Fintech Finance presents: The Fintech Magazine 22

ISSUE 22

THE THE FANTASY CFO How Lawrence Levy y ped take Pixar to help y and bey yond! infinity

TRANSFORM OR DIE

thing gs banks need to nail in the next y 10 years – and why

SO YOU WANT TO IPO? Ap ptitude on getting g ght the numbers rig

Wowzers! Top moments from our first (very much live) awards show

ALTERNATIVE THINKING Nomura and BSO: gital assets dig pe of and the shap gs to come thing

EXCLUSIVE

NOWHERETOHIDE

Post-Pandora, ’s Garient Evans on full transparency and how to achieve it

INSIGHTS FROM Mobiquity ● Hyve ● Mambu ● OakNorth ● Saxo Bank ● Finastra ● Microsoft

Feedzai ● Aptitude ● Tonik Bank ● SmartStream ● PPS ● Flybits ● LSE ● Atomic ● Santander

meniga meniga

CONTENTS

THEFINTECHVIEW

2021

Our FF Awards evening rounded off one heck of a year for fintech.

IPOs kept falling out of the sky...

Robinhood, Coinbase, PayTM, Riskified, Expensify, Remitly, Nubank. And there were some eye-watering raises through crowdfunding, too – UK fintech Freetrade with its £8.7million from nearly 7,000 investors via Crowdcube stands out.

Crowdcube itself secured an extra £10million, although it took a more traditional investor route to fund its European expansion.

So, as we head into another year of what’s likely to be exponential demand for what can no longer be described as ‘alternative’ financial services, since most found their mainstream stride during the pandemic, many will likely be looking to inject a wodge of cash. Aptitude's Mark Aubin offers some timely advice, then,

FINTECH FOCUS 14 How to inspire a start-up nation A new partnership between business bank OakNorth and the London School of Economics is encouraging a next generation of founders

32 Tales from a fantasy CFO We go behind-the-scenes with former Pixar CFO Lawrence Levy

56 A potent cocktail Banking apps have the potential to become our #1 life management tools. But institutions tread a fine line between help and intrusion

66 The Fintech Finance Awards We celebrate our red carpet winners

ISSUE #22

for capital-hungry CFOs on page 82. And, talking of CFOs, one former finance chief who would have felt right at home on our Awards red carpet in November is Lawrence Levy – the man Steve Jobs chose to help steer animation studio Pixar to success, and, ultimately, into the arms of Disney. He tells us what it taught him about creativity and business – and what ambitious fintechs could learn from it – in a four-page exclusive on page 32.

In this issue you’ll also find a big focus on the next generation of financial service users – and how to get closer to them.

The future is theirs, after all. And, as 2021 comes to a close, here’s to it... cheers!

Our last spine tingler, 'If you ask enough people, eventually someone will give you a horse', was a quote from Tandem’s Ricky Knox Sue Scott, Editor

88 WTF do we do about WFH? It’s a hybrid paradox that all leaders are facing: can and should you force staff into working from home full-time?

REGTECH 6 Nowhere to hide

56 21 Above and beyond How Saxo Bank cranked up its migration in response to a huge uplift in demand for digital trading

25 Unlocking the future

Post-Pandora Papers, Trulioo pledges to ‘turn over every rock’ in holding the most powerful to account

12 A question of trust Why Santander’s Rod Boothby believes banks hold the key to restoring trust in an online world

THE CLOUD 16 The only way is up

KeyBank’s reveals how Cloud technology has given it a head start in a vastly-changed financial world

28 Up, up and away SmartStream addresses banks’ Cloud concerns head on

DIGITAL TRANSFORMATION 36 Good to go!

PPS, Green-Got and Pockid on meeting next-gen needs

Mettle, Mojo Mortgages and Hyve on what a difference Cloud makes

32 6 ffnews.com

Issue 22 | TheFintechMagazine

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B U I LT FOR B E T T E R

Connecting financial markets globally_ We understand that fast today is not fast enough tomorrow.

Businesses need to have access to the right infrastructure for their specific needs whether it’s speed, reliability, or connectivity to underserved markets. BSO delivers capital markets technology at the bleeding edge.

Get in touch today: hello@bso.co

Or visit us: www.bso.co

CONTENTS

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40 Z is for… a ‘TikTok’ generation that will be looking for a new relationship with financial providers in 10 years’ time.

We asked Mobiquity and Bank of America for five key trends

44 A life and death fight for the relevance of banking

40

Mambu and Microsoft offer up tactical suggestions

49 Bottom-line thinking Is it time for loss-making challengers to plot a slightly different course?

Valentina Kristensen from OakNorth and Andy Renshaw from Feedzai, share their thoughts

52 Could Kate snatch Europe’s super-app crown?

Bank-assurance KBC Group is pinning its digital-first strategy on its proprietary AI

64

54 Naughty but not so niche In a market where there’s all to play for, neobank Tonik is proving just that

TRADING

EMBEDDED FINANCE 60 A combined effort

69 Investing in the future

Global financial software solutions company, Finastra, recently hosted a panel looking at the future of contextual finance and BaaS. These are the key takeaways…

What will tomorrow’s investment bank look like? Nomura and BSO discuss digital assets, technology and industry partnerships

72 Smarter and faster?

Field programmable gate array technology has driven tick to trade, but is speed always the most important benchmark in investing?

Saxo Bank and Netcope Technologies, now Magmio, agree to differ

63 Power to the merchant!

Alternative providers are disintermediating banks and PSPs that have dominated the market and made processes complex and expensive for so long. That can only be good news for merchants says Søren Mogensen, Chief Growth Officer at Banking Circle

64 It’s getting personal

LIQUIDITY & FUNDRAISING 75 The crowdfunding capital of Europe

Lindsay Davis of earned wage access fintech Atomic and Steve Lemon of cross-border payments specialist Currencycloud on taking the relationship with consumers to the next level

That’s what Lithuania, which took its inspiration from the UK to create an enabling environment for peer-to-peer lending, aspires to be Crowdfunding Association, and Invest Lithuania’s Gintare˙ Bacˇiuliene˙ believe it’s entirely

79 The big reset Lloyds Banking Group launched a surprise diversification in 2021 – and it’s helping customers similarly derisk their organisations, improve liquidity and rethink their business model

82 Hiding in plain sight Financial data and how it is presented can make or break a fund-raise.

Aptitude believes its software solution can make life a lot less stressful for capital-seeking CFOs

87 Chain reaction Previse CEO Paul Christensen considers how technology and collaboration can unlock liquidity and help supply chains establish their own new normal

85 The platforms taking business lending to a new level The richness and ease of consumer borrowing online is driving demand for similar services in business. Martin McCann, CEO of Trade Ledger, looks at how lending platforms can help

THEFINTECHMAGAZINE2021 EXECUTIVE EDITOR Ali Paterson

GENERAL MANAGER Chloe Butler

PHOTOGRAPHER Jordan “Dusty” Drew

EDITOR Sue Scott

US CORRESPONDENT Jacob Bouer

ART DIRECTOR Chris Swales

ONLINE EDITOR Eleanor Hazelton Lauren Towner

SALES TEAM Tom Dickinson Karen Estcourt Serena Khemaney Shaun Routledge

VIDEO TEAM Lewis Averillo-Singh Laimis Bilys Lea Jakobiak Daryl Kotze Douglas Mackenzie Laura Raimondi

FEATURE WRITERS Hannah Duncan ● David Firth Tracy Fletcher ● James Grant Martin Heminway ● Alex King Natalie Marchant ● Sean Martin Martin Morris ● Sue Scott

ISSUE #22 Fintech Finance is published by ADVERTAINMENT MEDIA LTD. Pantiles Chambers 85 High Street Tunbridge Wells, TN1 1XP

CONTACT US www.Fintech.Finance news@fintech.finance DESIGN & PRODUCTION www.yorkshire creativemedia.co.uk

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Issue 22 | TheFintechMagazine

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REGTECH: IDENTITY VERIFICATION

Nowhere to hide Garient Evans, VP of Identity Solutions for Trulioo, says the global identity verification company will ‘turn over every rock’ when it comes to data transparency and holding the most powerful to account The shady dealings of the rich and powerful revealed in the so-called ‘Pandora Papers’ rocked the world in October 2021.

Published by the Washington DC-based not-for-profit International Consortium of Investigative Journalists (ICIJ), the papers comprise of more than 11 million documents that reveal the tax-sheltering offshore deals and assets of more than 100 billionaires and 300 public officials – from former UK prime ministers to past US presidents – and the companies set up to facilitate them.

It followed similar revelations in the Panama Papers and the Paradise Papers, published in 2016 and 2017 respectively, but the latest cache of 2.94 terabytes of information, centred on 14 offshore advisors and service providers, make Pandora the biggest exposure yet.

Crunching this volume of data was no mean feat for the journalists from 117 countries who collaborated to crack it, including those from major outlets, including BBC Panorama, the Washington Post, the Australian Broadcasting Corporation and Le Monde in France.

They unveiled an unsavoury sign of our times – made all the more unpalatable, perhaps, by the fact such practices are taking place as the world at large is struggling to get back on its feet after one

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of the most serious pandemics in history.

Breaking as it did, during such a fragile geo-political operating environment, most of us have reacted with outrage to the scandal. It also caught the eye of experts at Canadian-headquartered identity verification (IDV) company, Trulioo.

Founded with the ambition to promote data transparency and see everyone in the world able to access a digital identity so that they can have equal opportunities in life, Trulioo sees revelations such as the Pandora Papers as confirmation of the justice in its mission to level up.

It’s now turning its data spotlight on the shadows where unethical companies and individuals have, until now, been able to hide from their fiscal responsibilities.

Imagine if the wealth of information, worldwide, were so rich, and so well-understood, that there were no hiding places left for journalists like the ICIJ’s to unearth.

Trulioo’s senior VP of identity solutions, Garient Evans, says the company plans to double its own data sources, coupled with highly sophisticated ways of making sense of them. The aim is full transparency, enabling companies to do business, governments to maintain tax regimes and national security, and individuals to manage their finances, in full knowledge of what and who they’re dealing with.

“Our business verification can get to the ultimate beneficial owner of a shell company that is trying to hide assets, which meets our mission of not only identifying individuals but also helping companies that want to do business with other corporations,” Evans explains.

“We want to shed light on different corporations and their movements around the world, to help companies

know their suppliers, their merchants, their business. We call it know your business (KYB), and we think [the need for that] is a trend confirmed by the Pandora Papers.

It shows there is a need for services that can provide this type of transparency, and we’re excited to be able to offer that.

“So, if you’re a global financial institution, or a marketplace, and you have to know what businesses you’re dealing with, who the owners are and whether or not they’re on a financial sanctions or designated persons list for terrorist financing or money laundering, we can help.”

Dramatically increasing the number of worldwide data sources that Trulioo can draw upon is key to enabling this.

“We’re embracing the challenge our CEO gave us: to double our data sources, in terms of the amount of countries and the depth of coverage we have,” Evans continues. “We are turning over every rock to identify high-quality sources around the world, to offer them back to our customers.

“We’ve learned that even the largest global players need quick, convenient, secure access to data sources, particularly from emerging markets where they could go to procure their own data from authoritative sources, like credit bureaus, government registries and utilities. However, they find it faster, cheaper and more reliable to come to Trulioo, because we’ve already prenegotiated the arrangements, implemented them, standardised them, and made sure they’re robust enough to provide quality identity verification solutions in these high-growth markets.”

Bringing emerging markets into the fold is not only commercially attractive. It's also essential to Trulioo’s goals of increasing financial inclusion and transparency, and helping to prevent fraud. www.fintechf.com

Our business verification can get to the ultimate beneficial owner of a shell company that is trying to hide assets “If you want data sources in the US, you have many, many options and, in some cases, they may not be very differentiated, so you’re competing on price, or whether you can bundle in a lot of sources,” says Evans.

“In emerging markets, millions of individuals have never been able to participate in the digital ecosystem, but many of them have a phone, are accessing local utilities, or may be on a government registration scheme that we can utilise. We ffnews.com

can use these to start providing these individuals with their first-ever digital experience for access to products and services. Then we can make that more convenient for the next service provider.”

Evans describes the process Trulioo employs, and why ensuring the best possible match rate is so vital to removing reasonable doubt from the results generated for each individual or company: “If you’ve ever switched phones, email

addresses or phone numbers, and had to port your contacts and merge them with another list, you realise just how hard it is to manage just the people in your own life. Imagine doing this on 10, 100 or 1,000-times the scale, dealing with millions of identities and trying to figure out if they’re unique – considering how many people share an address, phone number or email address – as well recognising nicknames and appreciating regional differences.

Issue 22 | TheFintechMagazine

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REGTECH: IDENTITY VERIFICATION By way of explanation, Evans says: “I was born in South America, I have three last names on my birth certificate and, if I use my official passport from Colombia, it also shows multiple last names. But I grew up in the United States, and there I just have one. My name is Welsh and has different spellings; my hippy parents spelled my name differently to the traditional Welsh spelling. Should I be rejected because it can’t be matched, or can there be a tolerance for that unique spelling?

“What that illustrates is that identity, and the process of matching it, is really complex and most companies can’t do it themselves, at scale, because it’s not good enough to take a local approach that might work in the UK, in Canada or the US, and assume that will be appropriate for matching identities in, for example, Dubai, Argentina or Ethiopia. And there are also lots of regional differences.

“Not everybody uses the Roman language and Roman characters, for a start.

Then there are regional accents and tildes, and whether they should be included or not. How many last names are appropriate?

Or double first names? Trulioo takes all these things into account when we match and standardise.”

Adding to this complexity is the fact that the people the data relates to are increasingly mobile, often, like Evans, growing up in one place and moving to another. And, as the Pandora Papers have shown, those who have the means, often deliberately operate in different jurisdictions, meaning firms must cater for this increasingly-borderless world.

“We recognise that names can change – people have nicknames, might get married, might hyphenate. While a date of birth and national identifier should be a static, one-to-one relationship, there are many, many relationships in terms of address, phone number, email; you could have many people associated with the same phone number, and many phone numbers. But we can account for that complexity, working with partners that have the depth of information, can look at the history and help us determine the most recent and relevant data for each person.”

Quite apart from compliance and fraud prevention, having the right parameters in place is a commercial imperative for Trulioo’s clients to achieve slick onboarding.

“There are good and bad matches, and

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false positives. Look for Garient Evans in the United States and, if you find me, you’ll probably get a true positive; there is only one Garient Evans there, I’m happy to say! But in Wales, there are several, so you might match my identity information with the wrong individual. That won’t meet your compliance requirements as a financial institution, and you might run foul of fraud. So, we test and control, using a very scientific method.

“We look at data sources and determine their strength, and how often they are producing false positives or negatives, which means you think you don’t have a match when it should have been and, as a consequence, that person cannot onboard.

We monitor these things with our clients to determine the quality of our data sources, and matching logic, then proactively go back to them and say ‘we have a better data source for you. We’ve been testing it, we’re getting better results and we recommend you switch to it’. That’s why doubling the number of our data sources is so important, because we are consistently finding better

So, what does good look like when it comes to match rates?

“It differs globally and, in the most developed markets, with different data options, you’re going to see 70, 80, 90 per cent being the standards for match rates,” says Evans. “But some developing markets that have a digital presence, like Eastern Europe and parts of South America, where there’s been a substantial digital onboarding presence for a while, will also have match rates in the seventies.

Three-quarters of folks there can get identified, and the key to that is mobile.

Mobile access, especially the proliferation of smartphones, means people can open a bank account and start having a footprint.”

Evans is particularly excited about opportunities surrounding the traditionally underserved business sector.

“A very exciting trend, which has accelerated because of the pandemic, is small businesses having their first digital experience,” he says. “Folks who were working in face-to-face settings had to

We continually have new data sources giving new insights. After all, who hasn’t gone through some type of change in the last two years?… Some corporations have done away with their offices

options to help our clients upgrade easily.”

Then comes the issue of maintaining the data effectively and compliantly – in terms of updating, cleansing and storing it.

“Many clients take advantage of the ability to batch up their datasets and send them back to Trulioo, because we continually have new data sources giving new insights. After all, who hasn’t gone through some type of change in the last two years? A new address, new job, perhaps they no longer have a corporate physical address, as some corporations have done away with their offices.

Quite a bit of contact information will have changed in the last few years and it’s not good enough for financial institutions to rely on old data.”

find another way to put food on the table.

Some are teaching courses online, creating content they can sell in a digital marketplace or customised goods to sell abroad, and we’ve seen a corresponding growth in requests for business verification within these small businesses, to be able to explain who the ultimate beneficial owner of that business is and do additional ID verification on them.

“Our mission is to give individuals access to digital experiences, not just to consume but also to work in a global way because markets are no longer limited by proximity.”

But opening this particular Pandora’s Box of data collection and management requires cooperation by regulators in different geographies, says Evans. www.fintechf.com

REGTECH: IDENTITY VERIFICATION “Regulators and legislators in certain markets have yet to define what is appropriate. This stalls a country in making that data accessible, and entrepreneurs from collating, cleansing, standardising and making it available for third parties to use and consume. There are so many markets that have yet to adopt some of the privacy and legislative advances you see in Europe, like the General Data Protection Regulation (GDPR), and, until the legislators weigh in and describe what’s permissible and what’s restricted, they have effectively frozen out solution providers and denied access to products and services to millions of people.

“We really encourage governments to adopt best practices and standards, so that participants can offer high-quality solutions to enable commerce.”

As embedded or contextual finance are enabled by technology, and new business models emerge, the lines between non-financial services and financial service companies are blurred, continues Evans.

That has an impact on the KYC they are required to perform.

“Taxi services now deliver food and provide various transportation services, including the ability to lease, or even borrow money to buy, a car. The largest e-commerce retailer is now providing merchant loans to allow merchants to stay afloat and purchase more supplies.

These are now financial service companies which means that, while they may never have seen themselves as financial service providers, they are now subject to some of the same regulations as the traditional ones, regarding fraud, money laundering and terrorist financing.”

All of which makes Trulioo’s potential marketplace both limitless and borderless.

“Most marketplaces experience demand from suppliers and consumers of their products and services around the world, so onboarding has to be borderless,” says Evans.

“In certain jurisdictions, address is one of the most important factors for ID verification, while, elsewhere, an email address could be an important point of identity, or a phone number. We keep an eye on what regulators are telling us and incorporate this into how we source data and do our matching, to keep our clients compliant.”

Trulioo also guides institutions on data nuances such as risk tolerance.

“We have conversations with clients

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about the range of regulatory approval their auditor is telling them is acceptable.

So, with nicknames, for instance, a strict matching posture will only accept ‘Jonathan Smith’ as a direct match. But, with tolerance, you can accept matches with the ‘Jon’, ‘Jonny’ or ‘J’ derivations of that name to create a more convenient onboarding experience for somebody who’s gone as ‘Jon Smith’ their whole life but their documentation shows ‘Jonathan Smith’.

“We discuss this with clients and test what their match rates are with higher tolerance – what we call fuzzy matching – like nicknames or one-time errors, such as the transposition of numbers in a phone number, which is off by just one digit. And, in regimes that require strict matching, we can also show what the repercussions of that are for onboarding.”

It’s hardly surprising, given the pandemic-fuelled growth in digital interactions, that Trulioo has been on a dramatic upward trajectory since a successful funding round in June 2021. This year, it was also listed among Canada’s 100 fastest-growing companies (503 per cent a year), and included in the Narwhal List of successfully-scaling private enterprises.

Its $394million Series D funding round, led by growth equity firm TCV with participation from existing investors, increased Trulioo’s valuation to $1.75billion and gave it the capital to accelerate its goal of becoming an end-to-end identity platform. By the close of this year, the size of its overall workforce will have increased two-fold, with new offices established in Austin, Texas and San Diego, specialising in developments such as artificial intelligence and machine learning. With a current, 260-strong workforce distributed across Canada, the States and Ireland, it plans to add an additional office, in Asia, in 2022.

The demand it’s experiencing is a reflection of macroeconomic conditions, continues Evans.

“Activities people might’ve been willing to do face-to-face, before the pandemic, have been driven online, from opening accounts to ordering their groceries or meals for

delivery from their favourite local restaurant and conducting their entire financial lives online. So, we’ve continued to see companies coming to us that are launching new digital initiatives, to offer their products and services more conveniently online.

“There are businesses that no longer exist, as a consequence of the pandemic, which is very unfortunate but has answered the question about whether or not companies can persist, not being technologicallyenabled and connected to digital experiences. I think maybe those that never invested, decided not to accommodate remote access to products and services, didn’t survive. Because consumers are finding the new way of doing things so convenient, they’re deciding to stay with it.

“Institutions that have had success in a single market are also now saying ‘we think we have an audience in multiple markets and want to expand to new territories’.

Instead of coming up with identity solution providers in each of those regions, they’ve heard how, over the last 10 years, we’ve developed the data sources to conveniently and securely identify folks in each of these territories, and are deciding it’s easier to work with us.”

All of this means that those companies still in the game will have to continually up the ante in terms of their online customer service.

“A decade ago, the largest e-commerce retailer gave us the one-click shopping experience. You could buy anything you wanted with one click, and that has set the bar for everybody else. How do we match that digital experience with safety and convenience, to create trust that customers will get the product and service on time, and that the data they provide will be held responsibly?” says Evans. “Everybody who’s working online is trying to replicate that super-convenient and safe experience.”

Whether you’re one of those retailers, onboarding a single consumer in a distant market, or a corporate that wants to be confident it’s dealing with a counterparty that’s not flying close to the moral wind, it’s useful to have a transparency trail-blazer like Trulioo on your side.

Our mission is to give individuals access to digital experiences, not just to consume but also to work in a global way.

Markets are no longer limited by proximity

www.fintechf.com

REGTECH: GUARDIANS OF TRUST Much to GAIN: The proposed new standard could restore banks’ status

Rod Boothby, Global Head of Identity at Santander and Co-chair of the Open Digital Trust Initiative, believes banks hold the key to restoring broken confidence in an online world. Now, he’s asking them to mobilise to fix it Who do you trust to vouch for you?

Your government, your doctor, a solicitor? How about your bank?

By the end of next year, millions of us could be looking to the organisations we deposit our money with to be the custodians of what is, arguably, a much more valuable asset – our digital selves.

The Open Digital Trust Initiative is being steered by the Institute of International Finance and the OpenID Foundation, which have built a coalition of organisations across the identity community, to create a global digital trust infrastructure that hopes to assign a new role to regulated entities – financial

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institutions principal among them.

It’s called the Global Assured Identity Network (GAIN) and it maps out a way for banks and others to offer digital trust services via APIs. To be clear, that’s not just for banks to act as gatekeepers for our identity in relation to financial services, but also delegated responsibility to confirm we can travel across borders, access health services and much more.

Why should banks take on the mantel?

According to Rod Boothby, global head of identity at Santander and co-chair of the Open Digital Trust Initiative, because they already have what it takes to execute on

possibly the most important mission of all – ‘to deliver truth and trust while allowing people to protect their privacy’.

And they can do it by leveraging their existing electronic know your customer (eKYC) and strong customer identification capabilities, as well as the confidence invested in them by public and business.

“Banks treat your identity as an asset and they can provide a custodial service to protect it, just as they provide custodial services to protect your cash or your stocks, because it’s your property,” says Boothby.

“By delivering this [identity-as-a] service, we hope to reduce the challenges www.fintechf.com

we see globally around whether or not people are who they claim to be online – and that covers everything from annoying spam messages, to catfishing on a dating site and spreading misinformation via social media.”

The aim is to deliver what is, in effect, ‘financial-grade’ identity assurance alongside a dramatically-simplified user experience that’s characterised by far fewer passwords and forms.

GAIN will be made possible by a new standard for verified data sharing services, developed by Santander and built on top of OpenID, the protocol that’s used billions of times a day by people across the world to log into platforms such as Facebook and Google.

It will allow banks to securely transmit information related to customers in three circumstances: to verify a customer’s identity, the bank simply confirming the client’s name and other basic identifying information to a third party; to share a summary of the information but not the private data behind it – for example, to confirm a person is old enough to buy alcohol but not revealing the date of birth; and to confirm and fully share verified data.

All of the above would only be initiated with the customer’s consent, but the potential use cases that could be built on top of such a global standard are myriad – think applying for a product and getting the best deal based on your profile characteristics; enjoying a simplified vetting process when renting accommodation or applying for a job; even helping to select the right profiles for you on a matching platform; or simply proving you can act on behalf of your company. It’s ideas like these that Boothby hopes to explore further during Sibos.

“Every time new standards are created, huge new value is built on top; many players come forward to provide all sorts of services,” he says.

To deliver those across borders will require partnerships, of course – hence the importance of building out the network.

“There are huge partnership opportunities to help bring this to market,” says Boothby. “For example, if you have a small company, you don’t want to sign contracts with 2,000 banks globally; you want to work with an entity that brings all the banks to you – a broker or aggregator.

And those organisations could work in ffnews.com

domain-specific spaces, like healthcare, facilitating information around insurance and payments, travel or even managing vaccine status.”

Banks have collaborated to build mutualised infrastructures before – transaction rails for trade, cards, digital payments and securities. Identity is now, as the Institute for International Finance, recognised when it co-published the GAIN white paper in September, the next such ‘critical frontier for the global economy’.

Boothby believes that, with this new purpose, banks could not only address several of the threats currently undermining their status – namely disintermediation and fragmentation of financial services – but also turn the security and compliance cost centre into a revenue stream, countering the effects of the unlevel playing field caused by how some aspects of open banking are being implemented.

Thus, for banks, facilitating truth, trust and protection could be seen as not just a moral imperative, but also a business one.

The idea of banks collaborating over identity flows isn’t entirely new.

Although confined within regional borders, there are several forerunners for a trust network operated by banks: Sweden and Norway have the almost universallyadopted BankID, Germany has the Yes network, Belgium has Itsme, and 17 million Canadians access federal government services via Verified.Me. “In Sweden or Norway, when you go to a website, instead of clicking ‘log in with your Google ID’ or ‘log in with your Facebook ID’, you click ‘log in with your BankID’,” says Boothby. “A message on your phone from your banking app asks if you really want to log in, and, if you’re registering for a site, if you want to really share that information with it. Usually, the bank will be able to reduce the amount of information that is shared. For example, in the UK, if you want to buy a lotto ticket, the National Lottery needs to know only two things; that you’re a UK resident and that you’re 16 years or older. That’s it. They don’t need your name, your picture, your biometrics; they don’t need to know your address.

“We want to create this simple, easy flow, where you can bring your identity wherever you go. You no longer have to

spread your identity information everywhere; instead, you have the choice as a consumer to work with an institution that you trust, an institution that doesn’t resell your data.”

While there are obvious privacy advantages for consumers, using banks to validate a business’ identity could benefit the economy, too.

“If I want to order goods from a company in a different country, and a bank in that part of the world can say ‘this person with a widget factory is trustworthy’, I can order widgets from them in confidence, knowing they’ll deliver,” says Boothby.

“This levels the global playing field.

Businesses do not have to give a cut of their profit to some big online company to distribute things for them. Instead, they can go direct to their counterparties.”

Importantly, it could address the rising, and seemingly unstoppable, tide of online crime targetting businesses and customers daily. The United Nations estimates that money laundering, alone, is equivalent to two-to-five per cent of annual global gross domestic product (GDP).

“The amount lost to financial crime and money laundering is stunning and facilitates all sorts of damaging activities,” says Boothby. “So, how do we create an environment where the individual has better control over their information and people don’t constantly feel they are under threat?

If we get this right, this standard will mean you can be certain you’ve reached a specific person who’s made a decision, and that the data they’ve shared with you is bona fide,” says Boothby. “They really are the CEO of that company and can sign legal agreements on its behalf. They really are in accounts receivable, that is a real invoice, and those are real payment instructions.

They really are from a company‘s call centre and are trying to help you.”

The urgency now is to persuade financial institutions to collaborate to deliver that trust with global reach; to bring about, as the GAIN white paper describes it, a fundamental shift in the digital economy.

“This is an open and free standard and we’re hoping many will want to learn about it,” Boothby adds. “We have huge challenges around identity and need participants to join us in solving them.”

There are huge partnership opportunities to help bring this to market

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FINTECH FOCUS: FOUNDERS As 2021 draws to a close, it’s worth reflecting on all the ways in which the UK business landscape has changed in the last half-decade: getting to grips with Brexit, the post-COVID recovery and the environmental pledges made at November’s landmark United Nations COP26 conference.

The UK is in real need of new, innovative companies that can react quickly to the challenges heading its way. But recent evidence suggests the country may not be as up for it as we thought.

Despite early evidence of an entrepreneurial rush to the head during the pandemic, with a host of lockdown-inspired startups, there was a sharp fall in the number of individuals setting up new businesses in the last few months of 2020, compared to 2019, according to a definitive study by the Global Entrepreneurship Foundation (GEF).

Paradoxically, the study also found more people than ever before thought starting a business would be a good career choice, but 53 per cent were prevented from doing so by fear of failure (an increase from the 46 per cent in 2019).

It’s not that recent events have made us all super-cautious. The confidence and emotional resilience needed to embark on an entrepreneurial career have been lacking for some time. An earlier, 2017 study by the same organisation among new graduates found a distinct lack of enthusiasm, with only 0.6 per cent of them having started their own business, compared to 8.7 per cent for the population at large.

As Brexit begins to have a more profound impact on the way the economy functions, a faltering pipeline of startup businesses could be a real issue at a time when Britain

must learn to be more self-sufficient. It poses an important question: how do we most effectively drive entrepreneurship in the UK to increase competitiveness, particularly given the apparent apathy among graduate cohorts?

One company taking a proactive approach to tackling the problem is financial services provider OakNorth, which has been in the business of encouraging entrepreneurship since 2015. The white-label business credit analysis platform spun off its own business bank under the same brand, to cater to a group of SMEs that it defines as the ‘missing middle’ – those in need of serious investment but lacking the size to get conventional institutional investors excited.

OakNorth’s founders Rishi Khosla and Joel Perlman found themselves in just that situation when they were looking for funding to support a previous business in 2005. Despite it being profitable with good metrics, no high-street banks were willing to provide the finance they needed to expand.

This informed the founders’ next move in – launching a credit intelligence software suite designed to (affordably) assess the creditworthiness of companies in this tricky middle segment, and then a bank to help secure them the funding they so badly needed.

A sharp focus on entrepreneurship has served OakNorth Bank well: it achieved unicorn status in 2019 and was the first UK challengers to turn a profit in 2018. It remains one of the few to do so. Now, in the face of the seismic challenges facing the UK economy, there is a sense at OakNorth that the time has come to expand the scope of its work beyond finance and funding, to broader social initiatives.

“We made a pledge, several years ago, to

give one per cent of our group profits to organisations that we think have impact,” says Khosla, also CEO of OakNorth Bank.

“How do you help people, who naturally won’t have the opportunities, get an opportunity to progress?”

That’s led OakNorth into partnership with Khosla and Perlman’s old university, the London School of Economics (LSE), on a ‘Mentorpreneurship Programme’ .

It’s run by LSE Generate, an initiative that’s been helping to build socially-minded businesses by offering a network of support and practical tools to would-be entrepreneurs since 2010. It boasts notable alumni including Allbirds, Lensational, and Disperse.io. And it’s just opened its first European hub in Lisbon.

The new Mentorpreneurship Programme encourages businesses to engage past, current and future student entrepreneurs in a ‘life-cycle of mentoring’. The hope is that the programme will be replicated across education to help address the transformations that the UK economy is facing, to prepare the workforce with the skills it will need more of, and break down misconceptions about who ‘qualifies’ to be an entrepreneur: in the GEF survey, four-fifths of the non-entrepreneurial population believed that those successful at starting a business came from an advantaged background. Ultimately, the programme to inspire a new generation of businesses that drive change in their communities.

Planting the innovation seed starts early.

“That mindset of entrepreneurship doesn’t get embedded when you’re finishing university or finishing college,” says Khosla.

“It probably happens much, much earlier on – in terms of your willingness to take risk, how you interact, how you collaborate.”

So, the Mentorpreneurship Programme

HOW TO INSPIRE A STARTUP NATION A new partnership between business bank OakNorth and the London School of Economics hopes to encourage a new generation of founders through a ‘Mentorpreneurship Programme’ that breaks the norm, as the bank’s Rishi Khosla and LSE’s Laura-Jane Silverman explain 14

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www.fintechf.com

will reach into secondary and even primary schools, and out to segments of the population that might need additional encouragement to embrace the idea of starting a business.

“The idea is that, by the time students get to university, they don’t have those hang-ups around failure, and they’re better-equipped to survive what is a really difficult journey, and thrive,” says head of LSE Generate, Laura-Jane Silverman.

That mindset of entrepreneurship doesn’t get embedded when you’re finishing college. It probably happens much earlier in terms of your willingness to take risk, how you interact, how you collaborate Rishi Khosla, OakNorth Bank

“Essentially, the message is that mentorship is not something that you just sprinkle over an entrepreneurship programme; it’s baked in from the beginning and embedded in the DNA.” The need for this was evidenced in research carried out in 2020 by LSE and the Massachusetts Institute of Technology (MIT). It found that half of young people in the UK, aged 14-to-25, do not know a family member or friend who is a business owner, and the majority cannot name an entrepreneur who inspires them. But exposure to innovation and entrepreneurship at an early age can have lasting impacts. In Australia, Denmark, and the Netherlands, programmes targeted at students as young as 11 raised awareness of this potential career choice and helped develop the attitudes needed to pursue it.

But parachuting retired captains of industry into classrooms isn’t the best strategy. From Generate’s work, it became apparent that aspiring entrepreneurs want access to those not so far up the ladder from them, says Khosla.

ffnews.com

“Someone who’s only two, three, four years ahead of you, and has gone down the path you want to take – maybe you’re a secondary school student who wants to get into a particular university, to read a particular subject. Just being able to have access to someone who’s done it, to understand that path, can be incredible.”

The Programme will be a key element in a new collaboration between Generate and the Girls’ Day School Trust, which is focussed on addressing the gender imbalance among successful founders.

However, the wider mission extends beyond age and gender.

“Representation for us is really, really important,” says Silverman. “Students said if all they saw were 50-year-old white males running businesses, then they couldn’t imagine themselves being in that position.

So, we make sure that every student is represented by alumni in the ecosystem.”

It’s not an entirely altruistic act on businesses’ part – a tick on a corporate social responsibility agenda. Underpinning all this is a firm belief that the process can benefit participants in both directions through reverse mentoring.

For Khosla, bringing young influencers into his own comparatively young organisation has been a source of inspiration; and it can fast-track innovation in those that have been operating in the same manner for years, too. Back in 2015, an initiative at Italian fashion house Gucci saw the formation of ‘shadow committees’ of younger employees, tasked with setting the 100-year-old business on a modern path. That helped inspire a more ecologicallyconscious design philosophy.

While that storyline might not have made the cut in director Ridley Scott’s current House Of Gucci, it apparently made a big impact on the company’s bottom line: one fashion commentator credits a 136 per cent spike in 2019 sales to the move.

Young people can have a lot of influence on a business because, quite often, they are the target audience, says Silverman.

“And students come into boardrooms and CEO offices with that confidence of youth and no hidden agenda,” she says.

“NOVA University in Lisbon is already working with corporates that really need that injection of innovation. Students get placed with a corporate for a month, where they get to offer advice. And that can be a life-changing experience for them.”

Students said if all they saw were 50-year-old white males running businesses, then they couldn’t imagine themselves being in that position Laura-Jane Silverman, LSE

The idea of a centuries-old educational institution collaborating with one of the UK’s newest banks to deliver such a seriously ambitious agenda would have been unthinkable just three years ago, says Silverman. But, in an era where the UK economy faces unprecedented change, it might be exactly the cultural norm-busting we require.

As Khosla says: “We need to create a much more adaptable generation. One that says ‘I can make change, I’m comfortable with change, I can take risk’.”

Stepping up: OakNorth and LSE are inspiring young people to become founders

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THE CLOUD: WHEN AND WHERE

For most banks, it’s a case of how, not if, they will adopt Cloud technology. We asked senior execs from NatWest’s Mettle, open banking-driven startup Mojo Mortgages and Cloud services provider Hyve what difference it can make The battle for business facing banks has never been more intense than it is now.

Speed of innovation is a key driver in a sector where digital challengers have dramatically ripped up the traditional landscape for so long dominated by incumbent, heavyweight institutions. And, if tech now defines success, then the Cloud and how chief technology officers deploy it, is probably the single most influential contributor – potentially levelling the playing field between legacy operators and agile newcomers and redrawing the CTO’s job spec in the process.

First, though, legacy banks must be sure they’re picking the right fight; deciding when to square up to challengers has

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become a crucial factor in a winning or losing strategy. UK banking giant NatWest Group has recently experienced both sides of that particular coin.

In May 2020, the group, then known as the Royal Bank of Scotland Group, closed its digital retail bank Bó only six months after a high-profile launch in which it directly pitted itself against successful neobanks such as Monzo, Starling and Revolut... and came up short.

By contrast, NatWest’s speedboat SME digital business bank Mettle has proved a hit since its low-key debut in 2019.

It’s grown to 250-plus employees, some of whom were incorporated from Bó following its demise, and it’s now grown up enough to appoint its first culture and people boss, to promote initiatives such as hybrid working.

Wayne Freeman, Mettle’s CTO, says its success was made possible by the fact the startup got its target market right from the get-go. And that market was the ‘passion economy’ – the small business entrepreneurs, freelancers and sole traders, fuelled by dreams of independence, and many seeking an alternative to the tired economic models and ways of working the pandemic has shot holes in.

“Mettle is built for members of the growing passion economy and we’re seeing more and more of those” says Freeman.

Sitting, as it does, inside NatWest’s innovation arm gives the spinoff bank the best of both worlds.

“We attempt to operate like a startup, with our ways of working and our structure, but we leverage the very best elements of being part of the NatWest experience,” says Freeman.

“Particularly at Mettle, the customer is at the centre of everything we do, and we serve their needs through technology, whether that’s apps, websites or the services they support. In order to deliver those experiences, I have to work very closely with the chief product officer, the chief operations officer and the chief marketing officer at Mettle, and I think our teams actually, culturally, are much more entwined.

“Product and engineering are matrixed – they work together – and they both own the customer experience, the features we’re building, all of the strengthening and hardening, the security, privacy, resilience and scalability considerations, as well. Those things together are extremely important.”

Chris Thacker, until recently CTO at www.fintechf.com

Above the Clouds: So many things would have been impossible without this tech

digital mortgage broker Mojo Mortgages, which has set out to disrupt, change and update the industry, is also unequivocal about the importance of technology and, by extension, the people in charge of it.

“We’ve definitely left the world where technology was seen as a cost; it’s now viewed as an enabler, a business’ competitive advantage,” Thacker says.

“So, whether CTOs are the most important executives in the C-suite is probably a debate that could go on forever, but their importance is growing, I imagine, every year.”

Both Mettle and Mojo were built on Cloud architecture, which, Freeman and Thacker agree, is a prerequisite for financial startups to provide the speed and agility they need.

“I wonder if something like Mojo would even exist if it wasn’t for Cloud systems,” says Thacker. “I refer to them as force multipliers. They allow it to have very small teams focussing on problems, and those teams can spin up an environment in seconds, which means that they can deploy to production in one day, which is hugely powerful.”

The Cloud allowed NatWest to spin out Mettle, even while the parent bank’s system remains largely bound to physical servers.

The group’s decision to treat its offspring as an independent entity, albeit under a ffnews.com

watchful eye and with access to larger group resources, could be a template for other legacy institutions to follow, believes Freeman.

“Trying to transform huge organisations’ financial platform systems, many of which may have been live for 40-plus years, is obviously no trivial task,” he says.

Whether CTOs are the most important executives in the C-suite is probably a debate that could go on forever, but their importance is growing Chris Thacker, Mojo Mortgages

“And I think we’ve also realised that taking those platforms and, potentially, lifting and shifting into the Cloud, doesn’t maximise the value, doesn’t deliver the operational benefit you’d want, and certainly doesn’t even come close to helping with any costs. But, also, all of the regulation, all of the compliance, all of the security and privacy aspects that come with it need a rethink, and it’s very difficult to do that at absolutely massive scale.

“At Mettle, I feel very privileged that we’ve had the opportunity to start in a relatively greenfield way, learn from all of the experience of the bank, while actually being able to build a banking platform and product, Cloud-natively, from the

ground up, which has definitely been a huge benefit to us.”

US banking giant J.P. Morgan adopted a similar strategy in launching its digital retail bank Chase in the UK in late 2021, as did Standard Chartered with its Hong Kong speedboat bank Mox in 2020.

According to a new survey commissioned by core banking provider Temenos and conducted by The Economist Intelligence Unit among IT execs in the banking sector, business agility, elasticity and scalability are among their top drivers for moving to the Cloud. The results, published in a report called Capturing The Cloud, found that while banks have generally been slower to adopt the technology than other sectors, both software-as-a -service (SaaS) and Cloud infrastructure have raced up their technology shopping list since the pandemic. Eighty-two per cent said they now have a clear strategy for Cloud adoption, while barriers to them embracing it fully included security, privacy and compliance and governance issues.

Paulo Machado, who leads a team of Cloud specialists at global technology provider Hyve, based in the UK, says scalability is a clear advantage that comes with Cloud adoption, especially in an organisation’s early growth phase.

Hyve works with banks’ IT teams to migrate on-premise systems to the Cloud using out-of-the-box solutions. It also supplies technology for other major customers, including the UK’s National Health Service, Capita, LG, Tesco and British Airways, covering mission-critical private Cloud, enterprise Cloud and colocation projects, as well as a variety of security services.

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THE CLOUD: WHEN AND WHERE Machado says: “The growth of a fintech may obviously purely rely on scalability, in terms of onboarding new customers, while traditional financial institutions would be a lot more stable.

“A startup also needs to be a bit more dynamic. Being able to react in terms of what’s actually happening in the market, and doing so quickly, is obviously fundamental to the business. So, in that respect, being able to scale out, whether it be horizontally on a business’ servers, or vertically, is of paramount importance to the business. And it’s key within the current marketplace.”

THE QUESTION OF SECURITY Despite the concerns apparent in the Temenos report, Wayne Freeman argues that a properly-designed Cloud system can

single interaction is authenticated and authorised. We believe this gives us considerably more security strength and depth.”

Machado broadly agrees with Freeman but also points to an ongoing debate about whether private or public Cloud solutions provide the best security.

“Whether to go public or private is something lots of CTOs raise with us,” he says. “There are obviously a lot of benefits with private Cloud. There’s the physical security around a private environment – they know exactly where it is, within a secure, manned datacentre. But, in the public Cloud, there are layers of authentication that they need to access their environment. Whether that’s multifactor authentication or utilising various VPNs, there are a whole range of

our productivity tools, it was pretty clear that it wouldn’t be, practically, much of a problem. In fact, we transitioned over the course of a few days, and just carried on.

Obviously, people missed the interaction, but there was no interruption to any of our service to our customers, and, actually, there was a measurable increase in our productivity for a few weeks, probably while people were focussed on not thinking about the pandemic. But, a few years ago, I think it would’ve been devastating.”

Global, once-in-a-lifetime events aside,

Decentralised, scalable systems are probably the only feasible way for banks and other financial institutions to be able to realise the benefit presented by open banking Wayne Freeman, CTO, Mettle (NatWest Group)

A startup needs to be dynamic.

Being able to react to what’s happening in the market, and do so quickly, is fundamental to the business Paulo Machado, Hyve

be made safer than one run on-premise, while acknowledging that, in theory, ‘hosting your applications or your platforms in the public Cloud means it could be accessible by any computer on the planet’.

“So, how you architect appropriately, what tools you use, what partners you use, and how secure your interactions are with these partners – all of those things are really important. But there is a huge paradigm shift; if architected properly, we’ve now seen that, actually, it can be safer than on-premise systems.

“I think we’ve moved, or we’re moving, from a world where the security focus is on building very high walls around something, where once you get over that high wall you have access to the crown jewels. Now, many organisations follow a zero-trust security model, as we do, where every

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security suite measures that can be applied to keep data safe.”

On-premise or remote hosting, he points out that the weakest link in both scenarios is staff who are vulnerable to the psychology, more than the technology, used by cybercriminals to breach systems,.

“So, it’s all about improving awareness within the business itself, and that obviously stems from the top down,” he says.

Cybersecurity is an ever-present threat, but Cloud systems were put to a major incident test by the COVID-19 pandemic, during which lockdowns forced millions of people to work remotely. So, how did it fare under those extraordinary pressures?

Both Machado and Thacker agree that the anytime, any place access provided by the Cloud was vital in keeping their businesses going, while Freeman says: “As CTO of Mettle, I was obviously concerned about how we would even work. But because of our use of Cloud technologies and SaaS platforms, not just to host and serve our customers, but actually for all of

there is another, more permanent change to the financial landscape that, according to Freeman and Thacker, wouldn’t have got as far, nor gone as fast, without the Cloud – and that’s open banking.

“Decentralised, scalable systems are probably the only feasible way for banks and other financial institutions to be able to realise the benefit presented by open banking,” says Freeman.

“There’s obviously a need to have a home for the vast amount of data it creates, and data within all of the institutions, moving in lots of different directions. “ The whole piece is about flexibility and speed of change. We build and ship features every day now into Cloud environments. I don’t think that was possible before.”

Thacker is in no doubt of the Cloud’s impact: “If Cloud wasn’t around, and people were still relying on datacentres, would the uptake of open banking have been as quick among businesses?

“My gut feeling is it wouldn’t have.” www.fintechf.com

THE CLOUD: GROUND RULES

Above and beyond When the pandemic prompted a huge uplift in demand for digital trading services, Saxo Bank responded by cranking up the Cloud migration that was already underway.

Group CIO, Ashok Kalyanswamy, gives an insight into the journey

IT teams within established financial institutions (FIs) often find themselves managing the tensions between sunk costs in legacy hardware and improved functionality offered by the latest shiny new thing as they strive to ensure the tech stack runs smoothly.

The outcome of that conflict makes itself felt across the organisation. Business units – and, ultimately, the FI’s users – rely ffnews.com

increasingly on super-fast databases to help process decisions and information flows. A capable and up-to-date tech stack isn’t just the IT teams’ concern, then: it affects how other departments can expand the portfolio of products and solutions they make available.

But what if the build cost of such a system is so great, and the speed of progress so fast, that it’s outdated before the organisation can see a return on investment? How can existing institutions offer the quality that customers expect without spending millions overhauling their infrastructure?

The online trading and investment specialist Saxo Bank decided that the way to avoid facing both those issues was by beginning a journey to the Cloud in 2018.

“Cloud enables scale, volume, processing, and computer power,” says Ashok Kalyanswamy, group CIO at Saxo Bank. “It’s like being in a shopping mall – suddenly, there’s a whole bunch of services you don’t have to build yourself; they’re available in

the Cloud, as software-as-a-service, which you can use to augment and drive information and decision-making.”

Two years after Saxo Bank announced that it was moving its entire tech stack to Microsoft Azure to speed up its digital transition, the events of 2020 prompted a record number of investor clients to join the bank, which is best known for its award-winning SaxoTraderGO platform, a complex and feature-rich application offering a unified web, mobile and desktop trading front-end. It became very clear that on-demand scalability was non-negotiable and validated Saxo’s decision to begin the transition to the Cloud back in 2018.

It’s significant that, under those pressures, it became the first (and so far only) bank to achieve the highest Security, Trust & Assurance Registry (STAR) grade available from the Cloud Security Alliance (CSA) for its management protocols and procedures.

So, what has this progressive new approach to its tech stack allowed Saxo Bank to achieve?

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THE CLOUD: GROUND RULES “A tremendous amount of organisational agility,” says Kalyanswamy.

“And that’s because, suddenly, people don’t have to make large copies of data to then go away and do their own thing. You can have virtual teams, working with their own view of good, clean data, in parallel. You can spin off, you can orchestrate, and you don’t have to worry about ordering servers, and being locked into a hardware.”

Organisational agility is something that may be greeted with a groan of despair in ever achieving it. Updating a user’s system is one thing, but ensuring that any updates run smoothly with infrastructure elsewhere, especially in large financial institutions, can be a real chore. That’s why successfully adopting a Cloud approach requires the organisation to undertake some serious groundwork. Saxo Bank, for example, spent a year building what it describes as its own ‘Cloud Foundation’, featuring around 77 critical controls to ensure that criteria around the governance, technology, legal and operational framework were all met.

Kalyanswamy believes that by keeping everyone in the organisation on the same diversified infrastructure but at the same time staying consistent within this well-defined framework, users don’t have to suffer from reduced interoperability or challenging inconsistency.

“Cloud enables autonomy for different application teams, which is super-important, but it has to be managed in a way that everybody doesn’t go off the reservation,” he says.

Implemented with a solid foundation, Cloud allows organisations to facilitate ‘autonomous teams, but with the consistency of use, a methodology, and a platform, that lets people scale in many, many dimensions and deliver value faster’, according to Kalyanswamy.

And what of organisations that don’t have the capacity to undertake a Cloud migration as ambitious as Saxo Bank’s?

Well, the good news is that there is a neat way to build up similar capability, “A big part of our business is also partnerships and white labels, because we have an open API itself as a product,” explains Kalyanswamy.

For smaller or regional players without the means to assemble their own complex infrastructure, licences and technology to support trading and investment services, the Saxo Bank white-label proposition is an

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obvious way to achieve the same ends at a fraction of the effort and expense.

“To get licences and technology in place costs a lot of money and takes a lot of time, but by white-labelling, they can own the user journey and use APIs behind the scenes,” says Kalyanswamy.

“The Saxo API also offers various other insights and services around AI and translation… it’s available in the Cloud, as software-as-a-service, which you can use it to augment and drive information and decision-making.”

Now three years into Saxo’s journey to the Cloud, Kalyanswamy is curious to see how the accelerated speed of queries

I spy efficiencies: But you need a good framework to operate in

“There’s no point giving yesterday’s news of the markets to traders today. You need to help them make trading or investment decisions in real time, based on news feeds, Twitter feeds, etc,” says Kalyanswamy.

“Similarly, it’s helpful to know what your client’s interests are, what they trade and what they could be interested in trading.”

CHOOSE YOUR OWN CLOUD In this environment, the beauty of using Cloud solutions, is that it doesn’t have to be a case of one-size-fits-all, believes Kalyanswamy. An organisation with existing strengths in its software portfolio, or with particularly esoteric demands in one specific area that a white-label solution is unable to cover, can easily cherry-pick what to adopt.

“Almost like choosing off a menu, you can say ‘I want this service, this service and this service’ and glue them together with a well-defined API, which you can then integrate and merge to provide more services,” Kalyanswamy suggests.

All of this is particularly important in the context of what’s happening to capital markets, where the speed of change means products and consumer solutions need to be more readily updated than ever before.

“Things are going to evolve much faster yet,” says Kalyanswamy.

“So, to keep up with technology in order to benefit the customer, you need to stand on the shoulders of giants.”

The Saxo model has allowed the bank to deliver speed at the core of its product proposition. New Cloud-streaming servers can be spun up in Kubernetes in under 10 seconds, allowing the investment platform infrastructure to scale on-demand, almost instantaneously.

For organisations considering a similar approach, it’s worth considering what this has allowed Saxo Bank to achieve.

It took 25 years for it to reach the DKK 100 billion milestone; over the past four years it’s added an additional DKK 500 billion in clients’ assets.

Only time will tell how far much further Saxo Bank’s journey to the Cloud will take it.

Cloud enables autonomy for different application teams, which is super-important, but it has to be managed in a way that everybody doesn’t go off the reservation

and visibility of data that it enables across the organisation – and, indeed, between organisations – plays out. “‘People say, data is the lifeblood of digital.

But how about the cleanliness of data?

And who defines what good looks like?” he asks. “I’m really interested to see how Cloud-based technology can maybe enable institutions of various different geographies and sizes to connect disparate systems to prevent the rubbish in, and rubbish out scenario.”

That’s likely to determine which banks excel, and which fall behind in an intensely fast and competitive trading landscape, in which the most successful participants are really only worth what they know – and it’s down to players like Saxo to tell them.

www.fintechf.com

More than 400 million Europeans have a bank account Why don’t you let them connect and pay with it?

Frictionless payments Real-time financial data Privacy by design

Say hello to open banking that simply works.

THE CLOUD: US BANKING

Unlocking the future

America’s KeyBank had already begun its journey to the Cloud when the pandemic struck. Here, its Head of Digital for Commercial Banking, Jonas Ng, explains how the technology not only rose to the crisis, but has given the bank a head start in a vastly-changed landscape For a nation at the heart of so much of the world’s technology revolution, the enduring love so many Americans have for cash, cheques and plastic cards has been a puzzling paradox.

But there’s now abundant evidence that, with physical restrictions forced on societies by the COVID-19 pandemic, their affection for traditional forms of payment is being replaced.

A recent US survey by respected market watchers McKinsey found that four-outof-five Americans made some form of digital payment in 2021. But that’s just part of a change in consumer behaviours that’s driving banks in the States to adopt a new infrastructure.

Lockdowns have supercharged a wider dash to digital by organisations, including banks, that previously heavily relied on face-to-face business; and they have had to bring their customers – many of whom had been kicking and screaming against it for years – with them.

COVID has been the accelerator for many financial institutions to tear up traditional banking rule books and enlist the help of third-party, Cloud-based providers to implement the transition to a new digital way of working.

One such organisation is KeyBank, which, with $181billion in assets, a $3.5billion annual revenue, 17,000 full-time equivalent employees and 1,000 branches across 15 states, sits at around number 20 in the league table of US banking institutions. ffnews.com

With a history that can be traced back to 1825, tradition runs deep in the DNA of the Cleveland, Ohio-based bank.

However, as Jonas Ng, its head of digital for commercial banking, explains, its pre-pandemic decision to begin moving to a Cloud environment, enabled it to quickly scale up its digital offering to meet demand when the pandemic forced it to temporarily shutter its counters.

“Cloud was the right place for us to be, at the right time,” recalls Ng. “There was this sea change in the way that customers were interacting with their banks, adopting these new channels.

“The sheer volume of new users on all of our digital assets and digital properties meant we had to scale up very quickly.

We have an almost immeasurable amount of data. But with big data comes really big challenges. It’s a monster to try and get your arms around, to manage the data ecosystem And these were customers who had been resisting those channels for years, even though we had enabled online, mobile and phone banking decades ago.”

Ng, who was working with Cloud technology in the early days of Amazon Web Services (AWS) and Microsoft

Azure, recalls how the focus, back then, was on the speed of software development that Cloud enabled – before the penny dropped that what Cloud services were really about was business growth at lower cost.

Describing that moment of realisation, he says: “We were playing around with Cloud computing and platform-as-a-service at the business I was with at the time, just to see if it would make us faster with our software delivery and development methodologies. We were really trying to get to weekly, if not daily, sprints and releases, and we thought Cloud could help us.

“But the reality is that Cloud computing is about efficiency. It’s about scale.

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THE CLOUD: US BANKING Maintaining hardware and software, developing new applications and distributed applications, and so on, requires a lot of manpower, a lot of time, a lot of money, and a lot of investment. Cloud computing can do all of that at scale and very simply.

“Banks no longer have to divert their own treasure, their own resources, their own expertise towards maintaining some of this apparatus and infrastructure. Instead, they can focus on the things that matter most; the things that are client-facing, the things they make money on.”

Initially, he says, the thought of banks ‘handing the keys to the server room’ to an off-prem third party not under its direct control or governance was considered ‘absurd’. But then came an acceptance that specialised Cloud-based providers, which could operate at vast scale, were much better-placed than individual banks to engage in the continual war of attrition against fraud, and that was a tipping point.

“We started to realise that we were willing to use them because of what we’d get out of it. Because it is really hard for individual companies, with fairly finite resources, in our little siloed environments, to constantly fight this battle.

“A Cloud provider can do it at scale for tens of thousands of clients, or even hundreds of thousands of users of those Cloud services. So, they’re going to be better, if they’re not already better, than anything we are doing on-prem.”

KeyBank, which processes more than four billion records every day, and moves that data to more than 40 downstream systems, was using about 150 servers, with more than 30 petabytes stored in a Teradata environment, when it took the decision to move to Google Cloud in 2019.

It had started hitting the limits of what an on-premise data warehouse could do and wanted to open up new analytics capabilities for its teams. In moving to a Cloud architecture, it says it aimed to ‘get the performance of Teradata at the cost of Hadoop (a collection of open-source software utilities), but on a single platform’.

By 2020, it was seeing three-to-four times faster query performance, and the cost of those queries was coming down.

“One of the first places KeyBank has tried to invest in, in Cloud solutions, is around reporting, data, analytics and business intelligence,” says Ng. “We have a treasure of data, an almost immeasurable amount.

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But with big data comes really big challenges. It’s a monster to try to get your arms around. We were fighting an uphill battle for years, just trying to manage this data ecosystem and trying not to let our data lake become a data swamp.

“We started considering whether or not Cloud providers might be the better path to go down for analytics, because, number one, they have economies of scale when it comes to expertise. And, number two, they just have the sheer raw horsepower, the computing horsepower, that is needed, to be able to churn out some of those analytics, some of this business intelligence.”

EMBRACING NEW MARKETS Since moving to Cloud, KeyBank has made some significant changes to its business.

Healthy move: The Cloud will power KeyBank's new offer to medics

KeyBank is involved in another major project – to develop an advanced mortgage platform which, again, will involve collaboration with third-party specialists. That’s a topic, he says, which is under constant discussion at KeyBank.

“The mortgage platform is a perfect example of whether to use Cloud or third parties and hosted-off-prem types of solution. This is a debate that we have continuously among our senior leadership at KeyBank, and it spans business, information technology and digital: ‘Are we going to build? Or do we rent, or buy, or lease, or partner? Or rent with an option to buy? Do we go with on-prem? Do we try to build it ourselves? Or do we go with a Cloud provider, which actually spends every waking minute doing some of these pieces of the project?’.

“We’re going to process tens, if not hundreds of thousands of mortgages, but a Cloud provider might very well be doing millions. They not only have economies of scale with the technology; they also probably have economies of scale with the data. Their models, their AI, is going to learn way faster than anything that we could ever hope to stand up by ourselves.

And I can tell you that mortgages are a very time-intensive, labour-intensive business for a bank like us. Historically, it could take customers anywhere between 20 and 120 days to get through that mortgage process.

“There are a number of things that we are looking at to make parts of that process that much more efficient, much more user-friendly, much faster.”

Circling back to McKinsey’s digital payments survey, it says financial institutions will have to continue to step up their digital offer to maintain pace with burgeoning US consumer demand, and that it will be ‘fascinating to see how these digital trends progress in 2022’s survey’.

KeyBank is well aware that the digital genie is now out of the bottle. So, what should established institutions do to thrive under its spell?

“Leverage your strengths and work with partners that bring other things to the table,” is Ng’s well-informed advice.

Banks no longer have to divert their own treasure, their own resources, their own expertise towards maintaining some of this apparatus and infrastructure

It recently created a digital national bank specialising in the US healthcare market, having acquired digital lending platform Laurel Road, which largely provides student loan refinancing for newly-qualified doctors and dentists.

To deliver that initiative as well as wider digital transformation of the core organisation, KeyBank employed Confluent’s Cloud-based platform for data in motion, and has set up an internal centre of excellence to help application development teams make the most of technologies such as Confluent and Google Apigee, to drive new products and improve customer experiences.

www.fintechf.com

THE CLOUD: INFRASTRUCTURE

Up, up and away?

The adoption of Cloud technology was accelerated during the pandemic, but some institutions are still cautious about further implementation. Jason Ang, SmartStream’s Product Manager for Transaction Lifecycle Management Collateral Management, addresses their concerns head on The Sibos 2021 virtual conference takes an in-depth look at how the industry can emerge from the disruption of the past year stronger than ever by exploring four connected themes: digital acceleration, managing risk, transformative technology and banking on change. And if there is one technology that speaks to all of those, it’s Cloud.

Adoption of Cloud technology rocketed during the pandemic. Microsoft CEO Satya Nadella is reported as saying the company saw two years of digital transformation in two months as its customers moved to Cloud-hosted solutions. The catalyst in financial services was the need to preserve critical functions amidst a dramatic shift to homeworking during successive lockdowns.

Cloud went from being a potential future option that many institutions remained sceptical of, to an absolute necessity for preserving competitiveness in an increasingly challenging marketplace.

A number of major players were bellwethers of the sudden sea change, including HSBC, which reached a strategic Cloud agreement with Amazon

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Web Services (AWS), Deutsche Bank with its announcement of a 10-year partnership with Google Cloud, and Santander’s decision to migrate more than 200 of its servers into the Cloud on a daily basis this year as part of a transformation it plans to complete by 2023.

Cloud solutions provide the flexibility required to support the blended home and office working – and international collaboration across workforces – that became a feature for many firms in the immediate aftermath of the pandemic, and which now look set to stay. According to PwC, 40 per cent of financial services companies have 60 per cent or more of their employees now operating from home at least once per week, compared to 29 per cent immediately prior to COVID-19.

Cloud enables such anywhere, any-time continuity, ensuring services are maintained, no matter what. It took a crisis for the technology to be trusted to deliver on that promise, though: an Association for Financial Markets in Europe and PwC survey discovered that 2020 saw a 30 per cent rise in Cloud adoption compared to 2018, with

Gartner predicting an 18 per cent rise in companies’ spend on Cloud solutions in 2021 alone.

Now they’ve made the leap, organisations are turning their attention to optimising the potential of the Cloud, while keeping a close eye on their security and regulatory compliance.

One organisation at the heart of that journey is transaction management technology specialist and Sibos sponsor, SmartStream, whose customers include more than 70 of the world’s top 100 banks. It made its own commitment to the Cloud two years ago and has mentored many of its clients through the process of transition.

We spoke to Jason Ang, SmartStream product manager for transaction lifecycle management (TLM) collateral management, about the opportunities www.fintechf.com

The wisdom of the Cloud: A crisis accelerated adoption, but the case had already been made

The idea of handing over control to an outside provider is sometimes scary for a financial institution.

Forced upgrades are a particular concern when those institutions are stringently regulated ffnews.com

that lie ahead in the Cloud, why some institutions remain unconvinced despite the unprecedented wave of adoption, and how those that do adopt a Cloud-based strategy can ensure they do it right.

A former senior executive with Deutsche Bank, Ang has been on the inside of some of those decision-making processes and understands institutions’ concerns. As he tells us here, he’s now also convinced of the advantages of Cloud-based services.

“SmartStream created Cloud-based, on-demand services because we know there are some key value propositions that are attractive to our clients.

“In terms of cost, it enables a mutualisation of personnel and hardware, which means that instead of each organisation having staff assigned to a particular hardware or software, we maintain it for them. This controls the cost and allows us to provide a very compelling use case. Internal hardware can also be very expensive for firms to maintain themselves, given current datacentre structures.

“Then there is the question of expertise. Rather than having one or two people within an organisation understanding our software, we have a full team that knows how best to run and develop it, so our clients can rely on us to take care of that for them.

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THE CLOUD: INFRASTRUCTURE “The third benefit is scalability.

Organisations can increase or decrease their capacity as needed, without having to physically add more machines, and only pay for what they use.

“While scalability is a (much-talkedabout) key performance indicator (KPI), I wouldn’t say it’s always the principle one.

It depends on the organisation. For some, it absolutely is, others may not be looking to scale dramatically but just want a turnkey solution so they can focus on their business rather than having a team that’s trying to maintain this kind of software.

Whether an organisation is looking to scale or not, though, it still needs expertise, quality and stability within its Cloud systems while controlling the costs.”

A SAFE CLOUD PATHWAY So, given the upsides, what’s still holding some businesses back from going further with Cloud adoption? There are several, understandable reasons why financial organisations might be wary of stepping into a Cloud-based environment, says Ang. And he understands their concerns.

“Security is paramount in people’s minds, especially the risk of penetration by hackers or other unscrupulous players. That’s why SmartStream chooses the best partners to work with: the likes of AWS and Azure spend billions on making sure their environments are secure – way more than any one client’s individual security budget.

“The other aspect of security that might concern them is the comingling of data.

A lot of Cloud services organisations pool all their clients’ data into one single system and the fear there, especially among larger organisations, is of data breaches or leaks. Where data is comingled but logically separated, a simple error in coding, for example, could result in a data breach. This is why SmartStream uses single-tenant, virtual private Clouds for each client.

“Then we come to the issue of control.

The idea of handing over control to an outside provider is sometimes scary for a financial institution. Forced upgrades are a particular concern when those institutions are stringently regulated. If a Cloud-hosted application forces them to upgrade, they may not have enough time to do all the connectivity and integration tests they wish to, and that’s too much risk for some institutions to be comfortable with.

If they don’t have enough time to test,

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that has an impact on quality, too. So, SmartStream doesn’t force clients to upgrade. Instead, it works with its partners to their schedules.

“Another risk is in not knowing the financial wellbeing and skills resource of their technology partner, and the related fear among financial institutions is of downtime that’s out of their control.”

On that score, SmartStream’s 40-plus years of experience in providing uninterrupted services for critical processes, in the most testing conditions, for blue-chip clients, coupled with a trophy case of awards, inspires confidence.

Cloud providers like AWS and Azure have teams upon teams of experts and SmartStream’s use cases are created with them as trusted partners because we want to build a better environment, with the best people, for our clients

“Those are some of the reasons why businesses are wary about moving operations to the Cloud,” says Ang. “But, as you see, SmartStream mitigates those risks and many, many clients are moving to our on-demand service as a result.”

Having helped organisations cope with the strains caused by the pandemic, does Ang believe Cloud technology will make the industry more resilient against future shocks?

“That depends on how the Cloud

technology is administered. It’s true that a lot of benefits were realised during the pandemic because the people who have been administrating and running Cloud-based systems are used to what the crisis forced traditional organisations to do, which is to basically run their businesses remotely. On top of that, volumes skyrocketed in some cases, which is where people began to see the advantage of scalability in the Cloud, and being able to add capacity without any issues arising from that. There’s no doubt that really helped some of SmartStream’s clients to manage the pandemic better.

“In terms of the future, that depends on the execution and risk tolerance of the organisation involved. Cloud providers like AWS and Azure have teams upon teams of experts in their organisations and SmartStream’s use cases are created with them as trusted partners because we want to build a better environment, with the best people, for our clients.

“Each organisation has unique needs, and we make sure we drive our solutions to help them. To do that, we bring a lot of collective expertise and experience to the table, not just in terms of technology, but also in being able to collaborate with, and have good relationships with, clients. In collateral management, we’ve decades-long partnerships with some clients, and so we’ve established a deep level of trust. And, because we have such a large set of clients, we can implement best of breed. So, all our clients benefit from this collaboration.

“I’m currently looking at data holistically, across organisations, for instance. What do people use our data for and how can we use data to help enhance our own processes and those of our clients?

There are questions around liquidity and the best use of assets across an organisation, providing data through APIs to downstream and upstream systems to determine pre-trade or post-trade optimisation. And then looking to surface these insights by having the data in a location where organisations can then use Cloud capabilities to scale up AI, giving them insights into cross-organisational data.

“Because SmartStream has a very powerful innovations lab that is driving AI through our solutions, the latter is one of the things we’re really looking forward to working on.” www.fintechf.com

FINTECH FOCUS: CREATIVE MANAGEMENT

TALES FROM A Animation studio Pixar is a Cinderella story – with Steve Jobs painted as the prince who swept it off its feet. But, behind the scenes, there was also Lawrence Levy, trying to be ‘the fun adult in the room, willing to make the hard decisions’ as the studio’s CFO. Are you sitting comfortably? Then let’s begin…

It looked like the fairytale might finally be coming to an end.

The Walt Disney Company, the creative juggernaut behind some of the 20th century’s most memorable films, had entered the new millennium on unsure footing. Rival animators were conquering the third dimension, CGI technology was fizzing with new ideas, and Disney’s sprawling studios, in the beating heart of Hollywood, suddenly felt a long way from the action down in Silicon Valley.

Happily, Disney had a long-standing distribution deal with Pixar, the animation upstart from San Francisco Bay. Unhappily, that partnership only exposed the creative ennui back in Hollywood.

Disney’s 2004 Home On The Range flopped at the box office, taking just $145million worldwide. Pixar’s Finding Nemo (2003) and The Incredibles

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(2004), on the other hand, had netted $871million and $631million, respectively.

Come the autumn of 2004, even that success-by-association was under threat, with Disney’s then-CEO Michael Eisner falling out with Steve Jobs, who’d been running Pixar since 1986, over a new distribution deal. Pixar reached out to other distributors, and Disney watched on, helpless. Meanwhile, isolated in their creative cocoon, Pixar’s animators would start working on a new story, initially titled Heliums, about an embittered old balloon salesman, stubbornly clinging to the past as the world raced on without him.

By the time Heliums, now called Up, hit the box office in 2009, Eisner was out, Jobs was in the ascendant, and Disney had merged with Pixar, creating the archetypal case study for successful competitor acquisitions.

Up, of course, ended on a high, too, the grumpy old children’s entertainer renewed and energised by his youthful sidekick – art imitating

life, perhaps? The film won two Academy Awards and was only the second animated feature in history, after Disney’s 1991 classic Beauty And The Beast, to receive a nomination for Best Picture.

A PARALLEL UNIVERSE So, what’s all this got to do with fintech?

There are teachings in the Disney-Pixar merger. Their story aligns neatly with the fraught incumbent-challenger relationship in the financial services sector – and that enduring tension between secure stability and risk-taking innovation. Having played his part in slaying the dragon of financial uncertainty at Pixar, the studio’s former executive VP and CFO, Lawrence Levy, knows what it takes to walk the plank between ambitious overreach and staid consolidation.

“It doesn’t matter if you’re making animated feature films or the next great fintech breakthrough, innovation companies live on the precipice of two things,” Levy explains. “On the one side, there’s the dream, the vision: ‘we’re going to make the world better, we’re going to make better products in this space’. And then, on the other side, there are the practicalities of it.

The fundraising, the profitability, the cash. You can’t run out of money.”

It’s all very well shooting for the moon, but if you can only afford the jet fuel to get halfway, you might as well have stayed on Earth. Pixar was initially funded by a mere $5million in cash when Steve Jobs bought the studio’s technology rights from George Lucas in 1986. As Levy explains, that’s an unenviable financial position for any incoming CFO. www.fintechf.com

“When I joined Pixar, it was making Toy Story and it had 200 people working on it. It takes four to five years to make one film,” he says. “Then they stop making that film and they make another, so every four or five years, you get a film. Well, there’s no way you can build a business by releasing a film every four or five years.

You’ve got to increase it.

“So we had this huge, months-long discussion: how often could Pixar make films? Would it be every four years? Every three years? Every one and a half years?

As the CFO, I’m saying ‘you can’t make them often enough… [let’s make them] twice a year!’. But quickly you come to see that if you push on that too hard, you’ll dampen the creativity that’s needed to make a great film.”

So, Levy opted for patience. Like Steve Jobs, who’d had no previous experience in the entertainment industry, he was willing, initially, to listen and learn – even as the financial dashboard lit up with warning lights.

Toy Story was distributed by Disney to cinemas in 1995, with Jobs admitting ‘if Toy Story is a modest hit – say $75million at the box office, we’ll both break even’. It ended up taking $350million worldwide, setting up a four-film franchise (and counting) that would be worth billions.

“I learned that stories take time to percolate,” says Levy. “You can’t force creativity; there’s a certain organic lifecycle to it. And you can’t control innovation – by its nature, it’s not going to just lay down and go according to your timetable.”

But, let’s face it, the developers and designers working on today’s fintech products would, in an ideal world, go to infinity and beyond to perfect their offering, forever asking for more time for fine-tuning and finesse. So, a CFO shouldn’t apply no pressure at all, surely? Levy, who after his stint at Pixar went off to study eastern philosophy, looks at this need for balance in terms of finding the ‘middle way’.

“In the context of businesses, I put it this way. You have the bureaucratic function that says we’re just here to get things done: to build, acquire, to measure, to produce. On the other side, there’s the free spirit, or the artistic function in life, interested in experience. ffnews.com

The CFO should live right on the edge of that precipice... one eye on the practicalities – the money – but also on the dream- building

Middle man: The CFO holds the line between creativity and making enough cash, says Levy

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FINTECH FOCUS: CREATIVE MANAGEMENT a decisive no. Even if office politics would “What the middle way would say is that, have senior managers poring over if you’re stuck in one of those extremes, technical details, the best way to manage you’re not going to reach good outcomes. firms operating on the cutting edge is to If everything in life is bureaucratic, you leave decision-making to the experts. might end up wondering ‘wow, did I ever “Steve and I never paid attention to the really live?’, but if you’re stuck on the politics. It didn’t matter if you were the spiritual side, the artistic side, you may lack lowliest person in the company or the momentum in life, and become frustrated highest person in the company, if you by that. People, individuals, businesses, and didn’t have something major to bring to organisations all get stuck in these places. the table, you weren’t going to be in the “In my mind, the CFO should live right on room. Compare that to Hollywood where, the edge of that precipice. It’s an generally speaking, the executives are opportunity to be a person that is keeping involved in everything.” one eye on both sides. One eye on Levy’s unlikely to draw any the practicalities – the money, unfavourable comparisons right, you know, the stuff Collaboration is that we need – but also an art, but I often say with Disney, but it’s fair to say that, with the on the dream-building. that collaboration only studio off the boil in the “Pixar really did early 2000s, something navigate its way to requires two things: you about the culture just the middle. It was have to get the right wasn’t right. Ultimately, able to have enough people, and you have to it was moving too slowly, bureaucracy, enough too cautiously. administration, enough listen to them Like today’s incumbent capital, but without killing financial institutions, Disney had the creative spirit.” built its Cinderella Castle, complete with It’s a sad truth that, piled up on the a seemingly impregnable moat. But the innovation scrapheap, are fantastic fintech paint was flaking, the wheels coming off products that ran out of funding, and the pumpkin carriage. well-funded in-house ventures that, cowed “If you’re just managing a business that’s

by Gantt charts and KPIs, lacked the space been around forever, you’re in maintenance to be inventive. According to Levy, finding mode,” says Levy. “But today, most the middle path in that would come by companies are trying to innovate. So I think creating a culture, from the C-suite down, it’s a great idea for large organisations to of smart collaboration – and sensitivity to try to remake themselves. But that may the people doing the dream-making. take 50 years, and they’ll lose momentum.

“I’m constantly telling businesses ‘have Large banks have this enormous inertia, you ever even paid attention to your and they vastly underestimate what it culture? Do you even know what your takes to move their culture is?’. Some people reply ‘I didn’t even culture to be like know we had a culture.’ But culture is challengers. So, if something that seeps into every detail: they could acquire how we speak to each other, how we some small work together, how we set up meetings. companies, to really “It’s literally in the details, in how you let that culture come in, collaborate. Collaboration is an art, but it’s a great idea.”

I often say that collaboration only requires two things: you have to get the right people, and you have to listen to them.”

As much as getting the right people in the room is important, Levy also believes effective collaboration has to be about excluding people from the process, too.

Should Steve Jobs, technology visionary, have a say in the trajectory of Nemo’s adventure; should Levy be given a vote when sketches of WALL-E are compared? Levy’s answer is

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With the pandemic changing the state of play, we’ve seen a number of mergers and acquisitions that look a lot more like scavenging than strategy. Those firms picking over the bones of disgraced Wirecard in late 2020 can’t have been doing it for the culture; it was for the assets. But assets alone – as all-powerful Disney could attest in the early 2000s – can’t deliver real innovation.

“With Pixar, every day we just couldn’t understand why Disney didn’t just crush us out of existence,” Levy admits. "They had infinitely more resources, they had the market access, they had everything.”

The Pixar effect: Running the studio changed Steve Jobs, says Levy

You can’t control innovation – by its nature, it’s not going to just lay down and go according to your timetable

It’s been years now since incumbents recognised the value of fintech firms. Few have managed to adapt fast enough, and many have failed to realise that partnerships and mergers don’t just head off competition: they drive change, invention and creative brilliance.

“The Pixar acquisition was actually all about infecting Disney with www.fintechf.com

ffnews.com

of his career,” says Levy. “But he learned how to run a creative company. So, by the time he got back to Apple in 1997, he had a whole new experience under his belt, learning how to be a different kind of CEO, and also learning the entertainment business. So, post-Pixar Steve was very different, and I think that’s sometimes not recognised.”

You could argue it’s the CFO who’s often not recognised – whether in film or fintech. They’re too often regarded as bespectacled number-crunchers, not innovation drivers. “I’m not a fan of every day we just this notion that the CFO is the couldn’t understand why numbers guy,” says Levy. “There Disney didn’t just crush us out are certainly people whose job it to focus on numbers, but the of existence. They had infinitely isCFO should see themselves as more resources, they had the bigger than that – broader than that. They’re the person catalysing market access, they had health within the company, trying to everything get all the forces within it aligned and working together.”

Like Woody, coordinating a rescue with Buzz, Rex and Mr Potato Head, or Mr Incredible trying to keep his family from bickering while they’re saving the world, the CFO has a broad diplomatic mandate.

That said, Levy suggests CFOs don’t just approach problems with stoicism.

“Try to be the fun adult in the room,” he says. “Not so serious, but also, you know, willing to make the hard decisions.”

For Pixar and Disney, those difficult decisions have all but guaranteed a never-ending story of fun, fantastical flicks for the world to enjoy.

o A li Paterso t ld n by Alex K e

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and further from Andy’s toy box; and even a CGI Carrie Fisher feature in the concluding scenes of Rogue One. It’s difficult not to see Levy and Jobs as the superheroes of this story. Their successful collaboration seems to have had a ripple effect that’s been felt in movie theatres and living rooms across the world.

Taking Pixar from an undefined technology company to a $7.4billion sale is, arguably, one of the great business success stories of our time. Steve Jobs, who’d owned half of Pixar, came out with a seven per cent stake in Disney, worth

$3.9billion. The next largest individual shareholder, previous CEO Michael Eisner, held just 1.7 per cent.

“I think that Pixar had a big effect on Steve, a real big effect,” says Levy. "It was an industry that he didn’t know, so Steve had to be humble.”

Bear in mind that Jobs had left his first stint at Apple under a gigantic cloud and in the middle of a media storm.

“He was really being written off; I think it was the With Pixar, lowest point

As Wri to tt

Pixar’s culture, rather than the other way round,” says Levy. “It worked so well that Bob Iger, the new Disney CEO, then went on this spree and bought Lucasfilm, The Avengers, and everything’s led to the modern Disney. But Pixar was the first of those acquisitions in that new era.”

Whether in a land, a galaxy or a comic universe far, far away, it’s paid for Disney to bring creative, innovative minds as close as possible over the past 15 years.

And film fans benefit from that, watching Iron Man share a screen with Captain America; Buzz and Woody venture further

l T ha t's a l

fo

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DIGITAL TRANSFORMATION: : NEXT GEN

More socially and environmentally conscious customers are on the horizon. So how do financial providers meet their needs now – and in the future? Here’s a pan-European view from Ray Brash of PPS, Andréa Ganovelli of Green-Got, and Jes Hennig from Pockid An uptick in regulation determining organisations’ environmental, social and governance (ESG) responsibilities and the emergence of a new generation of ‘conscious consumers’ are exerting a transformational pressure on banks and other financial service providers – not just superficially, but at the core of their organisations.

And the push-me, pull-me effect of compliance and customer demand is affecting the entire supply chain.

Here, Ray Brash, co-founder and CEO of European processor/issuer PPS, Andréa Ganovelli, co-founder and CEO of upcoming sustainable French retail bank Green-Got, whose tagline is ‘technology at the service of ecology’, and Jes Hennig co-founder and CEO of Pockid, the German banking app for young people (both of whom work with PPS) offer their insights on what Generations Y and Z want – and need – from a bank.

THE FINTECH MAGAZINE: People want 'more green' businesses – and younger generations of consumers (Gen Z in particular) have been vocal on that. Their demands extend to financial services, too. So, how can that sector ensure it responds and sees a commercial return?

RAY BRASH: If you think about it, cash is not a particularly great environmental product. It’s quite an intensive manufacturing process and it has to be transported, which requires big trucks.

Historically, plastic cards have had issues such as PVC content. Reducing plastic cards and cash both have a commercial benefit for the economies they’re in, and they also have an environmental benefit. I think we’ve seen those two impacts during COVID.

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You’re seeing more and more institutions producing products that are, effectively, card-based payments without a physical card, and, if the consumer wants one, that’s extra. That’s encouraging consumers to use digital payments, which are much greener, and, of course, from a commercial point of view, it’s saving costs for the fintech/bank.

ANDRÉA GANOVELLI: Paying for something is the end of every kind of production, and, when you produce something, you create a CO2 footprint.

A digital payment application can help people to understand the environmental impact of what they are consuming.

At Green-Got, we have an app connected to your card, which can help customers understand their CO2 footprint – because to reduce it, you first you need to know it, right? And then we can give them further advice. So, payments are key.

The payment, in terms of digital commerce, can quite easily drive a lot of social good Ray Brash, PPS

JES HENNIG: Whatever you do, remember that Generation Z are very familiar with sustainability issues, thanks in part to Greta Thunberg’s Fridays For Future campaign, and they are very alert to greenwashing, too. So, if you want to target a product towards them, then, as a company, just make sure you are meeting all of those sustainability requirements.

financial services align themselves with those values?

RB: In terms of digital commerce, I think payments can drive a lot of social good. Amazon is maybe not the best example of a socially forward-looking company, but they have a product called Smile, which is a way of making the same purchases you would make on Amazon, but if you go through its Smile site you make a donation with every purchase – in my case, it goes to my local village hall.

We’ve also seen examples of companies giving card readers to street buskers. The Big Issue magazine [which is sold on the street by homeless people to raise awareness of homelessness in the UK] famously has contactless payments.

And there’s a company called Pennies, for instance, that encourages rounding up to charity at the point of checkout.

So, there are plenty of examples [of e-commerce enabling these values].

As a consumer, you just press a button, it’s taken cvare of, and you feel you’ve done your bit.

TFM: Gen Z might know more than ESG and climate change than most of us here.

TFM: This generation is also said to be more socially conscious. How can www.fintechf.com

But, despite being digitally savvy, they don’t really have a good handle on money. So, how should providers address this problem and how should they communicate with these new users more broadly?

JH: If we look at the high street banking market, especially here in Germany, institutions are being challenged in the adult and corporate field all the time. But they don’t focus on the generation of customers to come.

Let’s start with the problem we want to solve.

This generation is socialised with in-game purchases – through Fortnite, FIFA, League of Legends, and the like – and they use subscription-based services, like Netflix and Spotify.

So, they obviously make e-commerce transactions, but they don’t have a hyper-tailored financial services offering that really helps them enable their digital hobbies and needs, and understands about their digital spending behaviours.

Our own analysis showed that 13-to-16-year-olds make around 20 to 25

microtransactions over a weekend and these transactions each have a value of 10 to 60 euro cents – they are trying to level up in their favourite games, otherwise they are missing out.

Therefore, we can take this use case, put it into our TikTok videos, and explain to our potential future customers why it is so important to have a banking app experience where they see their spending in real time and also how they can set spending limits.

We think it’s important to address this target group with use cases that they experience in their daily lives.

In terms of communicating, it’s about being authentic and also transparent.

We are already the biggest European neobank on TikTok and we have a big mission to help the young generation pay independently, online and offline, with a dedicated and hyper-tailored experience.

RB: PPS works with both Green-Got and Pockid. They bring the ideas and the target audience; our responsibility is to adapt and tailor our services, which, frankly, involve regulation that was never designed for a 13-year-old.

In fact, we started with our first product aimed at teenagers in 2001.

The next generation Future customers are used to in-game and subscription purchases, so will expect user-friendly banking services

ffnews.com

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DIGITAL TRANSFORMATION: NEXT GEN

Speaking their language Young people will engage with banks if the message is authentic and they are transparent

It was called Splash Plastic, for which we had to develop methods of selling financial services to people you couldn’t KYC, which is something most banks thought impossible – but we did it by being creative and really trying to understand the user experience. To do that, we work closely with our partners, and are able to adapt because we manage the regulation, as well as the processing.

Like Jes, I’ve definitely seen that there is a role for fintech in reaching an audience that has not been reached at all by big banks.

If you want to teach them, they need to trust you, and to trust you, you have to talk like a friend Andréa Ganovelli, Green-Got

AG: Huge banks all over the world serve people from 15 to 80 years old. You don’t talk to those people in the same way, but if those banks changed how they communicated, they would lose part of their customer base.

Challenger banks, focussing on Gen Z or Millennials, can talk to them in the same way that they are talking to their friends, which allows us to become an advisor to them. If you want to teach them, they need to trust you, and to trust you, you have to talk like a friend. That’s super-important because, here in France, they don’t know about the financial system, they don’t know

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about the banking system. It’s difficult for them to understand the money flow.

TFM: And, once these young people are customers, how do you keep them?

AG: Firstly, the app has to work.

Younger people were practically born with a phone in their hand. And, if it doesn’t work, they won’t wait for you to fix it – you’ll lose customers because, with so many offers on the market, they'll simply switch to the next one.

Secondly, we are going to grow up with our customers. Our communication will change over time, because the people that we serve, will change over time, too.

We are the same age – all the team at Green-Got is between 25 and 40 years old. We are our target audience, so we know our them perfectly!

JS: Our target group of 14-to-17-year-olds have high disposable income because, in Germany, people start an apprenticeship at 16. But around 50 per cent of this target group has no bank account at all and, in any case, in this country, 90 per cent of the cards distributed by banks are Girocards that you cannot use to pay online – they are used mainly for withdrawing cash and paying in stores.

So, coming back to my earlier point about in-game purchases, subscriptions, and e-commerce transactions, it’s pretty clear that they will quite easily fall in love with a product like Pockid – and this payment behaviour will not stop with the 18th birthday. Therefore, if we manage it,

to become their first bank account, with their first IBAN, and with their first virtual and physical debit Mastercard, we can, with a good experience, lock them in. We, too, will grow with them over time, and let’s see where we will be in five to 10 years.

TFM: How will banking be different for Gen Z when they are their parents’ age now?

JH: We are just at the beginning of the open banking trend. I think, over the next few years, we will see much more about contextual and embedded finance in different value chains, making the user experience even leaner and better. In the end, finance is an enabling industry but, with that, comes responsibility.

Gen Z are very familiar with sustainability issues and they have a good feeling for greenwashing Jes Hennig, Pockid

AG: In France, we have a lot of players now that are dedicated to people with issues around money. Financial inclusion is only going to increase in the future with crypto and the blockchain and that’s super-promising. It has to be regulated, but I think that’s going to have a big impact on the banking and payments industry to such an extent, that, at some point, people won’t use banks. www.fintechf.com

DIGITAL TRANSFORMATION: GENERATION Z Big banks need to adapt for the future, we all acknowledge that. But what’s the best way for them to do so, particularly when it comes to meeting the needs of emerging customers?

COVID-19 and the subsequent lockdowns catapulted investment into digital banking services, as branches shuttered worldwide. And while these changes were undeniably already underway, the pandemic certainly accelerated the technological revolution.

The benefits of this trend– and it’s a well-rehearsed argument – are twofold.

Customers enjoy more personalised services, as and when they need them, while banks can make efficiency savings by migrating transactions from high-cost, analogue channels to digital ones. Everybody wins.

But what about Generation Z – some of whom are not yet out of primary school, while others are just embarking on their careers – the next customer group that banks need to capture? While it’s true that their entire digital experience has been in the age of the iPhone – which, according to Mobiquity’s Ruby Walia, a senior adviser for digital banking, has been an impetus for banks to rework how they interact with all their clients – it would be entirely wrong to assume they eschew any form of human interaction.

Indeed, a survey in November 2021 by UK neo business bank Cynergy, among 500 18 to 34 year olds, revealed they thought bank and customer relationships had suffered due to the digital revolution: 64 per cent

believed it had resulted in a reduced understanding of their customer needs – in fact, they were more disenchanted by the changes than those over 35.

Bank of America invests more than $3billion a year in technology, while also maintaining a branch network of more than 4,000 financial centres in order to offer the ‘high-tech, high-touch’ approach that this more socially-engaged, thoughtful generation appears to demand.

Jorge Camargo, SVP and head of web and app products at the bank, says it understands that customers want access to staff for complex transactions and advice, while acknowledging that all banks need to adopt what Matt Williamson, global VP of financial services at Mobiquity, describes as a ‘three clicks or less’ customer service culture.

In 10 years’ time the last of the TikTok generation will be embarking on careers, moving into higher education, starting families perhaps… and where will banks be then? Pushing up the financial daisies or, having correctly predicted customer needs, getting down with the kids?

Here are five trends that Walia, Williamson and Camargo believe banks need to get right in the next decade if they are to respond to a generation of digitally native, yet environmentally and socially-conscious, customers.

the financial ecosystem that surrounds you will know all kinds of information about you as a consumer, as an individual, and you will feel comfortable sharing that private data because it’s being used to your benefit.”

Banking-as-a-platform and artificially intelligent data analytics will be the technologies that serve up this ubiquitous service, enabled by smartphones on the one hand and open banking on the other.

“Ubiquitous banking will be there with you every step of the way, guiding you through financial decisions you need to make – from small ones such as ‘where should I go for dinner?’ to larger ones like ‘when can I buy a house?’, and providing such services in a seamless, accessible form,” adds Walia.

Jiminy Cricket banking “It’ll be almost as if your bank is now this virtual friend, sitting on your shoulder, following you round as you go about your daily life,” says Walia. “In 10 years’ time,

Z is for...

a ‘TikTok’ generation that will be looking for a new relationship with financial providers in 10 years’ time.

We asked Mobiquity’s Ruby Walia and Matt Williamson, and Jorge Camargo from Bank of America what five key trends will define banking by then 40

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New wave: Gen Z-ers want a more colourful relationship with their bank

www.fintechf.com

Bank of America is among those exploring this Jiminy Cricket-style relationship with consumers. Last year, it launched its Life Plan digital experience, which enables customers to select, prioritise and make progress towards meeting their most important life goals across areas such as finances, family, home, work and leisure.

So far, five million clients have used the personalised banking service.

Fun, entertaining and addictive “By 2030, there are going to be more grandparents than there are grandchildren in the world,” says Camargo. But these aren’t the kind of gramps who wrap their debit cards in silver foil to protect them from fraudsters.

It’ll be almost as if your banker is this virtual thing, sitting on your shoulder Ruby Walia, Mobiquity

“The stereotype of the grandparent that has to go into the branch because they are averse to technology will no longer exist. Rather, the tech-savvy senior will be one that is very comfortable with digital solutions and will go between digital and physical seamlessly.”

Following close behind will be a generation whose experience of the world has been framed by TikTok – small bites of information delivered in a fun, entertaining, addictive format.

Camargo believes it’s only a matter of time before we see the ‘TikTokisation of finance’;banks will learn how to blend financial education into bite-sized content and insights, all the while keeping it an enjoyable and seamless experience for customers – a bit like the social video app.

That will prompt interactions that help banks discover what their customer wants to achieve in life and then, seamlessly, guide them in that direction by using what Camargo calls ‘micro-moments’.

“Learning about finance doesn’t have to feel like a chore,” he says.

“You want customers to think, ‘that’s interesting,’ or ask questions about ffnews.com

changing their behaviour in order to achieve better financial outcomes.”

We saw what TikTok did for sea shanties, perhaps a bank could go viral, too?

‘Hi, I ’m Erica!’

Banks will extend their customer experience by using more channels to enable those interactions.

“It’s going to be less about what’s a preferred channel of interaction and more about the most appropriate channel of interaction at any moment,” says Walia.

Voice technology – such as Bank of America’s virtual voice assistant, Erica, is increasingly popular and particularly helpful if you’re in a private space, such as your car or at home. At other times, and in public spaces, a text-based virtual assistant may be more convenient.

Walia also expects transactions to increasingly start and end on different channels. He paints a picture of

A lot of consumers’ decision-making is going to be about authenticity, and allocating and aligning with brands they feel fit their own values

Matt Williamson, Mobiquity

a customer getting in from work and saying to the room ‘how much do I spend on restaurants?’, to which Erica answers with a number far higher than they imagined. With the Internet of Things having established that the client is alone, a list of restaurants visited in the last month could then be displayed on the big-screen TV for their reference – even if it’s not exactly what they wanted to learn!

“The technology ecosystem is leveraging your surroundings,” says Walia. “The system knows where you are and what your privacy context is, allowing it to move from one channel of interaction to another,”.

The values piece Consumers across all sectors, including banking, are becoming increasingly environmentally and socially aware.

Younger customers often have very different values to previous generations and are hyper-conscious of how and

where their money is spent.

“A lot of their decision-making is about authenticity and aligning with brands that fit their own values, as well as the user experience,” says Williamson.

But, while there is a broad movement towards more socially-responsible governance, banks need to lead by example, he believes. It is not enough, for instance, to say they believe in financial inclusion while not allowing people to pay by cash or cheque, or claiming to be green because it carbon offsets its investments in fossil fuels. Banks must walk the walk.

They could add value from a social perspective through financial education, adds Williamson, given that much of society no longer has the touchpoint of cash for money management.

“Banks can step in and say ‘this is how money management can work for you. If you put 10 bucks aside each month, you can save up a house deposit’,” he adds.

The happiness index Camargo once held a senior role at Disney.

Happiness – and the value it created – was one of his key performance indicators (KPIs). Comparing that with banking might not be as far-fetched as it first appears.

By 2030… the tech-savvy senior will go between digital and physical seamlessly Jorge Camargo, Bank of America

“It’s in the same vein as client satisfaction, client experience and seamlessness,” he says.

The happiness KPI will become ever-more important as banks seek to capture the Gen Z market; as they move from the notion of simply providing financial products to building a more holistic relationship, one where – instead of credit cards, loans and current accounts – banks provide an ever-evolving, end-to-end life management service.

“At Bank of America, the notion of listening to that client satisfaction as a key metric is something that has already had a pervasive impact throughout the organisation,” says Camargo. “And it will be with us for years to come.”

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D I G ITA L CONTENT

O N L I N E NE T WORKIN G

IN PERSON SID E EVEN TS

2022 STAY TUNED

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DIGITAL TRANSFORMATION: EVOLVNG BANKING

A life and death fight for the relevance of banking ...and how to win it!

Kunal Galav and David Alstadter from Mambu, and Microsoft’s Peter Hazou offer up tactical suggestions to banks of all stripes After much posturing and sabre-rattling, the past decade’s standoff between incumbent banks and fintechs has simmered down into a grudging peace.

Olive branches have been tentatively extended in the form of incubators and partnerships. Mergers and acquisitions have made allies of would-be adversaries.

The sector’s even working up a kind of UN, with open banking initiatives promising shared prosperity and opportunity for all.

But while it may seem all quiet on the fintech front, both sides of this phony war are intent on capturing the other’s castle. Traditional banks still long for the dynamism and slick products of the neobanks, while they in turn covet the trust (and deposits) that consumers continue to place in centuries-old financial institutions. These battle lines are shifting, though, in step with consumer expectations, which are rapidly evolving in the wake of the pandemic.

According to former banker Peter Hazou, who now heads up core banking as a solution at Microsoft, the sector is facing ‘a life and death fight for the relevance of banking’. We sat him down with Kunal Galav and David Alstadter, both from Mambu, the Berlin-based SaaS Cloud banking platform, to sketch out tactics in this battle for survival.

Galav and Alstadter bring with them their own crystal balls, given that Mambu’s tagline is ‘ready for what’s next’. The composable banking firm is in harmony with Hazou’s stark prediction. Its recent

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report on the future of retail banking, conducted alongside Financial Times Focus, bears the title Evolve Or Be Extinct.

In a survey of senior bank executives, the report found 58 per cent believed their banks ‘will cease to exist in the next five to 10 years if they don’t change their business model’. Some 67 per cent expect to lose market share within two years if they don’t digitise. The long grass into which executives may dearly wish to kick this ball looks a lot like a kill-zone for careless incumbents.

Why this ramping up of paranoia?

Well, we’ve been through banking’s ‘unbundling’ phase, with fintechs seizing certain under-served and disillusioned customer segments from incumbents by offering them specific product lines and services. Big banks have responded by mimicking the neos’ technology – and particularly their UX. The fintechs have now also begun to feel investor heat. With so few having turned a profit – OakNorth and Starling being honourable exceptions among the first cohort in the UK – they are under pressure to put more customer bums on seats and broaden their offer by bolting on additional services. They’re rebundling in effect, so that they begin to look a lot like the banks they sought to depose. And now banks in both camps face a common enemy: embedded financial services that shift the customer interface away from banks altogether.

As Galav, Mambu’s regional director for advisory in EMEA, puts it: “It was brilliant, back when Monzo came about: simple, intuitive UI, and you could sign up to an

account in minutes. But now that’s table stakes. Everybody has done it. The learning curve is no longer that steep. It’s now about who can really address what the customer is looking for.”

So, with the battle lines now less distinct and banks of all stripes in survival mode, what are the five winning tactics the experts from Mambu and Microsoft believe should be employed?

WIN HEARTS AND MINDS At the beginning of 2020, Mambu was selected by TNEX, the world’s first ‘gametech’ digital bank designed 'exclusively for Vietnamese youth’, to build out its core product. A speedboat that was launched by Vietnam-based Maritime Bank (MSB), itself only founded in 1991, TNEX targets the 70 per cent of Vietnamese people who are aged 35 and under. Its 2021 launch has been a huge success: International Finance magazine voted it Best New Digital Bank in 2021.

“During the pandemic, TNEX realised mental health and physical health were becoming really important for the Gen Z customers it was targeting. So, they tied in questions like, ‘how are you feeling today?’ and ‘are you exercising enough?’ with the products they were offering,” says Galav.

It’s that kind of sticky innovation, targeted at an audience that banks truly understand, that’ll help them differentiate, says David Alstadter, global head of strategic partnerships at Mambu.

“At the end of the day, if banks aren’t delivering value to end users, they will end www.fintechf.com

On the winning side: Banks best weapon could be SaaS

up finding an alternative. Consumers haven’t had that opportunity before. In the past, banks had the big building, the vault, the armed guards, and everybody knew it was safe to keep their money there. That’s just the way it worked for generations.

Now there’s just so much choice.”

“And the culture around us is changing, too,” points out Microsoft’s Hazou. “The whole thinking about the society in which we live. ESG (environment, social and governance) isn’t just a slogan printed on the side of coffee cups in banks; it’s a real concern in society, and that drives a lot of changes, a lot of expectation.”

Beyond this, it’s clear that consumers now want banks to work around them – upturning what was the traditional, reverse model. “Banks were at the heart of society, driving economies,” says Galav.

“But now the customer is at the heart.”

If banks can sense a creeping irrelevance, it’s because the prevailing winds blowing through society aren’t catching their sails.

Those that don’t change course, winning the hearts and minds of consumers, risk drifting into irrelevance. But who, exactly, is at the helm?

EMPOWER VISIONARY LEADERS Speedboats like TNEX are more naturally dynamic than their inelegant motherships, or so the logic goes. But looking at incumbents’ slow pace of change in terms ffnews.com

of size might be missing the point.

According to Hazou, a bank’s turning circle is as much about the person behind the wheel as it is about the size of the vessel.

Success in the coming battle ‘belongs strategically to product management’, says Hazou. “But I think one of the problems with bank product managers is that they’ve been beaten down for years.

Unlike a tech company, where the product is the product, banks have a financial product and a technology product.

The problem is, banks haven’t reconciled the two Kunal Galav, Mambu

They have lots of ideas, they meet lots of customers, they go to lots of conferences.

But, when it comes to the annual cycle of the budget – where they put forward their ideas – they just get demolished.”

It’s difficult to avoid reaching for the ‘led by donkeys’ analogy, casting key decision-makers in some banks as fusty public-school generals, scoffing at the

suggestions of subordinates, even though they are closer to what’s actually happening on the ground. But that traditional hierarchy can change.

“Banks need to think about creating true product managers,” says Galav. “Unlike a tech company, where the product is the product, banks have a financial product and a technology product. The problem is, banks haven’t reconciled the two.

“They need technology that can be configured by someone who understands the customer as well as how calculation works, how interest rates work – without needing to go through a change request and a six-month transformation programme. So, leaders of banks also need to reconcile the differences between the two sides of product management, to create true product managers.”

These empowered employees also need the CFO in their corner to push through the kinds of products they believe will turn the tide in the bank’s favour.

Straddling several business lines as well as protecting the company purse, chief financial officers are a critical node, and naturally cautious, but product managers may win them over by engaging with dynamic SaaS plug-ins, instead of proposing ambitious – and risky – in-house features.

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DIGITAL TRANSFORMATION: EVOLVNG BANKING TAKE CALCULATED RISKS separate bank – you can call it a speedboat or a greenfield approach – to give Risk aversion is baked into the business customers new, innovative experiences,” model of banks. Built on trust, banks are says Galav. petrified of squandering that asset by But there’s a big cultural issue there: developing digital processes and products how do you keep the mothership and the too quickly or with too much ambition and neo together? The worst thing that you can too little due diligence and testing. As a offer customers is a disjointed journey. result, they become entrenched – rather While TNEX has been a wildly successful than innovating their way out of a rut. raiding party for Maritime “It comes down to risk Bank, banks needn’t appetite,” confirms Alstadter. necessarily keep the bulk “How far can you go, and at of their armies in reserve what pace? That’s the key of when experimenting with the struggle – not to make new product lines. a big misstep, because that “Once banks adopt a can be really disastrous, software-as-a-service especially with cybercrime.” approach, they can Even small missteps, or dynamically try a new projects and programmes product or business model, that end up delivering less in a market or in multiple than they cost, make their David Alstadter, markets, to do testing,” says imprint on a CFO’s psyche.

Mambu Galav. “It takes a lot less “A lot of times you’ll see time to spin it up, and to spin it back down banks say ‘oh, that didn’t work, and it if it’s not working. If it’s working, great – put cost so much money, and took so much more effort behind it. If it’s not, you can time. That’s a failure – we won’t do sunset it and try something different.” that anymore,’” says Galav. “But it may just Alstadter is confident that this will help be that their timing was wrong.” banks test entirely new business models as It doesn’t help that such projects take well as products. so long for banks to complete.

“In the near to mid-term future, SaaS “Those big waterfall projects need to platforms will be inevitable in everything. be rethought, rearchitected,” says Hazou.

That’s just the way the world is moving.

“You can’t have these big, two-year projects It’ll allow people to try different business sucking up all the oxygen. You have to get a models,” he says. new product out in the next four weeks.”

“If you look at the big And to get there, taking calculated risks payment service providers, on the new banking battlefield, they may using data and analytics wish to turn to the kind of composable as value-added services architecture offered by Mambu. accounts for 17 per cent of “API enablement, an SaaS platform, their revenue,” Galav adds. and composable banking – they're the "So it’s already happening. keystone for building things quickly,” argues Peter Hazou, Alstadter. “I think it’s a given that banks have Payment services providers Microsoft who are modernising really to adopt this – there’s no choice anymore.” fast have discovered new revenue models Hazou agrees. “Things have got to be and new revenue sources.” composable and easy to reach – it’s all For Alstadter, that should lead core about this kind of modernisation.” banking executives to reassess their entire If CFOs are traumatised by long-tail value chain: “Nothing is sacred. Everything projects, engaging with SaaS providers like should be under review.”

Mambu might help product managers SaaS-driven composable banking get their ambitious ideas over the line. gives incumbents the power to respond EXPERIMENT WITH STRATEGIES to the massed ranks of alternative providers gathering on the horizon, too.

Banks seeking to innovate while “Are all these new business models maintaining trust have typically followed known? No. But the whole point is, Maritime Bank’s model of releasing a more the easier route to delivery through digital-savvy offshoot.

SaaS also frees up the oxygen for new “They launch a separate brand, or a

It comes down to risk appetite.

How far can you go, and at what pace? That’s the key of the struggle

business model development, new things to come, new ideas, and new ways to compete,” says Hazou.

FIGHT FOR RELEVANCE Firms tend to conflate new technology with new revenue streams. They wield innovative technology as a hammer and go searching for nails. But, oftentimes, consumers aren’t moving to flashier fintechs for the strength of their back-end; they’re moving, based on how bank brands make them feel. That’s the real front line, along which banks can push via agile decision-making and engagement with SaaS platforms.

“As a consumer, I’ve had relationships with multiple banks,” says Alstadter. “Am I in love with any of them? Probably not. Do I see differentiation? Probably not. Do I trust the bank will keep my money safe? Yes. Do I feel aligned to the brands? No. Do I trust the bank has my best interests at heart? No. “I may be a focus group of one, but if they can overcome that with me, where I actually feel like they have my best interests at heart, that’s a big step to aligning me with that brand. If I feel that way, I may start saying, ‘hey, you know me, you can recommend things to me, you can do things for me.’ I might even go as far as saying ‘I’ll let you decide for me.’”

Hazou is in agreement that there’s something far more fundamental that banks need to grapple with in the near term if they still hope to be here in the long term.

“Technology is an enabler, but one has to think broadly,” he says.

“The fight for relevance in the value chain is really the guiding light. There’s lots of cool technology, but the framework isn’t ‘what do we do with the technology?’ The framework is, ‘what’s happening around us, and how can technology help in that?’.”

What’s happening around all of us right now remains unprecedented. Crystal balls have grown cloudy as a period of turbulence and change looks set to shake up more than just the financial sector. But Hazou, Galav and Alstadter are in agreement: it’s better to rearm and redeploy now than to come off second best in what may be, for some banks, a competition that leaves them irrelevant.

SaaS frees up the oxygen for new business model development

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DIGITAL TRANSFORMATION: WHAT NEXT FOR NEOs?

Is it time for loss-making challengers to plot a slightly different course?

Valentina Kristensen from (the very profitable) OakNorth and Andy Renshaw from financial software specialist Feedzai, share their thoughts Fintech was born out of a mission – to free consumers’ finances from the shackles of incumbent banks. Typically powered by the smartphone in people’s pockets, we’ve had one hell-of-a-ride of a products revolution in the last decade.

But incumbents have retained one huge advantage, and it’s, ultimately, the most important advantage of all – profitability.

Almost a decade on, the fintechs that burned that technology path are, for the most part, still addicted to fundraising cycles just to keep skin in the game – they can’t drive growth from revenue. And that means the price tag that the market puts on those companies is key.

“Many firms are chasing the valuation, rather than the value they’re actually delivering for customers,” observes OakNorth’s Valentina Kristensen. She speaks from a position of strength: OakNorth Bank is that rare thing – a profitable neo that delivered a 2020 pre-tax profit of £77.6million, a rise of 18 per cent on the previous year. So, the views of its executives are worth listening to.

“And you see a lot of fintechs still trying to be all things to all people, whether that’s crypto exchange, selling gold, etc,” Kristensen adds. The implication being ffnews.com

that over-diversification is contributing to their perpetual lack of profitability.

Valuations in the fintech sector recently have been stellar – in July, Revolut was valued at £24billion, ranking it higher than high street rival NatWest. N26 was pegged at £9billion when it went into a £900million series E round in October, giving it a higher market cap than Germany’s second biggest bank. Both are currently operating at a net loss.

Many firms are chasing the valuation, rather than the value they’re delivering for customers Valentina Kristensen, OakNorth Bank

Money is not the only issue. Since the incumbents began launching a flotilla of speedboat banks, the challengers are themselves being challenged, which, says Kristensen, only reinforces the argument that neos should double down on what drove them into business in the first place – answering a specific customer need. That increases the chance of building a game-changing product which is difficult for rivals to copy, she says.

“It’s better to ask ‘how can we do what the iPhone did to the mobile phone market?’ and create something that is so much better than what went before, not something that’s incrementally better.

“If you’ve only developed features, the big banks can come in and replicate them.

Whereas, if you create something that’s exceptionally better, the moat that will give you – that competitive advantage – gets wider and deeper.”

Kristensen puts OakNorth’s success – the bank has lent £6.5billion to UK firms since gaining regulatory approval in 2015, and made just over £1billion of net new loans last year – down to having just such an unwavering mission.

That and the use of Cloud technology, which has seen OakNorth develop and license software to customers including Capital One, Fifth Third Bank, SMBC Bank and ABN AMRO.

Agile say and agile do A particularly smart thinker (Albert Einstein, in fact) said: “The measure of intelligence is the ability to change.”

Andy Renshaw, SVP of product strategy and management at AI and financial software specialist Feedzai, believes that neos, having long preached agility in their tech stacks, should practise it in their business models, too.

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DIGITAL TRANSFORMATION: WHAT NEXT FOR NEOs? “There’s the notion that what got you to here, won’t get you to there, and some organisations are at that inflection point – they need to evolve and adapt,” he says.

Which rings true as much for incumbents as challengers, of course.

Stick to the mission Before joining Feedzai in 2019, Renshaw’s career had included an 11-year stint at Capital One, a firm he says that was game-changing when it entered the UK’s credit card industry. Like OakNorth, it had, and continues to have, a single-minded mission and did indeed put a very deep moat between itself and established players.

“We had a single product that was launched in a way to disrupt the big players,” says Renshaw.

“We didn’t undercut by five or 10 per cent; we undercut by 50 to 60 per cent, so we completely disrupted the market. But I’ve seen in some of the larger organisations I’ve worked for, that mission can get lost; often there are multiple causes, or there are causes by department or product line.

There can be too many.

“Also, in a crowded market, differentiation is obviously valuable, but simply doing that around the nature of the financial products, I think, no longer really resonates. If you’re not careful, all it really does is drive a race to the bottom.”

Renshaw was impressed by another feature of the culture at Capital One – a willingness to ditch projects that were failing.

“Where they were good, and probably still are very good, was taking a data-led approach to experiments,” he says. “If it wasn’t working, they knew exactly on what basis they were going to kill it, and they killed it quickly and decisively. Emotion didn’t come into it.”

An agile technology platform allows a business to pivot and thereby avoid mission creep, and both Renshaw and Kristensen cite Cloud-based systems as being key to adaptability.

Kristensen says OakNorth from the outset wanted its bank to be fully Cloud-hosted, not just to use it for ancillary services such as email or customer relationship management – although that’s pretty much all that was available at the time of the bank’s launch in September 2015.

“But OakNorth worked with AWS, our Cloud provider, and the regulators, and it

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became the first UK bank to be fully Cloud-hosted in May 2016,” she says.

“What that has enabled us to do is bring new products and services to market very quickly. We can now scale up and down as needed, and we avoid wasting money by paying for server space that we don’t need.

"In terms of cybersecurity and operational resilience, the ability to rebuild our core in a new location within a matter of hours is something that is not possible

on the product – what’s working, how it can be improved and so on.

“Being a first mover perhaps wouldn’t be possible for some of the larger institutions.

They often want to see others test the water, be the guinea pigs, and then, if it all turns out OK, they may be willing to give it a go.”

Feedzai’s solutions are also Cloud-first, and Renshaw says another benefit of that is 'we can share best practice very easily.’

“We’re able to leverage central models, central solutions, and ultimately achieve better outcomes,” he says.

“As Valentina says, you can scale up and down, and for a fast-growing organisation that doesn’t quite know where it’s going to grow, or how, then that’s key in protecting the cost and risk position.

“Cloud removes a lot of that tension.

And because, once data is there you can use it propositionally, you can use it to provide better service.”

Sadly, for fintechs, what they can do – in time – incumbents can do, too, as the arrival of speedboat banks, such as JP Morgan’s Chase, or NatWest’s Mettle, demonstrate.

So, what can a native fintech do to avoid bobbing helplessly in their swell? Relook at the business model, thinks Renshaw.

“Creating market share isn’t difficult; it’s sustaining it in a profitable way that’s compelling for the customer and the organisation,” he says.

“We’re seeing businesses try the subscription model, which I really like.

They’re trying to create Crowded a compelling monthly marketplace: or annual fee service.

Banks need more than It’ll be interesting to see a better me-too product how that plays out. for the traditional high “The other model street lenders, with their we’re seeing is simple legacy technology. reward-type structures.

We’re kind of comparing A number of larger spaghetti with lasagne: organisations have we have nice clean rewards, but they’ve sheets versus the become very complex, muddled spaghetti maybe they’ve layered structure that you’ll find them or they’ve removed in those organisations. areas where those rewards Andy Renshaw, Feedzai “Another factor was weren’t good for the that whilst building our Cloud stack, we organisation. But what you’re left with is were willing to be first movers with the a slightly diluted offering. partners we worked with. I think we were “So, I would say rewards, subscriptions, the first European bank to partner with or another way of creating a new financial Cloud banking businesses Mambu and proposition is the way to go – although nCino. That first-mover advantage meant I wouldn’t be so bold as to predict whether we got to play a big role in feeding back they’ll be successful or not!”

In a crowded market, differentiation is obviously valuable, but simply doing that around the nature of the financial products, no longer really resonates

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DIGITAL TRANSFORMATION: BEYOND BANKING Bank-assurance KBC Group is pinning its digital-first strategy on its proprietary AI – and it isn’t limiting its sights to financial services. Tom De Witte, CIO International Markets at KBC Group, and Non-executive Director of KBC Bank Ireland, explains how it’s navigating the technology choices to achieve its aims With core markets in Belgium, Czech Republic, Hungary, Bulgaria, Slovakia, and Ireland, it could never be said that bank-assurance KBC Group doesn’t have reach.

And with KBC Mobile recently named the world’s top banking app – chosen from 135 banking apps in 17 countries – it’s not short of stature, either.

But could it be the first of Europe’s ‘old guard’ banks to become a super app?

The award from independent research agency Sia Partners that put KBC at the top of the banking app pile, noted the large number of third-party services, simulation tools and full online capabilities available for many types of financial transaction and life admin via KBC Mobile. Of course, the all-important ‘delightful UX’ was present, too.

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In addition, the award noted the broad connectivity and integration with the bank’s other physical and digital distribution channels. And it fan-fared the central role that the princess of banking apps, KBC’s digital personal assistant, Kate, plays in all of this.

Kate is the not-so-secret AI weapon that’s helping to move the bank beyond banking and, according to the Group’s strategy update in 2020, all product and process development and updates will, ultimately, be driven by ‘her’.

KBC Mobile has, as the award noted, ‘undergone a dramatic transition, changing from an app for performing basic transactions and checking account information to a fully-fledged, customer-centric ecosystem that proactively meets increasingly more of the customer’s needs’. And those needs go well beyond banking, insurance and investment. They also include mobility, leisure and health services.

It’s what KBC has dubbed the ‘bankinsurance +’ model, under which it will rely on its own digital solutions for providing financial services (albeit many worked up with partners), but then mostly on third parties for tools that ‘make life easier’ – the leitmotif that’s

become core to what the bank does and which are delivered via APIs. KBC Group’s intention is clear: to park its big tanks on the lawns of those lifestyle tech and telco companies who otherwise might be tempted to muscle into the financial services space.

In 2018, KBC was the first financial institution to also offer non-financial services to its mobile banking customers.

That summer, customers could use their app directly to start and end a car parking session. Today, KBC offers about 15 different third-party services incorporated in the KBC Mobile app. They range from parking sessions, buying public transport tickets, uploading phone or data volume on mobile phones, buying gasoline and access to digital vaults. The services can be used by non-customers, too – indeed, KBC was the first bank in the Benelux region to open up its mobile services to customers of others.

The bank has seen exponential growth in app usage since its launch. For example, out of three million transactions, about 850,000 tickets for public transport were sold in the first nine months of 2021 and more than 770,000 parking sessions.

There have been a constant stream of partnerships and integrations over the past three years. Most notable, KBC Bank co-established with other banks Itsme, the ID and verification platform that aspires to being the European digital ID platform in the wake of COVID. It’s also recently teamed up with Personetics, a provider of financial-data-driven

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personalisation and customer engagement solutions. The companies will deliver multi-lingual, data-driven solutions to increase customer engagement on KBC’s mobile application, says the bank.

Then there’s Yippay, another multi-bank offer, but this time a payment solution being developed as a joint venture with Bank of Ireland, AIB and Permanent TSB, to counter the erosion of traditional bank transaction revenues by challengers.

Last year, KBC also spun out its Everyoneinvested wealthtech business, the principle objective being to encourage a wider pool of retail investors, who can be offered individually customised wealth management with AI. That’s being offered to financial institutions and asset managers via partnership agreements with distributors. Everyoneinvested has been described by KBC Group’s chief executive Johan Thijs, as ‘more than a startup; it is a strategy, a full-grown vision of how we want to elaborate our asset-management activities, taking into account the trends that we observe in the world.’

APIs opening doors Signalling its intention to make the most of the opportunities presented by PSD2, KBC unveiled its Differently – The Next Level strategy in 2020, which acknowledges that it will have to shift up a gear in response to rapidly evolving consumer behaviour to get to where it wants to be.

The man looking after core banking and IT in KBC’s international business unit, who has to advise on the right technology calls to execute this plan, is Tom De Witte, former CIO and COO at KBC Bank Ireland where he still serves as a non-executive director.

He says the bank couldn’t even contemplate the necessary gear change without APIs, which have allowed it to make full use of third-party services, and integrate them with its own architectures to bring much faster new functionality to customers. The days of nightmarish integrations, requiring a significant amount of interfacing to be developed, are – thankfully – a distant memory.

"We can’t do without APIs," says De Witte emphatically. “It’s enabling us easy access to world-class service providers (as well as offering) true standardisation, and reusability.”

In fact, the bank has spun that around to become a third-party provider itself in developing Itsme. ffnews.com

“Like other banks, we were struggling to facilitate customer authentication,” says De Witte. “In today’s AML and KYC environment these aren’t easy things to tackle, so we developed Itsme as a fintech to provide easy ID verification and authentication for all Belgian citizens. And it’s also now expanding beyond the Belgian market.”

PSD2 unlocked the technology dam for KBC, says De Witte. “And we found ourselves on the leading edge – some competitors have started doing exactly what we were doing – seeing the strategic advantage of it for their own customers, bringing new solutions to the market.”

But he cautions IT departments not to get distracted by the huge array of technology choice.

“Because the market has been flooded with new fintech, new solutions, and with APIs rolling out on a monthly or quarterly basis – if not faster – you’ll very soon be persuaded to set up your IT department in one or other direction, just to keep up with everything that’s coming in,” he says.

“As far as IT departments are concerned, there is one thing that stands out for me: stay in control. By that I mean it requires good and capable leadership to decide on which avenues, which routes to pursue.

As far as IT departments are concerned, there is one thing that stands out for me: stay in control.

It requires good and capable leadership to decide on which avenues, which routes to pursue “At times, what I see from some of our competitors is IT departments tending to get carried away by all the new technology that pops up. Then you’re at risk of no longer looking at the core of what you need to do, which is serve your business.

“So make sure you ask yourself ‘what is our view on our IT architecture? How flexible or open can we position it? What type of choices and selection of tooling on APIs do we make?’ For instance, in the case of customer authentication or identification, there are a massive amount of fintechs that provide solutions, but you

need to make up your mind, go for one, maybe two, but certainly not a dozen.”

Restraint is necessary, but he’s not denying that with choice – particularly of Cloud-hosted services – comes flexibility and better budget control.

“Instead of going through a tough and long journey to try to develop all of this ourselves, you simply reach out to the market, find a good and decent SaaS solution, do the sandboxing, or whatever it is you want to do to test it out, make your choice, and then go all the way,” continues de Witte.

“You’ll get far better time to market, better flexibility, scalability, and sometimes, surprisingly, at a far better cost, as well.”

As a former CTO, he knows how important it is for executives and board members to be of one mind when it comes to business-reorientating transformation projects such as these: the latter open to the opportunities that technology offers to change the business model, the former focussed on how each piece of technology fits with the ultimate goal.

While the bank had already digitalised a number of internal/underlying (often complex or manual) processes to ensure simple, high-quality products can be provided to customers quickly and easily, the emphasis now is designing with ‘digital first’ in mind. What this means at the coalface is making customer interaction even more future-proof and smarter, reinforced by AI, but with a network of staff and branches still available to customers.

That model of customer service can already be seen in its private and corporate banking divisions, where relationships are personalised via KBC relationship managers, supported by AI. While it will always be the customer determining which distribution channel is used to contact KBC, digital will form the bedrock for those relationships, though.

Eventually, all relevant solutions for their financial needs and beyond will be offered via mobile apps. Kate will play an important role both behind the scenes in driving processes and in terms of providing proactive, timely, personalised and relevant solutions in digital sales and advice.

“The big winner in all of this is the customer, ultimately,” says De Witte, “because new functionality is being provided in a much faster and more convenient way, which is exactly what we need to do as a financial industry – in all of our markets.”

Issue 22 | TheFintechMagazine

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DIGITAL TRANSFORMATION: PHILIPPINES Winning hearts and minds: Tonik’s quirkiness, as much as its interest rates, appeals to Filipinos

In a market where there’s all to play for, the first digital-only bank has smashed its deposit targets as it takes financial services mainstream. Founder Greg Krasnov tells us why Tonik is proving just that for the Philippines It might cheekily call customers ‘luv’ and invite new ones for a ‘quickie’, but Tonik Bank has no intention of being a one-night stand.

Quite the contrary: eight months into its launch in a country where the average age is 24 and 70 per cent of the population remains unbanked, the ‘naughty’ neobank is already playing a key role in helping more Filipinos build long and lasting financial relationships.

Pitched at one of the youngest, digitally-native economies in the world, Tonik’s fun façade masks a deadly serious intent: to gain substantial market share and have influence way beyond the famous palm-fringed shores. As the first privately owned neobank to be granted a digital banking licence by the Philippines central bank Bangko Sentral ng Pilipinas (BSP), the Tonik template – and the country’s regulatory approach – could pave the way for future digital banking developments in areas of the world that suffer similarly low financial engagement.

Tonik and five others that have since been granted the much-coveted licences, are being regulated by BSP’s IT department, which has been given a mandate to experiment in finding new ways to improve financial inclusion and grow the consumer economy. As part of that process, Tonik is also deeply involved in a pilot study to create an open banking ecosystem.

Driving all of that is BSP’s mission to boost the banked population

Naughty not-so-n iche!

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from 70 per unbanked to 70 banked and to have 50 per cent of payments carried out online within an ambitious timeframe that has an end goal of 2023.

For its opening salvo to disrupt the market, Tonik’s branchless, Cloud-based model, backed by global big hitters Finastra, Amazon Web Services (AWS) and Mastercard, allowed it to offer industry-leading annual interest rates of up to six per cent per annum for term deposits and between four and 4.5 per cent on creative products dubbed Stashes that enable customers to compartmentalise their savings for specific financial goals.

Both support its stated aim of enabling customers to ‘dream big, save bigger’. The results, so far, have been impressive, says Tonik founder and CEO Greg Krasnov.

Target-busting demand Since its March launch, Tonik has attracted US$100million in retail deposits, with minimal advertising, as increasing numbers of customers take advantage of the ‘quickie’ five-minute onboarding process.

“We basically blew past our December target in June, so definitely it looks like the population is responsive to what we have to offer,” Krasnov remarks.

“We see a huge demand from customers for a good digital solution. Basically, 70 per cent of Filipinos are unbanked, but they’re digitally native. Of the 30 per cent that are banked, more than half of those consumers who hold a traditional account are saying ‘give me a good digital channel and I’m out of here with my deposit’. And that’s really what we’ve seen since we launched.

“The key to that, of course, is onboarding, and the Philippines’ central bank has been very, very proactive in creating a fantastic digital onboarding pathway, because it is keen to solve financial inclusion. It understands that all-digital onboarding is key.

So, we’re onboarding customers in under five minutes based on a selfie, ID and a lot of background processes.

“At the end of that five minutes, they get an open, functional account straightaway, with a virtual debit card, full payments functionality and access to our deposit products, with credit and other products coming on stream soon. That’s definitely ffnews.com

something the consumer wants, but, unfortunately the incumbent banks have not been able to offer anything sufficiently attractive so far.”

The first open banking pilot kicked off in the Philippines in 2021 with Tonik one of the early participants.

“We’re preparing to start integration of the statement-sharing APIs, because we think, as a first step, that could help us a lot on the credit processing side,” says Krasnov, “since the majority of even banked customers don’t have prior credit history, or a credit bureau record.”

The neo is also blazing a trail with security solutions.

“There’s a huge, huge issue anywhere in the emerging markets around customer safety, security and authentication,” says Krasnov. “We’ve been putting a lot of thought into how to make sure that the customer’s money stays safe in the Cloud, and working with a variety of vendors on app security and cyber protection. We’re enabling some in-app features that are among the first in the market, such as card blocking, which no incumbent offers.”

The central bank in the Philippines has been very proactive in creating a fantastic digital onboarding pathway, because it is keen to solve financial inclusion After securing US$17million in pre-Series B funding two months after launch, Tonik unveiled a physical debit card in August, in partnership with Mastercard. It’s an area where Krasnov sees huge potential for growth, despite there being a substantial rise in the use of mobile wallets among Filipinos. The most popular, GCash, has seen its user numbers soar from 20 million in January 2020 to 46 million in June 2021.

“In the Philippines, payments have historically been dominated by cash and, within the consumer economy, the penetration of card payments is minimal; in our estimation, it’s still below 25 per cent of all consumer transactions,” says Krasnov.

“We’ve had a couple of large e-wallets pop up, backed by the largest telcos in the country and some financial investors.

They’ve been making inroads into getting people to switch some of their payments to digital. But we think there is still a huge opportunity to drive penetration.”

Meanwhile, Krasnov is sceptical about the level of take-up of QR payments, which are also being pushed hard by BSP. It is requiring all banks to implement the technology in the next couple of years.

“I think QR pay still requires too many steps from the customer,” Krasnov says.

“They have to open the app, access the QR scanner, etc. So, while it is active in Singapore, for example, I hardly ever use it, and I hardly know anybody that wants to use it because the card is just simpler.”

He’s much more keen to see another digital payments revolution head the country’s way. Surprisingly, in a land with such high mobile phone use, Apple and Google have yet to enable their wallets.

“As neither has enabled its infrastructure in the Philippines yet, we’re not able to integrate. However, we think that will happen some time next year, and it will be huge – Google especially, because Android phones are the dominant operating system.”

Tonik, itself, has major expansion plans as it starts a loans business, continues to develop its payments options and further concentrates on providing for underserved microentrepreneurs who account for almost a quarter of the country’s consumer income.

“We’re going commercial with our cash loan product and we will be rolling out more consumer lending products before the end of this year,” says Krasnov. “Our short-term focus is very much on that because we’ve proven that we can attract a lot of savings from consumers; now we need to make sure we can channel those into a profitable lending portfolio.

“In terms of monetisation, consumer lending, revenue-wise, is about a 10-to-20 times larger financial opportunity than consumer payments in the Philippines, so that’s why it’s our primary business case. We’re also starting to build what we call the Tonik 2.0 payments and transaction banking capability, which will let us help customers transact in a completely new and differentiated way.”

Underpinning it all is the ambition Tonik shares with the central bank to help boost financial inclusion and economic growth.

“Over the next five-to-10 years, this will create a complete revolution in financial access,” says Krasnov.

Issue 22 | TheFintechMagazine

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FINTECH FOCUS: CONTEXTUAL BANKING

The banking app has potential to become customers’ #1 life management tool. But institutions must be careful not to ‘cross the line between help and intrusion’, warns Vipul Lalka from TD Bank.

Here, he discusses the power of digital engagement and how to wield it with Matt Williamson and Ruby Walia from Mobiquity, and Hossein Rahnama of Flybits

Any time, any place, anywhere – there’s a wonderful world you can share…

No, not the ad for Martini & Rossi, the famous Italian alcoholic beverage company that promoted its particular brand of vermouth with an incessantly annoying jingle in the 80s. In the context of financial services, ‘the right one, the bright [as in smart] one’ today is a description of our banking apps, which can transport us to a world of financial happiness and sort out our life admin at the same time, often by plugging into a mood-lifting universe of third-party tools.

‘Delight’ is an over-used word in the customer experience lexicon, but if a bank can use technology and partnerships to simulate the kind of feeling that Martini was hoping to induce – effortless pleasure – it must do more than the bog-standard.

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Matt Williamson, global vice president of Mobiquity, the digital transformation consultancy, says it’s no longer sufficient to offer entry-level banking and financial services in our app-based and on-demand world.

“App usage is a digital lifestyle enabler,” he says. “We’re moving beyond simple financial tools, like checking your balance or making a payment, and providing services such as personal fund management and other tailored advice.

The bank app on our phones uses geolocation to identify where we might make a purchase. It knows, for example, if we’re at a garage and perhaps thinking about buying a car.”

And, so, the argument follows, it should be intelligent and intuitive enough to pop up, in that very moment, with appropriate advice and financial options. Except – and here’s the rub – is it always appropriate for a bank to be doing that? Is the technology in fact in danger of creating moral jeopardy for institutions whose most valuable point of difference in a market of spontaneous gratification is that they can be trusted not to exploit us – especially since what powers these tools is our data?

That’s the issue that innovative incumbents like TD Bank, in North America, have been grappling with, not least because there have been instances of ‘helpful’ contextual algorithms creating inappropriate suggestions with brand- damaging results.

American retailer Target, for example, which tracked the consumer data it had access to, to predict where a customer was in their pregnancy, fell notoriously foul of contextual customer experience when it sent baby clothes coupons to an expectant teenager, who hadn't told her parents.

So, digital technology, by providing context-specific information, can tailor customer requirements to precise needs.

The role of a financial service provider then becomes proactive rather than reactive. Needs are anticipated, desires are fulfilled, and value is added. But a line must be observed between being helpful and being intrusive.

In the early mobile days, we just offered value from a transaction perspective.

Now, we have technology that creates far more meaningful context. But, take the wrong approach and you may cross the line between help and intrusion Vipul Lalka, TD Bank

“It comes down to value versus privacy,” says Williamson. “If something is unsolicited and we feel we’re being spied on, we’re not going to view it as a good customer experience. However, it’s a good experience if we’ve been helped to make a positive decision and achieve something that matches our needs – and in just a few clicks. Before, for instance, we would need to contact our bank, or lenders, and work out the best finance deal, then make the purchase maybe www.fintechf.com

It comes down to value versus privacy... No one wants to be used as a sales vessel and feel manipulated, which is why having the right context for a message is vital Matt Williamson, Mobiquity

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a week later.

With today’s apps, decisions can be made immediately.”

Buy now, pay later (BNPL) has been the most obvious iteration of that with a rash of retailers and marketplaces striking up partnerships with BNPL credit providers, effectively cutting a customer’s own bank out of the equation at point of purchase.

McKinsey estimates that banks are losing $10billion in annual revenue to BNPL operators such as Affirm, Zip and, of course, Klarna. Some banks, including Barclays, have decided to embed partner BNPL services; others, such as Monzo, are entering the market themselves.

And that’s because they are well aware that business will not simply come to them; instead, they must cultivate relationships and create business by mirroring customer needs. As vice president of enterprise payments platforms and capabilities at TD Bank, Vipul Lalka says being proactive is at the heart of digital banking.

“In the days of traditional banking, when branches were everywhere, people would talk about all manner of things with their branch managers,” he says. “I’ve had conversations with wealth advisors who’ve recommended barbers to their clients. That’s what creating value is about.

“In the early mobile days, we just offered value from a transaction perspective. Now, we have technology that creates far more meaningful context. Geolocation is an obvious example, but there are so many other contextual points,. You can blend everything to create more relevant and valuable experiences for the customer.

But, I agree that, if you take the wrong approach, you may cross the line between help and intrusion.”

So, how do you find the right balance?

How do you avoid becoming Big Brother?

Ruby Walia, senior advisor for digital banking at Mobiquity, says banks must learn from app pioneers that have the

right formula, and use this knowledge to provide similar services.

“It’s an exciting prospect for banks,” says Walia, “because they can go into spaces that are not traditionally theirs. Banks have normally waited for customers to initiate interactions. Now, they have the technology and permission to interact and create delightful experiences, be it an insight or the right offer at the right moment, and do it in a seamless way.”

Leaving ‘footprints’ everywhere Flybits is a context-aware digital solutions company that is refining the art of customer experience and has worked with TD Bank on its app tools.

“When you put raw data assets together and can understand their relevance in a particular situation, you create the context,” explains Flybits’ founder and CEO Hossein Rahnama.

“And, if you look at the digital footprints we all create, both outside and inside the bank, every single one can be used as a signal to create context.”

The more of these signals you put together, he argues, the more likely you are to judge the moment correctly and present customers with what they want – even if that is unsolicited. Consumers are not stupid and we do, after all, willingly respond to those triggers in other areas of our lives.

“Just think of social media,” says Williamson. “If I’ve been on Facebook and clicked on an advert that just happened to ping up at the right time, it might prompt me to make a purchase. And, at that moment, even though I know someone has mined my data and presented the advert most likely to appeal to me to trigger a transaction, I don’t mind. That’s because it was relevant to something I was looking to achieve at that moment.”

The important difference with banking tools is that you’re not being buttonholed to accept mindless and irrelevant information, which would certainly mean a negative customer experience.

“No one wants to be used as a sales vessel and feel manipulated,” Williamson says, “which is why having the right context for a message is vital. Banks and financial institutions must know where their customers are on their journeys, and ensure that the data points they extract are of value to individual needs.”

Issue 22 | TheFintechMagazine

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FINTECH FOCUS: CONTEXTUAL BANKING It’s not just about forming, synthesising and accessing data, of course – it’s also about understanding governance.

“One of the great things we’ve achieved with TD Bank,” says Rahnama, “is not only better understanding the customer context, but also prioritising privacy. We build experiences and channels that make customers comfortable sharing their data and aware of how it is being used, ensuring transparency, auditability, and permission for a very good customer experience. Any bank that can do this effectively will be at the forefront of future financial services.”

Williamson believes banks need to be everywhere their customers are because the financial journey is not how it once was: “They could be having a buying or banking experience while watching sport on TV, mixing with friends or involved in any number of other activities,” he adds.

“The value lies in being present at the precise moment in a customer’s life when they need support and advice. In other words: right place, right time, right service.”

It’s an exciting prospect for banks because they can go into spaces that are not traditionally theirs Ruby Walia, Mobiquity

A good example is how Flybits uses geolocation data in Canada to help TD Bank customers navigate a stressful part of their day – making the bank app indispensable to them for all-important stickiness, creating a payment opportunity and generating real return on investment.

“Banking and travel go hand-in-hand,” explains Lalka. “Every time someone travels, they use their card. So, we looked at the GO Train system in the Greater Toronto Area, and, using geolocation data, we can figure out which of our customers commute on the GO Train. We realised there wasn’t a good system to update train schedules in real time and notify of delays or cancellations.

“So, we connected to the Metrolinx, provider of the GO service, to receive messages from its system. Then we relay that information to TD customers who have opted in to this feature. It was beautiful.

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We got messages like ‘wow, now my banking app informs me that my GO Train to Oakville is 15 minutes delayed, so I can get that coffee and then go to the station!’.

“Fast-forward to last year, when all our customers were struggling through terrible times. We wondered if we could give our small business customers – mom-and-pop bakery shops, coffee shops, etc – the ability to drive offers, such as 50 cents off a coffee, a free doughnut or whatever, in our retail-facing TD Canada app that six million customers have access to. So, leveraging geolocation, we notified them when in the vicinity of a coffee shop, for instance, that they could get ‘$1 off here today’.”

Through Flybits, TD Bank has achieved the type of non-conventional product development thinking that creates opportunities to drive payments over its platform. What bank, 10 years ago, would have joined the dots between banking and alerts for frustrated commuters? But Lalka stresses that this service operated within Canada’s data privacy framework, with an emphasis on opt-in models.

“Again, it’s privacy first: customers’ data is customers’ data,” he says.

Rahnama also underlines the importance of consent, especially in a period of global sensitivity around the increasing use of AI in relation to consumers. While Canada hasn't yet got around to enshrining algorithmic transparency in legislation requiring organisations to explain why their AI algorithm made a particular prediction, recommendation or decision based on an individual’s personal data, China introduced something like that in November. The US Federal Trade Commission has also tightened its guidance.

“The good thing is we are becoming more literate about our data ownership,” says Rahnama. “Big tech firms want to get into the financial sector, but banks are trying to use their digital strategies to remain the dominant force.”

The big difference is that customers still trust banks to manage their money and this trust factor, which is not a given with big tech, can be applied to other data, giving banks an advantage.

Open banking is another area where that trust and respect are key, says Rahnama.

“This is a massive opportunity for banks, because the data is owned by the user, and they must be convinced to share it, through brilliant experiences. We’ve learned a lot

When we started, the salient context was location, but now location is just one of 50 elements we use. With permission to combine location and other data, banks can act as customers’ exchange with telecoms operators, supermarkets, energy companies and so on, to offer a unified experience. These are some of the things we’re working on.”

Creating added value There’s a challenge in harnessing these disparate data sets and making meaningful connections But it is happening slowly.

“More banks will follow the likes of TD to create similar experiences,” says Walia.

“With regards to privacy, customers will ask ‘am I getting value by letting the bank use my personal information?’. If the answer is yes, we won’t see the kind of backlash experienced by some of the social media companies. Achieving the right balance depends on the quality of, and benefit from, the interaction.”

Williamson adds that this casts a wider lens on value, with people now rating experiences according to environmental, social and governance (ESG) issues. Even if they receive an amazing experience through an app, if it runs counter to ethical standards and goals they hold, they may well take their business elsewhere. And while digitisation can increase focus and relevance, banks must be mindful that they don’t become too impersonal, and too robotic, says Lalka.

“At TD, we’re bringing back the human touch to our digital experiences,” he says.

“When you have the right data, and make the right connections, you are answering real needs. We don’t bombard customers with 10,000 products and expect them to figure out which one meets their needs.

That’s the role of contextual data. The minute you take the wrong direction, you’d better correct it. Otherwise, it’s game over.”

Instead of referring to open banking, Lalka prefers the term ‘open data’.

Customers must be responsible for opening their data and defining how it is used, he says. And, if banks and financial institutions can balance data privacy with data opportunity, and collaborate with fintech partners to find the sweet spot, they will strengthen their roles and genuinely delight their customers – leaving them with a feeling that’s as delightful as drinking cocktails on a terrazzo. www.fintechf.com

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EMBEDDED FINANCE: ECOSYSTEMS

Embedded finance: A combined effort Global financial software solutions company, Finastra, recently hosted a panel looking at the future of contextual finance and BaaS. These are the key takeaways…

Customers are required to place a lot of trust in their banks: they rely on them to take actions on their behalf that will benefit them. The events of the past two years could be seen to have tested that trust, bolstered it, or made it more necessary than ever.

That was the opening gambit in a Finastra panel discussion earlier this year, which looked at the future of contextual finance and banking-as-a-service (BaaS), and the best way to handle potential challenges ahead.

The event was hosted by Finastra’s Angus Ross with contributions from Eli Rosner (Finastra), Andy Hirst (SAP), Mark Williamson (HSBC), and Valli Ardalan (Visa).

For Mark Williamson, maintaining the trust that HSBC has earned over more than 150 years, with both retail and corporate customers, is incredibly important. Embedded finance, he believes, will help cement the bond.

HSBC’s goal, he said, was ‘putting finance in the right place, at the right

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time, for our customers’. Which is precisely what contextual or embedded finance sets out to achieve, too: being able to access services and make transactions at any time, from any place, and do it in a way that’s accessible, efficient and woven into the customer journey. And if providers can deliver those benefits at pace – preferably, immediately – then even better.

Visa’s Valli Ardalan saw the pandemic as a catalyst for change, a trigger for the evolution of embedded finance.

“Businesses have been forced to re-examine the way that they pay and get paid, to stay ahead of it and, ultimately, thrive in today’s environment,” Ardalan told the panel.

So, who holds the keys to this evolution? The banks, the retailers and their payment processors, or the fintech aggregators and ‘embedders’?

The panellists tended to agree that, in this age of contextual finance and BaaS, there was no single winner.

What there was, however, was a recurring theme of collaboration.

No one has all the numbers on the bingo card. Rather, it is the

communication between all the various actors that drives the market forward.

Finastra’s Eli Rosner described it as ‘a push-pull game’. He painted a picture of money coming in from big brands and corporations; larger institutions like HSBC and Visa analysing the dynamic demands, so that they could step forward and provide the capabilities necessary to meet them; and, at the heart of the operation, organisations like Finastra, which bring the two sides together through an open financial ecosystem, connecting thousands of relationships. So, if you follow the money, what you see is a supply chain that requires clear roles, with all players doing their bit.

The panel heard that global, regulated banks like HSBC are continually looking at how they can embed financial services into the digital ecosystem.

Visa sits at neither the beginning nor the end of a payment transaction, but it is working on its network-of-networks strategy with a view to being a single point www.fintechf.com

BaaS oils the wheels: But collaboration is the key to embedded finance

of connection for people to move money.

Customers want lower cost, efficiency, security, customisation and reach.

SAP, meanwhile, has the technology, security and API knowledge. While it’s not a bank, said Andy Hirst, SAP commits itself to hosting workshops and empowering banks so that technology, digital services and applications become more widespread and more widely adopted.

“One of the things I think we’re all acknowledging, including, of course, Finastra, is that none of us can actually complete the whole mission on our own,” said Rosner. “The notion of collaborating and working together is critical here.”

So, where are the obstacles?

What’s stopping this golden age of contextual finance and BaaS from kicking into overdrive? The panel acknowledged that all parties involved ffnews.com

We can, however, understand where the potential lies, should banks take that step forward. By sharing distribution channels, by collaborating more closely with other organisations, there’s the potential for exponential growth. have to be as cautious as they are Contextual finance is always evolving. ambitious. But there is a tendency to BaaS is in high demand. The two things focus inward, not outward. Any person in combined mean we will see great growth any particular role is likely to concentrate over the next 18 months, the panel specifically on what they know, what they agreed. Every side of this ecosystem, can do, and what their part is. But it’s also from the banks to the fintechs, to the good to understand the bigger picture. points of sale, is important.

All sides agreed that, in the No one side can truly context of finance and claim itself to be the most banking, it helps to look at important element. They the supply chain as a whole, all have a key, and the door to understand all the pieces. has multiple locks.

While the old saying ‘know The panel concluded what you’re good at and that, as we look to the be good at what you know’ future of embedded finance, Eli Rosner, can be applied, it is also and the ecosystem that Finastra important to understand has emerged from the that key players like treasuries are often pandemic, we’ll see unprecedented the last to see innovation. growth for customers – retail and Not only do we face challenges in corporate, big and small. that, but banks and financial institutions Orchestrators like Finastra are at are not always noted to be in favour the heart of that; connecting and of increasing their risk appetite. That collaborating with thousands of said, we have to realise that every action customers from all sides of the a bank takes has to be beneficial. financial ecosystem.

None of us can complete the whole mission on our own

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EMBEDDED FINANCE: INFRASTRUCTURE

Power to the merchant!

Alternative providers are disintermediating banks and PSPs that have dominated the market and made processes complex and expensive for so long. That can only be good news for merchants who no longer have to accept high-cost, take-it-or-leave-it services, says Søren Mogensen, Chief Growth Officer at Banking Circle A 2021 survey of 1,000 Americans

by GoCardless revealed that 39 per cent of consumers overall were willing to ditch traditional banking for peer-to-peer and social media app payments; and that increased to half of Millennials and Gen Z-ers.

While every consumer environment has specific payment trends and cultural preferences, it’s indicative of the huge shift in customer behaviours that’s impacting merchants of all sizes.

Banking Circle, the payments bank for payment service providers (PSPs), banks, fintechs and marketplaces, is seeing the impact of that multiplication of payment choice. For one thing, it’s put the merchant in an enviable position, according to Banking Circle’s chief growth officer, Søren Mogensen.

“COVID-19 did not change the digital finance evolution, but it’s certainly accelerated it and that has led to opportunities, as well as threats,” he says. ffnews.com

“The opportunities are exemplified by all the new and interesting payment methods that have emerged recently; buy now, pay later (BNPL) is a tremendous example of that. As to the threats, competition is increasing. There is an intense battle for the merchant interface, such as we’ve never seen before. At Banking Circle, we see that played out every day.”

As to whether banks and payments companies are ready for these changes, Mogensen believes they ‘absolutely’ are.

“Payment companies are definitely expanding their service propositions for the merchant: they want to add accounts, including virtual accounts, lending, issuing, BNPL and much more,” he continues.

“They want to surround the merchant customer with an ecosystem of opportunities and we see several companies delivering that really well.

Banks are doing the same.

“But, now, we also see enterprise resource planning (ERP) systems creating an ecosystem of which cash management, transaction banking, and payment solutions form a part; and we see software platforms like Shopify delivering solutions such as payments and capital. Also in this space are the fintech aggregators.

So, there are interesting dynamics developing between companies trying to achieve the same objectives.”

There are two winners in this battle – and it’s not the providers. Rather, it’s the consumers and merchants, who have a wider variety of payment methods to choose from at lower cost, who benefit.

“Each category of provider will need to intensify their game,“ believes Mogensen.

“Each participant in this ecosystem will have to focus on what they are very good at. The payment companies will need to focus on serving the merchants with very strong propositions, and they will need to partner up with others, like Banking Circle, to get those solutions in place.

“For example, we deliver the payments, the accounts, the foreign exchange and lending for payment companies, but we see collaboration enabling them to deliver much stronger merchant solutions.”

The technology unlocking this explosion of choice, in the main, is APIs and the Cloud. Banking Circle’s open API, for example, enables financial services providers to connect automatically and directly to its payment infrastructure for real-time, cross-border processing.

APIs also allow merchants to integrate their systems with third-party payment service providers more easily, and fully automate transaction, accounting and reporting processes by embedding them into the ERP software or accounting system, as Mogensen describes.

As a payments infrastructure provider, Banking Circle is agnostic as to which of these many intermediaries is accessing its platform; it works with anyone involved in the payments process, but it doesn’t have direct relationships with corporates or merchants.

“Banking Circle is building an ecosystem of propositions aimed at payment companies and banks, but also software platforms and ERP systems,” says Mogensen.

“And we are developing strong partnerships that will deliver strong opportunities for all parties.”

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EMBEDDED FINANCE: INFRASTRUCTURE

It’s getting personal Lindsay Davis of earned wage access fintech Atomic and Steve Lemon of cross-border payments specialist Currencycloud on taking the relationship with consumers to the next level – and what’s holding it back The future of finance is embedded and resistance is futile.

A fast-growing ecosystem built on the premise of consensual sharing of data is poised to help companies get to know us in the most intimate of ways – through our employment history, tax filings and other personal data – allowing retailers and other non-FS organisations to abstract financial services from banks and offer them to their customers.

It’s a game-changer to which more traditional business models, such as those relied on by many incumbent retail banks, will need to radically adapt. The focus so far has been on streamlining payments, lending and insurance, based on bank data.

But that's just the start: the data streams that can be used to make supersmart finance a reality are pretty much limitless.

Take Atomic, the fintech power behind payroll connectivity. Intelligent earned wage access, Atomic would argue, helps level the financial playing field, not just for the low paid but also the growing number of freelance/gig economy workers. Not least, it could save them from being hit by some of the $4billion in overdraft fees earned by US banks last year.

Lindsay Davis, head of markets at Atomic, argues the insights that can be garnered from looking at the flow of money in and out of an account are fundamentally limited if all you are seeing is bank data – and particularly bank data supplied by aggregators, which is, necessarily, after the fact. Whereas, if you have direct access to data on your consumer about their income and employment history, you can build a product road map that is aligned with where they truly are in their financial lives.

And while that’s a threat to the traditional model of banking because the products they’ve relied on for so long to create revenue suddenly look a pretty poor option from the consumer’s perspective, if banks embrace the

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concept, it can unlock new business lines.

Take buy now, pay later (BNPL); a runaway success with consumers that was resisted by the establishment until the tide of adoption by retailers made it futile to resist – many banks came up with their own options or integrated with providers.

“Now you’re seeing all the cards are getting very aggressive in BNPL. Square making the acquisition, earlier this year, of Afterpay, is sort of validation that this is very much an area that is not going to go away, and a payment method, ultimately, that’s going to be long-term,” says Davis.

Steve Lemon, founder of cross-border paytech Currencycloud, traces the current explosion in embedded finance back to the aftermath of the 2008 financial crash, when venture capitalists invested heavily in specialist financial services organisations that saw opportunities to use technology to take on the banks.

There are several different styles of embedded finance companies, but I think there is going to be a petering out for the ones that don’t understand the regulatory frameworks and the complexity Lindsay Davis, Atomic

“It’s the expansion of the API-led economy that’s really, really driven this forward,” he says.

“The rebundling of financial services, and banking-as-a-service (BaaS), are bringing together best-in-breed providers of payments, lending and insurance, and presenting the best components, to give customers a really consumable service.”

And addressing how the look of the marketplace is altering. Lemon adds: “In terms of the brands, there are the constituent parts of embedded finance, the organisations providing the underlying service, but there are also those that are now able to offer financial services as part of their brand line-up.

It gives completely non-financial services-led organisations the ability to offer banking services, payment services, credit card services, etc.”

Lemon sees embedded finance increasingly making the transaction happen in the background with ‘no limit’ to the kinds of financial service that can be provided. Elaborating, he says: “I think in the years ahead it’s about abstracting away the friction, the pain point in a journey.

“Nobody wants to go and buy, nobody wants to go and take out a loan, nobody wants to go and take out a mortgage, nobody wants to go out and make a payment. They don’t choose to go and interact with their bank, to make a payment, or execute an insurance policy; it’s normally a by-product of something they’re doing. So, if you’re buying a car, you’re buying a car, you’re not taking out a loan; if you’re buying a house, you’re not taking out a mortgage and the associated insurance products that go with that.

“So I think in the future you’re going to see more and more consumer brands in all areas, whether that be retail, automotive, big techs like Apple getting onboard – Amazon and Google are already doing it.

You’re going to see a proliferation of transactions that just happen organically in the background, without a conscious need to go and execute them via your bank.”

And it’s not just individuals who will benefit. Davis sees embedded finance carrying huge advantages for businesses of all sizes.

“Offering BNPL enables retailers to improve the lifetime value of their customer, reduce friction and increase www.fintechf.com

conversion rates,” she says. “From a lending perspective, embedded finance provides opportunities for businesses to get access to a loan – it’s not easy today for a small business to qualify, to be underwritten, and to have to physically walk into a bank branch is onerous. And then there’s the data connectivity side of things. Being able to get access to that small business’ hub of data, that lives in other financial products and services, via APIs, enables them to run more seamlessly and decreases their cost of operations. So, there’s a lot of angles that can be impacted here.”

Embedded finance really is multifaceted and it’s just going to become more prolific and easier to do Steve Lemon, Currencycloud

And there are plenty of solutions on the ramp; although getting them out to the market is still a challenge. And it’s one that Atomic has formed a partnership with US embedded finance specialist Bond to address. Together, they are working on providing an embedded finance infrastructure that does the ‘heavy lifting’ of financial regulatory compliance for product developers, allowing them to be up and running within hours.

Such a network would offer developers an easy way to integrate with distributors of potential products, and learn what is and isn’t possible before they even waste the time writing the code for use cases.

Underscoring the difficulties for those trying to go it alone, Davis says: “We’re starting to see companies getting hit with the initial blowbacks of the General Data Protection Regulation, we’re seeing the state of California adopt a similar style model with the California Consumer Privacy Act (CCPA). All this means that it’s going to become much harder to get up and running.

“So, I know that there are several different styles of embedded finance companies, but I think that there is going to be a petering out for the ones that don’t understand the regulatory frameworks and the complexity of it.

“You can’t just, well, maybe you can build an API, but you’re playing with ffnews.com

people’s money, and you’re playing with their non-public information.”

In the US, compliance requirements differ in all 50 states – a huge source of frustration for both Davis and Lemon.

“When you have an open banking framework like Europe’s there’s an opportunity for fintech companies to go to market and build products and services,” Davis says. “In the US, we’re pretty hamstrung, because we don’t have it and it’s been pretty disjointed. Abroad, the regulators are actively empowering fintech companies to build these services, and it’s a huge benefit for end-consumers.”

That said, some opportunities provided by embedded finance, such as investing in stocks – a path followed by Currencycloud, which has arrangements with DriveWealth and Alpaca – have divided opinion over whether embedded finance is making services too easy for customers to consume. Proponents say that, in this context, it encourages more first-time investors, while critics argue it can encourage high-risk, short-term trading, rather than long-term investment.

Lemon believes embedded finance is an unstoppable tide. “It’s multifaceted and it’s going to become more prolific and easier to do, with the platformification of financial services,” he says.

Indeed, Atomic’s and Bond’s infrastructure solution will hasten the arrival of that future. Davis hopes it will provide a catalyst for the next generation of fintech to focus on innovation as well. Atomic’s efforts to ‘unbundle the pay cheque’ is just one way embedded services can make finance more personal and therefore capable of reaching a much wider demographic.

Davis says: “Among the leaders in this, aside from Uber, would be Grab and Gojek in Southeast Asia, which are moving a fully cash economy online and offering, essentially, bank accounts. This is a huge opportunity for the unbanked populations of the world to access fair and transparent financial services, that don’t charge them a thing because they’re embedded within an experience they’re already coming to love and trust.”

Sharing is caring: Access to more granular personal data will make life – particularly if you’re unbanked – easier

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FINTECH FINANCE: FF AWARDS

AWARDS AND T HE W INNER IS… Fintech Finance literally rolled out the red carpet for its first Fintech Oscars in London in November… and a star-studded cast of players stepped out in style to sweep them up!

Not every production is – or, indeed, wants to be – a blockbuster… but every one of them deserves their red carpet moment.

That was the premise for our first Fintech Finance live awards show, for which our 50 top-tier judges – hands-on financial experts, tech evangelists and big thinkers – broke out the popcorn and sat through 200 hours of video submissions from 170 entrants before casting their weighted votes.

Simultaneously, the fintech community got to select its 15 winners from 75 finalists.

This was their chance to bask in the spotlight with the greatest and the best – Hollywood-style.

Or, perhaps we should think of the Awards as more the Sundance of fintech: a festival where great creativity is surfaced

THE WINNERS AND FINALISTS

at which, ultimately, the winners were from bootlaced projects, driven by sheer decided by their peers, not by how much determination and passion. Because, buck they were able to pay for their bang. while the final line-up showcased big “We were overwhelmed by the number hitters such as ACI Worldwide and of entries we received for this new format SmartStream – the Spielbergs of fintech – something crazy like more than a – they were appearing alongside million minutes of videos were comparative newcomers 170 Entries watched by the judges. And such as the UK’s first 50 Top Tier Judges I’m glad I wasn’t one of them, all-digital mortgage lender, 200 Hours Watched because I couldn’t possibly Molo, founded just three 1500 Community Judges choose! ” says Paterson. years ago, and Norbr, 5000 Votes Cast “I feel a deep sense of pride the up-and-coming 75 Finalists whenever I see them used on payments integrator.

15 Winners various marketing campaigns Like many of the fintechs and social media channels now. there on the night, Ali Paterson, the "It was our first show and a steep video-native founder of Fintech Finance learning curve for all of us, but the and the only man to rock a kilt at the team stepped up to host one amazing Awards – is disruptive by nature. He was night and I thank them, the judges determined to do away with complicated and all our worthy entrants. These will entry criteria and preconceived ideas, and always be awards worth winning!” create instead an accessible awards event

1. WOW Moment In Consumer Banking

2. WOW Moment In Business Banking

3. Invisible Security

Monzo WINNER Jitterbit myPOS Starling Bank Aion

Untied WINNER Airbase Temenos Modulr Volante Technologies

Bottomline WINNER UL Futurex Feedzai ACI Worldwide

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www.fintechf.com

4. Pillar of Payments

8. Best WOW Insight from Data

12. Unseen Embedded Finance

ACI Worldwide WINNER Fingerprint Cards AB Bottomline Vesta Neonomics

ACI Worldwide WINNER Datactics Identiq Hiveonline Thinknum Alternative Data

Currencycloud WINNER TreviPay Global Processing Services (GPS) Nium MX

5. WOW Moment In ID Verification

9. Best WOW in Blockchain v

13. Open Banking Espirit de Fiducia

Fingerprint Cards AB WINNER Identiq LexisNexis Risk Solutions UL Trulioo

Zumo WINNER Umbria Network VALK (VOC Corp Ltd.) Hiveonline Ziglu

Neonomics WINNER CREALOGIX Untied] Spire Tech Finastra

6. Best WOW Using AI

10. WOW Moment In Lending

14. WOW Moment In Growing Your Wealth

SmartStream WINNER Yseop Fraugster Planixs Tinkoff

Molo WINNER Iwoca Sunbit Fronted Jifiti

Ziglu WINNER VALK (VOC Corp Ltd.) BUX Dorsum Freetrade

7. WOW Moment in Cross-Border Payments

11. Authentic ESG

15. WOW! We Can Build a Bank

Nium WINNER myPOS NORBr StarLiX OpenWay

ffnews.com

Meniga WINNER Enfuce Hiveonline Clim8 Zumo

Recognise Bank / Mambu WINNER Temenos Banking Circle FintechOS Finastra Giant surprise! Brian Blessed took to the stage, alongside host comedian Ed Gamble and Liberty X

Issue 22 | TheFintechMagazine

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Will customers leave my bank for better digital tools?

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TRADING: DIGITAL ASSETS For investment banks, being digital increasingly means forming the right technology partnerships, and that’s especially so if they want to move into the booming digital asset space.

The size of this market is growing rapidly, and so is institutional interest as big banks that have been slow to catch on, realise they risk losing out on multi-trillion dollar business.

“Digital assets aren’t going to go away – it will be a 10, 15, 20 trillion dollar business in the next couple of years, driven by asset tokenisations, stablecoins, and central bank digital currencies,” says Olivier Dang, COO of the wholesale digital office at global investment bank Nomura.

Dang has a remit that spans the bank’s electronic trading platform, digital assets and new business opportunities.

While partnerships are already central to Nomura’s strategy, they are critical when it comes to digital assets, he says.

“About three years ago, and before many of the other traditional banks looked at the space, we decided to enter the digital asset

custody market. But we did so as a traditional bank, and there was no way we were going to build an in-house solution that would meet the needs of cybersecurity, or that could keep up with the pace of technological change.

New coins that we may want to support are coming into the market every month, or even every day.”

So, instead, Nomura formed a joint venture (JV) to create a next-generation digital asset custodian called Komainu, alongside Ledger, a French fintech, and CoinShares, a large crypto firm.

Ledger provides a platform to secure, buy, exchange and grow crypto assets, while CoinShares describes itself as a pioneer in digital asset investing, whose mission is to expand access to the digital asset ecosystem.

“Nomura brings 100 years of experience to Komainu,” says Dang.

“We operate in regulated markets and have the institutional experience and scale. Ledger brings technology, and CoinShares has the expertise and knowhow in the crypto market.

“The Komainu JV is now fully regulated, has a few billions of assets

under custody, and is live and servicing institutional clients.”

It demonstrated how a large institution can successfully partner to leapfrog into untapped markets, taking investment banking in a new direction. It was also a smart move for Nomura, fortressing its position in a segment of investment banking that Dang acknowledges today’s traditional actors may cede to new players within the next decade.

“Already, the likes of Binance, FTX, and Coinbase are generating significant revenue, and transacting massive volumes, matching the levels in traditional exchanges and banks,” says Dang.

Based on technology developed in just the last few years, commissions made on crypto provide plenty of firepower for technology investments such as into DeFi – decentralised financial – products using Ethereum and blockchain applications.

“You already see protocols using automated market makers to generate volume on certain coin pairs,” says Dang, “and there are no brokers or actors in the middle. Very few traditional banks are in that space today. It’s difficult to enter because of know-your-customer and lack of regulation, but that’s not to say things won’t change.

Investing in the future What will tomorrow’s investment bank look like? Olivier Dang, COO of the Wholesale Digital Office at Nomura, and Matthew Lempriere, Head of Asia Pacific at BSO, discuss digital assets, technology and industry partnerships ffnews.com

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TRADING: DIGITAL ASSETS “In the next few years, there’ll be a massive shift towards new actors, mostly driven by the explosion of digital assets,” says Dang. “I think some of these crypto actors might attempt a reverse takeover and buy a traditional bank for its licence and institutional client base.”

In the meantime, without the right partnership and external skills, Dang says Nomura would struggle to define the scope of the product, and would not have had access to the best technology – nor, indeed, understood what’s happening in the market.

“These guys live and breathe the products,” says Dang, “but we don’t. What we bring is our client base, our knowledge of how to onboard a client, how to manage a risk framework and how to operate three lines of defence, plus all the key banking that pure fintechs may not know how to do. The synergy through a joint venture, through investment, is the right approach.”

I think some of these crypto actors might attempt a reverse takeover and buy a traditional bank for its licence and institutional client base Olivier Dang, Nomura

It’s one that Nomura has replicated in many other areas, mostly as an ‘efficiency play’, says Dang, where technology can achieve a few basis points of cost reduction. It tends to partner with well-established tech companies that have done it before, at scale, with other banks.

It has no appetite to be a guinea pig, says Dang, but if there is a clear-cut revenue gain, the bank won’t hesitate to shake on a mutually-beneficial tie-up.

“We’ll put money into an early-stage company,” he says, “and get equity so that we have a seat on the board. Then we

can influence the product roadmap and build something that really meets the needs of the industry. I’m convinced partnership, especially in digital assets, is the way forward.”

Matthew Lempriere, head of sales at BSO, which provides mission-critical infrastructure and network services, represents the technology side of these banking partnerships.

“Our clients depend on data,” says Lempriere, “and getting it to where it’s wanted, when it’s wanted, with the best possible technology, is what we do at BSO. Specialist companies like us, which provide ultra-low latency solutions globally, still have a serious edge, on the network side, over the Cloud providers that are doing the storage, the applications, the analytics… it’s just one-size-fits-all from most of them.”

His observation on the technology cycle presents a more unorthodox view of how the industry might evolve, with power returning to desktops, or a virtual on-premise setup.

“I take a slightly different view from other people,” he says. “If you look at where technology has gone, when I started my first job, in the late 80s, it was all mainframes and dumb terminals, then everything was PC-based, and now it’s everything in the Cloud, so my PC really doesn’t have much on it. Give it 10 years, though, and you’ll probably find that some of the technology will start coming out of the Cloud, or at least into the edge, because we’ll need the dedicated infrastructure again.”

Any evolution in investment banking and asset management will be more cautious than in other industry verticals, says Dang, due to the amount of regulation it’s subject to. But he tends to agree with Lempriere’s cyclical view.

Progress, especially when it comes to Cloud adoption, already varies from country to country. Lempriere points, for example, to a rule introduced in Hong Kong

which stipulates that all data should be stored on-premise. Indeed, he was involved in explaining why this would negate the benefits of the Cloud.

“Some countries are far more conservative than others,” says Lempriere.

“There are relationships between datacentre providers and local businesses where they want to keep the status quo and there is no desire to move to the Cloud.”

There are relationships between datacentre providers and local businesses where they want to keep the status quo and there is no desire to move to the Cloud Matthew Lempriere, BSO

That’s not the only technology shaping investment banking, of course. AI, greater automation, and low-code and no-code, all play a part. However, the concern is that digital asset players are progressing more quickly, says Dang.

“By definition, a digital asset must be all digital,” he says. “You need a faster information flow, using your AI engine to extract insights and data, and trade in a systematic way, instead of having a voice trader passing orders. If you’re not investing in your tech, your people and your leadership, you’re not prepared for the future and the growth of digital assets.

“We need to be less conservative,” he says, “as there’s a risk of falling behind.

We need to offer wide product sets and new asset classes. The institutional adoption of digital assets is almost at a tipping point, so if we’re not able to meet the needs of our institutional clients, they’ll look elsewhere. It’s critical for us to move into that space.”

On the money: Investment banking must embrace digital assets

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TRADING: FPGAs FPGAs have driven tick to trade, but is speed always the most important benchmark in investing? Ashok Kalyanswamy of online trading and investment specialist Saxo Bank, and Milan Dvorak, Founder of Netcope Technologies, now Magmio, agree to differ They’re used by physicists at CERN to pick up instabilities in the Large Hadron Collider particle beam; they could help a fibre-optic camera process multispectral images of arteries fast enough to be useful to heart surgeons; and they can eliminate the infinitesimal time delay experienced by scientists trying to study the beat of a fly’s wing.

‘They’ are field programmable gate arrays (FPGAs) – logic elements on a chip that can be configured and reconfigured for tasks whose success depends on eliminating the temporal time jitters seen with conventional computing.

In the financial world, they are most commonly associated with ultra-low latency investment transactions, the ‘tick to trade’ metric that determines success in high-frequency environments.

But that’s not their only application.

While in prop trading, using FPGA technology undoubtedly accelerates the race to zero latency, Milan Dvorak, founder of Netcope Technologies, which now provides FPGA services to the investment industry under the Magmio

brand, suggests that banks, brokers and other institutions could also find value applying them as risk gateways or market data processing gateways, especially in periods of high volatility. And everyone is now familiar with those.

“During COVID, many of these institutions ran into performance limitations other than latency, just dealing with the sheer amount of data,” he says. “And that’s another area where FPGAs can help.”

Ashok Kalyanswamy, chief information officer at online trading and investment specialist Saxo Bank, had previous experience of incorporating the hardware at a broker house that co-located FPGAs at exchanges. While hugely expensive at the time, it did put a market-beating distance between the company and its rivals because it was able to accelerate the last mile in the trading process.

But he says that you have to be discerning about where you apply the technology. And, as a retail-focussed investment bank, facilitating other people’s trades, Saxo hasn’t yet seen a compelling reason for using FPGAs. “You have to think about what you are striving for,” says Kalyanswamy. “If ultra-low latency is key to your strategy, you co-locate as close to the exchanges as possible and you can get raw market data and trade directly; if you have a proprietary algorithm and you’re trying to achieve ultra-low latency, then absolutely, [FPGAs are useful]. However, if you are catering for a retail investor who’s in Australia, trading with a broker on Nasdaq, it doesn’t really make sense just to optimise the last mile, because it’s many hops from the person making the decision to trade, and the order hitting the market.

If you are sitting in the UK, and you’re trying to trade on the Japanese market, is it going to make a nanosecond latency difference? Not really. By the time you hit the button on your app or desktop and it travels first to your broker and then to the market, those latencies are bigger than the last mile in the FPGA. “When you talk about ultra-low latency trading, to optimise the hardware, co-locating the decision-making, your algorithms and your strategies are as important as the connectivity part. You have to think, end-to-end, who is making the decision to hit the button to trade. ”In Saxo Bank’s case, we are a global facilitator in trading and investment, connected to 88 markets around the globe in 25-plus countries. We always try to get the best price for the customer, react to customers’ orders and what they are trying to achieve, as quickly as possible. ”But we look at the whole value chain: from different end points around the world, the network we connect to, the latency we have in our infrastructure throughout. We have a more of a systems-approach to latency and making sure there are no inefficiencies in our pipeline to the market, as opposed to optimising the last mile.”

For the majority of Dvorak’s clients, though, that last sprint is all-important.

“We basically create a tailored solution to a very specific use case and, in trading, the use case is usually ultra-low latency,” he says. “So, there is no operating system, there is no overhead, FPGAs are just pure logic, programmed to do one thing, and that’s trading. That’s why this technology can achieve great performance and

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low latency, beating the standard software solution by a long shot. But, at the same time, a FPGA is still programmable, so you can change it on a daily basis; upload new strategies, adjust your logic every day. You’re not stuck with an expensive piece of hardware that will eventually be outdated or stop functioning.

“FPGAs bring the best of both worlds together,” says Dvorak. “They give you ultra-high performance with programmability and flexibility.”

In this scenario, traders have a choice – to build or buy.

“Clients usually see two main challenges," says Dvorak. “One is time. If you are starting from scratch, it will probably take you

We have a more systems-approach to latency and making sure there are no inefficiencies in our pipeline to the market, as opposed to optimising the last mile Ashok Kalyanswamy, Saxo Bank

a long time to get something up and running on FPGA hardware. The other difficulty is finding the right people to do the job, because there aren’t many hardware designers or FPGA engineers around, and, if there are, they are probably already working for your competition.”

Before tasking the internal IT team with the project, it’s worth noting that coding for FPGAs is probably going to be very unlike any other programming they’ve undertaken. FPGAs are configured using a hardware-description language, and while that’s not difficult, it requires a different mindset. While most software code is procedural, gateware is descriptive.

“So, it comes down to a classic build versus buy equation,” says Dvorak.

“You can decide to build, which probably means two-plus years spent in development, with all the upfront costs, because you need to hire the people, buy the hardware. Or you can buy, really decrease your time to market and have a better cost control, but with some kind of dependency on the vendor.”

Kalyanswamy doesn’t deny the value of FPGA technology to some market

participants, but he believes the future of trading is about much more than speed.

“What traders are trying to do is execute a strategy,” he says, “and they have many different parameters in which to do that. A holistic approach to supporting them includes giving them timely and relevant information. We are all in the business of information and risk: information to make sound decisions; risk management so you can really manage your portfolio. Those are the things Saxo is focussed on and they are really critical to successful trading and making money.

“Our business is to understand our traders, what their strategy is and give them the information to help them trade.

That’s not just market data, but also news, it's earnings and it could be information on Twitter. And when they want to make trading decisions, we give them sophisticated tools so they can send the orders as quickly as possible.

We also give traders risk management tools that equip them with a real-time view of what the risk is.”

“It’s a balance between smart and fast,” agrees Dvorak. “Traders need more information; they need to make educated decisions. But that also means they need better technology to handle that. FPGAs are getting more capable, so it’s fair to expect people will want to do more with them in the future. That’s where Magmio comes in – to help reduce the complexity about using and programming FPGAs.”

FPGAs bring the best of both worlds together: ultra-high performance, with programmability and flexibility Milan Dvorak,

Magmio (Netcope Technologies)

Technology push: FPGAs could be useful to trading environments in more ways than one

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LIQUIDITY & FUNDRAISING: CROWDFUNDING Virtuous circle: Lithuania already has a well-developed peer-to-business lending regime

That’s what Lithuania, which has created an enabling environment for peer-to-business lending, aspires to be – and Jovita Aleksiūnė from the Bank of Lithuania, Vytautas Šenavičius, Chair of the country’s Crowdfunding Association, and Invest Lithuania’s Gintarė Bačiulienė believe it’s entirely possible Collecting money from a large number of small retail investors via online platforms is seen by an increasingly number of startup and scaleup businesses as a good way to secure finance and build loyalty with customer stakeholders.

But mainland Europe has lagged behind the rest of the world in using this type of investment vehicle. According to crowdfunder Fundly, in 2020 European businesses raised $6.48billion in crowdfunded revenues, compared ffnews.com

to $10.54billion in Asia, $17.2billion in North America; $24.16billion in Africa; $68.8billion in Oceania; and $85.74billion in South America.

The problem was seen as divergent regulation in different EU member states, which restricted a fundraiser’s ability to seek cross-border cash. But we could be about to see a crowdfunding boom in the European Union, thanks to the new Regulation on European Crowdfunding Service Providers, which came into force in November. It seeks to super-charge peer-to-business lending by creating uniform rules for platforms, which can then ‘passport’ services across the bloc.

One country already poised to make the most of the new regime is the small-but-fintech-mighty Lithuania.

With an already well-developed digital finance ecosystem, including 18 crowdfunding platforms, it will, in all likelihood, be the first country to offer passporting for licensed platforms and looks well-placed to become the crowdfunding hub of Europe.

What places the Baltic state of Lithuania, with a population of just 2.8 million, at the forefront of this revolution, is an established crowdfunding regulatory regime, inspired in part by the mature UK market.

“In Lithuania, we chose to create a legal system for this sector in 2016, to enable firms to work in a regulated and safe environment, but It has not [had] any unanimous regulation in the whole EU. Some countries had their own bespoke regimes, others didn’t or still don’t – it was a very fragmented legal system,” explains Jovita Aleksiūnė, a lawyer specialising in investment services at Bank of Lithuania.

The country started looking at crowdfunding as an alternative form of finance due to circumstance.

“Finance was very concentrated,” explains Vytautas Šenavičius, chairman of the Crowdfunding Association of Lithuania, “in that only a few per cent of all lending could come from alternative sources. A few large banks had the majority of the lending market. While there are a lot of different ways you could solve that, in Lithuania the idea was to do it through alternative finance by creating a bespoke regime.”

Gintarė Bačiulienė, head of the technology team at government agency Invest Lithuania, said the government was very aware of the value of crowdfunding for small and medium-sized businesses.

“Across the EU, we still see that the sector lacks access to funding from traditional sources,” she says.

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EQUITY AND FUNDRAISING: CROWDFUNDING “I think, from an economic perspective, there is agreement that we have to grow this sector of alternative funding, to ensure that companies have better access to finance.”

The country’s fintech sector has seen a stellar rise. There were just 55 fintech companies in Lithuania in 2014; by the end of 2020, there were 230 registered and licensed firms.

Many of the 18 crowdfounding platforms have carved out a very specific niche.

Among them are Vilnius-based InRento, that enables people, including those on lower incomes, to invest in rental properties across Europe. InRento itself recently received €530,000 for market expansion, in a round led by the Lithuanian Business

Small but influential: Lithuania is a global fintech trendsetter

Angel Fund, along with traders and executives from investment banks. Profitus is another real estate-focussed platform offering investments from €100. It claims to have already invested in about 300 projects, crowdfunding more than €41million and earning about €2million for its investors.

HeavyFinance, meanwhile, raises capital principally for businesses in farming and forestry. Anyone can invest in loans to the sector that are secured by heavy equipment, the benefit being that heavy machines are easier to sell than real estate and don’t lose as much value during periods of uncertainty. The company has already facilitated loans for more than 300 farmers, helping them modernise their farms, and this year it added Poland to the EU countries it operates in. The platform claims that, since June 2020, its investor community has contributed to improving the efficiency of 20,000h of farmland.

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OPEN-DOOR POLICY Government support for crowdfunding has been behind much of the sector’s growth in LIthuania – a trend further accelerated

by COVID-19. Any crowdfunding players with an idea, even a more unconventional one, can arrange to speak to the regulator or the Ministry of Finance within weeks, according to the Crowdfunding Association of Lithuania’s Šenavičius.

“We have open dialogue and open communication about how to make crowdfunding even better, even more flexible, even more modern,” he explains.

“You don’t have to wait for six months to get the first introductory meeting and introduce your new crowdfunding idea.”

In addition, there is a thriving and growing IT talent pool for the skills required by fintechs, as well as anti-money laundering and compliance specialists.

The decision to look to the UK – as well as France, Italy and Spain’s jurisdictions – to inform its regulatory regime around crowdfunding, has clearly paid off and puts it in a prime position.

“We have a not-very-large but mature market where, for our stakeholders, it will be really easy to adapt to the European regime,” says Šenavičius, “because they know the rules, they know that they have to avoid the conflict of interest, they know they have to acquaint the investors with the risks, they have to do the appropriateness tests, etc.”

The Bank of Lithuania’s Aleksiūnė also welcomes the EU’s harmonisation of crowdfunding regulation and passporting rights, as it will help its domestic companies thrive across the bloc in a way not previously possible for those operating in such a small market.

“Even having its own regulation, and having created a safe environment for crowdfunding to bloom, it was hard for our service providers because they were mostly limited to our market,” she says. “Now they will be free to go anywhere they like.”

We have open dialogue and open communication about how to make crowdfunding even better, even more flexible, even more modern

Vytautas Šenavičius, Crowdfunding Association of Lithuania The sector is also helped by Lithuania’s high ranking as an easy place to do business, with the World Bank placing it 11th out of 190 economies for having business-friendly regulations – a reputation the government is clearly keen to maintain.

“There’s a lot of effort that goes towards ensuring that we continuously work on improving the business environment,” says Bačiulienė, of Invest Lithuania.

This includes a world-class digital infrastructure with fast internet speeds and a willingness to bring in skilled non-EU workers, if required.

Lithuania also benefits from a multilingual talent pool, she adds. Some 85 per cent of young professionals are fluent in English, with more than half of the population fluent in two foreign languages.

Following the UK’s example has also created what you might call a ‘Brexit dividend’ for Lithuania. Šenavičius reveals that several British companies are talking to the Crowdfunding Association of Lithuania and the regulatory supervisor about plans to move there, as a result of challenges posed by the UK leaving the EU. “On one side, they have their huge market, so they don’t want to adapt and amend a lot of what they do now in the UK,” he explains. “However, on the other hand, Lithuania also understands and works in the European regime. So maybe that’s why they are coming to Lithuania and considering this as their headquarters for crowdfunding in Europe.”

The UK’s loss might be Lithuania’s gain. www.fintechf.com

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LIQUIDITY & FUNDRAISING: RESILIENCE

The BIG reset Lloyds Banking Group launched a surprise diversification in 2021 – and it’s helping customers similarly derisk their organisations, improve liquidity and rethink business models. The bank’s Gwynne Master told us how The reputation of major banks has been somewhat tarnished by events of recent decades: excessive risk-taking and shady practices resulting in the 2008 financial collapse, followed in the UK by extensive taxpayer bailouts.

One of the biggest recipients of those was Lloyds Banking Group, Britain’s largest retail bank. It took nine years for LBG to be fully returned to private ownership – the taxpayer eventually coming out with around £1billion more than had been put in. But now, as the country seeks to rebuild from a crisis arguably even more serious than the last, it’s time for banks to repay the favour.

And that’s exactly what it’s pledged to do.

The Group built its 2021 strategy review around a single pledge – ‘Helping Britain Recover’ – and it plans to do that by focussing on five key areas: to rebuild households’ financial wealth and wellbeing; support businesses to recover, adapt and grow; accelerate the transition to a ffnews.com

low-carbon economy; build an inclusive society and organisation… and expand availability of affordable, quality homes.

That last, very specific commitment, which echoes the socially-minded approach of mutual societies a century ago, is likely to resonate most with people on the street.

The UK’s largest high street lender is becoming a major private landlord – building a fresh income stream for itself while answering the increasing problem of housing shortages. Dubbed ‘Project Generation’, it began by buying its first block of 50 flats in Nene Wharf, Peterborough, which is being managed by subsidiary Citra Living. It’s a first among major UK retail banks and takes it into the territory previously dominated by private investors and pension funds. It’s a timely move, given that the Office for National Statistics forecasts there will be almost four million new households needing accommodation by 2041, an increase on today of 17 per cent.

What’s in it for the bank, apart from brownie points? A fresh income stream, for one, given mortgage lending revenue is at an all-time low due to rock-bottom interest rates. It could also pave the way for a new breed of related financial products, like deposit loans and private renters’ insurance.

In a strange way, it also puts LBG in the same shoes as the millions of businesses in the UK that have had to adapt, break new ground and come to terms with a very different operating landscape over the past two years.

Lloyds Bank Commercial Banking MD and head of working capital solutions, Gwynne Master, sees, first-hand, the imperatives now facing business organisations, given her responsibility for overseeing solutions including invoice financing and factoring, traditional, more structured, complex trade and the bank’s export credit agency and open account business.

“The last two years have been a period of huge uncertainty, with considerable disruption, to put it mildly,” she says.

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LIQUIDITY & FUNDRAISING: RESILIENCE “The real headline today is the fact that our clients are facing a series of concurrent stresses – not only the pandemic – that are fundamentally testing their resilience.

From a working capital perspective, supply chain disruption has impacted business, increased costs and promoted the need for new ways of working, as well as finding new suppliers to plug gaps and implementing technology to increase supplier visibility.

“We view this disruption from two perspectives – our own financial operations, risk and resilience, of course, but also from the customer standpoint.

Really, our role is to help our clients build resilience, something that goes both ways. Banks are more resilient if, and only if, their clients are resilient.

“We definitely see companies introducing new KPIs to determine resilience – things like time-to-recovery and time-to-survive.

Managers are asking themselves ‘how long can our company continue meeting demand from our clients if we experience a particular disruption?’ and ‘how long will it take us to recover?’. Obviously, it’s really important that a company should be able to survive longer than its recovery time, but the last thing it wants to do is hold a lot of idle inventory.”

Technology is one important tool for achieving this delicate balance – giving banks like Lloyds the visibility and clarity to navigate organisations through today’s disrupted world.

“There’s a new technology roadmap emerging,” says Master. “Artificial intelligence and automation play key roles in resilience and risk mitigation, and we look at a range of tools to help our clients.

“One category of tools is to do with risk assessment and mitigation, tackling issues like trading counterparty credit risk; working capital assessment tools to help determine type and timing of liquidity into their business, not only for our clients but also their supply chains.

“Another set of tools offers clients the right platforms to do business with their buyers and suppliers, which have to be as simple as possible.”

PARTNERING TO SUCCEED In late November 2020, Lloyds partnered with UK working capital fintech Demica to offer business clients a new supply chain finance platform with intuitive dashboards, access to key information, and straight-through-processing to automate transactions and minimise impact on corporate treasury teams.

Lloyds Bank's latest Financial Institutions Sentiment Survey suggests financial institutions of all flavours are engaging more in such partnerships with, and acquisitions of fintechs to help them adapt,

Really, our role is to help our clients build resilience, something that goes both ways.

Banks are more resilient if, and only if, their clients are resilient

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Crunching numbers: Lloyds is putting businesses in control

post-pandemic, with building resilience against future shocks a key theme.

More than two fifths (46 per cent) of financial services firms plan to extend their fintech relationships in the next year, compared with a third (32 per cent) in 2020. Developing new products and services (66 per cent) was the biggest driver of these plans, followed by improving client experiences (53 per cent) and driving growth (49 per cent).

The report also found that three-quarters (77 per cent) of senior leaders within UK financial institutions said investment in technology, automation and digital investment are strategic priorities for 2022.

More firms expect to grow investment in their technology systems and core

platforms over the next 12 months (77 per cent) compared to last year (62 per cent).

Lloyds Banking Group itself had already committed £3billion to ongoing digital transformation and is pursuing a multi-Cloud approach.

“We live in a mobile, digitally-connected world, with no tolerance for downtime and demand for low-cost, high-performing solutions, and we see a fundamental shift in thinking around enterprise risk management,” says Master.

“When a customer conducts a simple online transaction, there’s so much system interdependency that one of them going down could impact the client experience. Cloud reduces that risk and can really help ensure continuous availability, resilience and recovery to an unprecedented level.

“We’re more focussed on digital, end-to-end, than ever before, and it’s all about simplifying the client journey and reducing risks. Solutions that help our clients manage working capital can also help,” she says. “Smaller companies can’t afford technologies, like real-time tracking and monitoring, which larger corporations can deploy, so they need comparison tools and AI within bank solutions like ours to support their decision-making.

“For the foreseeable future, leaders have to expect the inevitability of disruption, which has big implications for the technology investment choices they make,” adds Master.

And this is seeing a new kind of collaboration within businesses, too, typically between their chief technology officers (CTOs) and chief financial officers (CFOs).

“Tech plays such a large role in business, that the CTO is now more of an integral member of the board, designing plans for development and growth in order to get businesses to where they need to be.

“At the same time, the CTO is now more savvy, when it comes to return on investment, and, likewise, the CFO is more well-versed in rapidly-changing technology and what it can deliver. But key is really that both the CTO and the CFO are focussed on how to get the right solutions and innovations into the business, to support its growth.”

Bank or landlord, the role technology plays in Lloyds’ own business success is only likely to grow. www.fintechf.com

LIQUIDITY & FUNDRAISING: REVENUE REPORTING Under pressure: There is no shortage of companies that've failed to pass scrutiny in the run-up to an investment offer

HIDING IN PLAIN SIGHT Financial data and how it is presented can make or break a fund-raise. Mark Aubin, Aptitude’s VP of Solutions Consulting in North America, explains how its software solution can make life a lot less stressful for capital-seeking CFOs The spectacular corporate shambles and real-life consequences for employees and investors that can result from not having the right revenue recognition and reporting systems in place – informing strategy and telling an accurate story of business performance – prior to a major fund-raising event has been reflected in the headlines around many an initial public offering (IPO).

At the eye of the storm is the chief financial officer (CFO) – a role that has morphed from passive reporting of historic financial positions and

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compliance to a figure with considerable influence at board level, vis-à-vis a company’s future potential and the investment needed to realise it, from angels, venture capitalists, existing shareholders or the markets.

Financial transparency, specifically how accurate and retrievable the data is around revenue recognition and management, comes under intense scrutiny in the run-up to a fund raise and especially an IPO. And the CFO can find him or herself in an uncomfortable spotlight if that data is not squeaky-clean and presented honestly and accurately.

“A CFO needs to ask ‘do I have the

necessary access to my data?’,” says Mark Aubin, VP of solutions consulting in North America for Aptitude, which specialises in accounting compliance and financial guidance tools for the CFO office.

“When you become a public company, you are going to be scrutinised by your new investors, the regulator and analysts, as well as your own board and employees.

“If a company isn’t prepared for its IPO and the regulator has questions about how it’s accounting for revenue, that could delay its access to sorely-needed capital. So, if it doesn’t have its revenue management processes, data, and reporting in place, the cost to that company could be substantial.” www.fintechf.com

The disaster that was WeWork’s aborted IPO in 2019 probably ranks as the highest-profile revenue management mess of recent years. The shared office space business finally went public in October via the mechanism of a special acquisition company (SAC), but at a value of $9billion compared to the $47billion valuation given by its principle investor SoftBank back in 2019.

In the eyes of analysts, WeWork’s failure was employing the tactic so loved by cash-burning, loss-making technology firms – non-GAAP (generally accepted accounting principles) earnings figures, to give a polished spin on its potential for profit. Media commentators tore its management to shreds over metrics such as ‘community-adjusted EBITDA’, which took an already-complimentary EBITDA (earnings before interest, tax, depreciation and amortisation) figure, then subtracted costs such as rent and tenancy expenses, utility and internet costs, building staff salaries and the cost of building amenities.

The use of EBITDA in earnings calls with analysts has apparently soared among tech and media firms. Last year, the Daily Telegraph reported that its analysis of data from Amenity Analytics showed non-GAAP figures were mentioned 19,398 times in earnings calls in 2019, compared to 8,573 times during 2010.

Meanwhile, even a long track record of stringent auditing is no guarantee an IPO will go well. Madhur Deora, CFO of Indian payments giant Paytm, said his business had been opening its books for a full audit for 13 years in order to meet the demands of investors when Paytm was still a private concern. In an interview with India’s Economic Times, not long before it hit the market in late 2021, Deora stressed that ‘with regard to revenue and the path to profitability, we’ve been able to demonstrate in the financials… that we have come a long way in the last two or three years’. But Paytm shares still crashed by 27 per cent on their launch day in November, wiping $5billion off Paytm’s value.

Company shares aren’t known as ‘risk capital’ for nothing, but having as clear a view of a business’ financial position as possible is vital for bosses and their investors. Indeed, even outside of a funding round, Aptitude would argue that ffnews.com

it’s essential for determining whether a company is in a position to make strategic change of any sort. Its Accounting Hub suite is designed to give CFOs that insight.

“The CFO’s office has traditionally focussed on two areas,” says Aubin. ”Those are compliance and stewardship of the business – everything to do with cash flows, accounting, regulatory reporting disclosures. And then financial planning and analysis, or FP&A. This has always been under the stewardship or guidance of the CFO’s office but we’re starting to see a big change in the connection between those two. It was more of a handshake before; now it’s becoming an interactive activity between the past and the future, to be able to make sure the company is making strategic decisions based on what’s going on in the company today, and where it might go tomorrow.”

Aubin reveals that Aptitude Software staff listen in to the analyst calls of its publicly listed clients to assess how clued-up their executives are: “Because we want to know what those KPIs are and what they are reporting back to investors about the company’s health. It’s always interesting to hear the investor analysts

It’s interesting to hear the investor analysts ask questions on the fly, and see how quickly the CEO and CFO are prepared with those answers… good answers mean they have good access to the data ask questions on the fly, and see how quickly the CEO and CFO are prepared with the answers. Because, if they’re giving good answers on the fly, it means they have good access to the data.”

Aptitude’s Accounting Hub software aims to be the solution that meets all accounting needs, from automating accounting for a business’ various teams, departments or subsidiaries, meeting the needs of regulatory reporting, and then harnessing data so that it can be used to guide forecasting and strategy.

“We have products to address various compliance guidances and our core product, the Aptitude Accounting Hub, is an enterprise accounting rules engine and subledger,” adds Aubin. “It takes all the business events, all the calculations, creates the accounting entries and establishes an enterprise subledger, with balances, to a level of deep granularity and attribution, before sending summarised journals into the general ledger. We like to say we’re ‘putting the general back into the general ledger’.

“We want the Aptitude Accounting Hub to be the business’ thick enterprise subledger, to support management reporting, regulatory reporting, strategic reporting, so that the company can be as nimble as possible.

“CFO offices are realising there’s a lot of data that can immediately influence strategic decisions,” Aubin continues.

“A CFO already has a seat at the table for strategic decisions, but now they’re often the enabler of those decisions because they have the best view of the company’s health.

“Rather than being in a reactive mode, answering the CEO’s questions, the CFO can present opportunities, they can say, ‘this is where we can go as a company’.”

Aubin adds that being able to harness data to look forward can improve a business’ agility at a time when digitisation is allowing firms to look afresh at their business models – a subscription-driven revenue model being one example. With a clear line of sight on the data, a clued-up CFO can help lead that change rather than scrabbling to react to it.

“The CFO will have been focussed on ensuring the company is running as optimally as possible, then the business model gets flipped. The sales team may want to hit a new market or move onto a subscription model,” says Aubin.

“Does the business have archaic systems and processes that are going to stifle its progress? Or does it operate in line with best practice and have everyone at the table, finance included, pulling in the same direction?

“In my opinion, the CFO’s team needs to be there in new market discussions, providing the data that will justify pricing and bundling decisions, based on past, current and future financial analytics.”

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LIQUIDITY & FUNDRAISING: ADVERTORIAL All the way back in 2016, a Moody’s Analytics Report forecast that ‘emerging technology, innovative use of data and expectations of an enhanced borrower experience will drive significant change in small business lending in the coming years’.

Those changes are still unfolding.

Mobile, the Cloud and data are the norm in consumer services – but, in business lending, they are still lagging. For once, the solutions won’t cost more – and could head off the competitive threat from Big Tech.

Martin McCann, CEO of Trade Ledger, whose lending platform is used by some of the world’s biggest banks, says: “There are six key things we think lenders could use technology for, so that they can lend more, control risk and expand into new products and markets.”

McCann’s first recommendation is to make it easier for borrowers to apply for credit. Instead of asking applicants which products they want (such as asset finance or invoice finance), and getting them to apply for each separately, lenders can recommend the right loan by assessing the prospective borrower’s assets, accounts and invoices together. Consumers are familiar with being offered a pre-approved credit card; the same convenient journey could be made available to business borrowers across term loans, debtor finance, overdrafts and more.

Next, lenders need to have their data on tap, says McCann. “Current lending processes involve paper or electronic documents that provide only static, historical evidence of a borrower’s situation. But today, data is available on- demand, in near-real time, whenever a decision needs to be made.”

Lending systems can collect data from borrowers’ online banking and accounting systems, credit reference agencies and official sources such as national registers of companies and directors. This information is delivered via API feeds, avoiding effort for customers, and manual errors and reworking for back-office staff. Obtaining data like this enables lenders to improve analysis, risk assessment and lending decisions.

Big Tech companies are already in on the act. They use their proprietary data resources

Consumers are familiar with being offered a pre-approved credit card; the same convenient journey could be made available to business borrowers across term loans, debtor finance, overdrafts and more to assess the risk of potential business borrowers. Many are offering credit at the point-of-sale and becoming intermediaries.

But traditional lenders also have proprietary data that they can make greater use of.

McCann’s third recommendation is to get all departments to work from the same dataset, so that they get a single customer view – harmonising the use of data across departments, eliminating silos and accelerating processes. That makes reporting and analytics easier, enabling lenders to check their KPIs and identify bottlenecks, as well as helping customers to manage their borrowing via dashboards.

Fourth, lenders – which have historically found the SME market too costly to serve – need to respond to market pull with new offerings, he says.

“The streamlined processes available from a lending platform mean lenders can now take on complex products, like invoice finance,” says McCann. “They can also offer choice over the assets used as security, and self-service, so business owners can apply for a loan at midnight, if they want!“ Fifth, he urges providers to reconsider what they will accept as collateral in the service sector, which makes up 80 per cent of many modern economies, because tangible assets don’t reflect the health of a business. Instead, it’s shown by their sales strength – evidenced by invoices, which can act as collateral. Invoices involve admin, but a lending platform can take the strain.

Six, look to the future. Supply-chain transaction services refers to digital contracts that serve a whole supply chain.

Within supply chains now, there is still a lot of work for people to do, bridging the gaps between computers and systems. For example, if a delivery van has an accident, the owner has to collect data about the vehicle, damage, insurance policies and more, to feed into the claims computer.

Much of this can be collected automatically, making life easier for everyone involved.

So, how do we to bring about this shift?

The key, says McCann, is how you put the data together to respond to customer needs.

“And a really effective lending platform, such as ours at Trade Ledger, can do this for lenders today.”

The platforms taking business lending to a new level The richness and ease of consumer borrowing online is driving demand for similar services in business. Martin McCann, CEO of Trade Ledger, looks at how lending platforms can help ffnews.com

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LIQUIDITY & FUNDRAISING: SUPPLY CHAIN FINANCE

Chain reaction Previse CEO, Paul Christensen considers how technology and collaboration can unlock liquidity and help supply chains establish their own new normal COVID-19 has altered economic norms worldwide. However, one area yet to evolve with this changing landscape is the supply chain, which continues to be built upon models that risk becoming overwhelmed by the next shock to the system.

Against a backdrop of rising prices and warnings of a ‘bottleneck recession’, I believe banks, corporates and fintechs can work together to help supply chains establish their own ‘new normal’ and build a more sustainable future for global trade.

LOOKING BEYOND COVID It was unfortunate timing that the Suez blockage occurred in the midst of a pandemic that had already put unprecedented strain on supply chains. This pressure was reflected in first-quarter earnings calls in the US, with supplier testimonials painting a bleak picture. Paint maker PPG Industries, for instance, said it had been operating ‘hand to mouth’ during the crisis.

But the reality is that supply chains have been besieged with problems for years – now, with many suppliers pushed to breaking point, there has never been a better time to take stock and reflect on the need for action.

Among the plethora of problems noted by suppliers on the aforementioned US quarterly earnings calls, is issues with stock – or, more precisely, lack of it, hampering companies’ ability to accurately plan inventory and pushing up the cost of doing business. At the same time, there has been strong demand in the US, putting further pressure on suppliers.

When supply and demand are put out of kilter, it has a knock-on effect down the chain and suppliers feel this most acutely, ffnews.com

largely because it often results in them having to wait longer to be paid – and the issue is not just the waiting, but also the chasing, uncertainty and stress involved.

Buyers who are forced to push up the cost of business due to a lack of inventory foresight, tend to lengthen payment terms for suppliers in a bid to maintain cash flow. No one can blame businesses for scrambling to maintain liquidity – the cash has to come from somewhere. But US quarterly earnings calls showed that, despite the litany of woes recounted by suppliers, buyers have remained largely profitable; companies have been protecting their margins by sourcing from elsewhere.

It should not be this way, nor does it have to be. With advances in technology, there is no reason why buyers should have to choose between their own liquidity preservation and prompt supplier payment, or switching their sourcing.

With shortages expected to continue dominating the headlines in 2022, the need to update the legacy processes that characterise global trade has never been more glaring With artificial intelligence, it is possible to exercise foresight over one area of supply chains that could be the gateway to further progress – the probability of invoice payment. Machine learning can make a smart assessment of whether an invoice will be paid, based on past payment behaviour.

Once it is determined that an invoice will be paid, the cash can be unlocked, instantly.

The result is that every supplier can be given a ‘pay me now’ button. This technology can be embedded into accounting systems, offered by large corporates to their suppliers, or used by SMEs to secure larger loans, repayable as they make revenue.

COLLABORATION IS KEY This approach, however, requires a collaborative effort – from banks, fintechs and corporates. The good news is, there are benefits for each party.

For banks, providing the capital to unlock immediate supplier payment can help them meet their environmental, social and governance (ESG) goals – an increasingly important consideration for investors. For corporates, unlocking their enterprise resource planning (ERP) data in a secure way can enable them to access swathes of small suppliers that would otherwise be precluded from offering their services – traditional supply chain finance options are prohibitively expensive, often outweighing the cost of participation. And fintechs can provide value to the market in a burgeoning industry in dire need of change.

With shortages expected to continue in 2022, the need to update the legacy processes that characterise global trade has never been more glaring. It is unrealistic to expect technology to transform supply chains in one big-bang moment, but the integration of innovative financial technology into legacy trade systems can help businesses of all sizes overcome the impact of shortages and bottlenecks.

The technology is ready and the world is watching. When the stakes are so high, it is crucial industry takes action: technology should play a key role in shaping the ‘new normal’ for the world’s supply chains.

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FINTECH FOCUS: REMOTE WORKING

WTF should we do about WFH? It’s a hybrid paradox that all leaders are facing: can you, and is it advisable, to force staff into working from home full-time. Or is it bad for them and bad for business? Hannah Duncan considers the options with Anjali Raina, Krista Griggs and Joanna Molik As a freelance writer, the concept of working from home (WFH), far away from office life, doesn’t seem contentious to me. I love sleeping in for a delicious extra hour, saving money on stressful London commutes and wearing clothes that don’t feel like they have the wire hanger still attached.

But not everyone feels that way. Over 2021, 81 per cent of Gen-Zers and Millennials suffered from isolation when working from home, according to Kadence, a hybrid working software supplier.

The 16- to 34-year-olds felt distant from co-workers and anxious about how the lack of face-to-face time was impacting their careers. Another 63 per cent revealed that if WFH continued, they would likely find it harder to focus, and 59 per cent believed they wouldn’t enjoy their job as much.

Banks and fintechs have demonstrated they have the digital tools – and now the experience – to go fully remote. But should they? So far, the only conclusive answer is to avoid conclusive answers.

Goldman Sachs recently tried to re-impose office life pre-COVID style, and it was not well received. The fallout was fast and furious, as employees went to the press to voice their disappointment.

Meanwhile, progressive UK challenger Atom Bank introduced a voluntary four-day week for its 400-plus employees without cutting pay. Experts have good vibes about this, as studies in Iceland found giving employees an extra weekend day to be a remarkable stimulus for business success.

American Express is among several creating a flexi model, offering hybrid working

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models for employees. Indeed, everywhere you look, banks are offering a new way of working, designed to keep employees (and shareholders) happy.

But is there a right and wrong way to do it? Are there missed opportunities that could arise from this new way of clocking in? We asked three industry experts for their views: Anjali Raina, who heads the Harvard Business School India Research Centre, which studies trends shaping business models there; Joanna Molik, executive director at Microsoft whose Teams software made big inroads into the unified communications as-a-service market during 2020; and Krista Griggs, head of financial services and insurance at Fujitsu, whose research found 89 per cent of business leaders and 77 per cent of employees in financial services believe hybrid working will make their organisation more resilient.

THE FINTECH MAGAZINE: Do you see financial services organisation moving to a hybrid workplace permanently?

KRISTA GRIGGS: Absolutely. We’re already seeing that in banks like HSBC and NatWest, which have declared that it’s a permanent change they are making. And, equally, we saw [the repercussions if they don’t] when Goldman Sachs said it wanted everyone to come back to the office – there was a real backlash to that.

ANJALI RAINA: I spent almost 26 years with different banks, Citigroup being one of them, and I’ve surveyed my past colleagues on this. The reaction was very similar to what Krista is saying, that some organisations are totally focussed on bringing everybody back to work and, in

fact, have already done it, and some are saying that it’s going to be hybrid.

But some of my more thoughtful ex-colleagues pointed out that it depends on the job. For example, in investment banking, a research analyst can do a hybrid job, or maybe a completely remote job.

But a person who is in sales and trading, or who’s trading in very large amounts, where milliseconds and approvals matter, perhaps they need to be on site.

Maybe all that we can say is that, coming out of this pandemic, the experiment has been fantastic in showing that remote working can be done and it can be productive. But how far people accept that, and how we take that forward – this is going to be something that we have to still work out.

TFM: How can banks and fintechs create a hybrid environment that supports the wellbeing of employees?

JOANNA MOLIK: The first step is to know your employees and know their needs. Provide them with the flexible hybrid solutions that are fit for different kinds of work, and the different kinds of jobs they are doing. There’s no one-size-fits all approach. We know some employees prefer to work from home and are more productive from home. While others cannot wait to come back into the office! That’s where the hybrid paradox comes into play.

It’s about giving everyone the same experience, no matter where they are.

For example, with the rise of in-person meetings, make sure that everyone is included, whether they’re joining digitally or are physically present… It’s the number www.fintechf.com

Home is where the work is: But it doesn’t suit everyone – or every job

one way to maintain and manage the level of communication.

That, for me, is the most important element for wellbeing at work and the key one to tackle: the ability to fit different expectations into one hybrid experience.

KG: One of the things we’ve seen with remote working, especially during lockdown, is that it’s really difficult to spot when people are struggling.

For some people, it’s created a difficult wellbeing situation, and, as managers and leaders, we have to be more cognisant.

We have to understand what the personal circumstances are, not just the job situation. Think, ‘what’s the right thing for this individual? How can we make sure they stay connected? That they’re not being burnt out? How can we help them?’.

AR: The very fact that we are talking about wellness and emotional ffnews.com

It’s a bit like automating a bad process. What we’ve done is just taken the existing work environment and transferred it to remote Anjali Raina, Harvard Business School India Research Centre

wellbeing of employees is maybe a wonderful fallout of this whole process, because I don’t think employers have ever really cared that much. They’ve looked at physical wellbeing, and they have had cafeterias with nutritious food, and they’ve had gymnasiums, and they’ve paid for yearly check-ups, and so on, but it’s always been in the physical dimension. This focus on mental health, mental wellbeing,

emotional wellbeing, even the focus on inclusivity, and on diversity, is probably more widespread than it was before the pandemic. And that’s a good indication.

That said, it’s a bit like automating a bad process, in that what we’ve done is really just taken the existing work environment and transferred it to remote. One can actually design the workplace in a better way.

We need to design it around the humans who are doing the work, rather than around the pressures of the financial services organisation they are serving.

TFM: What tools can banks and fintechs use to design a better workplace?

AR: Harvard put together something called the Flourishing Index, based on research it carried out, which has a number of parameters. It basically says people flourish when you have mental, emotional, psychological and intellectual health. It’s freely available research.

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FINTECH FOCUS: REMOTE WORKING Just like we look at the financial returns from an organisation, we can use that index to see if the employee is flourishing.

It can be an outcome measure that we work backwards from to design work.

KG: Give staff collaboration tools to make sure that, wherever they are, they can connect, if they’re not physically in the office, and be inclusive in making sure that everyone can stay connected with the team in a way that’s suitable and works for them; create offices that really are set up around collaboration. No more rows of desks of people sitting there for work. They can do that at home.

There is a huge war for talent and, therefore, it is quite simply essential to build an environment where people can thrive Krista Griggs, Fujitsu

TFM: Why is employee wellness and wellbeing relevant for banks and fintechs?

KG: There’s so much change happening in the financial services sector. There is a huge war for talent and, therefore, it is quite simply essential to build an environment where people can thrive. [Banks and fintechs must] attract, and retain the right people to do well as a business. So, looking after your people is essential to being successful and resilient in the market at the moment.

A lot of that comes down to how can you make it easier for people to work where they want? Whether they are in the office, whether they are at home, whether they are in a park on a bench, it doesn’t matter – they have to be able to do their job.

There is such a shortage of the right skills to drive forward the sector that if you don’t offer it, you’re going to lose out.

I think that’s one of the key things that will drive leaders to really put the right things in place, both from a process and environment point of view.

TFM: What are the top things banks and fintechs need to change to support this new way of working?

JM: Number one is empathy. It’s an important skill we need to build up to be successful in a hybrid world. This applies to leaders, to managers and to individuals

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alike. Also the ability to interact, to break this digital wall between us – to come together and meet as human beings.

There are different groups of skills to tackle. I want to focus on accessibility and inclusion – that not only applies to people with disabilities, but to making a meeting inclusive, and making sure everybody’s voices are heard. This doesn’t come naturally, but those leaders who I’ve seen embrace those skills, and build them in the organisation, get amazing results.

People are saying ‘we feel closer now than we were before, even if we were working in the same office!”’.

What we used to call ‘soft skills’, but I like to call ‘human skills’, are really of number one importance.

AR: Especially in financial services, we tend to think that face-to-face supervision is required. But we’ve seen that we don’t need to do that. We can trust the person. So, it’s really about changing the manager’s approach so that he or she is looking at how the output of the job is going to be measured. Then you can work backwards around that.

KG: It is essential to set boundaries, so people don’t get overblown by work.

There’s so much stress. People are saying, ‘it’s fantastic, I can work from home’. Actually, that means there’s no switching off between home and work life; those boundaries have become a lot more blurred.

As organisations, as leaders, we have a responsibility to make sure we provide staff with all the tools appropriate to the job and to their personal circumstances, to enable them to ringfence their personal life as something that’s protected and private.

TFM: How can we make sure that people WFH are not missing out on the social benefits of office life?

AR: When people get together, there’s a certain spark, an energy.

Often that spark was lit at a coffee machine accidental meeting. So, banks and fintechs should ask themselves ‘how can we make those serendipitous conversations happen?

How can we design for them?’. So look at the insights from the data and work backwards as to what is required – and if there is one thing financial services isn’t short of, it’s data!

KG: Start with purpose and a vision of what you’re trying to achieve. So yes, you want outcomes, but it’s not just about

financial outcomes; inclusivity is part of this, as well. That’s how leaders need to drive organisations; drive structure and culture. It’s about stating ‘this is the purpose, this is who we are, this is the culture, and this is what we’re trying to do in the world – the change we’re trying to make for our customers, for our society’.

Then you can ask ‘what data do I need to achieve that purpose? What outcomes are we looking for and how can we evidence that we’re making progress?’. Because the data has no value if it’s not aligned to purpose and values.

TFM: How should banks and fintechs create this intersection between culture, tech and their own personal values?

JM: Refocus on the purpose – not only on the organisational level but at the team level. Have a new social contract as a team, a charter that says 'this is why we exist’. Whether it’s an underwriting team in insurance, whether it’s a sales team, I think focussing – or refocussing – on that purpose is so important. Because then staff can say ‘I know why I’m here’.

Empathy is an important skill to be successful in a hybrid world,. Also the ability to interact, to break this digital wall between us – to come together and meet as human beings Joanna Molik, Microsoft

Our LinkedIn research shows us a great reshuffle is happening. When I look at financial institutions, why people are coming to work and how they are performing their daily tasks, has changed so much that now is a good time for leaders to think about the expectations of employees and managers. In most of the research we’re seeing, there is an increased feeling of inclusion among employees, so the tools are helping. But we still need that leadership mindset shift.

I feel we’ve learned a lot, we’ve experimented a lot as organisations – financial institutions especially. Now, it’s time to gather the insights from these learnings and redesign our processes and ways of working around the human experience. www.fintechf.com

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