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Thursday 08 November 2018

Lloyds puts thought – and dosh – into Thought Machine

logoThe idea of a 'bank in a box' – as in a fully-formed, end-to-end 'drop it and hop it' core banking platform in a package – has been the holy grail of banking software product developers for many years.

Most of the established banking software vendors have mimicked the concept by developing 'templated' versions of their standard offerings to simplify implementation, especially for new bank entrants, but it's still their legacy product under the covers.

London-based startup Thought Machine has, they say, started with the proverbial clean sheet of paper. They are developing a 'cloud-native' core banking system from the ground up. The startup, which was founded in 2014 by a couple of ex-Google engineers, has attracted interest – and funding – from Lloyds Bank, which has invested £11m for a 10% stake in the business as part of an £18m Series A funding round. Its co-investors were not disclosed. Lloyds has been working with Thought Machine since 2017 and plans to enter into a 'development and deployment phase' in 2019.

There was some mystery over Thought Machine, which reportedly went into administration late last year (Source: Banking Tech). However, the founders subsequently explained that this was part of a technical restructuring process and that the business was very much alive and well.

I commend the Thought Machine team for their ambition. However, the idea of creating a 'one size fits all' core banking platform is rather at the extreme end of the art of the possible. And were they to succeed, there is the even greater challenge for traditional banks such as Lloyds to migrate holus-bolus to the new platform. Far less complex platform migrations using traditional software usually come to grief (you know to whom I refer).

At best, Lloyds will get early access to some useful cloud-based IP which they may be able to deploy around their existing core systems. But a total core replacement would be a 'brave and courageous' move!

Posted by Anthony Miller at '08:26' - Tagged: funding   startup   FinTech  

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