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
