Fintech Finance Magazine Winter 2016 by Fintech Finance

Issue 3

Winter 2016

Awards Special 2017 Meet our first fintech heroes

Branching out

NatWest, RBR and Santander on new roles for retail banks

Pay attention!

Radically rethinking payments

Realms of Glory Where the physical and digital meet

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CONTENTS

BREXIT & TRUMP 8

Storm warning

Kerim Derhalli of investr on the fall-out from Trump and Brexit

BRANCH/ATMs 10 Cashing in on a high street presence

How NatWest is meeting the challenge of retail banking

10 12 The teller trick

RBR’s Daniel Dawson explains how first tellers disappeared… then reappeared

14 The big branch payout

Glory Global Solutions on playing to the high street’s strengths

17 The special branch

Santander UK’s Martin Bischoff on trust in retail

20 Someone to watch over you

NFC is helping Parabit ‘accessorise’ self-service banking

22 A golden age

Ron Delnevo says Happy Birthday to the ATM!

24 The accessible cash machine How developers can make them usable for all

TRUSTECH 2016 27 Yes, we Cannes!

Getting the red carpet treatment at Trustech

28 Give and take

Welcome Real Time unwraps the future challenges after PSD2

30 Splitting the financial atom

Dave Birch of Consult Hyperion on the impact of new ways to pay

32 Banking in a box

A neat solution from ATM specialist KAL

Winter 2016

THEFINTECHVIEW ISSUE #3

WINTER 2016

The festive spirits are high, the decorations are up, presents being bought and the end of 2016 is fast approaching. With the closing of the year comes our last issue of Fintech Finance magazine for 2016. And what a year it’s been! We’ve met many of you at the dozens of finance and technology events that we’ve attended around the world where it seemed every continent we visited a political earthquake followed in our wake… first Brexit and then the Trump. Was it us? Along the way we saw many familiar and fresh faces, who are driving fintech to greater heights. And in this issue, we celebrate their achievements with the launch of the first in our Fintech Finance annual awards. These honours give credit where it’s due to all those in financial services – whatever your line of work, there will be an award

for your sector because the winners vary from traditional banks to the most disruptive startups and the specialists that lie within each. A special mention must go to our Hero in Financial Services finalists, voted on completely independently by you, the readers, making this a very special acknowledgement of these individuals’ impact on your industry. Congratulations to all the worthy winners and to all our readers we wish you happy holidays and look forward to delivering more news to you in the New Year!

Ali Paterson | ali@fintech.finance

Did you recognise last issue’s ‘spine tingler’: "Failure is an option here. If things are not failing, you are not innovating enough" – Elon Musk 34 Playing their cards right

Matica Technologies’ Sandro Camilleri on the march of plastic

37 Getting to the next level FIME is helping customers up their game

AWARDS 2016 39 Fintech Finance 2016 Magazine Awards

Celebrating our front runners

PAYMENTS 62 Snatching the global wallet Chinese tourists are helping Alipay embed itself in Europe

www.fintech.finance |

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CONTENTS

64 A shrinking world, a growing problem

80 The fixer

Anders la Cour of Saxo Payments on the growing issue of underbanked fintechs

Why Pelican is all about AI

90 Writer’s blockchain

82 No pain – all gain

A crytocurrency thriller you won’t want to miss

Vayana makes business banking personal

67 One hell of a ride

What Uber can teach fintechs

84 Time to get relevant

68 Time for a grand design

Phil Cantor of iGTB on lessons from the US presidential election

87 Shining a torch on shadow banking

Wolters Kluwer’s guide to what companies need to know from January 2017

70 ‘Allo, Hello!

Credit.fr reveals a unique new partnership

EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales PAYMENTS DIRECTOR Doug MacKenzie

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All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying or otherwise, without prior permission of the publisher and copyright owner. While every effort has been made to ensure the accuracy of the information in this publication, the publisher accepts no responsibility for errors or omissions. The products and services advertised are those of individual authors and are not necessarily endorsed by or connected with the publisher. The opinions expressed in the articles within this publication are those of individual authors and not necessarily those of the publisher.

78 Playing the markets

4 th

Daryl Wilkinson of DWC kicks off a new series looking at open banking and APIs

DESIGN & PRODUCTION Yorkshire Creative Media www.yorkshirecreativemedia.co.uk IMAGES BY www.thinkstockphotos.co.uk PRINTED BY Webmart Limited www.webmartuk.com

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

AT M

76 Open for business

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Revealing Trusona’s secret weapon

COMMERICAL DIRECTOR Jason Williams SECURITY DIRECTOR Nikheel Solanki FEATURE WRITERS Dylan Jones, Will Dove, Sherree Moore PHOTOGRAPHER Jordan “Dusty” Drew

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ISSUE #3 WINTER 2016

FINTECHFINANCE

Innovation isn’t a big bang moment, says Innotribe’s Fabian Vandenreydt

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72 The god of small things

INNOVATIONS

Avaloq’s collaborative approach to IT architecture

EVENTS

88 An intelligent approach

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Winter 2016

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BREXIT & TRUMP

Financial climate change: But there are always opportunities

Storm warning

A year ago, the idea that Donald Trump would be elected president of the USA was about as likely as Britain leaving the EU. Kerim Derhalli, Founder and CEO of invstr, a social network and smartphone app that empowers investors and could ultimately influence the way markets work, gives his observations on the changing world order and the shape of things to come

What just happened? We were all finally getting used to Brexit meaning Brexit (although as definitions go, that one’s fairly light on meaning), when the US delivers the political economy another massively curved ball. President Elect Donald Trump will take his seat in the Oval Office next month, as Britain begins the countdown to leave 78 of hers in the European Parliament. Both have implications for financial markets, but neither necessarily represents an immediate calamity for investors. Long-term, it may be a different story. Like it or not, Brexit is here to stay. Whichever way you voted on 23 June, the short-term consequences are starting to become clear – even if the long-term effects of leaving the EU have left opinions divided. How the situation will look in two, five and even 10 years’ time is frankly anyone’s guess. For millennials, however, there are two immediate options. You can either sit back and watch it happen as uncertainty in the markets remains (and is likely to for a long while yet – from the period during the Winter 2016

official ‘leave’ process to sometime after), or you can decide it’s time to take charge yourself, and use the tools and information available to you to make it work to your advantage. UK banks and lending institutions are currently offering advice to consumers on the subject of Brexit, but it has tended to be speculative and limited – along the lines of ’watch and see’, given the dearth of information available. This doesn’t help anyone, particularly financial novices. Individuals need to take it upon themselves to make their own decisions when it comes to their money. The problem for millennials is that many do not have a deep enough understanding to make an informed decision, so instead they choose not to make one at all. We saw something similar with the EU referendum, where approximately 64 per cent of registered voters aged 18 to 24 voted, compared to 90 per cent of over-65s. Research we conducted at invstr also showed more than 68 per cent of millennials in the UK are worried about their financial prospects and don’t know what to do about it. Young people remain

unaware how these circumstances will impact them personally. This has to change. There are options available now that can allow young people to make the most of the current situation (and the longer term picture, as it becomes clearer), if they take that first step and learn to make smarter financial decisions, so ensuring a healthier financial future.

It’s not all bad news... The scene post-Brexit presents a number of opportunities for those with a basic understanding of financial information. Although potentially subject to some impact, the UK economy is in good shape, expanding by 0.5 per cent in the third quarter with employment reaching a record high in the three months to July. A number of markets are flourishing, with some offering a useful forecast for the months ahead. The property and construction market, for example – always a reliable barometer for the economic health of the country – is looking strong, with Barclays’ latest prosperity index showing that every region of the UK is better off than it was a year ago. www.fintech.finance |

BREXIT & TRUMP This is a good indicator of long-term growth and prosperity, and should be watched carefully for signs of rising and falling confidence. Elsewhere, on the back of the Brexit vote, sectors including oil and gas, pharmaceuticals, bookmakers and tobacco companies have all benefitted from recent growth. A quick look back at the markets that have weathered economic storms in the past can offer a strong indication of those likely to withstand any upheaval following the referendum result. The medical and grocery retail sectors, for example, have proven to be solid investment areas, even during the worst downturns, with consumers spending their money on these goods, regardless of overall confidence levels. Likewise for the transportation and security sectors, and even payment platform providers (like credit and debit card brands), which are the processors of payments rather than lenders. Investing in the post-23 June climate can be daunting – particularly for novices – but there are some excellent opportunities out there right now, with more to come. These are all well within reach for those who learn to take charge of their finances.

An end to ‘establishment‘ The US Presidential election was the second reminder in the space of a few months that if there’s one thing we can be certain of, it’s that we can be certain of nothing. Donald Trump took on the entire US establishment – the Clinton political machine, the Democrats, the Republican party, Wall Street, Hollywood, Washington, the US media – and won. I suspect that most people outside the US, with the important exception of Mr Putin, were fiercely opposed to the conduct of Mr Trump’s campaign and his divisive politics. But he won because he understood that the world is in revolt against the establishment and by positioning himself as an anti-establishment figure, he got voters on-side. By contrast, his opponent epitomised the worst of the establishment.

The revolution we are witnessing derives from the information revolution of the last 20 years, which has turned the polarity of information (and power) literally upside down. Information now flows bottom up, not top down. So the entire social and political establishment that made a living marketing information to the masses is now redundant and is being rejected by society. The political implications of the US election extend beyond the presidency. The Republican party now controls the office of President, the Senate and the House of Representatives – a feat it has only achieved once since 1931. The US Supreme Court will also become dominated by the Republicans once President Trump fills the current vacancy. So, President Trump will be one of the most powerful presidents in US history without the traditional constraints of Congress. His economic agenda is therefore likely to be passed by Congress. What he has proposed so far is radical: a cut in US corporation tax to 15 per cent; a 10 per cent tax amnesty for the trillions in US corporate cash balances held overseas; and a $1trillion investment in sorely needed infrastructure spending. This enormous fiscal boost will come at a time when the US economy is showing signs of increasing strength. The unemployment rate recently declined to 4.9 per cent and inflation is rising towards the Federal Reserve’s 2 per cent target. It seems very likely that the Fed will resume rate hikes at its December meeting.

Anything but normal The most significant financial reaction to the election result has been in the bond markets. With the prospect of higher short-term rates, higher borrowing by the US Government and higher spending, US bonds declined more than at any point since 1991. This collapse in prices and increase in bond yields has spilled over into international bond markets. The main beneficiary of higher interest rates and higher economic activity is the US

dollar. After the initial sell-off in the dollar, it quickly recovered and will ultimately resume its strong upward trend against most other currencies. I am expecting an initial period of consolidation, especially against the oversold British pound, but a higher dollar is ultimately inevitable. A stronger dollar is usually correlated with lower commodity prices. After an initial surge to $1,331 per ounce, gold has fallen back to $1,255. It looks likely to fall further to $1,200 in my opinion. In normal times, energy prices also correlate strongly with the US dollar. But these are not normal times – we expect to see a surge in renewable energy supply over the next five years, which will exceed the entire output of the fracking industry. It seems probable, short-term weather effects aside,that energy prices will collapse, providing a further boost to the global economy. In this environment, equity prices will surge. The initial ill-considered collapse in equity markets, which we expected to be reversed within days or weeks was actually reversed within minutes and hours. The analogy I used the morning after the US election was that of holding a ball underwater. Once the pressure came off, equity markets surged to new all-time highs in the Dow Jones, with soaring bank stocks a huge beneficiary from higher interest rates. When financial markets are as wrong-footed as they were on Wednesday, the counter-reaction is often very strong. We are also approaching year-end reporting, when fund managers will want to be fully invested to justify their management fees. In the long run, the prospect of higher global debt levels, a more imbalanced global economy led by the US and the potential for the inflation genie finally to be leaking out of its bottle after eight years of unprecedented monetary stimulus, is alarming. The coming bust will be the biggest in human history. In the meantime, whatever my heart might be feeling about Trump and his politics, I will be investing with my brain and carry on holding dollars and equities.

| www.fintech.finance

Winter 2016

BRANCH / ATMs

Cashing in on a high street presence The branch network might be changing, but it still has a unique role to play, says Jane Howard, MD of Branch and Private Banking at NatWest, which is currently finding new ways to deal with one of its biggest challenges… cash! The crash of coins is not a sound staff normally want to hear in a bank. But NatWest is encouraging just that – from children with a piggy bank of coppers to charity collectors and SMEs, it wants them all to spill the cash. The bank is trialling real-time coin counting machines at five of its NatWest branches in a bid to speed up the depositing process. After pouring in the coins, the customer is printed a receipt to take to the cashier, who instantly credits the amount to their account. “The noise it makes is phenomenal as it all funnels down, and it’s counted for you in seconds,” says Jane Howard, MD for Branch and Private Banking at NatWest.

| www.fintech.finance

“Children come in with their parents and grandparents and they love it. They may have saved their pocket money for the week and in seconds they know what they. The noise the machine makes encourages them to save and it’s great if we help them establish a savings habit from an early age.” For any small business owner who’s stood in a bank queue, clutching a bag full of cash, waiting for a teller to become free and apologising to the customers behind them, the rapid automated processing of coins is also a big step forward. As part of the trial, NatWest is allowing these customers to deposit cash at any time of the day or night with the money credited to their account within a day.

“The beauty of automation is that it enables business customers to be able to be in and out of the branch fast if that’s what they want to do,” says Howard. “A business customer can be short of time so to use a business quick-deposit machine, drop your cash and cheques within seconds, and walk out of the branch knowing that it will be credited to your account is a fabulous service. “They don’t have to take time out of their day when they’re earning money. They can drop it in at a time that suits them.” It is precisely this type innovation that was called for by G4S in its European Cash Report earlier this year. The firm discovered that although the proportion of cash Winter 2016

Building trust: The branch helps cement the relationship between banks and customers

being counted up to 17 times from till to bank, creating an ‘unnecessary cost burden for businesses and banks alike’. The same concern was raised in the 2016 World Payments Report, which said the cost of cash – including coin production, ATM provision and handling – rose by 30 per cent from 2002 to 2012. It concluded that outmoded payment infrastructures and cultural habits are two key reasons why cash will remain important for years to come. “We’re beginning to see a gradual reduction in all cash, but nothing like the reduction that I think everybody anticipated,” confirms Howard.

A complementary role All of which means retail bank branch networks will stay – because they are an important way for both personal and business customers to deposit and withdraw cash. But the role of the branch goes deeper than that, according to Howard. “The branch is a really important complement to digital channels,” she says. “Some customers, like me, are happy to do complex things using mobile – I was quite happy to sort out my mortgage using mobile. “But we find that the vast majority of our customers still want the option of using a

Many people thought that branches wouldn’t be necessary in banking, but it all comes back to this concept of trust transactions is falling, the amount of cash in circulation in Europe continues to rise. ATM withdrawals, which are considered a good indicator of cash spending, increased 14.6 per cent from 2009 to 2014 in the 28 European countries examined, and the volume of cash in circulation rose by 11 per cent per annum up to 2015. In only eight countries is the proportion of cash used in transactions below 50 per cent – including the UK at 45 per cent, France at 44 per cent, the Netherlands on 37 per cent and Luxembourg at 29 per cent. But that’s still a lot of cash. The report described Europe’s cash supply chain as being ‘highly fragmented’, causing ‘chronic inefficiency’, with cash Winter 2016

branch. For example, for opening their account they want to build a relationship – that is the feedback that we get. “They want to see somebody, meet them, know them, and then they’re quite happy to do their banking in a different way. But many customers prefer to build that initial relationship face-to-face. It absolutely complements the ongoing banking relationship. “Equally, you find that somebody might start a loan application overnight, at home on our online system, something happens and then they want to come in and get help.” It may be that this desire for ‘face to face’ contact is one of the ‘cultural habits’ raised by the World Payments Report that is

holding back progress . Howard says human contact is vital to building trust with a customer. “I think many people thought that branches wouldn’t be necessary in banking,” she says. “Of course, you can do it all on a mobile or online, but actually, when you listen to customers, it comes back to this concept of trust and having a relationship with somebody who you know is going to be looking after you; someone who is going to be honest with you. “So, everything that we’re hearing from our customers tells us that branches still have an important role to play. Clearly, we don’t need as many as we had in the past, but customers want to know there is somebody there to talk to if they want to get advice or help. Having that choice is really important, even if they only come in four or five times a year.”

Video channels There is, of course, a middle way. NatWest is also currently conducting a trial into the use of video links between customers and banking staff. It is designed to meet the same need for face-to-face contact, but delivered somewhere more convenient to the customer – such as in their own home. The bank anticipates that video will be more likely to be used for those transactions that customers who are otherwise happy to use online banking, deem to be more important or complex than their usual day-to-day transactions. “With video our customers can, for example, arrange a mortgage from the comfort of their own sofa or office,” says Howard. “For some people that’s what they prefer. They want the relationship, the human contact, but video is easier for them than having to go to a branch. The trial is going really well and the feedback so far has been fantastic,” she says. So, while mobile banking is very much where service delivery is heading for a retail bank such as NatWest, the branch is also forging a new, dynamic role for itself. “People live their lives via a mobile today,” concludes Howard. “It’s easy and simple. Customers love the fact that they can do their banking at whatever time suits them and wherever they want. "The busiest branch now is just anywhere with a mobile. But the physical branch is a really important complement to these digital channels.” www.fintech.finance |

BRANCH / ATMs

The teller trick By the magic of technology, banks made tellers disappear then reappear in branch. Daniel Dawson, Associate at RBR, works out how it’s done… and how far they will go Faced with mounting cost pressures and the mass adoption of digital channels, the banking industry is going through a period of re‑evaluation. Many institutions are critically reviewing their branch strategies, assessing how customers access services both digitally and in physical outlets, and how the branch can adapt to their changing behaviour. As a result, many banks have now embarked upon branch transformation journeys, with or without cashiers/tellers. Just how far they’ve gone, we hope to definitively reveal in a new study by RBR, Teller Automation and Branch Transformation 2017, due to be published early next year. But what we already know is that while on a global level branch numbers continue to increase, the rate of growth is slowing. In more mature markets, such as the USA and western Europe, branch networks are contracting.

| www.fintech.finance

The closing of superfluous outlets by banks, with the view to optimising their distribution networks, has increasingly been adopted as part of branch strategy. Some banks are downsizing the physical size of their branches and converting outlets to an open‑plan layout; others are adopting a hub‑and‑spoke model, where one large branch is surrounded by a number of smaller outlets that offer a limited array of services. A number of innovative banks are pushing the boundaries of branch banking, opening small outlets in shopping centres, extending opening hours and introducing pioneering technology. New branch formats are emerging, such as cashless outlets (without tellers) or even entirely staffless, purely self‑service branches. Cashless branches are already common in countries such as the Netherlands and some banks in India are following suit. The logic is simple: adapting the branch

to the changing needs of customers allows banks to keep down costs while improving the relevance of the branch. The average number of teller positions per branch also continues to fall on a global level, with an average of 2.6 positions per branch at the end of 2014. Many banks are seeking to move away from the traditional teller, evolving the role to encompass sales and advisory services. However, banks that plan to remove all teller positions are in the minority. Most banks have a substantial customer base that still prefers face‑to‑face transacting and some markets, such as Brazil, are governed by regulations that stipulate banks must provide at least some banking services through the teller channel.

The rise of TAUs Banks willing to maintain teller services in any form are looking to optimise teller operations through the use of teller assist

Winter 2016

units (TAUs). The number of these terminals worldwide continues to grow, reaching almost 180,000 at the end of 2014, the majority of which were capable of recycling deposited notes. All the growth has come from recyclers in recent years as the majority of banks prefer the efficiency that these terminals provide in comparison with dispensing‑only models. TAUs are regarded by many banks as a vital enabler of branch transformation: the added security they provide has allowed banks to move away from the traditional branch format (tellers behind a glass screen) to a more inviting, open‑plan layout. The increased efficiency enables them to develop the role of the human teller into one that helps create more of a ‘retail’ experience in the branch.

A happy compromise Despite the pressure to increase self‑service within branches and reduce teller positions as a cost‑saving measure, customer interaction with staff remains of key importance to many banks. As such, they are looking to achieve a harmonious balance between efficiency and customer interaction, with some introducing assisted self‑service machines as the tool to accomplish this. Assisted self‑service terminals allow a greater range of transactions to be migrated from the teller to the self‑service channel due to the additional assistance

Winter 2016

provided to customers who self serve. These terminals allow customers to perform transactions autonomously and, when needed, and receive assistance from a staff member, either in‑person or virtually via videolink. The two largest rollouts of such terminals are by two US banks, JPMorgan Chase and Bank of America, which deploy more than 2,000 assisted self‑service machines between them. The UK’s Barclays and Turkey’s Kuveyt Türk are also undergoing substantial change that will involve assisted self‑service. Assisted self‑service is still in its infancy, and it is difficult to determine the exact role that these terminals will play in branches. Banks across the world are currently testing the terminals and much

Banks that plan to remove all teller positions are in the minority; most customers still prefer face‑to‑face transacting

Transforming tellers: Banks have several options

depends on the outcome of such pilots. It is likely that assisted self‑service machines will be increasingly introduced into branches over the coming years and, along with TAUs and other new and existing technologies, will become an intrinsic part of many branch transformation programmes.

Multi‑channel, multi‑tech It is clear that there are many paths that banks can take when defining their future branch strategies. The vast majority will continue to provide services through human tellers and many of these will also use TAUs. That said, self‑service terminals will inhibit growth of the TAU market as banks increasingly migrate transactions over to this more cost‑effective channel. The emergence of assisted self‑service and other new technology could also affect TAU deployment. So, the most likely outcome , at least in the short term, is that both assisted self‑service and self‑service terminals will complement the real‑life teller and TAUs, providing a more comprehensive service for customers, greater client satisfaction and a seamless user experience while reducing bank costs.

www.fintech.finance |

Win win: Banks that move customers gently towards a digital and automated process in branch will hit the jackpot

| www.fintech.finance

Winter 2016

BRANCH / ATMs

The big branch pay out

Cash can be an expensive problem for banks. Javed Anjum, Branch Transformation Sales Leader for Glory Global Solutions, has a winning solution that lies somewhere between the physical and digital and plays to the high street network’s strengths It’s easy to view cash in financial services in much the same way as you would a gramophone at an iPhone launch party: a nice retro touch, but rather irrelevant. Even the Bank of England’s new polymer fiver, designed to withstand the immense strain of the modern wallet, feels a little quaint compared to the glossy app of an online-only, real-time bank.

However hard financial technocrats try to persuade us otherwise, though, the fact is cash still plays a significant role in global transactions. Which is just as well because otherwise Javed Anjum might be out of a job. As branch transformation sales leader for Glory, a global leader in cash technology solutions, it's his duty to maximise the efficiency of bank branches that deal with large volumes of the stuff. “Cash is still a challenge inside the branch,” he says. “In fact, as more and more technology is brought into the front office to automate consumer transactions, the back office is being left to deal with more cash than ever. How do you reconcile all these transactions, processing them in the most efficient way possible? That’s one specific area that we’re working on with various customers across Europe.” But that's not all he's focussed on. Despite Glory’s history as a business dealing solely with tangible currency, the firm has exhibited a high level of flexibility in altering its product lines to function effectively within the digital age. “As the banking industry continues to transform branches, a lot of our focus has shifted towards automation and digitisation,” says Anjum. “As digital forms of interaction become more and more commonplace, one set of consumers are repeatedly struggling to have their needs met. “SMEs in particular have a significantly higher value of transaction requirement and this is not met by the vast majority of digital

Winter 2016

alternatives. Therefore, SMEs are among the few customers still calling for regular human intervention within the branch.” He believes there is a pragmatic solution. “An assisted serviced solution lies somewhere in between the two,” he says. “It’s partial automation, so customers can continue to benefit from a simple and intuitive experience. However, as soon as the customer feels unable to complete the transaction or to do so requires authorization or validation, then help is immediately available. This help is entirely personalised and the transition from on-screen guidance to the assistance of the teller is seamless.

Almost a quarter of consumers regularly feel the need for help when using self-service devices in branch “Our research entirely supports the viability of assisted service solutions; almost a quarter of consumers across all age groups regularly feel the need for help when using self-service devices in branch. For example, a customer may walk up to a machine, commence a transaction and then subsequently discover that their card has been captured or their notes jammed. In this situation, it’s in the bank’s interests to prevent any feelings of discomfort in the customer in order to ensure a positive banking experience. An assisted service solution fulfils this need by automatically alerting the bank’s staff to what has

happened, allowing them to intervene and provide proactive help without the customer ever having to say a word.” Glory has developed a technology capable of real-time monitoring of customers’ interactions with machines in branch, and is currently supplying it to various customers across Europe. “Our assisted service solution eliminate the problem of lost customers wandering around branches, searching for staff to explain their issue to. The immediate benefits of this in providing a greater customer experience are evident, but the long-term objective of the products is to help increase the adoption of automated and self-service technologies. The better the experience that customers have using machines in branch, the more likely they are to visit these machines in the future, rather than the teller, allowing banks to profit from lower operating costs.” In essence, then, Glory is helping banks to develop both physical and digital environments where all of their communication channels are seamlessly interconnected and accessible to every customer, regardless of how technically competent they are. It’s a challenge for banks to achieve this singlehandedly. “Every customer, every bank that we’ve spoken to, has a desire to move towards an environment where all the channels are working together. In fact, I don’t want to use the word ‘channels’ anymore, it’s basically different ways of interacting with the bank and it could be anything,” says Anjum. “That journey is continuing. “One of the problems is that all of these technologies came at their own time, and therefore existed in a silo. So every form of customer authentication is typically connected to a channel, whereas it should be one authentication to authenticate yourself to the bank. To bring them all together requires a significant change and that’s a big part of the digitisation effort.

www.fintech.finance |

PAYMENTS BRANCH / ATMs & INNOVATION

Seamless service: Customers don’t think in terms of channels

“Arguably, banks were some of the first IT companies, offering online and real-time transactions long before other industries,” says Anjum. “Over the years, new technologies have arrived and been adopted by banks only to exist in silos, kept separate from other technical systems. This separation has led to the isolated evolution of bank technologies. “Bringing them all together requires a significant technical overhaul as part of a larger digitisation effort. Branches nowadays should be focussing on the integration of back-end systems into their overarching operations, since that will allow them to introduce new and advanced services in the future without having to replace all their pre-existing mechanisms, which can be a cumbersome and complicated task.” The branch that prepares itself effectively for technological progression will be the one to survive, he says. In his view an ideal branch is one that has been made future-proof through flexibility measures. This doesn’t necessarily entail the bank spending vast sums on the latest cutting-edge technology, though. “When I say future-proof, I mean that the branch is suitably equipped to adopt new technologies as soon as they become available and economically viable,” says Anjum. “Change is constant, both in terms of technology and consumers’ lifestyles. The branch of the future must be ready to consistently embrace both of these things, despite their transient natures.”

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Despite the proliferation of alternative channels, he's confident banks will have a staffed presence on the high street for a long time to come. “Consumers are not tied to channels,” he points out. “All the channels within the banking environment should work together to offer a great customer experience. It’s not the job of one or the other. In any case, customers do not think in terms of channels – it’s confusing for

All channels should work together to offer great customer experience. It’s not the job of one or the other them. Take airlines, for example. How many channels do we use until we board the plane? It’s the choice and flexibility offered by the multiple channels that makes the overall experience great.” He believes the jury is still out on the mobile-only banking business model. “If your business has a specific way of

delivering a product, whether it’s internet or mobile or any other channel, you are limiting yourself to a niche,”says Anjum. “There’s a large body of research to suggest that consumers go online, conduct their research on what products or services may be of interest to them and then visit a branch in order to discuss with someone before they make the final purchase decision. “Therefore, this vital part of the buying cycle appears to be remaining within branches, since a significant proportion of consumers feel that it’s more secure and convenient to speak to somebody face to face than to finalise an agreement through a screen. The result is that the quality of interactions in branches is likely to increase as more simple services, such as balance checking and transfers, are offloaded onto digital and mobile platforms. Branches are still a highly valuable resource in the eyes of the customer,” he adds. “However, for banks to retain this value they must impose a robust digitisation strategy, so that branches are not left trailing in the technological dust of their other channels.”

Winter 2016

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BRANCH / ATMs

The special branch

Remote banking technology played an important part in rebuilding the relationship with customers after the crash – but branches can help cement it, says Martin Bischoff, MD of Retail Distribution for Santander UK “Eight years on from the financial crisis of 2008, there’s no denying that personal branch banking, which was by no means to blame for the crash, has faced an uphill struggle in rekindling the confidence of its customers,” says Martin Bischoff.

As managing director of retail distribution for Santander UK, Bischoff can look back from the top of that hill with some satisfaction. According to international ratings agency Fitch, Santander has recovered from the financial crash faster than most other high street banks in the UK. It has boosted profits and strengthened its customer bases, with retail account numbers up by 86,000 over the past 12 months and total deposits by customers with a primary banking relationship growing 10 per cent to £94billion in the same period. It’s largely succeeded in putting the past behind it, but as its UK chair Shriti Vadera was keen to point out earlier this year, there’s no room for complacency. “We have particularly focussed on building trust through customer satisfaction,” says Bischoff. “We’ve gone to great lengths to ensure that our processes and propositions are as simple, personal, and fair as possible. Our mission has always been to help people and businesses to prosper, and we’re delivering on this proposition by giving customers choice.” And by customers he means all of them. Santander is one of a handful of banks using technology to give those with disabilities equal access to financial services through a combination of technology and training. ““For our deaf customers we’ve introduced SignVideo,” says Bischoff. “At home, with use of a tablet or other device, customers can connect to a sign language interpreter who will appear on screen to translate what they are saying to our

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contact centre colleagues. Our intention is to also introduce it to the network on branch tablets, so that these customers have equal and parallel access to our products and services. “We’ve also done a lot of training around dementia. Many of our colleagues in branch are dementia friends. “It’s important that we recognise and understand our customers as individuals and provide the support they need.” Just as these customers are being encouraged to use technology to help the bank improve its relationship with them, so digital customer numbers overall continue to grow. More than two million are now using the bank’s mobile apps each month, for example. “People are thinking mobile first,” says Bischoff. “You know, our busiest time in terms of interaction is first thing in the morning when people wake up, look at their mobile phone and want to check their bank balance. Not quite sure why, but they do!” Santander is now on a mission to educate consumers on how to get the most from its latest services. “It’s one thing to have technology, but it’s another thing to be familiar with it,” says Bischoff. “We can compare the current state of digital customer tools in bank branches, to when airports first introduced automated check-ins. At first, airline customers required significant help in order to check in themselves, and this help was administered by airline staff on hand at the check-in machines. Several years on, most customers feel very comfortable operating an automated check-in alone, because all they needed was that initial help to introduce them to the new system. “In retail banking, our automated services are still at a very nascent stage. We pride ourselves on resourcing from the front, as

Important network: Branch and digital banking are part of the same ecosystem

Winter 2016

we call it, which entails having colleagues always present to assist customers in branch. From an education standpoint, we don’t wish to interfere with customers as they interact with us, nor do we aim to teach them how to use a computer! “What we do hope for is to be able to demonstrate to our customers how they can use the various digital tools that we offer, such as our mobile app and automated machines. This way, we’re giving them the freedom to bank on their own terms, through their preferred channel, and effectively create the customer experience that they’re looking for all by themselves.” To this end, Santander has installed wi-fi in every branch nationwide and launched a campaign, encouraging customers to bring in the devices on which they’re likely to carry out their banking. “Tablet-bearing colleagues can provide a face-to-face walkthrough of the Santander application on the customer’s particular device, equipping them with the knowledge of how to process a variety of day-to-day transactions online from the comfort of their own homes,” explains Bischoff. “Simultaneously, the colleague can recognise new opportunities to help the customer, since their tablet will alert them as to whether the customer is registered for digital banking and other such services,” he adds. Bischoff sees no contradiction in maintaining a branch network even as online services expand. “Even though a lot of people do online shopping, we still have shops, right? Apple still opens stores. I don’t see any difference in banking. The transactions you undertake there may change, and your ultimate fulfilment by channel may change, but actually it doesn’t matter. What matters is the customer feels they’re getting a good service, they feel they’re getting value, and there’s transparency within it,” he says. “‘For moments of truth, as we call them, such as setting up a mortgage or making a large investment, customers still prefer to speak to someone from their bank face to face. One day, the teller-less branch will be the norm, but for the time being we still need to deliver the level of excellence in our traditional channels that ensured our customers' trusted and had confidence in us throughout the crisis and beyond.”

It’s one thing to have technology, but it’s another thing to be familiar with it

Winter 2016

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BRANCH / TRANSFORMATION

Someone to watch over you

Near field communication technology is helping branches create a personal service for customers from the moment they enter the door. Rob Leiponis, responsible for Self Service and Security Solutions at Parabit Systems, explains how We are all used to being monitored by closed circuit TV when we enter a bank branch.

But we are on the verge of mobile phones heralding our arrival – so staff can give us a tailor-made experience. Near Field Communication (NFC) is the next generation of security and communication in banking. It allows the exchange of data between two devices in close proximity, providing a much more secure transfer of data and blowing open new opportunities for mobile banking and a more personalized customer experience. Rob Leiponis, who is immersed in security and self-service solutions at US-based Parabit Systems, launched a new Multi Media Reader (MMR) in August. It utilizes NFC to interface with mobile devices and contactless EMV cards, as well as traditional Mag Stripe cards for customers to more securely gain access to ATM lobbies and vestibules outside of standard operating hours. “One of our biggest customers, Bank of America, is in the process of outfitting every one of its ATM lobbies and vestibules throughout the US with our MMR reader.” There is also an MMR version with embedded beacon technology. Although currently dormant, when activated once software development is finalized and deployed, it will utilize BLE (Bluetooth Low Energy) to open up customer behavior with your branch tracking, thereby supporting new cross-selling opportunities and the chance to boost customer loyalty. “Banks in the US have always tried to get branch personnel to cross-sell consumers coming to teller windows to cash a cheque or make a deposit. Beacon technology will allow them to do this in a much more informed and relevant way.” Parabit is developing MMR beacon features that connect customers through their banks mobile app, and provide

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personalized customer information to bank personnel. “For example Banks can identify a customer who has a significant amount of money in a simple savings account – staff may want to start a dialogue between that customer and one of the investment bankers,” says Leiponis. “Staff can be trained how to interpret data to better position themselves and their products to effectively meet the specific needs of each customer.” Through the Beacon within the MMR, Retail Banking would also be able to monitor customer movement within the branch as well as track customer dwell time. Monitoring these behaviour patterns will inform educate retail banking while they form their customer sales strategies. “In the US we’re seeing a massive push by financial institutions to develop multiple touch-points involving mobile and Beacon

Parabit is all about accessorising the self-service environment, as well as securing it technology to be able to monitor the behaviour of customers entering ATM lobbies and branch retail stores,” says Leiponis.

Surveillance and security The secure and mobile possibilities presented by NFC are gaining traction at a time when technology has driven banks to strategize on how the modern branch should look and feel to meet the needs of

today’s consumer. This topic of branch transformation has been an area of great strategy and debate across the industry. “I see the future branch environment catering to the traditional banking customer with many engagement tuch points but also serving as a platform to transition into a more mobile, more independent banking relationship, where branch staff will engage with customers via a mobile device or through online banking via PC or tablet.” “We perform anywhere between 1,500 to 2,000 equipment conversions/installations a year for various commercial, savings banks and credit unions,” he says. “We see a large increase in the investment of technology that is placed in access areas that go beyond traditional banking hours. Leiponis says that local branches remain a vital component for banks – they display the physical brand presence within communities while also providing the reassurance of financial strength and stability. But with pressure to keep staff costs and other overheads at a minimum, automation is crucial. “We’re working with some clients that are investigating a smaller branch footprint where there is technology within a larger ATM lobby,” says Leiponis. “Bank branches that used to be 2,000 square feet are now 750 - 1,000 square feet. There may be a small vestibule with a second entry where a customer can video conference with a banking representative to open an account, or apply for a loan, or pay a bill.” It’s important for banks to evaluate all types of self-service touch points, however those areas must be hardened so they can be utilised in a 24-hour environment. “Parabit is all about accessorising the self-service environment, as well as securing it,” says Leiponis. Winter 2016

Round-the-clock surveillance: NFC technology is improving security and services

Open sesame: Access to ATM lobbies can be controlled

Parabit’s ATM Lobby Card Access Control System serves as a facilities management system that ensures the area is not coming under attack or being misused. Tamper alerts, motion sensors, light sensors and specialty surveillance cameras all work together to keep bank personnel informed of standard processes and threats, as well as to ensure a smooth customer experience. Additional software features streamline and Winter 2016

centralize daily functions including hours of operation and holiday schedules, as well as provide custom settings for high risk locations. Patented SkimGard technology mitigates card reader risk to the one billion in annual skimming losses, while RFID reader skimming detection is also utilized on their MMR card reader. Leiponis states that NFC technology is the most secure multi-level platform for transaction authentication and are being embraced by both banks and retailers. “A lot of background processes have been implemented within banking systems to monitor multiple transactions from a perspective of where the consumer is,” says Leiponis. “This, too, is also one of the benefits of utilising NFC on your mobile device. If you’re authenticating a transaction on your mobile device, your location can be identified through triangulation. So, if another transaction occurs halfway around the world, it can be detected and denied.” Another security measure Leiponis believes provides huge potential for banking – facial recognition. Parabit has developed a high-resolution

camera for bank teller windows which has virtually stopped ‘note passing’ crime at banks that have implemented them – whereby a criminal passes a scrap of paper with a written note, threatening the teller and demanding cash. The camera is specially mounted to the teller’s barrier glass serves as a powerful deterrent. And if a criminal does go ahead with a robbery it is likely they will be identified and caught. Leiponis says Parabit has equipped 1,500 teller windows with the camera for one particular bank. But he says such cameras can be used to scan faces and identify them in the same way NFC phone technology can. Parabit has been delivering security solutions for banking, retail, aviation and government sectors since 1995. “We’re working with the airline industry on a similar platform, but facial recognition is also a very powerful tool to be utilised in the banking community,” he says. “Through a very high resolution camera, with facial recognition applications built into it, you can monitor your customers walking into your branches and identify them.” www.fintech.finance |

BRANCH / ATMs

Ron Delnevo, Executive Director Europe at the ATM Industry Association, looks back over 50 years of the cash machine… and forward to the new era of fully automated community financial services hubs – the smart ATM 27 June 2017 is a landmark date for the ATM industry. Half a century earlier, the world’s first ATM was installed at a branch of Barclays Bank in the London borough of Enfield. The rest, as they say, is history. And what a history! Three million of the revolutionary machines have been installed around our planet in the intervening five decades. That first installation featured a ‘cash machine’ created by a team headed by my fellow Scot, John Shepherd-Barron. Other teams, in Scotland and elsewhere, were working on similar devices but were pipped to the installation post. No one can take that honour away from him. Another Scot, James Goodfellow, who saw the style of ATM he created installed for the first time later in 1967, also invented the personal identification number (PIN). Multiple Scots, inventing secure means of dispensing cash automatically. Who would have believed it? As is the case with many inventions, it is difficult to sort out the facts from the folklore surrounding the genesis of the ATM.

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For example, there is a lovely story that John Shepherd-Barron’s enjoyment of a hot bath one evening was being ruined because he was concerned that the limited opening hours of his local bank branch might make it difficult for him to obtain cash the next day. What better place than a bath to have a Eureka moment? As he literally worked himself into a lather, John came up with the idea that would make a great splash. For billions of people, it would ultimately make a fundamental change to how they would access the cash they need to run their daily lives. However, in 1967, the impact on almost all of us was still a long way off. As envisaged by John S-B, the first ATMs were only intended to support the cash needs of those who could not get to their local bank branches during their rather limited opening hours.

Uneven innovation In 1967, most bank customers really only had a relationship with one bank branch and one ATM. It wasn’t until ATMs started to be networked in the 1970s, that they became

a truly convenient way of accessing cash. All you needed then was a plastic card plus a PIN number. So equipped, you could go to any of your own bank’s ATMs to get the cash you needed. In those days, most people used only cash for retail purchases, so this new convenient access was a truly transformative innovation. Of course, ATM innovation has not always been evenly spread. Take networking. By the late 1990s the LINK national ATM network had connected 99.9 per cent of ATMs in the UK. This allowed any customer of a UK card issuer to use any UK machine. However, even today, 20 years later, many countries do not have their own national ATM networks and rely on international card schemes to provide convenient connectivity. Another example of uneven innovation concerns the recycling of cash at ATMs. In Japan – surprisingly, with no intervention by any famous Scot – the first cash recycling ATM was installed in 1982, only 15 years after the very first machine appeared at that Barclays branch. Thirty years later, in a number of European countries there are still no ATMs Winter 2016

A hole lot of history: But the future of ATMs looks even more exciting

recycling cash, although many do accept cash deposits, at least in the form of notes. Many observers find the delay in introducing cash recycling hard to understand, especially in the context of the general focus on environmentally friendly solutions. What could be more environmentally friendly than reducing journeys made by fuel-consuming cash delivery trucks, by allowing local people and businesses to deposit cash in an ATM conveniently located in their community and then making that cash available for withdrawal by those who need it? The slow introduction of cash recycling ATMs was hard to understand, even when bank branches were ubiquitous. However, when that was the case, at least bank customers, both personal and businesses, had somewhere they could deposit their cash. Now the picture is very different.

The disappearing branch In many countries, branches are closing as banks seek to reduce their costs. Even where branches can still be found, in some nations, such as Sweden, very few of those Winter 2016

shop for everything to do with financial services, at the heart of a revitalised local community.

A new future for ATMs So that is the truly marvellous future for ATMs. Replacing bank branches, providing a local focal point for all who need to engage with financial services. That is true financial inclusion, for everyone. Which brings us back to that golden anniversary – because 2017 will be a year of real celebration. We'll be commemorating the past and heralding an exciting future for the ATM. The ATM Industry Association, itself celebrating an important anniversary in 2017 – it was founded in 1997 – will be holding events around the world at which the landmark nature of the 50th birthday of the ATM will be recognised. One of the highlights of the year will be a gala dinner and award ceremony on 12 June in London. The great and the good involved in the ATM industry worldwide will gather at this event, with special awards being presented to those who have made notable contributions to the past, present and future of ATMs. Immediately after the dinner, on 13 and 14 June 2017, the Lancaster London Hotel will be the venue for ATM & Cash Innovation Europe, the ATM Industry Association’s new flagship European event. This event will welcome a stunning group of speakers with Bill Nuti, president, CEO and chairman of NCR, leading the way, followed by an array of more than 30 industry galacticos. This will be a truly global celebration of everything to do with ATMs, self-service, bank branch transformation and multichannel innovation. The ATM Industry Association has partnered with Reconnaissance International to create the leading industry events of 2017. You can learn more from our website at www.atmia.com. Put the dates in your diary and register to attend as soon as possible, then get ready for a new golden age of ATMs.

ATMs can fill the gap left by disappearing bank branches worldwide

remaining accept cash deposits. ATMs can fill the gap left by disappearing bank branches worldwide. As an example of this modern thinking, the Indian government has recently given ATMs the same status as bank branches. This can be seen as a positive development and could well be the start of a widespread trend. Instead of bank branches, we could start to see the appearance of community financial services hubs. These hubs may be located in retail premises, at gas stations, in leisure centres, in bars – even in churches. In fact, anywhere with the space to accommodate a group of smart ATMs. Of course, the hub ATMs will not just allow the deposit, recycling and withdrawal of notes and coins. Customers may also be able to deposit cheques, apply for a mortgage, loan or credit card, get a replacement card produced, carry out a video conference with a pension consultant and so on. It will be a one-stop

www.fintech.finance |

BRANCH / ATMs

The accessible cash machine Mike Taylor, Senior Analyst at the Digital Accessibility Centre, which works with developers to create digital media that can be used by everyone, turns his attention to ATMs Like everyone else who leads an increasingly busy life, I need to get my hands on my money quickly, securely and independently. But as a totally blind person, how easy is that? What if a new cash machine is installed to replace the old one that I am familiar with? What happens if I move house and need to get to grips with a different machine in an entirely new location? And what happens when things go wrong? As senior accessibility analyst for the Digital Accessibility Centre, it’s part of my job to help the financial services industry, particularly developers, better understand blind and partially sighted people’s experiences when dealing with technology, including cash machines – crucially, what I as a blind person need to know before I do anything relating to my account.

Getting money out For instance, I need quite a lot of information before accessing a cash machine for the first time. Without it I am unable to complete my task independently and there’s an increased possibility of something going wrong. My biggest fear, apart from someone stealing my PIN, is having my card gobbled up. And it’s not an idle concern – it’s happened to me three times since I started to use ATMs! Ideally, I’d have a trusted friend or relative with me when using a

cash point that I’m not familiar with, or alternatively, if I’m in a branch, I would like to be able to ask a member of staff for help. Every blind and partially sighted person has their own way of doing things, but this is what I need to know and most people’s requirements will be similar: ■ The location of the keypad (including the enter and cancel buttons) ■ The location of the card slot and cash dispenser ■ The location of the ‘cash only’ button, and the different buttons for selecting the required amounts of cash

What about deposits? While it’s not a function I use often, the facility to deposit cash and cheques via an ATM is something that should be just as easy for me via a cash machine as it is using an agent in-branch. In this case I need to know: ■ The location of the cash and cheque slots ■ The correct method for inserting notes or cheques, for example in portrait or landscape orientation

Voice prompt v memory Many cash machines require me to memorise the position of buttons and slots,

and what should happen when I make a selection. I already memorise buttons and procedures in many other areas of my life, such as programming the controls on the washing machine and what route I take when walking my daughter to school. But how much more helpful would it be if the cash machine had voice output? For a few years now, some machines have had an audio plug-in where a blind user can insert a headset and hear instructions on how to use that specific machine. Sadly, I can’t use this function as often as I would like because the machine I’m familiar with doesn’t appear to offer it. I say ‘doesn’t appear to’ as I haven’t found an audio plug-in yet, but it may exist. The important thing here is that as a blind person, I cannot find it! If a machine has audio output, it needs to tell me all the above information in the simplest terms, enabling me to do everything myself. Then I won’t have to worry about using an unfamiliar cash machine, making the entire experience more user friendly and enabling me to be as independent as possible.

Independence & security Independence for me also improves security. There have been times in the past, and there will likely be times in future, when I have urgently needed a member of the public to look at the screen because something’s gone wrong. While this

As a blind person I have to trust a stranger if I am alone, or hit the ‘cancel’ button if I feel there is a risk to my account 24

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Winter 2016

obviously holds risks, it’s preferable to losing my card and/or cash. Maybe I just need to be told that ‘the machine is broken’. Whatever the scenario, at that moment, I have to trust a stranger if I am alone, or hit the ‘cancel’ button if I feel there is a risk to my account. A machine with speech output via a headset would resolve this problem since it should give me all the information a fully sighted person would see on screen, including an ‘out of service’ or ‘please wait while we process your request’ message. If I used a talking cash point regularly, I would, of course, become familiar with the various functions it has to offer. However, at first I would also need the option to replay the instructions, or to change the play-back speed of the voice, as well as having a number to contact if I needed further support.

ATMs – in or out of branch? Purely because of my location, I don’t go in to my branch often, so having fully

Winter 2016

One for all: ATMs built around blind users’ needs would improve everybody’s experience

accessible cash points away from the branch would be a huge help. In the event that I am in branch, I would use an accessible cash point with more confidence, as there are members of staff around if I need support. This would minimise security problems, while reassuring customers like myself using a talking cash machine for the first time.

What more can be done? Many of us now own a mobile phone. Using fingerprint ID combined with a phone’s near field communication chip (NFC) will allow users to easily authenticate themselves, which also eliminates the possibility of a personal identification number being discovered.

Another option may be to ask a user to enter a code sent to their phone via text message, which is another step in the process of identifying the user, although both methods would rely on good mobile network coverage, of course. I believe as long as time is taken to build in accessibility for every user, the end result will be greater independence and better security for all.

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Automation enables transformation Our solutions help to optimise the cash processes across your entire branch. Free up time, free up space and free up your staff to focus on your customers.

To ďŹ nd out how we can enable your branch transformation strategies, visit www.gloryglobalsolutions.com or contact your Glory sales representative

TRUSTECH

YES, WE CANNES! With a new title and a new venue, Trustech is rolling out the red carpet for thousands of visitors to Cannes, while its conference host FinTechStage promises another blockbuster event. We asked its Co-founder Matteo Rizzi what to expect Fintech Finance: What will Trustech be focussing on at Cannes this November? Matteo Rizzi: 2016 Trustech is about renewal. For the past 30 years, the event, which was formerly known as the Cartes Exhibition, has been the number one international meeting point for trust-based technologies for payment, identification and connections. For its 31st year, the organisers want to focus on innovation as the core of the industry. To reflect this new emphasis and the increasing digitalisation of payment and identification, the event was renamed Trustech. It incorporates the Cartes Exhibition (the long-running exhibition for the smart card ecosystem) and the Trustech Confex (featuring the latest generations of payment and identification technologies). With this new name and format, the programme was able to integrate several keynote sessions (every morning and evening) with companies like Tesla Motors, Google, Poynt, Santander Bank, Mastercard, Paypal, Samsung Pay and more. FF: Can you give us an idea of the scale and scope of the event? MR: Cutting-edge topics will be covered, including paytech disruption, mobile payments, fintech, securing the Internet of Things (IoT), the future of blockchain, smart borders, biometrics, e-ID and e-government, and cyber security. In a nutshell, Trustech 2016 is three days of unrivalled networking opportunities, 40 innovative start-ups pitching on the main stage, 250 international speakers, 400 exhibitors and sponsors, 1,800-plus CEOs and 18,000 attendees. The importance of content has grown

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considerably. This year, the show will offer excellent content with 13 thematic tracks and an exceptional line-up of speakers. I’ll be chairing the FinTechStage at Trustech. We’ve joined forces to bring the brightest fintech minds together, who will deepen our collective understanding about the digital shifts impacting financial services with a particular focus on the cognitive data space and the way digital identity is becoming the next big opportunity. Trustech will include a one-day conference devoted to fintech, prepared in collaboration with FinTechStage, as well as fintech pitches on the main stage and a fintech area with more than 20 fintech companies showcasing their innovations.

We’ve joined forces to bring the brightest fintech minds together FF: What payments industry trends have emerged over the last year that have surprised you? MR: Blockchain is the word on everybody’s lips and crypto-currencies have hit the headlines – for good or evil – although they have not experienced any significant development so far. Nevertheless, a number of stakeholders are looking at the virtues of blockchain technology, which demonstrates considerable potential in many areas, be it in the financial sector, the automotive industry, the IoT or health. So, the Trustech conference programme will include one day devoted to blockchain.

Fintech is both supporting and displacing the old finance world with technology. In the 21st century, financial services are understood as digital infrastructures, allowing the establishment of new types of agreements and procedures in the classic areas of banking. Global fintech investments increased by 75 per cent in 2015 to $22billion, and it targeted all businesses, such as digital payments, online money remittance, person-to-person transfers, online bill payments and digital currencies. FF: What should visitors look out for as a talking point/highlight? MR: The event brings together financial services, retail, enterprise security and the IoT, tech and mobile, as well as government representatives from all continents. It gathers attendees from more than 130 countries and represents a unique opportunity for doing business and networking. Over the three days, attendees and exhibitors will be able to learn, benchmark and discover the latest innovations and trends in their respective branches of industry and enjoy busy networking in a convivial environment while listening to some inspiring keynote speakers. I want everyone to leave Trustech feeling they have a better grasp of the industry and its latest trends. I hope they will also take away new ideas and partnerships for their companies, having made new friends and contacts in the payments and identification ecosystem, and be left with a concrete vision of all the products and innovations presented in 2016.

www.fintech.finance |

TRUSTECH

Give and take Pierre Boces, Head of Product Marketing and Consulting at loyalty solutions specialists Welcome Real Time, unwraps the future changes and challenges for banks after PSD2

Few industries are as closely monitored and heavily regulated as banking, with each new intervention often greeted by universal cries of dismay. Rarely do you find one that meets with overwhelming approval. But so it is with Europe's newly revised Payment Services Directive – at least, among fintechs. The recently adopted PSD2 radically expands the scope of the original directive, introduced nine years ago, creating what has been described as a ‘revolution’ in the payment services industry. It's widely seen as being a gift to fintechs and Pierre Boces, head of product marketing and consulting at business loyalty solutions provider Welcome Real Time, is confident that it will do just what MEPs intended it to do – liberalise the financial market for new entrants. “It’s definitely a good thing when regulation is intended to open up the market,” he says.

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“Everybody benefits from it; first of all the consumer and then the new players. Ultimately, the banks do, too, when they choose to adapt to the change “PSD2 should prove to be a major breakthrough for newcomers, since it will force the banks to think differently, for example by developing a rich suite of application program interfaces (APIs) to partner with the new fintech players, which is also known as open banking.”

A question of loyalty Another of the key changes introduced by European regulators is a mandatory reduction in credit card interchange fees.

Gone are the days of loyalty to plastic. Banks need to immediately reward customers for any interaction through the bank

“Now that the fee has been capped at 0.3 per cent for credit card transactions, the banks have to devise new methods of raising the funds necessary for their loyalty schemes,” says Boces. “One of their options is to extend their loyalty programme so that it is bankwide. This means that it goes beyond just card usage and is integrated into every banking operation, thus increasing customer profitability. Another option is to negotiate for more merchant-funded rewards. This entails the merchant providing offers and discounts to the customer through the bank and the bank increasing traffic to their stores in return,” says Boces. “It clearly shows how regulations – PSD2 and the interchange cap – can significantly disrupt banking operations, but also create some excellent opportunities for others inside and outside of the industry.

Whose customer is it? “The introduction of PSD2 will inevitably lead to the creation of more of these aggregated services and consequently muddy the waters even further when it comes to defining the owner of a customer relationship,” Boces adds. At the same time, payment methods based on tokens disintermediate the customers from their banks. “In the past, customer loyalty simply constituted in the usage of a particular card or payment method. Now, however, cards are being tokenised and separated so that they can function within applications, such as Apple Pay. “Gone are the days of customers being loyal to a piece of plastic. The winner of the loyalty race will be whoever rewards the customer, regardless of the channel or the payment method that they use,” says Winter 2016

A gift to fintechs: The revised European Payment Services Directive (PSD2) offers new possibilities

Boces. “Thus, it’s the customer accounts that banks need to hold if they wish to maintain their grasp on the relationship. To do this, they require robust omnichannel systems to initially identify the customer through any channel and then they need to immediately reward them for any interaction they have through the bank.”

Instant gratification This is the space in which Welcome Real Time operates, which is why it was presenting its mobile POS reward solutions at the Trustech conference in Cannes this year. “As the name of the company suggests, our solutions provide loyalty from payments in real time. When we say real time, we mean that you’re rewarded at the exact moment of payment and are also offered the chance to redeem your reward on the spot,” explains Boces. “For example, instead of paying £100 for an item at the checkout, you only pay £50 Winter 2016

because the other £50 is converted from your accumulated reward points. “Of course, due to the nature of our service, it’s vitally important for us to develop strong solutions for mobile platforms. In the past, we were restricted by the limited capabilities of traditional payment terminals, but now we have a whole host of mobile technologies to play with. Mobile POS applications on tablets and phones provide so many more visual opportunities that can enhance the user experience – intuitive interfaces and logos, for example.” At Trustech the company aims to show ‘just how much sexier we’re making interactions using mobile POS as well as how simple it is to earn points and redeem them instantaneously’. Before the show ,Boces was looking forward to presentations focusing more on subjects relating to software and digital solutions than hardware. “For example, many banks in France are now adopting Apple Pay, and the

repercussions of this need to be considered,” he says. “Also, blockchain is still a prominent topic of debate in the industry, especially with regards to loyalty programmes. There’s a new school of thought that blockchain could soon be used to sign and certify rewards and electronic coupons, which would obviously cut down on the creation of fake forms and increase security. This would also enable interoperability between several loyalty players issuing and accepting the same type of secured rewards.” Acquired by global marketing specialists Collinson Group in 2014, the company has ambitious plans. “We’re working closely with two of our sister companies in the group, ICLP and Collinson Latitude, in an effort to extend the overall integration of our products and solutions,” says Boces. “We’re also aligning our sales forces and account managers to create greater synergy and supplying our peers with access to our bank clients. We’ve no doubt Welcome Real Time will benefit from the global presence of the Collinson Group throughout 2017 and beyond.” www.fintech.finance |

TRUSTECH

Splitting the financial atom Finding new ways to pay can have a profound effect not just on business but on how millions of us live, as Dave Birch, Director of Innovation at Consult Hyperion, explains Consult Hyperion’s annual forum, Tomorrow’s Transactions, was recently described by one writer as being where ‘ideas about the future of money are smashed together like particles to see what happens’. To suggest the fallout from this Hadron Collider of fintech could one day have as much impact as proving the Higgs bosun may be stretching the metaphor a little. But some digital financial technologies do have the power to transform the way millions of us live. As head of innovation at Consult Hyperion, it’s Dave Birch’s job to find these God particles of financial physics – specifically in digital networks, digital identities and digital money – and help companies, governments and nongovernment organisations (NGOs) use them to construct a new world of retail electronic transactions. It’s an area of the industry which is travelling – much like the atoms under Geneva – at something approaching the speed of light and Consult Hyperion, based in the UK and New York, has made it its mission to keep up. “We’re very proud of the special expertise our team possesses. There are around 50 of us in total, so we’re very niche, but it’s this specialisation that allows us to be so meticulous and relevant with all our advice,” says Birch. A prominent speaker at the Money20/20 conference in Las Vegas this year, where he chaired several panels on subjects related to transaction services and payment technologies, Birch says

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the really interesting debate right now is around regtech and identity. “We’re keeping a very close eye on a lot of technological trends in order to ensure that the service we provide is as cutting edge as our clients aspire to be. Voice, biometrics, tokenisation, chat, and artificial intelligence are all hot tech topics at the moment,” adds Birch. “However, on a broader business level, I believe that our work in the coming months will focus more on the regtech side of things, as opposed to fintech.” It’s particularly relevant to his clients, since they’re incumbents, not start-ups. “A lot of these more traditional corporations are losing control of the regulation part of their cost base as enforced compliance, know your customer (KYC), anti-money laundering (AML), and counter-terrorist financing operations drain their revenues,” continues Birch. “It’s our job to consider this problem among our clients and then evaluate the potential of new technologies to combat it.” And it’s in this context that he believes blockchain could offer solutions. “A lot of weak blockchain strategies are currently being devised, such as the implementation of shared ledger subsets in payment networks. Sure, this could save a few per cent on money transfers here and there, but it’s hardly going to change

the world. However, there are some strong arguments for blockchain being able to save 20 to 50 per cent for companies when it comes to their KYC, AML and compliance operations. For our clients, that would make a monumental difference to their cost bases and it’s for this reason we’re beginning to look towards regtech.”

Financial inclusion Identifying the best emerging technologies to address security, risk and identity in relation to payment transactions ties in with Consult Hyperion’s other big focus. Financial inclusion is an area that requires very different strategies, depending where in the world you’re targeting. “Financial inclusion in developed markets and financial inclusion in emerging markets require completely different approaches,” says Birch. “Financial inclusion is not only the extension of existing services, but also the establishment of new services that are appropriate for their intended market. Developed markets and emerging markets require totally different services.” From building and operating a Token Administration Platform to allow subsistence farmers in Nigeria to redeem vouchers for subsidised agricultural products and devising a UK-Somalia

Different goals necessitate differents strategies and unconventional solutions are often highly effective in emerging markets Winter 2016

Transformative: Fintech can be life-changing

safe remittance corridor, to a money management mobile app for low income families in the north of England, the company has been instrumental in improving access to finance and empowering those with limited resources all over the world. “When we’re working with a client in a developed economy, where the majority of individuals have access to formal banking services, the focus is always on how to engage with those who are excluded from the service and how to encourage them to adopt it,” says Birch. “Take Direct Debit in the UK, for example. This type of payment is inherently bad for those on low or variable incomes, since failed Direct Debit payments can lead to hefty penalty charges for the account holder. An innovative solution to this might be utility providers, for example, requesting customer payment through their free mobile app, with the option to defer payment for a few days at no charge. The providers would benefit from enhanced managing of customer payments and there’s even a good chance that they’d receive the money more quickly than through Direct Debit. “This is a good example of how

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financial inclusion can be achieved through greater communication, control and flexibility on the side of a company.” “It’s only through our research into local markets that we are able to aid banks, NGOs, mobile money operators, and mobile network operators in making informed decisions and developing innovative and inclusive products. Our insights are drawn from extensive experience across various developed markets, but also from emerging markets, such as Bangladesh, Kenya and Somalia, to name a few,” says Birch. “In emerging economies, the term financial inclusion generally constitutes an organisation’s ability to extend its services into an unbanked market. An example of this may be a product that delivers its service to a remote rural community, or perhaps a mechanism by which the cost of the service is lowered to make it a feasible option for a lower income group. “Different goals necessitate different strategies and unconventional solutions are often highly effective in emerging markets," he continues. “Clients can often deliver healthy savings, loans and remittance services by

utilising existing infrastructures and relationships, or even embracing mobile money as a means of reaching markets that were previously untouched”.

Speed of light transactions Making transactions easier for farmers in the sub-Sahara may seem a world away from the early morning scrum on the London Underground, but here too Consult Hyperion has helped make a difference to the quality of life. “You may have noticed the last time you visited London that you no longer need an Oyster card to board a bus or enter the Underground system,” says Birch. “Now, you can tap your contactless credit card on the Oyster card pad, or your phone with Apple Pay, and a payment is instantly registered on your account. “That was a project that we worked on with Transport for London and we’re now doing the same with transport agencies in other locations, such as New York. Transit cards are becoming a thing of the past and we’re helping to make that happen.” Now, if you're a daily commuter on the 7.20am from Aldgate East to Waterloo that definitely feels like a Higgs boson moment.

www.fintech.finance |

TRUSTECH

Banking in a box

With the demise of the traditional cashier role comes a neat solution for banks looking to combine convenience with a personal touch. Steve Hensley, Executive Vice President of Sales and Marketing at ATM specialist KAL opens up… The experience of using a cash machine or ATM has become entirely familiar since their introduction in the 1960s. We can all relate to the pain of seeing a £2.50 usage fee notice flash on the screen in a corner shop machine, just as we cherish the Holy Grail of one that dispenses fivers.

But KAL, an ATM software company based in Edinburgh, believes they can be so much more. It’s setting out to transform the 50-year-old ATM into a ‘universal bank connection hub’ by injecting some true automation into the automated teller. Steve Hensley, executive vice president of sales and marketing at KAL, says there is a compelling reason for banks to invest in updating their aging estate of holes in the wall. “A lot of banks are downsizing the number of branches they have and are consequently having to automate more and more processes. That’s where we come in,” he says. “We don’t just focus on ATM software, but also software for kiosks and bank branches. We help banks to automate both their branches and their ATMs, and we provide software that supervises ATM networks to ensure that they are fully functioning, available and up to date. “We’re working with a lot of big banks around the world on these projects, as our software allows ATMs, kiosks, and self-service machines to provide many more functions. We also help them to alter their branches to support new kinds of devices, such as cash recycling machines, coin machines and deposit machines, to name a few,” he adds. Having started rolling out Remote Teller Machines (RTMs) four years ago, giving bank customers instant access to their cash from merchants in locations where ATMs are hard to find, one of KAL’s partners is now ready to launch the ETM – the Extended Teller Machine, described as a ‘bank in a box’. “Branches aren’t going to disappear any time soon,” says Hensley. “But we recognise how banks are having to optimise their

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branches for face-to-face communications. Some things just have to be done face-to-face. When it comes to more complicated interactions, such as setting up a mortgage or an investment, people still want to sit in front of a desk and have a discussion with a real person but we don’t believe that this necessarily needs to take place in branch. Why not use video technology to connect the customer and the advisor? Our assisted self-service cash machines, such as the KAL RTM, are doing just that,” he adds.

Collaborative effort The ATM, RTM and now the ETM are all part of the company’s ambition to encourage a ‘collaborative effort between the customer and the banker to embrace self-service technologies’. “Our machines allow face-to-face communication to occur without either party being present in the branch,” says

Our machines are effectively converting cash machines into mini branches Hensley. “We expect the result of this to be a continued decrease in branch numbers, but also a significant growth in the intricacy and importance of video-enabled transactions with remote teller assistance.” The business case for adopting next gen tellers is persuasive. “The biggest problem facing banks is controlling the cost of delivering transactions,” says Hensley. “That is what’s motivating the move to self-service. The cost to a bank of providing a transaction over the counter is very expensive. It is simply no longer commercially viable for them to provide this service. That’s why banks are having to automate processes,

because automation permits consumers to carry out the transactions themselves. This way, bank staff are free to act as both sales people and consultants in branch, focussing only on higher value transactions. “The result of all of this? The quality of higher value transactions in branch is improved due to the greater availability of bank staff; the convenience to the customer of lower value transactions, such as depositing and cashing cheques, is increased; and the operating costs of banks are lowered to a controllable level.” He sees financial firms focussing on achieving ‘an unprecedented level of universal convenience for the consumer’. “We’re constantly seeing the addition of new delivery channels in the mobile, tablet and home banking sectors, and it’s all in the name of customer comfort and security,” he says. ”The unrelenting increase in contactless and tap-and-go transactions is proof of how consumers are responding positively to these developments. “There’s a lot of talk about the transformation of bank branches for convenience purposes, but I believe that a lot of people are approaching the task in the wrong way,” he adds. “Perhaps we shouldn’t be referring to it as the ‘transformation’ of branches, so much as the ‘extension’ of branches. What’s the difference between going into a branch to carry out a special or unique transaction and visiting a self-service machine, or doing exactly the same thing, having conversed with a bank teller using video technology? Our machines are effectively converting cash machines into mini-branches, and that’s how we’re contributing to the convenience craze that’s sweeping the financial industry.” Steve and the KAL team will be at this month’s invitation-only Branch Transformation event in London, where they will present the new ETM to senior bank executives responsible for defining the future size and shape of their branch network. KAL will be hoping one of those shapes is a box. Winter 2016

Shape of things to come?: Banking convenience in a 'box'

Winter 2016

www.fintech.finance |

TRUSTECH

Playing their cards right Branch ‘minimisation’ is driving the introduction of more efficient technology, such as bank cards on demand, while emerging markets can’t get enough of plastic. It’s all keeping Matica Technologies busy, says CEO Sandro Camilleri The process of acquiring a new credit card has always been something of an inconvenience. Whether you’ve just opened a new bank account or failed to notice your wallet still glued to a beer-soaked table as you left a club, receiving a new card will probably mean waiting for two confidential envelopes to work their way through the post – one containing a card, the other containing your pin. In recent years, however, banks have begun to employ a system called financial instant issuance (FII), which allows customers to receive cards in branch within minutes of making a request. Metro Bank in the UK and BBVA in Spain are leading the way, but this revolution in card convenience means instant issuing machines are becoming a must-have for banks worldwide. And if you think mobile banking is going to steal a march on them, think again. Matica Technologies, one of the world’s leading producers of FII machines, has just sold 500 to the Middle East, where financial card production is 9.2 per cent up year-on-year, reaching 2.75 billion in 2016. “The Middle East and Africa is the third largest growth region in terms of cards, despite the common perception that Middle Eastern consumers are especially fond of mobile payments,” says Sandro Camilleri, CEO of Munich-based Matica, which provides solutions for the instant production of credit and debit cards, transit cards, driver licences and pre-paid cards, to name but a few.

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“Another region that we’re paying close attention to is India and Asia Pacific, as it’s there that card production has seen the greatest increase in recent years.” More than 10 billion cards are expected to have been produced in Asia by the end of 2016, up by 11.3 per cent in a year. “We won a banking card project in Asia a few weeks ago and what we’ve seen from these countries is that they tend to make a technological jump, leapfrogging alternative solutions in favour of the latest, most cutting-edge technology available,” says Camilleri. “This habit of Asian banks is shaping our company as a provider of FII solutions, since it’s imperative for us to integrate the latest technologies into our machines so that they maintain a strong appeal in this rapidly expanding market.”

Automated solutions In the UK, we recently rolled out around 50 FII machines located in a chain of major

More than 10 billion cards are expected to have been produced in Asia by the end of 2016

department stores and we are piloting a further 100 machines on behalf of another customer. This is symptomatic of another trend – branch minimisation. “Right now, there is a worldwide tendency to reduce the number of people in bank branches while expanding branch services that are tailored to customers,” says Camilleri. “These two goals contradict each other somewhat, so banks are requiring automated solutions, such as ours, in order to deliver a greater level of personalisation without hiring more staff. “I don’t believe that a relationship with a human being will ever be fully substituted by a machine,” he says. “I think that the more automation we see, the more customers will be drawn towards a service that still incorporates a human connection. That’s the type of service that our products provide. We develop machines around human interaction, as opposed to instead of it, and our solutions therefore enhance branch-consumer relationships.” One of the world’s top two companies in the field of FII, Matica is experienced in tiptoeing through the minefield of

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regulation that governs card licensing in different regions, as Camilleri explains. “The problem with expanding across more and more countries is that each is strictly regulated by its own licences or central banks. For example, we have a production plant in Italy, and the Bank of Italy doesn’t distinguish between the issuance of a card and the issuance of physical money. The same goes for many other countries across Europe, meaning we as a company are having to be regulated by a whole host of separate central banks in order to operate in each country. Regulation is therefore the number one obstacle that we’re currently facing in terms of expansion and every other card-centric company is in the same boat.” Nevertheless, it’s still managing to bring significant benefits to banks beyond improving the consumer experience. “The decentralisation of the production and distribution of cards is

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helping banks to win and retain customers in an increasingly competitive marketplace,” says Camilleri. “Unactivated cards have always caused a significant loss in revenue for banks. In the USA, for example, only 58 per cent of all activated cards are ever used and only 53 per cent of all issued cards are ever activated. “FII machines allow banks to activate a card in branch and place it directly into the customer’s hands, drastically reducing the number of cards that remain unactivated. Not only this, but FII enables banks to save on courier costs and also grants them the opportunity to take their desktop card printers to new locations, such as airports or shopping malls, where there are opportunities for them to generate new revenue streams,” adds Camilleri. Matica Technologies is due to unveil four new products in its portfolio of FII and secure

ID card printers at Trustech 2016 in Cannes, where other companies will be showcasing the latest biometric and enhanced security solutions. Do they signal the end of plastic? Not according to Camilleri. “Despite these new developments, I don’t believe that we’ll see a replacement of our tried and tested card technology any time soon,” he concludes. “Between 2015 and 2017, it is estimated that 50 billion cards will be produced globally and 22 billion of these will be traditional EMV ‘chip and pin’ cards. In 2015 alone, due to the adoption of EMV, the US market grew by more than 30 per cent. In my mind, this continuing dependence on ‘old cards’ points to the growth of more sophisticated solutions in the card sector, such as those developed by Matica, as opposed to any outright replacement of existing technology.” House of cards: The world can't get enough of them

www.fintech.finance |

TRUSTECH

Getting to the next level Already widely known for its testing and certification services, payment transaction expert FIME is helping customers up their game by taking a partnership approach. Marketing Vice President Guillaume Labendzki explains the strategy In the fast-moving world of payments, new technologies, new form factors, new standards and new apps light up the leaderboard every day. Navigating these options and deciding which will take your business to the next level more than often requires a skilful nudge in the right direction. Which is why French transaction expert FIME has just pressed the button on a new campaign, positioning it as the ‘pinball wizard of the payments world’ in helping customers to develop and certify cutting-edge products and programmes. Known globally for its payment testing tools and certification services, FIME is less well recognised for its other areas of expertise, which mean it can partner clients on their entire journey, from design and specification to development and launch. Marketing vice president Guillaume Labendzki explains: “I believe we have the widest portfolio of tools and certification services in the industry. However, FIME can also deliver a range of other services, such as project management, implementation support, validation and audit, consulting and training. We want to be an implementation partner to our customers – be it for the launch of a new card, terminal, mobile payment application for vendors, or deployment of a new payment means for banks, we see Winter 2016

our mission as being to help them get it right first time.” Its client base ranges from payment wallet providers to banks and vendors and all of them face similar key challenges when designing and deploying a new programme, says Labendzki. “We provide them with the tools and access to our certification services so that their product is brought quickly to market, is secure and interoperable. We have a one-stop shop, an A to Z implementation partnership approach.” FIME’s new pinball-themed marketing campaign, which is linked to an online game, is designed to reflect the payment ecosystem’s complex and unpredictable nature, he says. “In this ecosystem there are lots of different technologies popping up, while some disappear. It’s complex and ever-changing. It’s risky sometimes but there are also lots of business opportunities. The campaign message of ‘get to the next level’ is just that – we’re partnering with customers to achieve their goals. They can learn to master tricky conditions and play the game right.“

International expertise The 20 years that FIME has spent developing test tools and implementing new payment technologies around the world has helped it build close links with industry standardisation associations, such as Global

Platform, EMVCo and GSMA. And experience in one region is often helpful in assisting companies in another. Take near field communication (NFC) payments, where its work in the Asia-Pacific region allowed FIME to support banks and vendors in the US, where NFC remains a comparatively new technology. “We adapt our offer to the market,” explains Labendzki. “In the US, we are very much helping banks to deploy their programmes. At the same time, we are helping vendors to design and manage systems to validate the NFC contactless mobile payments and contactless cards.” That experience is also passed on in customer training programmes that allow clients to tap into the best practice delivered elsewhere. Despite the unstoppable pace of payment innovation, Labendzki believes chip card payment technology will remain a core part of FIME and its clients’ payment portfolio for some time to come. “I think the card represents and materialises the link between financial institutions and their customers,” he says. “It illustrates that they are actually delivering the service. That said, cards will gradually have to make space for other innovative payment means but the same demand for convenience, interoperability, universality and security will prevail and we'll still be helping clients achieve that.” www.fintech.finance |

Â© Fotolia, FIME

FINTECH FINANCE AWARDS 2016

The fintech front runners Fintech, regtech, insurtech, wealthtech… name any sector in financial services and there will a community of techs just itching to disrupt it with their digital wizardry, legacy-lite business models and plenty of entrepreneurial enthusiasm. Our first Fintech Finance magazine awards aim to capture and celebrate that spirit of corporate adventure. From the hottest technology area right now in Europe and the US – payments – to less sexy subesectors, such as regulation, and Asia’s current obsession with insurtech, blockchain and analytics,

we’ve looked for examples of start-ups and established businesses that have shown themselves to be distinctly different and/or commendably focussed on customer service and innovation. While there’s no doubt that venture capital investment in fintech companies slowed in Q3 of post-Brexit Britain whether as a result of the referendum or as a natural levelling off – there has been no halt called on growth and development. Far from it. Once viewed as almost an irrelevance by large financial institutions, then a nuisance, many of these upstart

disrupters are now sought after by them as partners in collaboration, for direct investment and M&A. The banks have one aim – to adopt solutions that can reduce risk and improve customer engagement and fintechs are their best chance of achieving it. These award winners represent the part played by every area of fintech – the headline grabbers as well as the unsung heroes – and were selected from those who attended the big conferences this year, from Sibos to Dreamforce. Together, they represent the full breadth and depth of our global industry.

2016 Fintech Finance Awards Finalists BEST CORE BANKING SYSTEM Fiserv ● Temenos ● Accenture

BEST WORK WITH BLOCKCHAIN Blockchain ● Earthport ● Ripple

BEST IN BIOMETRICS Daon ● BioSSL ● Nuance

BEST NEW KID ON THE BLOCK Monzo ● Monese ● Curve

BEST INNOVATION IN PAYMENTS Saxo Payments ● Ingenico ● Verifone

BEST SME LENDING Iwoca ● Credit.fr ● FundingCircle

BEST BANK BRANCH Metro Bank ● Barwa Bank Deutsche Bank

BEST IN CYBERSECURITY AND FRAUD PREVENTION BAE Systems ● FICO ● FeatureSpace

BEST INNOVATION IN REGULATION Glassbox ● ComplyAdvantage ● Contego

BEST BANK APP N26 ● Monzo ● BBVA Compass

BEST CRM TECHNOLOGY OF THE YEAR Pega ● Smart Engine ● Capgemini

BEST ISLAMIC BANKING TECHNOLOGY Path Solutions ● Turnkey Systems Sopra Banking Software

BIGGEST DISRUPTOR OF THE YEAR Alipay ● ACI Worldwide ● FundingCircle

BEST WEALTH MANAGEMENT Nutmeg ● Wealthify ● MoneyFarm BEST DIGITAL TRANSACTION BANKING iGTB ● Pelican ● Bottomline

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BEST REGULATORY REPORTING SYSTEM Wolters Kluwer ● Unavista ● Oracle BEST PAYMENT TECHNOLOGY PROVIDER PPRO ● Contis ● Global Processing Services

BEST FINTECH REGION OF THE YEAR Isle of Man ● Malaysia ● Northern Ireland BEST HUB/ACCELERATOR OF THE YEAR Level39 ● Yodlee ● Startupbootcamp HERO OF FINANCIAL SERVICES 2016 Kim Fournais, CEO and Co-founder, Saxo Bank Michael F. McGovern, MD, Brown Brothers Harriman George Osborne, Director Barclays’ Global Transaction Banking

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AWARDS: BEST CORE BANKING SYSTEM

The beating heart of banking If there’s one service everyone needs, in one form or another, it’s banking. Whether business or personal, banking keeps the world turning. The aftershocks of the worst global financial crisis on record, left none of us is in any doubt about what happens when banks crash, and the knock-on effects this has on the international markets and economy. Today, banks feel more responsibility than ever to demonstrate to a jaded public that what they do is credible and trustworthy – as well as demonstrating to shareholders that they ae both competitive and profitable. Increasingly, technology is helping them achieve both. To keep up with ever-increasing customer expectations and ever more demanding regulation, they require core banking systems that are responsive, adaptable and meet customers’ digital expectations

Each bank uses a different core and each has its own strengths and weaknesses. We have chosen three outstanding examples for recognition in this year’s awards.

Joint Gold: Fiserv Agiliti & Temenos T24

There is no Silver award in the category this year, as we have a tie for Gold between Fiserv’s Agiliti, a cloud-based core banking system, and T24 by Temenos. Each system uses different delivery platforms, with different – though equally impressive – outputs. Fiserv’s Agiliti is a purely Cloud-based platform, whereas Temenos’ T24 takes a more traditional approach to a core banking system. Both strong, each wows in its own way. Agiliti’s use of the Cloud has many benefits. It cuts costs as banks don’t have to invest as heavily in hardware, software or manpower to keep it running. It creates an environment in which clients can be brought closer together and form stronger relationships with one another, thanks to easier transaction processing and the potential to combine big data with seemingly unlimited computer power and absolute precision. One company that has utilised this platform successfully is Fintech start-up Tandem Bank. With T24, Temenos has designed an incredibly robust system that claims to be indestructable. As a real-time platform it enables financial institutions to offer their customers specific products at the right time of the year in order to meet their needs more successfully. It lets them build products extremely quickly, while also personalizing their offering for individual customers – creating what Temenos describes as a ‘market of one’. The most interesting feature for the T24 system is its zero risk of obsolescence. This is due to 20 per cent of annual sales being invested into continual development and research and development, to ensure the ‘legacy’ issue never arises again.

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Our Bronze award goes to Accenture’s core banking solution. Having been implemented by over 200 clients across the world, this system has made Accenture a force to be reckoned with. By creating a vast framework to meet their clients’ varying needs, Accenture is able to provide broad appeal and value. This includes industry expertise in the design and delivery of project architecture, including unique operating models and software solutions for clients. With a network of more than 50 delivery centres globally, Accenture is able to manage and implement large-scale banking systems in very little time, and with precision. The programme it uses, called Alnova Financial Solutions, is able to implement new operating models, which is key to the contemporary banking sector, as institutions are desperately looking for ways to shed the legacy systems that are holding them back.

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BEST NEW KID ON THE BLOCK: AWARDS

We’ve seen many new businesses emerge in recent years with the sole purpose of disrupting the financial services industry’s traditional approaches. Some fail because they’ve come up with a solution to a problem that doesn’t exist; others because their ‘great idea’ has already been created by another vendor or a bank’s IT department.

But those with a well thought out strategy and a product that’s offering a fresh approach to banking that’s truly market leading are transforming the landscape around payments, account management, platforms and security. Here we highlight three new entrants that we’re tipping for great things.

Shaking things up Taking Gold this year is Monzo, previously known as Mondo. Barely off the starting blocks, this online bank has already been the winner of multiple awards and is leading the race between on-line only banks. Customers can apply for a card now to open an account, although it’s not launching until 2017. What truly sets Monzo apart is its balance updating. Most banks take at least a few hours, and sometimes a few days, to update totals once a payment or deposit is made, but with Monzo, it is instant. And not only does the balance automatically update, the app uses graphics and data to track the customer’s spending habits and shows them where they have spent their money, helping them manage their finances more effectively. The app’s design is elegant and simple, so that just a brief glance is enough to take in the information. Other banks have started to imitate its design but Monzo’s is still the fastest and cleanest user interface.

Monese takes Silver with a UK current account and card that doesn’t require a customer to be resident in the UK. This mobile-only account offers the same services as traditional banks, with access to ATMs and the option to have a salary paid into an account. Monese uses the latest Cloud technologies to safeguard customer funds and data, making use of Cloud technology to develop and deploy updates and technologies. Although the account has a £4.95 per month service fee, it gives users access to faster bank transfers, eight-times cheaper global payments and LOGO NEEDED the option to receive money in either pounds or euros – among other benefits.

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Fresh-faced Curve is forging a reputation as the master of cards. The fundamental principle of Curve is that it merges a customers’ credit and debit cards into one. So instead of carrying around a wallet full, customers need only take their Curve card and choose which of their accounts it represents for each transaction. It is compatible with online merchants like PayPal. It has a rewards system and can be used abroad at a lower conversion rate than most high-street banks. By connecting a card holders’ accounts, Curve makes it easier for the user to track how much credit they have and what they have spent after every purchase. When using the card abroad, every transaction is displayed in both the user’s native and foreign currency, making it not only an all-in-one card but an all-in-one currency converter.

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AWARDS: BEST BANK BRANCH

The retail warriors

The march of online financial services has forced traditional banks to think seriously about the role of the high street branch and its place in the accelerated evolution of banking.

Although networks have contracted, we’ve not seen the predicted death of the branch. Instead, the digital switch has acted as a catalyst for a major reimagining of its design and function, so that the branch continues to play a unique role in the omnichannel experience. From welcoming, retail-style outlets that look and feel like a local café, to computerised staffless branches, we have narrowed down the many new-style offerings to our three favourites. An honorary mention must also go to Santander Bank and Nationwide Building Society for the transformation of their branch networks and in particular the introduction of served or self-serve options for customers. Featuring open spaces, modern furniture and interactive monitors, their modern banking environments notable because they succeed in being places in which people actually want to spend time!

Gold goes to German fintech, N26, a purely digital bank that is distinguished from its competitors because of the depth of features it offers. From being able to see personalised information about their own account to having a built in option, making it easier and cheaper to transfer money abroad, N26 is pushing the boundaries of banking. The app is available across multiple platforms, including smart watches, and on each platform customers have full access to all of N26’s banking capabilities via a seamless user interface. Because it is partnered with Mastercard, customers are able to withdraw their money at any Mastercard ATM. The app tracks spending in a similar fashion to Monzo’s but also allows users to send and receive money through MoneyBeam transfers, using phone numbers and email addresses rather than account numbers and sort codes .

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A round of app-lause According to the British Banking Association mobile interactions rose to more than 895 million last year, a trend that’s only set to continue. With many consumers seeking out banks that can offer them the same ease and simplicity of interaction that they experience in every other area of their digital lives, the development of banking apps has accelerated, revolutionising both the industry’s customer-facing services as well as back-end systems. With so many apps available, designed for specific customer needs, we judged this category using security, seamless channel crossing and best user interfaces as our top criteria. It was tough, but we rose to the challenge and here are our favourite three.

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The first high street bank to open in the UK in more than 100 years when it launched in 2005, Metro has done more than any other to change the retail banking experience by applying its customer-driven ethos to its entire banking infrastructure and the level of service it aims to offer. Each MetroBank location is carefully selected and stores – as MetroBank prefers to call them – are designed to give shoppers maximum visibility of the environment from the outside and comfort within.

Barwa Bank is located in Qatar. Its stylish branches are minimalist in design with modern furniture and a soft, light colour scheme. Again, space is a strong feature, in which customers can freely browse as well as using automated technology if they wish. On entering Barwa’s branches, customers are greeted by a ‘butler’ who directs them to a service, depending on their individual needs. There’s an air of luxury designed to make each customer feel special. Visitors can use a variety of interactive screens to make enquiries, effectively combining digital and physical interaction in one exclusive experience.

Deutsche Bank set out to create branches as safe environments in which customers feel comfortable and reassured, as well as having access to the latest innovative banking tools that simplify their interaction with the bank. The EVO.HABITAT is made up of three smaller, interconnected areas offering advice, products and services. It combines innovative banking technology with collaborative and education areas in which customers are given the support they require while also developing a sense of community. The branch design reflects Deutsche Bank’s commitment to ethics centred on trust, simplicity and transparency, as part of a peer-to-peer community.

AWARDS: BEST BANK APP

The beautiful thing about digital-only Monzo is its tracking capability for spending. Users can instantly see how much they’ve paid out and where, broken down into sections by merchant or category. By better informing the customer about how many times they’ve been to a Costa and bought a certain item, for example, Monzo helps them to budget better, which makes them less likely to stray into their overdraft.

BBVA Compass wins our Bronze award for favourite banking app because of its variety of capabilities and smart interface, designed to anticipate other services that the user may need. With the use of prompts which don’t come across as hassling, it allows for a more fluid experience by not forcing the user to return to the main menu before going to another section of the app. One particularly beneficial aspect of this is its mobile deposit feature which automatically photographs the user’s cheque and will notify then when the funds are available.

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AWARDS:BEST IN ISLAMIC BANKING TECHNOLOGY

At any given time there are around 1.6 billion Muslims in the world, which equates to roughly 23 per cent of the global population. This makes the potential of Islamic banking unfathomable. Yet the foundations of the Islamic faith mean that banks have to make sure they offer products and services that comply with Sharia law, which forbids the charging and receiving of interest. Other Sharia rules focus on compliance with the Qur’an and the ethics of risk-taking.

There are several other ways in which Islamic banking differs from conventional banking in the West. The biggest of these is that Islamic banking focuses more on making money from investments rather than lending. Given that a fifth of all people in the world share a religion and that religion has a specific banking system in place to uphold their beliefs, it is worth paying some attention to. With this in mind, we’ve chosen what we consider to be the three banks that best comply with Islamic banking requirements.

An ethical solution Path Solutions consistently offers a large portfolio of Islamic banking compliant products and services, including commercial banking software, retail consumer financing companies, investment banking and fund management. Path Solutions’ iMAL offering can integrate with any core banking system and is built on open architecture, meaning it combines low cost running with the use of established computer languages, such as HTTP/S and XML. This software enables a faster route to market for products, a selection of delivery channels, and built-in Islamic operational standards-compliant workflows and system controls. Its front-to-back office functionality also empowers users through unrivalled scalability and customer-centric capabilities.

A subsidiary of Sopra Steria, based in France, Sopra Banking Software solutions are sympathetic to the challenges surrounding Islamic banking. While it can more than match the particular demands of Sharia banking, this highly dexterous platform can also be easily applied to more conventional financial services requirements. Indeed, Sopra is clearly passionate about its technology being used by as many people as possible. By covering everything from deposits to trade finance, it has opened a door to a massive market. The honourable mention for this category goes to ICSFS. By investing extensively in research and development, this company has been able to make incredible advances within Islamic finance. Cloud-ready, it offers multi-channel capability and scalability, with a high level of compliance with standards including Know Your Customer.

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Operating since 1981, Turnkey Systems has become a leading integrated IT and services solutions provider with a large portfolio comprised of world-leading solutions and services spanning a variety of industries, especially financial. Also included in its portfolios are strategic outsourcing and managed and professional services, enabling it to support its customers’ business needs with ease. Through its ETHIX Finance Programme, it is able to offer a quick, easy and Sharia-compliant configuration of Islamic finance options, which is also adaptable to future changes in products, laws and services.

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AWARDS: WEALTH MANAGERS

Defying the downward trend The impact of the worst global financial crisis on record is still weighing heavy on interest rates, which are being kept down as part of stimulus measures to aid market recovery. Seven years on, we’re continuing to witness the kind of ultra-low rates that would have been completely inconceivable pre-crisis. This is, of course, fantastic news for anyone with a mortgage, loan or credit card. It is not so brilliant, however, for those with capital to invest and wanting to make it work for them. Indeed, to even avoid it falling back in the race against inflation is now nigh-on impossible, when it comes to cash accounts.

This platform, for the less experienced, may seem visually daunting at first. However, the tools and help the company offers counterbalance this, so we think even novice investors will grow to love the variety of options that Nutmeg provides. The number of portfolios Nutmeg has available, and the level of intricacy involved in each one, mean investors can tweak to create a personal solution that perfectly suits their needs and risk appetite. On top of this, they can customise each portfolio from its name right down to how much they want to invest, and for how long.

As with all things, though, there are two sides to this story. With no sign of interest rates increasing any time soon – the king that was cash has handed over his mantel to the wealth managers. With quality advice, it is still possible for customers to see a decent return, depending on their personal risk appetite. With so many wealth managers to choose from, though, picking one which will offer them the right combination of good advice and value for money, is no easy task. So we have narrowed the field to our favourite three, to provide avid investors with some insight and inspiration, based on trustworthiness, consistent returns and levels of customer support.

Wealthify stands out due to its impeccable transparency. It provides a plethora of information to address the potential questions and concerns customers have. The effort it has put into communicating in this way makes it much easier for potential clients to assess whether or not a particular investment is right for them. If, having digested the graphs and walkthroughs, a customer remains confused, Wealthify offers to explain how their cash will be invested and its growth potential through a live chat.

As with a lot of new financial businesses, MoneyFarm has realised that the user interface has to be simple to use and look clean. Whether a customer is accessing it via a stationary medium, like a PC or laptop, or on the go through a mobile app, this user interface is seamless. The accessibility of MoneyFarm’s offering for both long-term and short-term investors means it doesn’t take long for even the inexperienced to be able to see the risks and benefits of investing in each company. Accessibility often gets overlooked, despite being so fundamentally important to financial transactions, but the team at MoneyFarm have really hit the nail on the head.

An honourable mention here goes to Personal Capital, a North American wealth management service founded in 2009. The company’s’ financial tools are what makes it so special. The detail offered by the ‘Personal Dashboard’ includes an array of information options from net worth to top gainers and losers.

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AWARDS: BEST IN DIGITAL BANKING TRANSACTIONS

Taking the pain out of payments Digital banking platforms have enabled a more seamless process for sending and receiving transactions both locally and internationally, cutting costs and reducing the pain in payments. But it’s an area of finance that is in constant flux, not least due to regulatory change. Companies in this sector must be especially nimble and dynamic to deliver appreciable benefits to both banks and their customers. So who are the best of the bunch and why?

The new chain gang Blockchain is still the ‘new’ technology on everybody’s lips. From what it can do, to where it will take us, everyone is curious about how this technology will change the face of the industry. Its sphere of influence could make it the most transformative single development we’ve seen so far – and Having raised more than $30million in capital from investors, including Sir Richard Branson, the eponymously named Blockchain has managed to take the lead in the provision of Bitcoin wallet and ledger technology. With the most widely used Bitcoin application processing interfaces (APIs), and the world’s most popular Bitcoin wallet, with more than 5,000,000

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there are many competitors working hard within this field, trying to apply it to their individual sectors. It’s anybody’s guess what the ultimate effect will be on the financial markets. That said, a large amount of money has been invested into each of our top three blockchain companies, in the hope that it will bring individuals and businesses closer than ever before. users, this company has developed the strongest and most trusted brand within the Bitcoin market. The user interface (UI) and accessibility to the shared Blockchain ledger are minimalistic and fresh. All the user options available can be found with little to no hassle and with a live update on the market value of Bitcoin it keeps users up to date with all the key information they need.

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The world’s first complete global transaction banking platform, iGTB’s operations are governed by ‘the seven Cs of transaction banking’ – commitment, core, connectivity, cooperation, competency, customer centricity and conviction. It has improved its straight-through processing while building strong risk management. This in turns has reshaped the level of intimacy the company enjoys with its customers. Its omnichannel presence ‘allows users to buy three times as many products as single channel users’, according to iGTB, which shows how investing in these technologies benefit both business and the customer.

An Americanbased transaction company, Bottomline Technologies’ response to the increasing amount of regulation and competition within transaction banking industry was to create an innovative user interaction model with self-service tools to tailor the customer experience. Combining business financial management services and payments with cash management capabilities allows for faster innovation and growth. The platform gives clients the option to manage and create their own digital brand and offers a consistent user experience across multiple channels.

The Pelican team has used its combined experience in fintech and payments to create a leading-edge platform that uses artificial intelligence (AI) to provide integrated solutions for transaction banking, corporate banking and payments compliance. The search for an end-to-end payments and compliance management solution drove Pelican to adopt the three pillars of AI – natural language processing, machine learning and knowledge-based systems – to create an inhouse Intelligent Payments Management progam. This reduces the need for human intervention in the payments process, which in turn reduces costs, lowers risk and creates new opportunities for profitability.

AWARDS: BEST WORK WITH BLOCKCHAIN

With a presence in more than 60 countries, Earthport specialises in making cross-border payments seamless and superfast for banks and businesses, demonstrating just how blockchain can reshape the financial environment, By plugging into its clients’ infrastructure, Earthport can provide multiple connectivity, technological and file-formatting with integration options, such as with SWIFT, allowing transactions to be resolved much more quickly.

The ability to send and receive money across borders in a way that accurately reflects the prevailing exchange rate, is something every household and business that travels to, or interacts with, another country, would benefit from. Ripple delivers it through a global financial settlement solutions that significantly lowers those exchange rates. Already adopted by 15 of the world’s top 50 banks and with coverage in 87 per cent of foreign exchanges, its clever use of the blockchain allows people and businesses to send settlements more cost effectively, instantly and with full traceability to prevent fraud.

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An honourable mention also goes to the Ethereum Project, a decentralised platform that runs smart contracts. These contracts are going to revolutionise the way in which traditional paperwork is processed. Because it doesn’t require a person or business to be physically present to sign a document, the platform saves considerable time, energy and money for both individuals and businesses. And by employing blockchain technologies, smart contracts may prove to be less of a security risk than traditional paper signatures. The level of security offered by these contracts, and the speed at which they can accelerate trading, means they deserved our attention.

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AWARDS: BEST INNOVATION IN PAYMENTS

The best way to pay From the outset, fintechs have collaborated with others in the financial services industry and beyond to create payment processes that are quicker and more intuitive, while also making intelligent use of the data those transactions generate.

We have narrowed down the payments industry to three companies that we feel have been the most innovative within this sector, and who have the most to teach others.

Saxo Payments, a branch of Saxo Bank, has designed a payments solution to plug the ‘holes where banks allow money to seep through the cracks’. It’s done this by designing a reciprocal marketplace with a focus on helping other fintechs to prosper. A specialist in cross-border transactions, Saxo Payments has been able to lead the way in lowering international payment fees while simultaneously being able to deliver payments instantly. Focussing solely on this niche has allowed it to invest in more seamless solutions and alternative ways to provide the best product.

Although they aren’t new to the payments industry, in recent years US-based Verifone has set out to change the way payments are handled and how they appear. A feature unique to Verifone is customisable templates on its digital payments page. These enable retailers and general sellers to create a web page that looks and feels like their own site, thus ensuring greater brand consistency across the sales platform. Verifone looks after all the transaction data on behalf of merchants, relieving them of the responsibility of looking after customer information – an attractive solution for new businesses or companies that don’t wish to invest in this area of data handling with its related security hazards and costs. An honourable mention also goes to Apply Financial, which uses Cloud technology to drive its solutions. Using the Cloud has enabled it to reduce cost while providing a superior tracking method for payments with increased security.

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For seamless omni-channel experience, this one is hard to beat. It allows for a better customer journey with little to no disruption in purchasing, helped by Ingenico taking responsibility for the security. A full range of customer loyalty solutions are also provided to help increase merchant revenue, backed up by customer data analysis, which allows the merchant to see sales areas need improving or more promotion. Ingenico provides prospective clients with an easy-to-read chart of the services it provides and can be bundled to make it easier to incorporate into the business, creating ‘packages’ to suite everything from small startup to major conglomerate and tailored to suit individual business needs.

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AWARDS: BEST IN CYBERSECURITY & FRAUD PREVENTION

The key to online defence With one in 10 people falling victim of online offences and fraud – including more than a million plastic card frauds in 2015 – cybercrime has become the fastest growing economic crime in the UK.

Four in 10 consumers carry out all their financial transactions online; Brits transfer around £3billion a week through apps, but living in the digital age carries its own risks and it’s not surprising that an entire industry has emerged to counter them.

More familiar to most people for its work in defence, BAE Systems also has a powerful arsenal of products ready to defend business from attack. Among the areas the company is active in are AML transaction monitoring, insurance fraud and customer due diligence (CDD). Its NetReveal software uses advanced analytics to detect and investigate suspicious activity in all these areas and more. This allows the clients of BAE Systems to minimise damage done to their reputation while reducing the increasing cost of compliance; and contributing to improved detection rates and a greater chance of hackers being held accountable for their crimes – for everyone's benefit.

Featurespace’s products can be deployed on business premises or via the Cloud. Its ARIC platform uses adaptive behavioural analytics – a self-learning machine that responds to the constant flow of customer information, adapting to show vulnerabilities within the client’s system. Being shown where these weak points are allows businesses to assess and re-assess the approaches it takes to tighten security. These analytics are especially useful to gambling and insurance companies who will see a higher amount of attempted fraud than many other businesses. By analysing each customer’s behaviour in real time it enables companies to quickly detect subtle anomalies suggesting a person is acting out of character and therefore could be a victim or perpetrator of fraud.

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The cybersecurity and fraud prevention specialists we’ve selected are all on the front line, defending financial institutions and others from direct and indirect attack, and preventing untold billions from entering the black economy. FICO have been in business since 1956, building a global presence in 25 locations worldwide. Its FICO Falcon Platform is used across jurisdictions to combat fraud through event processing, monitoring, rules and case management for transactions. Its platform can be used in tandem with one or more Platform Modules for payment products and its predictive market analytics mean it is able to detect up to 50 per cent more fraud than rule-based systems. For general cyber security, FICO’s solution also features self-calibrating analytics. Together with industry insights to enhance and refine these analytics, it is able to provide real-time detection of emerging threats.

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In 21st century banking, whether new or established...

...make your Customer Experience your legacy. Flawless customer experience management email: matt.sims@teleperformance.com @TPmarketingUK TeleperformanceUK TeleperformanceUK

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AWARDS: BEST CRM TECHNOLOGY OF THE YEAR

Customer care is King Customer care is the number one priority within the financial services industry at the moment. The surge of fintech, coupled with regulations that are focussed on putting customers first, has forced many traditional services to undergo drastic change to remain competitive. This growing need to appeal to customers and give them what they

demand, instead of telling them what they need, has led to a huge increase in the number of customer relationship management (CRM) systems and specialised CRM businesses. With so many options available, it can be tricky to figure out which ones give the most bang for buck, but here are what we consider to be the top three in the market at the moment.

Pega Customer Service is an omni-channel offering that features guided interactions and a fluid customer service desktop. Like its competitors, it provides a wide variety of reports and graphs full of real-time information about work and processes, in order to analyse performance over time. But it has a number of significant advantages. The system delivers impressive automation, which makes work quicker and easier to complete. Its dozens of predefined service requests, like address changes, significantly reduce the amount of manual intervention involved. Pega Customer Service also includes built-in support to help clients manage not only business-to-consumer but also business-to-business interactions, giving companies an insight into their customersâ&#x20AC;&#x2122; experience of what they offer.

Whether or not a business is currently a SAP (Systems, Applications and Products) software user, Capgemini can help it work out what elements it needs and deploy the technology appropriately, affordably and fast. It does this by providing a number of templates for sales, service, marketing and other operations. It also features hundreds of ready-to-go test scenarios, allowing businesses to figure out what needs changing and where in order to achieve their desired result. Through its solution Capgemini helps businesses understand their customers better, embed key performance metrics and generate opportunities.

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Smart Engineâ&#x20AC;&#x2122;s loyalty reward system seeks to deepen merchant alliances through card-linked offers, combining four technology areas to create the ultimate solution. Smart Engine focusses on the mobile phone for the greatest customer appeal, leveraging big data to assess spending patterns; social networks to identify and understand trends and needs; and utilising software as a service for optimal customer experience. Through its analytics, it can tell its clients what sort of offers would be best to implement; what time of year or day to do it; and which areas of the country it might appeal to most. Simply put, its strategy is to provide relevant offers at the right time, in the right place, to encourage loyalty in a number of industries.

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AWARDS: THE BIGGEST DISRUPTER

This award comes as little surprise. The Chinese third-party payment platform is quite simply a financial phenomenon. Frequently compared to PayPal, its rate of growth and innovation since 2004 puts other global providers in the shade. Featuring a slick user interface and with unequalled customer support, Alipay is one of the most secure and widely used financial platforms in the world. So confident is it of its security and finance management that it implemented a 90-day protection period in which a customer can file a claim of unauthorised payments. Having already swept across Asia and amassed 400,000,000 unique account holders, Alipay now has its sights set on world domination.

The fifth columnists The financial crash in 2008 unleashed a surge of financial startups, emboldened by cynicism towards traditional banking models and a tsunami of regulation, which had the effect of breaking up the monopoly they had enjoyed.

These new disrupters created waves in the financial ocean that changed how the industry works from within. In response, traditional services upped their game and began to think about services and customers in an entirely new light, some even forging hitherto unthinkable alliances with the new imposters. The disruptive elements continue to move the industry forward on all fronts and weâ&#x20AC;&#x2122;ve chosen the top three to keep your eye on.

Helping to follow orders Compliance is a fundamental necessity within financial services, but its increasing scale and complexity together with the risk associated with failures in reporting has created one of the biggest costs on bank balance sheets. While everyone accepts the need for rules for the civil and economic good â&#x20AC;&#x201C; such as those to prevent money laundering and tax evasion â&#x20AC;&#x201C; the drift towards digital and online financial services has magnified the compliance challenge. Our three favourite providers in this category help businesses follow those orders, reduce risk and save on costs.

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Universal payments company ACI Worldwide executes $14trillion a day in payments. It is used by nine of the top 10 banks in the United States and Europe and has a formidable presence in several other countries. And yet, for the majority of ordinary bank customers who benefit from its services, ACI remains anonymous! The company has extended its reach over the years from payments and transaction banking all the way to risk management. It is becoming a library of knowledge in solutions to the everyday needs of banking.

This business lending company has already extended ÂŁ1.3billion of funding to more than 20,000 businesses across several countries, including the UK and USA. Transparency is what defines it. The entire statistics history of a business is laid bare so potential users are able to see how prosperous this journey can be and track where their money is, giving them peace of mind. Although it entered the market as a disrupter, it is now working alongside some of the best known banks in a partnership that could change the industry through collective learning.

Our honorary mention for this category goes not to a company but a technology, Bitcoin â&#x20AC;&#x201C; justified because the crypto-currency has had an unrivalled impact across the entire industry. The creation of Bitcoin predicated the development of blockchain technology which has been the single biggest influencer on the banking industry with practically all of them researching ways to utilize it. The gains that are going to be made from this technology and currency are going to be unlike anything the financial world has seen so far.

AWARDS: BEST IN REGULATORY REPORTING

Using a single source of data in order to ensure accuracy, reconciliation and consistency, OneSumX from Wolters Kluwer helps companies stay on the right side of regulation and compliance handling. It offers both a local and global view, while simultaneously providing full insight into data. The company actively monitors the regulatory environment and provides an automatic regulatory update service (RUS) so businesses can be reassured that they are meeting the legal requirements at any time. When this is used in tandem with the local and global views, it means customers are able to access support across multiple jurisdictions. But the outstanding feature within OneSumX is the amount of data insight businesses receive and data, or big data, is the gold currency here.

Oracle is an international giant that offers services ranging from Cloud solutions to platform services, such as the Governance, Risk and Compliance (GRC) platform. Some of the many options available for GRC clients are highlighting key risk and performance indicators through executive-level dashboards; being able to determine root causes and accountability for risk in real time; and the standardising of measuring, identifying and responding to operational risk; plus streamlining of compliance efforts.

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Part of the London Stock Exchange Group of companies, UnaVista provides careful explanations and definitions of financial regulations â&#x20AC;&#x201C; what they are, why they have come about and how they should be used. The aim of the UnaVista Rules Engine and regulation repository platforms is to help organisations find the right solutions, which can be configured to better fit the business using the UnaVista partnership approach. Using the solutions provided, businesses can eliminate the need to build their own responses to regulation and can better address future regulations as they come into play.

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AWARDS: BEST PAYMENT TECHNOLOGY PROVIDER

According to PPRO, by 2019 more than half of the world’s online transactions will be based on alternative payment methods and the fintech’s work in this area will undoubtedly help get it there. PPRO is outstanding for its unrivalled cross-border payment speed and the way it has integrated complex technology to create a model that offers a huge range of payment methods with additional capabilities, such as refund processing. It allows customers to connect to any chosen payment method through a single interface, thus maximising speed and efficiency while keeping transfer costs low. PPRO now supports international payment schemes in more than 190 countries, which sets it apart among payment technology providers.

Working faster and smarter It’s surprising how long it has taken transaction banking to grasp the nettle around payment systems, given that the industry’s raison d’être is the safe and efficient transfer of cash. Many customers have put up with high costs and slow transfer times because there was simply no alternative available – but

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thanks to a new generation of technology providers, that’s no longer the case. The companies in this award category have shown vision and strong execution of technology that has changed the way B2B, cross-border and retail payments are made, improving life for the customer and the bank.

A first party processor of pre-paid plastic, Contis describes itself as the ‘home of alternative banking and payment solutions’, working across the business landscape, but excelling in niche sectors, such as financial inclusion, where it has provided stand-out products for credit unions, among others. Clients are able to choose from full or partial solutions to their current account, debit card and pre-paid card processing requirements with every service bespoked and wrapped around individual needs. Contis’ dedicated support team is able to walk through issues with businesses at any point and the service offers faster speeds for lower cost with a high level of customisation. There is also a loyalty programme manager to encourage new customers to join and to help retain existing clients.

Another specialist in end-to-end prepaid card solutions, it was GPS’s technology that impressed us. It is both robust and scalable, making flexibility and control over what are often complex tasks easily managed. GPS uses an open architecture and the Cloud, which means its core application is able to support integration with other GPS modules that in-turn give clients real-time access to its range of channels and interfaces.

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AWARDS: BEST IN BIOMETRICS

An out of body experience Celebrated fraud prevention expert – and former identity thief – Frank Abagnale believes the only way to beat the hackers is to stay one step ahead of them… in this awards category, the winners are aiming to be strides in front. These passwordless pioneers are using

biometric technology, from fingerprint scanning to facial recognition, to protect individual property and business interests, fusing big data and science in novel ways that could revolutionise security. So who among these Alcatrez builders of the digital world has earned their stripes?

Daon’s renowned IdentityX human authentication platform allows its clients to manage risk and reduce fraud by making the person the password. The beauty of this platform is that it offers the freedom to integrate a company’s existing security systems into an overarching design that’s infinitely scalable and able to accommodate new technologies as they are released. In this way, clients can choose to transition from one authentication system to another, be they more conventional digital certificates and device signing, or palm, face, fingerprint or voice biometrics. The aim is to future-proof a company’s overall security from a single, flexible platform.

Nuance has led the way in developing conversational interactive voice response (IVR) using innovative algorithms to capture the intent of a conversation and provide rapid and relevant answers to customers’ queries. A specialist in voice biometrics, Nuance captures and analyses hundreds of unique characteristics in a human voice, which are then compared to a voiceprint on file. Its stand-out product is Nina an intelligent personal assistant who can be interrogated by voice or text to deliver instant, accurate and successful outcomes in a natural, human-like way. Through the voice biometric technology used to create Nina, clients can take on the appearance and tone of any brand, for example the voice of an actor who represents them in other channels.

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By using three human verification pathways – fingerprint, voice and facial recognition – web security expert BioSSL locks down access to hackers. Its unique feature is that it does not allow for the storage of images, scans or biometric features on a local device or server, thereby preserving their integrity if the device is stolen, damaged or lost. Its fingerprint and facial recognition templates cannot be reverse engineered. Security is entirely handled on the BioSSl server and no two private-public keys are ever the same. The company is an omni-channel solution for banks, financial institutions, e-commerce and government, using military-grade ID systems.

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AWARDS: BEST AINNOVATION IN REGULATION

A tech tonic The developing area of regtech startups is one populated by a number of different specialists – the definition itself will mean different things to different people, but its simple mission is to bring technology and regulation together to address compliance challenges.

It is the regulators’ forensic focus on data and reporting that has stimulated a huge number of niche providers to emerge, many of them predicated on the collection and interrogation of mass data. This sector is so vast and features so many strong competitors at the top of their game, that we have narrowed down the winners to three that we feel can provide the best service within their specialised field.

Since its inception in 2012, Iwoca has managed to build an unbeatable platform. With a minimalist layout and an excellent customer service, this company truly deserves its place at the top. It thrives on feedback, offering itself up to TrustPilot for reviews that have given it an outstanding 9.6/10 rating by 500-plus businesses who have shared in the £80million so far borrowed via the platform. The most intriguing feature is an adaptive slider to scale across how much money a business needs and for how long it needs it, showing the average interest it wouild expect to pay, depending on the type of loan taken. Though the sliding calculator may be fairly common within this sector the detail and simplicity provided by Iwoca’s is unbeatable.

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Small is beautiful

Ninety-one per cent of the small business lending market is still dominated by the top five banks, but it’s an area ripe for disruption. And our winners are doing their best!

The alternative lending market has shown some of the most exciting applications of new technology and processes – from purely online to interesting hybrid solutions – but all offering fast, cost-effective and above all flexible solutions for the small business community. A dynamic and constantly evolving category to judge, this was a hard choice, but Iwoca, Credit.fr and FundingCircle have all managed to disrupt the market in unique ways, giving businesses a wide range of choice in how to structure their loans.

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As its name suggests, Glassbox is all about the capture, recording and analysis of data with the express aim of making its customers’ digital spaces completely transparent. Through the rigorous recording and tracking of everything to do with a business, Glassbox is able to identify performance issues and scrutinise customer behaviour. Tracking behaviour allows Glassbox to expose weak and strong points in a company’s infrastructures as well as helping to measure the likelihood of a new product succeeding.

This specialist in compliance and risk is seeking to make an impact on the way financial crime is fought. By reshaping how AML data is collected and generated, ComplyAdvantage is able to automatically monitor global data sources, identify those with risk, build profiles from this information and use what it terms ‘elastic search’ to thoroughly sweep for and identify issues. The company may be young but it already operates in 190 countries, analysing five million media and blog articles daily in order to ensure it’s up to date on the latest security threats. By prioritising the security of customer information, it has ensured countermeasures to worst-case scenarios.

In essence, Contego is a research company that performs detailed checks on prospective clients, companies and ID documents in order to reduce risk and enforce compliance. Using an extensive range of data sources, Contego is able to use its technology to provide due diligence services, know your customer (KYC), document verification and fraud investigation. Contego has shown the industry the power of big data and how it can be used for good in protecting both companies and customers and ensuring people are being treated fairly.

AWARDS: SME LENDING AWARDS

The French-based lending company’s user interface is what sets it apart from its competitors. Presented in an easy-to-access format, investors are able to view detailed information on a wide variety of businesses to invest with. By providing their ‘selection of the week’ both investors and businesses get the opportunity to see and be seen by a wide number of potential clients over the course of the campaign.

The UK-based small-business lending company founded by Samir Desai CBE, James Meekings and Andrew Mullinger in 2010, has so far loaned £1,574,000,000 and is seen as one of the most successful challengers to the banks. Having businesses such as Accel Partners, BlackRock and Index Ventures as its current equity investors, investors and borrowers can be assured that the platform is here to stay.

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An honourable mention goes out to Growth Street whose unique selling point is its hard won media presence. By being on a variety of platforms, from LinkedIn to Instagram, the business is able to respond and interact with its customers across multiple networks, meaning it can engage with queries wherever suits the customer. Growth Street also uses its social media presence to update people on adjustments to their policies while also using it to inform them of upcoming features to the business model. With this ambitious reach, the company is also able to offer financial advice to prospective customers, informing them of all the best choices at hand.

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AWARDS:BEST REGION OF THE YEAR

Wish you were here Brexit brought location front of mind to many companies, especially in financial services where the issue of passporting could well be a make or break for them in future negotiations with the EU. The regimes under which companies flourish in all 196 official countries in the world vary enormously. So, how do businesses decide which jurisdictions are most favourable for expansion? We’ve made a virtual tour of the globe to come up with our three ‘wish you were here?’ options for financial services companies.

With excellent tax rates for both individuals and corporations, the Isle of Man is the ideal location for ventures wanting to test new products on a target demographic with little financial loss. The added advantage of this tax haven is that it is a short plane ride from the City. With its cultural, financial and geographic links to the UK, USA and Europe it’s a good melting pot for ideas to be marketed to those key areas. For the moment at least, the island is treated as territory of the UK for customs, VAT and excise purposes, making a good choice among off-shore locations.

Northern Ireland is a land of opportunity with cheap capital, skilled labour, a generous grant system for startups and a welcoming attitude to technology companies. The country’s international airport has direct flights to several financial capitals, including those in the USA, turning what may seem a relatively small island into an global hub of opportunity.

Johor on the southern tip of Malaysia is just a short hop across the Singapore Causeway to the island city state’s global financial hub, buzzing with the latest technologies and innovative ideas. The advantage of being on this side of the water is that the cost of labour in Malaysia is cheaper and the low cost of living and business charges make it a great launchpad for global expansion. The country is also home to a vast number of data centres.

Our honourable mention for this award goes to KwaZulu-Natal. What sets this country apart is the value for money businesses who use contact centres there receive. It’s an ideal location to improve their customer experience programmes, while allowing for rapid development within the region and in the country’s home region.

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AWARDS: HUB ACCELERATOR OF THE YEAR

In an industry whose very name is derived from the fusion of two sectors – finance and technology – it’s perhaps not surprising that fintech is rather good at promoting engagement, knowledge sharing and co-opetition through hubs and accelerators around the world. These physical and virtual mind melds facilitate a healthy exchange of ideas across geographic borders, between industry and academia and through collaborative business projects as well as providing investment opportunities. We’ve chosen our top three hub/accelerators, which are all have a dynamic approach to networking, bold strategic objective and impact on start-ups.

A step up the ladder Fintech Finance believes that being a small business in Level39 gives you the best chance to grow your enterprise. As a result of being Europe's largest technology accelerator space, your business gets access to the best facilities, top-notch mentors and a non-stop program of events throughout the year. Flexibility is key to Level39 and we were impressed with the variety of options afforded to businesses operating within. From hot-desks to fixed desk or even private office spaces, companies could work to their size and capabilities effectively. One of its greatest strengths however is the location: One Canada Water. Canary Wharf is synonymous with the Fintech Revolution and so it gives Fintech Finance great pleasure in awarding Level39 with this honour.

Ynext is a a six-month incubator programme hosted by Yodlee. With a very selective admission policy, those participating are expected to go above and beyond in all stages of their business, from idea to outcome. During Yodlee’s bootcamp, those participating can expect a serious amount of expert help in getting up and running. They’ll receive advice from experts in their respective fields with the opportunity to form partnerships with them. They also receive 12 months of unrestricted access to Yodlee’s platform. This give them the opportunity to collect data and measure areas of their new business so they can easily identify what needs improving.

This fintech accelerator launched in 2010 to give start-ups direct access to connections that otherwise would be very hard to come by. Over a three month programme, investors, mentors and startups take a hands-on approach to developing products. This allows investors to truly assess the product and the business model. Startupbootcamp itself invests €15,000 in each programme but a hefty €1,000,000 comes in deals from partners. Successful participants are validated by experts in their sector, get to stamp their name on the financial services map and start making their mark in the industry almost instantly.

The honourable mention for this award goes to Wells Fargo. This intensive programme, which lasts six months, is designed to help potential businesses understand what it takes to become part of a ‘corporate stack’. It helps both the startup and Wells Fargo identify areas that need improving and ultimately assess whether company has what it takes to become a corporate entity.

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SPECIAL AWARD: HERO IN FINANCIAL SERVICES

Titans of our industry Over the past couple of months the Fintech Finance team has hosted a poll in which we asked you, the readers, to vote for who you think is this year’s superhero in the financial services sector. You didn’t disappoint. One thousand

votes were cast for individuals you thought were making the biggest impact on the industry or were making big enough waves to shape the future of finance. We started with a potential clear winner, but the race soon narrowed between the final three positions as they jockeyed for

KIM FOURNAIS CEO & COFOUNDER, SAXO BANK

Kim Fournais is regarded as a pioneer in his field, having embarked on his financial journey in 1996 with a vision to give private investors access to the same global financial markets that had been traditionally

dominated by institutional players. With a strong belief in the power of

MICHAEL F. MCGOVERN MD, BROWN BROTHERS HARRIMAN (BBH)

Michael McGovern joined BBH in 2014, a company with a 200-year-old heritage and a reputation for choosing the right people for the right job. It had chosen wisely yet again. BBH was entrusted at the time with almost $4trillion in client assets. Having previously served a 26-year career in IT, McGovern was now responsible for the management and leadership of the firm’s technology strategy and system infrastructure, keeping those assets safe and working harder for clients. It’s a challenge he has risen to admirably by keeping abreast of technological and other developments in the industry.

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top spot. Behind these we also had some surprising nominations – for people who had long sinced passed away and votes for Harambe, the gorilla from Cincinnati zoo, who was tragically killed earlier this year! But it was king of the apps, not apes, we were after – and here they are…

technology, Fournais has consistently been ahead of the curve. Under his leadership, Saxo Bank has built award-winning platforms and widely used solutions, leading to partnerships with more than 120 banking ventures as he encouraged research and investment in upcoming technologies to empower every user. With plans to further expand the company as a financial markets facilitator, Fournais’ ambition is still clearly not quenched.

GEORGE OSBORNE INNOVATION DIRECTOR, BARCLAYS GLOBAL TRANSACTION BANKING

George Osborne started his journey at Barclays in the role of VP of its Financial Institutions Group. In his current role as Innovation Director for Barclays’ Global Transaction Banking, it is up to him to identify and deliver transformational change for both the bank and its global clients. His remit takes him into a broad range of areas, from debt and working capital to foreign exchange, for which fintech has solutions. Honourable mentions also go to to Edward Metzger, Head of Innovation at Santander, John Cryan, CEO at Deutsche Bank, and William Rucker, CEO at Lazard London, who were all voted into the top six.

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PAYMENTS

Snatching the global ewallet Chinese tourists are helping payments provider Alipay to embed itself in Europe. The company’s Head of Middle East, Europe and Africa, Rita Liu, explains the strategy The idea that you should put customers’ needs ahead of the profit motive might sound like a recipe for financial disaster, but it’s going well so far for Alipay. The Chinese payment platform, already one of the largest in the world with an ambition to serve two billion customers by 2026, has acquired five per cent of the online payments market (by its own analysis) since launching 12 years ago. And it’s done it by keeping customers squarely in its sights. “Consumers are becoming more and more demanding as society changes,” says Rita Liu, head of Alipay Middle East, Europe and Africa. “Their needs are now extremely diverse, which in turn makes them much harder to satisfy. As a result, it is now more important than ever that financial service providers place the task of meeting customers’ needs at the forefront of their operations, ahead (perhaps controversially) of actually making money. “This concept forms the philosophy of Alipay as a services provider; we place the consumers’ needs ahead of everything else. We ask ourselves the questions: what kind of value can we bring to the consumer and why should they choose us? Once we’ve answered those questions, only then do we develop a strategy, solution and, eventually, a product.” But as the gap in technological adoption widens between countries, with some regions still relying on paper-based transactions while others have bypassed the PC era in favour of mobile-based banking systems and a large number take a hybrid approach, it’s becoming increasingly difficult to interpret those needs.

China connection Founded by the existing Chinese ecommerce platform Alibaba, Alipay

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currently serves 450 million active users in China alone. “China is a big country,” says Liu. “The consumer base we have there is huge, but we’re not limiting ourselves to one country. Our aim is to be serving more than two billion customers in 10 years time. Admittedly, most of these customers will come from Asia, and, paradoxically, it’s because of this that we’ve recently turned our attention to Europe in a big way.” Alipay is now focussed on satisfying the needs of its existing customer base by providing solutions for Chinese tourists visiting Europe. “This is a massive market with huge opportunities. In 2014, there were 120 million outbound Chinese tourists and 10 million of these travelled to Europe. They spent approximately $21billion as they

Alipay is not just an ewallet. We like to think of it as a global lifestyle super app travelled there, which proves just how large the market is that we are looking to address. “With Alipay being such a popular payment option for both ecommerce and physical transactions in China, we want to offer Chinese tourists the same experience that they are accustomed to while they are travelling outside of China,” Liu adds. In recent years, the payment platform has witnessed an unprecedented level of both digital and physical mobility among its domestic customers.

“From the creation of Alipay in 2004 until 2010, the service was primarily PC-based, with transactions mainly consisting of ecommerce payments,” explains Liu. “Then, as key ecommerce players in China rapidly moved to mobile, our Alipay users moved at an equal pace. “It’s amazing how, in the space of no more than two years, mobile wallets have come to dominate the financial interactions of consumers in China. Nowadays, you can head out into the streets of Beijing without cash or a wallet and pay for everything you need with your mobile, be that a taxi, meal, or new pair of jeans. “However, the same cannot be said for Europe in its entirety. I believe this is down to the fact that the financial services infrastructures in European countries are more mature than those in China. As a result, European consumers have a far stronger attachment to credit cards and are much less inclined to alter their payment habits.” So how is Alipay planning to supply its mobile wallet services to Chinese tourists travelling in a card-reliant Europe? The company has developed a strategic expansion plan that focusses on ‘merchant acceptance’ across the continent. “It’s important to remember that our customers are not just consumers, but also merchants operating on the other side of the counter,” says Liu. “Therefore, we asked ourselves, ‘what can we bring to our merchant customers in Europe?’, and the obvious answer was the market consisting of our immense Chinese user base.” There’s strong logic to support Alipay’s targeting of merchants as opposed to individual consumers in Europe. What business owner could miss the lucrative opportunities posed by the Chinese tourist market? But Alipay isn’t just another Winter 2016

payment option for merchants to accept; it constitutes a powerful marketing and customer engagement tool for businesses, too, says Liu. “Alipay is not just an ewallet. We like to think of it as a global lifestyle super app. Within the app, users can, of course, make payments, but they can also search for nearby merchants and offers, they can get directions, and they can even receive coupons in the app for the shop that they’re currently visiting. “Not only this, but using our Big Data platform, we would know of users’ travel plans before they’ve even boarded the plane and we would push relevant information through to them. For example, a

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customer may have booked a flight to London using Alitrip and we would send them a message on the day of their flight saying ‘this merchant in Oxford Street is offering a fantastic deal’. Once they’ve arrived in London, they would simply head to the store and use Alipay to make a payment and simultaneously redeem the coupon they were sent. “We see our service as the completion of the transaction ecosystem for Chinese tourists visiting Europe. On the one hand, our current customers are able to extend their seamless payment experience as they travel outside of China, while also receiving helpful tools and advice to help them on their travels. The Chinese tourist market is being made totally accessible to European merchants, who can also profit

from supplementary marketing services that are a by-product of our mobile app.” In response to the technological disparity that exists between China and Europe, Alipay has identified the needs of both its existing Chinese customer base and the merchants of Europe and generated a product that may help to close the gap between the two regions. Its ‘merchant acceptance’ strategy has already been implemented in certain parts of Europe, particularly in Germany where large groups of retailers are being encouraged to adopt the service. “We commenced our full merchant development efforts six months ago when we launched in Munich Airport. Ninety per cent of its airside shops now accept Alipay and travellers there are able to enjoy exclusive offers (including significant price reductions) when they pay through us. “We have several important launches planned for the coming months. We’ve achieved such an impressive rate of expansion through our commitment to developing mutually beneficial partnerships across the Continent. For example, our successful launch at Munich Airport would not have been possible without the help of our partners at Wirecard, and we’ve recently announced another German partnership in the form of Concordis. “It’s vital that we keep in mind, though, just how diverse Europe is. There are so many countries and every country is so different. That is why we have a diverse selection of European partners that know the local markets best and this is why we are working so closely with them. The first question we always have to ask is: would the service we provide in China work in this country? We can’t answer that question, but our partners can.” www.fintech.finance |

PAYMENTS

A shrinking world, a growing problem The world today is a smaller place than ever, in terms of international travel, commerce and business, and it continues to shrink rapidly. The fast development of new technology and online solutions to long-standing impasses is opening up the world so that even the smallest companies and start-ups can trade across borders in a way never before possible. However, in setting up the international infrastructure of a business – whether a fledgling company with global ambitions or a large firm only now expanding internationally – provision of a strong and cost-effective payment solution can often be left neglected at the bottom of the to-do list. If it makes it onto the list in the first place, that is. The automatic response when payments do make it to the ‘priorities’ list,

Anders la Cour, Chief Executive Officer of Saxo Payments, explores the growing issue of underbanked fintechs is to investigate suitable bank accounts. This is, of course, the traditional and long-standing solution for sending and receiving payments.

Only banking has the answer? Companies looking to trade abroad generally need to open accounts in each of the geographical regions in which they wish to do business. But the appetite of the incumbent banks to offer this service is waning. Regulation, competition and even terrorism are all causing the incumbents to find the basic bank account a less attractive aspect of their offering. As a result, start-ups, including the burgeoning world of fintechs, and established payments businesses are left searching for a bank that is willing and able to help them reach their international trading potential, by allowing them to open the necessary accounts.

It seems that the supposedly ‘simple’ process of opening a bank account is becoming increasingly difficult for start-ups and even established businesses. This presents a real risk, quite remarkable in this day and age, of a growing community of underbanked businesses. Worryingly, this can seriously affect their growth both locally and globally. Regulation requirements also play a part in hindering the cross-border growth of businesses. And these high barriers to entry can stall many companies and ultimately reduce competitiveness across the board. It’s a ‘lose-lose’ situation. When banks are able to help businesses with their bank account requirements, companies can find that the bank’s sheer size and restrictions due to legacy infrastructure mean it is not able to be as flexible and responsive as they might require. This is especially true for younger companies, including fintechs. By nature, fintechs are small, nimble and quick to adapt to

Don't be hooked: Not all payments and transfers need to be carried out through a bank

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changing market conditions, and can find incumbent banks restrictive when it comes to trading internationally. Even just the number of intermediaries required for a traditional international bank transfer adds significantly to the cost and time involved with the process. Worryingly, many companies – of all sizes, from start-ups to huge corporations – are putting up with these high costs and slow transfer times when there are alternatives available in the market. At Saxo Payments we recently carried out an exclusive study into the payment processes of issuers, acquirers, payment service providers (PSPs) and merchants, which provided some shocking figures.1 Sixty-three per cent of businesses are not satisfied with the length of time from payment being sent to payment arriving, yet haven’t switched provider. This is mainly due to a basic lack of spare time to invest in researching alternatives (31.5 per cent), but these businesses also stated that they are hampered by limitations on the internal resources that would be required to make a change (25 per cent). In addition, less than 40 per cent (38.2 per cent) believe they get a competitive foreign exchange rate when handling cross-border transfers, but again have not switched provider. The reasons given mirror those above – 32 per cent do not have time to look elsewhere and 28 per cent are put off because the change is so unlikely to be implemented due to the resources required to make the switch. Finally, opinions as to whether business get a good deal in terms of the rates they pay to handle cross-border transfers for customers is split relatively evenly – almost half (48 per cent) do not feel satisfied, yet are putting up with the poor service from their current provider. These businesses are sleepwalking through the payment and transfer process, paying fees that have a serious impact on their profit margins, and putting up with delays, which could see them lose potential business or suppliers if they cannot make payments occur more quickly. The payment

process is a fundamental element in the running of a business, which should not be neglected, or the company risks losing out in a big way.

The future of payments Accelerator programmes, sandboxes and tech labs are just some of the latest buzzwords in payments and fintech, and they all present some really exciting opportunities. Fintech accelerators are popping up across the world, regulatory sandboxes have also been introduced globally, and the latest news in technology laboratories is the signing of eight start-ups to the Asia-Pacific Fintech Innovation Lab.2 This is all extremely exciting for development and innovation in the banking and payments industry. But these new initiatives must not ignore the basic fundamentals of business operation – including payments. As fintech start-ups continue to emerge on an almost daily basis, there is a growing question over whether they will be able to access the basic banking services they need.

To bank or not to bank? But what is a fintech to do? They need a bank account in order to send and receive payments, but these are time-consuming and complex to set up, even if they do find a bank able to provide a basic account, and the high cost and slow transfer times associated with cross-border payments through this account could make trading abroad unfeasible. All of this culminates in huge limits on the company’s growth potential. Should the business keep looking for a cheaper bank account, or accept the limitations the account places on it? Neither is an

attractive option, particularly for an ambitious new start-up. Thankfully, there are now alternative solutions available to businesses of any size. While banks will remain necessary for certain services, such as deposits, not all payments and transfers need to be carried out through a traditional bank as they have been in the past. It is also possible for a company to use more than one provider, selecting the range of solutions that best meets their specific requirements. And this doesn’t have to make the processing or management of payments more complicated, in fact it can make things simpler as well as faster and cheaper. What businesses should be looking for is a solution that allows companies that are serving merchants in the digital space to open physical and/or virtual IBAN accounts in a wide choice of currencies, in their name and/or their client’s name. And users should be able to send and receive cross-border and local payments at a low cost and within seconds rather than days. Banks will always play an important role in business, but alternative solutions can be employed alongside to complement the traditional banks’ offering and maximise profit potential and international growth. The most important thing is that companies of all sizes take the time to investigate these alternatives, rather than sleepwalking through the high fees, slow transfer times and poor foreign exchange rates with which they have long been dissatisfied. It is time payments worked FOR payments businesses, not AGAINST them. 1 www.saxopayments.com/

cross-border-b2b-payments-todayslandscape-tomorrows-opportunity 2 www.finextra.com/ pressarticle/65751/eightstartups-enter-the-fintechinnovation-lab-asia-pacific

There is a growing question over whether fintech start-ups will be able to access the basic banking services they need Winter 2016

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INNOVATION: PAYMENTS

One hell of a ride It’s German for ‘above’, but for most of us Uber has come to mean a cheap way of getting from A to B fast. The shared transport company is a true digital disruptor with an opportunity for fintech to get on board

Fintechs are often described as ‘shaking up the industry’ and ‘challenging the status quo’. But if you really want an example of a disruptive influence, look no further than your next taxi ride. The phenomenon that is Uber not only transformed personal travel plans, it has also impacted on jobs, pay, politics, our future city planning, even climate change – and not just in one country, but across the globe. That’s disruption for you. Uber isn’t just big, it’s brave. CEO Travis Kalanick has placed his bets – and the future of his company – on smart travel. His rocket fuel injected ambition is propelling the company towards innovation and trialling the ‘next big thing’ in passenger transport. This year, it will have spent $2billion driving through the China and India markets and opening up a super highway in the shared economy of Asia. And that has implications for fintech, too. Because Uber’s clear global vision for intelligent, interconnected, sustainable, inclusive and cost-effective public transport for both users and operators, relies entirely on a digital payments framework to support it. And what happens in the Uber world is likely to spill over into other areas of public transport, too. “We operate in 80 countries and 500 cities. But even with such huge coverage, Uber still remains local enough in every market to make sure it fully understands its customers’ needs and customises its products to solve local problems,” says Vidit Agrawal, Head of Strategic Vehicle Partnerships, APAC, at Uber. Winter 2016

“This strategy gives us advantage over our competitors as Uber’s scale helps us to use our global learnings and at the same time serve the needs of the people in each city,” he says. Regional differences have been most apparent in the local preferences displayed for in-app payments. “This has led to various solutions which are more region specific,” explains Agrawal. “Though traditionally Uber used credit card payments, which was majorly successful in the EMEA and North America, we soon

Traditionally, Uber used credit card payments… we soon realised that regions like South America required unique solutions realised that regions like South America, India, China and South East India, with low credit card penetration, required unique solutions. “This has led to in-app wallet solutions, like Alipay in China and Paytm in India. Also, based on customer feedback we realised that cash is still the preferred option in most developing nations and therefore we introduced cash payments.”

With the relatively recent introduction of UberPool, riders heading the same way and sharing an Uber, have the potential to enjoy a commute as affordable as taking a subway, or a bus, or other means of transportation. And with the advent of driverless cars that cost reduces even further, according to CEO Kalanick, who predicts that ‘when there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle… and then car ownership goes away’. “Today all car manufacturers are moving towards autonomous vehicles and Uber is one of the first movers and leaders in this technology. With the recent introduction of driverless taxis in Pittsburgh, Uber has got closer to the dream of autonomous cars that will be much cheaper and safer than the taxis of today,” adds Agrawal. “Uber plays multiple parts today. In some parts of the world where proper public transport does not exist, Uber is the only solution for its riders to move around their cities. In other cities, Uber is seen as the last mile solution for train and bus riders. Also, with the introduction of the Pool, it is often the cheapest and fastest mode of transport. “With greater penetration of technology, existing public transport will improve its standard and digitalise its approach to be competitive in today’s world,” he concludes. And that could open up a whole new roadmap for fintech. n Vidit Agrawal, Head of Strategic Vehicle Partnerships, APAC, at Uber, will be at Transport Ticketing Global 2017 to discuss how Uber is ‘Creating a smart city to solve passenger problems’. www.fintech.finance |

INNOVATION: FRONT AND BACK OFFICE

A new architecture: Incremental digitisation just puts additional strain on old IT systems

Time for a grand design Adding a modern extension on top of crumbling IT architecture only makes digital transformation more costly for banks in the long run, warns Thibaut Jacquet-LagrĂ¨ze, Head of Sales & Marketing at Avaloq, which is taking an ever more collaborative approach to building from the ground up

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Winter 2016

“Updating core technology can pose a significant risk to banks. Every bank has some level of digitisation and every bank therefore has substantial assets in terms of technology. Banks are hesitant to take the plunge and renovate these technologies, since any failure in the renovation process could quickly become a financial disaster for the business as a whole.” Thibaut Jacquet-Lagrèze, head of marketing and sales at banking software and business process outsourcing company Avaloq, doesn’t mince words. He acknowledges that digital transformation is a nettle that’s difficult for banks to grasp, given the pressure they are already under from regulators and shareholders. But he believes their default ‘safe option’ – incremental progress – will only result in more pain. “Too often banks are choosing to bear the extortionate costs of their current architectures and only address the most urgent needs that arise. Why? Because they're desperately trying to maintain their margins and profits, it's a bigger challenge for these banks to plan a multi-year investment to transition from their legacy IT environment to a new package,” says Jacquet-Lagrèze. “The problem with this strategy is that it leads to their IT system becoming increasingly complicated and inefficient, because what banks are actually doing is piling more and more applications on top of outdated architecture. This strategy is entirely unsustainable in the long run. The added complexity of all the new software makes their old architecture extremely costly to maintain as a result of its inefficiency.”

One infrastructure solution Avaloq has developed an all-in-one digitisation package for banks and wealth managers worldwide. “We don’t just replace the core banking system, but also all of the accounting and portfolio management systems,” explains Jacquet-Lagrèze. “Essentially, our package rolls all a bank’s applications into one highly efficient infrastructure.” The company claims that comparison studies between the performance of banks that have adopted the Avaloq system and those that are still operating a hybrid based on their traditional architecture, demonstrates they gain an average 10 Winter 2016

points in terms of cost/income ratio and return on assets. “The efficiency of our system means that banks can get a return on their initial investment after two to three years, which proves why banks should extend their horizons by a year or so,” says Jacquet-Lagrèze. Medium-term financial benefits aside, there are other more immediate advantages for banks that take the plunge and invest in a digitisation package. Systems like Avaloq’s are revolutionising their data maintenance capabilities. “There is no longer any duplication of data across different applications, since it’s all contained within the same system. This creates one single point of truth from a data perspective and eradicates the problems of disconnection and misalignment within the architecture, so client data is always up to date, reliable, and totally secure,” adds Jacquet-Lagrèze. He argues that there is no longer any excuse for banks to upset the continuity of the client experience because of a lack of

When we innovate, we don’t just innovate as a company, but as a community digital integration, especially if they claim to provide an omnichannel service. It’s not all about customer facing services, though. “Our proposition consists of three pillars,” says Jacquet-Lagrèze. “The first is to increase efficiency in the back office of the bank. We have a lot of experience with a range of banks and this experience has allowed us to pre-configure our banking suite to natively include many standard back-office processes. “We also have an outsourcing programme,” he adds. “Unlike Tier 1 banks, most small and medium-sized banks don’t have the capacity or resources available to achieve a high level of efficiency in the back office. “We offer all banks the chance to outsource their back-office operations to us, leaving them free to only pay for what they use and need. This way, smaller banks

can scale their operations economically, without having to invest heavily in their infrastructure or hire a vast team of people. “The second pillar is simply digitisation,” he adds. “Whenever we begin work with a new client, our first step is to ensure that the bank can serve the customer on a digital channel and that the customer can interact with the bank on a digital channel.” Avaloq built its digital solution from scratch in 2012 and 24 banks are now live on the platform. “By establishing ourselves quite late, we have actually been able to build the most modern solution possible, incorporating the most cutting-edge technologies into our architecture,” says Jacquet-Lagrèze.

A problem shared But the third, and arguably most important pillar, is Avaloq’s ‘financial ecosystem’. “When a customer joins Avaloq, they’re also joining our community of partners and universities,” explains Jacquet-Lagrèze. “When we innovate, we don’t just innovate as a company, but as a community. For example, when a new regulation is released, we say ‘who would like to help us come up with a solution to this new regulation?’, and perhaps 10 or so banks invest a small amount in a development with us. “By constructing a strong financial ecosystem, we’re accelerating innovation at a rate that we couldn’t achieve as a single company,” he says. Being a member of the ecosystem also gives Avaloq’s partner companies and banks access to a state-of-the-art software exchange, incorporating a broad range of third-party solutions. “It prevents the need for our customer banks to waste time investigating other solutions as they’re already integrated into Avaloq.” In September, the company announced an extension of this concept with the launch of its new developer portal “We’ve developed a robust application programming interface (API) and we also supply all the documentation needed to integrate new applications into our architecture,” explains Jacquet-Lagrèze. “Our aim is to open up our technology to all players in the market, be they fintechs, independent developers, entrepreneurs or bank developers, as this will lead to the integration of innovative new solutions into the Avaloq framework for years to come.” www.fintech.finance |

INNOVATION: PEER-TO-PEER

’Allo, Hello!

A unique new partnership between France’s Hello Bank! and crowdfunding platform Credit.fr has the potential to revolutionise SME investment, as its Head of Business Development Nadim Takchi explains There’s a second revolution taking place across the Channel – only this one is purely financial and everyone's keeping their heads.

At Paris-based crowdfunder Credit.fr, Nadim Takchi has watched from a front row seat as the first musket shots were fired in the direction of the French commercial banks by disruptive fintechs, such as his own. Jasons compared to the Goliaths of the French banking industry, who provide around €80billion a year of lending to SMEs, the alternative financiers could hardly be described as a threat to the establishment. In fact, as head of business development at Credit.fr, Takchi is sympathetic to the ancien régime. “You have to understand one thing,” he says. “The banks have cost structures that are very, very high. When a project comes in for between €20,000 and €100,000, their profit margins are practically non-existent. In fact, more often than not, they actually lose money by devoting man hours to studying these smaller projects.” But now the status quo is being upset: one of these banks has seen an opportunity – not to bankroll small entrepreneurs itself, but to offer its customers the opportunity to do so through a unique tie up with one of the revolutionaries, Credit.fr. It's the first deal of its type between one of the nation’s biggest players and an alternative lender – albeit it at a digital arm’s length. The partnership was hailed as combining ‘what fintech and online banking do best’ by BNP Paribas, when it announced that its online Hello Bank! had struck up a partnership with the crowdfunding platform in September 2016. Under the arrangement, account holders with the 100 per cent digital Hello are given direct access via their personal pages to Credit.fr’s portfolio of SME projects. And within weeks thousands of them had

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responded, no doubt attracted by Credit.fr’s generous average rate of return and low-risk model. The deal has enhanced Credit.fr’s reputation as a leading player in the alternative investment market and clearly appeals to Hello Bank!’s demographic of customers – who are typically young, connected and with an appetite to invest in the real economy, albeit that their individual investment in any one business is limited to a maximum €2,000. “Our agreement with Hello Bank! is somewhat unique, as they are suggesting us to their clients as a potential source of investment solutions,” says Takchi. “Hello Bank! has strong ties with BNP Paribas and before the partnership was agreed we had a visit from BNP themselves. They came to our offices and examined our entire

BNP Paribas approved all our processes… we felt rather flattered. But then our results speak for themselves portfolio of funded projects. Then they scrutinised our risk analysis methodology very closely. “After their visit, BNP approved all of our processes and the agreement went ahead. We felt rather flattered, but then our results speak for themselves. We are the only major platform in France that has had no defaults or incidents on any of our payments and that places us in a position of great strength within the market.”

Fast returns Credit.fr specifically targets SMEs with

revenues of between €200,000 and €5million – all of them local businesses with healthy balance sheets and a keen desire to grow, if only modestly. The company’s website homepage in October, for example, offered visitors the chance to contribute towards a new breakdown recovery vehicle for a garage in Normandy and a new ‘bateau’ for a boat tour company in Saint Tropez. Both were offering investors a 7.5 per cent rate of return on their investment and both had already met their funding targets. Takchi believes the range of projects that Credit.fr funds is one of the reasons for the platform’s spectacular success. That and its exceptionally tough lending criteria, which sees just 0.5 per cent of applicants approved. “We take a more comprehensive approach to risk assessment than the bank and consequently provide funding for a greater range of purchases,” he says. “For example, we may be contacted by a company requiring immediate funding to hire three new sales people as a rapid response to new business developments. They’ve just picked up a big new client and they need to react fast to cope with new demand. The likelihood is that a bank would instantly refuse this funding request. This is because banks often require a guarantee of collateral from the project holder, so that, in the event of the company being unable to make repayments, they can reclaim as much of the value of the loan as possible. You obviously can’t place a guarantee on new sales people as you would with new stock. However, at Credit.fr, we can assess the risk of each funding request on an individual basis and we always refrain from refusing a potentially profitable client on the grounds of a lack of collateral. “All the companies we finance need money both quickly and efficiently. With Winter 2016

Bon appetit: Investors are hungry for local business opportunities

us, there’s no hassle with lots of documentation and that increases our effectiveness immensely “We perform a rigorous screening process on companies that apply for funding; we study them in depth, and also only accept companies that are at least four years old. As a result, those we approve are always safe and secure and simply require finance in a different way to what the banks are proposing.” Nevertheless, Credit.fr took the precaution of establishing a partnership with France’s second largest debt collection firm, Contentia, at the beginning of its crowdfunding journey. It hasn’t had to call on its services yet. “Investors diversify their investments with us, so that even if we do have a default, they are unlikely to lose a net amount of money,” says Takchi. “With regards to the investor, a proven method of reducing the risk of crowd lending activities is to diversify your investments as much as possible. It’s never Winter 2016

a good idea to put all your money into the same project – you should be spreading it across as many funds as possible. I am a prime example of someone who has successfully employed this tactic. I’ve invested in 82 of our projects so far, placing a small amount of money in all of them. I’ve profited a great deal from this strategy and the only time I’ve not invested in one of our projects is when they’ve reached their target within a couple of hours and I’ve been too slow to catch them! “The reason why this strategy works so well for our investors in particular is because we offer such a great rate of return on each project. Each one’s yield is around 7.5 per cent, which means that even if a company defaults two years after the initial investment is made, the investor has still recuperated more than 50 per cent of their capital through monthly payments.” Taking this fact into consideration, the chances of an investor with a diverse Credit.fr portfolio not turning a profit are

negligible, says Takchi. It’s not surprising then that the company’s investors are exhibiting an unprecedented level of loyalty to the platform. It currently has more than 7,500 individuals making pledges with between 20 and 50 new subscribers a day now also signing up through Hello Bank! “Per month, almost 80 per cent of our projects are financed by returning customers,” says Takchi . “We’ve witnessed how first-time investors usually place between €300 and €400 euros on one or two projects and then, after a couple of months, they reinvest the profits from their ongoing investments in new ones along with some fresh capital. “This is why the crowd lending business model is so prosperous – it works through total transparency. Once the investor is on board, a cycle begins, with the investor effectively putting more money in every month and seeing more money come out as a result.” www.fintech.finance |

INNOVATION: INNOTRIBE

The god of small things Innovation isn’t a big bang moment – a breakthrough that changes the technology landscape forever. Rather, it’s the slow and collaborative accumulation of many small but significant advances, says Innotribe’s Fabian Vandenreydt “The benefits of technology innovation are in danger of being siloed,” warns Fabian Vandenreydt. This is a man who should know. A regular in Financial News Fintech 40, SWIFT’s global head of securities markets and leader of the SWIFT research institute, Vandenreydt has been at the heart of the fintech sector since he started overseeing the Innotribe network in 2013. Since then he's seen a proliferation of labels but less co-operation in leveraging the different 'techs' to combat mutual challenges, such as cybersecurity. It's what he called on the Innotribe and Sibos communities to do when he spoke at this year's Sibos event. “There is much hype around the expressions fintech, regtech, wealthtech and insurtech, when actually these different areas might be using the same technologies, talents and processes,” he says. “Labelling these types of technology puts silos around areas of innovation, which goes completely against the principles of innovation being

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developed out of a connection of different ideas from different areas.” In fact, he’d like to see the very term ‘innovation’ redefined. Rather than using it to describe one big, new, disruptive product, he believes innovation should reflect an incremental, sustainable advancement on all fronts, including customer relations and internal processes, for example. But it’s more than a question of semantics. SWIFT puts the definition into practice as a network platform comprising of clients, start-ups and more established software companies, and it has a unique process of engaging with this ecosystem with regards to innovation. “This community-led approach is central to SWIFT’s innovation strategy. In SWIFT’s R&D process, the research side investigates fundamental shifts in technology and evaluates whether these new ‘building blocks’ can be incorporated into existing business processes. “When we conduct research, it is

acceptable to look at ideas and say what is not for us.” The development side of the process, meanwhile, works at a more accelerated pace to create new products to bring to market. “It is important that the concept of R&D is company-wide, not only the purview of a specific division, but as a part of our everyday processes,” says Vandenreydt. “Adding the voice of the customer at an early stage of the process is also integral to success.” Vandenreydt believes a sound innovation and R&D strategy should engage with talent that is itself developed by sourcing from inside and outside an organisation. While SWIFT strongly encourages the development of internal talent, it also manages an ecosystem of start-ups through Innotribe and academics through the SWIFT Institute. This opens up a pool of additional skill sets, including those of start-up founders, members and students, who the organisation might be interested in hiring or engaging with as partners. Winter 2016

Innovation: ‘The next big thing will be a lot of small things’

The Medici Effect Vandenreydt is a big believer in the Medici Effect, a term used to describe innovation that occurs when different disciplines and ideas intersect. The phrase takes its name from the Medici family, whose wide patronage of science and the arts was credited with kicking off the huge outpouring of creativity known as the Renaissance period. “I think that element of diversity in innovation is important,” says Vandenreydt. “Innovation happens when people from different cultures and skills sit together and work on a common goal. Also key is a clarity of purpose around why different parties want to work together, to

avoid misunderstanding created by misaligned goals.” He identifies nine key skills that fintech entrepreneurs and intrapreneurs (entrepreneurs within large organisations) need to possess in order to achieve success. Firstly, they need to master the soft skills that bestow resilience and the ability to cope and learn from failures, authentic leadership techniques, and a gift for storytelling in order to convey propositions. From a financial and legal standpoint, entrepreneurs should be familiar with private equity and business modelling and have a grasp of platform economics and intellectual property rights. On the technology front, they need to incorporate lean and iterative software development practices, and deploy business architecture as well as open source management. “All of these elements, such as financial goals, intellectual property and competition, need to relate to the end goals of a business and be very clear from the outset. This is not easy because the goals of a start-up will inevitably evolve,” says Vandenreydt. “If I was to give advice to innovators, I would say people need to think the technology through to its conclusion before embarking on the hype. Do the homework. “Also, be agile and persistent in innovation. Go ahead when you think something will work, and try even harder when things are failing. Lastly, be aware of the importance of cultural compatibility. This is where Innotribe comes into its own, essentially acting as a cultural translator between start-ups and more established institutions so that they can work together.”

Innotribe at Sibos The sheer size of the Innotribe programme is impressive, incorporating more than 1,000 participants representing start-ups, judges and coaches. It is a community that combines an array of disciplines, from the established banking networks to the

Nine key traits for fintech entrepreneurs/intrepreneurs Human

Financial/legal

Technology

Resilience – ability to cope and learn from failures

Private equity/ business modeling

Lean/iterative software development

Authentic/ethical leadership

Platform economics/ ecosystem management

Business architecture and API management

Storytelling – convey your value proposition in a crisp way

Intellectual property/ digital rights management

Open source management

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start-up fintech community, but the goal is to innovate for the benefit of everyone. At this year’s Sibos, Innotribe addressed key industry topics, including blockchain, robo-advisors and cybersecurity, while also focussing on the hows of innovation, such as modern organisation, culture, talent, people and platforms. “The show regularly attracts an interesting bunch of speakers, talking about a variety of topics, and we are proud of the calibre of key influencers and professionals joining us. That is one of the strengths of Innotribe,” says Vandenreydt, who took the opportunity this year to issue a clarion call for collaboration. While the Sibos community has been examining various forms of innovation for years, Vandenreydt believes it is now time to inject these ideas into the mainstream.

The industry as a whole needs to better articulate the business case for new technologies “The industry as a whole needs to better articulate the business case for new technologies,” he concludes. “There needs to be more talk around how a proof of concept can scale into a mainstream industry solution by actually defining the transition phase and associated costs.” Cybersecurity and how innovation addresses it was the focus of several conversations at the recent Sibos event. “Protecting the assets of everyday people is important for the world in general, but collaboration around cybersecurity is also key so that banks can help protect themselves and each other,” says Vandenreydt.“The call to action is to leverage communities like Innotribe to advance in this area.” Walking in his hometown of Ghent one day, Vandenreydt spotted a phrase written on the wall of the university: the next big thing will be a lot of small things. “This phrase hit home to me,” he recalls. “When the hype dies down, we will still need to innovate. To advance, we need to connect rather than create even more silos. To progress sustainably, we need to build many small things.” www.fintech.finance |

INNOVATION: FRAUD

The most successful defence against hackers is knowing how criminal minds work, which is why reformed identify thief Frank Abagnale is Trusona’s secret weapon. We sat down with him for a special Fintech Finance Q&A Frank Abagnale, one of the world’s most respected advisers on forgery, embezzlement and secure documents, has been attached to the Federal Bureau of Investigation (FBI) for more than 40 years. Today, he works as a consultant for a select number of clients across the financial and security sectors – the newest of which is Trusona, an identity authentication firm whose patented and insurable TruToken technology guards against fraudsters and hackers bypassing authentication systems. Here, he discusses his involvement with Trusona, gives his views on banks’ security technology and looks at how future innovations can help guard our assets. Fintech Finance: How did you come to work with Ori Eisen, founder and CEO of Trusona? Frank Abagnale: It all began 15 years ago when Ori was the corporate director of security worldwide for American Express. When we were introduced, I quickly realised that he was the most knowledgeable person I had ever met in my 40-year career when it came to cyber-related crimes and cyber detection and fraud. When he made the decision to take his knowledge elsewhere and develop his own technology, he asked me to be his adviser. The rest, as they say, is history. FF: Before Trusona, there was 41st Parameter. Can you explain what that is? FA: When Ori left American Express, we started 41st Parameter together, which is

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a leading online fraud prevention and detection solution for financial institutions and e-commerce. The concept behind the project was that companies from all around the world use 40 parameters to confirm that a person is who they say they are. We wanted to take it the next level – hence the name. Once the technology was developed, we sold it to every major airline, retailer and credit card company. After that, we decided that we either had to go public or sell it to a company that could distribute the solution around the world. We ended up selling 41st Parameter to Experian for $326million and it has delivered the technology to banks and corporations in 80 countries. FF: So, what was the idea behind Trusona? FA: Trusona is what you would call ‘unfinished business’. It wasn’t even six months after we sold 41st Parameter that Ori called me to discuss a plan to develop a technology that would eradicate the need for a password. The idea, originally, was to provide an identity authentication platform for a select one per cent of the population that would help protect the identity of the person on the other side of the login. When we designed it, however, we realised that we could take it much further than that and have since brought it down to the consumer level where it is now free to anybody around the world that wants to use it. It is no secret that passwords are becoming increasingly worthless and unsafe to use – ultimately, Trusona is the answer to that.

Follow the money: Cyber theft is used to fund more serious crime

Winter 2016

FF: What is your role in Trusona? FA: When Ori was interviewed a couple of years ago, a reporter enquired about my ability to write code and what it was that I brought to the table. The answer that he gave perfectly summarises my involvement with the company. He said: “I can’t think like a criminal. I can develop these things, but I don’t know what a criminal is going to do or how a criminal is going to circumvent it. He (Abagnale) does.” So you see, my working relationship with Ori and my guidance and contribution to Trusona is rather like a game of chess. He develops it, I offer my insight as to how it could be overcome and from there he is able to develop a system that cannot be beaten. Like he told the interviewer then, when there is no way that I can hack into the code, he knows that his product works. FF: If you could build banks’ security technology from scratch, what would you change or do differently? FA: Banks, I think, do a good job of developing and putting technology in place. A bank in New York, for instance, will spend $600million a year just on technology to keep the criminal out. In fact, banks actually do a better job of combatting and preventing counterfeit fraud than government does. Why? Ultimately, it is because governments don’t have a board of directors or shareholders that they have to answer to and, as such, they do the least to protect the assets of the citizens of that country. I know this, criminals know this and it is why they are the real ones at risk and not the banks. The one thing I will say about banks’ security technology is that customers do not always understand why they need it, which can be damaging to compliance and, in turn, the effectiveness of the product. Back in the 1970s before anyone knew who I was, I used to do public service advertisements for the US Government on how to protect your wallet, credit card and so on. No-one does

Banks actually do a better job of combatting and preventing counterfeit fraud than government does... I know this, criminals know this

Winter 2016

that now and customers are paying the price. Thus, if there is one aspect that I would change, it would be for banks to place more emphasis on educating their customers. FF: Where do you think the future of financial technology and security lies? FA: Ultimately, cybercrime is about making money, stealing information and manipulating technology. In five years’ time, criminals will be doing exactly the same things, the only difference is that they will be doing it better. Instead of being able to access technology from 35 feet away, they will be able to do it from 5,000 miles away. What’s more, I think that people’s intentions will start to change from ‘how much money can I make and how much can I rip a bank off for?’, to ‘how can I shut a bank down and steal all of its information?’ In fact, it wouldn’t surprise me if we see a major breach in the next couple of years. FF: What is being done to prevent a major bank cyber heist from occurring? FA: It is because of these threats that technologies like Trusona’s, are so important and why the sector must continue to implement proven, effective solutions that ensure long-lasting and continuous protection. I truly believe that we have the technology and ability to fight these crimes, but we must continue to take action, otherwise criminals will find a weakness and a way in. Having taught at the FBI academy for 40 years and reinforced to every agent that has gone through the place to ‘follow the money’, I would also say that the sector needs to remain vigilant about tracking where the money goes. The reason being that if you follow it long enough you see, unfortunately, it is usually being used to fund a hideous crime, such as drug trafficking. As such, it is up to us all to prevent that as much as we can, because quite often the money that is being stolen is being used to commit further crimes against humanity. So, to come back to the question, what is being done to prevent these threats? I think many would agree that we aren’t doing enough, and I for one, endeavour to do everything I can to prevent these heinous crimes from occurring. www.fintech.finance |

INNOVATION: REGULATION

All change: PSD2 has potential to transform the customer experience through open banking

Open for business Whether you’re a challenger, a mid-tier or one of the Big Four, banks in the UK are about to be transformed. In the first in a series on Open Banking and the API Economy, Daryl Wilkinson of DWC explores how regulation is driving change In the UK, people have been used to the traditional offering of the Big Four high street banks – HSBC, Barclays, Lloyds and RBS – for years. Between them, they hold 77 per cent of personal accounts and 85 per cent of business accounts. Until recently, their dominance has led to a certain level of apathy among many bank customers, who believed that there was no attractive alternative, or any real incentive, to go to the time and effort of switching. Without any active engagement with, or call for innovation from, the customer, there has been little demand for change and without it banks have been reluctant to radically change their products or services. How then will transformation in the UK retail banking sector come about? The answer, perhaps surprisingly, is regulation – first from Europe and then from the UK.

Top-down change European regulators recognised that the dominance of a few large banks and their limited technological development in the payments sector had led to stagnation in innovation and stifled competition. It has been nearly impossible for any new financial organisation to break into this sector. Thus, change has now been initiated in a ‘top-down’ way. The European regulators have published two Payment Services Directives to deal with these issues – PSD1 came into force in 2007 and PSD2 in October 2015. The effect has been to open up banking to new organisations by increasing competition, reducing fees on cross-border transactions and promoting an open use of customer banking data.

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PSD1 established a new framework for an integrated European payments market by allowing for the creation of new non-bank payment service providers, or ‘payment institutions’. This eased access for new market entrants and enabled established companies, such as PayPal, Worldpay and Western Union, to expand and offer new remittance services, as they did not have to be regulated to the same standard as banks. It also established the legal foundation for the Single Euro Payments Area (SEPA). Under SEPA, almost all cross-border Euro payments in the European Free Trade Area (EFTA) are now charged at the same rate as domestic payments and are subject to the same terms and conditions. PSD2 goes further. By mandating banks to open up the customer’s account to external parties in a safe and secure way, it encourages more new players to enter the payments market. A direct connection between the customer’s bank and the retailer will be enabled, using application programming interfaces (APIs) under the access to accounts (XS2A) provision. A further key benefit for customers is the ability to have access to their banking information from multiple providers in the same place. Aggregator websites and apps will emerge to provide this information in an easy-to-use interface, giving them a complete view of all the accounts they hold with different banks, thereby helping them to understand their finances and make better financial choices. UK regulators have now taken on the challenge set by Europe to stimulate innovation and competition. In September 2015, the Open Banking Working Group was set up at the request of HM Treasury to

explore how data could be used to improve the banking experience. The resulting Open Banking Standard aims to stimulate a new set of banking models to achieve that, recognising that incremental change through initiatives, such as the seven day switch (previously, it took up to 30 days to switch bank accounts to a new provider), had not stimulated the required change.

■ The average UK customer keeps the same bank account for 17 years Regulatory effect Established banks have traditionally been structured in silos – closed-off vertical systems for individual products – that will now need to be opened up to allow for the personalisation of products to customers. This will take time and it will be costly. Silo structures will be expensive to dismantle and to re-integrate horizontally, but doing so will allow for open access through APIs for fintechs, developers and other third parties. So how will the new regulations affect the different types of banks? Challenger banks The new wave of UK challenger banks enabled by new regulations (e.g. Atom, Monzo, Starling and Tandem) do not have the issue of re-integrating vertical silos – they are digitally transforming banking services from the ground up. With their focus on offering products and services in a Winter 2016

solely digital manner, they have concentrated on taking full advantage of the new European and UK regulations. However, they may not have the brand presence or budgets to attract mainstream customers and are likely to appeal first and foremost to tech-savvy customers looking specifically for the digital option. Customers who are worried about security or who have not even used a high street bank’s digital app may prefer to keep their custom with their current provider. It is likely that some of these new banks will try to become API platforms for banking services in their first business lifecycle. Known as banking as a platform (BaaP), this works in a similar way to Amazon Marketplace but for loans, mortgages and credit cards. Others may instead opt for selling their services (or the company itself) wholesale to the established banks. Mid-tier banks Mid-tier banks (e.g. Metro, Virgin Money and Shawbrook) and building societies (e.g. Nationwide, Yorkshire and Coventry) should all be well-positioned to take advantage of the new regulations and the growth of fintechs (whose skills they can leverage through collaborations and partnerships) to open up their systems through APIs. They do not have the same burden of legacy as the major banks and many will be more agile to react to legislative changes. They can capitalise on their established presence in the market and their reputation for good customer service to attract customers keen to explore digital. They should also be agile and bold enough in leadership to adjust their business plans to react to developments in legislation and technology. If they maximise these opportunities, they could increase their market share by providing cheaper and more valuable services than the Big Four, while keeping ahead of the challengers. The main problem for this group is that their market share will be squeezed from both sides: the incumbent banks will look to develop their own digital offering to entice new customers up from the mid-tier banks while the challengers will try to attract their digitally minded customers. With smaller budgets and less brand value than the Big Four and (in most cases) less digital innovation than the challengers, there may only be a limited market for the mid-tier organisations to compete in. The Winter 2016

possible outcomes, if no suitable partnership arrangement is found, could be mergers with others in the mid-tier group, the purchase of a challenger bank, or even a sale to an incumbent bank. The Big Four So, where does this leave the Big Four? It will take time and great expense for them to innovate and react to the regulations. Decision-making for them can be a slow process and they are traditionally more risk averse. They have been working to develop their digital offerings, but in many cases this is more ‘digitising’ than true ‘digital transformation’. It is more probable that they will look to partner and collaborate with third parties, as we have already seen with traditional banks overseas. In the US, JP Morgan is partnering with a fintech called OnDeck and using its technology to give quick approvals and funding for SME loans through a white-label agreement. Most customers will not be aware they are getting the loan through OnDeck’s platform, but it receives origination and serving fees on each.

The industry as a whole needs to better articulate the business case for new technologies This model enables fintechs to leverage the name and business of huge brands, saving them the difficult task of establishing their own with customers. It benefits the established banks by enabling them to offer customers a better service without investing in a whole new IT infrastructure and platform. Santander in the UK has already partnered with a number of fintechs, including Kabbage and Funding Circle. Kabbage provides a risk-scoring service using external sources of data, including social media. Funding Circle is a peer-topeer lender that has smaller overheads than the high street banks due to its online-only presence. Rather than compete, Santander has opted for a cross-referral agreement as its model of working with a digital challenger. This could be an indication of

how the Big Four will approach providing such services. Instead of developing them from the ground up, they will pivot towards partnership and collaboration – exactly what the Open Banking Standard envisages.

■ Between 2011 and 2013 only 1 in 20 people switched their bank accounts Opening up their systems to offer a BaaP service will enable banks to be better informed when considering new products and services. Previously, if a new product was deemed unviable due to thin margins it would not be launched,and perhaps not even tested. A BaaP service enables the bank to beta test new products on a digital platform and gauge customer appetite before making a decision to proceed. BaaP would further enable banks to cut costs and development times by using APIs to provide access to externally developed products and services on their own platforms. Fintechs or developers could either sell the solutions to the banks in a format that enables integration via an API, or run the services for them on the banks’ websites and apps, via APIs. In this way, the banks would benefit from speed and efficiency in offering new products and services, while customers get to use them via an established online banking platform. Ultimately, banks could offer automatic account aggregation, where financial and personal information from different accounts and providers is compiled into a single database. Having access to all their accounts – banks, building societies, mortgage and loan providers in one place is potentially ground-breaking for customer experience. For the banks, better informed customers should lead to less debt to write off, a reduction in administration and legal costs, and an increase in customer satisfaction. Working in this way also increases scale and stability for the fintechs and smaller providers of new technology, enabling them to continue to develop new and innovative products. Next issue: How APIs are changing the banking landscape www.fintech.finance |

INNOVATION: TRADING

Playing the markets invstr is on a mission to make finance social and fun, with a games app that allows anyone new to the financial markets to play, learn and share experience about investing without risking real cash. But could this virtual world hold lessons for our own? We are all born with the capacity to understand financial markets. A baby senses human emotion. A baby also knows when he or she is raised in the air or when she is lowered. Financial markets are no more than instruments rising or falling on the back of human emotion. We are also all natural investors. During our lives, we make a myriad of investment decisions with our time, our effort and occasionally our money. Going to the gym, learning a language or planting spring bulbs in the garden are all decisions about investing time today for some benefit in the future. Making financial investments is no different. We also intuitively understand risk-reward. Whenever I cross the road, I am calculating whether it is safe or not. Some of us will step out into moving traffic, others will wait until the road is completely clear. So, we are naturally equipped to take charge of our own investments. And yet few of us choose to do so, even though technology is increasingly empowering us to take charge of so many other parts of our lives.

Learn to earn One of the largest problems we face as a society is the dearth of financial understanding. This is a universal affliction that affects young and old, rich and poor, educated and uneducated. We can’t teach financial education. We all need to learn. And how better to learn than by playing and having fun? That’s what we set out to do with invstr, a mobile app that allows users to play, learn and share their way to an independent and collaborative financial future – to make a change in all our lives. It features two games: a simple

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investment game and a prediction game. In both, as ‘invstrs’ we decide whether to buy or sell a variety of financial instruments using notional capital. We can monitor our performance with real-time reporting of our profit (or loss) as the financial markets move up or down. And when we play, we also learn what proportion of our fellow invstrs are buying or selling, as well as the community’s predictions. We can easily share our investment decisions or results and check how we compare against other invstrs on the leader board. Finally, completed ‘missions’ earn us badges on our profile that help to attract followers.

Financial markets do not currently work to minimise the volatility needed to maximise investment Making it social, simple and fun to invest is, we believe, an essential first step towards getting all of us interested in taking charge of our investments. Learning is easy when it is fun. Through it, we learn about the sentiment in the markets; we can see what proportion of invstrs are buying or selling an instrument (we learn what an instrument is for a start!); and when we make a prediction, we can see how ours compares with that of the rest of the community. These insights into the latent expectations of the community update in

real time and are not available anywhere else. They help ‘invstrs’ with all levels of experience, whether a novice or professional, keep their fingers on the emotional pulse of the markets. Critically, the games also help us to learn about ourselves without risking any real money. How well do we handle triumph and disaster when it comes to investing? Are we willing to risk it all on one turn of pitch and toss? Or do we take a slightly less poetic and more pragmatic approach to financial decision making?

A wealth of knowledge The app provides access to millions of financial instruments and millions more news articles, market commentaries and research reports. Every day we add 15,000 articles to our database. Our streaming real-time data and research covers 70,000 stocks globally. From the news feed, it is easy to find top stories, the latest market commentaries and content that is recommended especially for each member, based on a sophisticated understanding of their interests. All of the news and research reports that relate to the instruments in the watch list are also automatically displayed in the news feed. A new search process makes it very simple to personalise the news feed with content from hundreds of sources. Tapping on any instrument, from the watch list, carousel or any instrument logo, takes us through to the single instrument view. Here, we can see all of the information that we need for any instrument – charts, news, research reports, a calendar of events, social posts and more detailed fundamental Information to help inform decisions. Making it easy to search for and access as much of this information as any of us

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could ever need for any financial instrument and presenting it in a highly convenient format is just one of the problems that invstr solves. Making this kind of data and analysis intelligible for everyone to understand is perhaps the most exciting differentiator of the app. It makes investment child's play.

Sharing is caring Have you ever been part of a great team? Perhaps it was a sports team at school. Perhaps it was an orchestra. Perhaps it was a business organisation. What made that team great? No doubt a lot of things, but most of all that it was a winning team and the team won because people collaborated by contributing their skill for the good of all. There might have been an outstanding player, but even star players need the support of those around them to win. So how do we win as a society? The answer is simple, isnâ&#x20AC;&#x2122;t it? We win by creating economic growth that gives all of us the wherewithal to live decent lives, without taking away economic incentives to excel as individuals. We create economic growth through investment and we maximise investment when we minimise the risk or uncertainty associated with it. Anyone who has spent more than a nanosecond in the financial markets will know that they do not currently work to minimise the volatility needed to maximise investment. On the contrary, we have allowed enormous asymmetries of information to persist so that some people make money at the expense of others. The result is levels of unpredictability or volatility that are higher than they might otherwise be and levels of investment that are lower than they might otherwise be. In a debt-laden world, the thing we need most is investment to help us grow our way out of the debt trap that will otherwise dampen growth and prosperity for decades to come. We believe an optimal society is one in which individuals are incentivised to contribute and their contributions adds genuine value, rather than detracting from the greater good. So, how does

Winter 2016

invstr's virtual world help to create that winning society? For a start, we eliminate information asymmetry by making financial information available in real time to everyone for free. Then we create a fun and exciting environment in which people can share their financial predictions with their fellow invstrs and be recognised for their skill. We give them status and kudos through league tables, scorecards and individual badges that attract more followers to them. We allow them to share their expertise through a games feed and a social feed. We celebrate their success within our community. They are winners and the community also wins. We all get to see for free, in real time, the collective wisdom

of the community. And the more people who join our community, the more accurate that collective wisdom will be. It will become financial reality or the closest thing to reality we could expect. And our hope is that once they have gained confidence in this virtual world, invstr players will go on to become informed, fully developed investors in the real one. A world in which we all know everything that can be known about the future will be a world in which volatility will be lower and investment will be higher â&#x20AC;&#x201C; and economic prosperity will consequently be greater. By democratising access to financial information, invstr hopes to demonstrate that we can collaborate our way to success. And sharing, as they say, is caring.

Net gains: The invstr app creates a team of financial players who share their expertise in pursuit of a common goal

www.fintech.finance |

INNOVATION: CUSTOMER RELATIONSHIP MANAGEMENT

The Fixer

Insurer Direct Line scored a commercial hit with its unexpected parody of Pulp Fiction on TV, but now marketing director Mark Evans has his sights set on new ways of targeting customers

When Direct Line recruited Harvey Keitel – aka mob ‘fixer’ Winston Wolfe from Pulp Fiction – as the new face for its insurance policies, it was hard to say whether or not it would pay off. Two years later, the results speak for themselves. The Tarantino crossover has been heralded by Mark Evans, the company’s marketing director, as the ‘most transformative campaign’ he’s ever been involved in. Direct Line, which had been in steady decline, has now entered a period of significant growth. “Our motor insurance advertising is 53 per cent more effective than it was prior to August 2014 and why is that? Keitel is one of the most famous actors in the world, Pulp Fiction is one of the most iconic films ever. It’s really dramatising insurance in a way it’s never been dramatised before, but getting across how the Direct Line brand is different,” says Evans. In line with its positioning as a ‘fixer brand’, Direct Line has spent the last few years trying to tackle the organisation’s legacy systems among a variety of other issues. These included making dramatic improvements to its customer service, which led to it winning a customer satisfaction award from the Institute of Customer Service for two years running. And having won them, the company intends to keep them, but it acknowledges it will be a challenge staying ahead of the

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public’s increasingly multi-channel expectations. Networking sites, including Twitter and Facebook, are key to their desire to have a less formal relationship with the insurer, but social media brings its own pressures. Evans gives an example from Twitter. “Somebody tweeted in to say ‘I’m not very happy that my TV hasn’t arrived, I want to watch a boxing fight tonight’ on our Twitter handle. To cut a long story short, our customer service agent drove to their own home, picked up the TV and took it to the customer’s house, enabling them to watch that match. Doing this is gold dust for a business, to be able to bring the brand promise to life.”

Channel hopper Tuning in to customer needs means not only going the extra mile – or in this case several of them; it also means making sure digitally savvy customers can move seamlessly between their channels of choice. And that, according to Evans, demands a more collaborative organisational culture. “If you move people through channels either in a clunky way, or not in the way that they want to be moved, you’ll start to lose customers every day,” he says. So Direct Line created a mantra for its workforce and embarked on ‘empathy training’. This brand vision was eventually distilled into a phrase consisting of only two words: ‘on it’.

“That was a very purifying and uniting thing. It’s almost like a contract or a bond that has become the foundation of a behavioural manual,” says Evans. “In turn this creates a swell of people who have a fixing attitude, not restricted by silos but all in it together – one brand, one promise.” This can-do attitude led a Harvard study last year to conclude Direct Line was the most empathetic company on Twitter. It showed how making the right investments in the right place can turn a declining company around within a matter of months.

Good to know you Knowing its customers better h as opened up a variety of new doors. Simply put ‘the more you know about consumers, the more you can give them’. Nowhere is that better demonstrated than with young drivers. “Younger drivers, in their first year, are Winter 2016

Fiction and fact: Hiring Pulp Fiction star Harvey Keitel (left) was a sign that Direct Line had entered a new era

eight times more likely to kill somebody than in subsequent years and so part of our CSR strategy is to use data to help people to become better drivers,” explains Evans. This led to Direct Line using its data to build and release the Drive Plus app. “The Drive Plus app will give you feedback on your performance – how you corner, how you brake, how you accelerate, how you anticipate – and then some quite detailed advice on how you can improve.” The app is a win/win for the insurer and driver. The problem was making young drivers aware of it when the company

knew the majority didn’t watch commercial TV, where Direct Line had traditionally advertised. It had to find an alternative means of reaching them and for this it hired the now megastar YouTube vlogger Alfie Deyes to promote the app on his popular channel, followed by 5.29 million viewers. “The premise of the campaign was that we would help Alfie to pass his test and become a safe driver in six months,” explains Evans. “Through coaching him we would be coaching many, who would want to use that app and become better drivers themselves. We hoped to invert

If you move people through channels in a clunky way, or not in the way that they want to be moved, you’ll start to lose customers every day Winter 2016

a perception of ‘it’s cool to drive badly’, to ‘it’s cool to be in control, to drive safely, and rationally’.” The regular 30-second YouTube slot brought Direct Line more views in the first three days than it had enjoyed on all other channels in the preceding six months. And it’s a communication method that’s likely to be used increasingly often as the future speeds toward the insurance industry in the shape of driverless cars and home goods connected to the Internet of Things. “What does that all mean for insurance? Where does the liability sit? Is it on the individual? Is it on the manufacturer? Is it on the on board operating system?” says Evans. While insurers work out the answers, he’ll continue opening up new dialogues over new media with new customers, creating a Direct Line of communication that could just pay dividends in the long term. www.fintech.finance |

INNOVATION: CORPORATE BANKING

Simple: Corporate banking that takes care of itself

No pain – all gain For consumers, financial services at the touch of a fingerprint, or swipe of a watch screen, is fast becoming the norm. Anand Krishnamurthy and Karthik Raman, from Omnichannel Customer Experience innovator in the banking space Vayana, see no reason why it can’t be that way for corporates, too

We are in an era of instant gratification, when it comes to financial services. The power no longer lies with banks and other providers, but with consumers they serve. They demand solutions that support their fast-paced modern lifestyles and act as a gateway to the things they want, the second they want them. Yet, though businesses might want and need this too, financial technology and regulation has so far lagged behind when it comes to enabling the IT and data sharing flexibility to make it happen. Progressive regulators and operators are now starting to change this, by paving the way to greater data sharing between financial institutions. Corporate transactions are by their nature more complex than personal banking, often involving the need for multiple organisations to interact across numerous channels – and even geographies – to carry out actions, such as payment processing. As a result, business

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banking processes have been convoluted and long-winded. Until now, according to Vayana. The brainchild of a banker and a technologist, Vayana’s name is inspired by the Sanskrit word for weaving – and that’s what it does, seamlessly integrating Financial Institutions and their corporate customers,using its groundbreaking SolutionNET omnichannel customer experience platform. This user-friendly business banking interface is backed by a ‘pick n’ mix’ suite of products, which firms can plug in or ignore, according to their size and requirements. It aims to be the missing link to speed up complex transactions, by providing the means to connect the processing systems of businesses, banks and other third parties, giving them ‘the information they need to be able to make appropriate financial decisions, at the right time’. Anand Krishnamurthy, Vayana’s chief operating officer, explains: “Our system aims to provide easy access to financial services, according to our four pillars:

simple, relevant, pervasive and secure.” As well as the connectivity it offers, SolutionNET’s user-friendly tools, which cover the range of activities corporates of all sizes need, can be added on to suit individual requirements. These include its Generic Corporate Adapters (GCAs), which integrate with customers’ own processing ecosystems and those of financial institutions to process transactions in the quickest way possible. GCA facilitates straight through processing (STP) by creating data as a channel. With tools such as Receivable Management, Cashflow Forecasting and Account Aggregation, the financial institution can offer complete solution to Corporate Customers. SolutionNET can handle transfers and payments (including international payments with multiple foreign exchange (FX) rates); bulk payments with the ability to upload them in a range of file formats; and trade finance, with numerous templates for simplified transaction initiation. Winter 2016

At the delivery end, it offers internet, mobile and ‘wearable’ banking solutions, with a view to helping customers keep pace with the digital revolution. “Put simply, we want to take the pain out of the financial activities essential to businesses, through an interface that gives a single line of sight across all bank-to-business services, says Anand. “It enables banks to navigate a path through the complex web of different enterprise resource planning (ERP), account receivable and account payable systems used by companies. A knock-on effect of making these processes a whole lot less painful for their corporate clients, is longer, deeper and more profitable relationships.” SolutionNET can also take care of core services like security, audit, reporting, access control, hierarchies and limits, by integrating with a banks back and middleoffice systems as well as third party service providers. At the same time, it enables banks to provide up-to-the-minute channel solutions their business customers want, mirroring the modern personal banking experience by translating across internet, mobile. “There is a huge amount of focus on user experience (UX) among corporates now, not just in terms of the look and feel of financial services but, importantly, usability too. Expectations are increasing among businesses just as they are among consumers,” adds chief innovation officer Karthik Raman. “There was a time when corporate banking was just about functionality and it didn’t matter how a service was delivered, but people have increasingly Facebook-like user experience expectations and financial institutions need to be able to keep pace with this.” “In the regions where we operate, including India and the Middle East, there are different segments of ‘corporate’, from the huge and high-profile conglomerates, right down to really small partner firms with one or two employees. Each of these types of business has different needs. “We are trying to simplify the process of tailoring the application so that Financial Institutions can offer solutions appropriate to each type of business, and cater for them.” “For example, smaller organisations might want the same applications, but in a simpler form. Their customer onboarding process will Winter 2016

be very different, as will the level of risk management features. A SME is unlikely to need complex multi-signatory matrices for payment authorisations, so we allow them to select the suite of functionalities they do require – and the trick is that our system is scalable, and can grow as the company does.” One key process Vayana is taking the pain out of, is customer onboarding. “Financial institutions on board corporates from different industries and different sizes, having specific banking requirements. Hence we’re looking at templated solutions to enable banks to on board their customers as quickly and seamlessly as possible, with automated attachment of the correct account features, limits and profiles to each template – followed by basic know your customer processes. We have different templates to suit the

There is a huge amount of focus on user experience among corporates… expectations are increasing among businesses just as they are among consumers

authenticated by a mobile device on the paying side. So the collection is immediate and is completely interlocked with the physical supply chain. That’s going to significantly change the way corporates deal with their customers.” Even greater than all of this though, he believes, will be providing solution directly to Corporates that gives them the ability to deal with several banks simultaneously with a single line of sight. “Typically, corporates don’t engage with one bank, they have multiple relationships. Each bank traditionally provides a corporate internet banking portal and it’s very cumbersome for companies, because they have to log into and out of each bank in sequence. They can’t get an aggregated view of their records across banks. So, what we are trying to do is flip this on its head through an application that can talk to different banks, access their account details, aggregate and display them. “Similarly, when a payment initiation happens, the payment app can actually connect to different banks, depending on the account the payment is coming from, and source the money. In this way, you have a single app that can do everything – more of a work station sitting at the corporate, rather than the corporate reaching out to a specific bank for every need.”

onboarding requirements of different businesses.” One of the biggest challenges – and opportunities – facing the banking industry, according to Karthik, is cross-border payments. Here, too, SolutionNET has an answer. “We support a range of transactions, on the initiation side, in a flexible way,” he says. “For example, we are looking at new options that allow customers to dynamically fix their rate when they have initiated a payment transaction. Asked what changes they foresee in the future of business banking, Anand says: “I think one big thing will be immediate payments. Imagine a company visiting a distributor to deliver stock. They could debit for the invoice, which is immediately www.fintech.finance |

INNOVATION: CORPORATE BANKING

Time to get relevant

What can a businessman in the White House, elected on the basis of his ‘relevance’ to ordinary Americans, teach the banks? Phil Cantor, Head of Digital Transaction Banking & CMO at technology solutions company iGTB, has the answer “Perhaps it’s time America was run like a business,” said Donald Trump back in May 2012. Well, now he will get his chance. As a businessman, who reportedly owes more than a quarter of a billion dollars to banks, he clearly knows how to handle

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them and believes he knows how to make America’s businesses great again. Trump’s winning appeal to his voters was his relevance. They feel he knows what matters. Whether you love him or hate him, it has always been apparent he focusses on relevance and gets to the essence.

So, what is relevant to a business? How can banks ensure they become and remain relevant to anything from a small company to a mid-cap, a government department to a charity, a multinational to a financial corporation? What do they all have in common? Winter 2016

Google ‘what matters in business?’ and you’ll get an eclectic variety of answers, from people to innovation to agility to solidity to… essentially, you’ve entered the world of fashion and you are asking what’s this week’s style. So, try a different tack: Google ‘how do you compare businesses?’ Suddenly, all the answers are about financials – not the bank accounts directly, but the embodiment of financials that are relevant to the CEO, the balance sheet and the profit & loss (BSPL). Er… doh. It was staring us in the face: it’s always what the bank asks to see, for example, to assess the business risk. And so does the CEO. Simples. Let’s dig into a typical BSPL. First asset: cash at bank. Yes, the bank can provide that information, that’s an easy one. Second asset: inventory. And what’s the problem with inventory? Paying for it, especially before being paid for it (and you have to sell it first). So, that means working capital finance or maybe supply chain finance. Plant needs longer term debt. Debtors, of course, are always a problem. The banks may want their $250million back from Trump or they may be happy just earning their fees and interest from it but, for most businesses, debtors are a problem. And with a problem comes many solutions, typically from different lines of a bank's business: collections just to get on top of the problem and get the money in, but also supply chain finance to allow cash flow mismatches to be evened out. I would even argue trade finance, too, as a way to avoid collection problems at the outset.

A payment is not a payment I won’t go through the whole BSPL, except maybe to point out that it gives the lie to the idea that ‘a payment is a payment is a payment’: paying salaries (through a single-debit, multicredit mechanism that is maybe multicurrency, multicountry and host-to-host, and where the finance lead

is not permitted to see the individual beneficiaries), is very different from paying a rush invoice (maybe through a series of banks and payment schemes with choices of routing, speed and cost) but, more critically, needing a way to fund it in time and with a completely different payment approval workflow). In the last 10 years, banks have stitched together different ‘lines of business’ – trade finance, for example, having its own trade shows, magazines, conferences, bank departments, products offered, back-end processing and even front-end solutions, which is separate from payments and separate again from risk, for example. Now

Banks are spending hugely on digital transformation. Let’s hope it doesn’t result in a new patchwork of incompatible systems it’s time to start unpicking the stitching and create a garment that… well, fits – by offering a single digital transaction banking (DTB) experience.

Digital transaction banking ‘I want to buy these raw materials from overseas,’ thinks a client – a true statement of need, not ‘I want to make a payment’. So, why not offer a choice of solutions to the settlement of the resulting invoice? These might include a straight wire payment, with or without foreign exchange (FX), electronic invoice presentment and payment (EIPP) to make the process easier, a loan to cover the funding, supply chain finance to offset against other expected payments and trade finance to increase certainty that payment will only be released if accepted goods are delivered. With an integrated DTB solution, the bank can achieve this in a problem-solving, contextual banking, way – offering

The business case for integrated DTB +220% +173% +63%

Global trade

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Corporate banking revenue 2020

Bank spending on digitisation

something meaningful to each and every business. That’s how to get relevant. No wonder huge numbers of businesses are reviewing their cash management and trade finance product selections. It’s not like the market isn’t there. Banks are spending hugely on digital transformation initiatives. Let’s just hope this wipe-the-slate-clean approach does not result in a new patchwork of incompatible systems that doesn't allow banks to provide solutions that are relevant to business and corporate clients. Evidence shows that where integrated DTB is offered (notably ensuring that cash management, liquidity management and

% Corporations reviewing

Cross-sell Balances Income Impact on bank/corporate relationship of adding cash managemen/ bundling

other services are bundled with accounts and lending) the profits are bigger. If you want to make a business case, look at these: ■ Cross-selling of products is 63 per cent higher for those with bundled products than without ■ Balances comparing losing the cash management and adding it differ by 173 per cent ■ Income from such clients is a whopping 220 per cent higher

Proof of the pudding The lesson we have learned from providing DTB solutions is that it works. It has increased the customer base, doubling it in less than a year in one case and stimulating a steady 32 per cent increase each year in another. It drives costs down and increases fee income, which means you are not relying on the bank’s capital. As a result of all these things, our clients have measured distinct increases in profitability. Being relevant to your clients is what they want and allows you to charge higher fees. Being relevant makes you stand out in an old-fashioned industry under pressure. Being relevant is what businessman Trump would advocate and it's best achieved not by thinking, organising, training and buying in silos, but by adopting DTB. www.fintech.finance |

Protect your business from financial crime. Increase the accuracy and efficiency of every discipline: • Anti-money laundering • Know Your Customer • Fraud prevention • Bank Secrecy Act compliance • Sanctions screening • Financial Action Task Force Pitney Bowes makes it easy to overcome data limitations, so you can detect and resolve financial crime in less time with fewer resources. Our integrated, proven approach to entity resolution lets you quickly find, link and visualise complex relationships across parties, accounts .and transactions.

See customers and transactions as they really are. Improve surveillance Detect, identify and visualise complex, obscure relationships utilising advanced entity resolution capabilities. Boost productivity Gain a complete view of customers. Consolidate and prioritise alerts to make investigators more efficient. Accelerate savings Streamline and automate case work, enabling more rules in your transaction monitoring system. Increase agility Respond quickly to new regulations and achieve more with your existing platforms, systems and processes. To find out how Pitney Bowes can help your organisation, please get in touch: Email: pbsoftware.emea@pb.com Phone: +44 800 840 0001 Visit: pitneybowes.com/uk

INNOVATION: CORPORATE BANKING

Shining a torch on shadow banking Selwyn Blair-Ford, Head of Global Regulatory Policy for the Wolters Kluwer finance, risk and reporting business, examines the new European reporting requirements for managing exposure to shadow banking From 1 January 2017, banks in the EU will be required to adhere to exacting internal reporting standards that allow them to clearly identify exposure to shadow banking entities. These exposures must have their own internal risk limits that will need to be monitored and adhered to, too. The shadow banking system is defined by the Financial Stability Board (FSB) as ‘the system of credit intermediation that involves entities and activities outside the regular banking system’. This includes plenty of firms operating in the financial sector for which there is no requirement to have a banking licence or to participate in government sanctioned deposit insurance protection schemes. Shadow banking activities include those that result in maturity transformation (receiving short-term funds while investing or lending longer term), non-banking participants in securities lending activities, provision of credit, securitisations, money market fund and financial trading that requires leverage, and derivative trading. They all provide a service typically offered by banks, but are not regulated as a bank. However, shadow banking policies are to be included in firms’ internal capital adequacy assessments and capital planning (ICAAP), which may be onerous for those that do not have the ability to identify and monitor all shadow banking entities. It is, therefore, advisable that shadow banking metrics are incorporated into institutions’ daily/weekly management reporting and that software is updated to reflect this. Come 2017, firms will need to have a robust methodology for identifying and

managing counterparty information, including monitoring legal ties and significant business ties. Arguably, the shadow banking sector provides many economic benefits and useful competition. It can, for example, provide credit and liquidity where it is difficult for banks to do so. However, during the financial crisis the inability to measure the extent to which banks were exposed to shadow banking entities, combined with insufficient information about their risk and exposures, contributed to the problems. Tasked with strengthening oversight and regulation, the FSB has chosen to address themes such as the mitigation of the spill-over effect between the regular and the shadow banking system, and the reduction in the susceptibility of money market funds to runs. It will also examine and align incentives around securitisation. All FSB jurisdictions will participate in a global information sharing exercise, resulting in the FSB’s Global Shadow Banking Monitoring Report. The Basel Committee on Banking Supervision has meanwhile implemented risk-sensitive capital requirements for banks’ investments in equity funds and a supervisory framework for measuring and controlling exposures. The International Organisation of Securities Commissions has also moved to reduce the likelihood of a run on money market funds.

EBA guidelines It is against this background that the European Banking Authority internal reporting requirements are set. One objective is for banks to set appropriate aggregated limits on their exposures. The guideline requires banks to put in

place effective processes and controls on shadow banking exposures with strong oversight by the management body. They should: ■ Be able to identify individual exposures to shadow banking and all potential risks ■ Have an internal framework for identifying, managing, controlling and mitigating potential risks, which will require the specific documentation ■ Address the shadow banking risks within a firm’s ICAAP ■ Show a logically thought-out risk tolerance/risk appetite for exposures ■ Implement a process for determining interconnectedness between shadow banking entities, and between these and the institution. A process must be in place where that cannot be determined ■ Have effective reporting to the management body regarding exposures and the risk management framework ■ Have action plans ready in the event of a breach of limits The institution’s management body is also charged with specific responsibilities around risk and exposure. Notably, the limits set by institutions should be relative to their eligible capital. Tighter individual limits may be set on individual shadow banking entities, based on the specific business conditions of each. If firms are not able to adhere to these guidelines then they will need to limit their shadow banking exposure. EU banks clearly need to ensure that their existing processes are able to adequately cope with these new guidelines.

Come 2017, firms will need a robust methodology for identifying and managing counterparty information Winter 2016

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INNOVATION: CORPORATE BANKING

An intelligent approach The established transaction banking industry can steal a march on the new entrants by adopting artificial intelligence – not to do so risks writing themselves out of history, argues Parth Desai, CEO solutions provider Pelican The early adoption of elements of smart technology in the consumer sector has transformed the delivery of customer services. Unfortunately, the transfer of money or, more specifically the payments life cycle, has not benefitted as much and inherent inefficiencies still exist, as evidenced by the findings of a recent Pelican survey, Leveraging Artificial Intelligence For Payments Efficiency, conducted with Finextra Research. All too often, these shortcomings appear to be accepted as ‘business as usual‘. To address them, we must gain an understanding of when and where they occur.

Customer challenges The survey results show time to market, client onboarding and product innovation are the three areas within payments that suffer the most from inefficiency. The data provides an insight into how difficult it is to launch smart, innovative products quickly when dealing with a dated technology environment. The results showed that a large percentage of businesses are without concrete plans to eliminate inefficiencies, or are addressing them with manual solutions, such as increasing headcount. Long-standing disciplines within compliance – sanctions screening, anti-money laundering (AML) and fraud were also perceived to be inefficient. It is evident that achieving optimum efficiency levels across the entire payments business and processing operations continues to be challenging, and that high levels of manual intervention prevail. We have seen media coverage of a few new technologies being adopted in some areas of the financial domain, such as biometrics for authentication and robo-advisors in customer services. But the less glamorous world of payments and transaction banking has not yet realised all the benefits that intelligent

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technology can deliver, as evidenced by the continued dependency on manual processing during the payments life cycle. There are, however, isolated examples of intelligent payments management (IPM) emerging within our industry.

Business impacts The inefficiencies that cannot be resolved with conventional technology have a common result: higher costs and more delays due to human intervention. This problem is particularly acute in cross-border payments where the scenarios creating higher costs, such as failure to achieve straight through processing (STP) and/or compliance alerts and delays – which are often false (aka ‘false positives’) – are common. What is needed across the industry is a new, intelligent approach towards managing payments. If the rate of automation is increased, the cost of processing will reduce. Gartner’s recent research, The Smart Machine, predicts that AI will be pervasive in all new products by 2020.

Understanding IPM Intelligent payments management is the specific application of certain AI disciplines into the payments life cycle and compliance. This results in the tangible achievement of superior levels of efficiency for banks and corporates that can drastically reduce costs, lower risk and create opportunities for increased profitability. Disciplines of AI that can be leveraged in transaction banking and payments compliance are: Natural language processing (NLP) This enables computers to read and understand human languages by creating

the ability for machines to interpret information presented by humans in unstructured or uncoded free-format text. Once understood, the machine can process this information. Machine learning Machine learning gives computers the ability to learn without being explicitly programmed. Machine learning focusses on the development of computer programs that can teach themselves to grow and change when exposed to new data. Knowledge-based systems (KBS) A (KBS) is a computer program that reasons and uses a knowledge base to solve complex problems. AI can also help solve key challenges within payments in the following areas: Time to market and innovation Introducing new products can be challenging. There will typically be a requirement to process data in a specific way, send or receive information to or from different or new destinations and correspondents, and apply a different pricing structure that may need to vary, based on content, destination, etc. An AI-based system reduces time-to-market because it eliminates the need to programme everything from scratch. AI systems are knowledge-based – i.e. rules and data-driven, which is used by a specialised software AI engine. By altering the knowledge base, the functionality of the AI engine can be changed. The computer program therefore becomes data-driven rather than

ROI can be realised soon after rolling out an AI-based solution Winter 2016

code-driven, which significantly reduces time to market. For example, by simply specifying the requirements of a new product into the AI system, a bank can automatically create and deploy it in less than two weeks. The increased revenue and profitability will mean return on investment (ROI) can be realised soon after rolling out the AI-based solution. Sanctions and AML compliance False positives have long plagued compliance teams. Nowadays, there are multiple ways to communicate payments and trade instruments, and some of the formats that can be used, for example ISO 20022 and trade finance messages, offer the ability to include more reference information than traditional message types. While this is excellent news for parties wishing to cascade more information through the transaction chain, it causes a headache for many compliance filtering systems as extra data is passed through. Unstructured data, which is common in trade finance transactions, is particularly subject to more false positives. But AI-based systems using NLP can understand the purpose of a transaction and interpret the information in the proper context, so significantly reducing false positives. Another important benefit of NLP integrated with a knowledge-based system is the ability to explain the reasoning behind every decision â&#x20AC;&#x201C; as auditors will expect to see. Once the context and actions are understood, machine learning will also derive new ways of improving by knowledge discovery. This allows continued development of the intelligence capabilities through experience. Payments routing Banks can achieve cost savings by routing suitable payments via a local automated clearing house network instead of real time gross settlement. Considering the entire payments life cycle, where each bank can play a different role per transaction, it can be difficult to identify which items should be routed differently from others. In addition, banks wish to route cross-border payments via

Winter 2016

more complex combinations of correspondents, which are determined by certain criteria within the payment message. However, their systems often lack the flexibility to route, based on content. NLP and a knowledge-based learning system can assist with understanding the full context of the payment within its life cycle and derive the role the financial institution has to play. By understanding the payment environment, its connectivity to clearing and settlement mechanisms (CSMs) and international correspondent banking networks, an intelligent system can automatically plot the optimal route for the payment, balancing the cost and speed, depending on the client requirement. Repairs and exceptions Some originators will send in wrongly formatted information. While simple errors can be corrected with basic levels of automated repair, more complex errors need human intervention, creating a direct cost for the bank. NLP enables machines to understand free format text and

unstructured data in context, mirroring human reasoning. Computers can then covert the data into coded information, delivering more complex and intelligent repair capabilities. When a transaction is manually repaired, using machine learning the system can start understanding the gaps in its knowledge base and enhance this in a controlled manner. After gaining sufficient confidence in its understanding, and upon approval, the machine can start using the newly acquired knowledge to automate previously manually completed repairs. Customer data insight Incumbent banks in particular have the benefit of possessing an abundance of digital data on existing customers. AI technologies, such as machine learning, can use this to generate insights, which will lead to product innovation and improved service levels. This can also help long-established institutions to take full advantage of their heritage to gain a competitive advantage over the new challengers and entrants from the fintech community, who lack the comprehensive volume of data these banks have amassed. We have looked at how AI-based technology can address issues and lead to increased revenue, profitability and customer satisfaction. Businesses in the transaction banking industry have a rare opportunity to provide a superior user experience to customers by seizing the chance to leverage AI before their competitors do. The longer they wait, the further they will fall behind and risk ending up an irrelevant organisation in a highly competitive world.

Superior thinking: AI technologies will play a part in most new products by 2020

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INNOVATION: BOOK REVIEW

Writer’s blockchain

Forget non-fiction, William Hern’s fast-paced thriller is the best explanation yet of how an economy based on cryptocurrency actually works, says Will Dove The literary world is bursting at the seams with non-fiction texts that claim to unravel one of modern finance’s greatest enigmas: the cryptocurrency.

It seems that every expert, renowned or self-proclaimed, is currently striving to produce the ultimate Bitcoin handbook – a concise guide to a mind-bogglingly intricate subject, that will supposedly grant us mortals a slightly better understanding of just how blockchain is going to revolutionise our lives. Proof of their efforts can be found in the business section of airport bookshops nationwide. While William Hern’s new novel may not be perfect, it does provide a refreshing perspective on cryptocurrencies by rejecting the popular non-fiction format of the vast majority of Bitcoin studies. Hern has instead decided to address the topic of cryptocurrency technology within a fast-paced story, a thriller set in an utterly believable near future. The mythical title, Chronos, is perhaps an indication of just how momentous Hern believes blockchain developments could prove to be and his novel certainly succeeds in portraying a world that has been totally transformed by digital wallets, for better or worse. The story follows the character of Tom Jenkins, a British bank programmer, who sets off on a journey to find an old university friend, Max Whitting, who’s recently gone missing. The pair met while studying computer science in England, but lost touch years ago when Max took a job in the USA. Now, Tom is putting his life on hold in order to travel to San Francisco to help Max’s pregnant wife Faiza find her husband. However, it soon becomes apparent that Max’s disappearance is no accident and Tom is convinced that it has something to do with a clandestine security project that his friend has been working on regarding the ubiquitous Cube cryptocurrency. Hern uses pseudonyms for various real-world technologies throughout the novel, although there’s rarely any doubt of what he’s referring to. For example, Tom

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The novel’s greatest strength lies not in its prophecies of incoming developments, but in its artful explanations of current technologies wears a digital assistant on his wrist in the form of a voice-activated band called Iris (even this old reviewer could reverse the letters of Iris to spell a certain Apple aid). Despite the slightly clichéd effect of these pseudonyms, Hern succeeds in presenting an impressive vision of the future of consumer technology within the novel and I often found myself nodding approvingly at the sheer credibility of a lot of his predictions. However, the novel’s greatest strength lies not in its prophecies of incoming developments, but in its artful explanations of current technologies, most notably Bitcoin. Hern explicitly states in the back of the book that the Cube cryptocurrency is based on Bitcoin and the similarities between the two are indeed unmistakable, from their elusive developers (Mehmet Yilmaz for Cube, Satoshi Nakamoto for Bitcoin), to their innovative shared ledger

systems. Under the pretence of explaining the operation of Cube to the reader, Hern’s novel in fact delivers a basic, yet suitably comprehensive description of Bitcoin and the cryptocurrency concept as a whole. Chronos can be viewed as a significant achievement in financial literature, as Hern has succeeded in bucking the trend of the hefty, uninviting non-fiction text as a means of relaying information on contemporary technological developments. Despite all odds, the author has produced a text that is as approachable as it is informative and one that surpasses the majority of its non-fiction counterparts in terms of educating its readership on the subject of Bitcoin. If that wasn’t impressive enough, Hern delivers an engaging plot that is chock-full of twists and turns and sure to prove popular among the most discerning of bibliophiles, digital wallet holders or not.

Chronos is released under a Creative Commons Licence, which makes it freely available to read and share in multiple digital formats via www.chronosthenovel.com. Hardback copies with additional, exclusive content, are also available to order, priced at £25. Go to www.williamhern.com. Great for: Mystery-loving technophiles intent on losing their Bitcoin virginity. Best read: As an e-book, dictated by a military grade smartphone during a transatlantic night flight. Good read rating: ★★★ ★ Winter 2016

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