Temenos has announced that it has acquired Logical Glue, a small vendor of financial-services-specific AI software covering use cases like credit scoring and underwriting. While Logical Glue has been successful on its own, Temenos has not acquired the firm because of the size of its business: Temenos is positioning the acquired software capabilities as an AI platform within its broader banking platform — an AI engine that can enrich its “conventional” banking capabilities across a variety of use cases such as behavioral prediction, fraud detection, and product pricing.
Is this acquisition relevant? And if so, is it relevant beyond making some off-the-shelf AI capabilities available to Temenos? Temenos is right in saying that financial services firms are making growing investments in the AI space. However, the vendor could have coped with this demand via partnerships that could deliver a similar AI engine or by building an AI engine on its own.
The relevance of this acquisition goes beyond vendor tactics and go-to-market strategies. In 2017, banking platform vendors began offering the first AI use cases and started considering new ones. At that time, Forrester stated that “AI will move from being something special to a core technology — and banks of all shapes and sizes will have AI-powered banking applications.”
Many banking platform vendors — such as EdgeVerve (leveraging parent company Infosys’ Nia AI engine), Oracle (using its own AI engine), and Sopra Banking Software (using multiple external AI engines) — have taken the path of AI-enhanced banking platforms. While Temenos certainly hasn’t neglected the AI side of its banking platform in the past, the acquisition indicates the strategic need for highly specialized AI know-how and control of an AI engine. The technology patent that comes with the acquisition is a bonus.
Banking platform vendors that follow the approach of offering a suitable, internally built, and tightly controlled AI engine will find it easier to deliver the flexible AI-powered banking platforms that banks need. With AI having moved center stage, we will likely see more acquisitions in the AI space — similar to the many acquisitions of digital front-end vendors in the past. This means that in the long term, when banks of all types and sizes are using AI-enhanced banking applications, a bank won’t need to focus on AI but on the business value it delivers.
Please let me know what you think!