: My last question, I promise. What, as you look ahead, and you think about all the things you’re doing, all the clients who interact with, these visionary incumbents, these challengers, all the things you’ve talked about in this in this conversation, do you have a clear idea in your mind of what – and I appreciate this can’t be a static concept, it will change over time – the digitally transformed bank of the future will look like in your mind? Do you have that vision clearly before you when you’re talking to clients?

1.00.34 Leda Glyptis: I do. For me, there are three things that will be radically different. And we can reconvene in a few years and see if I was right. The digitally transformed bank or transformed bank will own very little of its technical estate. Because if you don’t own it, and you partner or buy, you can swap out when it stops working for you. Which means that I need to always be best-in-class. I can’t stop worrying about it and expect you to come back in ten years and buy the new version of 10x. But as a bank, you need to own as little as possible. So that you can always move to the best possible solution and focus on the things you need to do well. So lower ownership of your own estate, work with entities like us, with partners. We’re deeply, deeply embedded and partnered with you but run that thing. It’s their problem, not yours. That’s one. Two, banks will stop obsessing with customer touch points, and will start understanding customer value-add. Bothering your clients and enhancing their life is not the same thing. Talking to your client and enhancing their life is not the same thing. We’re seeing that happening. It will happen much, much more. So really understanding that digital capabilities are about nuanced service, not touch points. And then the third piece will be about speed. A digitally transformed bank is a bank that doesn’t groan when it needs to change something. That’s when you know you’ve arrived, if you need to make a change to one of your provisions, to one of your reporting modules, to one of your schedules, to pricing, to, to, to…  you can do it with zero pain because you have created a system that has plasticity which is what is required of you.

1.02.45 Dominic Hobson:  Leda Glyptis, thanks very much for taking the time to talk to Future of Finance.

1.02.48 Leda Glyptis: My pleasure. Thank you for having me and thank you for this fantastically insightful dialogue.