EP1019: Beyond Core Banking: The Rise of the Modern Bank Operating System

Booshan Rengachari, founder and CEO of Finzly

As banks look beyond traditional core modernisation, the industry is increasingly focused on building a modern bank operating system that combines real-time payments, AI-driven intelligence, and connected financial ecosystems. Puja Sharma speaks with Booshan Rengachari, Founder and CEO of Finzly, about overcoming legacy constraints, enabling low-risk transformation, and preparing banks for a future shaped by agentic AI, tokenised assets, and next-generation payment infrastructure. 

Transcript

SPEAKER_01 0:01

I'm Pujan Shandram of MIBS Intelligence, and you're listening to the MIBS and IVs podcast. With me is Bhushan Drinka Chamberli, CEO of FINSLI, a fintech company based in Shamalit USA, is a banking and payment technology company that helps financial institutions modernize their infrastructure through a cloud native platform. Known for its unified payment hub, FINSLE enables banks to manage multiple payment rails, improve interoperability, and accelerate additional transformation while supporting evolving regulatory and customer demands. Today we are diving into how evolving ACH regulation that is automated clearing house, a US electronic payment network that moves money between bank accounts. Real-time payment and modern banking infrastructure are shaping the future of banking. Welcome to the podcast, Pushin.

SPEAKER_00 0:55

Hey, thanks, Puja. Nice to be here.

SPEAKER_01 0:58

Pushan, the industry is increasingly talking about the rise of modern bank operating system. What is driving this shift and how does it differ from traditional core banking model?

SPEAKER_00 1:08

So if you look at the banking, the bank has been using the technology that has been there for the last like 30, 40 years. Nothing much has changed, right? Banking is always the banking. Like, you know, banking does three things in general. They receive deposits, they lend, and they move money. These are the three major functions of the bank. And these functions have not changed, right? From paper ledgers, they went to system ledger, right? And then after that, digital banking, online banking came, and then mobile banking. So at every revolution, what happened was the systems, the COBOL mainframe systems, it just remained the same. And banks continue to create layers and layers on top of that. So every time they want to do something, they will create a solution, they will create a layer. And what happened was over a period of time, all the systems became so complex to manage. Layers and layers and fragmentations. So they will create solutions and assemble it. And even if they buy a vendor solution, the vendor has bought from like five other different mergers and acquisitions. And it created complexity. You know, banks couldn't move, right? So what we all started seeing is that fintech started evolving. Hey, you know, banks are not doing anything. Let's do, let's do that job for you. So fintech started doing the banking services and used banks as a back-end utility. And you know, that solved some problems. And uh players like Square, Stripe, you know, Modern Pressure, all these things is kind of it became better solutions for businesses because banks were still doing the same things they did for several decades. And um now what you are seeing is that fintechs are becoming banks, right? Now almost every fintech in the US is applying for a banking charter, and they're all becoming banks. Now the question is, what is the future of the banks? Right? That's where the interest the banks are at at this point. You know, fintechs are becoming banks, banks are still banks. How can we bridge that gap? That FinSley is addressing that gap, right? How can we enable banks to stay ahead, to compete with the fintechs, to recapture their business of receiving deposits and moving money and doing that business the way they used to be? And that's that's exactly what what the industry needs, because banks, you know, the communities, the the can the countries need banks because banks are very highly regulated. And you know, if I ask you, where do you want to keep your money, would you like to keep it with Strike, or would you like to keep with their bank? You know, you'll say it's a bank. Um, so I think that's uh that's that's very very uh very important. And and and it is very important for banks to address that gap and quickly address that gap because you know the the kind of technical debt they have created over a period of period of time, it's too much. And uh the key is how can they address that gap faster so that the gap doesn't continue to increase and start to compete and start to grow their business and start to uh earn more revenue? I think that is more important um in today's economy.

SPEAKER_01 4:39

Banks have spent years modernizing their technology stacks. Why do many still struggle with legacy constraints? And where have previous transformation efforts fallen short?

SPEAKER_00 4:50

You know, I guess I think if you look at the way the banks have operated, right, um they totally rely on um a core platform. And uh they built around that one. You know, a lot of time they get constrained with you know, the some of the cores they have like very ridiculous contract agreements. Then if you do business with them, you cannot do business with anybody else. You cannot buy anything else from you know any other provider, right? And um, and you know, some of those constraints, and uh and when they don't have such constraints, um, they will have a commercial banking solution from a vendor, and then they will have a consumer banking solution from a different vendor. They'll have a mobile banking solution that maybe created in house. So all these things you create like you know, layers and layers, like you can create multiple solutions. All of these things are doing one thing, right? They are not trying to solve the customer's problem. If you look at banks, banks are, you know, they want to seriously address what is important for their customers, consumers and businesses, right? And when they want to address those problems, when they look back and look at the technology providers, and they are like, you know, they are not going, they are not delivering what the banks needed. So they are in a position where, hey, I need to deliver what my customers want, and I have these limitations. Who can help me? There will be some players, they will just solve one problem and they will go and say, hey, come and solve my problem. Three months later, there will be a different problem. Who can solve this problem? Let's bring them, let them address this problem. So over a period of time, they ended up having like so many vendors, so many point solutions. And what happens is if you touch one thing, then like 10 other things is going to fail. It's that's that's the reality today, okay? And nobody wants to touch anything, so they just keep it as it is because they don't want to disturb customers, right? Because you know, you may want to keep some customers happy and you touch it, you are going to make someone else unhappy. And that cycle they don't they totally want to avoid. That makes them just stay statuscope, right? The thing is, the demands of the customers don't change. They keep demanding more and more because you know, um, fintechs are moving at at the speed of technology, right? Banks, they are moving at the speed of their people who are laying on. And that that that gap is uh it's a serious problem for them. So as as they as they look at what these specific problems, and uh what we tell them is hey this is this is one of the reasons why FinSley, I I work for banks, I'm I'm a technologist, and I couldn't see these problems continuously troubling the banks the way they can, they have to uh modernize and innovate. And we decided, hey, banks need something, yeah, radically different solution. Instead of just continuing down the same path, why don't we just think fresh, like nothing, apply first principles, think about what is available today in the in in technology. And because like technology is so advanced, right? There is no reason why banks have to get stuck with these kind of problems. It's like unbelievably bad. Um so we said like no, we have to rethink, reimagine, and let's think about what we can do, right? One is the legacy systems are going to remain. Like they don't nobody wants to touch that one because it is so fragile, nobody wants to touch that one. And I want to address what my customers need. And we said, hey, let's create a parallel operating system. Let's create a parallel bank operating system where banks will be able to add new solutions, just like you know, you are in your iPhone, you like an app, you install it, you use it. Why don't we give that similar solution for banks? If the bank has a problem, if there is a solution, just add it, test, and start serving your customers. And I think that philosophy, that concept shaped the way uh FinSley is built, right? So we built that operating system that has everything like you know, every banking system needs compliance, audit, documentations, communication, and all that, all that stuff. So we built all that stuff, and then on top of that, we created galaxies of solutions. So you know, we have payment galaxy to address payment specific challenges. So if you go into the payment galaxy, payment systems, on the other side, the legacy systems, you have ACH system, ACH team, ACH experience, wire system, wire team, wire experience. And banks have like six, seven different uh payment rights. You have that many teams, that many vendors, that many systems. And basically, banks were continuously pushing these products to the customers rather than giving them an experience of money movement. Hey, let's start with what the customers want. They just want to move the money. Like, you know, when you go to FedEx, you don't have to tell them, I want this to be shipped by flight or by train or by track. I just want to move the money. Just tell me where you want to move, how fast you want it, and then here is the fee. That's all the customer cares about. So we started from there, and then we created that the galaxy, which is payments, ACH, wires, instant payments, international payments, all of them got bundled in that payment galaxy. Next, we looked at ledgers. You know, we created accounts galaxies for everything that you want to keep track of, debits, crits, balances, all those things went into the ledger galaxy. And then foreign exchange trade, the comment, you know, the treasury capabilities, the advanced customers, uh, corporate customers they need, it all went into Trade Galaxy. And then we have token galaxy for blockchain, right? So at the end, what we did was we created the solutions so banks can assemble all these galaxies, create the stores, and create their own universe. Because every bank, their needs, their business is different. And we decided, hey, let the bank build their own universe, build their bank the way they want it. So that's how our bank operating system is helping our banks to compete uh with any players, right? Today, yeah, even yeah, a regional bank can compete with JP Mode. That's unbelievably great thing that's happening. And uh we are we are extremely proud of what we are building here.

SPEAKER_01 11:36

That could ideally be a pull code. AI adoption is obviously accelerating across banking. What role will AI and agent tech capabilities play within the modern bank operating system?

SPEAKER_00 11:48

Yeah, I think AI is is uh you know is is very important, right? Today, nothing is going to be great without AI. And I think what I'm excited about AI is a few things, right? One is how AI can help bankers do their job better. You know, for example, how it can accelerate some of the payment investigations, reconciliations, and uh, you know, general operations work, right? Because now tomorrow, let's say you want to triple your payment volume, are you going to add uh that many number of people to support that volume? Or are you going to use AI and start doing more intelligent work and use that intelligence to enable your bank operations, right? And when you do that, I think one of the most important things is how can you still stay compliant? Because when the bank regulators come and question your processes and uh you know general workflows and other stuff, you cannot tell, hey, AI made the decision. You know, you that's that's not a good answer to give to regulators. And you need to be able to ensure the AI is doing its job correctly. So it is important that whatever that we are doing in AI within the bank is compliant and regulated, you know. Banks are still taking accountability and take responsibility for the decisions made by the AI. It is just only going to get better, right? So that part is going to help primarily banks do the job better, enhance their operations capabilities. And then the next angle in AI is how can banks help their customers do better business with that, right? How can if the if a customer wants to connect from cloud to the bank and then you know do some enquiries and data investigations and create a summary or you know, anything that you know, any alumni thinks that they want to do, they should be able to do it from cloud or chat GPT or any AA agent they have, right? So that angle is becomes important. And when you do that, now the question is how do you know it is the customer is doing the job because now AI agents are doing it, and you know, the customer is going to say, Hey, I didn't authorize this one. And how do you prove that they are the one authorize the agent to do the job? So it becomes very important for the banks to kind of ensure there are controls and auditability and traceability, everything is in place so that they can ensure that the AI is helping their customers better. And I think the way, you know, if if any bank is not on AI, I think they are going to be falling behind further. And I think, you know, it is it's important that every bank has an AI strategy for their own operations team and for their customers.

SPEAKER_01 14:50

Many banks want to modernize but are wary of large-scale uh core replacements, right? Uh, how can institution transition to a modern operating model without taking on significant migration risk?

SPEAKER_00 15:04

Yeah, so I think that's that's one of the common problems that we see across the banks, right? Because you know, as I told you before, the systems that have been created over the la like the last few couple of decades is kind of layered, layered, fragmented, and complex. Nobody wants to touch that. And if you want to touch it, you're going to break it. And if you're replacing that means it is like it's impossible. So I have seen banks who have taken over 10 years in their core replacement, right? You know, like think about you know, you start this project in 2016, and now you are completed that one. By the time you're done, the industry has moved so much, and there are so many other advanced technologies, and now you are again, you know, catching up, right? So that is never the right option. And um, what we do is we we recommend our banks to take this approach. Surround the core, shrink it. So surround the core, you're running a parallel bank operating system and let it do what you want to do to your customers. Like now, how you want to help your customers. If you want to launch a new product or you want to launch a new capability, or you want to serve a new segment of the customers, start doing that in this parallel operating system, right? You know, some banks, some of the banks they say, you know, um, I want to start offering this new API capabilities for payments. Okay, start there. And then migrate the other, you know, other channels to FinSt. And then migrate the incoming way. So there are different ways that you kind of slice and dice, but um, the the Q core idea is start as a parallel core and then start moving one piece at a time. Now you you are kind of slowly shrinking that one, and then you can exit out of that legacy system. So surround, shrink, and exit. So that's the that's the strategy banks should adopt um when they want to modernize their work platform.

SPEAKER_01 17:10

Looking ahead, how will emerging innovations such as real-time payments, tokenize deposit, and stable coins shape the future of bank operating system and the broader banking ecosystem?

SPEAKER_00 17:23

Yeah, so real-time payments is not any more modern, right? That um you know, most of the countries they have real-time payments. And um, you know, um ES is different. Okay, it's it's one of the largest economies. If you ask, has there been your real-time payments? Kind of. You know, we have had Zell, we have had, you know, the debit card is always real-time. If you look at other economies, they never had this such thing. And they moved from, you know, check cash to directly to real-time payment systems. So the the real-time payment systems today in the US is addressing some new use cases, right? That that is very important. Now, almost all the banks they know that they need real-time payments. But what is happening is more than the real-time payments, what's happening beyond these traditional payment rates is that blockchains and stable coins and tokenized deposits, right? Add that, yeah, like all these things are making so much of a difference. Uh, think about tokenized deposits and stable coins. I think you know, there are significant differences between both these digital assets, right? Stable coins are really good when you want to transfer money from you know one country to another country. Like it's uh, you know, the money is collateralized and it is reserved and kept in treasury. So your money is there, right? And um, the money is going to move from one place to another place very quickly and you without any intermediaries or anything. But the problem is the money is going to stay with treasury that cannot be used for the money cycle that is generally created by the banks. When you deposit $100 at the bank and um, you know, they receive that, take the deposit, there is a ratio that they have to keep it as a reserve. But the remaining money, let's say for every $100, they can lend $80. They keep that $20. And the remaining $80 they can lend, right? They earn interest on that front. Now that money they are lending, it is going to come back as a deposit, maybe in the same bank or maybe as some other bank. So that cycle continues, right? But with stable coin, that cycle is broken because you deposit, that's it. It stays as a collateral. So banks were very concerned about the stable coins, you know, like there were like over a trillion dollars of money is moving on the in that one. And uh several billions of dollars has has been stored as stable coins. And that means this much of money is moving from the banking system to to a treasury, which is going to be you know just earning some interest, but not going to help the banks to do their uh business well. So banks came out with this tokenized deposit, which is awesome, right? Now they said, hey, I'm going to I'm going to give you the similar characteristics of a blockchain payment or a stablecoin payment, but I'm going to continue using these money cycles, right? The $100 deposited is still $100 deposited. Instead of keeping in a traditional ledger, I'm going to keep them in a blockchain ledger. I can still lend $80 to other other customers. And that money cycle continues. But it all at the same time, it brings the characteristics of the stablecoin, right? So there are several consortiums of the banks in the US, right? And it's a carry network, a cell network, and then there is a clearinghouse network that is coming in. And there are like, you know, there are there's one more for credit unions. So all these consortiums, what it's going to do is the deposits that is, you know, that is received as a tokenized deposits can be moved to any account in the network through this blockchain instantly, right? So the real-time payment capabilities uh come into this uh blockchain network. Um, the next step, what what I'm more excited, interested in solving the problem is that how can we connect all these networks? Because let's say I'm in one network, I'm in one consortium, you are in a different consortium. How can I send money from my bank to your bank instantly through the similar same blockchain tokenized deposit network, right? So that is that is going to be interesting uh development that is going to happen. But I think you know the tokenized deposit stablecoin is here to stay. I was not a big fan of the crypto, um, but I think the once they tokenized deposits development started, I got more excited. I think that is going to be the biggest difference, and uh it's going to encourage more adoption of the digital asset and uh blockchain money movement.

SPEAKER_01 22:20

Moving on, uh Finzley is also looking for geographical expansion. Would you want to talk more about that?

SPEAKER_00 22:26

We have built a great technology, right? And if you look at the US market, it's the most regulated and very competitive and highly demanding market in the entire world. So if you are solving the biggest problem, then you can solve any problem anywhere in the world. So we are always very ambitious to grow further. But I think we are, you know, we we are looking at various options. You know, we don't have a clear plan of where exactly it is, but we'll be growing outside of US very soon. And uh you can start seeing us more in uh different parts of the world.

SPEAKER_01 23:02

Bhushan Rengachari, CEO Finzley.