11 minute read
Ahead of the eight
Ahead of the eight Michael Phillipou brings a unique combination of skills to his new role as CEO of Sandstone Technology – including that of an Australian Football League pundit. We got in a huddle with the new boss to talk tactics as he maps out his plans to expand on the back of open banking
“There’s so much work for banks to do over the next decade when it comes to having a compelling digital value proposition because digital is the battleground now for financial institutions,” says Michael Phillipou, the newly-instated CEO of Australian fintech, Sandstone Technology.
And that’s not just a technology vendor talking. He’s come to that conclusion from the perspective of a banker who ‘fell in love’ with the first-wave challengers that emerged after the financial crash, and also as founder of a lendtech himself.
Technological advances, regulatory pressure points and evolving consumer habits mean that to win, competitors on
Sandstone has been at the forefront of fintech since before the term was even coined. The mid-90s startup is now a global technology business, providing a wide range of micro services, mainly for top and mid-tier financial organisations that are upgrading or transitioning systems such as digital acquisition, loan origination, settlement management, internet banking, mobile banking and online financial management. It doesn't provide core banking services, but works with partners that do.
Phillipou’s appointment as CEO coincided with the firm’s 25th anniversary and comes during a sea change for financial services on its home turf.
the financial services pitch must change their game plan, teammates and targets, while playing to their strengths and addressing any weaknesses – and Phillipou knows a thing or two about adapting to the field of play. As an Australian Football League boundary rider for Oz broadcaster ABC, he turned up to deliver commentary on games from the sidelines while simultaneously building his career in financial services. Having watched premiership cup strategies over five seasons, he’s hoping to increase the digital goal score at Sandstone, where he was appointed CEO last December after occupying the role of chief customer officer for 15 months.
Australia is currently rolling out the Consumer Data Right (CDR), its own version of open banking, allowing the permitted sharing of customer data to improve access to, and availability of, financial services for millions of people.
Open banking also encourages competition among providers and creates opportunities for technology companies like Sandstone, as existing institutions seek to maximise the use of data to achieve efficiencies, become more innovative, and improve, or even redefine, customer relationships.
July was a milestone in the phased introduction of the CDR as, by that point, every bank, not just the big four – CommBank, NAB, Westpac and ANZ – were required to have systems in place to share data.
A crucial difference between open banking in Australia and the UK is the scale of the concept. Perhaps in keeping with its reputation as a big country with big ambitions, open access to data isn’t stopping at financial services. Under the watchful eye of the Australian Competition and Consumer Commission (ACCC), it’s going full throttle for an open data economy, giving Australians the right to access not just all their financial data but their utility and telecoms data, and more.
With clients in Australia, New Zealand, Asia and the UK, Sandstone has its own views on why adoption of open banking in most other regions where it has been introduced has been relatively slow. In November it even produced a white paper on the subject, concluding that where open banking hesitancy existed, it was due to a combination of regulation, the complexity of the technology change, and fear – not just among consumers who have been told for years never to share their data, but also among banks who see the legislation as a major threat to their highly valued customer relationship. Noting how Australia could learn from, in particular, mistakes in the UK, where still less than 20 per cent of banks have signed up to open banking, it warned that ‘in the UK, the regulatory framework and cost of entry has seen significant shortcomings in uptake’.
Nevertheless, Australia took its lead from there, in that standards in the two countries are technically similar.
“Technology is a little bit like fashion, where whatever you guys are wearing today, we’ll be wearing in three years’ time,” laughs Phillipou.
Despite the UK’s shortcomings – and perhaps lack of ambition – Phillipou sees it as a market that Sandstone absolutely must target, particularly when it comes to micro services for credit.
“The size of the lending and therefore the origination capability and opportunity in the United Kingdom is much greater than the Australian market,” he says. “From our perspective, it looks more evolved, ready to take more banking-as-a-service (BaaS) capability.”
There’s one trend in the area of lending that could benefit greatly from open banking – more accurately described, says Sandstone, as ‘everything-as-a-service’ – and that’s buy now, pay later (BNPL). New providers and business models have been reinventing the loan origination market Down Under for some time. But it’s a service that has raised issues for policymakers both there and in the UK.
“It’s under scrutiny now in terms of what the regulatory requirements should look like because BNPL is not subject to the same level of compliance obligations that lenders or banks are,” says Phillipou. “However, we’re likely to see that change and the BNPL players adjust. What we are seeing already are collaborations with major organisations, major banks, that recognise there is some extraordinary capability in this.”
Technology that provides lending insights is one of Sandstone’s core competencies, and an area Phillipou knows well.
25TH ANNIVERSARY A FINTECH BEFORE THERE WERE FINTECHS: THE SANDSTONE TECHNOLOGY STORY 1996-1999 2000-2009 2011-2012 2017-2018 2020 Sandstone Technology is founded by Violet Yu and Bob Hall. A series of market firsts follows, including internet banking enabled across multiple devices, internet banking solutions with scramble pad security, two-factor authentication integrated into internet banking and deployment of an intractive voice respose (IVR) solution. A loan origination solution for personal and home loans is launched, including home loans in the UK. Sandstone becomes the first organisation to certify BPAY View for internet banking and apply internet banking transaction signing functionality. It develops one of the first device-agnostic mobile banking solutions (using HTML 5) in Australia. A loan origination solution is deployed into an Australian Tier 1 Bank. Launches a mobile banking app at Finovate in Europe. Rolls out a digital lending solution for credit cards and personal loans.
2014 Deploys a P2P mobile payments, enabled for Paym (the UK’s mobile payments service), to Cumberland Building Society. The first customer in Asia (Vietinbank) goes live with an online banking (responsive) solution. Deploys end-to-end consumer digital home loan acquisition solution. Launches AI-driven document verification tool (DiVA).
2019 Launches open banking solution in the UK for Cumberland Building Society, followed by first fully automated online mortgage top-up product into the market (Loan+). Launches home loan digital management tool, Manage My Mortgage. Michael Phillipou is appointed CEO.
2021 Celebrates 25 years in business and appoints Ross Watts as chief customer officer and Katherine Dziaman as chief financial and operating officer. Launches Tranche Management for managing the flow of retail and business deposits.
Having worked in financial services for more than 20 years, holding general management roles across the industry including Westpac, Bendigo and Adelaide Bank, he co-founded the innovative digital financial services disruptor, Lodex, in 2017. Australia’s first loan and deposit marketplace, Lodex was way ahead of its time in using personal data, including social, to leverage power for consumers. It was a brave concept, borne out of Phillipou’s own fascination for pioneering fintechs that were challenging the distribution model.
“Back in the early 2010s, I realised that technology was changing the landscape around how financial services products would be distributed and fell in love with the likes of Revolut, TransferWise [now Wise], Monzo, N26, and all the neos – Curve and the likes of LendingClub, Credit Karma, and some of the US fintechs that were making waves. Then I was fortunate enough to found a company with a group of people, and we built some pretty cool stuff. I exited that business in 2019.”
Did he never argue the case from inside the bank to adopt the technology that was then emerging?
“I probably didn’t realise the gravity of the opportunity,” he admits. “I think, certainly now, sitting on the vendor side, the tech side, and seeing the way we’ve built out some of the capability of banking-as-a-service, particularly in the UK, that is certainly our strategy – to be able to support banks to have the latest and greatest overall core. We’re not a core banking player ourselves but we partner with core players, and provide all the front-end capability.”
Last year, for example, recognising the post-COVID shift towards consumer self-service, as banking customers became less enthusiastic about face-to-face meetings, it released a new suite of digital tools. These gave homeowners more autonomy in managing their loans; a kind of self-service lending, centred around the removal of the mortgage broker as middleman, to simplify the process.
This year it has developed Tranche Management, a back-office feature, which is a component of Sandstone’s digital origination product BankFast Apply. The new feature allows financial institutions to easily and quickly manage the flow of retail and business deposits. It’s designed to take the guesswork out of predicting when a savings product tranche is full, which supports a company’s risk management. skillset – that of banker, innovator and
The company ‘partners where it counts’ to broadcaster – in co-hosting the regular deliver services, says Phillipou. podcast, Digital First: A Banking
“Banks need to have optionality, and Transformation Series. A collaboration they’ll have preferences when it comes to between Sandstone and Financial Executive credit decisioning, so, for example, we’ve Women (FEW), a career advocacy done all the integrations with major bureaus programme for women within financial here in Australia – Equifax, Experian, and services, it’s seen him interview thought Illion. Partnerships exist when it comes to leaders of both sexes from banks and desktop property valuation capability or fintechs that have run transformation know your customer (KYC)/anti-money programmes themselves. laundering (AML) requirements. We’re out “They’ll talk about all the different there, benchmarking the ecosystem in terms pillars that are involved in running a of real speciality areas of the value chain.” successful transformation, and some of
Now that open banking and the the pitfalls that invariably organisations BaaS concept is gathering speed, Phillipou will have to navigate through. We’ve finds himself at the helm of a company been getting really good feedback from that can influence the way banks maximise the FEW members and they’re pushing those opportunities by creating the us to bring many of the guests back self-same ‘beautiful UI (user interface) onto the programme – the likes of Joseph and UX (user experience)’ used by the Healy, one of the co-founders of Judo pioneering fintechs he so admired. Bank [an SME challenger bank in Australia],
“We’re an enabler. We can support them who’s remarkably impressive.” to provide a frictionless He hopes the show experience and will give decision-makers complement their overall moral support when they offering,” he says. “What run onto the digital pitch. they’re focussing on, is As for Sandstone, it’s being able to enhance heading for the top of their overall digital value the league table, building proposition to support on its track record of their objectives. Every 100 per cent successful board is saying to every implementation. CEO, ‘we need you to “The biggest risk with do three things. Firstly, any transformation increase the return on programme is execution equity, so grow your risk. You hear horror assets and liabilities book. stories of banks going Number two, reduce the through transformation cost-to-income ratio, do more with less and programmes, spending hundreds of millions, become more efficient. Number three, make quite often, and then not ending up with sure you meet your regulatory obligations’. a functional product, and obviously a few
“We see this across every single bank and years behind the eight ball,” says Phillipou. every single board. And we can provide “Proudly, we’ve never not delivered. technology as an enabler of all those key “With banking executives thinking ‘how points, by providing straight-through do we futureproof our business overall?’, capability for the origination of products. the answer is that unless they innovate, Efficiency is really about trying to replace they’re going to find it very difficult. So, low-value human tasks with AI and machine our major investments over the next few learning, and digitise and automate years are going to be very much around processes. Then your systems need to be straight-through processing capability, regulatory compliant, and comply with data from origination to our data strategy, obligations – data sovereignty and the and making sure we capitalise on all the general data protection regulation (GDPR), opportunities when it comes to open over in the UK and European market.” banking – SME banking, in particular.
Now pushing Sandstone to reach deeper Then you’ll see the evolution of our into its target markets, Phillipou nevertheless BaaS offering, as we push to take more makes time to combine his unique positions and win more customers.”
