Infosys’ Finacle is finally having a moment two decades after launch

Other implementations of Finacle include Community Bank, Bangladesh, National Bank of Bahrain, Vietnam’s consumer lending platform FE CREDIT, and, most recently, Nepal’s Prabhu Bank for digital banking, over the last few months.

According to Arun Krishnan, Senior Vice President & Head of Engineering, Infosys Finacle, this is demonstrative of Finacle’s journey over the last few years.

Let’s begin the journey

Finacle was launched in 1999, with the aim of automating banking processes. Despite being one of the first products to be launched in the digital banking space, it went through many ups and downs, before it was done playing catch up.

Over the last few years, the company rebuilt it portfolio to suit the changing technological and customer needs, making it relevant for financial services.

The product competes with Temenos, a Swiss company, Oracle i-Flex and TCS’ BaNCS for digital banking.

The initial euphoria

“Back in 1999 or early 2000s, the concept of automating banking processes was new and there was a lot of euphoria around it,” a former IT executive with a rival firm, who has also worked with Finacle’s banking customers, said.

But once banks got past the euphoria, there was the harsh reality. For one, banks found it difficult to customise Finacle’s functionalities based on their needs.

Another issue was the integration of non-financial processes of banks with the financial processes automated by Finacle, the executive pointed out.

“In banks, you will have specific set of processes that are being automated and others like HR that are manual as integrating the two was not possible,” the executive added.

"The product was thus seen as rigid and not user-friendly," the executive added.

Unable to get into foreign markets

The company also found it difficult to expand its reach to matured markets like the US. Sampada Rahalkar, Practice Director, Everest Group, explained that while Finacle was successful in regions like Asia-Pacific, which were largely untapped, US banks work on a different scale.

US banks had already developed core banking systems, and to break into the market, a company would need strong capabilities in business analytics and data-warehousing, he added.

A BusinessLine article pointed out that Finacle was also lagging behind in technological capabilities and failed to understand the changing customer needs. For the record, in 2011, the US-based Union Bank of California cancelled a multi-million dollar core banking deal with Infosys as the customer priorities changed.

The first breakthrough

It was not until 2014 that Finacle was able to break into the US market. In 2014, Finacle signed two deals with two US financial services clients -- Discover Financial Services and Eastern Bank -- for core banking modernisation.

It took longer to get more digital banking deals, where Infosys has positioned itself now.  In 2016, Goldman Sachs chose Finacle for its lending platform Marcus. The same year, Paytm, chose Finacle to power its payments bank.

This came at the back of the transformation the product underwent a few years ago. It is not clear yet if the transformation could be attributed to Vishal Sikka, who took over as CEO in 2014.

While some executives hint that the change could have started before Sikka, his move to make Finacle a part of EdgeVerve Systems, Infosys’ product subsidiary, did bring in a different mindset.

Change in product mindset

This approach was important to position itself as a digital banking product in matured markets.

“Creating proprietary products and platforms requires very different skillsets and approach compared to Infosys’ traditional services business, and, hence, the move was in the right direction,” Rahalkar explained.

Since 2015, the team saw people from core tech companies being inducted into EdgeVerve to turn the product around and to be ahead of the curve.  Krishnan himself was a former Microsoft executive.

It’s transformation time now

The next few years saw Finacle transform itself into a cloud-first platform. Its offerings expanded, too. From core banking modernisation, it expanded to customer experience, deeper customer insights using data analytics and artificial intelligence and digital engagement channels such as payments and omni-channel banking.

Krishnan said that the company pipeline in digital engagements is high and is growing at a much faster rate. “Earlier, our pipeline was filled with largely Indian banks. That is not the case anymore. Now most of our deals are outside India. Many of them are digital-only deals,” he added.

The company also started having more conversations with customers to understand what their needs are, which was one of the concerns raised initially.

“It is interesting …compared to how Finacle was viewed, we can now see from market reaction and customers and prospective clients that even they might keep their core banking system and put Finacle as the digital system,” Krishnan explained.

An Infosys executive, requesting anonymity, told Moneycontrol: “Finacle is a much better product now than it was two years ago, and is moving towards a truly product organisation. We now talk about cloud deployment on AWS, Azure etc. This is generating a lot of interest among existing customers also.”

All these have made Finacle an attractive product for banks across the globe.

EdgeVerve registered Rs 2,497 crore in revenues for FY20. In FY19, EdgeVerve's revenue stood at Rs 2,538 crore. Though the company does not share Finacle’s revenues, reports reveal that Finacle accounts for a significant share.

Finacle now has more than 200 banking customers across 100 countries serving over a billion consumers. According to reports, close to 16.5 percent of global banks now transact on Finacle platforms.

Partnership strategy paying off

In addition to product placement, the company’s partner strategy is paying off.

In 2019, it partnered with R3 for blockchain technology and Moneythor, a Singapore-based data-driven digital banking provider, for personalised financial products.

But this growth could come at a cost, pointed out analysts. Most IT service-providers are product-agnostic. Infosys is an implementation partner for products that include those of the peers they compete with, and, which banking clients adopt.

Its competition includes banking product firms Temenos and Oracle’s i-Flex.

Now when Infosys has its own competing products, there could be a possibility of it presenting as a competition for the product firms, pointed out experts. But not yet, they added.

In most cases, system integrators like Infosys come into the picture after clients have made a decision on products. However, in a few cases, there could be a concern but not to a point that the company has to rethink the strategy yet, analysts added.

For now though, Finacle is making the most of its resurgence.