Putting core banking on the cloud, with Antonio Separovic

It’s not often that a bank’s ATMs running out of cash is a sign of its success, but that’s exactly what happened when Cantilan Bank, with its systems on the cloud, were able to get back on their feet after Typhoon Rai, and to dispense much-needed cash to the people, when no one else was able to. In today’s episode, I speak to Antonio Separovic, co-founder of Oradian, the fintech whose cloud-native core banking system made that bounce-back possible.

But, though forged in developing markets, the market for cloud-based core banking systems has continued to expand and so we chat about everything from working around infrastructure gasp to powering cutting-edge fintech.

You can find Oradian on their homepage here - https://oradian.com/

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), while you can find my action-adventure novels on Amazon, some versions even for free.

If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.

Regards,

Brendan

The full written transcript, with timestamps, is below:

Antonio Separovic 0:00

And effectively, they ran out of cash in the ATMs! They were very proud because they were the only bank open within the region. So no other banks were able to operate... but they ran out of cash. So their ask for the regulator was, like, you got to fill up our ATMs much quicker.

Brendan Le Grange 0:23

One in 238 people in Botswana has the surname Molefe, that makes it about as common as the surname Williams is in England and the USA. So imagine, you want to send out a customised offer to 25,000 of your customers, you're going to get a little over 100 different Molefes in Botswana or 100 Williamses in England or the US. That's not a problem, per se, they'll all have different initials, perhaps, except that 7 of the 20 most common first names in Botswana start with either a K or a T.

So what, maybe you have a few dozen K. Molefes in your file, why is that a big deal? And the answer to that is that in Botswana, at least while I was still working there, which admittedly is a decade ago, the size and the nature of the mining industry was such that many customers use their work address as their correspondence address. So every time we sent out a campaign, we'd have several people with the same initial, same surname, and same address in our file. They'd have different mobile numbers - but the big shiny system that our parent bank had signed us up to implement came with only one channel to contact customers: letters.

So every champion challenger campaign we sent was noisy, because one K. Molefe might not respond to an offer for a three month interest free period on their balance transfer if they've accidentally opened another K. Moelfe's six month offer, or worse, one K. Molefe might open a collections later meant for another K. Molefe and see some private data that shouldn't be shared. This was simply not a scenario that had been imagined in the lands where post was fast, secure and direct.

So there's something to be said for core banking systems been designed from the ground up with developing markets - and flexibility - in mind. Welcome to How to Lend Money to Strangers with Brendan Le Grange...

Antonio Separovic, you're CEO and co-founder of Oradian, a Zagreb-based FinTech with its roots in financial inclusion, but perhaps we could say its future is wherever growing businesses need a core banking system.

But before we talk about cloud native technology and taking rural banks digital, let's talk about how someone with an accent just like mine has ended up based out of Croatia.

Antonio Separovic 2:57

Hi Brendan, thank you very much. And good question, I've asked myself the same thing often. So, fellow South African, I studied in Cape Town, then went to Johannesburg where I got involved in the.com boom, building websites, and then as many South Africans do, they go to London. So I went for my three or four months in London, which ended up being about 10 years.

And that's really kind of where I started my career. I got involved with a core banking system based in Belfast. Around that time, I was also thinking about moving towards Croatia out of interest. My parents were originally from Croatia, and I experimented with working from home. So I found myself moving to Croatia while working out of London. I thought it was a good lifestyle. And that's what kind of got me.

Fast forwarding a little bit, after that I decided to set up a business and so I started from my apartment in Zagreb. So that's kind of my journey over geographies.

Brendan Le Grange 3:52

And Croatia is a country that most of us might more readily think of in terms of tourism and the beach, but not necessarily from a tech point of view. Is there a FinTech scene out of Zagreb, but what's the environment like in terms of new business creation?

Antonio Separovic 4:08

We have, in Croatia now, two unicorns. And they're growing, so there's more and more coming out. So it's pretty interesting for a country of just 4 million people. What Croatia is also known for - as well as Eastern Europe - is for great tech talent. And so that was, for us, when we decided to start Oradian here. We were looking to bootstrap, so starting from my daughter's bedroom. But in parallel, Croatia was moving into the EU, and a bit of naivety in that process as well, but it was well suited for as we were building it.

What we're seeing, through the years, we've noticed more and more startups are coming out of Croatia and having a global recognition, which is fantastic to see.

Brendan Le Grange 4:47

So you had been working with some pretty successful software companies and doing a lot of exciting projects. And then you had this idea to head out to Croatia, but also to explore entrepreneurship. Working out of your daughter's bedroom, what was that founding vision? What was the goal you set out to achieve with this new business?

Antonio Separovic 5:07

I suppose in a way, I was frustrated.

So my frustration inspired it, but working at this core banking system, what I found was the demand for core banking is high, so it wasn't a challenge to sell a core banking system, but when I was going to ask the same customers who I had sold to, to be references, they were often very, very frustrated. And the root of that frustration was they struggle to implement what they purchased. A core banking systems is a very expensive purchase, you're committing the entire organisation into it. And once you start, it's the hornet's nest of challenges.

So for me, it was very frustrating looking on naively only from a sales point of view, that why wasn't I getting enough references. And that was the inspiration, I thought why don't you build a core banking system that actually addresses the problem of the customer, and makes the customer appreciate you that they would be your reference?

And as I say, it was very naive perspective, but what I also realised was that most core banking systems selling to the emerging markets were solutions designed in the West in very mature markets, very complex financial services, which clearly addressed the needs of the market, but it was then taking that solution and tried to parachuted into other environments. And from my design background, what I often thought about was wanting to solve the problems within the market you're selling.

So if you start from there, you're on route to understand what the customers problems are, and help them through the journey of changing core banking. That was the direction that I took. And the motivation to start a radian was very much to put the customer at the centre of the whole idea and then work around the customer by finding the right solution for them and helping them mitigate the risks from moving from one call banking on to our call banking.

Brendan Le Grange 6:53

Earlier, my career was mainly with some of the big banks, and I think in our office in Kenya, there was an old 386 computer very carefully protected, because it was the only one old enough to run some key bits of software, everyone was too nervous to update it, because well, it works. But everybody was unhappy.

We spoke before this recording about your first project, I think we should maybe talk about that just to set the context of how different this is, we're not talking about, you know, a high street bank in a slightly smaller country. You've done some projects in really pretty extreme conditions. So maybe we can talk a little bit about that. What was the first project that you rolled out with Oradian, and what did it teach you about maybe what your future would hold?

Antonio Separovic 7:37

Back in 2013, our very first customer was an organisation called DEC based out of Bauchi, north of Nigeria. Bauchi, particularly at the time, was more popular in the news because of the civil unrest with the Boko Haram. So really challenging environment to operate. And then, by the added complexities, Nigeria has very tough infrastructure challenges, particularly with energy. Part of what we wanted to do, particularly in the early days, was to make the system available for any type of financial institution and be able to be robust to work anywhere, and kind of taking this concept of solving for them. We were very conscious of bandwidth constraints of how they run their branches, what they have in terms of servers.

And so we we took it for granted, a blank decision, that the right way is cloud.

And we wanted to try out our thesis, we actually managed to implement with quite a bit of ease, we migrated their data from a previous system, we trained the staff, and we were able to complete the implementation quite quickly. What started becoming quite interesting is all the different dynamics that started coming out from being an on premise system, and cloud. So access to real time data. So some of the changes started happening very quickly, where branch managers no longer needed to travel to the head office to take the data, because they all had to have an on prem database, put onto a flash drive and brought to the head office to consolidate the data, they didn't have the bandwidth to be able to send that by email. So we noticed these kinds of challenges.

And then ironically, this is a non technical issue, but which was quite interesting is that there was resistance from the managers because they weren't getting their per diems for travelling. And so they felt that the system was shortchanging them. And then we find ourselves talking to with our customer and looking at finding different bonus incentives so that they could still earn that but it was rather related to performance than to the behaviour they had.

So we learned a lot on their very first implementation. Fast forward three years later, they had managed to 3x their clients base that they were serving. So we saw a lot of value coming out of that change in behaviour, behaviour change in the way they operate, freeing up resources to serve more clients less back into work, everything was online, all they needed to do to open up Have you brought was just having you laptop and have a low bandwidth connection. So it was a great experience having, you know, in that learning from that very first customer, which then went on to kind of start defining what radian is looking to achieve. And that was to kind of have a cool banking system that could work in any environment for anyone. And in enabling financial institutions, banks, credit unions, to be able to serve more clients, there was what we set out to do to see can we do that in Nigeria, and we achieved that and went after a lot more across the continent.

Brendan Le Grange 10:33

I'm sure that a fair amount of the pushback on videoconferencing is the nice executive trips here and there, that's much better than meeting via Zoom. So maybe we need to still provide people the opportunity to get that trip, but just not from random meetings. But as incentive.

And you spoke about from there, you grew and you moved around the world you've implemented in many other markets. One of the ones that you particularly successful in is the Philippines, which is a market close to my own heart. Having worked here for a few years myself, but the Philippines is a market, unfortunately, very prone to typhoons that come through cause lots of damage. Part of the benefit of your cloud based approach and having that data off premises is that it's physically off premises for when things go wrong.

And I know that you had a client who was struck by a typhoon in the Philippines and by flooding, can you talk about how your cloud based approach help them to recover and keep their business going, despite the chaos they found themselves in.

Antonio Separovic 11:37

This specific typhoon was just before Christmas of 2021. So is in December 2021, the region is around the ring of fire. So there's a lot of natural disasters that occur in the Philippines, but this particular typhoon was lot stronger than most were anticipating, and particularly on island called Mindanao - and facing the Pacific is a town called Cantilan. This typhoon wreaked havoc through Cantilan.

And what struck me was Cantilan, giving a debriefing to the regulator, and the BSP, and then we're highlighting some of the benefits of cloud. And maybe just before I get into the benefits, I'd give a little bit of context here: Cantilan was the first regulated bank within the Philippines to move their entire core banking system into the cloud, which was moved that was very much welcomed by the regulator. And this is as early as 2013. Fast forward 2017, we started working with Cantilan, and immediately after the typhoon, they were able to get up and running.

And so they plotted on a graph: day one, everything was out; day two, two branches up then three branches up and started going, and within within a week, they had over 60% operations of all their branches. And that enabled the community to get financial services, and one of the things that they needed was access to cash.

And effectively, they ran out of cash in the ATMs, because they were the only bank open within the region!

No other banks were able to operate and they were able to operate. So they were very proud that they were they were up and running. All the big banks, they couldn't operate, but we ran out of cash. So they asked from the regulator was like, You got to fill up our ATMs, like much quicker, you can't leave as just because we have a disaster doesn't mean we're disconnected, you got to keep that infrastructure enablement!

And what we learned from that experience, as well, is not only all the advantages of being able to operate anywhere, but also whenever there is a natural disaster, how quickly can they get back online or to the needs to be online.

And the frequency of such things going to happen more and more. And the physical risks are going to become more and more intense, particularly for financial institutions who are working in challenging geographies or in remote areas, and they kind of come back a little bit to the problems we end up solving for our customers is, you know, how can they be more agile. And what I'm really proud of is that we're able to take technology that you're expecting to see in banks in London and apply it anywhere in the world. So regardless, if you're in the Philippines, if you're in Nigeria, or if you London, everyone can have access to the best tools, the best technology by being on the internet.

Brendan Le Grange 14:24

There's a lot of incumbents sitting there taking things to their cloud, but it takes a little bit of bravery or somebody to stand up and think about core banking and taking that into the cloud, which it's great to have these conversations because at some point, it's going to have to happen.

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Yeah, we've spoken about it now a fair amount from it. technology point of view. But you also talk about design thinking and that your approach in rolling out your products isn't just okay, we're doing everything, you know, that used to be done on a floppy disk, we're now putting it on the cloud, you've taken this from the ground up approach to building core banking systems for the developing market. So let's revisit that point a little bit for a moment. What is the approach that you take? And how are you doing things differently?

Antonio Separovic 15:26

It was very interesting for me from growing up in South Africa, observing how within the telco space, in the mobile space, prepaid sim cards actually took off in South African. It was a testing bed. And now it's globally accepted that everyone can buy a prepaid card. And so that, for me, is an example where you're taking something from emerging markets and applying it into the West. And we see more and more that.

Where we came from, you know, we kind of followed that same trajectory. We started with very simple financial institutions, but what we did was, we always had one source code. And yet we've grown to where we now have representation in, or at least our customers are, in 11 different countries, regulated/ non-regulated different types of financial institutions, all on one source code. And then really meant that we had to be smart about how we actually built our core banking solution, how we are able to facilitate, make things parameter-based rather than hard-coded in... putting all of this into the system and thinking about it made it incredibly robust.

And today, what we're seeing is we are able to serve as very simple institutions, we also able to serve financial institutions that are on the bleeding edge of financial services, what they refer to headless, so there's no branches, everything is online, and they're reaching their client base through mobile phones only. And their big need is about innovation and speed.

We've got a great foundation of what we built on by starting off, as we discussed, in Nigeria and the Philippines and so forth, but what we also see ourselves as managing to fill in the gap for a lot of forward looking institutions, those who are wanting to kind of leap frog and compete with fintechs, as well as fintechs themselves. How to deliver new services, how to take what over their clients are asking for and address it, both as a service as well as eventually going back into their products.

So where we're standing is how to enable that innovation and speed to market. And this is very much the next chapter at Oradian is introducing new services within our offering, and working with different third parties to be able to offer services to financial institutions. There's a great picture we have in the offices, although we're working in rural parts of Nigeria, there's a shot of our core banking system running in a Tesla. And I think it's a great contrast, where we've come from, to now where we are on the very, I would say, bleeding edge of fintechs, while still being able to service the entire longtail.

And that I think this puts us in a unique position is both we have the experience and the technology to address all types of needs.

And that's, you know, that we've seen our customers wanting to learn from that experience in the coming to us. And you know, can you sit down with us and get involved in our strategic plans? You know, we started off by selling a core banking system, to being partners with our customers, and helping them look forward so we can start bringing that into our innovation. And the advantage to all of them is both the knowledge we've collected along the way, the knowledge we built into the system, but it also the ability to react with speed.

And so how do you improve the experience for the end clients, and that's where the big value proposition comes from, but it's based on building on the right foundation, solving it for those requirements within the market.

Brendan Le Grange 18:57

Yeah, and I'm glad you spoke about knowledge. It's something you forget about, but not just the technology, but that those ideas, those learnings, that those can now be transported easily is vital. And we're no longer in two separate worlds. Everybody's going online, there are of course, communities that really still need to be served in different ways, but the mobile phone and the smartphone meant that the problems we're facing are becoming more similar.

And since we are a show about lending, I better not leave that unasked: do you do any lending products as well?

Antonio Separovic 19:30

Yes, we do. So we have our product engine that has loans as well as a deposit taking savings. So you can you can have both within one system. And then that's the neatly tied into a product engine, very neatly tied to the General Ledger within the system, automated and then easily exported. And that becomes very important for the different type of customers and the different places we work that the ability to do the calculation in real time is really important for our customers because that information is really easy to consolidate instantly.

And you can go back and pull out a report at any given time with a picture of what it looks like at that moment in time. So yes, we do do loans. And we have very powerful reporting behind that as well.

Brendan Le Grange 20:16

And that bird's eye view. I mean, we talked about the impacts of multiple systems and systems that are working, so nobody's brave enough to fix but invariably you one system running credit card, one running mortgage as a separate one running your auto loans, many banks, surprisingly, many banks will go to somebody like a credit bureau and find out via the credit bureau, which of their credit card customers isn't one of their loan customers, because they internal bank systems simply can't talk to each other, or who in doing something else, they realise 'wait a minute, 30% of my personal loan business doesn't have a credit card with me, but has with somebody else'.

And they can't see that themselves, because systems are simply just working and are held together with duct tape. So having that view over that, it's not just that they've got a view that would never have had in lending, but from an affordability point of view that's better, from a KYC point of view that's better, and even from the bank's point of view, they can see who your customer is, you can offer them the products that they need without having to do funny work arounds. So really great to hear.

And I think, you know, I've been working in banking for 20 years, and all 20 of those years, we've been joking about how bad the systems are, and how old the systems are, and how nobody wants to touch them. I have a friend who helped oversee a migration of internet banking platforms for one of the major banks and I don't think he slept for weeks, he was camping under his desk, just holding thumbs that this internet banking would move over. They are big, difficult projects. But you can't go 20 years still making the same jokes and the systems have just gotten 20 years older, it is something that we will need to address is like, at what point do we make this migration because again, the simplified FinTech story is always the big banks can't compete with the challenges because legacy systems.

I wonder from your side, having worked in London, having worked around the world in developing markets, too, what are you seeing in your projects that you're running now that maybe the developed world should be taking a particularly close look at?

Antonio Separovic 22:23

Yeah, as you rightly said, I think everyone's nervous about changing the core banking system, and how to approach the problem, as always, we'll leave it for the next, the next CEO to get to worry about that. But I think, you know, it starts off by making the first step, you don't always have to have a revolution, you can have an evolution, I think that's what's really great about cloud technology, you can take component by component and start moving it into the cloud, what we've learned is, we've started out by building a core banking system that is effectively replacing the existing system or systems.

So we often go and go and replace a number of system. But as our system has matured, what it also isn't labelled as, particularly with the low code approach to implementation is that we can really adapt to any environment. So we can integrate with existing systems through our API's, and that starts allowing CTOs and CIOs to think about core banking from a different perspective, you can do it in a phased approach, you can do it in a big bang approach. And I think that's the big learning is that swallow the frog as quickly as possible, take on the big project, because then everything else becomes easier. Everything else is just kind of putting lipstick on a pig.

So for me, it's not a technical technology learning, it's more of an approach. And what's happening is that those who are embracing technology and digital transformation are the ones who are clearly becoming the winners in the market, the demand from a consumer point of view, even from businesses is acquiring more and more convenience.

So the demand is driving the transformation, the costs are driving digital transformation. banks need to embrace that and start working on that.

And there's going to be two things that they're gonna have to deal with one of the technology and one is the impact on change management within an organisation that can be tackled very, very easily if they're well thought through, well planned. I mean, part of what's really important through that process is finding the right partner that can help you through that transition. Is that through a set of consultants, is that right technology, which combination of both I would also recommend before embarking on a project, go and get references from customers who've gone through that transition.

That's the unspoken secret is like just get references from whoever you work with. From our side at Oradian. We like to take the customers through that journeys, fully understanding what is the impact of changing how that will impact them, and then demonstrate the ease of how our technology can work with their technology. And so we invite them to meet with the existing customer base, but also just deep dive straight away into the system and get to play with it and then see how easy it is to integrate.

Brendan Le Grange 25:07

I like that closing the loop of the references: obviously, you did finally get what you were hoping for the customer group that were happy enough with the product they got to tell others about it. So congratulations on that.

Antonio, thank you so much for your time, you're in 11 countries now, so you're not shy to take on new markets, you've won many awards for innovation, you made many lists on companies to look out for, what is coming down the line?

Antonio Separovic 25:36

Ee often talk about the unbanked. But what I also see is within banking markets, the ease to be able to get financial services is becoming challenging, banks are getting more and more constraints. And I see that what that's putting pressure on is the market needs access to services. So we've seen a lot of innovation, you know, that's what we're gonna continue to see over the coming years is more and more technology companies creating these gaps in the market.

So we'll see a lot more innovation. And then as enablers like ourselves, we're going to be enabling that innovation with speed to market very easy to use back end architecture, I consciously choose not to get overly technical, because one of the things I think is really important for any leadership team within a bank or financial institution is not to get caught up with technology, but rather sit down and figure out a strategy around digitization.

All of this is about making business sense.

It's not about the technology, the technology generally works because you mould the technology you code the technology you write and what you want it to do. But you got to be clear what what is it that you're trying to achieve. And then I think the other big thing that we'll see in the next two years is a lot more openness, where financial institutions have to work with third parties are both in attracting new customers enabling new services, they can't do everything by themselves. So they need to find those partners. And that's going to come down back to their core banking is how open can their system work with other third parties.

So I think it's very much about playing nicely with the parties in Europe we see with PSD to we're going to see that in different forms and different markets. And it's going to come out in different acronyms or different names or different business models, but it's very much about collaborating.

Brendan Le Grange 27:21

Yeah, that's a good point because, I won't mention any names, but a friend of mine is in financial services, they sell a data product, and they want to sell to the banks, the banks have API's, they can comply with those API's, but in terms of getting the compliance sign-off, he said it could take two years before you can actually do business. And it creates this secondary route in where smaller companies with something to offer will go and connect to one of the bigger incumbent partners, like a credit bureau, and say, 'well, can you resell my products, and then I can go in by your door because you've already been pre-approved by their compliance team, by the procurement team'. These walls that banks have put up.

And you're right in Europe, in the UK, I think that's going away, but it's not just having API's, but it's yet the willingness and seeing the value in connecting to these partners. And if I think about someone like Klarna, you'd say they're a fashion brand, because so much of their work is about who are they partnering with? Which brands are they combining with and that appeal that they're creating? And you look at is an HSBC or Barclays going to compete in the Buy Now Pay Later space against Klarna, from a technology point of view probably quite easily, but what about the branding? How you're going to appeal to what are Gen Z looking at on the internet? What are the cool brands? Sitting in a bank boardroom, who's gonna know that?

So these are big changes that I think are definitely worth calling out.

Antonio Separovic 28:47

And those are the different types of financial institutions that we need to be conscious of that they are going to come out of market demand. And these financial institutions need to be careful not to fall into the same trap things where they become effectively technology companies where they're only servicing one client.

And I think that's the big advantage for outsourcing.

This trend is growing with number of cloud based call bank systems in the market by outsourcing it. You also have the ability to learn from others experience. I mentioned knowledge earlier on how do you bring that knowledge back and you making it available through the system, so everyone gets the benefit. We've done implementations multiple times, so we're learning from all our customers in a diverse set of markets, how we take that knowledge, we put it back into the system, we're investing into the system so that we can have lots of innovation, but coming from a wide net of learning.

And that's the big advantage as well, is when you outsource this, that we are seeing now is our traditional banks - they're learning from what we're doing with fintechs and it's making them reevaluate how they see things. The system's already enabling them to do what other fintechs are doing. I think that's really, really important and for me, it's a big takeaway is that one doesn't have to fear technology that was mentioned earlier on his list all legacy system, one needs to embrace it and can start very, very quickly by looking at parts of the business, rather than thinking of it as one massive dinosaur.

Brendan Le Grange 30:16

And if anybody listening wants to start that journey wants to get some of those references from your customers wants to learn more about what you're doing at Oradian. What is the best place for them to go and look for more information?

Antonio Separovic 30:30

hello@oradian.com , I think that's the starting point, or our website www.oradian.com.

And yeah, the team are always very happy to kind of discuss needs requirements. And we also to brutally honest and if we're not a good fit, we'll we'll let customers know but we we prefer to do is really understand what their challenges are, and their approach doing it. And then very quickly, kind of come up with a roadmap for that solution.

Brendan Le Grange 30:57

Great. Well, thank you very much for your time. Again, it's been a pleasure chatting to you.

And thank you all for listening. If you enjoyed that, please do rate and review on your preferred podcast platform and share widely including on LinkedIn. And while you're there, send me a connection request. The show is written and recorded by myself Brendan Le Grange in Brighton, England and edited with assistance by Kane Hunter, show music is by Iam_Wake and you can find full written transcripts, show notes and more content at www.HowtoLendMoneytoStrangers.show

And I'll see you again next Thursday.