''In my view, if you’ve hired several hundred developers as a challenger bank, then you’ve got fundamental flaws in your technical architecture''

Today we speak to Patrick Stanton, co-founder at Cyoda, whose key offering is to build complex systems on complex data within a fraction of the time and cost. We find out how they do this, what the benefits are and how such technology is fuelling FinTechs...

@humansoffintech: Tell us about your career path so far…

I think like a lot of developers, I started in my early teens, with simple games. Early in my career I built a data collection and market research platform, early social media platform (96) and then moved into building investment banking systems, starting at the London Clearing House. Before Cyoda I was building post execution core systems for global investment banks, cross product cross functionality.

@humansoffintech: When did Cyoda set up?

The idea/requirements behind Cyoda gradually evolved from idealistic lunch chats with my co-founder, Paul, around 2004 - discussing the fundamental technical requirements of an investment banking system that would make it far easier and cheaper to build and change stuff. We thought it was technically possible at the end of 2012. Cyoda was originally incorporated in Australia, we started in early 2013 recruiting and building the R&D team and I went full time. Then in Sept 2015 we re-incorporated in the UK.

@humansoffintech: How did you and the co-founders know each other?

There are 3 of us who founded the company. I worked with Paul in Frankfurt for several years in the early 2000s and I’ve known Lucy for 25years since university.

@humansoffintech: So lets find out a bit more about Cyoda and what you offer…

What is a Single Source of Truth?

Having all your data in one place, one simple data platform for all processing, reporting and analytics as opposed to duplicated many times and spread across countless systems

@humansoffintech: What are the commercial benefits to this?

* Eliminate the need for reconciliations

* Reduce cost of change (For example, in a conventional architecture, when something simple needs changing, such as a new field, you potentially have to change the data model in the source system, the interface that publishes that data and then all the downstream systems that report and process that data as well as the reconciliation system that checks the consistency of those systems that contain the same data. With a single data platform, there’s just one change.)

* Accurate reporting. No need to consolidate data from multiple disparate sources which may be inconsistent with each other

* Reduces regulatory risk (through improved data accuracy & consistency)

* Collateralize accurately (free up vast amount of money to invest elsewhere)

* Capitalise on market opportunities fast because you can change faster

* Reduce the cost of operations

@humansoffintech: What are the technical benefits to this?

Frankly the technical & commercial benefits are closely intertwined.

* Know your data (everything in one place, easier & faster to locate)

* Faster to change (& to build new requirements)

* Far easier to ensure accuracy & consistency

@humansoffintech: With such benefits, why are all banks not switching to this formula?

Some have, at least in part. It is an enormous undertaking to both technically and politically to “re-platform” a bank. Where do you start, when do you start and what with?

@humansoffintech: What are the risks and challenges that banks face when implementing new technology such as this?

* There is typically huge resistance to any talk of large-scale re-platforming. People think huge, multi-year projects. Massive risk. Delays. Scope creep.

* The solution is to start small and iterate. Pick the requirement which currently causing the greatest pain and where there’s the greatest benefit from consolidating data into a single source.

* Once that’s up and running, you will have your data consolidated - accurate & consistent - on a single, scalable platform. When the next requirement comes along it will be easy and fast to build that on the platform.

@humansoffintech: Have you got an example of a success story where implementing a single source truth has benefited?

 I understand that both JP Morgan and Goldman Sachs have consolidated systems onto a scalable data platform

@humansoffintech: Who are your main clients?

Our most significant live client is Value Concepts in Germany. Their vc-trade.de platform is built entirely on Cyoda. It’s a corporate syndicated loan trading platform which digitalises the end-to-end process for corporate borrowers, arranging banks and investors - involving complex legals and an auction process. We built the platform to VC’s specification, going live just 9months from our very first conversation. Since then they’ve been hugely successful, with 9 major banks using the platform and over 6BN EUR of placements to date.

We have a number of other clients who’re currently at project planning/scoping stage.

@humansoffintech: What advice would you offer a bank that is setting up?

[I’m answering this thinking of new Fintechs more broadly, not just challenger banks]

I actually believe (and from personal experience) the hardest part of setting up a new business is not the tech…It’s the commercial side. You need to be really, really confident of the market for your proposition and do the homework to make sure you’re right and you know how to access that market. If you look at the stats (e.g. CB Insights) or at the post-mortems on Medium - most fintechs fail due to poor product-market fit or unrealistic commercial expectations.

Of course, that doesn’t mean you can’t trip up on the tech. There are several challengers who’ve have raised tens of millions to build out their tech - they’ve hired tech teams in the 100s - and have still got tech problems. In my view, if you’ve hired several hundred developers as a challenger bank, then you’ve got fundamental flaws in your technical architecture. Yet these firms are typically labelled as ‘successes’. We’d argue they could have built the same thing for a fraction of the cost, with a far higher return to founders & investors if they’d used a platform like Cyoda.

@humansoffintech: When banks are setting up, what should they consider when picking their technology provider?

* If you don’t have technical expertise, make sure you speak to a lot of different people with different views/perspectives & ideas. If you like an idea, sense check it against others to find out if there may be downsides.

* If you are technical, be aware of your own biases. - You may unconsciously be inclined towards technologies you know. Be open-minded.

* Beware of great marketing. It is not the same thing as great tech!

* Think about the Total Cost of Ownership, not just the cost to deliver. If you have ambitious growth plans, the scalability and ease/cost of iterating new requirements will be far more material in the long run.

* Choose a vendor who is comfortable working on agile principles. - This is essential if you’re building a fast-moving business which needs to iterate fast. Be realistic that this requires a high level of mutual trust. Your ideas will be evolving all the time, so they can’t give you a fixed price up-front; you need to rely on trust, openness and daily collaboration to collectively steer the outputs toward a moving target, whilst staying within budget.

* Weigh carefully the balance between building and buying; often the answer lies somewhere in the middle. Ideally you want agility of change without re-creating the wheel.

@humansoffintech: I recently went to your panel discussion about whether fintechs should buy or make their technology – what is your opinion on this?

I would echo the consensus of the speakers. Firms new and old, big or small need to get very clear on who they are, what they can do better than anyone else and what they absolutely must ‘own’. Beyond that, it rarely makes sense to re-invent the wheel. For example, at Cyoda we’re a tech company. We’re perfectly capable of building pretty much anything ourselves. We sometimes get frustrated with tools we’re using and talk about building our own video conferencing or something. But then we stop, realise that’s insane and pull ourselves back on track.

Of course, we also need to consider what it means to ‘own’. For example, you may have an innovative business idea, for which there is no solution currently on the market. If that’s your ‘edge’, you’ll want to own it, but do you really need to own all the enabling tech stack that lies beneath?

That’s something we can help with; our platform comes with a business rules engine and a Workflow Designer which makes it super easy to view, build and change business logic. So clients can design bespoke functionality very easily and fast, whilst the platform takes care of all the underlying tech stack. They own the IP for that functionality, which is completely separate our enabling platform that sits beneath. But they get their solution much faster and more cheaply than if they’d built it all in-house. 

That time-to-market saving is often the biggest selling point to our customers - in today’s fast-moving world getting an idea to market fast can translate into significant competitive advantage. It’s also a robust, operational solution that will scale as their business grows and won’t need to be re-engineered as volumes take off.

@humansoffintech: What are the top 3 factors companies should consider when asking themselves this question?

1. What can we do better than anyone else in the market? What’s our USP?

2. What must we own directly to deliver that? (& By consequence where might we consider outsourcing)

3. What skills do we need in-house to manage and oversee outsourced activities?

Patrick is speaking at an event I am working with for The FinTech influencers next week. The event is a collaboration between Harrington Starr and The Realisation Group - book your tickets here.