Fintech Finance presents: The Fintech Magazine Issue 12

ISSUE 12

THE

FINTECH MAGAZINE

Managing expectations

From angry to bewildered, what’s the CRM fix?

Cashless courage Will QR help drive the Singapore swing?

Follow the money Why Trulioo is targeting the world’s rich lists

Mutual benefit How £4.1billion of new tech is helping Nationwide stay true to its roots

11 FS

The financial Avengers assemble for an epic tour of the digital banking universe

PLUS INSIGHTS FROM iboss ● DBS ● BNY Mellon ● OCBC ● Finastra ● UOB ● Citi ● ACI

Citizens Bank ● Moneyhub ● Aptean ● Banking Circle ● SmartStream ● Trulioo ● SWIFT

It was Paris Fintech Forum 2019

220+

280

CEO speakers

150+

180 2600+ soouldt!

 fintechs on stage

attendees

60+

countries

75

Get ready for the 5th Edition!

parisfintechforum.com

120

exhibitors

145

CONTENTS

11:FS SPECIAL 8

Fintech Avengers: The game’s only just begun ‘Challenger consultancy' 11:FS has famously said that digital banking is only one per cent finished. So, we gave its crack team of financial superheros a chance to explain how they intend to complete it – starting with Cofounder and CEO David Brear, and CTO Ewan Silver

11 The profound romance of plumbing Chief of Staff Leda Glyptis has a special fondness for core banking

13 The change horizon Sarah Kocianski, Head of Research, looks at two of key trends driving FS

14 Permission to be great!

Head of Ventures Simon Taylor on why legacy bank brands might need to disguise their innovative streak

14 The real value add of marketing Pile it high while channels are cheap... is the advice from CMO Eric Fulwiler

17 Taking the pulse of financial services Ross Methven, Practice Lead for Research & Benchmarking, on getting to the next level

18 Look before you leap Brandon Chung, Jobs To Be Done Consultant, on why you shouldn’t enter Asia without researching first

THEFINTECHVIEW

2019

In only our second ever issue, we were lucky enough to secure an interview with the team at 11:FS, then a shiny-new startup with some awesomely impressive people at the helm. That conversation inspired a whole series of special features, which referenced the superhero universe: the Fintech Avengers had been born.

Three years later and a lot has changed – for them, us and the industry. While we’ve grown our stable of financial technology titles, 11:FS has been busy expanding its massive collective brain by attracting a whole slew of talented individuals who have made their mark on fintech. For this issue, we invited them to explore the shifting digital banking landscape and explain how their challenger brand of

ISSUE #12

consultancy is helping to transform it.

While 11:FS is one of the freshest faces on the block, Nationwide is one of the oldest – yet it’s the fastest growing digital account provider in the UK. How this national treasure has achieved it while remaining true to its mutual roots goes to the heart of the phygital debate.

But that’s not all – it’s a page-turner of an issue with insights into CRM, wealthtech, cyber security and more!

Did you recognise last issue’s ‘spine tingler’ Life is never completely without challenges

by Stan Lee, the American comic book writer, editor, publisher and producer. R.I.P x

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19 Fintech be nimble, fintech be quick Emerging FS is subject to the same rules as incumbents, but, over time, is less burdened by them, says General Counsel & Head of Risk, Nasir Ahmad

20 Keeping it real Marketing Manager Bianca Sarafian looks for the humanity in FS and finds it a radical new model of organisation

20 The biggest mistake in digital transformation?

Jason Bates, Deputy CEO and Head of Product, reveals all

CUSTOMER RELATIONSHIP MANAGEMENT 22 The platform pulsar Finastra is charting a bold course to the financial stars with FusionFabric.cloud www.fintech.finance

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Secure user Internet access on any device, from any location, in the cloud Shift the focus from following perimeters to following users so that consistent cloud security is applied while users are in the office or on the road.

www.iboss.com

CONTENTS

30 45 42

38 24 Anger management There’s no greater test of a company’s customer service than when things start to go wrong, says case management platform, Aptean

26 Managing expectation Citizens Bank probes what’s needed from a CRM system to meet the needs of today’s commercial clients

28 Speaking in code Why Singapore’s OCBC bank has seen a staggering 450 per cent increase in QR code transactions

30 How you build the bank of tomorrow UOB’s new digital bank is very different in style and concept to what has gone before in South East Asia

32 Tooling up Low-code development platform MatsSoft is giving incumbents a new tool in the box

34 Openly curious That’s Westpac’s attitude to technology that’s challenging the very premise of banking www.fintech.finance

36 Street-wise retailing The death of the high street has been much exaggerated, according to Valitor’s Payment Solutions Division

38 Do the maths The founder of Moneyhub was once told ‘put the customer first and the money will follow’, so that’s precisely what she did

NATIONWIDE 42 Innovation for all Emma Huntington, Nationwide’s Director of Innovation and Ventures, is determined to help members run a better financial race in life

45 Open for business As Nationwide prepares to launch its first business account aimed at SMEs, Director of Payments, John Hutton, looks forward to the Open Banking journey

46 Liberating banking Matt Cox, Head of Open Banking, and John Hutton, Director of Payments, at Nationwide, consider how the most transformational event in financial services will shape its future

48 Staying relevant James Smith, Director of Digital at Nationwide, is responsible for one of the biggest IT transformation programmes.

But the technology is in service to only one goal

WEALTHTECH 50 On-fleek fInance Canada’s millennial-friendly Wealthsimple, is bringing a touch of street cred to the UK’s investment market

52 The inconvenient truth As bad actors become more sophisticated, financial services is finding it increasingly time-consuming weeding them out. Verification specialist Trulioo can save organisations the bother

PAYMENTS 56 A Chartist movement for cash The erosion of payment choice isn’t just inconvenient, it’s profoundly anti-democratic, argues Ron Delnevo Issue 12 | TheFintechMagazine

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Beautifully simple banking.

Mobile banking for personal, joint and business.

Download the app today to get started.

starlingbank.com Starling Bank is registered in England and Wales as Starling Bank Limited (No. 09092149), 3rd floor, 2 Finsbury Avenue, London EC2M 2PP. We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 730166.

CONTENTS

58 88

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58 Fast work!

Speed is of the essence in cross-border transactions and the SWIFT/ACI #PaymentsforBreakfast Roadshow shows SWIFT gpi pulling ahead of the race

66 The inside track on payment rails

84 Mhealth lightening the load for insurers

Citi’s Treasury and Trade Solutions Head’ explains why SWIFT and blockchain both have roles in improving corporate payments

EVENTS

60 Cashless courage SMEs in South East Asia are understandably jittery about going cashless. DBS bank is doing its best to calm their nerves

62 Circle of trust It’s no secret that SMEs struggle to access credit. But innovative financial utility Banking Circle wanted to know why and what impact financial exclusion had... so it asked them and concluded that a new approach was needed

65 Filling the gaps A trend towards outsourcing is redrawing the ATM cash replenishment map on the continent of Europe. RBR, explores where the opportunities lie

68 The Davos of digital finance Ali Paterson, Editor-in-chief of The Fintech Magazine, interviews Laurent Nizri, Founder of Paris Fintech Forum

DATA 76 Mastering the art of digital

The vital signs for health insurers are not good. Financial services leader Daryl Wilkinson believes connected communities are key to improving outcomes

CLOUD & SECURITY 86 Finding nirvana Exploring the benefits and challengers raised by migration to a Cloud environment with Citi

88 A secure stairway to heaven As the financial services industry migrates from the physical to the ethereal, internet security specialist iboss explains why it’s important not to leave your protection back down on earth

BNY Mellon has assembled a crack team to propel the bank’s digital transformation to the next level

78 View from the top SmartStream CEO Haytham Kaddoura talks technology, strategy and company culture

81 No sweat!

LAST WORDS 90 Good vibrations

The tiny city state of Singapore has a big reputation when it comes to fintech acceleration. DBS – one of the largest and best known of the South East Asia banks based there – is on the grid and revving up

THEFINTECHMAGAZINE2019 EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales

ONLINE EDITOR Yash Hirani PHOTOGRAPHER Jordan “Dusty” Drew SALES Chloe Butler Tom Dickinson Shaun Routledge

VIDEO TEAM Douglas Mackenzie ● Lea Jakobiak ● Shaun Routledge Lewis Averillo-Singh ● Classic Dom Beasley ● Laimis Bilys CONTRIBUTING WRITERS & DESIGNERS Tom Dickinson ● Will Dove ● David Firth ● Tracy Fletcher Rachael Harrison ● Alex King ● Natalie Marchant Sean Martin ● Fiona McFarlane ● Sue Scott ● James Tall Swati Sanyal Tarafdar ● Emily Tatham ● Brendon Ward

In his new book, former banker David Reiling says it’s perfectly possible for banks and other financial institutions to do well by doing good

ISSUE #12 Fintech Finance is published by ADVERTAINMENT MEDIA LTD. Advertainment Media Ltd. Riverside Business Centre, Riverside Lawn, Tonbridge Kent, TN9 1EP

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Issue 12 | TheFintechMagazine

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11:FS SPECIAL

FINTECH AVENGERS

THE GAME’S ONLY JUST BEGUN

‘Challenger consultancy' 11:FS has famously said that digital banking is only one per cent finished and in the three years since its launch, it’s been busy helping build the other 99. To do that, 11:FS has assembled a crack team of financial superheros while its blockbuster Insider podcast series has fans across the world. Here, Cofounder and CEO David Brear,, and CTO Ewan Silver, tell us what they believe is its secret sauce David Brear 11:FS CEO My whole strategy is simple: I focus on unleashing talent.

I think many organisations start to drop the bar on recruitment once revenue flows in. Instead, I’m building a team capable of achieving anything – building a new bank, changing a policy, standing up in front of a crowd to inspire change.

I genuinely believe we have the best team in banking and it is very exciting, it renders us magnetic. A lot of people view company culture as a sort of a fluffy and ethereal thing, but for me, it’s the beat that drives this firm.

When Chris Skinner, Simon Jason and myself came together at the start of the 11:FS journey three years ago, it genuinely felt like The Avengers. And now, numbers are swelling from incredible additions – Leda Glyptis at Foundry, Ewan Silver as CTO, Jess who does such a phenomenal job with social media; Pet, who came in as an intern and is now creating amazing content across the board.

There is an invisible consistency in the quality of people we bring in: each are fantastic at what they do, are possessed with an almost bizarre passion for their craft, and underneath it all, they are incredibly good people. The last element is crucial because our mission is not an individual quest, 11:FS is a team sport.

From the inside, we act as a group of people striving to become experts in our field while revering other people’s expertise. The mutual esteem and co-creation is, in many respects, the

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secret, but I like to think that the dynamic is just one aspect.

Right at the beginning, when it was just Jason, Ross, Simon I about to start the company, our culture hatched from individualism. We could all do great things individually, but were drunk on the certainty that collectively we could change the industry. And that’s really where The Avengers metaphor comes from; this idea of coming together to create a force of belief centred on what the company stands for and actually make it happen.

Once upon a time, our culture priority was survival. The original gang worked 24 hours, seven days a week to ensure survival

I genuinely believe we have the best team in banking – it renders us magnetic and our arrival at the next phase of corporate cultural sustainability. There is no point bringing amazing people in to the organisation and not having the culture or the capability to ensure sustainability for them.

There are two main policies in our Employee Handbook. One is: “We rely 100 per cent on trust, and so don’t create thousands of policies to tell you what you should and shouldn’t do.” If you don’t give individuals the ability to actually think about what they’re doing, they stop thinking altogether. Fact. And the second policy is simple: “Don’t be a dick.”

It’s effective and resonates heavily through the fabric of the company: don’t be a dick to the company, don’t be a dick to your colleagues, don’t be a dick to the client. It works.

We also talk a lot about the Humble Hustle. Many companies’ hustle culture means working to the bone for the sake of a deal, but our hustle refers to taking ownership, because if somebody is taking real ownership of not only their work but others’ too, they will understand how they can help them achieve their goals.

We make it a rule not to deploy any hustle without humility, because for us, humility is all about creating empathy. It adds up to an office culture where people are encouraged to say ‘I don’t get it, I don’t understand, and I can’t do it’.

The accumulation of people, environment, passion and mindset has rocketed us to where we are now. With Foundry, we’re completing multi-billion implementations in minutes – and months ahead of the big organisations.

With the consultancy arm, we’re building greenfield challenger banks and winning strategy work from McKinsey and Bain. Collectively, we’ve carried out campaigns for some of the world’s best firms – LinkedIn, Microsoft, AWS. For a three-year-old startup, those are feats worth shouting about.

The FS in our name refers to financial services, our original point for disruption, but I see us as applicable to any industry; insurance, healthcare, government. Who knows where we’ll go? As we say, the journey is only one per cent complete.

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11:FS SPECIAL

Ewan Silver 11:FS CTO Having a competent team and healthy work environment are the wheels of the machine, but I believe that the extra ingredient that has made the 11:FS journey so singular is our multi-faceted, layered understanding of the industry’s organisational psychology and how we use it every step of the way to bring out the best possible outcome for everyone. People don’t necessarily grasp just how layered our intelligence is.

An easy place to start is our individual roles during the early days of challenger banks, before everyone and their dog began building a bank. In the early 2000s, as one of Betfair’s first engineers, I built the platform that revolutionised online betting – imagine what I learned and saw during that disruption! Then, in 2013, I was approached by Anne Boden about building the platform that would become today’s Starling Bank (and Monzo). I accepted, met Jason Bates (Starling, Monzo and 11:FS) and Tom Blomfield (Starling and Monzo) along the way, and when some of the Starling team left to found Monzo I went off to become CTO at Nutmeg.

When we met up once more in 2016, we jointly had unparalleled experience in the thought process and building out of new SME propositions and banks around the world – a level of knowledge that was, in fact, too intimate for me. I left Nutmeg once it revealed plans to do just that in Singapore because I knew how difficult the task was and I had no intention of spending my career manning teams of 1,000-plus engineers. Ironic really, considering that the move brought me to 11:FS and today we are doing the same thing. The difference is that we collectively put our knowledge from Monzo, Starling, Nutmeg and Mettle together when creating our Foundry service.

Let me come at this from a different angle. Why do you think our service is finalising changes in minutes where original systems take months or even years? It’s

because we genuinely understood the organisational blueprint. Every product on the market has fashioned itself on the top end and, as a result, others are spinning out incredibly finicky things. A Mettle is certainly no Monzo or Nutmeg – which is why we created an Azure-style system that went through the backdoor.

Obviously, the consulting arm of 11:FS offers us another great insight into the nuances of organisational psychology, thanks to its wide range of work across multiple jurisdictions and business areas: from the States to Hong Kong, Singapore and South Africa, Europe, the UK. Every month, I fly to a corner of the world to sit with a banking team and understand their tech issues. While there, I pick up on the

The podcasts are dog whistles to those inside banks seeking a sign that the battle they are fighting isn’t a solo one

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organisation’s management and thought patterns.

Everyone believes that the one per cent completion in our slogan refers to the technology advance. And, granted, bank technology isn’t the greatest, but there’s a reason why it’s there, and it feeds my theory that banking mindsets are the industry’s true inhibitor. By mindset, I’m referring to the past ones whose decisions shaped how banks’ function today, as well as the current voices, which worry that things can’t be done differently, won’t be allowed, it’ll fall through or whatever.

The banking industry believes in fintech, but doesn’t make a realistic connection to

it. Innovation is an amorphous thing.

It seems silly, but we see it happening first-hand all the time. When the DNB project in Norway got into the news, for example, we received a crazy number of inbound requests from large corporates and smaller banks from people on the lookout for something that will work for them in a way that everything on the market at the moment hasn’t yet. It was obvious from their inability to articulate what they were after that they hadn’t connected technology to their problem.

But that’s what our consultancy is there for – as well as our podcasts. I view them as dog whistles to those inside the banks seeking a rallying call or a sign that the battle they are fighting inside isn’t a solo

one. We craft them in a way that allows people to intrinsically understand that the banking landscape is shifting, mindsets are changing and that change within their sphere is a step closer to realisation.

And, once they realise it, they reach out to us and we can explain to them everything about what we do.

Explaining the software engineering aspect of 11:FS is no walk in the park, but I doubt we would be able to inspire banks around the world to envision their true technological capabilities if we weren’t continuously shaping ourselves reflectively to their operational psychology as they evolve, each at their own pace, towards the future of banking. www.fintech.finance

11:FS SPECIAL CORE BANKING

The profound romance of plumbing Believe it or not, Chief of Staff Leda Glyptis has a special fondness for core banking and a passion to help it be the best version of itself It’s not cool, but I don’t care, so I will happily shout it: core banking is a beautiful thing.

Actually, I should caveat that. It could and should be a beautiful thing, but it isn’t. At least, not yet. It’s a messy, tangled affair that does no one any favours.

For a long time, I got very frustrated because the world started to change but the fundamental mathematics of banking stayed the same. While regulatory barriers to entry were lowered, the technical ones remained.

Build or buy, setting up a bank is slow and expensive. Choices are made today for systems that will go live in years, guaranteeing a certain degree of obsolescence right out of the gate.

But what can you do? What options do you have?

The way things used to be is no longer an acceptable reason for anything.

I can’t tell you how happy that makes me. Core banking was long-deemed too boring for innovation, too big for experimentation, too creaky and slow for hope; the thing that limited us, the thing that held us back. But no more.

The team at 11:FS Foundry are not the only people hoping to shake up core banking. And more of us thinking about solving a certain thorny problem is a very good thing. We directly and indirectly push each other to do and be better. The more of us working in the space, the faster the narrative will change, and the sooner

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‘the way things used to be’ will cease to matter. That means for someone like me, who likes a bit of dramatic grandstanding, it is a great time to be a plumber.

The ‘U’ word Bear with me here. But think about it: utilities are meant to be huge, functional, taken-for-granted and expected to work for the betterment of life. Just like plumbing.

What if, by treating the core banking capabilities as utilities (which is what they are: core because they are fundamental and universal, not core because they are key to market differentiation) we could totally change the game?

Core banking was long-deemed too boring for innovation... but no more A thing that takes, if you’re lucky, five years to build is already outmoded in technical terms by the time it’s finished. It replicates what you already do because that’s the way it’s done, the same way it was 30 years ago. Limiting your ambition to the infrastructure’s worst day is the measure of how ‘not useful’ this thing is – not by design or malice, but just by the relentless passing of time and inadequate keeping up and future-proofing.

Costs and timings are bound to ways of doing business; to rules and systems. But it doesn’t need to take five years to stand up a ledger. And it matters that the service is not slow or expensive. It matters that we offer access. It matters that we finally democratise finance and at all levels.

So here we are. We need infrastructure for a real-time world, but for a long time we tried to slow the world down because we just didn’t have the right infrastructure that allows us to stand up digitally native propositions; that pushes our ambitions, rather than limits them. We are doing it with 11:FS Foundry. But, as I said, we are not alone.

There are others fighting the good fight (and, yes, I think my product is better because I get to make choices towards where I believe the real problems lie, where the real value can be unlocked; I think it’s better because I am dedicating every ounce of effort to make it so), but the point remains, we are all on the same side.

Maybe plumbing is not romantic to you. But to me, it’s my little slice of resistance. My own battle for freedom is core banking infrastructure that enables real-time capability building, at a lower cost and in a matter of minutes, rather than years. And it helps me sleep at night, to know we are all united by purpose. That we are not alone.

Issue 12 | TheFintechMagazine

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11:FS SPECIAL TRENDS

The change horizon The 11:FS research department is approached by firms in all areas of financial services, big and small, from all over the world with requests for insight.

Over the past 18 months, we’ve noticed a number of trends in the industry that have captured the collective imagination. But two stand out. So, what are these heat spots and why are they causing such interest?

Onboarding clients Pioneered by fintechs, an onboarding journey that is digital end-to-end is fast becoming a hygiene factor for financial services firms in Europe, particularly the banks. The best digital onboarding journeys are fast (a matter of minutes), require the customer to supply minimal information and result in an instant decision, with the customer receiving their account and virtual card details almost immediately if approved.

There are a number of drivers behind the increasing need for onboarding processes that meet these criteria. They were originally born out of necessity, as digital-only startups had to find a way to enable potential customers to apply in a compliant way that didn’t require capital outlay on physical premises and extra staff. But additional benefits soon became apparent.

Those include reduced applicant drop out, increased customer satisfaction at a process that can be completed by those with even the most challenging work or sleep patterns, and the ability to reach a broader demographic, including those who are unable or unwilling to visit a branch.

Adding to this trend there has been a change in customer expectations more broadly.

People now expect to be able to complete applications for any kind of account entirely online and lose patience with

Sarah Kocianski, Head of Research, looks at two of the key trends driving change in financial services firms that don’t offer the service. The end result is financial firms of all sizes looking for ways to implement entirely digital customer onboarding. If you want to find out the best way to do that, check out my report on Best In Class Onboarding at https://pulse.11fs.com/research.

The SME segment remains woefully underserved in many areas, particularly between sole traders and firms with more than 50 employees SME financial services Around the time of the global financial crisis, several startups spotted an opportunity to profitably offer SMEs financial services tailored to their unique needs.

They were targeting a demographic that had been hugely

underserved by incumbent firms, who essentially charged high fees for little more than a standard current account.

From the original digital lenders, the ecosystem of fintechs serving SMEs has boomed in the last 11 years. There are now hundreds of companies across Europe offering every kind of financial service an SME might need, including, but by no means limited to, lending, payments, cash flow management, accounting, invoicing and bank accounts.

Incumbents were relatively slow on the uptake when it came to offering services to compete with these fintechs, but in the last few years they have begun launching competing products, often in partnership them.

In the UK, the Banking Competition Remedies (BCR) Capability and Innovation Fund has spurred a new wave of interest in the SME space. After the recipients of Pool A funding were announced, which showed that it wasn’t just the expected players who were in with a chance of success, activity in the space has ramped up even further.

Despite all this, the SME segment remains woefully underserved in many areas, particularly when you look at the group that falls between sole traders and firms with more than 50 employees. And while the BCR Fund is stimulating the environment in the UK, the rest of Europe has, by and large, been slower to wake up.

That means there are plenty more opportunities out there for innovatively minded firms. You can find out the best way to start capitalising on those opportunities in my Best In Class SME Financial Services Report, also on https://pulse.11fs.com/research.

If you or your team are interested in finding out more about 11:FS research services, or want to discuss themes or topics you feel are underserved, drop us an email at pulse@11fs.com.

Opportunity: SME services are ripe for disruption

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Issue 12 | TheFintechMagazine

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11:FS SPECIAL FINANCIAL BRANDING & MARKETING

Permission to be great!

Head of Ventures Simon Taylor on why legacy bank brands might need to disguise their innovative streak Creating a challenger service isn’t easy.

Incumbents have spent years, centuries even, cultivating a brand that’s imposing and demands respect.

How can they shift from being serious authority figures in your life to talking to you as their equal – one that makes you feel like an individual with hopes, aspirations and financial concerns?

Brand permission is an interesting concept. It’s one we discuss a lot in the 11:FS office, given that our Fintech Insider podcast pushes the balance between being informative and irreverent. We feel we have brand

permission to do that. If that sounds like agency nonsense, let’s dig into the psychology a bit.

What is brand permission?

In 1999 Seth Godin wrote a book called Permission Marketing. Godin observed that successful brands were ones that obtained the consumer’s consent to market to them (and he didn’t mean an opt-in tick box, but emotive, genuine consent). He then noted three core elements to permission marketing: ■ Anticipated: people will anticipate the service/product information from the company

The real value add of

MARKETING

Pile it high while channels are cheap... is the advice from CMO Eric Fulwiler when it comes to content.

But first understand your audience

Driving growth and building brand is tough in 2019. Everyone has a voice. Advertising isn’t limited to the big companies that can afford to hire agencies and launch TV-centric campaigns. Everyone, from big enterprise to start-up, is dumping content into the ecosystem.

So, how do you break through? You bring value. You earn people’s attention

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instead of buying it (or, worse, expecting it). The brands held up as best-in-class in this era are the ones that bring value to their audience through their marketing; the worst (or the ones who are ignored entirely), are still stuck in the old model.

They use marketing to extract value. They start with themselves – their business, their product, their sales targets – instead of their audience.

Inbound marketing, content marketing, using a ‘publisher approach’ – all these models stem from the same philosophy: marketing as a function to add value instead of subtracting from it.

How do you add value? You reverse-engineer from your audience. You start with the customer, the prospect, the listener. You push yourself and your team to

You wouldn’t expect your bank, which has spent the last three decades being aloof and corporate, to suddenly be your best friend

understand who they are, what they care about, and what problems they’re trying to solve. You need to define the value you want to add first and constantly reassess whether you’re delivering against it.

Adding value is our north star at 11:FS. We try our best to produce content and experiences that will be valuable to the financial services community: educational or entertaining (ideally both), and distributed to where people are, not where we want them to be. We invest heavily in our trio of podcasts, our video, blog, and events. We appear on hundreds of other industry podcasts, blogs and events as well.

Anything and everything we do starts and ends with the question ‘how can we add value through content or experiences?’.

Most companies struggle to get their head around the ‘add value’ marketing model, especially in B2B, or even B2C with more short-term-oriented CEOs. It’s not the way things have traditionally been done and it can be hard to close the loop with sales. After all, you’re giving something away with no expectation of getting something back. But marketing’s primary www.fintech.finance

■ Personal: the marketing information explicitly relates to the customer ■ Relevant: the marketing information is something that the consumer is interested in The first point is key to understanding your own brand permission.

In banking particularly there’s a real push for ‘innovation’. Without care, the outcome of this push risks being perceived by customers as similar to when a politician cringingly name drops the latest breakthrough artist as their favourite in interviews.

In many ways, brands are quite static and do best when playing to their strengths. Older brands may find themselves in the ‘dominant/competent category’, that’s not necessarily a bad place to be. However, when doing a new service launch, brands must consider whether their customers feel this should be coming from them. Does the legacy brand stretch to accommodate it, or should it come from a new brand?

Telco O2 (Telefonica) understood this well when in 2009 it launched the Giffgaff brand in the UK. Teenagers mostly bought

function is and will always be to drive growth. That should never change. And the ‘add value’ model is actually more effective at driving growth because the landscape of media and attention is so different now.

Value delivers growth because attention is the most valuable commodity in your sales funnel. Your product might be amazing, but it won’t matter if nobody knows about it. Your sales pitch might be stellar, but it won’t matter if nobody is there to listen. You need to collect and capture attention in order to convert it.

Content is still king Good content is the most effective tool; and lots of it in all three forms we consume – written, video, and audio. And it’s the battlefield of modern-day marketing.

cheaper prepaid SIMs and, no matter what pricing O2 offered, teenagers were not drawn to those offers. By launching Giffgaff with some unique product features (e.g. being one of the first to offer 3G data on prepaid) and a new brand, they now had permission to market with a new tone of voice and a new offering.

What this means for brands At 11:FS we often talk about a client’s place on the ‘banking battlefield’. The key is understanding where you want to start with regard to: ■ Your existing tech capability ■ Your existing culture ■ Your existing brand permission Each position on the banking battlefield has different strengths and weaknesses. But there are opportunities for incumbents, challenger banks and big technology companies to leverage their existing brand permission – to start somewhere else on the battlefield – as a hedge to the main business. We are increasingly seeing this from large banks with brands like Marcus by Goldman Sachs, Yolt by ING and Mettle by NatWest.

The cost of production has been lowered to the point that anyone can create their own media company and the pipes of distribution have been widened to the point where you can never produce enough content to saturate all the potential attention out there. Volume matters. It’s about quality and quantity. Take how much content you’re producing now, find a way to double it and it still won’t be enough, so much attention is there for the taking and it’s cheap to access as well. When a channel is new, it’s cheap. It’s less proven, less accepted and most marketers stick with what they know. Podcasts, social, and much of digital video still fits this category.

The best marketing takes

Take how much content you’re producing now, find a way to double it and it still won’t be enough… so much attention is there for the taking www.fintech.finance

The threat looming on the horizon for a number of years has been the big techs: Google, Apple, Amazon and Facebook in the West and, in Asia, the super app players Alibaba, Tencent and Grab. All of these organisations have made a play in finance. Most notably, Apple recently launched its own credit card. It can leverage its platform and position to win a greater share of the customer relationship and more of the value that comes with it.

Where big techs succeed is that they understand their brand permission, build and iterate on it.

What happens next?

We’ve helped a number of incumbents, big techs and fintechs identify the strategy and execute it, depending on their position on the banking battlefield.

Your strategy to acquire (or keep) customers will depend on where you start and where you want to get to. It requires a deep understanding of your brand permission and if your existing brand has an advantage that you can build on. And, if not, how willing are you to go to market with an entirely new brand and all the effort that requires.

the ‘add value’ model and activates it on these channels. Sounds simple, but as with most things, the idea is the easy part – it’s the execution that matters. Adding value consistently over-time is what builds great brands and drives real, sustained growth.

Now, I can’t take any credit for the execution of this model at 11:FS because I only joined recently. But I can tell you how important our audience and community has been to its success, where we’re humbled to have millions of listeners to our podcasts in more than 180 countries, and an active community of followers across our content platforms. It’s you, our community, that drives us to add as much value as possible. So, thank you to all of you who listen, consume and engage. And, if you don’t, head over to 11FS.com now and let us know what you think.

Issue 12 | TheFintechMagazine

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11:FS SPECIAL RESEARCH

Taking the Pulse of financial services Two years ago, 11:FS had an idea to create a new research tool.

We took the view that the traditional methods for providing digital financial services competitor insights were broken.

Digital banking was more experiential than ever before, so the days of presenting static screenshots, buried deep in PDF reports, were coming to an end. A new medium was required to bring these kinds of insights to life. Step forward, 11:FS Pulse.

The development was supported by three pioneering banks that shared the vision and a MVP (minimum viable product) was developed with their support. The teams at 11:FS who are actively involved in building digital propositions for our clients quickly found Pulse to be an essential tool as part of any design and build project. It captured the attention of others in the industry.

Affectionately referred to as ‘the Netflix of fintech’ by our users, Pulse now contains thousands of videos of end-to-end customer journeys across a broad range of incumbent and challenger banks all around the world. The content library grows with each day, driven by market developments and requests coming directly from our large, and rapidly expanding, user base.

Never stop improving We knew we had a really good service that users liked. But we still weren’t satisfied.

www.fintech.finance

We recently took stock of why we had created Pulse and looked at where we want to take it. In doing so, we re-examined our reasons for creating Pulse in the first place.

We created Pulse to enable our customers to build the very best digital financial services products. But how do you define ‘best’? It cannot be defined in isolation – it comes from a diverse universe of people and teams, including: ■ ■ ■ ■ ■

Product teams at incumbents Product teams at challengers and fintechs Industry experts and commentators Clients Research users

If we want to truly help the teams, wherever they sit within each organisation, build the best products, then we need to actively involve the entire community in Pulse. The by-product of this approach is that it will also help us to continually advance what ‘best’ means and looks like at any given point in time.

We have already begun involving the makers in our new weekly Homescreen series, a live, streamed show, where, so far, we have interviewed the people behind leading brands and propositions such as N26, Revolut, Monzo and Up. Homescreen is a first step in actively

We are working towards Pulse becoming the FS community’s hive mind

Ross Methven, Practice Lead for Research & Benchmarking, on getting to the next level involving the wider financial services community, encompassing the incumbents, the fintechs and everyone else in between.

We are working towards Pulse becoming the FS community’s hive mind. The community will be placed at the heart of the platform and help decide what’s best and what’s next and to help each other to deliver on both.

Today’s leading features quickly become hygiene factors and no longer delight customers. Think card freezing, PIN management, instant transaction notifications pioneered by some of the challengers and, over time, eventually aped by incumbents. We want to actively engage in our Pulse community to help identify what features fall into that category but, crucially, what is on the horizon.

It won’t just be 11:FS deciding what is market leading, it will be them. We will continue to curate and have a voice, but it is the makers and users of financial services products we will bring front and centre.

Our vision is to make Pulse the tool for anyone and everyone that wants to create digital financial services products and services. It will combine the best of the industry and best practices and ideas from other verticals, including consumer goods, retail and energy, for example.

Ultimately, this will: ■ Create a valuable internal tool: the platform will host the conversations that teams have as well as the content those conversations are about ■ Deliver a highly collaborative approach to innovation inside and between organisations ■ Include and actively encourage a more diverse set of perspectives: curating a community that gives a voice to the makers, users and industry experts to identify what really is ‘best’ If you, or your organisation, would like to get involved, head over to pulse.11fs.com today or drop an email to ross@11fs.com.

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11:FS SPECIAL ASIA FOCUS

Look before you leap Brandon Chung, Jobs To Be Done Consultant, on why you shouldn’t enter Asia without first doing your research There is a common perception in the West that markets in the East have not so much leapfrogged as vaulted over some financial technologies. It's always dangerous to generalise in life.

While it might be true in China, where messaging apps and QR codes render physical cards somewhat redundant, in Japan, Korea and Hong Kong different stories unfold. There, it’s a familiar one of legacy struggles, digitisation of analogue structures, testing of new forms and the forging of challenger banks.

In Hong Kong, which has traditionally been dominated by three banks, the arrival of Alipay and WeChat Pay weren’t as disruptive as anticipated and it’s the new virtual banking licence that’s caught people’s attention. The Hong Kong incumbents, who haven’t really had much competition in the past, suddenly find themselves threatened by new models and competitors and, scariest of all, digital services. There, virtual banking is the golden ticket for those who’ve looked down the barrel of a gun and asked: how much is it going to cost me to keep patching up existing infrastructure until the year 2050? Is it worthwhile for me to reinvest in a new infrastructure and try to carry that back to the mothership somewhere down the line?

So, there are specific opportunities for growth, but they are as diverse as the region itself. By way of illustration, WeBank, the first privately owned and wholly digital bank in China, has two primary loan products are Weilidai and Weichedai. Both have experienced approximately 250 per cent compound growth between 2015 and 2017. The interesting thing

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about Weilidai, which offers micro loans to consumers, is its model. It has partnered with more than 150 financial institutions to offer credit, but is only itself exposed to 20 per cent of the risk. If you’re borrowing $100, WeBank gives you $20 and its partner banks stump up the remaining $80. Not only does WeBank require fewer assets to operate and generate a return, but it also takes a fee from the banks to utilise its loan screening capabilities. So, in 2017, its return on asset was at 2.7 per cent when the industry average was 0.96 per cent. You can see the potential in this model for any big tech firm looking to launch a new virtual bank with other existing incumbents in the APAC region, all of them leveraging each other’s advantages.

In Korea, KakaoBank, which sprung from the Kakao Talk messaging service and payment app, is another huge success story.

It gained close to two million customers within the first two weeks of launch and more than 6.5 million accounts in a year.

But you won’t find KakaoBank in the nearby Philippines or Vietnam. That's because as a region, Asia is heavily nuanced both between, and sometimes within, each country. Accepting this, taking the time to research and have these nuances reflect in one’s proposition and an acquisition strategy, is key. Although the size of the population in the region should make new entrants seriously consider how their onboarding process will cope with going from the tens of millions to the hundreds of millions, size does not matter as much finding their pain points.

Pulse, the 11:FS research and benchmarking service, covering thousands of customer journeys with brands across the world, helps clients do just that. It allows them to ask ‘what are the best-in-class journeys and how others are solving customer

Asia is heavily nuanced both between and sometimes within each country

pain points?’. Pulse can help creates inspiration in terms of saying ‘how can we do better?’ And, more importantly, 'how do we localise those approaches?’

What Monzo, for instance, does in the UK might not apply to what a virtual bank does in Hong Kong, but a lot of the underlying principles would help.

Instead of a static competition report, you can say ‘did you see how that was done? This is what we’re trying to do, too’.

It also helps build bridges between executives, product managers and the design team, which is often a chasm that needs to be crossed when coming up with a new product or service.

So, where will the market go next?

Following the successful entry into financial services of the original disruptors, Alibaba and WeChat, we will undoubtedly see more techfin involvement in Southeast Asia, in particular. So, for example, Grab expanding outside of Singapore, Go-Jek reaching beyond the Philippines, and Kakao in Korea also viewing new horizons. Japan’s LINE has already applied for a virtual banking licence to operate in Taiwan in 2019. As they increase their footprint in Asia, they are all likely to follow the tried and tested model of partnering with financial institutions to deliver the groundbreaking services that customers want. These firms understand that customers fundamentally don’t want a bank and, as they increasingly own the customer relationship, banks will compete on manufacture and distribution costs.

Some incumbents are working to craft an alternative ending and also building standalone challenger brands to reclaim relationships with customers, sometimes with these same firms; for example Mizuho Finance's new service with LINE in Japan.

While the East and the West differ drastically in language, culture and infrastructure, the human need for services is universal. Grab, Alibaba, LINE and other technology firms have been designing and launching wildly successful propositions with this principle. Others are now playing catch up.

www.fintech.finance

11:FS SPECIAL RISK & COMPLIANCE

Fintech be nimble, fintech be quick Emerging FS is subject to the same rules as incumbents, but the good news is that, over time, it is less burdened by them, says General Counsel and Head of Risk, Nasir Ahmad Having worked for both fintechs and major high street banks, I’ve seen how different sizes of institutions view and approach managing risk and compliance.

When I compare them, two things immediately strike me:

1 2

The rules are the same for everybody: while there are some exceptions, in the main, the same rules apply to the same activities, whether you are large or small.

How you meet these rules can differ wildly: this is the key difference between fintechs and larger financial institutions, but small and large firms have their own strengths and weaknesses in this regard.

The rules being largely the same for everybody may be a ‘you don’t say…’ statement but you’d be surprised at just how often the temptation at small firms is to think ‘this can’t apply to us’! This is compounded by the fact that fintechs often only have a few staff with financial services experience. My basic message to these firms would be that you have risk/legal subject matter experts for a reason: get them involved early.

How fintechs and larger firms meet the rules differs wildly. There are some obvious truths here.

Smaller firms are quick and nimble and not burdened by legacy technology or distribution channels. The difficulties large firms have with their identity and verification (ID&V) processes is a great example of this. Whether customer-facing processes or back office systems, large firms often cannot escape previous practices or systems that, once created, are modified and built upon but rarely ripped down or abandoned. At 11:FS we’ve written, and podcasted,

www.fintech.finance

Fintechs can set their risk appetites more aggressively than larger firms… this does not necessarily mean they are riskier or more gung-ho extensively on the topic of legacy and its constraints in a digitally native world.

It’s not all bad news for incumbents, however. Large firms are resourcing, experience and subject matter expertise-rich. There will, generally, be someone who knows the answer to a question. The hardest part in a large firm is finding them. Small firms will generally only have a handful of ‘experts’ who are required to cover multiple issues; from operational risk to compliance, to AML. Even in relation to infrastructure, while small firms are not burdened with legacy systems, they are burdened with the need to either build their own systems from scratch or, where possible, buy them from third parties. Both approaches come laden with costs in terms of money and time – demands that ‘skinny’ (from a resourcing and funding point of view) fintechs can find hard to support.

For this reason, it’s often the case that fintechs will, despite their slick customer-facing exteriors, be just as dependent on spreadsheets and manual processes as any large firm, if not more so, at least in their early days. Once fintechs do get around to building or buying these systems, however, the playing field begins to

tip in their favour, compared to their larger competitors.

Where fintechs have another advantage is in their approach to risk, in particular where they set their risk appetite, and their speed of decision making.

Decisions typically only need involve a few key stakeholders rather than having to go through multiple departments and/or governance committees before reaching the ultimate decision maker.

Fintech stakeholders are closer to the coalface, and therefore the details of the decision, than their big firm counterparts.

In addition, fintechs can set their risk appetites more aggressively. This does not necessarily mean that fintechs are riskier or more gung-ho. Instead, it stems from their size and lack of traditional distribution networks. Rather than having a one-size-fits-all risk appetite based on the lowest common denominator in a company with thousands of staff, fintechs can take a case-by-case approach, leading to more flexibility and pace.

So, don’t despair fintechs! While risk and compliance might feel like a drag on your growth aspirations and you may think larger firms have inbuilt advantage, remember you are quicker and more flexible and that playing field is tipping towards you.

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11:FS SPECIAL AUTHENTICITY & DIGITAL TRANSFORMATION

Keeping it real Marketing Manager Bianca Sarafian looks for the humanity in fintech and finds it in a new, radically different model of organisation There is something borderline intangible about the 11:FS tone of voice. It’s iconoclastic. It’s different. It stands out like a sore thumb in our industry because we get away with speaking as actual human beings and not as a big ol' corporate business consultancy.

And that’s fantastic because you’ll never catch us coming to your boardroom saying that we’re going to ‘maximise your efficiency’. And we won’t walk out leaving you with nothing except a PowerPoint of high-level ideas.

We certainly wouldn’t be caught ‘streamlining your processes’ by

‘offshoring your operations’.

If we say AI, we actually mean artificial intelligence. Sorry, Pepper.

Maybe, on occasion, we’ll say we’re ‘getting our ducks in a row’, but that one sometimes slips through the net.

There’s no secret to this. What 11:FS is and does – from our services, to our podcasts, to our company culture – is built upon being real human beings.

We speak like them, act like them, and you’ll often find our keynotes decorated with memes instead of quadrants. Are we ‘singing from the same hymn sheet’ yet?

I remember applying to 11:FS more than a year ago. I wasn't

The biggest mistake in digital transformation ... is if you don’t understand what it’s truly for, says Jason Bates, Deputy CEO and Head of Product Large banks are shovelling billions into digital projects: new apps, robotic automation (sadly, not involving actual robots), social media initiatives, chatbots, intelligent services and application programming interfaces (APIs).

They will tell you that they are ‘digital’, pointing to their app and APIs, and they are confident that they will survive the digital shift that is rolling glacially across all industries and markets – upturning

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established business models and felling consumer giants in its path.

“We’re nothing like Blockbuster or Kodak!” proclaims every bank, everywhere.

But there is a key distinction here that many of our clients miss, and it’s an important one that will determine who will still be around in 50 years. The distinction is this: are you digitising what came before or creating truly digital services?

Banking started as an analogue process.

The guy sat on his bench in Renaissance Italy, took deposits, made loans, transmitted money to his cousin in a far-off country. That was the model for generations and, even when machinery started to make life easier for Luigi and his descendants, the machines were kept in the background and it was still an analogue business.

Many people are still talking to bank tellers, receiving printed versions of what used to be a handwritten ledger, and swearing down the phone at a recorded facsimile of a junior clerk.

When modern digital technology came along, we saw the opportunity to ‘digitise’.

That bank statement could now be shown on a screen. Writing cheques could be actioned on that black bit of glass and questions could be turned into FAQs. A new channel was born: digitised banking.

We’ve seen this play out in a variety of different industries, of course. Newspapers were an analogue product and many of them have ‘digitised’, publishing identical versions of their physical products onto tablets and phones. Do you remember when you first saw a newspaper app on an iPad? It was as though a physical www.fintech.finance

exactly hunting for jobs at the time, but the vacancy listing spoke to me.

It read: Not sure what you want to do? Click here”. So, I did – and, boy, am I glad!

I am unashamedly myself here. What I wasn’t prepared for was discovering that the tone-of-voice online and the attitude to building digital financial services wasn’t a marketing gimmick. It wasn’t a

must be thoroughly calculated, and we must dehumanise our audiences into a broad swathe of ABCs or – yes, I’m going to say it – millennials.

This model is long dead. Emerging fintech companies are embracing authenticity and transparency in a way that incumbent organisations are utterly unable to comprehend or compete with – and so are we. Incumbent brands have already

Emerging fintech companies are embracing authenticity and transparency in a way that incumbent organisations are utterly unable to comprehend or compete with brand. The humanising attitude goes (as Leda Glyptis would say) all the way down.

Historically, the phrase ‘marketing authenticity’ was something of an oxymoron. In all sectors, brands are constantly vying for attention and promoting their services in the most appealing way possible. Negative commentary must be ignored or swept under the rug. Everything

spent decades carefully crafting gated communications and objectifying consumers without a need to generate a real connection with them. And when they do need to make that connection, it's too late. The customers have already given up on humanising the brand; the negative connotations are already deep-rooted.

It can try to pivot its tone of voice, but the historic inauthenticity of its brand

newspaper had been trapped under the glass. Music followed a similar route. CDs and records provided distribution for fans to buy albums and singles, which led to them being available in a digitised format on iTunes, Google and Amazon.

Digitisation looks good for large incumbents: cost cutting, positive headlines and relatively happy customers – until, boom, truly digital services appear.

Suddenly, Buzzfeed and Facebook with their clickbait headlines and infinite column inches deliver something different.

Suddenly, we stop buying music and start subscribing to streaming services.

So, digitisation is good, but digital is likely to be many times better.

The problem in banking was that it digitised the customer journey rather than being truly digital. When you walked into a branch you had a human you could relate to and who, in turn, could empathise with you. When we ’digitised’ banking, we created a service gap. This lengthens the distance between customers and banks.

I’ll say it again for those at the back: digital isn’t just a new channel, an add-on for an existing business model. Understanding

the virtues of being digital is the pathway to delivering truly differentiated digital banking services: the characteristics of the

www.fintech.finance

I’ll say it again for those at the back: digital isn’t just a new channel, an add-on for an existing business model new technologies and how they support building real-time, intelligent, contextual services that are human and extendable. The services that actually do a job for a customer who is underserved and overcharged, will radically change the shape of the dominant organisations in financial services.

message will always overrun it. It comes across as weirdly creepy when it does try to connect. People do not like to feel ‘influenced’. New market entrants, on the other hand, including ourselves, capitalise on the fact that incumbent audiences will rarely ever shift perception. We can be real and authentic from the get-go.

Authentic marketing sits best in authentic companies that are built by humans for humans. 11:FS is united by a common goal with our clients and our podcast audiences: to make banking better. And that’s not a mission statement. That’s our job. And we love it.

The landscape is changing for brands.

Authenticity and colloquialism aids community building, which aids brand ambassadors, who help establish and maintain your authenticity with a shared passion for your services. That’s our main marketing tactic: being real and being honest about the issues in our industry; maybe even dropping an f-bomb now and again in a keynote.

It’s a strange comment to come from someone in marketing, but this really isn't marketing. It's just the truth.

Unlike machine-based experiences of the past, the best digital experiences feel human: empathetic design and connection with real people… in effect, we are building a virtual private banker for the mass market, and it should feel like that.

In the past, banks delivered their own products within the walled garden of their branches, websites, apps and phone lines, and tried to convince customers to stay within it. Digital services upend that. They feel like they are ‘yours’ as the individual, not as just another customer.

The biggest, most frequent mistake is confusing digitisation for the truly digital. That’s why there is so much left to do.

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CUSTOMER RELATIONSHIP MANAGEMENT

The platform pulsar Finastra went into open banking orbit with its hybrid developer platform and API marketplace, FusionFabric.cloud. Now, CMO Martin Häring is charting a bold course to the financial stars The international team coordinating the Event Horizon Telescope released the world’s first image of a black hole in April – an awe-inspiring visual rendition of the universe’s complexity. In peering 500 million trillion kilometres into the cosmos, mankind demonstrated an awesome capacity for farsightedness, brought about by innovation and collaboration.

And it’s precisely this vision that London-based Finastra, the financial technology company whose name fuses ‘finance’ with ‘astra’ – the Latin for ‘star’ – aims to emulate in the banking universe.

Recently named a UK Business Superbrand for the fourth consecutive year, Finastra works with more than 8,500 customers across 130 countries to deliver tech-based, B2B solutions to help institutions keep in step with their customers’ changing expectations.

In much the same way as nuclear fusion delivers the energy that sustains a star, it’s fair to say that the fuel that keeps Finastra burning bright, with an annual revenue of around $2billion, is the financial industry’s need to constantly reimagine the customer experience in the era of digital banking.

That’s certainly the view of Finastra CMO Martin Häring, who puts the challenge that financial institutions are facing in no uncertain terms: “Nowadays, banks are trying to answer the question: ‘how can we provide a better customer experience? How do we create the best customer experience?’. This is where banks have struggled so badly.”

But in the last two years or so, they’ve crossed the financial event horizon and started seeing fintechs less as competitors and more as collaborators, says Häring.

“They know that without agile, customer-centric programming, delivered by fintechs, they can’t survive.”

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He’s echoing the prevailing wisdom that the age and size of incumbent financial institutions (FIs) can actually serve to hold them back, with delays in innovation threatening a black hole-like inward collapse if customers spot better provisions elsewhere in the expanding financial universe. That emerging reality catalysed a period of feverish activity from banks, with a rush to onboard fintechs through incubator programmes and strategic partnerships, or to home-grow tech solutions as the industry pushed towards digitisation.

Finastra’s most recent response to the new age of banking was launched in March of this year. Fusion Digital Front Office, a tablet-based platform that offers a simple way for community banks and credit unions to build upon customer relationships outside of their physical

We firmly believe that most of the innovation will not happen in your own company; it will happen outside of it branches by deploying staff in mobile, responsive units.

It’s a well-timed provision, given that bank branches in the UK are closing at a rate of 60 per month, according to analysis conducted by Which? in 2018.

Partners 1st Federal Credit Union and Vons Credit Union are currently piloting the Fusion Digital Front Office in the US, where branch closure rates also peaked to an all-time high last year.

For Häring, though, collaboration between fintechs and incumbents is simply taking too long to adequately

serve customers by building solid new relationships in the virtual world.

He’s also adamant that the singular, non-scalable partnership of a fintech to a bank is a terrible business model for entrepreneurial fintechs with their eyes on the global marketplace.

“I have spoken to a lot of fintechs, and they’ve said sometimes it takes between 12 and 18 months, from the moment they knock on the door of a bank, to the moment they can really integrate,” says Häring. “It’s a long, long cycle – it’s a very thorny and clunky model, it doesn’t scale, and it’s not the right business model for the fintechs.”

This was the key insight that led to the launch of FusionFabric.cloud – Finastra’s solution to delayed customer provisions in the financial sector. Supported by the Cloud capabilities granted by Microsoft Azure, Finastra’s platform-as-a-service portal connects innovative fintechs with modernising FIs, delivering upgrades to banking customers without those year-long development cycles.

Spurred on by Europe’s transformational revised Payment Services Directive (PSD2) and the open banking initiative, FusionFabric.cloud enables customer-serving breakthroughs, thanks to the plug-in or bolt-on possibilities offered by application programming interfaces (APIs). The platform hosts Fusion Creator, a portal that allows FIs to experiment with fintech APIs in shielded sandbox environments, while also allowing fintechs to understand the APIs of major banks – all in the secure, isolated environment guaranteed by Microsoft’s Cloud.

As it grows, FusionFabric.cloud will act as a vendor, displaying apps developed by the fintech community’s rising stars for purchase – a platform Häring is more than happy to compare to the Apple App Store. www.fintech.finance

Starstruck: Finastra is looking to expand the financial universe

“Every bank or fintech connecting to our platform will see what’s on the store, with its cost and a rating system. The fintech programs once, and then leaves it to the ecosystem to see if it’ll take off.”

Bearing in mind that Finastra works with 90 of the world’s top 100 banks, it’s an attractive deal for fintechs creating new, customer-orbiting services. And the ability to co-innovate with some of the banks partnered with Finastra is a rather different proposition to working one-on-one with a single bank and its unique digital architecture.

A hybrid business model For Finastra, this platform-as-a-service is an exciting new nebula of possibilities – one-part marketplace, one-part development portal. In both cases, the software provider plans to monetise FusionFabric.cloud by charging at the point of engagement – judging the price charged

by API call volume and API complexity.

“Overall, it’s probably a hybrid business model between what you see used classically by Amazon or Uber – purely connecting buyers and sellers – and a development platform, like the ones from Apple or iOS,” says Häring. That’s not to mention, of course, the power Finastra will accumulate – in the form of data and industry-leading tech – through industry engagement with the platform.

Some of the first APIs to be hosted on the platform were due to be announced www.fintech.finance

at Finastra’s FusionONE hackathon and developer’s conference, taking place in London in May. The hackathon is Finastra’s opportunity to prove just how much quicker its FusionFabric.cloud platform can be for banks to better serve their customers with innovative tech.

“We firmly believe that most of the innovation will not happen in your own company; it will happen outside of it,” says Häring. “We want to stimulate hackathons on our platform and what we call 90-day sprints. From the idea creation, to a proof of concept with the client, it has to take only 90 days.”

This breathless pace of development may hark back to the ‘hacker philosophy’ of the early internet, but it’s in the future that Häring believes we’ll see the grandest changes for banking customers and the technology they use day-to-day.

“Next year, we’ll also be allowing third parties to put their APIs in our catalogue,” says Häring. “We’re completely open to that.”

Open banking at its finest – and it’s in this way that the company hopes to gather together a galaxy of services that pave the way for the bank-as-a-platform future that goes way beyond those explored by UK challengers, such as Starling, and is more akin to the universe as imagined by China-based financial services provider Ping An. “I would compare what we are doing to OneConnect from Ping An. They build a

platform where the bank is no longer just your financial advisor. The bank takes care of your whole life. It connects with health services, car services, almost everything that you touch as an individual user throughout the day,” explains Häring.

“The more banks collect data about you, which they can backend and monetise, the more they can cross-sell.

So, a bank sees in its database that there is a client turning 18, and they have bought a car, and immediately there would be a cross-REST (representational state transfer) API call to an insurance company, saying ‘what is the best price I can get for this 18-year-old person?’, and it will offer that through the banking portal to their client.”

It’s a dream that Finastra is closing in on through its FusionFabric.cloud platform, creating an API marketplace that will allow banks to centralise their customers’ financial lives, creating an undeniable ‘stickiness’ that’ll transform the very idea of what a bank can do for its customers.

It may feel like this consumer relationship revolution lies, like a distant black hole, hopelessly out of reach. But in its platform-as-a-service initiative, enabling light-speed technological upgrades and new constellations of collaboration, Finastra might just be launching an asset that reaches beyond the stars and into a bright future in which the customer is the centre of their own financial cosmos.

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ANGER management There’s no better test of a company’s customer service than when things go wrong – which is why banks need a sophisticated, scalable case management platform, says Aptean’s General Manager of Compliance Solutions, Martin Wagstaff, and Chief Technology Officer Jenny Peng You’ve a problem accessing your bank account online. You call telephone banking for help and listen to some Mozart for 10 minutes. When you get through to an adviser, their system is down, so they can’t see your details. You’re passed to another department and have to start all over… the problem is at last resolved, only for you to be locked out again and you’re obliged to repeat the whole thing from the beginning. It’s the worst kind of Groundhog Day. This is the sort of nightmare customer service that might prompt a rational customer to switch banks – which, since 2013, has been made a whole lot easier in the UK, thanks to the Current Account Switch Service.

Eighty thousand TSB customers decided to do just that when they were frozen out of their accounts for days following the bank’s disastrous IT migration to a new core banking system in April 2018. Despite adding more than 300 complaint handlers to the customer service team to deal with the crisis, high call volumes, long wait times and inadequate responses couldn’t stop the bank haemorrhaging accounts. The saga eventually cost TSB £330million and chief executive Paul Pester his job.

Inevitably, customer anger following the meltdown spilled out on social media.

But in an era of instant venting even one person’s poor experience can cause long-term reputational damage to a bank.

“Most banks provide the same products and services, so one of the big differentiators is the experience customers get from their bank,” observes Martin Wagstaff, general manager of compliance

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solutions at US-based enterprise software specialist Aptean. And it’s when things go wrong, of course, that the quality of that experience is truly tested, which is where Aptean’s complaints handling solution Respond comes in.

Though not exclusively developed for financial services, the software, which can be run on premise or in the Cloud, has gained traction across the industry, including in the UK, where banks are now forced by regulators to disclose system outages. That applies as much to the challengers as established financial institutions, but the app-first challenger banks’ focus on customer service has

The system can flag up the severity of a problem before a handler picks up the case so they can assess the degree of frustration and engage in an appropriate way left many traditional providers in the UK and elsewhere scrambling to catch up.

One of the key advantages of the Aptean Respond software is that it gives complaint handlers an instant overview of the customer’s case notes, which are attached to the complaint journey, so any member

of staff can immediately assess the problem. Questionnaires that are specific to the customer’s issue follow its resolution to gain feedback on the process. And the software generates data analytics to hopefully avoid a recurrence.

Aptean’s clients range from small businesses with a handful of users up to Tier 1 banks, according to Aptean’s chief technology officer Jenny Peng.

“A key ingredient for having a great customer experience is consistency across the various ‘grabs’, so the experience is as good with customer service person A as it is with person B,” says Peng.

“There is a predictive element, too; the system can flag up the severity of a problem before a handler picks up the case so that they understand the customer sentiment, and can assess the degree of frustration and engage in a conversation in an appropriate way.”

Wagstaff adds: “The key difference between the customer surveys we issue after a problem has been dealt with and those issued by some of our competitors is that ours are contextualised to the problem. So, when a survey is sent out to a customer, more insight into how the issue was dealt with is gained in order to improve processes.

“Secondly, the survey information is aligned with the complaint and case data.

Root cause analysis is one of the key things that we drive from Aptean Respond.

We make sure we understand what the learnings are from each complaint and consolidate them. This information is then provided to management so that changes can be made.” www.fintech.finance

Once the data and feedback is gathered, the numbers can be crunched to spot trends and make predictions on complaint patterns. This may pinpoint specific problems, or identify larger trends based on time or geography.

Peng says: “There’s so much you can learn from the data gathered. There may be seasonal patterns to the complaints coming in and you could use that to predict complaint volumes so that the workforce can be adjusted accordingly.

“Or you could use the data to spot a regional pattern. That could become an indicator of a national index, in terms of satisfaction in the banking industry, or for certain institutions or services.”

Aptean also provides a feature for managers to analyse staff performance in complaints handling. Its Quality Accelerator module for Respond is billed as a ‘risk-based, real-time quality assurance process’ and can ensure teams are providing satisfactory service.

“It gives the managers the ability to see that best practice is followed, and identify any mistakes so that training plans or improvement measures can be implemented,” says Peng.

“On the flip side, it also gives managers the ability to spot the employees who are doing a fantastic job – the ones providing a superb customer experience and really driving the company’s brand. Being able to highlight those individuals and provide proper recognition is a method of retaining top employees. And it’s done through having tangible measurements that can then be used as an example of best practice for other staff.”

Aptean Respond can be employed alongside other software to boost a company’s knowledge of its customers, as Wagstaff explains: “Customer issues come through multiple channels, whether that’s social media or self-service, or through call centres and so on, and by bringing that together through Aptean Respond, and consolidating it with your customer relationship management solution, you can build a 360-degree view of the customer and analyse their interactions with you.

That provides real insight.

“We often find the big banks are www.fintech.finance

leveraging both a traditional customer relationship management (CRM) system and complaints management solution, and building an interface between the two that allows them to maximise the power of both.

“As an example, if a staff member is using a CRM to validate a customer through the call centre and the customer then raises a complaint, from the CRM the employee can launch straight into Respond but pull all the details through. Likewise, through the case and complaint journey, Respond will update back to the CRM on the status of these interactions.

“Both the CRM and Respond are used to their full potential and the company builds a complete picture of the customer.”

But what happens when things go catastrophically wrong, as happened with TSB? With the Aptean Cloud solution, which is based on Amazon Web Services (AWS), comes the potential to rapidly scale up in response to major outages when, for whatever reason, complaint volumes soar.

Peng concedes that the escalation in complaints, such as the one TSB experienced would be ‘very challenging for any business to take on’, but a Cloud option provides such elasticity. The software can handle and combine multiple communication channels, such as social media, phone or a customer self-service portal. And it can communicate out, via email, social media post, text or the traditional posted letter.

“When there are peak hours or major complaints, we’re able to scale and adapt to the business needs at the snap of a finger,” says Peng.

“That’s the advantage of working with

vendors like us, to be able to address business needs depending on the season, or specific things that are happening for the business, and be able to expand or reduce the service as necessary.”

She adds: “Aptean Respond is targeted at specialist complaint handlers and we’re seeing a lot of them moving to the Cloud. Approximately 20 per cent of our customers have adopted the Cloud solution and it accounts for about 80 per cent of our new business.

“Being hosted on AWS gives us the scale and the storage, and takes care of a lot of the certifications we need. A Cloud-based solution has a lot of advantages for a business, too – they don't have to worry about a lot of the IT and infrastructure for a start and staff are freed up to invest their time on what really matters, which is tackling their own particular business challenges.”

What’s your problem?: Frustrating customer experience can cost a business dearly

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Managing expectation

Matt Richardson, SVP of Product Solutions at Citizens Bank, probes what’s needed from a CRM system for modern commercial clients What is a CRM? Though you could be forgiven for answering ‘Salesforce’, customer relationship management (CRM) in fact indicates three separate things.

Firstly, it is strategy; the business’ philosophy for accomplishing relationships with customers and potential customers CRM is also a process through which the business manages and nurtures relationships. Finally, it is the concrete technology used to record, report and analyse interactions with users.

Computer-based CRMs didn’t enter the market until 1993 with Siebel Systems but, once introduced, began to sell like hot cakes. By 1999 (the year it launched its first mobile CRM and, coincidently, CRM champion Salesforce was founded), Siebel was the fastest growing tech company in the United States. By 2017, the industry had blossomed into the $40billion opportunity predicted by Gartner.

According to IBM, their rise in popularity was compounded by the adoption of Cloud technology for CRM, turning classic standalone desktop systems into nimble, feature-rich, more user-friendly applications. It also improved affordability, widening the client list from public listed companies to SMEs. Today, 87 per cent of global CRMs are thought to be powered by the Cloud.

CRM systems tailored to finance and insurance typically support market segmentation, sales strategy and customer support through monitoring and data analysis. When combined with a good business model, the right software can make the difference between market survivors and market leaders.

That being said, top-performing CRMs remain a bit of a luxury product for big banks. Few have a CRM plan that

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outlines goals and priorities set by the senior management team, or a scorecard with specific and realistic targets.

So, we caught up with Matt Richardson, SVP of Product Solutions at Citizens Bank, America’s 13th largest financial institution, to learn how it’s making strides to improve the customer experience for commercial clients by layering and updating its CRM. THE FINTECH MAGAZINE: Tell us a little bit about Citizens Bank and its CRM journey.

MATT RICHARDSON: We kicked off our whole digital transformation journey four years ago with a new mobile banking platform, a middle layer and core banking system upgrade in 2016.

The platform-as-a service technology was implemented with Bottomline Technologies, one of a number of partnerships we have fostered.

Last year, we linked up with Infosys and Finastra to give our corporate clients access to their integrated trade solution delivered via FinCloud, and last month we partnered with Priority Commercial Payments, based in Alpharetta, GA, to offer business-to-business integrated payment services. Both projects were leading edge, but I’m particularly excited about this last one. Citizens’ new access AP™ platform will automate the accounts payable process using multiple

Our commercial system users interact with consumer-based systems in their personal lives all the time, whether it’s Amazon or eBay

settlement types, such as virtual card and dynamic discounting, delivering them to clients in a single experience.

The easy-to-use web interface eliminates costly, paper-based payments, and drives electronic settlement options like commercial card, which offer revenue share from purchases for additional value.

We are also in the process of rolling out our new commercial online banking system, accessOPTIMA. That will upgrade the user experience in 2019 within commercial and make the functionality as robust as we can. We want to make sure we can deliver what our clients need.

TFM: So, how does Citizens Bank stay one step ahead of those commercial customer expectations?

MR: There’s a lot that’s changing but it’s important for us to stay on top of expectations and balance them against feasibility. Our clients have wants and needs but they might not always know what’s coming down the road and they rely on their banking partners to bring what's possible into play.

Internally, we perform data analysis that allows us to identify and build out our solutions set around the edges.

It’s useful to share data and ideas with strategic fintech partnerships like Finastra, to increase services. Based on what our clients are doing, and what we know about them, we target fintechs that will be a good fit for them and us.

We’ve seen great value in partnerships to improve our CRM software and strategy. Banks really benefit from partnering with tech-specific fintechs that may have thought of a way to attack a problem not seen previously in the market. Their out-of-the-box thinking, unconstrained by a banking mindset, www.fintech.finance

That being said, we see lots of crossover in the needs of both client types. Things like accounts payable efficiency and optimised working capital are things they already want or may see benefit in trying.

This is a development stimulus for us when creating new kinds of CRM support.

TFM: What do you do when things go wrong on a CRM? MR: When processing billions of transactions annually in the banking environment, things do go wrong and there are three parts to resolving an issue with professionalism. The first is clear communication with the client.

We do so via our commercial online banking system, which sends alerts on both the good and the bad stuff.

The second part is using the feedback loop to gain insight into the incident to create better solutions for the future.

This leads me to the third and most important, which is creating a pathway for banks and corporate customers to communicate issues back to us.

makes up the bulk of their value. We leverage their creativity and build a new approach suited to Citizens Bank.

This could be with one partner, or an amalgam. We’ve learned to not feel we have to choose just one service provider.

Working with fintech firms, it is important for the bank to first define the problem because fintechs out there are teeming with great ideas but one must have an iron-clad sense of the problem area so that the project doesn't get side-tracked.

We also take stock of what is happening around the world on a micro and macro level and monitor our ecosystem for the right time to implement.

Real-time payments, already up and running in the UK, is the perfect example.

We’re finally bringing it to the US for our commercial accounts. Part of what’s going to come with real-time payments is the ability to do a request for payment. What I mean by that is that a person who is owed money can send out a request to the individual who owes it to them, and this individual can see that request, action www.fintech.finance

it, and all the data about the payment flow and process is captured. So, not only are we fundamentally changing how a corporate collects funds, but we are also creating a new data stream.

It will revolutionise how payment collection is done across the US. TFM: What are the biggest differences between retail and corporate accounts, from a CRM strategy point of view?

MR: For corporations, there is a greater need for functionality and performance.

They need to not only get information but also execute transactions as quickly as possible. For example, if there are fraud prevention tools on the online system, the corporate has to make decisions like ’this item is questionable, should I pay it or not?’

They have to be able to perform those actions on the system and, ideally, on a mobile as well as a desktop. The second biggest difference is the need to customise access permissions and data workflows.

TFM: What is the single biggest problem in CRM? MR: The speed at which the payments landscape is changing. We’ve had to look at the end-to-end effect on a client base when new opportunities get introduced.

For example, the relentless push towards commercial cards in commercial payments.

This is great from the payer’s perspective, but gives the receiver yet another incoming payment stream that needs to be reconciled into their backend systems. That’s just one example of how progress on one side may cause or exacerbate a pain point on the other.

TFM: Where is the next customer experience opportunity going to be?

MR: CRM usability that is simplified, intuitive, customisable and, above all, robust. Our commercial system users interact with consumer-based systems in their personal lives all the time, whether it’s Amazon or eBay, fostering subconscious expectation that filters down into what they expect on the commercial side. We’ll have to continuously evolve our offerings to make things simpler to use yet utterly functional. The challenge for the whole industry lays right there.

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Speakingincode What makes Asia so exciting as a fintech territory is that there is ‘no stagnant water’ when it comes to digital adoption, says Milind Sanghavi, Head of Digital Payments for OCBC, Singapore With its AI-enabled robots, self-driving vehicles, high-tech household systems, drone-enabled police force, and other hi-tech gadgets, Singapore has been the unofficial technology capital of Asia for quite some time.

Singapore aims not just to be a smart society, but a cashless one and, given its small size, theoretically that would seem effortlessly achievable.

And yet, a 2018 study by the International Institute for Management Development (IMD) that measured how well global economies were prepared to digitise, based partly on how each society responds to and incorporates new technologies, ranked Singapore 15th in

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the world – a shocking contrast to its current position as the most competitive economy, second only to the US. The IMD study wasn’t purely concerned with digital payments, but its conclusions chime with banks’ experience of driving cash out of the Singaporean – and wider South East Asian – monetary system. So, why the apparent contradiction?

At just 720 sq kilometres and with 5.5 million residents, it might be argued that Singapore’s bijou size means there’s less incentive to move to cashless transactions – even online sales here are usually cash on delivery. More likely, Singapore is a victim of its own fintech success: there are just too many choices when it comes to digital payments, not helped by a lack of

standardisation, which confuses and inconveniences customers. Although three out of five merchants now accept digital payments, they don’t all accept the same options, which for customers translates to carrying multiple cards or ewallets. Add to this the cost that merchants incur to go digital, which sometimes amounts to three per cent of the transaction, and you can’t blame them for asking ‘why pay more, when to use cash is free and convenient?’.

Milind Sanghavi, head of digital payments for OCBC Bank in Singapore, confronts these questions daily as the bank works to smooth the path to their universal adoption by identifying problems and coming up with solutions, often involving other actors in the payments network.

Sanghavi primarily blames legacy structures for failing to keep pace with the digital promise – ‘the fact that merchants [who accept digital payments] don’t see www.fintech.finance

their money for three days worries them’.

But while real-time remains elusive in some areas, standardisation has already demonstrated it’s a prize worth achieving.

The core of all standardisation and instant payments in Singapore and the wider ASEAN region lies in QR code technology, believes Sanghavi.

“We believe QR is a great way to enable consumer choice and to create more payment methods for merchants. The specific advantage that QR brings is that it lowers the cost,” he says.

In September 2018, the Singapore Payments Council helped launch the SGQR, a common standard for QR code payments that will work across all schemes, ewallets and banks in the market. Developed by an industry taskforce, the initiative was co-led by the Monetary Authority of Singapore (MAS) and Info-communications Media Development Authority. For consumers the new standard means that any QR code-based service they choose should be able to be used at any merchant, simplifying the purchasing experience and thus boosting electronic and mobile payments.

On the back of that, OCBC’s mobile Pay Anyone app has seen QR transactions increase by an astonishing 450 per cent.

The Pay Anyone app can create and send personalised QR codes to other OCBC Pay Anyone users via social networking apps or email when requesting payment.

Alternatively, the payer can instantly scan a QR code displayed on the payee's phone to complete payment. It allows customers to send or receive money instantly by using a National Registration Identity Card (NRIC) or mobile number, through a mobile wallet application, without sharing bank details.

Corporate PayNow offers merchants instant settlement, supported by a QR code.

“Rather than going to a merchant and seeing 16 stickers, SGQR means there’ll be only one,” explains Sanghavi. “It makes the consumer’s business much easier, it makes the merchant’s business much easier.”

A common QR code-based service, acceptable across all providers, has proved that a simplified digital payment experience will result in significant adoption. And the same could hold true beyond Singapore.

QR could enable growth even in crossborder transactions, healing some www.fintech.finance

of the troubled epayment areas, where merchant acceptance infrastructure barely exists. Sanghavi cites the Alipay and WeChat Pay experience as evidence that QR has the potential to make such an impact.

“Cross-border has historically been a large pain point, especially in this region, where merchant acceptance infrastructure hasn’t existed at this scale,” says Sanghavi.

“QR enables a large growth in that.

“Singapore is working with all of the other countries to figure out a way to do real-time payments that are cross-border but there are a few things that need to be ironed out. What happens from a foreign exchange rate standpoint, for example, and how do you clear and settle funds, across borders, and then make sure that the consumer is still protected?

“When you look at the long-tail merchant – a small market in Indonesia, or a small store in the Philippines – they’re very worried about digital and the perceived cost that comes with digital,” says Sanghavi.

There is a strong push from the Singaporean Prime Minister to digitise and from ASEAN ministers and central banks to facilitate frictionless, real-time payment methods throughout the region. Singapore’s payments system got a shot in the arm when NETS, an electronic payment service provider, and Southeast Asia’s first unified digital payment platform, was launched in November 2017. This centralised epayment platform was supposed to standardise digital payments and encourage cashless payments for more than 12,000 small and medium business owners across Singapore.

The NETS app allows users to store up to 10 plastic cards digitally and make payments with a tap on their mobile phones or by scanning a QR code. Together, prominent banks in Singapore – OCBC, United Overseas Bank (UOB), DBS and POSB – enable more than 11 million of their customers to pay digitally through the NETS app. Citibank, and Standard Chartered, too, have recently joined.

OCBC is also encouraging more people to go digital by rewarding first adopters

with an early payment of their SG Bonus from the Government (a way of sharing the fruits of Singapore’s digital development with Singaporeans, worth $300 for the least well off ).

“From OCBC’s perspective, we believe that real-time payments are going to be the future, with instant settlement built in,” says Sanghavi.

“We’re very focussed on how to drive digital by solving specific merchant or consumer pain points across the ecosystem. We have constantly chosen to evolve... in terms of how we move to cashless in Singapore, which we are leaders of in terms of our market share.”

Apart from solving real-life problems for consumers, the focus should also be on making digital payments fun, he adds.

While users might not go so far as to call it fun, contactless is certainly making big gains in Singapore, with banks, retailers, transport systems, and universities embracing the technology.

Banks have been at the forefront, with DBS, UOB, OCBC, Citibank, and Standard Chartered all offering contactless cards.

The move towards contactless has been further boosted by trials, which have so far involved more than 100,000 passengers taking more than 26 million trips on public transport using Mastercard contactless credit or debit cards on buses or the city state’s MRT system. Another VISA trial with NETS, including OCBC and other cards, is currently underway.

Singapore has come a long way in the past couple of years, from low digital adoption to an increasingly trustworthy atmosphere of instant payments riding on QR, a technology that doesn’t need much sophistication on the part of the user.

Sanghavi is optimistic. “The beauty of Asia is that there is no stagnant water when it comes to digital adoption, not only in terms of payments, but also digital commerce,” he says. “So if you genuinely adopt a system, then it grows together, and everybody wins. The question is, how do we make it better, smoother, faster for our consumer? What is the incentive for them to no longer carry cash in their wallet?”

We’re very focussed on how to drive digital by solving specific merchant or consumer pain points across the ecosystem

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How you build the bank of tomorrow

UOB’s new digital bank is very different in style and concept to what has gone before in South East Asia. Dennis Khoo, chief architect of TMRW, sets out the vision According to Dennis Khoo, ‘banks do projects; they don’t build software’. Which is why the chief architect of United Overseas Bank’s (UOB’s) latest digital consumer platform reached out to fintechs when trying to imagine what a financial service looks like in the social media age.

He literally built tomorrow.

Inspired by trendy textspeak, TMRW is the latest addition to the digital banking landscape in Thailand. A purely mobile service, it’s aimed at millennials and follows the launch of UOB’s sassily named Razorpay, an ewallet for the same demographic. UOB hopes TMRW will land it three to five million more customers, if not in the next 24 hours, then over the next five years.

“The mission was to better serve a new generation of banking customers,” says Khoo.“ They are specifically young professionals; technologically literate and with high expectations. It’s a market that large banks in the UK are struggling to keep from migrating to the likes of Monzo and Starling, as Khoo discovered in early research.

“We visited banks all around the world, and realised that the service wasn’t good enough. What was crucial to the TMRW project was to deliver a very different kind of banking experience.”

So what exactly does ‘different’ look like? Khoo and his team started with customer engagement, working on the premise that ‘if you don’t harness data to digitally engage, then you’re going to be too similar to existing banks’.

Next, Khoo and his team needed to find the right partners to help them deliver it.

“By chance, we saw Personetics present at a conference in Hong Kong, and we

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thought ‘hey, this solution meets our needs’,” says Khoo.

Personetics uses artificial intelligence (AI) and machine learning to generate highly personalised transactional data for banks, so that they can, in turn, provide a highly individualised service. In fact, UOB was so impressed by Personetics’ proposition that it now owns a stake in the company.

“Using Personetics, one of the breakthroughs we hope to make is being able to personalise the bank to the specific individual by collecting information about each person so we can better understand them better and the things that are

We started by asking ‘what experience can we create, so customers will say every bank should be like this’? important to them. We can tailor our communication to a segment of one,” says Khoo.

It might be using the latest technology, but UOB didn’t set out to build an artificially intelligent bank in TMRW. Rather, the technology was an organic part of the process.

Khoo explains: “Whatever you do today will touch on artificial intelligence, on machine learning, but we never said ‘we want to use AI’ or ‘we want to use machine learning’. We started by asking ‘what experience can we create so that customers will say every bank should be like this?’”

Along with Personetics, UOB also enlisted the services of fintech startups

Meniga, the China-based data enrichment specialist, to deconstruct transaction statements and help customers track their expenses in real time.

“Advanced expense tracking sorts and categorises these large volumes of complex transaction data. This means our customers can match their purchases without having to scratch their heads, trying to figure out the retail or brand name associated with the merchant,” says Khoo.

TMRW also leveraged the joint venture partnership between its parent bank and another China fintech, Avatec.ai, whose dynamic credit assessment model uses non-traditional data points such as utility bills, call history and spending patterns.

UOB announced in April 2018 that it planned to invest $12million in Avatec.ai to extend services to underbanked populations across South East Asia.

It’s clear that choosing the right partners was important for Khoo and his team.

“Startups are always very hungry for business, so they are always very willing.

The issue is, how do we know which are the right startups to work?” says Khoo.

“We have a team of people looking at the digital engagement space and its leading fintechs, then we narrow down and produce a shortlist of the ones that

make us say ‘these guys have got a pretty interesting solution that we think could be used to increase our engagement capability even further’.”

Once he had his fintechs all in a row, Khoo selected Thailand as the launch target because ‘we wanted to start at a place where standards were already high’.

Khoo knew that Thailand’s digitally savvy consumers were well-accustomed to customer-centric banking. As far back as 2007, the Thai finance ministry launched PromptPay, which drastically reduced transaction fees for customers, as part of an initiative to create a cashless economy. By 2019, the Annual Global Digital Report showed that 74 per cent of Thai internet users accessed banking services via mobile devices.

Khoo explains: “We want to build a brand that connects emotionally with millennials and reflects how they think, how they feel and how they treat money differently.”

That approach is reflected in TMRW’s branding, which is refreshingly at odds with traditional banks’. Its lively Instagram feed, free Starbucks vouchers on its Facebook

page, bright colour palette and cartoon character website graphics make TMRW look more like an advertising agency than a bank – which, of course, is exactly the point.

Meanwhile, TMRW’s focus on improved customer engagement made implementing chatbots as part of the platform a logical move.

“In the chat world, everything is recorded,” says Khoo. “So chatbots are going to be very significant in servicing customer experience and I think this area is very important, because, consistently, when you ask customers what their experience of a call centre has been, they will say it’s poor.”

Transcripts are also, of course, a data source that can provide insights into TMRW’s customers. Data is fundamental to the TMRW project.

“That data can help to improve customer experience, whether it’s in better user interface design, better insights and advice,

or in the credit and risk management systems,” says Khoo.

While TMRW is mainly aimed at millennials, they are not the only demographic TMRW hopes to serve.

Khoo believes the new banking solution could help foster wider financial inclusion, too.

“In the Association of Southeast Asian Nations (ASEAN) one of every two working adults is still unbanked. Because of the cost involved in the past of setting up a branch and problems staffing it meant you might not be able to serve certain segments of the population,” explains Khoo. “But with mobile banking, everybody has a branch in their hand and, because you build it once, you can spread the cost over millions of customers.”

And it’s helping UOB realise the bank of TMRW, today.

Getting the foundations right: Find out what doesn’t work… and do the opposite

www.fintech.finance

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Toolingup

Richard Billington, Chief Technology Officer for low-code development platform MatsSoft, describes how the company is helping incumbents gain ground in the customer satisfaction stakes by giving them a new tool in the box Legacy systems and complex IT structures have weighed heavy on heritage financial services firms for years.

Updating their systems to keep up with nimble new entrants by offering an efficient and error-free response to their customers’ needs, has historically been a time-consuming and expensive process that, nine times out of 10, involved outsourcing that development work.

How many CTOs must have wished there was a low-cost, in-house alternative to managing third-party providers? Well, now there is… So-called ‘low-code’ application creation and development by solution providers offers an alternative approach which, in the words of MatsSoft’s chief technology officer Richard Billington, makes ‘life better for people who make things better… [be they] process ninja, CX pro, innovation leader or IT chief’.

This unsung technology pioneer, operating in a rapidly evolving space, is providing code-light technology to enable high street banks and other financial institutions to transform their apps in-house, with minimal training and expertise. It does so via an intuitive drag-and-drop interface that enables users to configure applications using the ‘seven building blocks of app development’, instead of complex code. It makes the whole process faster and more accessible for even non-IT professionals who, it promises, can get to grips with the ‘MATS’ system with just a few days’ training.

UK-based MatsSoft originated as a digital design agency, developing websites and web-apps that enabled some of the UK’s largest financial services players to win awards for customer service improvement by streamlining their mortgage application processes.

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It was so successful that, within three years, MATS was processing 35 per cent of the country’s mortgage applications for businesses including Nationwide and Santander, enhancing their customer experience and productivity through a more agile approach.

MatsSoft soon realised it could apply the learnings about process, case management and customer communications to other sectors – exploding its global growth by onboarding clients as diverse as Novartis, for drug supply management, and Thomas Cook, for customer relations.

In essence, MATS removes the digital ‘middle men’ from the process – developers that have traditionally been needed to bring digital transformation to fruition, and the shortage of which prevents change from happening. It calls this ‘the process execution gap’.

MATS can help with everything from data model design to process and communications support, integrating with legacy systems like Salesforce and SAP. It also comes complete with dashboards, analysis, service level agreements and notifications geared towards helping organisations to serve their customers better. As a result, it was named among the 13 low-code development providers that matter most by independent research firm Forrester in its The Forrester Wave™: Low-Code Development Platforms For AD&D Professionals, Q1 2019. Acquired by customer engagement innovation provider Netcall in 2017, MatsSoft recently renewed its 14-year contract with Nationwide. The Fintech Magazine asked Billington to explain more.

The Fintech Magazine: We’ve seen a lot of digital platforms built by the big banks fail – in some cases quite spectacularly. Why is that?

Richard Billington: Legacy plays a big part and it’s not always a case of projects failing, sometimes they don’t get off the ground at all. An IT department’s remit is to keep the lights on and deliver core business infrastructure. Then, CIOs and CTOs are turning to them and saying ‘as well as that, you now need to deliver digital services to our customer base’, often against a backdrop of reduced budgets and a digital skills shortage. So, what do they do? Typically, the business decides that the IT department can’t deliver for them and sources help elsewhere. Then, at the end of that process, they turn round to IT and say ‘here’s a solution we’ve built, you’ve now got to support it’. And it causes them a huge headache.

An alternative is to implement a platform like MATS, to give the business a toolset to create solutions upon, with the element of constraint and control that IT requires within its remit to ensure auditability, governance and adherence to regulatory requirements, all taken into account at the point when it’s provisioned.

Then, the business can go away and build digital apps on top of that.

TFM: How does your platform enable these institutions to achieve such digital fluidity?

RB: When the platform is implemented, IT has signed off the security and governance and we have a toolset any business user can utilise to create the digital engagement apps that the business requires. We have one of the lowest barriers to entry in the market, for getting business users onboarded and building apps on the platform, via a two-day builder essentials training course.

That doesn’t necessarily mean you’re an www.fintech.finance

to the consumer.

If you look at Amazon, Uber, even Domino’s Pizza, they’ve taken data about their users and reimagined the digital process. But it’s not just about a shiny new app, you’ve got to look at the underlying process and re-engineer it, end-to-end.

TFM: Is revenue the only reason that institutions move to digital platforms?

RB: It’s necessity. Lots of new organisations are coming into every market sector, displacing legacy vendors.

In financial services, we have challenger banks that haven’t any legacy to deal with. The first thing they do is deliver a customer-centric process. Alongside our platform, or similar, incumbents can offer an experience much like those organisations, which would be impossible with their old tech stack. expert, but at the end of that course you’re given a brief to go away and build a solution, and you’ll be able to deliver a web-based service on the MATS platform.

This means the business can engage its wider staff base in delivering these digital services, rather than going to IT and trying to book in hard-to-come-by developer resource.

We see business analysts and subject matter experts suddenly involved in delivering solutions, which was unheard of before and enables the business to deliver five or 10 times as much.

TFM: How important is speed to market?

RB: It’s critical. The traditional big five banks are being challenged in all quarters, and they have to be able to react to that.

The challenger can deliver digital engagement, like apps that allow you to apply for a mortgage and get a response in minutes, up against a paper-based process at a bank. This means the market share is going to move towards the newcomers.

Organisations have to respond to that, but they can’t just rip out and replace everything they’ve got. They have to build on top of it. A low-code platform enables them to do that, via integration, pulling and pushing data as required. www.fintech.finance

There is no point in putting a shiny new app on top of a broken process; customers are still going to be frustrated TFM: What will improved customer experience technology do to the financial industry, going forward?

RB: It will save both employees and customers time, certainly when you couple low-code with the likes of artificial intelligence (AI) and robotic process automation (RPA) technology.

We integrate with application programming interfaces (APIs) and, as a result, can offer smart chatbots and predictive analysis. In the case of robotic process automation, it’s about integration with legacy solutions. Where there isn’t a real-time, web-based API that can be consumed, we need a different approach. RPA gives us the ability to scrape information in and out of green screens, for example, and ultimately present a digital engagement application

TFM: How important is end-to-end service for large institutions?

RB: It’s critical. There is no point in putting a shiny new app on top of a broken process; customers are still going to be frustrated and it will not gain you market share when you’re competing against challenger banks that have digital, end-to-end processes by design.

A low-code platform allows you to deliver a shiny front end, via web, desktop or mobile apps, but also push that work into the back office and deliver a new solution for processing it, for a customer experience journey that’s customer-centric by design.

You can also test and learn quickly, fail fast and involve people in implementing solutions that they feel might meet a specific business requirement, but, if they don’t deliver what’s required in A/B testing, scrap them and start again, way quicker than with traditional development. A low-code platform, when coupled with an agile, iterative approach, hugely speeds up the time to delivery.

We’ve even developed an ‘agile project management’ app for organisations to manage their projects, which is free to download via our community app share.

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Openly curious That’s Westpac’s attitude to technology that’s challenging the very premise of banking. Michael Correa, general manager for Asia Pacific, and Di Challenor, general manager for global transaction services, share their thoughts Founded in 1817, Westpac Banking Corporation – or Westpac, as it is more commonly known – prides itself on having served Australians for more than 200 years. Now, the pioneering bank is focussing on fintechs in a bid to define its role for 200 more years to come.

Westpac is one of Australia’s ‘big four’ banks. It is also one of the largest financial institutions in New Zealand and is looking to expand its presence in Asia Pacific.

But to successfully do that, Westpac understands it needs to evolve its services. And it believes that’s best achieved by getting involved in the fintech ecosystem.

According to Michael Correa, Westpac’s general manager for Asia Pacific, banking will look increasingly different as we see financial services being embedded into consumers’ digital experiences.

Customers are more and more looking to connect with their bank through a smartphone instead of a local branch, while millennials often don’t want to talk to anyone at all. So, what will the banks’ role be, especially in the hotly contested area of payments?

Australia is leading the way in contactless payments, which are the preferred transaction method for 90 per cent of purchases, according to Westpac research.

But it is still in the early phases of rolling out its version of the UK’s Faster Payments Service – Australia’s New Payments Platform (NPP) – while the implementation of Open Banking is only due to start later this year.

Regulation and Industry are both driving innovation in Australia – NPP and Open Banking are the result of government initiatives. Asia, on the other hand, being made up of a multitude of countries and cultures, is an impatiently dynamic market, which is leapfrogging legacy infrastructure, through millions

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of consumers who own a mobile phone.

Here, innovation is driven by services such as Alipay, which recently announced it has 230 million active daily users.

“It’s slightly ironic that you’re seeing the Asian markets innovate much more easily, and embracing technology compared to the more developed nations,” says Di Challenor, general manager for global transaction services in Westpac Institutional Banking.

But, not to be outdone, in November, Westpac launched an Asian innovation hub called co.lab in Singapore, to serve as a springboard for some of Australia’s 750 or so fintech firms who want to zero in xon Asia’s fast-evolving markets. The bank uses the 8,000 sq ft lab to incubate fintechs, supporting them with business development, contacts and even direct

You could go from a situation where an economy may not have a broad-base banking network, to everybody gets to have a digital wallet because they have a mobile phone investment, not to mention the valuable association with the Westpac brand. In return, the bank benefits from gaining deeper insight into technologies and business models that may drive new customer experiences.

“There’s no doubt working with fintechs is critical in Asia, the way that technology is evolving so fast here,” says Correa. He cites the examples of India, where digital wallets such as Paytm are becoming ubiquitous, and China, where payments are becoming part of

what he calls a wider ‘lifestyle system’ with services such as WeChat.

“Apply that to Indonesia or Vietnam, where we see very large demographics and what’s going to happen next could be a leapfrog of technology,” says Correa.

According to the PwC Global Consumer Insights Survey 2019, Vietnam's mobile payment usage growth alone increased from 37 per cent to 61 per cent, up by 24 percentage points over the last year.

“You could go from a situation where an economy may not have a broad base banking network, to all of a sudden everybody can get a digital wallet because they’ve got a mobile phone.”

This is why banks and traditional financial institutions, such as Westpac, need to remain ‘openly curious’ about technological innovation, he says.

At home, the bank has already made strategic investments in fintech companies, such as Assembly Payments, Uno and Zip. And its $150million venture capital fund, Reinventure, champions firms that have the drive to disrupt the fintech industry in Asia-Pacific and beyond. Companies it has invested in so far include peer-to-peer lending platform SocietyOne and property investment start-up BrickX. Looking to the future, when traditional banking systems may no longer be what customers want or require, Westpac needs to decide whether it’s part of the payment system, merchant system or regulatory oversight, says Correa.

“I don’t think you can rule out anything in today’s market,” he adds.

It is already supporting and enhancing what some of the fintechs are doing, especially in the payments space.

“I’ve been in payments for 20 years, and right now we’re seeing the convergence of the fintech world, real-time payments, and traditional banking,” says Challenor.

“We’ve spent the last couple of years www.fintech.finance

developing the New Payments Platform, providing the rails to power the Australian economy, but even more exciting is what’s happening on top of that – what we’re doing with the fintechs to bring new capabilities to our customers. For example, we’ve made a strategic investment and partnership with a company called Assembly to deliver an omnichannel customer experience.”

Assembly addresses Australia’s highly card-based market, where merchants find themselves having to operate across multiple payment modes, meaning the system is very complex for consumers.

“You often go into a shop in Sydney and you’ll see multiple terminals sitting on the counter,” observes Challenor.

Westpac is focussing on bringing those together and managing different payment methods for its customers through its partnership with Assembly – which claims it can save a typical outlet up to an hour a day in keying card transactions.

“Payments should be seamless, they should be easy, and I’m hoping that the ecommerce world and the offline world learns about me, as a customer, and what I need. I’d like to walk into a shop and just say ‘I want to buy that’ and my digital wallet picks up the payment details and says ‘use that credit card’ or ‘use that buy-now, pay-later scheme called Zip’ or ‘use my bank account’ and, bingo, off I go. More intelligent payment capabilities and using artificial intelligence (AI) to be able to do that is what I see as the future of payments,” says Challenor.

But there is still some way to go. Even the real-time payments system continues to hold challenges. Apart from ensuring security, there’s maintaining the infrastructure that is required to run 24/7 and having the liquidity to be able to move money that quickly – because, as Challenor points out, ‘when you move money in real time, it really is gone’.

When it comes to cross-border transactions, Westpac is a member of the SWIFT gpi initiative, which aims to improve the customer/bank experience in the realm of international payments. Westpac is looking to integrate gpi capability into its front-end channels in the future, to give www.fintech.finance

clients themselves greater visibility of where their money goes when making cross-border transactions.

Real-time payments are already available in Singapore, Australia, the UK and parts of Europe, and Hong Kong will see them soon.

“Once we connect those payment systems then I think we’ll see a much better cross-border payment solution and capability for consumers and businesses,” says Challenor. “I think it’s down to us as domestic banks, but also global banks, to really push cross-border payments to make it feel like the real-time payment we have in most of our domestic markets.”

So, what of the future? Challenor expects credit cards to continue to be prevalent because they give customers confidence that they can get their money back if something goes wrong. And for all the banking industry’s ‘curiosity’ about new tech, we’re unlikely to see a cashless Australia any time soon.

Governor of the Reserve Bank, Philip Lowe, said recently that cash was always likely to play a role in the national payments infrastructure. Nevertheless, both Correa and Challenor expect AI to create future payment capabilities and relieve the regulatory burden attached to them.

With the rise of automation, customers can provide their data digitally and manipulate it to a point where they can ask for services themselves.

“That helps us because it deals with a lot of our regulatory frameworks,” says Correa. “For instance, if you can ID verify yourself so there is no dispute as to who you are, and you can make payment to an individual, over whose identity there is, similarly, no dispute, then that is the easiest way to do business.”

Fintechs help in identifying those opportunities, says Challenor. “It’s all about the customer experience and understanding the customer lifecycle.

Put the two together and that’s where your solution is.”

Who do you think you are?: Banks will need to decide what role they play in future

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CUSTOMER RELATIONSHIP MANAGEMENT

Bright future: Online shopping can’t compete with in-store experience

Street-wise retailing The death of the high street has been much exaggerated, says Angus Burrell, General Manager for Valitor’s Omnichannel Payment Solutions Division The biggest blow to the high street has undoubtedly been the inexorable rise of online shopping.

In the UK, children’s outlet Toys‘R’Us, the last record store to cave to downloads, HMV, and, most recently, Debenhams department chain, have been among the scores of familiar retail names to cite the internet as the cause of their demise.

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More than two-thirds (69 per cent) of internet users across the EU bought goods or services online for private use last year, 19 percentage points up on a decade earlier, according to Eurostat.

Eshopping was particularly prevalent among younger internet users – 73 per cent favouring digital stores. In the UK, 87 per cent of web surfers made an online

purchase of goods or services in 2018.

That’s it, then: fate sealed. Or is it?

Despite what appears to be evidence to the contrary, Angus Burrell, general manager for Valitor’s Payment Solutions Division, is emphatic: the high street is ‘definitely not dead’, he says.

And his reasoning is as follows: however seamless the customer journey, online shopping will never deliver the experience that a physical store can. And Experiential shopping is where it’s at.

Even retail guru Mary Portas has bought into that with her ‘brand temples’ of

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immersive consumerism, while successful retailers such as Lush have demonstrated for some time that energetic showmanship keeps customers who could just as easily buy a bubble bar online, coming back in store for more. Online fashion retailers Missguided and Joe Browns are two examples of stores tapping into younger generations’ desire to try clothes on in-store, before making the purchase on their smartphone. Both have expanded their business offline by opening up bricks and mortar outlets.

“The high street must move towards being an experience, a destination, somewhere to go, rather than somewhere to turn up and buy something,” says Burrell.

So why is Valitor invested in the idea?

Valitor is a global payments solution business that helps merchants, other businesses and consumers make and receive payments. Founded in 1983, it operates in 22 countries, with a strong presence in Iceland, the UK, the Nordics and pan-European retail. Notable achievements include being one of the first companies to receive a cross-border licence for acquiring services in Europe in 2003; becoming an international issuer and entering the UK market in 2011; and then acquiring Denmark-based payments platform AltaPay in 2014.

Valitor’s key offering is a single connection for payments of all kinds, from in-store through to online and mobile. In the case of the high street, this technology enables retailers to create a seamless omnichannel customer experience that doesn’t just end at the point of sale (PoS).

And for the retailer, it offers a 360-degree view of the customer across all channels.

Why is this important? Burrell says that the biggest change in the retail space has been the consumer – how they behave, what they can do with a smartphone, how they share and buy on social media.

And retailers must keep up with the pace of this change to retain customer loyalty, particularly among younger shoppers.

The good news is that they have public sentiment on their side, for while there has been an undeniable decline in footfall over recent years – dropping by 1.9 per cent in February 2019 alone – British consumers still very much value their high streets.

Valitor’s recent High Street Rebooted report

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on the UK retail sector found that 87 per cent of respondents would care if their local high street disappeared and 78 per cent feel compelled to support it.

Valitor’s research also showed that the three key drivers motivating people to shop on the high street were convenience (63 per cent), price (46 per cent) and the ability to try on and test out products (30 per cent). Perhaps surprisingly, younger customers are particularly keen to shop there. “They like and strive to get that experience,” says Burrell.

And it’s where Valitor’s omnichannel payments technology could prove invaluable for future-proofing the high street because, as Burrell says: “What retailers are failing to do is to deliver something that’s different from a product on a shelf that you buy.”

The benefit of Valitor’s omnichannel approach, over a multichannel one, is that the former involves creating a more joined-up shopping experience.

The future is the high street... but in a fully integrated, digital way While a multichannel solution enables a retailer to let a consumer buy in different places – in-store, on a mobile phone, using a wallet or credit card – they often can’t return an online purchase to a physical store, for example. Neither can the retailer analyse that information and intelligently use it to drive further purchases, cement loyalty and encourage brand engagement, says Burrell. And engagement with a brand – also known as the after-payment emotional experience, or APEX – is really important to customers, even if they don’t realise it, he adds.

“An omnichannel experience completely joins up that consumer engagement – with social channels, with mobile, in-store, etc – so that the retailer has a single view of that customer, and is able to use it accordingly,” he says.

Much of a brand’s success hinges on marketing effectiveness and Valitor’s payment solution can help a business better understand, and thereby market

more effectively to individual customers.

Its purpose-built, fully tokenised, single gateway, in-store and online platform gives businesses a single view of a customer, regardless of how or where they’re making their purchases. Customers, meanwhile, benefit from a seamless shopping experience, better after-sales service and more personalised, pertinent marketing.

“Using our system, customer loyalty can be driven through the payment channel by showing a retailer when, where and how a consumer likes to buy. Do I tend to shop with a brand when I’m overseas? Perhaps I always buy when I’m in an airport. Perhaps I only buy when I’m on a mobile. Perhaps the majority of a retailer’s consumers see a tag on Instagram, then go to Facebook and make a small purchase there, but all subsequent purchases might be in-store, and much larger.

“We’re allowing a retailer to use all of that data, to put it into other systems that they have and effectively market back out to that consumer, or indeed allow them to get something refunded in-store when they’ve purchased online, or vice versa,” explains Burrell.

But he cautions a selective approach and against what he says is a growing tendency to market to consumers too heavily.

“What we don’t want is for consumers to be bombarded with spam emails because they’ll click unsubscribe and never go back to that brand again. Moreover, they’ll probably speak negatively about that brand to friends – exactly the opposite of what a retailer wants.”

Similarly, he believes retailers should take a less-is-more attitude to new technology integration in the wake of the revised Payment Services Directive (PSD2).

“There are all sorts of technologies out there,” he says. “I think it’s a question of retailers being sensible about what they implement and having something that is relevant to consumers today, without trying to unnecessarily lead the charge on something that may never take off.

“Let’s get back to basics: having well-informed, pleasant staff, great delivery options and returns policies, and great aftercare and marketing that actually works. That’s what will ensure not just the survival of our high street but make them an essential element of all retail strategy.”

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In today’s financial market, keeping track of our personal finances across several different providers can be tricky, tedious and downright discouraging. But, according to fintech boss Samantha Seaton, all we need is a gentle ‘nudge’ in the right direction – and she intends to give it.

Do the

maths Samantha Seaton was once told ‘put the customer first and the money will follow’. So, with Moneyhub, a new concept in financial ‘nudging’, that’s precisely what she did

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The CEO of UK-based Moneyhub Enterprise is on a mission to harness technology to change our experience of financial services and management for the better. If spreadsheets and investment portfolios set your head spinning, then it’s time to rejoice.

Moneyhub builds digital financial tools for customer-centric organisations.

From implementing the revised Payment Services Directive (PSD2) to fintech solutions to support sales strategies, its technology platform is available off the shelf and ready to be switched on. It can also be developed collaboratively into a bespoke solution with ‘pick’n’mix’ application programming interfaces (APIs) to suit the specific needs of an individual or enterprise.

At the forefront of the Open Banking revolution, the Moneyhub platform consolidates accounts from multiple sources and providers into one place, giving consumers live insights into their financial behaviour and eliminating the complexity of money management with a human touch.

“It’s really about trying to help you understand where your money is,” explains Seaton. “What have you got? Where does it go? And what could you do with it that may be different to what you’re doing with it now? Ultimately, I would love for it to be able to help you know what’s the next best thing to do with your money.”

To be honest, it comes pretty darn close. Imagine an app that can give permission to make an automatic sweep from a savings account into a current account to avoid unnecessary overdraft fees. Or one that gives you

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a nudge when the time is right to move your investment. With an API that tracks every bank’s interest rates, updated at four-hour intervals, Moneyhub can show the optimum level of cash to hold in a consumer’s current account and tell him or her when to transfer the rest to the highest performing interest account on the market. It’s your personal treasury at your fingertips.

There’s no doubt that Seaton’s unwavering interest in people affects her approach to technology, right down to crowdsourcing ideas for what she terms Moneyhub’s ‘nudge store’ (insight analytics, to you and me).

Personalised smart nudges help users save money. A loan-to-value ratio nudge, for example, alerts consumers when they qualify for better mortgage rates. It’s a great example of her customer-first philosophy.

“The beauty of Moneyhub is that it is what I call segment agnostic,” says Seaton.

“It doesn’t really matter how much money you’ve got, where you are on the journey, because Moneyhub is very personalised.

We keep getting told by our users ‘we want more nudges, more insight’, so that’s the direction of travel.”

But how do you give more insight and nudges to people quickly and effectively?

And, anyway, shouldn’t consumers be able to figure this stuff out for themselves? Can’t they just do the maths?

“I have quite a strong view that, for most of us, maths solves a lot of our problems – from when we start saving right through to our first bank account, to student loans, and trying to get onto a mortgage ladder or just pay our rent.

If you look at the journey that most of us go on, maths would be able to prompt us fairly easily as to what we should be doing with our money to make the best use of it,” says Seaton.

“Therefore, I’m not sure why we’re not doing more of that. Why aren’t we trying to just help people in a very effortless manner? Just nudge you in the right direction. You don’t have to do it, but there’s no reason we shouldn’t tell you and make it very visible that this is a way that you could save money.

“It might be you’ve got a store card that you’ve forgotten is costing 32 per cent.

www.fintech.finance

There’s only £200 on it, but all these little bits we do poorly, with our admin and our money, do make a difference. And there isn’t an advice community out there that wants to help you with that. We’re just left to our own devices, so why wouldn’t we try and fill that gap with maths and technology?

“The way to do it is to use all the brains out there in our customer base.

You should be able, if you’re technically minded, to write nudges and put them in the nudge store, which is then accessible to everyone, expanding our ability to create that insight.”

Seaton’s business philosophy, and that of her company, can be summed up by the maître d’ of a Singapore Hotel, who once told her: “In Sri Lanka, we put the customer first, and the money will follow.”

It seems as simple as two plus two equals four, but some bigger banks and financial institutions appear to be struggling with the concept.

“You’ve got an era of people running those businesses off profit and loss for so long,” says Seaton, an Aussie who has lived in the UK for more than 20 years. “Then you’ve got another group of people coming through, saying ‘we need to put the customer first’. And when the first group says ‘well, what does that mean from a revenue perspective?’ there’s this disconnect and that’s very difficult.”

services that can benefit its members in the future. And, towards the end of last year, bosses used capital from its £50million Venturing Fund to invest in Moneyhub, to help the banking giant ‘identify, learn about and explore new capabilities and technologies’.

Seaton says Moneyhub shows the potential of Open Banking, artificial intelligence-based data analysis and a customer-first culture to develop new financial products and services – and to power a step-change in how those services are delivered.

“I think some of the big institutions will start to look at customers more holistically, as people with needs that have to be met – not someone they sell a pension or insurance to. I think they will start to really broaden the remit.

“Take the self-employed, for example. This is a growing market with quite specific needs. It’s all very well saying they need to invest in their pension, but that’s not a group that will invest in pensions because they don’t want to lock money away. When you’re a freelancer you worry that if you have a gap, you’ll need to get your hands on that money, so it discourages you from long-term investing in any way, shape, or form, unfortunately. Whether that’s right or not, that is their need.

“So, imagine if you came up with a pension, or a long-term investment, which meant you could also perhaps borrow against it if you had a year without work?

“Suddenly, you’d be like ‘oh, OK, well maybe I’ll put my money into that then’.

And the thing is, most people don’t go without work. Most of them actually end up fine. But they get to the end of their career and don’t have a pension because they’ve never been confident enough to do it – but they could have.

“I think some of these things are going to start to emerge, which are quite different to what we’ve had in the past. And we need them.”

It might be you’ve got a store card that you’ve forgotten is costing 32 per cent and there’s only £200 on it

Imagining the impossible Open Banking means UK and European financial institutions are now obliged to allow fintechs access to the data and accounts of any customers who give their authorisation. Those institutions that are prepared to be agile, fast followers should reap the rewards, and enlisting the expertise and insight of specialist fintechs, such as Bristol-based Moneyhub, can give them a huge boost.

Nationwide, for instance, Britain’s biggest building society, is strategically investing in startups to support development of advanced products and

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NATIONWIDE: DIGITAL

Ease of use: Nationwide’s members drive development

Y L P SIMBEST THE

The UK’s biggest building society has risen from digital ground zero to become one of the fastest growing digital account providers on the back of a £4billion-plus transformation strategy to create ‘a building society in your pocket’. It’s a challenge, but it doesn’t have to be complicated, says Deputy CEO Tony Prestedge It’s easy to forget the breathtaking pace of digital innovation in financial services over the past five years.

Back in 2014, when Tony Prestedge was helping to oversee one of the largest replatforming programmes in Europe for Nationwide, his young son – clearly, a CTO in the making – wanted to cut chips out of his dad’s payment cards and stick them on the back of his wristwatch… it was to be another 12 months before we saw Apple come up with something a little more sophisticated.

“Mobile banking was still pretty nascent, the internet bank, while it was being used really widely, was largely about servicing, contactless hadn’t launched… there was no real concept of digital payments in the marketplace,” recalls Prestedge.

Like Prestedge’s son, Nationwide was also thinking ahead of its time. And its technology arc since, with an extraordinary commitment to spend £4billion over five years, has already placed it at the head of the legacy race: a mutual society founded more than 170 years ago is now one of the fastest growing digital account

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providers in the country. But its approach has been singularly different.

That stems, says Prestedge, from the Nationwide’s history of being a cheerleader for the people. One of a diminishing number of building societies that has hung on to its mutual status, it saw many of its fellows, including Halifax and Woolwich, convert in the first big wave of demutualisations in the 1990s. Among only around 40 left in the UK, Nationwide is now by far and away the biggest mutual by every measure, including its physical estate, with four times as many branches as its nearest rival and 700 times more than those of the smallest. It recently pledged to retain a branch in any town or city where it currently has a presence for at least two years as it works through digital the society’s transformation programme.

“The view that we had strategically is that technology would make things possible, but people would always make it matter,” says Prestedge. “Institutions have spent a decade putting technology between people to drive simplification and cost

efficiency. Those things are important to make sure you’re a sustainable organisation. But, for the first time, technology is being used to bring people together, rather than pull them apart; to have conversations, not just do processes.”

Prestedge points to a WhatsApp service currently being trialled with customers, which encourages just that by giving the direct access to high street staff.

“You can see pictures of our colleagues in the branches and you’re able to choose who you want to engage with,” explains Prestedge. “By making staff accessible through the app, you start to humanise the technology. Even if you never have a conversation with that person, you have a face to put to a name – it gives you that same sense of confidence [as meeting them physically]. If you humanise the technology by bringing people to the fore, rather than engineering them out, you start to see the thing that we’ve all been talking about for almost a decade. That is, channels properly blending, so the app just becomes an entry point to the organisation. Bringing www.fintech.finance

app-based technology together with the physical environment is the thing that’s making the brand so special.”

Ultimately, though, it’s the members who drive those technology choices.

“They are the architects of our investment,” says Prestedge. “They have said to us, consistently: ‘We adore the people in your branches – they are the hallmark of your service. But we also want to engage with you through technology.

We want to be able to have our building society in our pocket’.”

Prestedge believes Nationwide’s selective approach to innovation is validated by the society retaining its premier position in Forrester’s Customer Experience Index.

Based on a survey of 9,033 UK adults, it measures how well a brand’s customer experience strengthens brand loyalty.

“We could put more and more function into the technology, but the reality is it doesn’t get used,” says Prestedge. “You should develop your product to deliver the things that the membership’s asking you to deliver and then make those things really accessible and usable and experienced in a way that makes sense. The fact that it’s uncluttered means, I hope, that what people are experiencing in the physical branch network is great people-based service and, through the technology, real simplicity of use.”

The KISS principle Keeping it simple has nevertheless necessitated some fiendish reinvention of the way the society operates. So far, it’s involved upgrading and simplifying the organsiation’s data estate, including reducing data stores from 20 to two while increasing investment in AI and machine learning to improve analytics and give more insight; outsourcing IT for the first time; and implementing Microsoft technology in the front office and SAP at the back.

In line with its mission to deliver benefits across society, the move to an off-the-shelf IT policy has included investing in early-stage start-ups through a £50million venture fund. Most recently, Nationwide took a stake in Canadian voice analytics company Scaled Insights, which prompted it to move its HQ to Leeds in the UK. Scaled Heights uses behavioural AI to analyse more than 130 different variables in an individual’s speech patterns to give an idea www.fintech.finance

of their personality traits; understanding what motivates them means organisations can respond in language that is most accessible for the customer, leading to a more personalised service.

Scaled Heights was the society’s fifth investment target in both back office and customer-facing, third-party services. In fairly short order, it has also taken a minority stake in UK-based personal financial management app Moneyhub and in proptech startup Acasa, UK university spin off Hazy, which anonymises data to ensure companies are compliant with data sharing rules under the General Data Protection Regulation (GDPR), and payment request service Ordo. All are a result of Open Banking.

“I believe the concept of Open Banking, where you own your own data and have the right to share it in whichever ecosystem you choose to bring about more value for you or improve services for yourself, will be more transformational to our industry than the internet and mobile banking has been thus far,” says Prestedge. “Internet and mobile banking gave you access to services you could have accessed physically. What Open Banking does is completely empower you to use your data in a way that makes sense for you. Consumers – our members – will have to get comfortable with the security of that and my view is that brands that people recognise and trust will win out.

How customers might use data in a way that helps them, is something we will learn over time.”

Prestedge believes that three things determine the development of Open Banking services.

“First, whether or not you, as a customer, trust an organisation. Do they use your data ethically? Do they use it in a way that you feel comfortable with? Secondly, customers will only see value in exchanging their data if they get something in return – how many apps have we all downloaded and then deleted within two weeks; an app needs to bring additional value to you constantly. And, thirdly, the service needs to be something that’s omnipresent, not something you go back to monthly, but you use every day of the week in the way that helps shape and inform your life.”

Both Hazy and Ordo will support Nationwide’s move into business banking

for small and microbusinesses later in 2019, a journey that began with trials in 2018 of Mettle, a banking platform for SMEs developed with 11:FS and Capco. The Mettle mobile app will allow customers to open a business current account in minutes, forecast their business performance, create invoices from their mobile phone and provide reminders for chasing payments.

“Two and a half million of our customers have an SME. Many of those small business clients will be on the road, doing jobs where they need to bank outside of normal facilities – so you have to be there when they need you to be through technology,” says Prestedge. “But what they really want is for the bank to connect to them as people, so our transactional bank facility will be available through the branch as well as digitally. Then we will use Open Banking to bring about other services, such as factoring and asset finance. We can start to introduce people to best-in-class products that we don’t produce ourselves, rather than asking people to tie themselves to a single institution.

“We couldn’t have done all that 12 months ago, because one of the reasons we’ve not been in SME banking before is the cost of entry,” says Prestedge. “Open Banking will allow us to launch what I believe will be the best business bank in the UK for SMEs. But we’re not going to build it on our current legacy technology, we’ve been clear about that. That means we can start to build a Cloud native service, use microservices, make sure that the frontend experience is separated from the back end, so you’ve all the right security and resilience in terms of the core ledgers. It’s helping us transform our operating model, because we’re learning how to build new businesses, outside of our core.

“What customers want from us for the future is what they’ve wanted from us for the past 170 years,” says Prestedge.

“That’s an organisation they can trust, with an ethical set of brand values and people who stand up for something different. Who deliver a great service that contributes not just commercially and economically to the health of the building society, but to the health of society as a whole.”

Technology makes things possible, but people always make it matter

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NATIONWIDE: DIRECTOR OF INNOVATION & VENTURES

Inn vati n for all The way people consume financial services is changing and providers need to keep innovating in order to stay relevant. That much we know. But, at Nationwide, innovation is nothing new!

Founded by the Victorians to help working people pool resources to build better homes that they could own, the society has been disrupting the status quo for nearly 200 years. Innovating for good is a philosophy that‘s embedded in its philanthropic roots, but modern technology and data means it can be fully realised in ways the founding fathers would never have imagined.

According to Nationwide’s Emma Huntington,

Emma Huntington, Nationwide’s Director of Innovation and Ventures, is determined to help members run a better financial race in life innovation should be inclusive, accessible and put the customer, and what they want to do, at its heart – and it involves everyone in an organisation trying to deliver it. In other words: “Innovation belongs to everyone.

“We think about how we help foster and facilitate

innovation across the whole Society, how we might seed new ideas. It just looks different, depending on who you are and where you are in the organisation,” says Huntington, Nationwide’s director of innovation and ventures.

“The human element is absolutely critical. When we are trying to solve problems, or look for opportunities to help our members, it comes from them.

“I think the challenge is really in responding to the way people live their lives now. It’s not about banking products anymore; it’s about serving people in a

Lightbulb moments: There is no monopoly on innovation

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www.fintech.finance

way that’s more personalised,” she adds.

Huntington’s team prides itself on spending much of its time, not huddled in a creative bubble, but mixing with members of the public, including some of Nationwide’s 15 million customers. The ‘innovation venturing team’ will spend at least half a day a week in the community, looking at financial issues. Just now, it’s focussed on how the mutual can better support people in ‘later life’ – those approaching or entering retirement.

“It’s fascinating to understand how real people manage their day-to-day finances, make decisions and then turn that into something, whether it’s a digital service and/or through our branches and contact centres, that can really help them,” she says.

The most concrete example of how the society’s innovative thinking positively impacts the physical world is perhaps best illustrated by the recent announcement of a revolutionary not-for-profit house building programme in south-west England – making Nationwide the first modern ‘building’ society to live up to its name. In a scheme that harks back to its roots, the society is planning a development of 239 affordable homes at Oakfield Campus near its headquarters in Swindon, Wiltshire. Designs were drawn up after consultation with the local community and Swindon Borough Council, and Nationwide intends to use local firms for the construction should the plans be approved, which looks very likely.

This inclusive approach also extends to the digital realm.

Last year, the mutual set up Nationwide’s Open Banking for Good Challenge, which sees seven fintech companies sharing a £3million fund to develop apps that help people who are ‘financially squeezed’. The selected firms – which address three categories of need, ‘income and expenditure’, ‘income smoothing’ and ‘money management and help’ – also receive mentoring from major UK organisations including Accenture, Citizens’ Advice and The Money Charity.

Unveiling the seven participating fintech firms earlier this year, Nationwide CEO Joe Garner said the initiative was driven by the mutual’s social purpose, with the aim of creating revolutionary new technology to help those facing www.fintech.finance

financial challenges. He added that it was a great example of businesses, charities and the government working together to make a positive difference to society. Jeremy Wright, Secretary of State for Digital, Culture, Media and Sport hailed it as a ‘fantastic example of how to harness tech for social good’.

Nationwide also last year launched its £50million fintech venture fund to form partnerships with startups exploring technology that could benefit its members and customers.

“These are very smart people, who are thinking about a problem every day, which could be valuable for their future,” says Huntington.

For Nationwide, technological innovation is about more than just using data and Open Banking systems to provide better products. It’s about improving accessibility and serving

We think about how we help foster and facilitate innovation across the whole society, how we might seed new ideas people in a way that’s ‘on their side’, says Huntington.

“So, using data and Open Banking, but using them for good.”

The first startup Nationwide invested in as part of the scheme was proptech firm Acasa, a home management platform that supports both landlords and tenants living in shared accommodation to manage their everyday finances. The app enables people to split their utility bills and track their household expenses, with the potential of saving users up to £200 a year.

“So, no more nasty notes on the fridge, because we make it much easier for people to split bills,” explains Huntington.

The second major investment was in data company Hazy, an artificial intelligence (AI)-driven platform that identifies and anonymises personal data and helps

businesses remain compliant with the General Data Protection Regulation (GDPR). A winner of the Microsoft Ventures Innovate.AI programme, Hazy has already worked with a range of clients, including fellow startups, international banks and the UK government.

Nationwide has also partnered with Moneyhub (see page 38), a financial management platform that uses AI and Open Banking technology to enable customers to collate and view all their financial accounts in one place. Most recently, it invested in billing start-up Ordo, an app that uses Open Banking and Faster Payments technology to help users pay bills without having to give out their bank account information.

Partnership is important when it comes to Nationwide’s venture funding. It sees it as a way of benefitting both the companies involved and the wider community.

“We’ve invested in those businesses but, more importantly, we’re looking at ways that we can work with them, to help support them while also looking to provide those services to our members.”

Huntington believes the trajectory for financial services will be mapped more closely to customers’ financial wellbeing in future. She believes the industry will increasingly step up to the plate when it comes to helping people manage their finances in order to live a ‘really healthy life – with money not as a means to an end, but with money as a enabler’.

Huntington compares extending accessibility to financial services to running the London Marathon.

“Twenty years ago, it tended to be elite athletes that ran the Marathon, now thousands of people enter the race – that’s where our market is going to go.

“I think people are going to get much better at saying ‘this is what’s right for me, there is technology and there are companies out there that can help me to really own and take control of the way I manage my money’.”

Nationwide’s founders were all about enabling poorer people to run a better financial race in life. Today, the mutual is all about helping them win it.

Issue 12 | TheFintechMagazine

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NATIONWIDE: DIRECTOR OF PAYMENTS

FOR BUSINESS As Nationwide prepares to launch its first business account aimed at SMEs, Director of Payments, John Hutton, looks forward to the Open Banking journey After more than 170 years in financial services, Nationwide is making its first foray into business banking – with an account targeted at small and medium enterprises (SMEs).

The building society is boosting competition in a sector traditionally dominated by big banks, where just five providers control 85 per cent of the market.

To help it do so, Nationwide has applied for up to £50million from the Royal Bank of Scotland State Aid Alternative Remedies Package, which was set up by the UK government after the financial crash to help stimulate innovation in the SME banking market.

As a mutual, which focusses on delivering benefit to its stakeholding members rather than profits to shareholders, Nationwide will seek to serve the UK’s 5.7 million smaller and micro businesses, instead of larger organisations, with its new account. So it will target sole traders, tradespeople and owner-managed businesses, rather than startups and big corporates.

“It’s a really exciting opportunity,” says Nationwide’s director of payments John Hutton. “There will be some real benefits to expanding into this market for both customers and Nationwide, with our ethos and our core values.”

Alternative payment services, which are predicated on Open Banking, are key to this business offering, giving SMEs access to what Hutton describes as a ‘whole ecosystem of products’.

One example is payment request service Ordo, in which Nationwide has already invested an undisclosed sum through its www.fintech.finance

Venturing Fund. Ordo connects businesses with their customers via a payment request platform that does not require bank details. Businesses can use the system to send a smart request to a customer and the recipient can then make an account-to-account payment in real time through the platform, without having to reveal their personal details.

Security is a top priority for Ordo so, in addition to not having to share bank account details, the biller will always receive payments with the reference they provided with the original smart request.

They can also send the customer an invoice attachment as part of an end-to-end encrypted message.

Launching later this year, the service aims to improve cash flow for SMEs and help customers stay on top of their finances, while also protecting against invoice and payments fraud.

Speaking at the time of its investment in Ordo, Nationwide’s deputy CEO Tony Prestedge described the partnership between Society and startup as a natural fit for a brand that helps its members manage their money better.

Hutton believes that real-time payments such as those offered by Ordo will prove key to the industry in future. At present, there is the UK’s Faster Payments scheme and a near real-time processing window of up to two hours. But looking ahead, he expects to see card transactions becoming real time, too.

“It’ll use that single proof rail mentality that we’re trying to build with the new payments architecture – and, of course, with the RTGS (real-time gross settlement) changes as well, with the Bank of England,” says Hutton.

Automation will also become increasingly important, he adds. Indeed, it has been used throughout the centuries to improve cumbersome processes.

But it’s not all about the technology for an organisation like Nationwide.

Hutton makes clear that there is a balance to be struck between automation and personal contact.

“We want to automate in the right way.

It’s about finding the balance, the right blend,” he says. “So we’re investing a lot in our branch network to ensure we still have that personal contact for our members, as well as automating some processes in the background that make their experience better.”

He also expects an ever-growing number of new entrants to the payments industry, many of them targeting the low-value/high-volume type of transaction where margins may be small but the business model is instead built around owning the customer journey and leveraging the data that flows from it.

“I see some of the really large tech companies getting into this space to develop solutions whereby it’s not just about the purchasing of something on a website, it’s about owning the payment journey,” says Hutton.

“There’s a huge amount of opportunity for the future of payments in that space.”

And, with investments like Ordo, Nationwide looks set to help fill it.

There will be some real benefits of expanding into this market for both customers and Nationwide

Issue 12 | TheFintechMagazine

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NATIONWIDE: OPEN BANKING & PAYMENTS

LIBERATING BANKING

Matt Cox, Head of Open Banking, and John Hutton, Director of Payments, at Nationwide, consider how the most transformational event in financial services will shape the society’s future

THE FINTECH MAGAZINE: What are some of the benefits of Open Banking and the revised Payment Services Directive (PSD2) for institutions like Nationwide?

MATT COX: This regulation is transformational. It’s going to require organisations to create an entirely new channel, based on application programming interface (API) technologies. In practical terms, that means if a member of Nationwide chooses to share their current account or credit card information, or enact payments via a separate third party, then they will be able to do that securely, and with trust in that service, across the whole industry.

Part of a broader set of trends, Open Banking will allow Nationwide to be a consumer of that data as well – we can access data on other people’s payment accounts and enact payments on behalf of our members, as a third party. We’re also there to give our members choice, and if they choose to share their data – and it’s their data after all – then that’s in their interests.

JOHN HUTTON: PSD2 has convinced well-regulated organisations that they have to change. They also have to ensure that transactions are made more secure at the same time as opening up the market through Open Banking.

You can see a future whereby you can bring in other industries, like pensions and insurance, through the use of API technology to be able to capitalise on a more open world construct, rather than just banking. However, at the moment in the

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UK, funding for Open Banking is sustained by the top nine banking institutions. As we progress, that funding model needs to change so that it becomes more equitable across the ecosystem.

TFM: What are we going to see from Nationwide in regards to customer experience, when it comes to data and incorporating third party companies?

COX: As we move towards full PSD2 compliance in September 2019, we’ll see access to a wide range of payment accounts via secure APIs, and a radically different way

At the moment in the UK, funding for Open Banking is sustained by the top nine institutions.

That needs to change to authorise sharing of that information with a third party. To bring that to life, we will go from redirecting someone to log in using internet banking credentials, to a touch-ID-based experience on a mobile.

We can already see propositions in the marketplace that allow our members to manage all of their money and finances in one place. And once you’ve got that data, you can start to do far more targeted and complex things with it to help them manage their money more effectively.

We’re also likely to see it transform the

way mortgage applications run because you automatically know that somebody is receiving an income of a certain level.

You can make better credit risk decisions because you can see what their previous history was and predict what their future payment history may be.

So, we are already, for example, in our remortgage journeys, choosing to partner with different organisations that can provide a salary check via an API and do really smart biometric ID and validation checks at the front part of that process.

We will see many, many more of these as we re-engineer our member journeys.

HUTTON: Looking at the industry more broadly, I expect to see larger tech companies get into the payments space, in particular, not because they want to be a bank, but because they want to own the whole customer journey and the data that allows access to.

TFM: How do you see Open Banking shaping financial services and Nationwide in the future?

COX: We’ve spent many decades being the single manufacturer and distributor of our products. Open data will start to see organisations operate in different spaces.

For Nationwide, my personal view is that we have a unique and differentiated position as a building society. The relationship is still the most important factor for us, and the investment we’re making in our technology is all designed to make sure that remains the key point of our proposition. www.fintech.finance

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NATIONWIDE: DIGITAL

Staying relevant

Clear focus: For Nationwide, it's about digital empowering human interactions

James Smith, Director of Digital at Nationwide, is responsible for one of the biggest digital change programmes that Nationwide has ever seen.

But the technology is in service to only one goal Ask any fintech fan to list the benefits of an incumbent as opposed to a challenger bank and their response will almost certainly be: what benefits? In the eyes of the fintech community, being a mature institution established during a bygone financial era has nothing to recommend it.

After all, it’s difficult to remain competitive while simultaneously shelling out for the maintenance of lethargic legacy systems and bricks and mortar facilities.

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On the other hand, incumbent banks hold one of the two key attributes of a healthy, competitive financial services institution as a direct result of their prolonged presence in the market – trust. It’s something that the fresh-faced challengers are fighting to gain, and the venerable incumbents are seeking to protect at all costs.

Nationwide, the UK’s largest building society, has accrued its fair share of trust over the years. But James Smith, its director of digital, says that in this ever-changing digital landscape, consumer confidence is

not the only thing necessary for incumbents to ensure continued success.

“At the heart of any institution that offers financial services there are two really key components,” he says. “The trick for traditional players is maintaining trust, which has been earned through years of service, while also maintaining their relevance.

“While they may not possess the same levels of trust, some of the newer players are really starting to make a drive for relevance,” says Smith.

“In a world where 80 per cent of the population have smartphones, and people are spending huge amounts of time consuming new forms of services, relevance is proving to be the key battleground. For institutions like ours, then, evolving our services to ensure they meet our members’ needs is going to be absolutely crucial.” www.fintech.finance

Protecting its presence Judging by the alarming rise in the rate of pedestrian collisions as a result of smartphone fixation, one would presume that Nationwide would be looking to downsize its number of branches in accordance with those changing customer desires. But the society has, in fact, recently made a promise that every town and city with a branch will still have one in May 2021, safeguarding its 650 or so high street contact points.

“We firmly believe that forcing people into a particular way of interacting, for example by mobile, is not in our members’ interests,” says Smith. “The key is to provide customers with choice. With regards to channels, right now, a large proportion of our members rely on a mix of branch and digital interactions. There are certain circumstances where digital interactions make perfect sense – for example, conducting an account balance check on the go or cancelling a card in an emergency. However, at other times our members require a degree of empathy and understanding in their interactions with us that can only be delivered by a human being. In circumstances such as these, our branches are still proving to be extremely valuable in terms of remaining relevant to members.”

The problem is, if the last two decades are anything to go by, that this balance is a tricky one to maintain and consumer behaviour can tip the scale quickly, throwing a logistical spanner in the works for organisations such as Nationwide.

“If you go back 20 years, people were just about comfortable looking at their basic transaction information online,” says Smith.

“Very few people would’ve bought a mortgage online. Nowadays, however, we do a significant proportion of our most straightforward mortgage business online.

As technology evolves, and people’s acceptance with it, we’ll see interactions that today would be conducted in branch or over the phone, moving to digital.”

So, in a bid to make its digital moves at just the right time, Nationwide has created in-house teams whose job is to uncover exactly what members want and expect in terms of a contemporary banking experience. These teams employ a technique similar to method acting – only hopefully they’ll be winning customers instead of Oscars. www.fintech.finance

“As we design new systems and experiences, our teams think about them from a member perspective,” says Smith.

“They ask themselves questions such as ‘what do I actually want to achieve through this service?’.

“Referring back to the previous example, getting a mortgage is no one’s goal.

Instead, what people want is to buy a new house. Having identified the true customer goal, our teams go on to consider how best to optimise the journey that leads to it. Is it easiest to interact with us in branch, on the phone, or digitally to achieve the target outcome? What pain points currently exist in the process that are causing frustration for our customers and driving up our costs, and how can we eradicate them? This is the approach we’ve adopted when it comes to reengineering all of our core customer journeys to be as streamlined as possible.”

One such customer journey that has already received Nationwide’s streamlining treatment is its mortgage application process. The society recently rolled out an app called My Nationwide to guide first-time buyers through the perilous process of financing a home.

We firmly believe that forcing people into a particular way of interacting, for example by mobile, is not in our members’ interests “For somebody who’s not been through the house buying process before, the whole thing is slightly bewildering,” says Smith. “’Where do I start?’, ’what type of mortgage do I require?’, ’how much do I need to save?’, and ’what level of protection should I aim for?’ are typical questions they ask. Within the My Nationwide app, you can instantly discuss all of these queries with a specialised chatbot – and also get access to a real person via a new WeChat-style messaging service.

“Currently, about 70 per cent of questions are being answered successfully by our artificial intelligence (AI), but should you wish to explore things further you can

simply hit a button and immediately be put through to a member of staff.

Once you reach a certain point in that conversation, the operative you’re speaking with can book an appointment for you to talk things over in person at your nearest branch. After visiting us, you’re free to return to interacting via My Nationwide’s chatbot as the record of your conversation is kept up to date, no matter which communication channel you choose. It’s just one example of how we’re blending physical and digital to continue to provide our customers with the warmth and humanity that we stand for,” says Smith.

Nationwide has no intention of stopping at AI chatbots. In fact, in September last year, the society announced a top-up to its digital transformation investment strategy, taking it to £4.1billion over the next five years. As well as overhauling legacy systems to pave the way for new digital platforms, Nationwide plans to use the funds to deliver a unique face-to-face service experience, integrating video and social media into high street branches.

Where some digital transformation programmes seem purposely designed to eliminate the presence of humans, Nationwide predicts that its strategy will create between 750 and 1,000 new jobs, and a UK-based technology hub will be built with the purpose of training and re-skilling existing staff.

While £4.1billion may seem like an awful lot for any institution, incumbent or otherwise, to spend over the course of five years, it’s worth remembering that this isn’t just any old digitisation pursuit. This is one of the world’s largest cooperative financial firms striving for something far more valuable than a handful of shiny new technologies to prove it’s still in the game.

“Whether it’s in branch, at our contact centres, or in any other part of our organisation, our mission is to retain our relevance at whatever cost,” says Smith. “To do this, we need to implement a technology stack that is quick and easy to maintain and upgrade. We also need to ensure our workforce is familiar with agile ways of working, so that we can initiate something new, monitor it, check its relevance and make any refinements in the hope that it never stops adding value to our offerings.

When it comes to relevance, there’s no point at which our work is done.”

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WEALTHTECH

ONFLEEK FINANCE

Toby Triebel, CEO Europe for Canada’s millennial-friendly Wealthsimple, is bringing a touch of street cred to the UK’s investment market On the face of it, designing a service to be appealing to millennials is as easy as ordering a vegan chai latte at an artisan coffee shop.

The basic formula is as follows: choose a funky, one-word name (for ease of hashtags); offer signup and full control through a minimalist app that doesn’t devour precious smartphone battery; have a handful of Instagram influencers endorse the service before their 100k-plus followers. Et voilà! You have successfully created a service fit for even the most lit (that's up-to-speed, if you’re not) millennial.

Despite cheating slightly and fusing two words into one for its name, Canadian investment platform Wealthsimple undoubtedly ticks all the right boxes in terms of a millennial-friendly service.

The company provides its own online magazine targeted at Generation Y readers, which features ‘Money Diaries’ supplied by the likes of Kylie Jenner, Kim Kardashian and celebrity dermatologist and Instagram sensation Sandra Lee (AKA Dr Pimple Popper).

It announced the platform’s US launch in January 2017 with a minute-long Super Bowl ad showing a young professional sipping a fruit smoothie, who was confused about the complexities of traditional investing. If all this wasn’t millennial-y enough for you, Wealthsimple’s head office in Toronto contains rows of succulents along almost every windowsill, an assortment of sushi boats in the large communal eating area, and a freezer stocked with complimentary popsicles. “If we took away the ping-pong table there’d be riots,” says Wealthsimple Communications Director Rachael Factor.

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Nevertheless, when it comes to encouraging millennials to invest any cash left over after student loan repayments, things are not quite as simple as offering free ice lollies.

According to a report published by the CFA Institute in October last year, 40 per cent of non-investing millennials cited ‘not living pay cheque to pay cheque’ as their top financial goal, whereas only 21 per cent claimed that ‘saving enough to retire and live comfortably’ was their fiscal objective.

This reluctance to embrace investment opportunities can obviously be linked to increasing debt and insufficient income among millennials, however there are other barriers between twentysomethings and long-term financial planning.

Dazed and confused Contrary to the perception of millennials as brash know-it-alls with chips on their shoulders and itchy keyboard fingers, the CFA Institute’s

report uncovered that Generation Y is suffering from a distinct lack of confidence when it comes to investment decision-making. Only 21 per cent of non-investing millennials reported feeling ‘confident’ in making investmentrelated decisions, whereas 37 per cent claimed to ‘not feel very confident’ in deciding how best to grow their savings.

Interestingly enough, millennials don’t exhibit a similar sense of doubt towards financial professionals. Seventy-two per cent of the millennials surveyed said they were ‘very satisfied’ with their current financial advisors, using words like ‘knowledgeable’, ‘savvy’ and ‘experienced’ to describe them. That being said, they also expressed a desire for financial professionals to be prepared to educate them and customise their entire approach to suit a client’s needs.

Wealthsimple’s charismatic CEO, Michael Katchen, stated that he wants his company to become ‘the Vanguard for millennials, with $1trillion in assets under management in 15 years’. In order to

make this dream a reality, Wealthsimple has incorporated the needs of younger investors, such as tailored investment advice and support, into the core of its business, as Toby Triebel, CEO Europe, explains.

“When you boil it down, what makes Wealthsimple different to your typical wealth management company is the combination of technology and human,” he says. “We combine the best of both.

For example, we use technology to make investing accessible, simple and intuitive, and also to provide the best user experience possible for clients looking to enter the world of investment for the first time. It takes minutes, not days, to open a Wealthsimple account and become a funded client. The human element of our service lies in the fact that every one of our clients, no matter how much they invest, has access to a qualified, human investment advisor,” he says. “We believe that this combination of technology and human is very, very powerful.”

Judging by the statistics, Michael Katchen’s plan to dominate the millennial market is progressing rather well: 85 per cent of Wealthsimple’s customers are aged 45 years and below, and one in four clients are first-time investors. Wealthsimple’s popularity among this fresh-faced demographic can be attributed in part to the quality of human advice available to all clients, regardless of their investment, but also to the platform’s extremely competitive pricing strategy. In an interview with CNBC, Katchen declared ‘not paying more than one per cent of what you are investing in a fee’ as one of his top five pieces of advice for first-time investors, and his own platform certainly adheres to this rule.

Wealthsimple charges 0.7 per cent of money invested per year, compared with one to 1.25 per cent for the majority of its competitors.

For millennials who can barely gather enough pennies together to purchase a new pair of purposely ripped jeans, Wealthsimple’s exceptionally low fee www.fintech.finance

makes the platform a very attractive prospect indeed. The question is, how can Wealthsimple afford to keep its fees as tight as a hipster’s trousers?

“We use technology to build scalable, largely automated systems, and we then pass the savings that come from this back to our clients,” says Triebel. “We also automate our anti-money laundering (AML) and know-your-customer (KYC) checks, which allows us to save costs, offer an accelerated onboarding process and remain fully compliant with increasingly stringent regulation.”

On account of its core values, Wealthsimple takes a different view of regulators to other investment platforms.

Where some firms regard regulation as a thorn in the side of their margins, the Canadian company considers the regulator to be its BF in the fight to bring financial power to the people.

“We view regulators as strong advocates of the business model that we’re trying to develop, and also as true partners in all of the markets in which we operate,” says Triebel. “We’re fortunate enough to work with a whole variety of different regulators, some more progressive than others. Currently, the UK’s Financial Conduct Authority is by far the most progressive, since it’s very much in favour of promoting product transparency, giving clients choice and making sure that investment products are accessible to everyone, not just the wealthy,” he says. “This last point really mirrors Wealthsimple’s ethos, hence our decision to invest in low-cost portfolios, exchange traded funds (ETFs), and index funds so that our investment products are affordable to all of our clients.”

and me) and struggle-free investment platform of all time, Wealthsimple has not overlooked other demographics in the war for the millennial market.

“Our youngest client has just been born and has a junior ISA in their name, and our oldest is 103 years old,” says Triebel.

“This just goes to show the diversity of clients we cater for, and we’ve introduced new products such as our Black and Generation offerings to make sure we meet the needs of all our customers.”

A long way from the ‘pay cheque to pay cheque’ clients, Wealthsimple’s Black service is available to those who invest more than £100,000 across their Wealthsimple accounts and comes with a whole host of benefits, including lower fees of just 0.5 per cent and a financial planning session with one of Wealthsimple’s expert advisors. Should your savings exceed £500,000, you’ll be eligible for the Generation service, which features even greater advantages.

You’ll be assigned a dedicated advisor who’ll design you a customised budget and cash flow plan based on your financial goals. You’ll remain in touch with your dedicated advisor via monthly calls, wherein you’ll be able to ensure your investments are always aligned with your personal goals and timelines.

As a bonus, both Wealthsimple Black and Generation clients are granted access to more than 1,000 airline lounges in more than 400 cities.

A Wealthsimple account takes minutes to set up, it’ll cost you peanuts (or another vegan snack of your choosing), and you can manage your investments on the go while simultaneously posting to Instagram. With any luck, in a few years you may even gain access to Wealthsimple’s Black service, or better yet, its Generation offering.

Think of signing up to Wealthsimple as like gaining entry to the coolest, most exclusive nightclub in town, only you’ll be making money as opposed to frittering it away on extortionately priced drinks.

And that’s surely every twentysomething’s dream, right?

We use technology to build scaleable, largely automated systems and pass the savings back to our clients

An inclusive investment club Wealthsimple crossed the Pond only two years ago to compete with the likes of Nutmeg and Wealthify, differentiating itself from most of the competition by offering a pension product and socially responsible investing strategies.

Despite Wealthsimple’s preoccupation with becoming the most hashtagged, on-fleek (that’s flawlessly styled to you

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WEALTHTECH

Theinconvenienttruth As bad actors become more sophisticated, financial services are finding it increasingly time-consuming weeding them out. Anatoly Kvitnitsky,, Vice President of Growth at identity verification company Trulioo,, and General Manager Zac Cohen,, explain how they can save organisations the bother To find neighbourhoods of rich people head for the US, Japan, Germany and China. Between them, they shared 61.2 per cent of the world’s high net worth individuals, according to the Capgemini World Wealth Report 2018.

But look more closely at the statistics and you’ll find that the rich increasingly reside everywhere, and areas of rapid growth continually shift as emerging nations modernise and upskill. India, Indonesia and African countries are undergoing massive change and have a fast-growing middle class, meaning there’s huge opportunity for industries keen to follow the new money.

However, a barrier remains – just who are these newly wealthy people?

Legislation around know-your-customer (KYC) and anti-money laundering (AML) are a huge headache when attempting to verify individuals outside of the established, advanced economies.

“In the G5 markets, it’s relatively easy to verify an individual,” says Anatoly Kvitnitsky, vice-president of growth at identity verification company Trulioo.

Outside the G5 markets, where 70 percent of the population resides, verification becomes difficult. The data sources are just not as developed, they’re not as mature as they are in G5 markets and, given the huge fines that can be imposed for holding dirty money, it’s one of the things that keeps bankers awake at night.”

Trulioo was formed in Vancouver, Canada, in 2011. It now works extensively with hundreds of companies, particularly with financial institutions and financial services, to provide online identity verification in developing markets, as well as emerging markets, where identity verification is more challenging.

Much of the initial motivation was around helping the world’s unbanked – people, who often lack an identity footprint and are, therefore, difficult to verify. But those same

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verification processes are also put to work to verify and authenticate people with millions of dollars to invest, and helping established banks with brand prestige to build the requisite confidence and trust to take on their business. Kvitnitsky’s colleague and Trulioo general manager Zac Cohen explains that the point where new customers apply for a financial services account online is the point where due diligence is most vital.

He says: “The account creation process is the first interaction with the user – it’s that first handshake. At that point, a company is most susceptible to fraud because if you allow a nefarious individual into your system, it’s going to be more likely that you have fraud problems later on.

Identity verification is key to that initial onboarding. You must ensure the individual accessing your service is real. It’s very rare that a legitimate user – a real individual – will engage in fraudulent activity or provide problems in your system afterwards. So, the best technique is using a comprehensive identity verification solution that can work for your user base, demographic, and regulatory requirements.

“You need to stay one step ahead of the bad actors. We see quite often that where a new technology is launched, the first individuals to experiment are the ones you don’t want.”

Trulioo’s solutions are typically provided through application programming interfaces (APIs) that ultimately allow clients to verify

We see quite often that where a new technology is launched, the first individuals to experiment are the ones you don’t want

the identity of five billion people in more than 195 countries. The firm’s staff have pinpointed the most effective sources of data for each nation covered – which could be government records, or, for example, mobile phone contract information in countries with weak governance.

Knowing where to go for what information is Trulioo’s strength, and means clients don’t need to devote time to carrying out their own due diligence and then have to monitor and manage those ID systems. Importantly, Trulioo uses multiple sources and cross-references data to reduce the risk of onboarding fraudsters who hold a fake passport. Offering the service through an API means established banks can simply bolt it on to their legacy systems. And for challenger banks and other smaller clients, the API gives them the potential

to grow their customer base fast. Cohen says: “Banks face such a high level of scrutiny. The standards and brand value of banks are so high that they definitely take a different approach to deploying regulatory technology and to satisfying their internal compliance requirements.

“Established banks have legacy systems that have been in place and active for decades, and so changing how they do things can be difficult. At the same time, they have the most pressure to deploy digital transformation to satisfy the customer base that they want to attract and to make that service more accessible to online users. So, we provide them with a platform they can access and leverage the www.fintech.finance

Guess who: ID must be subject to scrutiny

tools that they need, as opposed to replacing their entire infrastructure. At the same time, we need to satisfy those high levels of security and data privacy. So, as an organisation, we work very closely to ensure brand values are maintained.”

Another factor that Trulioo focusses on is reducing friction – Cohen warns that wealthy clients will often abort applications with firms that take too long to process their applications.

“Customers now have easier access to register for the types of accounts that were either prohibited before or just not easily attainable for individuals online.

Wealthtech services are absolutely online-first, mobile-first. So we deploy our tools alongside these providers to ensure that they don’t sacrifice any of the due diligence, security, and privacy of the information, but still have the great access tools they provide to their client base,” says Cohen.

“Also, a mobile-first approach satisfies the needs of the younger generation. From the consumer perspective, availability is key, as is a variety of tools and services.”

Brokerage companies and securities dealers are among the organisations that have adopted Trulioo’s solutions to onboard customers. When offering services to international investors, a broker must overcome the real-time trading risks posed by numerous markets while ensuring the customer is bone fide. Trulioo says before such organisations started using its ID verification services, they typically demanded a customer submit paper documents, such as photocopies of passport, driver’s licence or national ID card, which were then manually processed. With recent growth in online nominee stockbroking accounts, brokers were struggling to meet demand, and processing times grew.

Each country poses its own challenges.

China, for example, has high ID verification rates but each region has different data sources and requirements. Hong Kong has no official postal codes or street names.

That becomes a nightmare for an account provider with onboarding processes that demand address validation and has address data fields to complete.

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WEALTHTECH Trulioo says many brokers have adopted GlobalGateway (its marketplace of identity data and services). One such client is Wall Street-based Webull Financial, a zero-commission, online broker dealer that demands no minimum deposit to open an account. Such an offer attracts novice investors and so Webull Financial uses GlobalGateway to flag applicants who have previously been involved in any fraud, conspiracy, and/or trafficking. It was able to onboard 100,000 bona fide new investors in six months.

Contracts-for-difference and spread-betting broker IG uses Trulioo’s solutions to avoid reliance on paper-based manual onboarding processes. The UK firm already had an automated ID verification system for British and Australian clients and needed a method to extend this to other territories.

Catherine Jeetoo, from client onboarding operations at IG, said her firm was keen to attract active retail investors who may be prompted to apply for a dealing account by a specific short-term opportunity. She says: “With fastmoving markets, people want to take advantage of the now, whether it’s a global issue such as Greece or China, or whether it’s a particular stock that they’re interested in. Having to wait for an account to be opened is a missed opportunity.”

As well as instant ID verification, Trulioo reduces onboarding field types by a quarter due to its built-in intelligence and mapping of common fields. Trulioo’s normalized API supports a long list of country-specific fields, including name, address and IT attributes, and reducing fields means clients can add customers more efficiently. Beyond brokers, Trulioo has worked with cybercurrency providers – an area where know-your-customer and anti-money laundering protocols have been weak. One client was a Canadian company that used GlobalGateway to scrutinise applicants during its initial coin offering. Some cybercurrency providers have enshrined customer anonymity as a point of principle, but the Canadian operator worked to ensure compliance to the country’s province-specific securities laws. Another major challenge was meeting US regulations so US citizens could take part. Investors there must be

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verified against watchlists to weed out criminals and terrorists. Using GlobalGateway, the initial coin offering accessed data from around 60 countries to verify the ID of 2,500 investors in real time so they could buy tokens at the launch.

Faster onboarding Kvitnitsky says that while Trulioo is happy with its ‘several hundred clients’, as head of growth, he is always looking at ways to increase that to several thousand.

His plan is to productise the expertise and services Trulioo provides to existing clients and roll that out to others.

Developers don’t say ‘show me the money’ they say ‘show me the API’ “One way we’re doing that is with a snippet of JavaScript code, called EmbedID, to then populate an entire sign-up form for more than 70 countries,” he says.

“The form helps support KYC compliance requirements and verifies customers (end users) instantaneously. So, whether it’s a startup that wants to launch internationally, or it’s an established company that is doing business in 100-plus countries, this capability offers an easy

way for clients to access GlobalGateway during the customer onboarding process to perform due diligence.

“Everyone is strapped for technical resources, no one has enough developers.

So EmbedID lowers the amount of technical resources needed to create compliant identity verification.”

Another innovation is verification of organisations – an area Trulioo entered last year, following the introduction of the 4th AML directive in Europe. Trulioo sells this API-based solution in around 80 countries for clients to verify a business entity without having to manually research them.

Kvitnitsky says: “If you look at a bank today, specifically a European bank, it takes them roughly four to six weeks to onboard a commercial customer. The bank’s compliance department will have screens for up to 50 different registrars of countries where they look up entities. With our business verification solution, one portal (or one API if they want to directly integrate), can verify more than 250 million businesses, across 80 countries, and do it all instantly. So the onboarding process can be done in minutes.”

Meanwhile, Kvitnitsky also reveals there is another reason to offer Trulioo services through a simple JavaScript code – it attracts today’s key decision makers at tech-driven companies: the developers.

“I’ve been at Trulioo for nearly five years now and, even just a few years ago, an executive or a product manager would make a decision on which product or solution they’re going to go with and then tell the developer what to do. That is no longer the case. The developer will decide which API is best,” says Kvitnitsky.

“Developers don’t say ‘show me the money’ they say, ‘show me the API’ and that’s what influences their decision.

“So, we want to make sure that, whether it’s a two-person startup or a large bank, that they have the best developer tools possible to perform verification services around the world. Whether that’s EmbedID, with its snippet of code to verify the globe, to the best API docs for identity and business verification, we’re building new tools to help developers automate and digitalise customer onboarding around the globe to increase trust and safety and reduce fraud and financial crime online.” www.fintech.finance

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PAYMENTS: HARD CURRENCY

A Chartist movement for cash Are you tired of being told what to do all the time? If so, join the club!

Many of us have exactly that feeling.

Democracy isn’t the most common system of government in the world – but even where it is nominally in place, many so-called democratic governments seem to want to unnecessarily limit the rights of their citizens. Security is often made the excuse these days but, when all is said and done, if we lose most of our personal freedoms to protect us, we are little more than prisoners of the system, with our DNA stored, our every move watched and penalties imposed for even the most minor push-back we might make.

Governments want to limit our choices to exercise control – and massive commercial enterprises have an identical ambition.

Henry Ford reportedly told prospective customers for his Model T that ‘you can have any colour, so long as it is black’ and that is exactly the same message that many businesses give their customers today when it comes to payments.

In this day and age, with the public, in theory, having so many options as regards how they can pay, it is simply not good enough to give them no choice. It’s

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The erosion of payment choice isn’t just inconvenient, it’s anti-democratic, argues Ron Delnevo, Executive Director Europe for ATMIA much worse, of course, if the customer is effectively trapped in an environment that is controlled by the business dictating to them.

Motorway services in the UK are a case in point. I once suggested to an executive at one of the m-way services operators that it might be seen as a bit of a rip-off to charge high fees for access to cash at ATMs, considering that customers did not have a convenient option to go elsewhere. The reply I got was along the lines of ‘they believe we rip them off anyway, so what does it matter what we charge them?’.

Another example from the field of transport: British Airways will not now

accept cash for the purchase of food and drinks on its short-haul flights. I have seen passengers having their food and drinks served, only to have their proffered card refused or rejected by the point of sale terminal and, even though they had cash available to complete the purchase, being forced to return the food and drinks, including cups of tea and coffee.

That is a complete and utter disgrace and appalling customer service. But then so many businesses seemingly don’t want to deliver decent service at all. Human contact is being reduced in many service environments, with ‘cost reduction’ the usual excuse.

Now, it may seem strange for someone who supports ATM use to bemoan the lack of personal service. However, it must be remembered that the inventor

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of ATMs initially viewed them simply as a way of getting cash outside of bank branch opening hours. Today, of course, bank branches are an endangered species, verging on the extinct, so we need ATMs to replace them entirely. That is very sad, but King Cnut had more success with tides than any campaigner has enjoyed in keeping bank branches open. So, what are we going to do to stop customers’ ability to select their preferred payment – their payment choice – being destroyed?

Some people, including Natalie Ceeney, Chair of the UK’s Access to Cash Review, seem to believe that voluntary arrangements can safeguard payment choice. I am far from convinced of this and my worry is that if too much time is spent seeking agreement on voluntary

Some people seem to believe that voluntary arrangements can safeguard payment choice. I am far from convinced measures, we may find payment choice has been eroded beyond the point where it can be saved. Once it is gone, who will be prepared to foot the bill for restoration?

Nobody, would be my educated guess.

In my view, what we need now is not fine words: we need action. To this end, my colleague Debbie Smyth and I, two financial services professionals with more than 50 years’ experience between us, have

developed A Charter for Payment Choice.

It covers six crucial issues and details legal requirements that need to be put in place to safeguard payment choice.

In essence, the Charter focusses on acceptance and access. Get those matters right and any threat to payment choice will be removed.

Of course, a Charter in itself is not enough. It needs to be implemented.

To this end, Debbie and I will be circulating the Charter widely to governments, central banks and regulators. We will also follow up with them to press for implementation.

It will be very hard work – but what choice do we have? Without payment choice, democracy is just a word and personal freedom an illusion.

SIX STEPS TO A CHARTER FOR PAYMENT CHOICE

1

Businesses that accept in-person payments (including through vending machines) will be required to accept any payment method that accounts for more than five per cent (by number not value) of the total annual in-person payments to the business in the country in which the payment is made. Any business that does so, and provides full transparency of all charges related to those payments, shall be eligible to apply for a CE Mark* (or equivalent), to be awarded by the relevant national regulator.

2

Businesses shall be required to make clear at point of sale the transaction limits that apply to each payment method. For avoidance of doubt, it shall be a legal requirement to accept all payment methods up to a limit of €100 or the equivalent. This limit may be varied, upwards-only, by national regulators to meet market conditions.

3 4

All business-to-business fees relating to payments shall be set by each nation each year, based on a transparent cost-based methodology.

Any direct charges made in connection with in-person payments are to be fully transparent and subject to specific approval by the customer, prior to the completion of the transaction.

5 6

All bank branches shall be required to provide access to deposit and withdrawal facilities for cash, both notes and coins.

with cash deposit functionality.

Universal deposit is to be made into a bank account, with maximum individual transaction and daily limits to be set to meet reasonable national anti-money laundering requirements. *The CE Mark is a certification that indicates conformity with health, safety, and environmental protection standards for products sold within the European Economic Area.

Every nation shall require the development and adoption by all card Issuers of a Universal Cash Deposit Transaction for both notes and coins, allowing members of the public and businesses access to deposit facilities at any bank branch or at any machine equipped

Time to take a stand: Payment choice is a democratic right

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PAYMENTS

Speed is of the essence in cross-border transactions and the SWIFT/ACI #PaymentsforBreakfast Roadshow shows SWIFT gpi pulling ahead of the race The first meal of the day is typically spent over the morning post in the comfort of one’s home, but on nine dates in nine cities this year, groups of experts from banks and government bodies have been sharing it with two fintechs at the 2019 SWIFT & ACI Worldwide Partnership Roadshows.

At just under two hours, #PaymentsforBreakfast conferences are tailored to quickly assess the monetisation potential of new propositions as well as latest projects in domestic and cross-border payment processing through a combination of panel and open discussions. The publishers of The Fintech Magazine and 80 attendees joined SWIFT in a private suite at the St Paul’s Grange Hotel to assist the London edition, which was co-hosted with ACI Worldwide, the scheme’s first accredited SWIFT gpi vendor.

The evolving payments processing marketplace Characterised by deep-rooted relationships between corporate treasurers, the rarefied quality of the payment processing marketplace has

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WORK!

largely protected it from fintech or other competition. But the pressure for change seen across the financial sector has begun to build there both internally – with the list of services necessary to remain a relevant player unremittingly lengthening – and externally, due to the prolonged period of low economic growth, which has weakened and fragmented global market coverage, heralding the urgent need for a new business model for servicing international trade networks.

Pre-empting this technological squeeze, SWIFT designed and rolled out a new service in early 2017, SWIFT gpi – the global payments innovation.

SWIFT gpi is the biggest change in cross-border payments over the last 30 years and has dramatically improved the customer experience by increasing the speed, transparency and end-to-end tracking of payments.

It offers three key features: a tracker, which allows for transparent, Amazon-like tracking of payments from start to finish; a directory, which provides a complete list of gpi member banks and enables members to apply apt payment routing methods, and an observer, which monitors gpi members’ adherence to new service level agreements to enhance cross-border payments.

In addition to providing transactions solutions across the globe since 1974, ACI Worldwide has been a key partner for SWIFT, and is now delivering the

connectivity and processing power required for gpi to evolve from a suite of basic services to the modern ones available today.

ACI Worldwide became an accredited gpi vendor in 2019 and has launched its own suite of gpi solutions, including ACI Real-Time Payments, which offers full access to Swift gpi and its Swift Data Service; ACI Swift gpi Connect, which is a flexible stand-alone, wrap-around solution that works with existing back office systems; and ACI Swift Data Service, which creates direct access to the SWIFT gpi data tracker central database to pull or push all data related to inbound and outbound gpi transactions. The data tracker also links all charges and statutes of every message, including confirmation data, payments status and foreign exchange and fee information, to give clients an end-to-end view.

What was on the menu?

With Stanley Wachs (global head of bank engagement, SWIFT), Craig Ramsey (head of real-time payments, ACI Worldwide) and Tony Craddock (director general of the Emerging Payments Association) on the panel, the London Breakfast Conference kicked off with a heavy focus on gpi’s rapid adoption rate.

Stanley Wachs said: “More than $40trillion was sent via SWIFT gpi in 2018, a 270 per cent year-on-year increase;

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$100billion is being sent every day now via gpi and, as we speak, transactions are happening over 1,200 country corridors.

We are proud to announce that more than 55 per cent of SWIFT’s entire cross-border payments traffic is being sent on gpi, cementing the service as the true new standard for bank cross-border payments.

“Speed, certainty and transparency were our greatest ambitions from the beginning, and we’ve succeeded in creating that value for members here – especially with speed. On average, 40 per cent of SWIFT gpi payments are credited to end beneficiaries within five minutes; 50 per cent within 30 minutes, 75 per cent within six hours and almost 100 per cent within 24 hours.

“Banks have also seen a significant reduction in the number of payment enquiries and quicker investigations handling. Overall, the traction gained from members has been promising, and we are now aiming to bring the headiest benefits of gpi – speed, certainty and transparency – to the entire SWIFT community.”

Craig Ramsey emphasised that the improvements had been made possible through collaboration.

“Whether it’s the initiation, the acquisition, the processing of a transaction, including all of the interaction points that the bank might have or, indeed, the clearing and settlement connectivity to actually make sure the payment reaches the beneficiary, collaboration within the sector is key to success.

“SWIFT gpi has been gaining terrific traction with financial institutions all around the world.”

The level of industry progress in terms of transparency and speed has certainly spelled a new era of business for gpi members, but the panel unanimously underlined that areas in serious need of improvement remained. For example, reports show that 60 per cent of the world’s cross-border payments still contain errors. Additionally, the momentum created by the network of 3,500 banks and 460-plus banking groups using gpi has created pressure for non-gpi adhering corporations to adopt it quickly or risk being left behind.

More than 55 per cent of SWIFT’s entire cross-border payments traffic is being sent on gpi, cementing the service as the true new standard for bank cross-border payments

Ramsey said both organisations understood that adoption isn’t as easy as just signing on the dotting line.

“Banks have to overcome some hurdles before being able to make a decision, no matter how cost effective or necessary it is.

ACI’s suite is structured to enable a bank to bring its existing back-office systems onto gpi painlessly and in less time than it would take for them to rebuild their internal systems – whether they already use an ACI payment engine or not.

“Acceptance will work itself out as corporates move to leverage the infrastructures and mechanisms that are emerging, or already in place, across Europe. We have every faith that the concerned industries will all evolve without fatalities. Our focus is to help them do it fast.”

After a volley of questions from attendees, which underlined the problems institutions are facing when it comes to satisfying customer needs, the conference disbanded, clear in the understanding that 2019 is the payment processing sector’s handover period from the 20th Century to the digital 21st.

Established corporations and banks continue to have the upper hand, but for how much longer will largely depend on their ability to climb aboard.

Accelerating payments: $100billion is being sent every day over SWIFT gpi

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SMEs in South East Asia are understandably jittery about going cashless. Jasmin Ng, Group Head of Cash Product Management at DBS Bank, explains what it’s doing to calm their nerves In the past two years, global ecommerce and, consequently, fintech, has been eyeing the South East Asian markets with hunger.

Ecommerce in the region has experienced explosive growth but, compared to elsewhere, the payments ecosystem that enables it is distinctly different in the way it has been built and adopted. That’s been seen in the way digital is promoted and supported by the Association of South East Asian Nation’s (ASEAN’s) respective governments; the hybrid growth of payment solutions; how establishing trust in financial institutions has been a key challenge and how delayed funds clearance and settlements added to the lack of it.

Then there is the way in which QR technology took on a life of its own and customers strongly favour cash-on-delivery over other payment strategies for buying online. In short, if you already have experience of trading in the West, South East Asian markets need their own, customised strategies.

In Singapore, a city state that has made a commitment to smart tech and a cashless future, banks’ attention has focussed on the business customers who make up 99 per cent of the corporate community – the small and medium sized enterprises – as a way of accelerating digital payments adoption among consumers.

DBS Bank, for example, recognised that if the region was to follow through on its

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cashless promise, then its fragmented payments market must come together to enable SMEs and retailers to transition away from cash. DBS understood that the financial infrastructure requires the simplest of all systems and its users need compelling value-based reasons to go cashless.

Jasmin Ng, the bank’s group head of cash product management, is dedicated to designing strategies to move SMEs away from cash management and cheque collection, employing a variety of initiatives and leveraging partnerships.

She says: “Because SME outfits are small, cashflow is very important for them, and one of their key challenges is the ability to get the kind of liquidity, working capital, that can balance between their sales versus their expenses. So, as a bank, we are constantly looking at how we can innovate to help them optimise their working capital, how we can facilitate their collections as well as payables.”

Ng explains how developing capabilities that promote faster cashflows for these businesses – real-time transactions, faster cross-border settlements, QR technology and other similar infrastructure – leads to opportunities that help the bank grow along with its customers. DBS has proactively built a number of payment infrastructure adjustments to achieve speedy transactions, including the adoption of SWIFT gpi when it was launched, while at the same time building its own real-time

intra-bank transfer system with a customer app called IDEAL. Linked to its internet banking infrastructure, IDEAL allows account holders to track payments in the system.

“When SWIFT gpi was introduced, DBS was one of the first banks in Asia to embark on it. Today, six of our core markets are on gpi, which offers the traceability, transparency and speed for transactions outside of our DBS network,” says Ng. Adopting SWIFT gpi allows customers to check every detail about the status of a transaction – where it is, when it gets credited and, if cross-border, at what FX rate.

“In addition to gpi, DBS also offers PriorityPay, as a value-add service to our customers who do cross-border transactions within the DBS network, so they get cross-border transactions happening almost instantly in Asia,” Ng adds.

An IDEAL solution To ensure the accuracy of the status information around online transactions,

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IDEAL attempts to capture relevant and accurate information and instruction from the users, and validate them at every stage.

“The validation capabilities on that platform help to minimise any form of failure for transactions that go downstream or across to the beneficiary banks,” Ng explains.

“The bank’s cross-border payment services today offer different capabilities that the client can enjoy both within and outside of the DBS network.”

DBS is also partnering with various South East Asian entities, including government-supported ones, on working towards a cashless society. Together with the Singapore government-run Info-communications Media Development Authority (IMDA) and leading communications technology group, Singtel, DBS created an ecosystem that can help their SMEs to go digital.

A giant leap: Will Singapore have the courage to make it?

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Called 99%SMEs, it currently operates as a business-to-consumer site that works as an ecommerce platform, primarily for retailers looking for an online presence.

But the 99%SME ecosystem is designed to facilitate every aspect of digitising SME operations, expanding across borders and handholding during the transformation process. There are now plans to bolt on a B2B marketplace to the 99%SMEs portal.

“Our SMEs can use the platform to advertise their merchandise and services.

It’s a way to both promote them and help them adopt digital technology; to show that the sales model can be omnichannel and customers can buy online through that marketplace. When it comes to delivery, customers can visit the store to collect

We are constantly looking at how we can innovate to help SMEs optimise their working capital, how we can facilitate their collections as well as payables

– that’s the offline bit. And, at that point, merchants can take the opportunity to do some cross-selling,” explains Ng. “We see the marketplace as a way of taking the nerves out of going digital for SMEs. At the same time, they can see this is the beginning of an expanding sales model.”

DBS has extended this concept into the property arena, where it partnered with property listing companies to post around 100,000 homes on the DBS Property Marketplace. Applying the ecosystem model, it introduces those looking to rent or buy a home to SMEs in the domain that are providing auxiliary services likely to be of interest to them, such as electricity, plumbing and internet providers.

Meanwhile, DBS Max, the bank’s merchant app, simplifies payment collection by using QR code technology facilitated by the PayNow system that’s being adopted by more and more banks in South East Asia. DBS Max allows for direct transfer of payments between bank accounts that participate in the PayNow network. It also leverages QR; customers simply download the app, get a user ID by registering as a corporate client with DBS, set up the app on their mobile following a simple process, and use it like any wallet system. Apart from simplifying collection, DBS MAX provides other forms of benefits, explains Ng. “We can track their sales collection from the app itself; they can set up refunds if there’s an error with the sales collection and, at the end of the day, the system automatically sweeps the funds. What we tried to do through the app is digitise the whole journey of how an SME does its collection (offline).”

Pushing a growing economy and fast developing markets from traditional to cashless involves, above all, a willing change in user behaviour.

Governments as well as financial entities in the South East Asian region understand that this will entail building sustainable systems together and should be based on user trust and mutual benefit. Only then will Singapore have the courage to go cashless.

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PAYMENTS

Circle of trust It’s no secret that SMEs struggle to access credit. But innovative financial utility Banking Circle wanted to know why and what impact financial exclusion had.

So, it asked them… and concluded that a new approach was needed Every company was once a startup, an SME, a financial unknown and high-risk investment opportunity.

For some, growth has taken many decades of prudent business decisions and gradual expansion.

However, in the much faster-paced markets of the last few decades, the ability to grow has gained a greater sense of urgency. And to support that fast-paced growth, investment is needed from the outset.

For some enterprises, this might come from family and friends, and then from forward-thinking venture capitalists. But for others, if early cash injections cannot be secured, they could well become one of the high proportion of startups that fail within their first four years of trading.

This makes financial exclusion for SMEs an increasing – and very real – concern for the global economy.

Companies of all sizes, but especially the smaller, younger firms, can be held back from meeting their full potential by difficulties with payments and cashflow. Transfers can be too slow and expensive, and without access to additional funds many SMEs struggle

and potentially fail. Traditional banks are unable to provide flexible, fast and low-cost solutions.

Identifying this issue as a key ‘pain point’ for SMEs – but also an opportunity for the financial institutions servicing this sector – groundbreaking financial utility Banking Circle recently commissioned Magna Carta Communications to carry out in-depth, independent research.

The aim of the study was to provide a unique insight into what is causing financial exclusion for SMEs and the opportunities that exist for the financial services sector to improve the situation.

The current landscape There are more than 24 million SMEs in Europe; they make up more than 99 per cent of all the region’s

businesses and account for two-thirds of all employment. They contribute more than half of all business turnover and generate more than half of all value added in the non-financial business sector – worth €4,030billion in 2016.

These businesses clearly represent a significant opportunity, yet many find themselves financially excluded.

Some lenders are ahead of the curve and already providing dedicated solutions to better serve companies where traditional banks have been unable to help. For example, PayPal recently announced that it has provided £1billion of finance to more than 37,000 small businesses in the UK since it launched PayPal Working Capital in 2014.

However, it seems that fear of the unknown could be holding back SMEs from capitalising on the new solutions coming onto the market. A Growth Street survey of 2,000 SMEs recently reported that 51 per cent would still approach a traditional bank in the first instance if they needed additional

A credit bridge: Existing lending models do not suit many SMEs

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funding. The figure has, in fact, increased since its previous survey a year earlier when 45 per cent said they would approach a bank for lending first.

The recent Banking Circle survey of more than 500 SMEs revealed that, without access to additional funding, 24.6 per cent would have to cut employee numbers and 13.3 per cent believe the business would fail. Therefore, this loyalty to traditional banks – despite SMEs confirming their lack of satisfaction with the service delivered and costs incurred – is questionable.

But there is some good news. The earlier Growth Street survey also showed an annual increase in the number of SMEs considering using an alternative lender – up to 35 per cent in 2019, from 30 per cent in 2018.

Collaboration is missing There is a growing commitment to improving access to commercial banking, transaction services and lending for SMEs across Europe. But the multitude of issues at play means there is no one-provider-fits-all solution.

With Europe’s SMEs covering every industry, with varying business models, distribution and ambitions, no two firms are alike. This creates a barrier to providing effective and viable financial solutions at scale – neither existing corporate or retail-focussed offerings are suitable, so SMEs are left out in the cold.

There are plenty of ambitious, but still underserved, businesses with specific needs that could be met by an open, joined-up ecosystem. There are also plenty of potential providers of innovative ‘point’ solutions. But there remains a lack of connection between the two, apart from individual, often ad hoc collaborations. The bigger picture of a

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connected ecosystem is often obscured by a virtual tidal wave of statistics, audits and promotions.

The reality is that small businesses have specific requirements. Consumer banking products that try to appeal to SMEs are often not agile. And the solutions developed for corporates are often too complicated for SMEs.

A collaborative approach Without access to suitable solutions, SMEs find themselves facing high prices and other barriers to entry, which are stunting growth and limiting the appeal of SMEs to prospective lenders – it is a vicious circle of self-reinforcing inaccessibility. What’s needed is a more collaborative and creative approach to build a mutually supportive ecosystem in which SMEs can thrive and improve their contribution to the economy.

There are plenty of ambitious but still under-served businesses with specific needs that could be met by a joined-up ecosystem SMEs with access to suitable financial solutions are also better-placed to increase internationalisation and exports.

This helps to support the diversification of the wider economy which, in turn, improves social integration and community cohesion. So, the significance of financial inclusion for SMEs should not be underestimated.

The Enterprise Europe Network recently reported that 65 per cent of small

businesses expect to increase their turnover and 85 per cent expect to create or preserve jobs in the next year. These ambitious companies need financial services providers equally committed to innovation and growth. Yet, despite the European Union recognising the importance of financial inclusion and bringing in policies and programmes to help deliver better access to SME finance, many still can’t reap the benefits.

The financial services sector is at an inflection point. To move forward, Banking Circle believes all ecosystem participants must continue the conversation and work together to build collaborative models and solutions that can fit this diverse and disparate market. If they can, it will help build a larger marketplace from which providers old and new can benefit.

There is clear evidence of the significant gains to be made by all participants.

But, rather than relying on top-down directives from state institutions, this needs to be led by forward-thinking organisations that can build accessible, inclusive solutions from the bottom up.

Banking Circle has built solutions to help businesses of all sizes compete and prosper. The suite of innovative Banking Circle solutions is increasing financial inclusion by providing previously excluded businesses with access to essential lending, banking accounts and cross-border payments.

■ The full report, Financial Inclusion For Europe’s SMEs: Building A Circle Of Trust, will be published at Money20/20 Europe. To register for a copy, available to download from June 3, 2019, visit https://www.bankingcircle.com/ pre-register-for-our-upcoming-whitepaper-financial-inclusion-for-europessmes-building-a-circle-of-trust.

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PAYMENTS: HARD CURRENCY

Filling the gaps A trend towards outsourcing is redrawing the ATM cash replenishment map on the continent of Europe. Robert Chaundy, Associate at retail banking research group RBR, explores where the opportunities lie RBR’s latest global ATM survey has revealed how different European countries approach ATM cash replenishment.

The study, Global ATM Market And Forecasts To 2023, shows how central Europe increasingly resembles western Europe, while eastern Europe – Russia and its neighbouring states – is shaped by different historical practices and regulation. In western Europe, distinctive practices can be observed in the north and south. So, how does the map look?

Western Europe: a north-south divide RBR’s study shows that, in most of western Europe, it is still common for bank staff to refill branch ATMs. This makes sense in large branches where workers are trained for such tasks, but it is not always suitable for smaller branches.

ATMs inside the branch are usually straightforward for bank staff to refill, but those facing the street, for security reasons, must usually be replenished by third parties. Italy, Denmark, Greece, France and Turkey all have high proportions of such machines.

In some western European countries, the refilling of most or all branch ATMs is outsourced. In the Netherlands, Sweden, Norway and Finland, nearly all branch ATMs are replenished by private players, while in Germany the proportion is nearly three-quarters. In the Mediterranean, figures are much lower with no outsourcing of cash replenishment of branch machines at all in Greece and Spain, despite southern European banks having above-average numbers of through-the-wall ATMs in Europe.

UK moving away from outsourcing cash replenishment Across most of western Europe, non-branch www.fintech.finance

ATMs are routinely refilled by third parties.

At the end of 2017, cash replenishment was outsourced for nearly 90,000 off-site ATMs, or almost two-thirds of the total.

Cash replenishment is outsourced for all non-branch ATMs in Germany, Ireland, Italy, Portugal and Spain, and in most other western European markets for the vast majority of machines. The main exceptions are the UK and Turkey, where around two-thirds of off-site ATMs are refilled by the deployer, and France where this is the arrangement for a third of remote ATMs. The UK is the only market that has seen a significant move away from outsourcing – there, the share of ATMs for which cash replenishment is carried out in-house rose from 36 per cent in 2014 to 67 per cent in 2017. This is because the UK market is increasingly independent ATM deployer (IAD)-heavy, and these companies tend to keep cash replenishment in-house.

Regulation still an obstacle in eastern Europe Several eastern European markets are challenging environments for would-be cash replenishment providers.

Russia and Ukraine together account for 60 per cent of central and eastern European ATMs; in Russia, cash replenishment outsourcing runs at 48 per cent, and in Ukraine at just 11 per cent. In Ukraine, only licensed banks can carry out cash in transit (CIT) and cash replenishment services, and this is also true of neighbouring Belarus.

Several eastern European markets are challenging environments for cash replenishment providers

Outsourcing that does exist in these markets is to other banks.

The same practice of outsourcing to banks exists in Russia, but now covers less than 10 per cent of the country’s ATMs. State-controlled companies such as Rosinkas and CCCB refill a third of ATMs, while private sector providers, such as Brink’s and Inkakhran, are also active.

Cash replenishment is outsourced for most Polish ATMs RBR’s research shows that central Europe may be more promising territory for CIT and cash replenishment providers.

Poland, the second largest market in central and eastern Europe, a more liberal economy without regulatory barriers, has seen outsourcing grow quickly in the last five years to 69 per cent of ATMs in 2017.

IADs own nearly half the country’s ATMs, but unlike UK IADs, these companies often outsource cash replenishment.

In Croatia, the Czech Republic, Hungary, Slovakia and Slovenia, more than half of ATMs are already refilled by commercial providers. Opportunities remain in these markets, however, as bank staff still replenish more than 11,000 ATMs. Banks are keen to cut costs, meaning that new outsourcing providers still have chances to prosper.

Opportunities remain Some eastern European markets will remain difficult for cash replenishment providers to enter, but may open up in future. Even in central and western Europe, the trend is towards greater outsourcing, and competition with established players can still open doors.

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PAYMENTS

The inside track on Ebru Pakcan, Treasury and Trade Solutions Head for Citi, explains why SWIFT and blockchain both have roles in improving corporate payments Instantaneous everything is fast becoming the norm in the consumer financial services space, but less so in the B2B world of corporate finance.

A previous lack of demand combined with the lack of a technological hook to hang them on, mean institutional payments, and particularly cross-border ones, still face a time and transparency lag.

This is about to change dramatically, according to Ebru Pakcan, treasury and trade solutions head for Citi, as changing client expectations force the greatest innovation this sector has seen.

The question is, will new or old rails lead the charge – specifically SWIFT gpi, using the correspondent banking network, or blockchain?

While Citi is a long-term SWIFT supporter, Pakcan is keeping an open mind, recognising blockchain’s vital role in fuelling innovation, with some interesting potential prospects in the pipeline.

SWIFT still holds an advantage as the largest network for payment processing, offering speed, security and transparency to its 165 member banks, with more than 11,000 in its network.

However, it faces competition for the first time, from blockchain-based disruptor RippleNet. SWIFT gpi’s GPI Tracker, GPI Observer and GPI Directory follow payments using unique end-to-end tracking references (UETR). Meanwhile, Ripple uses distributed ledger technology (DLT) boosted by inter-ledger protocol (ILP) capability for greater interoperability and scalability. Its product selection includes RippleNet, xCurrent, ILP, xRapid and xVia. Setting new standards in tracking, speed, scalability and liquidity, it can confirm payment completion within seconds compared to gpi’s 30 minutes to 24 hours.

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Pakcan believes the old, but gpi-enhanced, correspondent banking network still has legs while banks feel their way towards DLT and find the right use cases. Citi itself is dipping its toe into blockchain waters like Komgo, the new DLT platform for trade and commodities finance being developed by Citi and a number of other partners. Founded by a diverse group, including ABN AMRO, BNP Paribas, Citi, Rabobank and energy giant Shell, it aims to digitise the trade and commodities finance sector through a blockchain-based open platform, developed with support from the ConsenSys innovation group. One of its first products will be digital letters of credit, including digital signatures, which Pakcan believes will be part of ‘a great evolution, and in some ways, revolution, of banking activities and financial services activities with our corporate clients’.

SWIFT gpi We’ll be able to tell you that out of 10 payments, eight have made it, two are on their way, are waiting with a correspondent bank or need repair In a recent blog, Citi lists the reasons for sticking with SWIFT, including the way it supports the company’s strategy of ‘making communication between our systems and our clients as efficient and future-proof as possible’, smooth implementation and service, positive client feedback and the flexibility to

choose between MT 199 messages and APIs as a means of accessing the system.

It is currently adopting phase two of SWIFT gpi, which will bring additional functionality such as instant payment stop and recall. In July 2018, the bank added the Citi Payment Insight app onto its online banking platform, allowing treasury departments to monitor and directly intervene in payments stuck anywhere in the gpi system, thereby maximising a powerful combination of old rails and new tech.

“For us, the most exciting space is our work with institutional clients around real time – not just payments or transactions, but real-time funding, liquidity and information,” says Pakcan.

“For our large corporation and institutional clients, it is critical to know where their payment is,” she adds.

“This sounds obvious but historically, especially for cross-border payments, it hasn’t been the case.

“Sometimes the payments they want to trace are critical for a particular supplier or their own purposes, so they need to understand why they are being rejected, for example, and what they can do to influence that.

“Information and speed are important because these institutions are interacting more with customers and the retailers that serve them, and need to be able to respond to their requirement for a real-time response. More real-time infrastructures being rolled out across the globe mean that they now have a way to do it, compared to a decade ago.”

She continues: “When you step back and think about it, SWIFT and its member institutions should probably have been doing this for a very long time, so why hasn’t it happened? Firstly, there was no real impetus for these institutions to say www.fintech.finance

‘we must evolve’, which is where something like blockchain comes in because the thought processes and ideas around it created the drive among the banks to innovate.

“Secondly, was actual demand and client need. In the institutional payments world, real-time interactivity in the large corporate payments SWIFT was designed for, historically, was not required because those institutions weren’t involved in digital flows or electronic commerce. However, as those trends evolve, the need for real-time information and action increases.

“Those two things were finally put together a few years ago, when SWIFT came together with its largest user banks, of which Citi is among the top ones. When we sat back and said ‘what can we do in this environment?’, it was obvious to respond with ‘what do customers need?’.

“The simple answer was ‘they need to know where their payment is, how it is travelling and what they can do if there’s an issue with it’, and that’s exactly how gpi was born. It’s been evolving very quickly ever since.

“Imagine you’re a corporation making payments to a large group of suppliers, based in the US, in Europe, Asia or elsewhere. When you’re making those payments through SWIFT gpi, we’ll be able to tell you, out of 10 payments you’ve made, eight have made it already and two are still on their way, are with the correspondent or waiting for some sort of a repair, like an issue with the account number. This means you can quickly do something about it,” says Pakcan.

“This is especially important in a globally connected world where electronic commerce is reaching small and medium-sized enterprises, which are becoming suppliers to large corporations.

For them, money is everything. When they make a sale, they like to get paid, and this allows our corporations to make their payments more efficiently, have the visibility, get the money out there in real time and actually develop their

supplier network in ways that can fuel their own individual growth as well.”

Citi is adapting to this with its flagship Citi Payment Insight application on the Citidirect BE platform to leverage the potential of SWIFT gpi.

“Our customers have been using the Citidirect BE platform for almost two decades now and it has been evolving and growing. With versions on mobile and tablet, they are able to do all their account transactions, including invoices and statements. We’re now building big data information into the platform, including what comes from SWIFT gpi, giving them end-to-end visibility of the transaction lifecycle,” explains Pakcan.

“If that shows them something they need to interfere with, like stopping, cancelling or redirecting a transaction, they’re going to have that ability online, digitally, and with no paper trail whatsoever.”

So, where do practical considerations like esignatures fit into all of this, when it comes to enabling swifter payments that fit with regulation, and how can Citi help?

“If we can figure out how to bed esignatures into our processes and workflows, it will be very, very powerful.

A lot of financial flows have various pieces of bureaucracy that are needed for different reasons. A trade transaction

BLOCKCHAIN There are more credible and possibly long-term sustainable solutions and ideas coming to life around blockchain

has paperwork like the bill of lading and shipment documents that need to be submitted to an expert authority. These all inform some signing – the actual wet signature and the level of authority needed for a particular transaction. For many years, this meant lots of paperwork and documentation going backwards and forwards, which is painful for our customers because many of them are operating with a large number of legal entities and subsidiaries across the globe, with many bank accounts and lots of mandates they need to give to the banks.

“There is huge efficiency and cost benefit where we can apply an electronic signature or other forms of digitisation and workflow tools, leveraging utilities, Cloud-based documentation or onboarding tools that customers can access, and provide that information and connectivity to the bank.”

So, which out of SWIFT and blockchain does Pakcan see winning through, then?

“It will continue to be a bit of both,” she says. “There’s been a lot of hype about blockchain but people trying to innovate on it have brought that innovation impetus and mindset to a financial services industry that has not necessarily been so.

“Having said that, there are more credible and possibly long-term sustainable solutions and ideas coming to life around blockchain.

Fundamentally, innovation will continue, as long as you listen to your clients and make an effort to understand what they actually need.”

On the fast track: But transparency of payments is as important as speed

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EVENTS: PARIS FINTECH FORUM A global audience: Representatives from 75 countries were present at the 2019 Paris Fintech Forum

The Davos of Digital Finance Ali Paterson, Editor-in-chief of The Fintech Magazine, interviews Laurent Nizri, Founder of Paris Fintech Forum Paris Fintech Forum has established itself as one of the main global events of the sector in only a few years.

The 2019 edition confirmed this reputation. Held over two days, on January 29 and 30, at the Palais Brongniart in Paris, the forum gathered 2,700 attendees to listen to 280 international speakers, almost all CEOs from global financial institutions, regulators and, of course, fintechs from all over the world. Most of the participants came from outside of France, with 75 countries present, and the event was a sell-out a week before the opening.

Laurent Nizri, Managing Partner of the consulting firm Altéir Consulting, and President of the Association de l’Économie Numérique, is Founder and CEO of Altéir Event, which organises the Paris Fintech Forum.

We asked him what we should remember from this 4th edition.

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THE FINTECH MAGAZINE: How would you describe Paris Fintech Forum to someone who hasn’t attended, and why is this event so unique?

LAURENT NIZRI: Paris Fintech Forum is the most exclusive European event on digital finance for fintechs. There is no other event gathering as many international CEOs from across the industry, both among the audience and on stage.

Another thing that sets us apart is that we purposefully limit our capacity to 2,700 attendees to leverage real networking in a club format. We are a kind of ‘Davos of digital finance’.

We have no keynote, all the speakers participate in strong, added-value panels in order to debate and exchange opinions on the future of the industry. We receive numerous ministers, governors of central banks and other regulators involved in the industry. As an example, among our 280 speakers were Christine Lagarde, Managing Director of the International Monetary Fund; Bruno Le Maire, French Minister of the Economy and Finances and his Belgian, Lithuanian and Luxembourgian counterparts; Carlos Torres Vila, Chairman of the BBVA group; François Villeroy de Galhau, Governor of the Banque de France; Ann Cairns, Vice Chair of Mastercard; Laurent Mignon, CEO of BPCE; Frédéric Oudéa, CEO of Société Générale; Thomas Buberl, CEO

of Axa; Gottfried Leibbrandt, CEO of SWIFT and, of course, CEOs and founders of the main global fintechs such as N26, Nubank, Atom Bank, TransferWise, Kabbage, Starling Bank, Zopa, PayU, Trov, Ripple, R3, Airwallex, Younited Credit, Ledger, eToro and so many others.

Another key characteristic of this event is that we gather people together from a diverse range of sectors. You can find credit, payment and neo banks as well as insurtech, regtech, blockchain and cryptocurrency tracks at our conferences.

By the way, if you missed those astonishing panels, most of them are online on our video-on-demand channel at www.parisfintechforum.com/VOD19.

Lastly, a key purpose of the Forum is to foster business meetings between key players. This year, with more than 150 exhibitors, eight thematic lounges for conducting business, and many side events dedicated to networking (VIP lunches, parties, etc.), our attendees did get multiple opportunities to strike up new partnerships or imagine future collaborations.

TFM: Eighty per cent of the 180 fintech CEOs on stage were not present last year. What are your selection criteria?

LN: Our team doesn’t come from the event sector but from strategic consulting in fintech and finance. For more than 20 years, with Altéir www.fintech.finance

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EVENTS: PARIS FINTECH FORUM Consulting we’ve been accompanying big groups and new entrants in their innovation and expansion of new offers strategies, taking advantage of the amazing opportunities of digital transformation. What we aim for at the Forum each year is a real expert selection to offer to our participants an up-to-date, state-of-the-art vision of what fintech is in the different geographies and in all financial domains.

We do not claim that we select the best fintechs; we choose the ones that, at the time of the Forum, are the best representative players in their sector, bringing real innovation and/or being at the centre of a strong commercial traction.

We don’t have a lot of early stage companies because one of the aims of the Forum is to enable partnership between strong players and new entrants.

This is possible only for startups that have already successfully taken the first steps in their company journeys and are stong enough to face the unavoidable hazards and timelines accompanying collaboration between big groups and startups.

Our selection is a mix of international unicorns and a plethora of startups, sometimes less well known to the general public, that apply to be on stage via our online platform. This year, we received almost 900 applications from more than 50 countries, and we selected 180 of them to speak on stage. You can find more details about this selection and all the information about 150 of these companies in the 2019 edition of the dedicated book we publish every year (you can order your own copy on www.parisfintechforum.com/book19).

all or part of their businesses. Indeed, media tend to highlight detractors of retail banking because it’s an easy subject to trivialise, but the reality is new entrants mostly disrupted tech solutions providers (core banking, regtech, robo advisors, credit platforms, API providers, blockchain solutions) more than banks or insurance companies themselves.

To get back to your question, yes it’s difficult for a startup to work with big companies, and this is true in every sector. Nevertheless, since our first edition in 2016, we have observed lots of changes in the financial world and, more specifically, in France, which is ahead of its time in Europe.

Every bank, without exception, has an ongoing digital transformation plan with very motivated and organised teams willing to work with fintechs. On the new entrants’ side, at least the ones that survive this highly competitive industry, they have learned how to work with those settled players, to exchange with regulators and to take into account the value of time in the

We select fintechs that are the best representative players in their sector

days

2

www.fintech.finance

TFM: Who are the main partners to organise such a big international event?

LN: Every year we gather around 100 financial partners from major sponsors.

In 2019, they included BNP Paribas, BPCE, Arkéa, Marstercard, Google Cloud and Wirecard. Then there are the many startups that decided to be part of the 150 exhibitors we also welcomed, without forgetting the countless partnerships we offer to incumbents and fintechs to maximise their brand exposure and real business-making on site. Many of our partners are very loyal and renew their participation every year.

By the way, more than 60 per cent of our different commercial offers are already sold for the 2020 edition.

2,700

An event held over 2 days to foster real exchanges between major players from different ecosystems

280 speakers

3

attendees

As in 2018, the event reached full capacity. We welcomed almost 2,700 attendees for this 4th edition

exhibition halls

n 50+ exhibitors & partners

Mainly CEOs & managing

52%

n 120+ Fintech booths

international

directors of banks, insurers and

all sectors at various development stages

6 stages Session

For 150+ keynotes, panels, interviews, pitches & partners’ workshops

8

&

75

countries

1,340

companies

37%

Networking

Banks, Insurers, Regulators

innovation

Lounges

Organised with our partners to discover, learn, exchange and do business through showcases, meetups & 1 to 1s.

43% Fintech & tech

12% VCs /investors & media

3

parties

regulators and more than 150 worldwide fintechs from

TFM: You are talking about the necessary cooperation between established players and new entrants.

Opinions are mixed on the success of those cooperations. They are often seen as a communication strategy more than a real, long-term business relationship.

Is this cooperation a reality in 2019 in Europe and specifically in France?

LN: Let’s begin with a fact: 90 per cent of fintechs target, for commercial purposes, established financial industry players for

Twitter era of ‘everything now and fast’.

So, I believe that, even if the road is long and failures unavoidable, cooperation between big groups and fintechs is absolutely on the right track.

This is good news for the financial industry in general, which is in need of those innovations in order to evolve, for the future of fintechs and, above all, for the customers who will be the first ones to benefit from the large-scale development of those innovations.

n

Speaker dinner

n

Gala dinner

n

Closing party

82%

C-level & top management

29% CEOs & founders 35% C-level & directors 18% Managem’t team

Issue 12 | TheFintechMagazine

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EVENTS: PARIS FINTECH FORUM

2019 EDITION: 280 LEADERS WERE ON STAGE…

72

Christine Lagarde

Bruno Le Maire

Alexander de Croo

Pierre Gramegna

Vilius Šapoka

F. Villeroy de Galhau

Managing Director International Monetary Fund (US)

Minister of Economy & Finance (France)

Minister of Finance (Belgium)

Minister of Finance (Luxembourg)

Minister of Finance (Lithuania)

Governor Banque de France (FR)

Stefan Ingves

Robert Ophèle

Eva Kaili

Carlos Torres Vila

Laurent Mignon

Frédéric Oudéa

Governor Sveriges Riksbank (SE)

Chairman Autorité des Marchés Financiers (FR)

Member European Parliament (BE)

Chairman BBVA Group (ES)

CEO BPCE (FR)

CEO Société Générale (FR)

Wim Mijs

Ann Cairns

Thomas Buberl

Nicolas Dufourcq

G. Leibbrandt

Charlotte Hogg

CEO European Banking Federation (BE)

Vice Chairman Mastercard (US)

CEO Axa (FR)

CEO Bpifrance (FR)

CEO SWIFT (BE)

CEO Europe Visa (US)

Jonathan Larsen

Frédéric Janbon

Gilles Gade

Paul de Leusse

Susanne Steidl

Stéphane Boujnah

Chairman Ping An Global Voyager Fund (HK)

CEO BNP Paribas A.M. (FR)

CEO Cross River (US)

CEO Orange Bank (FR)

CPO Wirecard (DE)

CEO Euronext (NL)

David E. Rutter

Carolin Gabor

Jay Reinemann

Tomasz Czechowicz

Stefan Klestil

Harry Nelis

CEO R3 (US)

CEO Finleap (DE)

Partner Propel Venture (US)

Managing Partner MCI Capital (PL)

Partner Speedinvest (AU)

Partner Accel (UK)

Nick Cowan

Simon Paris

Flavia Alzetta

Oskar Miel

John Doran

Ruth Foxe Blader

CEO Gibraltar Stock Exchange Group (GI)

CEO Finastra (UK)

CEO Contis (UK)

Managing Partner Rakuten Capital (JP)

General Partner TCV (UK)

Managing Director Anthemis (UK)

TheFintechMagazine | Issue 12

www.fintech.finance

EVENTS: PARIS FINTECH FORUM

… FOR 80+ INTERVIEWS & PANELS AND 60+ PITCHES

Kristo Käärmann

Kathryn Petralia

David Vélez

Mark Mullen

Brad Garlinghouse

Oliver Hughes

CEO TransferWise (UK)

President Kabbage (US)

CEO Nubank (BR)

CEO Atom Bank (UK)

CEO

Ripple (US)

CEO Tinkoff (RU)

Maximilian Tayenthal

Anne Boden

Charles Egly

Laurent Le Moal

Scott Walchek

Rishi Khosla

Co-Founder N26 (DE)

CEO Starling Bank (UK)

CEO Younited Credit (FR)

CEO

PayU (NL)

CEO Trov (US)

CEO OakNorth (UK)

Jason Gardner

Zach Perret

Viola Llewellyn

Nuno Sebastiao

Diana Paredes

Jack Zhang

CEO Marqeta (US)

CEO Plaid (US)

President Ovamba (CM)

CEO Feedzai (PT)

CEO Suade (UK)

CEO Airwallex (HK)

Eric Larcheveque

Christian Faes

Jaidev Janardana

Paolo Galvani

Yoni Assia

Leanne Kemp

CEO Ledger (FR)

CEO LendInvest (UK)

CEO Zopa (UK)

Chairman Moneyfarm (UK)

CEO eToro (IL)

CEO Everledger (UK)

Erik Voorhees

Daria Rippingale

Michael Reitblat

Eugene Danilkis

Jeff Lynn

Ali Niknam

CEO ShapeShift (CH)

CEO Bankingblocks (NL)

CEO Forter (US)

CEO Mambu (DE)

Executive Chairman Seedrs (UK)

CEO Bunq (NL)

Ismail Ahmed

Chris Lynch

Chao Zhu

Arik Shtilman

Nick Bortot

J. Kaenprakhamroy

Executive Chairman WorldRemit (UK)

Chairman DataRobot (US)

CEO Asset Pro Technology (HK)

CEO Rapyd (IL)

CEO BUX (NL)

CEO Tapoly (UK)

www.fintech.finance

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EVENTS: PARIS FINTECH FORUM

TFM: Gender diversity is a major concern in companies in general, but even more in finance and fintech. How are you contributing to making things change?

LN: This is more than a concern; it is a serious issue. By dedicating our stages only to CEOs, managing directors and founders of companies from the financial services and fintech sectors, we arrived in January 2018 at the (very) questionable but (very) industry representative result of having less than 10 per cent of women on stage. This was for us like an electric shock and we spent most of the 2019 edition programme preparation, with the help of associations and key players in the industry involved in this matter, looking for women leaders of the sector all over the world to participate in the event.

It was a hard task not least because there are so few in positions of authority, but also because they tended to more often refuse the invitation to be on stage than men.

In the end, for last January’s edition, almost 23 per cent of the speakers on stage were women. That meant we were in a position to promote key female voices on the main stage. That was in large part thanks to the help we received from influential associations, willing to work in cooperation with the ecosystem to find solutions and reduce this gap.

Society needs role models. Our kids must understand that being a fin and tech leader nowadays isn’t equal to being a

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‘white male over 50’. But, unfortunately, the situation won’t change in one day.

I don’t believe in quotas nor in aggressive actions, but I truly believe in positive cooperation between the different actors and, more than anything else, on the next generation’s common sense, which is taking the lead within companies in not leaving 50 per cent of the global population out of economic and political decision-making. So, we’ll continue in the upcoming editions to play our part in this transformation.

This year, we also organised the first edition of the Women in Finance Lunch where we gathered together 120 high-profile participants. Among them were the Deputy Prime Minister of Belgium, Alexander de Croo, CEO Europe of Visa Charlotte Hogg, director of retail banking France at BNP Paribas Marguerite Bérard-Andrieu, and the French Banking Federation’s managing director Marie-Anne Barbat-Layani, to debate and share opinions about the causes of this situation and what needs to be put in place to make it change. We’ll organise this lunch again in 2020.

TFM: This year, you also launched Paris Finance Week. Can you tell us more about that?

LN: More than 3,000 people, 50 per cent of them coming from foreign countries, gather every year for two days at Paris Fintech Forum. With this new initiative,

we wished to encourage the emergence of many events during the last week of January in order to offer our attendees the opportunity to discover more about the diversity of the European fin and tech ecosystem. The initial success of this first edition, with just under 20 events organised, encourages us to grow this initiative in 2020. If you want to organise an event, contact us!

TFM: To conclude, can you give us an insight into what we can expect from the next edition of Parish Fintech Forum?

LN: We are a content-driven event, so it is a bit hard to imagine what will be the relevant content to highlight nine months before D Day! Nevertheless, you can count on us to continue to put on stage the key leaders of the financialand technology ecosystem from all over the world to share with you their thoughts and visions on the transformation of our industry. If you think that you fit with the definition, the call for speakers is open – just go on our website.

In terms of format and organisation, we will do exactly the same thing we did this year – but even better.

■ The fifth edition of Paris Fintech Forum will take place on January 28 & 29 2020, at the Palais Brongniart. While you’re waiting, don’t forget to follow the event’s news at www.parisfintechforum. com and on twitter @ParisFinForum. www.fintech.finance

2019 FINTECH SELECTION 50+

56% in lending, payment, next-generation banking and platform/API

countries

900+

4%

Personal &/or Business Personal &/or Business Finance Management

150

factoring / financing

Finance Management

fintechs selected

32

countries

7

% 7% Blockchain / Bitcoin Blockchain / / Bitcoin / alternative Currencies alternative Currencies

Wealth Management & Investments

Payment / Payment / Transfers Transfers / Fx / Fx

& Investments

9%

9%

€ raised

12%

Regtech

Regtech

10%

5.5

10%

Insurtech

11%

Bootstraped

11%

Bootstraped

4%

€1M to €5M

<1

<1

27% 2 to 3

10%

€1M to €5M

10%

€5M to €10M

€5M to €10M

19%

€10M to €30M

27%

Platform & API

19%

€10M to €30M

4%

€30M to €50M

4%

€50M to €100M

8%

€50M to €100M

22%

> €100M

22%

> €100M

35%

3 to 5

29%

8%

€30M to €50M

29%

2 to 3

3 to 5

Banking / Next Generation Bank

Platform & API

22%

< €1M

22%

< €1M

2%

2%

4%

12%

Banking / Next Generation Bank

10%

Insurtech

10%

years old on average

63% have raised more than €5M

14% 14%

9% 9%Wealth Management

5B+

www.fintech.finance

20%

Data leverage for Alt. Finance: 4% 20% Finance industry / Data leverage for Lending / credits Finance: 5% Finance industry factoring / Alt. Lending / credits / financing

5%

fintech applications

7%

5 to 10

> 10

Issue 12 | TheFintechMagazine

35%

5 to 10

7%

> 10

75

DATA

Mastering the art of digital BNY Mellon’s Senior Executive Vice President and Head of Digital, Roman Regelman, has assembled a crack team to propel the bank’s digital transformation to the next level In a business climate driven by strong digital forces, disruption and rapid innovation, every company is now a technology company – or, at least, it’s striving to become one.

Customers are demanding new methods of engagement that are contextual and tailored for individual usability. And the opportunities are there for today’s leaders to shape tomorrow for every corner of their organisation – imagining a future and then harnessing innovation to create a digital transformation.

Worldwide banking and financial services giant, BNY Mellon, is looking at new ways to provide services to its clients and drive dramatically improved quality and efficiency.. But how can a 240-year-old legacy institution working in 35 countries with 55,000 employees and tens of trillions of dollars under its custody or management, hope to create a digital phoenix?

Global digital transformation expert Roman Regelman was appointed to the position of senior executive vice president and head of digital at BNY Mellon last year. He says the answer to that question lies in a rigorous re-aligning of perspectives – putting the customer experience, not the product, first.

Reporting directly to the CEO and chairman of the board, Regelman’s brief is to lay the path for a digital future and invest in client and internal digital capabilities, including data management, analytics, artificial intelligence (AI), machine learning and robotics. He will be helped by a new global team, which he has been tasked with building by attracting top digital talent.

In April 2019, the bank announced a

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slew of senior appointments. Michael Demissie from rival State Street was hired to lead the custodian bank’s activities in areas such as AI, machine learning and blockchain. He is now head of advanced digital solutions.

Alina Peradze was appointed digital business development leader and Janelle Prevost as client journey reimagination leader, a title that leaves no doubt as to nature of the task ahead.

Peradze will lead the build-out and launch of new digital businesses, while Prevost is spearheading BNY Mellon’s efforts to rethink how it delivers differentiated capabilities for its clients to maximise end-to-end value.

With his growing bench of digital talent, Regelman is already transforming ‘business as usual’ and building on legacy systems.

“Technology by itself doesn’t create the insights,” he explains. “Thinking of our clients’ business – and embedding the data into their operations and the way they do business, that’s what really creates the differentiated advantage.”

It’s a lesson that a colleague at BNY Mellon, Massimo Young, head of data solutions in investment management, learned early on. He admits that when he started working for the firm, he had a philosophy of ‘machine learning is cool and I want to go apply it’.

He made that pitch to a senior executive – who threw it right back at him asking ‘why should we do that?’.

So, his group went through a demanding data integration project to provide portfolio analytics, pulling information together from different source systems, understanding it, cleaning it, documenting it and making sure the business and information technology

experts saw eye-to-eye on everything.

In the end, the new portfolio analytics were helpful — they just didn't require machine learning at all.

Regelman has spent 20 years in the industry, as a consultant working across the globe for fintech startups and larger companies. At BNY Mellon he is relishing the opportunity to ‘change the bank and change the industry’, always with customers at the forefront – although it would be wrong to think that, until his arrival, the bank had made no progress towards that horizon. In fact, by 2017 it already had more than 220 bots running across its estate, giving the bank a reputation for early adoption of AI with the ultimate aim of improving customer service.

Two of the firm’s most recent digital improvements, from a client-facing perspective, have been in the corporate and investment divisions. Both are practical applications to solve real-world problems. The first is an escrow account opening service for lawyers and other agents; the second is a tracker tool for investors, developed in response to changing sentiments – and, in some territories, regulation – on environment, social and governance (ESG) reporting.

Escrow Advantage streamlines the whole process by offering the ability to initiate an escrow relationship ‘in minutes’. It also creates a more secure mechanism for the collection of highly confidential information. Clients and law firms can start the account opening process from a smart phone, tablet or desktop by utilising a secure know-your-customer (KYC) process designed to capture all required information in one step and avoid unnecessary correspondence. www.fintech.finance

Furthermore, it allows registered users to delegate some or all of the tasks to other registered users, such as internal peers or other parties involved in the transaction.

BNY Mellon has also recently debuted a range of reporting tools to track investments, based on ESG issues and United Nations Global Compact (UNGC) principles.

The launch comes as regulators propose new ESG-related requirements, including clauses within the EU’s Directive on Pensions (IORP), which came into effect in January, requiring pension funds to disclose the relevance and materiality of ESG factors and how they are being taken into account for risk management processes.

BNY Mellon’s clients will now be able to view their total ESG and UNGC scores on equities at the account level, versus relevant benchmarks over time.

Whether you consider digital to be the proliferation of devices connecting us with services of all kinds in real time, or the constructive use of data and analytics to deliver an ever-improving end-client experience, no business or industry is immune from the competitive pressure to transform its means of delivering value to customers. Regelman admits there is still a lot of work to do at BNY Mellon, but he is building on what has already been done there.

“We have done a lot over the years.

Even before I started there were digital programmes in place. We have innovation centres around the world, we’re building products and services. A big mission of mine is to coalesce all this together and have a strategy and a vision,” he says.

His vision is to digitise BNY Mellon across three horizons – core digitisation; client interaction and new products and services. Transformation isn’t easy, but what’s most important when designing an experience is focussing beyond the task at hand and considering how it adds value to the advisor-client relationship, he says.

“It is done in stages so that the customer is getting a better experience. We’re getting knowledge, through data, about how this new experience is working, how the new processes are performing, and we leverage that knowledge and data to create even better services and products.

“Any customer is an individual who wants to have a great experience and the bank, the institution, needs to deliver on www.fintech.finance

that experience in the most efficient, effective way. We’re not creating a parallel institution. People have done that; they create something that is a shiny toy, but it fundamentally doesn’t change the value proposition for the existing customers.

“What we’re doing is embedding the techniques from challenger banks, we’re also embedding the techniques from fintechs, startups and our big technology partners. You get the best of all worlds.

You get trust, you get reputation, you get security, you get infrastructure – that we have – but you also get the fantastic digital-first native experience.

“We have to digitise what we have, but we are also creating the digital-first client

We’re not creating a parallel institution. People have done that; they create something that is a shiny toy, but it fundamentally doesn’t change the value proposition for the existing customers

experience and a digital-first delivery system for that.

We’re working from both ends. By working these three horizons simultaneously, we allow ourselves the opportunity to scale, while servicing the clients at the same time.”

How will digital technologies transform the longer-term strategies of global financial institutions and payment

service providers? There’s no single answer. But in surveying the landscape of digital native companies, one observes (a) an innovative approach to understanding client needs and preferences through data and business intelligence, (b) service designed around simplicity a nd self-service principles and (c) accelerated product innovation through client-centricity and a culture of experimentation and adjustment.

Those in the industry that adopt these lessons, while not abandoning the business practices that underpin client trust, will likely be winners.

For the time being, Regelman is focussing on the year ahead at BNY Mellon and continuing to help the company master the art of digital. So, what are his priorities for the next few months?

“Wonderful client engagement on the digital priorities, changing the way we work with our clients, cross-functional teaming, creating the digital results and really embedding the client experience, the client view, in everything that we do.”

Creative impulse: Changing the value proposition for customers

Issue 12 | TheFintechMagazine

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DATA

VIEW FROM THE TOP Having kept a watching brief on potential applications for artificial intelligence, machine learning and blockchain in financial services, SmartStream announced towards the end of 2018 that it was to open two new innovation labs. Here, SmartStream CEO Haytham Kaddoura talks technology, strategy and company culture THE FINTECH MAGAZINE: There’s been a lot of expectation around what artificial intelligence (AI) and blockchain can deliver for financial services. In your opinion, in which operational areas could they prove most useful and how is SmartStream looking to leverage them?

HAYTHAM KADDOURA: With both of these technologies, the net for potential use cases was cast pretty wide. But I think financial institutions and fintech players alike are increasingly trying to get greater focus on what their priorities should be now.

You’ll find divergent paths attached to specific institutions. Tier 1s in Europe, for example, are more focussed on using the technologies to achieve cost efficiencies and handle Brexit (which is still a big uncertainty).

In Asia and the US, banks’ priorities might be different. We’ve picked up 13 use cases for AI and are involved in proofs of concept (PoC) with four Tier 1 financial institutions.

Blockchain is a lengthier process than AI because you need to align your partners, bring them all onboard and make sure that the value is effectively realised in collaboration.

We have a longstanding history with multiple financial institutions that have relied on our solutions for years. Some of these solutions are running on an on-premise basis and a lot of the interaction between the financial institutions happens offline, via phone

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calls or other communication channels.

What we are doing is building bridges, so that the authentication validation or whatever is needed, gets done instantaneously by simply linking what’s already on-premise in a blockchain environment. That results in better operating efficiency.

We have the audience, we have the technology and we have the reputation so, for us, it’s a minor jump to bring those institutions currently running on-premise solutions into a cooperative, distributed ledger structure – to have the banks cooperate fully, as opposed to running some components of the operation on our systems and having to track, through emails or phone calls, with their counterparties. When everybody is on the same blockchain, then it’s much easier to validate, verify and cross-check.

We’re working on a couple of PoCs in the blockchain environment and, by Q3 this year, we’ll be making some major announcements in that space.

TFM: There are a number of (potentially competing) industry-led blockchain initiatives emerging.

Does that concern you?

HK: I think a high level of accuracy is what’s needed by a lot of financial institutions – and blockchain addresses the risk measures at a high level. It touches multiple areas, and that’s why I think it’s taking time, across the industry, for blockchain to be adopted, because different pieces within each financial institution need to be tuned in to derive the best value. Having said that, if you look at the clearing

systems – SWIFT versus Euroclear, versus different sorts of institutions that are carrying out similar functions in the US – I hope blockchain doesn’t go down that route, because that will not derive the maximum value I spoke of. You’ll have financial institutions in certain parts of the US focussing on one blockchain and similar entities in Europe coalescing around others.

I suspect there’ll be different blockchain environments addressing different markets, each with their own key supporters.

Deciding who to be aligned with is going to be the big challenge for Tier 1 institutions.

TFM: Banks have always had access to vast and detailed amounts of data; up until fairly recently, they just weren’t doing very much with it. How will applying AI to that data in the ways you are exploring transform the world of finance as we know it?

HK: You’re right. Banks have collected data ever since they existed but it’s only in the last decade that they have started realising the value in it. Having the right data in the right format, updated consistently across their client base and across their operations is now the big challenge. There have been some major reports recently that have looked at the banking infrastructure’s ability to clean and enrich this data, so that it’s useful from an AI utilisation perspective.

This is one of the major hurdles we have today, but I trust that the banks, within a short time, will be able to address that, so that they are able to predict the direction their clients’ requirements are going to take.

AI is going to make financial services much smarter and more efficient. It has the ability to pick up data trends faster than any human can and that makes the banks much more responsive in addressing their own regulatory

www.fintech.finance

requirements, their feedback to clients and all their stakeholders.

There are so many different uses of AI, it’s impossible for anybody to actually frame it and say ‘this is where it’s going to be most useful’. While there is a lot of hype out there, few companies actually have anything proven, though. SmartStream is in a fortunate position because more than 2,000 financial institutions already rely on our solution – and that’s a great source of knowledge and support when it comes to rolling out our technology initiatives.

TFM: Can you give us an example of how you might use this technology?

HK: One of the components is allowing banks to predict their cash and liquidity requirements by tracking historical data and analysing variations – across time frames, holiday period, etc – and allowing banks to better understand what their cash position is going be two hours down the line, at the end of the day, at the end of the month. That will make the treasury function much more efficient.

TFM: The opening of the Vienna lab was a step change for SmartStream and, given how the company is embedded within the banking landscape, could have a major impact on financial infrastructure.

What’s your vision for the company?

HK: The changes in the sector, in technology and regulation, are creating a perfect storm. There are so many moving parts that it’s pushing us, as a fintech, in a direction that is super-dynamic: to look at new ways to serve the industry around digital payments and reconciliation, and using Cloud environments to do that.

We are very well tied in with the financial institutions that we’ve been serving for almost 20 years now, and so there’s a strong level of trust that’s moving us increasingly into a greater strategic role. I think it’s down to the changing nature of the environment that banks are increasingly wanting to work strategically with a fintech such as SmartStream. Banking IT departments, with all due respect, are not necessarily sufficiently funded, or geared up, to address requirements from a wider industry perspective. It’s much more efficient for a fintech player, that is well

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embedded with financial institutions on a global basis, to do so. SmartStream is happy to be playing that role.

TFM: One of your flagship products is the Reference Data Utility (RDU) unit.

What’s on the horizon for that this year?

HK: The RDU has been growing quite significantly. I’ve seen a ramp up in demand over the last two years, driven by regulatory changes, especially in Europe around the second Markets in Financial Instruments Directive (MiFID II) reporting requirements for financial institutions, and around the systematic internaliser (SI) registry function. We’ve been offering the latter in collaboration with a group of approved publication arrangements (APAs), including Bloomberg, Deutsche Börse, NEX Regulatory Reporting, TRADEcho, Tradeweb and Trax, since April 2018. That service enables SIs to register the financial instruments for which they are providing SI services in a centralised database through their APA, so that they can determine which counterparty must report the trade.

The RDU started out focussed on derivatives. However, in 2019, we’ve launched reference data on equities and towards the end of 2019, into early 2020, we’re providing reference data on fixed income securities, too.

We are currently catering for more than 160 capital markets and it took time to get there, because you need to, effectively, negotiate with every market separately to acquire its data. Now that we’ve achieved that, though, there’s been a tremendous uptick in growth which, I believe, is only going to continue.

TFM: Digital payments is a relatively new area for SmartStream.

What’s your USP in that space?

HK: Digital payments is being driven out of our Austria venture, with support from our Bristol team in the UK. Using the Austria team’s product knowledge is critical because they’ve been

involved in the evolution of digital payments for at least seven or eight years, historically focussed on emerging markets – places like Africa, the Middle East and Asia. This is where digital payments are growing and mature markets are followers in this space. But now we’re leveraging that knowledge across the globe.

TFM: Another key area of operation is fees and expense management where you’ve done some major work with Credit Suisse. How is that performing for you?

HK: It took a while for financial institutions to realise its value, but now SmartStream is a significant component of the fees and expense management operation within at least five Tier 1s. This is where we’re talking strategic value added, where financial institutions, including some Tier 2s also, are pushing quite a bit of their strategic data and operations to our teams.

Growth in Europe and the US has been significant, I think simply because banks are working to get greater transparency on their exposure to other financial institutions.

We are in a very sweet spot when it comes to helping banks become more accurate, more relevant and more efficient in their handling of fees and expenses, and we’ve saved them millions of dollars in less than a year. I think the business case is there for the taking.

Scaling new heights: SmartSteam is in a strong position

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DATA

The tiny city state of Singapore has a big reputation when it comes to fintech acceleration. As Chief Data and Transformation Officer for DBS – one of the largest and best known of the South East Asian banks based there – we asked Paul Cobban how it keeps up THE FINTECH MAGAZINE: DBS has been busy re-engineering its services to be predictive and pre-emptive of customer needs, based on better collection and interrogation of data.

What have been some of the core milestones in that journey?

PAUL COBBAN: The real turning point for our realisation of the power of data was probably around eight years ago when we entered into a joint venture with A*STAR, the Singapore government’s research and development arm. Banks have been using data for marketing and credit forever, but A*STAR showed us how predictive analytics could be used to, for example, tell us when one of our branches was going to have an operational error, or even which one of our relationship managers was about to resign!

So we woke up to the realisation that the data we already possessed, had immense power that we hadn’t unlocked. But it was actually quite hard to get

access to our own data, because of the banks’ policies. Gradually, we’ve increased the velocity and number of data analytics projects and we’re seeing more and more value emerge as a consequence. Now, we’re supplementing that data with instrumentation, some experiments and, increasingly, data from external sources.

every swipe you make on our apps, every button pressed, every pause, every time you abandon a journey, we capture that in real time and put it in the Cloud. That enables us to identify where our customers are struggling, so that we that can intervene and help. Importantly, we can also see where groups of customers are struggling, so that gives us an indication of where we need to redesign aspects of our service.

Even more important than that, we can start to use data analytics to predict customer behaviour and so prevent problems in the first place. That’s the direction data allows us to take our customer experience in.

TFM: What does that mean for customers on the ground?

PC: We’re embracing the concept of customer science, which is using data to provide world-beating customer experience. So,

Big but agile: DBS is keeping up with Singapore’s frantic fintech pace

!

T A E NO SW www.fintech.finance

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DATA TFM: You mentioned you store some data in the Cloud. How much of the bank’s operation is now Cloud-based?

PC: We use the public Cloud for certain applications, but we want to be quite cautious in our migration to that. So, our primary investment has been on our on-premise but Cloud-ready solution stack, which gives us scalability and security, but also starts to give us access to some of the data science tools we need.

Companies like Amazon with AWS (Amazon Web Services), are releasing product features all the time and we can’t possibly keep up with them, so the priority for us is to move our data, as opposed to our applications, to the public Cloud, in order to access this emerging technology.

But we’re going to go very cautiously

is really reaping dividends now. We took an approach to transformation that is T-shaped. The broad part of the T is about encouraging everybody in the company to participate, to have a go – we’re not going to hold anyone accountable, it’s all about the participation. The deep part of the T is where we provide management focus, resources and investment to try to maximise the benefit in those areas.

We’ve repeated that model, through operational excellence, customer experience, innovation, data… and it works for us. It has enabled us to sustain the rate of change we have seen at DBS. TFM: Do you think it’s been easier and quicker to realise that innovation here in Singapore than it might be if you were

way we bring people onboard – using hackathons to attract the very best engineers here in Singapore and also in Hyderabad in India. We’ve been completely blown away by the quality of people that come through that process and who have ended up working with us.

TFM: Singapore is continually in the financial technology news. It’s ranked among the top five fintech hubs in the world and, for two years running, it has hosted Money20/20, attracting an international audience that is predominantly interested in what is happening here around payments.

Are you surprised by all of this?

PC: Well, I think payments is an area that is at the very heart of banking and DBS’s

Singapore: A ‘tiny red dot’ on the map that attracts a lot of attention

because customer data is obviously very sensitive and we need to make sure that we’ve all the controls in place before we make any major shift.

Over time it may well be the case that it improves security, but it’s still a fairly immature area and every company that moves to the Cloud does it in a slightly different way. So, we have to be very clear about what our threshold is. We’re still on that journey.

TFM: DBS is a large institution compared to some of those beginning to compete in your space. How do make sure you are as agile as them?

PC: Ten years ago, when our CEO Piyush Gupta joined, we made a decision that was counter intuitive, or counter to what everybody else was doing at the time, but

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We’ve 300 APIs now exposed, which we think is the largest banking portal in the world based elsewhere in South East Asia?

PC: We’re fortunate to have such an amazing infrastructure in Singapore. We have a progressive regulator and Singapore attracts the world’s best talent because it’s such an amazing place to live. But we are a regional player, too – we’re not just in Singapore and we have great sources of talent across the region. As DBS’s brand has grown stronger, we’re finding, more and more people want to come to work with us.

We have also been very innovative in the

strategy has been about recognising that and building ecosystems off the back of it.

It’s a very crowded space and it’s very competitive, even here in Singapore, where DBS has a strong presence. You could see that as both a threat and an opportunity.

So, we’re putting a lot of focus on building out an ecosystem.

At the heart of it is our API (application programming interface) portal, where we’ve 300 APIs now exposed, which we think is the largest banking portal in the world with well over 100 API partners using it. So, in payments, it’s going to be tough but we’re not complacent.

As to Singapore’s reputation, when you think about, it’s a tiny little country and this little red dot is attracting all this attention and infrastructure, and innovative thinking… it’s quite phenomenal. www.fintech.finance

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INSURTECH

mhealth lightening the load for insurers The vital signs for health insurers are not good. Global financial services leader (and, incidentally, a GB Powerlifting competitor) Daryl Wilkinson, believes connected communities are key to improving outcomes

Globally, insurers are noticing the allure of mhealth – mobile health – to change the conversation from risk and loss to a more engaging one about health for the customer.

Particularly in Asia, insurance mhealth propositions such as AIA’s Vitality and Manulife’s MOVE are centred on physical activity tracking. In these programmes, insurers provide discounts on renewal premiums and improve coverage if customers achieve activity-based goals, such as the number of steps taken. The opportunity is greater when mhealth is addressed more holistically by including features that are important to varied customer segments, such as emotional wellbeing, medication management and emergency response management.

These propositions come as the use of mobile tracking devices for general medical surveillance is reported to be on the rise, as is the level of investment in accurate measuring devices.

In 2015, Google launched a wristband with the lofty claim that it could monitor vital signs to such a degree of accuracy that it would be suitable for use in clinical trials. Since then, several such devices have hit the shelves for general consumption. Ava, a fertility tracking bracelet for women is a good example.

Ava’s sensors collect data on nine different physiological parameters and, using its algorithm, then detects the time when they are most likely to conceive.

Online health support services, such as Babylon, are giving patients instant access to doctors by email or video link, removing the need to visit a local GP in person. Patients simply log in to a virtual waiting room online and wait until the doctor is ready to see them.

The ever-increasing pressures on GPs to provide services to more people, more effectively, means that video consultations are likely to penetrate the public health service. And with technology enabling remote access to doctors, the natural next step is the remote download of

your vital signs for analysis by the doctor on screen for a more thorough online consultation. Meanwhile, artificial intelligence (AI) health apps such as Ada, which remove the need for initial consultations with doctors, are also seeing significant traction. Ada first understands the patient by asking questions on personal attributes, medical history and current symptoms. It then applies its AI engine to the information to suggest the right medical care.

Data, data, everywhere Accurate monitoring devices can take some of the guesswork out of health issues. In appointments of the future, instead of the doctor asking how you have been, you might share your data set and a system could generate a report on the fly that provides an instant and comprehensive review of your current health. Taken further, if this data was to be periodically fed into monitoring systems, your doctor could flag up issues before you have even noticed anything is wrong.

This preventative care could not only save insurance companies significant sums of money, it could also help us to live much healthier lives with less disruption from sickness, and relieve

Doing the heavy lifting: Better data collection could relieve the burden on health services

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pressure on remedial health services that area already struggling.

With the advantages of mhealth devices and apps becoming increasingly apparent, businesses are now looking to reap some of these benefits. Fitbit has previously revealed that the fastest growing area of its business is supplying companies with devices to monitor their employees’ health. It sounds creepy to some, but it is optional for employees and it provides employers with opportunities to monitor and support their wellbeing.

Using the data gained as a cost-saving tool for insurance policies, employers are turning to mhealth devices as a perk that benefits both them and their employees.

Providing services such as Babylon as an employee benefit means that employees can deal with medical issues more flexibly and at times convenient to them.

While this is great for reducing stress on employees, it also minimises lost working hours for employers. We can intuitively accept healthier and happy employees are more productive ones, too.

These trends present a fresh opportunity for life and health insurers to engage and distribute their products differently – online, via community-based models.

A healthy community If research from PwC is to be believed, 44 per cent of insurance directors think that most insurance providers will not survive, at least not in their current form.

I understand this pessimism: ■ Industry return on equity has been flat and persistently low interest rates continue to depress returns ■ Agent commissions and distribution costs, circa 60 per cent of a typical insurer’s overall operating costs, have ratcheted up at an average rate of five per cent since 2010 ■ The regulatory eye is turning to fixed fees, with many life insurers expecting a mandated change in pricing models ■ Strategy is to move to direct and digital distribution channels The growing popularity of mhealth offers a chance for insurers to re-evaluate their direct-to-consumer distribution strategy and cost model. Furthermore, positive engagement opportunities arise with an improved understanding of www.fintech.finance

If research from PwC is to be believed, 44 per cent of insurance directors think that most insurance providers will not survive, at least not in their current form customer needs. At the heart of this thinking are communities, specifically, digital health and fitness communities.

Several Insurers have started this journey, with John Hancock’s Vitality programme being one of the more mature schemes currently on offer.

Unfortunately, many people may feel Vitality is now less about health and more about the free coffee. Could Yulife be the 2.0 reboot? In either case, both of them fall short in my opinion and the industry as a whole is still grappling with issues.

I see four challenges to overcome and an adaptive wellness proposition is the missing link:

1

Mixed customer reception for insurers’ well-known digital wellness programmes – customer delight is still elusive Customers perceive that insurer solutions fall short when compared to a plethora of digital wellness apps and devices offered by startups Most programmes focus only on lifestyle risk management and fail to focus on other areas of customer interest, such as disease risk management Current digital wellness programmes are not defined with multiple customer personas in mind and address the millennials as one age group

2 3

4

Connecting customer value My nearly 30 years in the health and fitness industry as a passionate contributor has taught me time and again that ‘cookie-cutter’ programmes for wellbeing do not work. Adherence eventually dissipates, no matter how many free (skinny) lattés you offer as rewards and incentives. Personalisation is required and this must adapt with the recipient’s needs over time.

A support network can also help with adherence and, given we are now living in the age of the Internet of Things, this couldn’t be easier to deliver.

Dr Amy Redmond, who recently supported a healthcare technology review commissioned by the UK Secretary of State for Health, is involved in research and providing evidence about the ways in which technology may help to enhance the health of individuals. She says: “There is a clear need to address issues of inactivity and resultant poor health.

Technology-enabled interventions that offer greater incentive, encouragement and personalised wellness solutions may allow individuals to better manage and improve their overall health and fitness.

“Stress, poor diet, inactivity and poor mental health increase the risk of cardiovascular disease. As such, there is likely to be overlap between cardiovascular and emotional health, dietary, vital signs monitoring and mindfulness interventions.”

Today’s connected devices generate more data about our lifestyle and health than anyone could have predicted 10 years ago. But what’s in it for insurers?

Connecting with customers via purposeful communities enables insurers to build more regular and meaningful engagement. In turn, these connected communities help insurers to harness data from devices that monitor vital signs, activity, nutrient consumption and sleep patterns for more precise underwriting and pricing while offering value-added fitness and lifestyle feedback.

To see how technology is enabling these support services to evolve is fascinating. Making decisions informed by it helps us and our families lead better lives. The information is at our fingertips.

The question is, will insurers put their weight behind incentivising us and our employers to use it?

Daryl Wilkinson is recognised in the European Digital Financial Services ‘Power 50’ as one of the most innovative people in digital financial services in Europe. Outside the office, he helps working mums and dads to eat better, move more and live well. He competes in raw powerlifting with the GB Powerlifting Federation.

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CLOUD & SECURITY

Finding Nirvana Phil Hong, Head of EMEA Channel Services for Treasury and Trade Solutions at Citi ponders the benefits and challenges raised by migration to a Cloud environment Citi’s technology chiefs have been outspoken in describing the digital watershed represented by the ‘ABCs’ of artificial intelligence, blockchain and Cloud computing as an ‘extinction event’ if they are not embraced by established institutions.

Citi has been sizing up the possibilities for Cloud-based banking for some time; in 2016 its transaction banking division looked at the corporate to bank integration space and asked in a discussion paper 'is Cloud technology the answer?', concluding that it would likely strip out complexity and reduce costs.

But there are no simple answers.

The trade-off for reducing the cost of infrastructure

could be increased operational and governance budgets.

Here, Phil Hong, head of EMEA channel services for treasury and trade solutions at Citi, explains how a ‘lift and shift’ or ‘lift-tinker-and-shift’ approach – essentially moving old, onsite applications to a new, Cloud-based environment – is likely to result in

less-than-optimal economies and improvements in service. He favours taking time to re-engineer applications to Cloud-native ‘micro services’ that can help Citi achieve ‘IT nirvana’.

The Fintech Magazine: Why aren’t all Clouds created equal?

PHIL HONG: It depends on what you want to use Cloud technology for. As consumers, a lot of us have our social media, personal photographs, etc., in the public Cloud.

In professional environments, Cloud can be used to develop a more cost-effective way of managing capacity and bandwidth. So, as our

Up, up and away: The Cloud is where financial services are heading

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data requirements grow and our customers’ payments business grows, the amount of processing and the amount of information that we need to store grows exponentially, too. The Cloud is a way for us to accommodate that, but we wouldn’t want that very sensitive data in a public space.

A private Cloud is not only better from a security perspective, but possibly from a regulatory perspective, too.

That leads to another question: ‘where exactly is the Cloud?’. Because while, physically, the Cloud is made up of servers and machines that have to be located in a physical space, largely that is shared and distributed in a very virtual way. One of the things we’ve seen with a number of data protection laws being passed in countries around the world, is that several regulators talk about data having to be localised or ringfenced within their national boundaries. So, one of the challenges is how do we apply some of this data protection and regulation to personal data in a Cloud-based environment?

TFM: So, what were the overarching goals and benefits to moving to a Cloud-based platform for a large global institution like Citi?

PH: Cost has to be a factor. Adding additional hardware is not just an expensive thing to do, but there is a lot of lead time spent in procuring hardware, commissioning it, installing it and testing it. If our applications are deployed in a Cloud-based infrastructure, adding additional bandwidth, in terms of data capacity and processing bandwidth, is simpler to achieve.

Cloud-based technology also really encourages large organisations such as ourselves, which may have grown very large legacy applications over the years, to rearchitect those applications into a micro service approach. Those micro services enable us to be much more agile in the way we grow and enhance certain functions, and combine them in order to create the right services for our customers.

I’ll give you a specific example. Our online banking application, CitiDirect BE, has payment capabilities across 135 currencies, 27 languages and, over the years, we’ve built that up into quite a large application, with more and more functionality that our customers have been demanding. Moving that into the Cloud has meant, for us, quite a large challenge in www.fintech.finance

rearchitecting that application into micro services that, ultimately, will enable us to utilise Cloud technology to its fullest.

We can build up the capacity of those services in a much more agile way.

TFM: How is Citi using Cloud-based technology to improve its interactions with regulators?

PH: In Europe, we’ve had a couple of really big pieces of regulation impacting the payments industry. The revised Payment Services Directive (PSD2) opened the doors to Open Banking, allowing customers to access their accounts from other platforms, other applications, other software. In order for us to meet the requirements of PSD2, but also to embrace some of the opportunities of PSD2 and Open Banking, we need to start moving our applications, and our capabilities, into a Cloud-based environment, and to have those exposed to the world through application programming interfaces (APIs).

Cloud-based technology encourages organisations such as ourselves, which may have grown very large legacy applications over the years, to rearchitect those into a micro service approach The other regulation that has impacted us recently is the General Data Protection Regulation (GDPR) and that provides a different challenge, particularly because, when we think about data protection as a requirement, one of the things we have to think about is the geographic location of our data.

With Cloud-based technologies, the data will be residing on servers in some physical location, but also virtually, because it’s being accessed from all around the world. So, what does it mean for data to be in the Cloud, when it comes to national regulations that are concerned about the data being ringfenced within their geographic borders?

TFM: Where does Citi see the biggest opportunities to serve customers better using Cloud-based technology?

PH: The Cloud is starting to really help us open up our transactional capabilities through APIs, not just for our customers to make use of themselves but, increasingly, as they move their software and vendor requirements into Cloud-based apps.

For example, the traditional enterprise resource planning vendors, like SAP and Oracle, are creating their applications in the Cloud, as well as some of the treasury management systems that have grown up in the fintech space with companies like Kyriba, BELLIN and FIS. These systems that our customers are using are increasingly able to access our banking as a service capabilities through APIs. Not only that, but I think it’s been very interesting what SWIFT has done with SWIFT gpi. It’s something that the banks have come together with SWIFT to create in order to provide better servicing and better visibility of cross-border payments around the world for customers.

The gpi has been a classic example of how to build something in the Cloud, with all the banks having to collaborate in order to update the status of payments as they flow through the banking network.

Cloud-based technologies and APIs have been the way that gpi has ended up being implemented and I think it’s working extremely well.

Our customers have really welcomed the fact that gpi is giving them real-time visibility of where their payments are. We’ve embraced the capability by adding it to our online banking interface, CitiDirect BE, with something we call Payment Insights, which enables people to track where the payment is, very much like a parcel tracking reference. Because it’s been so valuable to our customers and they’ve given us such positive feedback, we’re trying to extend that now to all payment methods.

TFM: So how does Citi stay at the forefront of all these Cloud-based developments in financial services?

PH: Through innovation. Through listening to how our customers want to make use of our services. I think this move towards being much more open, much more agile in our delivery of banking services, is where Cloud-based technologies and APIs are going to really help.

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A secure stairway to heaven

Forced by the seemingly endless growth of data worldwide, the financial services industry is gradually joining the virtual mass exodus from terra firma to Cloud-based hosting.

The problem comes, according to Peter Martini, president of US-based Cloud security specialist iboss, when the checks and balances that firms attach to their earthly storage don’t climb the same stairway to heaven.

According to Gartner, just 29 per cent run their security from the Cloud.

“This effectively negates many of the benefits,” Martini wrote in a recent blog.

“For instance, an employee wishing to use a Cloud-based applications securely must be routed via the appliance and is restricted by where that device is physically located. This introduces latency with potential virtual journeys, over expensive bandwidth, of thousands of miles for each server request.

As the amount of company data increases, it requires continuous hardware upgrades just to keep up.”

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As the financial services industry migrates from the physical to the ethereal, Peter Martini, President of iboss, explains why it’s important not to leave your security back down on earth iboss’ answer is to offer IP address retention but with a customer-by-customer data separation, a global Cloud footprint and geo isolation of employee data,all combining to provide increased flexibility, better compliance with new data and local regulations and reduced cost, according to Martini.

The ‘bandwidth problem’ The irresistible shift to Cloud storage in financial services – despite some residual security concerns around public Cloud hosting – is being driven by the sheer weight of data in existence, and the speed of response and scalability demanded by

today’s market. On-premise appliances simply can’t take that pace, resulting in the so-called ‘bandwidth’ problem.

All of this is coupled with the increasing trend of employees – including C-suite executives – using mobile devices in out- of-office environments. This necessitates alternative means of entry to files while restricting access to sensitive data, all the time protecting individuals from unwittingly contravening data protection in whichever host country they happen to be operating from.

In April, iboss announced the native integration of its iboss Cloud and Microsoft Virtual WAN. This allows branch offices and other remote locations to securely access the Cloud from where they are, independent of centralised data centres, increasing internet speeds and productivity, and reducing cost by removing the need for private internet connections to transfer data backwards and forwards.

“The old bricks and mortar four walls, putting appliances inside your www.fintech.finance

“Some of the first Clouds, what we call Cloud 1.0, had a monolithic design, so all the data had to flow through a central Cloud. Cloud 2.0 is based on containerised architectures that allow the security to reside across multiple different Clouds – a micro-Cloud approach. When you move into a Cloud 1.0, you have to sacrifice elements of how you operate your environment.

We want to ensure organisations can apply the same security policies they had for their on-premise equipment – such as IP restrictions ensuring only the authorised user can access Cloud data and applications when they’re on their own corporate-owned device versus a personal device – to ensure they’re meeting compliance and not accessing company data with an infected personal device.”

Where is your data?

Reality check: Your organisation might not be ‘in the Cloud’, but your data is almost certainly there already

organisation to protect user data, doesn’t even make sense,” says Martini. “The data is no longer there, so there’s nothing to protect. Users are everywhere, they’re accessing your data across multiple different Clouds, so protecting the users accessing data in third-party Clouds is the reality we live in.

“We grabbed the concept of security in the Cloud and leveraged a containerised gateway architecture, which allows us to cohabit across multiple different clouds.

We can protect the data where it resides and is being accessed by users remotely.”

This approach helps to overcome issues with so-called ‘Cloud sacrifice’ – when appliance-based functionality is lost.

“Cloud security provides lots of benefits, including scale and elasticity, and the ability to secure a user from anywhere. The question that usually arises is ‘how do I move the security policies in my appliances into this Cloud architecture?’ and ‘where do I have to make a sacrifice?’,” adds Martini.

The answer is they don’t. www.fintech.finance

Compliance is becoming ever more complicated for those organisations with employees operating across multiple jurisdictions.

“Some of the biggest questions we face when people move to the Cloud, especially with the General Data Protection Regulation (GDPR) and similar worldwide data privacy regulations, are ‘where’s my data in the Cloud?’, ‘who’s accessing it?’ and ‘is it compliant in the Cloud?’. It’s really important to implement a Cloud security platform that allows you to control these things in a containerised architecture,” says Martini.

“Because this architecture can separate the data plane from the multi-tenant user plane, it allows you to isolate and control all those variables that you typically have to sacrifice when you move to the Cloud.

You can define where your data lives and

The idea of protecting your data via a virtual castle and moat arrangement, where people walk in to the office, open their desk and log in to their desktop using a VPN, no longer exists

who can access it, setting geoplanes around it. So, for example, if that data is only intended to rest in the UK, then only employees in the UK can access it while they’re in the office and then only using certain applications – thereby protecting the organisation and its customers. The idea of protecting your data via a virtual castle and moat-style arrangement, where people walk into the office, open their desk and log in to their desktop using a VPN or similar appliance, no longer exists.”

Europe, Middle East and Africa region, and the UK in particular, is a target market for iboss, as for other Cloud services providers, given the country ranks third in the US’s top 20 target export markets for Cloud services worldwide. iboss, established by Martini and his brother Paul in 2004, is already established in the UK education sector, but is now looking for partners to expand into financial services and elsewhere, in the second half of 2019.

The fact that financial institutions are more willing than ever to adopt Cloud technology should help.

Traditionally, they’ve tended to keep their IT in a vault, but as many as three out of four systemically important financial institutions may now already be using the Cloud, according to statistics released by Microsoft Azure. In the UK, the migration has been encouraged by the Financial Conduct Authority and made commercially desirable by the revised Payment Services Directive (PSD2) and open banking in Europe.

It’s pointless waiting to make the leap says Martini: “Because, in reality, your data is moving to the Cloud, and either you are adopting it or staying behind.

“We’re going to see more and more applications moving to the Cloud, and your security has to shift there, too.”

But he adds a word of warning: “If you don’t do it in a secure, planned fashion, you could end up creating what is called a ‘shadow IT’, where people start using their own Cloud.

They want to send a file to somebody, so they use their own Dropbox, for example, because they don’t want t o VPN into the corporate office. You might believe you’re not using the Cloud, but your employees could be, and that’s a scary thought.”

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LAST WORDS: BOOK REVIEW The heart of fintech: Social conscience isn’t the enemy of success

Good vibrations

Former banker David Reiling says it’s perfectly possible for financial institutions to do well by doing good. Tom Dickinson (right) joins him on the road to digital Damascus

I recently had a conversation with a representative of a fintech at a networking event that descended into us joyfully trading fintech clichés.

It was perhaps a reflection of the hard slog that corporate networking events can be sometimes; or maybe my sarcastic mood was a product of hearing words like ‘seamless’ and ‘disrupt’ one too many times.

Fintech can easily become so lost in hyperbole that you forget its goal should be solving problems and disrupting common practice.

At face value, David Reiling’s book Fintech4Good appears to follow the industry’s trend for excessive language.

However, Reiling’s point that fintech is addressing real problems for ordinary people is argued coherently and with concrete examples.

Reiling certainly has the qualifications to comment on this shift in thinking in financial services. He began his career in banking in California, before working with his father at a chartered bank that would become Sunrise Banks, at which he is now CEO and a director.

Sunrise Bank is partnered with various fintechs to empower people at community level. As one of the first public benefit

corporations in Minnesota, Reiling tells us that Sunrise Banks is an organisation that is ‘empowering everyone to achieve financial wellness’. As such, it is part of the paradigm shift among financial services, that (in his words) demonstrates ‘doing well and doing good are no longer mutually exclusive’.

Reiling’s book is an exploration of this premise, promoting the message of fintech as a real force for positive change, challenging the shareholder-focussed, risk-averse nature of financial services organisations in the past.

He demonstrates the point with five case studies of fintechs, ranging from Peanut Butter, an organisation helping individuals escape from the financial shackles of student loans, to Nova Credit, which helps immigrants to the US overcome the credit history issue. Reiling provides an insight into the problems these organisations address that is engaging and relatable.

The founders of each of those that Reiling references have often experienced these problems firsthand and this emphasises the change in culture that is finally addressing a common issue: a disconnect between a service and those who need it.

The goal of fintech should be solving problems and disrupting common practice

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Reiling throws in a good few statistics along the way, tethering us to each point.

When exploring the crisis of payday loans, for example, he notes that there are more payday loan franchises than there are branches of McDonald’s in the United States.

Reiling concludes by saying that the organisations he references have inspired him to ‘change the way we do business’.

It might come across as idealistic and even a tad preachy, but why not?

The financial issues that Reiling explores at a human level are compelling and his arguments for real change and growth are rock-solid. If Reiling is another of those overused descriptors, a ‘fintech evangelist’, then I’m a believer.

Fintech4Good: 5 Stories About Changing The World With Groundbreaking Technology

by David Reiling is published in Kindle version by Engine4Good Publishing.

Great for: Restoring faith in the humanity of bankers.

Best read: When the fintech hyperbole gets too much.

Good read rating: ★★★★★

www.fintech.finance

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