Fineract — software for financial services

This week, I’m excited to talk about the open source project fineract.apache.org at the annual ApacheCon (online only this year).

Fineract started its life as Mifos, a project I created in 2002. Skipping over a lot of history, … early on the Mifos Initiative chose to be on the most modern architecture, and to (as much as possible) to anticipate the future directions in technology. We built a centralized server, with thin clients (mobile enabled) at a time when most core banking systems were operating on the concept of federated data and distributed client applications. We built for the containerized cloud and open APIs in our second generation in 2010. Now on our third generation, we’re building for composable and/or orchestrated microservices. The software released as mifos or fineract is now in use in dozens of countries for a huge range of financial sector players as the core banking platform, as the wallet, as the transaction engine, as the mobile money agent management system.

To the extent possible, we surfed the trends that we could see coming. We benefited from the trends, developers, funders, and the advisors who supported us along the way. Our users, the software companies that built on top of mifos/fineract showed us where we needed to go next.

So, this begs the question: What trends are we surfing now? and where might they be going?

Here is one list of ideas:

  • Open Standards and ecosystems of providers requires constant innovation, in particular those new models around PSD2 (PISPs and IASPS)
  • Cloud based “x as a service” takes us to pluggable relatable componentization and containerization enables commodity scale
  • Commodity software eats bespoke software for breakfast
  • PlatFins (a term coined by Vikas Raj) are winning because they understand network effects in addition to economies of scale and scope
  • Devices, including embedded devices and powered biometric cards with local processing power are a new promising frontier
  • Mesh connectivity + low-earth-orbit satellites *may* compete against wifi, wimax, telecom base-stations, microwave transmission backhauls.

I’ll cover some of these ideas in my talks this week at apacheCon, and perhaps expand on them in a further Medium post.

There’s a recent popular theory in business thinking that one must adopt an “infinite mindset” {source}, which is to say, to frame your goals as constantly innovating, seeking the long term value, having an objective to “frustrate the competition”. i.e. Don’t “counter” the competition, don’t mimic them, instead, focus on your value to people, authentically anchored to an ideal vision of the world.

I think we have an infinite mindset for all sorts of reason, including our aims as a community to build better financial inclusion. We’re not directly competing against the banking platforms, we’re simply building a better open source approach that allows us to replace them, connect to them, or innovate on top of them. And, we’re not choosy about which cloud infrastructure we are hosted upon, we’re happiest when we have deployments on Azure, AWS, Google, IBM and RedHat. Just as today’s giants in the financial systems industry were small companies in the 1980s, we anticipate that our platform *could* be the fundamental building block of commoditized banking infrastructure on demand, native in the cloud (and hybrid local private clouds), offered as a service.

If, in the next five years, we start to eat into the market of the larger banking systems, we can imagine that they will join us on an open source journey. Many are already moving in this direction in the stack of technology that they are using in production, especially in the core databases and cloud technology. We could imagine the larger banking platforms today borrowing from us or converging with our technology. We would like to imagine a Association of banking platform providers, based on Fineract, sitting around a governance council to decide the software roadmap. Think of Apache Hadoop and how the various larger companies inform the roadmap of that.

Moreover, the financial services industry has already started to adopt Open Banking standards, and ISO standards are already part of their tech conversations. It is now possible to demonstrate that the Mifos Payment Hub on top of Fineract, connecting to Open Banking is going to greatly accelerate the journey for these larger system providers.

As incumbent banking institutions face challenger banks, as smaller banks are gobbled up by larger, as platFins take over in many value chains, there is an opportunity to counter that with a set of OS technologies including fineract, which provide a way for smaller institutions to compete on the basis of place based values or history in a community. We can concede that these large players are a necessary incremental disruption to an industry that has long taken customer retention as a given, and exclusion as a unfortunate side-effect.

At the end of the day, we should ask — why are we doing this? The vision at Mifos.org is democratization of financial services.

We’re not alone in this. In the US and elsewhere there are recent calls for a public bank option — accounts offered by the Federal Reserve to every citizen. And similarly there are calls for Central Bank Digital Currencies (CBDCs). These could be conceptualized together — bringing banking services at the lowest price point to everyone on the planet.

Mifos and fineract continue to push the agenda of open source for financial service offerings, spanning not just accounts and portfolio management but also AI for credit scoring, mobile money wallets, and consumer facing QR transaction initiation. Globally women are more excluded than men and the global pandemic has given rise to both opportunity and challenges as pointed out by this paper , this, and this.

If you are interested in our technology and where we are today, where we could go together, join us at ApacheCon2020.

James Dailey is chair of the Mifos Initiative and on the Fineract PMC.

See these talks:

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