Hiten Patel: On today's episode I am co-hosting with my colleague Cosimo Schiavone, who leads our banking technology work here at Oliver Wyman. And our guest today is Jouk Pleiter, the CEO and founder of Backbase. Thank you for joining us today, Jouk.
Jouk Pleiter: Yeah, thanks for having me. Thank you, guys. It's a pleasure to be here and I'm really looking forward.
Hiten: Awesome. Why don't we kick things off, Jouk, with you just giving a brief intro to your role at the company and tell us a little bit more about what Backbase does.
Jouk: Yeah. Well, I'm the founder and CEO of Backbase. So we started the company already 20 years ago. That's a long time ago guys, but we've been on a journey to, first as an entrepreneur. I like building companies. I like to have a vision and be inspired by the world around us and then translate that into scalable solutions. So, we've been in Backbase for, I would say quite an entrepreneurial journey of finding product-market fit. We had to pivot the company at least two to three times to get it. And then around 2013, so that's now 10 years ago, we made that final decision. Probably one of the most important decisions, to focus Backbase as a company on a single industry- financial services and banking. And to take the technology we had at the time and to really translate that into something meaningful to help banks to accelerate their digital transformation. But in a nutshell, Backbase I would say is a very entrepreneurial story of a tiny startup trying to find product-market fit, and now being a global company with more than 2000 people and on a very nice growth trajectory together with our clients.
Hiten: Amazing, amazing. I always like to rewind the tape a little bit. Start back at the outset, and you've been a bit of a serial entrepreneur, right? So before Backbase you had a couple of other ventures. Talk to us a little bit around pre-Backbase life. What were you attempting to do? What did you learn from that? What's kind of enabled you to be successful in this latest venture?
Jouk: Actually, I was, in the mid-90s, I was kind of finishing my university degree and I was talking with my roommates, and I said, guys, I was reading it in the newspaper, there's going to be this new information highway and I need to look into that. And these guys were literally thinking I had to do something with the roads and whatever. They couldn't even translate it. But to me at the time it was really like what probably AI is today. This is a super cycle. This is really going to change the world and it's going to have a lot of slipstream effects. So I was super intrigued by that. So I worked my way into one of the first internet service providers. I was a very entrepreneurial kid, so it was recognized by the leaders of the company. So they gave me a lot of opportunity and I did business development.
I'll spare you the details, but that was kind of the first couple of years. Then I was one of the founding team of one of the first interactive agencies, and I saw problems where people tried to publish content to the web, but you needed a program or so. We started to invent one of the first content management systems at the time. So maybe some of the audience people, if you're old enough, you maybe remember companies like Vignette, BroadVision, Interwoven, we were kind of the European alternative to that. So that became the third company in the content management space. And that's also where I learned the power of software and solving a problem in a generic software product that can scale. And then we basically solved that and then I started to really focus on Backbase and it took me quite a few years to get product-market fit there, but all the rest is history.
Hiten: Let's start, let's pick up the story there. So the first variance of Backbase, when you started on the journey, what were some of those? How would you describe those early years as you were starting out and exploring?
Jouk: Combination of fun, exciting, but also extremely painful and frustrating. Like any entrepreneurial journey. What we did was right I think. The original founding idea is that the user interface at the time in the browser was a click and a page refresh. So maybe some of you guys remember that, but what was almost like reading a comic book, so very different than your desktop. And with the company, we were one of the first movers to introduce a technology called Ajax. And Ajax basically was transforming an HTML page into a dynamic update. So you could click something, and the page would stay the same, which you would just basically update the data stream into the screen. So the notion of a single page interface. So, the founding idea of the company was, from a technology point of view, spot on, because that's kind of the norm nowadays if you look at Gmail and any browser-based application.
But the problem at the time was that everybody started to open source the core technologies, the Yahoos, the Googles, et cetera. So, what for us was the primary product to generate an income stream, for others it was a side product developer tooling, and they could give it away for free. So you're building a company, you have 50 people on your payroll and you're competing with something that has a street value of zero. I can assure you that was a bit of a puzzle, but we overcame the challenge. I think you just have to pivot and take the assets you have and move it in the right direction.
Hiten: Talk to us a little bit about those pivots, take them in turn. I quite like to, I don't want to just jump to the, hey, here's my winning solution and now I'm king of the world, take us through some of those.
Jouk: So maybe that's for any other entrepreneurial person and that's with your own company or if you are working in larger organizations. I think when you're confronted with problems, you have a set of assets, either your personal assets, your unique characteristics you have as an individual or as a company. And I think you cannot completely pivot to something that is completely different. So I always compare it with a highway. You have multiple lanes, you are on a certain lane, you know that the current lane is probably a dead end. Like, hey, I'm confronted with an open source that's not going to fly commercially. So you either go left or right and you go to an adjacent market, and you take the assets you have, and you combine it with something else in order to find a new value proposition and you validate that. And in our case, we had UI technology, and the first pivot was to actually combine it with an integration engine and a security engine.
And we started to position it as the next generation portal. And that really worked really well. We shifted from developer productivity into let's unify stuff in a common user interface, a portal, a next generation portal, which is 10 times more intuitive than at the time the old Oracle or IBM alternatives. And that was kind of helping us from zero revenue stream back into the business where you have a healthy revenue stream. The second pivot we had to do is that we realized with this portal technology, it's nice, but we're now operating in telco, in healthcare, and let's say all sorts of industries and people are always challenging us like, yeah, this empty portal, it doesn't give me an instant industry solution. And every pitch is difficult because you have to make it contextually, very smart people can do that, but if you want to do it at scale, you ideally are building more end-to-end integrated vertical solution.
So that became the second pivot for Backbase to say, let's take this portal. And instead of, but we had large telco customers, large healthcare customers, and then you need to have the decisiveness to actually go all in on a single industry. Not easy, not easy to do because you have multiple revenue streams in other industries, but you have to place that bet. So this is kind of probably the two minutes version of you take the assets you have, you pivot on the highway to a direction, you never know. What I just said sounds very simple, but it's a process. Each of these pivots is probably two to three years each. And it is like the lean startup, you have to test with the market, the feedback, does it work? Does it resonate? Can I get new customers? And then customer success will basically encourage you to continue and double down, or customer feedback in rejections will basically educate you to stop and go somewhere else. So, I'm not sure if you guys are familiar with this book The Lean Startup from Eric Ries, but I think it's extremely true and applicable to a lot of things in life.
Hiten: Oh, very, very, very familiar. And then what was the signal or what was the information you got when you decided or triggered the decision to say, hey, financial services or banks was going to be my primary core vertical. What was happening at that point in time that allowed you to have that conviction or take that mini leap that you needed to take?
Jouk: Yeah, this is probably the number one question, right? It's a couple of things. One, if you compare an insurance portal and you compare that with a banking portal for online banking at the time, just look at frequency of visits. How often would someone visit an insurance portal just to check their insurance, whatever, or you would go to your online banking environment. So we saw that out of all the industries we were serving, the frequency of visits to a banking portal was by far the highest. And we also like its high frequency, but also probably high intimacy because it's your money. So that kind of gave us the indication like this is probably one of the most highly frequently visited type of portal. So hence probably it's extremely important for that vertical, because the day-to-day interaction with our customers will move to the digital channel on a massive scale. And then secondly, it didn't hurt that it was a very large industry with substantial funding. So the combination of those two, it's basically that simple.
Hiten: Interesting. And bring us up to speed then. So you gave a little bit of a hint. So where's the organization at now in terms of scale, in terms of the traction it's getting? Where are we? Where are we today?
Jouk: Yeah, so if you look at Backbase in the last 10 years in the industry, originally we really started, people would refer to Backbase as a company that is on the glass, that is basically bringing all sorts of ingredients from the traditional banking systems into a single user interface, but very light on business and logic. Basically repurposing all the systems that are out there and just kind of unifying it in a nice user interface. And that is kind of how Backbase started entry into the market. Like a lean portal, a light portal used to bring stuff together 10 years ago, 12 years ago. The journey was basically every time we saw that we basically need to add orchestration logic, because you have the system of records in the bank, which is the core banking platform, or the card systems, or the payment rails. Then you have the system of integration, and then you have the system of engagement.
So, it's basically a three-layered model. And in that system of engagement, we found out throughout the years that you actually need to have a lot of business logic to orchestrate customer journeys end-to-end. And think about entitlements, like who's entitled to do what, approve payments, to what threshold? Can you allow employees to act on behalf of a customer? Does the customer need to be there? Do they need to sign off for that? Digital signatures, workflows, case managers, like hundreds and hundreds of microservices were required actually to properly create a seamless customer journey. And a lot of people talk about customer journeys, but in journeys the most simple thing is the UI. That's actually printing stuff on the screen. But having the integration logic so you can have instant data and logic access from the system of record. So I think the integration logic, that's really basically a part of the iceberg that you don't see, that you need to automate, that and you need to industrialize the pipelines and the connector infrastructure to make that a no-brainer and go fast.
And then on top of that, you need to have a lot of business logic to orchestrate journeys, like a Netflix, like an Amazon, like a Google. That type of business logic. And it took us 10 years. The total company now is around 2200 people, but I think close to a thousand of them, so almost 45% are just working on product development. So it's a very large group of people and that platform is completely organically grown with hundreds of customers, where you basically get all the requirements from that sample set about what they actually need. And then we had to translate that into a generic platform, an industrialized platform, one platform, one architecture, one code base that can serve these hundreds of customers. So you can imagine that as a daunting challenge at an architectural level. And you can also imagine that we probably, we didn't get it right in the first round, so it probably took us three to four rounds to mature the platform, to have it at the right level of configuration readiness. I think that's craftsmanship of any craftsman where you need to have a few cycles to mature the things you create.
Hiten: Well, congratulations. It's awesome where you guys have got to with it, and just hearing you speak, it triggers a very obvious reflection in my mind, where the simpler things are to the user, the more complexity you as the provider or the technology provider have had to internalize. And it brings up an anecdote in my mind during Covid, where I had a very traditional banking provider, one of the biggest banks in the world who couldn't open an additional account for me, even though I had a few accounts with them already unless I came in a branch. And so I did go to a new FinTech type bank who did it in 10 minutes, and it was nuts how simple that simple interface without the complexity probably required all of those things that you described to simplify at the backend. So congrats on getting there. I'm going to invite Cosimo in now and just to kind of ask a few questions and exchange views, really on the market that you guys are active in and get kind of your latest take on where things are headed. So Cosimo, do you want to jump in here?
Cosimo Schiavone: Thank you. Thank you, Hiten. And congratulations on the amazing journey so far with Backbase. Really amazing. Yeah. So we'd love to hear your perspective a little bit on the bank tech market and how it's evolved, and some of the future expectations. So maybe let's start from digital transformations. You mentioned that a little bit, but where are banks struggling the most? So over the last 10 years with Backbase, what are bank CIOs, CTOs, business leaders asking Backbase for help with?
Jouk: Yeah, there are different perspectives on the question on how to answer it, right? But let me just take one or two. I think number one is that over the last four decades, so let's say or five decades, 40, 50 years, banks have been adding a lot of technology to their stack, but they've done it all in isolation. So I think at a given moment there was kind of the branch automation cycle, then there was the call center opportunity, then there was the ATM somewhere in that journey. Then there was internet banking around 2000 or a little bit earlier. Then there was the mobile wave in 2010. But the problem is that all these different channels have been developed in isolation. And I think that's also the example from Hiten. Why is it difficult for an older bank not to do these things? Because I think, and it's not that these people are not smart, they are smart, but they basically implemented five decades of different technologies, and they've been implementing them in isolation.
So that's one. The second problem is that the whole architectural always have been either product centric, so let's do a lending product, let's do a debit product, let's do an issuing product like a payment product, or it has been channel-centric, the call center, the branch. And if you now look at today's reality and you look at a competitive benchmark with any other e-commerce or platform player, the model is different. It's customer-centric. So here you are, you wake up and the whole world basically needs to be in a customer-centric paradigm, but you have 50 years of architecture that is the opposite. So I think this is, if you really zoom out at a 10,000 feet, I think this is the number one challenge. How do we move from product-centric into customer-centric? How do we move from channel-centric into customer-centric? Basically how do you re-architect around the customer?
So sounds super easy, it's always easy to make an observation, right? And I think that's, if you would be able to start today from scratch, some of the neobanks, most of them actually have the opportunity to do this from scratch. So now the big question is that how do we help these larger traditional banks with a massive amount of technology debt, basically orchestrated and developed in the wrong paradigm? How do we help them progressively, incrementally make a transformation into the right paradigm, which is how do you move from channel silos into a single engagement platform, so you can orchestrate these journeys? How do you move all the integration spaghetti below these channels to the systems of record? Like where you have thousands, if not 10 thousand of bespoke duct tape integration patterns, how do you move that into an industrialized integration architecture? And I think if you look at that problem, this is now maybe the second observation, most banks are spending hundreds and hundreds of million on technology that's in the wrong paradigm even to solve new problems. And I think this is the most ironic part of it. You're spending hundreds and hundreds of millions. So the meta problem is how do we help them to capture some of that run budget and transform it into change budget, and then give them a blueprint architecture that can drive the change. Maybe it sounds a little bit abstract, but I think the paradigm shift is major and then, as a result of that, billions are invested on something that is not futureproof. So you're basically literally burning money.
Hiten: And Jouk, I just want to come in there because I think you've hit upon a really important point that's coming up in a lot of our conversations, that organizational design you described to get your output. So I guess there are a lot of people we speak to who want to become more customer-centric, like you described, yet this challenge is kind of enabling that. What have you learned from your journey when you go back to your point around organizational structure, what do you think some of the key principles or what have you learned that didn't work? When you want to translate that philosophy, which I think a lot of people subscribe to but aren't actually able to set up their organizations to deliver on?
Jouk: Probably this is, and I don't want to offend anyone who's listening to the podcast, but this is really one of my biggest personal frustrations where I meet so many people that genuinely want to be customer-centric, and also they are on stage to talk about their next innovation, or their next customer experience program. But then behind all the great PowerPoint success and the beautiful career they're having, the actual reality for the clients is not that great. Because it is so hard to tackle the underlying problem. So it's nothing about these people individually, I think they're genuinely all deeply motivated to make it happen, but in the industry, partly because there was no horizontal platform that would help them progressively modernize. So that you need to have that enabler. And I think right now that enablement technology with players like Backbase is in place. Then the second thing is it really requires, I think bold leadership from the top.
Jouk: And in my personal mind, I start to see the world more and more between leaders that actually would like to keep the status quo, and you will keep the status quo I think with that attitude. And you see more ambitious leaders that also you could say career limiting risk, you have to take it to change the status quo and you have to be brave and you have to be ambitious to do that. And I think it also has to come from the top because it's very hard as an individual contributor to make that change in a bank. But I think the formula now is there, and I think it is horizontal platforms. So the industrialized fabric is there, you can rent it in the cloud. It's the same thing with cloud technology. You don't have to do it yourself. You can create value on top of it.
Jouk: You're going to see the same with AI. None of us have to do large learning modules. The big four will do it, but you can innovate on top of it with small learning models. I still think in the digital transformation world, most of that planning is in place. So now it's about how do you create digital factories where people engineer in capacities allocated to solving real customer problems. So I think in these digital factories, you're looking for an organizational model where everything is organized around front to back customer journeys. And businesses, and IT are working together under the same roof, not in two different skyscrapers with a few stoplight dashboards to discuss how well things go. So yeah, I think the formula is clear, but I think there's still a lot of room to grow in learning, in how to apply this.
Cosimo: Maybe zooming out a little bit, if you are a tech entrepreneur starting today, where would you focus? Where do you see the biggest opportunities in digital banking? What are some of the, obviously customer engagement, it seems to be the area of focus, but where are the margins, where around that do you see the business?
Jouk: What's happening right now, I think we are in a unique moment in time with AI. I think it's going to be a mega supercycle, and I don't want to kick in an open door, but this reminds me completely of the first age of the Internet. I think what we see today is probably the Netscape mosaic browser, something like that. I think that's the level of where we are in the maturity of the AI cycle. So now we see it's possible you can browse the Internet, there's kind of this next wave of AI. Nvidia is what Cisco was then back in the days. It's almost like remarkably. So I think also what does it mean for FinTech and what does it mean for Backbase? I really think it is super important. We have all the pipelines to legacy systems, because you can do whatever type of AI stuff, but if the pipelines are not there, it is broken. So I think pipeline development to kind of get the data in the same location, to get unified business logic in a vertical industry, I think is crucial. Then on top of that, of course you need to have your headless engagement logic, and then I do think initially it'll be copilot, but ultimately I think there will be agents, either software development agents that will help developers to create journeys, or consumer, or business agents that will actually act on behalf of humans to execute tasks, light speed in parallels.
I really think this is going to impact a lot of, let's say, white collar jobs at a very significant scale, and it can help them, but it can also to a degree replace them. So I think, I don't know how it's completely going to play out, but I think you should position your company. We as Backbase have to completely reinvent ourselves as well. I think to the innovator's dilemma, to be super relevant and to complete, I think as existing SaaS companies, existing banks, I think all of us, you don't have to go too fast, but you have to embrace this completely, and for startups as well.
Hiten: Yeah, I think for me Jouk it goes back to what you said earlier about some of the risk taking and boldness. I think on the productivity side, I think we could see from what we're observing anyway, there's a bit of a linear progression, as you say, everyone's comfortable around the productivity gains of AI, and the co-piloting, and all of the software, and development side being more productive. I guess in terms of what the end product and solution is, it definitely feels from where we sit, it's going to be a non-linear playout, a little bit like the Internet as you described. What does that end model, winning model look like? And it may not be that goes from A to B, to C, to D, and I think that's where embracing that element of the random walk and being bold, and who's in a position in the seat where you can afford to be bold. When you talk about the innovator's dilemma, I think there are a lot of people who sit in seats where you've got to meet the quarterly PnL [Profit and Loss] requirement. You've got to incrementally tinker with the margin. So you're solving short term versus saying, hey, do you know what? I'm going to be bold, I'm going to take risk. I'm going to position myself for something that's quite fundamentally different and transformational. And not every actor out there is able or willing, I think you need both conditions to be able to play that game.
Jouk: Sometimes people misunderstand bold with only risk, but I think in the word bold, you can actually be very, let's say, you can find a very nice balance. So I think there's always no regret moves, and then there's experimental moves from which you can get signal to go all in. But let's say we never will go all in. Bold doesn't mean all in. You want to go all in when you know what to do. In my mind, number one, the no regret moves are making sure that the enablement infrastructure is in place to be able to play in the first place. So if you don't have the data pipes to aggregate all the data you truly need in a single location, you're not going to be complete. So I think there's a lot of infrastructural work in the integration layer, but also in the engagement layer to make sure that all the engine room capabilities to compose the right customer experience, either in online, or in mobile, or in chatbots, or whatever future speech, whatever the interaction pattern will be, that plumbing needs to be there.
So I think you can make an analysis, how well are we positioned right now and how do we make non-regret bets today, because it'll drive for the classic world we know today for online and mobile banking and streamlining journeys for customers and employees, and then it'll also lay the same underlying plumbing foundation to drive an AI future. So I think that's basically the no-regret. Then you can start to place smaller experiments or little bets in developer productivity, and intelligent process automation, and financial insights, and you're just close to the fire with smaller teams just to make sure that you have, when you need to move and when there's a breakthrough, you can double down. Again. It's the lean startup philosophy. So to me that would be bold already. So bold is not taking crazy risks.
Hiten: Yeah, no, I like that framing that kind of no regret coupled with the experimental, but what you described is that proximity though, to be able to pick up on that feedback when you're doing that experimental and the timing of that. So no, thank you for sharing that. I'm going to switch gears slightly. The other part of the conversation we like to explore with guests is a bit more on the personal side, so invite you to kind of share, reflect on a lesson that you've learned along your way, along your many years. What did you take from it and what is something that you think is valuable to share with the wider community of listeners, given what you've gone through?
Jouk: Yeah, it's probably in line a little bit with what we discussed earlier, but the thing that comes now to mind is these super cycles. On one end they go, I think it was Bill Gates who said something like this. They go slow and they go, you think they will go slower than you initially think and then they will go faster ultimately about the impact they have. I don't know the exact quote, but we've seen, I think all of us, we've seen it with the internet cycle, we've seen it with the mobile cycle. So you will go through a few slopes of up and down, but I think my biggest lesson is play the long game. That's for Backbase, that's in your private life, but I think that's also for the banks. If you take the long game, you think, what are the moves I need to make?
And sometimes that requires in my personal life or in others, to take the hard medicine, and persevere, and roll up your sleeves, and take calculated risks, and expose yourself to hard work and pain. So I think also there needs to be a level of, internally, explain in a very positive, gentle way, but ooh, this is going to be painful to kind of conquer this challenge, right? Because these things, if they're easy, they're easy, there's no pain, but most of these things are difficult for a reason and you need to overcome them. So there will be a level of pain inside Backbase, inside a personal mind, whatever life, inside a transformation program with the client. So I think just to be ready for that, but also then think if you overcome it together with the right positive together attitude.
Hiten: Awesome, awesome. Thank you for sharing. Finally, we like to invite guests to kind of share and throw the spotlight. So I don't know if there is an individual or a company that's impressing you right now that you think the audience ought to pay attention to or look up, and it might be an interesting one for them to look into.
Jouk: And again, this is very contextual and this is just Jouk in March, 2024. So these things are always moments in time, right? But at this moment, I'm reinvigorated by companies that create vertical ecosystems. So if I look at Square and the Flywheel they're building with their small business segment and then the consumer segment with cash, and at the scale they do this, I think it is phenomenal for me as a software entrepreneur, but I also think it would be a playbook for any banking executive just to, they are creating the whole product. They are creating the super app notion where they are basically bringing all these things together in an extremely meaningful outside in. So in my mind, these companies are architecting around the customer, and they're creating the whole vertical ecosystem. So I find that very inspiring and also what Jack Dorsey is now doing there with the next wave of the cryptocurrency, kind of bringing that to the fruition.
Jouk: I don't know if it's going to work, but I think I would just encourage him for trying it and building a level of change. And also there he probably has to have a lot of perseverance. This is not, I think you cannot judge him on the current stock price or the current flavor. Again, I think it's a longer play. So yeah, I would root for it. I think based on what they've been building so far, I think there's a compounding effect in these models because these compounding flywheels, they come bigger and bigger. I think it's extremely powerful. Another company, but that's also very specific to Backbase. Bill McDermott with ServiceNow, they basically took this workflow engine and now it's like 10 billion in revenue, but the speeds in which some of these companies embrace AI and translate it into business value. So I'm talking about larger companies with 10 thousands of employees, with 10 billion in revenue, the agility they have. It's the same with Microsoft, with Nadella, they are oil tankers in a way, compared to most of the companies, at least I'm in. I admire their speed and their decisiveness. They recognize the supercycle, they mobilize their people, and I'm impressed with the agility and the speed they can bring in companies that are of very large scale. I think in another way that could also be hopefully inspiring to some of the banking executives.
Hiten: Indeed, indeed. Very much so. Jouk, that brings us to the end. So thank you so much for sharing, taking us on that journey. Right back to the pre-information superhighway era. You've left an image of motorways in my mind as I think about what goes on in the AI journey ahead. But look, thank you for being generous with your time. Thank you for being generous with your thoughts and sharing your reflections. It's been great to have you on the show.
Jouk: Thank you both.
Cosimo: Thank you.
