The shape of things to come

from Fintech Finance presents: The Insurtech Magazine 06

Ahead of the game

Paolo Zaccardi, CEO of Fabrick, explains what collaboration means Italian-style, and how insurance is benefitting from open finance

As company taglines go, ‘shaping finance together’ is a pretty apt description of what one of Italy’s most innovative businesses is doing across the financial landscape. Even the company name, Fabrick – to English speakers, at least – purposefully blending ‘fabric’ and ‘brick’, suggests strength in combination and a creative mix.

Fabrick is indeed about co-operation and exploiting the power of many, and it is both mobilising and inspiring Italy’s fintech community. The company describes itself as a B2B2C ecosystem, and its CEO, Paolo Zaccardi, is clear about Fabrick’s role in promoting change and uniting different technology and financial players to create better services.

“Fabrick is an open finance ecosystem, based on an open platform model,” says Zaccardi. “Our mission is to create interactions between banks, insurance companies, large corporations, fintechs, startups and other parties.”

The Fintech District, a Milan-based efficiency and customer experience, and all that information can be managed on top of a single, open finance platform.

“The real change is the openness,” notes Zaccardi. “A platform, in general, is multi-sided, and open finance means we have many providers – across the banking space, the insurance space, the payments space, and so on. They all provide APIs that you can combine, in order to improve customer experience.”

Just one example of that is investment provider Moneyfarm (which, incidentally, counts insurer Allianz among its investors and targets the Italian and UK markets). It is extending its business on top of Fabrick’s platform via API connections.

For insurers, there’s a customer perspective and an organisational perspective, says Zaccardi. Open finance means there are countless customer touchpoints created – and insurance is a sector that usually suffers from a lack of quality connections with end-customers.

“Many large insurance companies are developing a sort of digital wallet,” says Zaccardi, “so they can manage and deepen their customer relationships. Payments are a key touchpoint. Imagine having tens of millions of customers, and you can provide them with a digital wallet, a sort of banking-lite, to manage payments. It’s a very good way to increase contact and strengthen a relationship.”

innovation cluster, was the first Fabrick initiative, and it now has more than 170 startups working on a wide variety of projects. Fabrick is encouraging this type of collaborative and entrepreneurial spirit across financial services throughout Italy and beyond, reinforced by a platform that manages APIs on behalf of service providers and publishes them on the Fabrick Marketplace.

“We enable banks, insurance companies and large corporations to produce and publish APIs,” explains Zaccardi, “as well as use APIs to build services for end-customers. We started in Italy three years ago, and today we’re Italy’s leading platform. It’s a sort of booster for the open banking and open finance model, and we’re adding many different types of service. We now have 1,700 APIs on our platform.”

While Europe’s revised Payments Services Directive (PSD2) has been a great enabler, it’s the breadth and versatility of the open banking movement that excites Zaccardi.

“The possibilities go well beyond banking,” he says. “For instance, insurance and utilities are both spaces where you can combine services. The important thing is to understand what the value is for the end-customers, who are always seeking simple and convenient journeys.”

By making crossovers, you improve

One of the first truly dynamic insurance wallets, as opposed to ones used simply as a store of information, is that of US insurtech startup Marble, which aims to keep customers engaged through rewards and notifications, as well as the ability to bundle, compare and keep track of all their policies at a glance.

Zaccardi believes insurance companies can go much further than they are.

“Through the data flow, you can better understand the real needs of your customers,” he says. “You can understand the level of credit that they need, or the level of investment they could have. Which means you could provide savings and pensions products, among others. A growing number of companies are now looking to complement traditional insurance products with banking products, all based on mobile banking or on digital wallet solutions.”

Fabrick developed and, until recently, wholly owned, Italy's first and leading challenger, mobile-only bank Hype. It’s now a co-investor, having created a joint venture with open banking platform Illimity – a move Fabrick sees as promoting the open finance agenda in Italy. The Hype basic account gives the option to buy insurance in-app and its premium subscription users get travel, shopping and ATM theft coverage bundled with the account. It’s Fabrick’s own, home-grown case study of what can be achieved with open finance.

“Hype has more than 1.4 million customers,” says Zaccardi, “and it has at least three insurance companies integrated through APIs, so it can provide its customer base with simple insurance products from the likes of Zurich, integrated with the bank’s app. That’s very powerful, because you can embrace several products and have just one customer experience.

“The same with other banks – if you are an insurance company with an API published on top of a platform, you can reach banks that want to provide your product to the end-customer. So, there’s a combination of possibilities between consumers of APIs and producers of APIs that will open up new channels for the insurance companies.”

The Fabrick platform isn’t just about front-end integration. Remodelling products to offer customer-driven, micro insurance with maximum flexibility – the modular approach promoted by Tigerlab and others – impacts critical processes throughout the organisation. The nightmare of handling complicated payments and commissions when you have millions of tiny, turn-on-turn-off contracts for cover has to be addressed. In fact, it just wouldn’t be conceivable to offer such products if the modular, third-party technology wasn’t available to make it even work from a process point of view, let alone work profitably. The collaborative nature of the ecosystem that Fabrick promotes means that the close relationship between the API consumer and the API producer –

which is almost symbiotic – means such disruption (and more, as yet unimagined) is not only conceivable but very much deliverable.

Fabrick’s own core products, offered as ‘packaged solutions’, all revolve around payments. Among its customers for these are Net, a digitally-led, customer-driven provider of micro insurance products and embedded insurance, which distributes through both legacy and challenger banks as well as insurtechs in Italy; and HDI, a global insurer that works through various traditional distribution channels.

“We are optimising the payments value chain and creating an automatic reconciliation between payment collections from customers and the reconciliation in the organisation’s account system,” explains Zaccardi. “Again, by combining different services and digitising, you improve overall service.

“Net Insurance’s goal was to create a single payment management engine. We provided the engine and Net Insurance worked internally to connect with other kinds of services, such as providing credit during the sales process. It’s important to enable the sales network, so when you’re selling policies, you can integrate other services like these.

“Everything has been digitised, using PSD2 to aggregate information from many accounts. It has real-time information about the payment flow, which helps with reconciliation, providing credit for customers, and onboarding.”

The payment is now effectively invisible, observes Zaccardi, and when you make the payment invisible, onboarding, renewals and other activities are smoother and more efficient, which, he says, boosts both customer acquisition and retention.

Fabrick provided a similar solution for HDI Global, creating a ‘pay by link’ option, based on the API provided by Fabrick, which simplified the payment process across a network of 500 agencies. It enabled end customers to pay in real time, with a choice of payment methods.

“In Italy especially, insurers are very much in favour of collaborating to build better services,” says Zaccardi. “We have data showing that more than 70 per cent of incumbents are beginning projects with startups, or with external actors, in order to create insurtech initiatives and other projects. These projects will become part of open finance because it’s the best way to innovate.”

Customers are driving transformation, says Zaccardi, and insurers must respond to their desire to manage their money better and to switch between accounts, by collaborating to create those freedoms. Legacy, he says, is no longer an excuse not to because open finance allows for building something external to an existing system, which can then be reconciled to it through easy API integrations.

“Open finance is an unstoppable trend,” says Zaccardi, “and we’re just at the beginning of the curve. We’ll see many more players working together in a way that combines collaboration with competition. The backbone will be open finance and open banking, and the result will be much better customer experience.”

Boot on the other foot:

Zaccardi says 70 per cent of incumbents have projects with startups

In Italy especially, insurers are very much in favour of collaborating to build better services

NEW RESEARCH:

Expectation versus reality for payments data monetisation

Identifying the data-led services corporates want

Through interviews with 168 senior bank executives and 217 corporate treasurers and CFOs, a new report published by Celent in partnership with Icon Solutions and MongoDB delivers fresh insight to better understand respective strategies, pain points and challenges, and the specifi c services that will enable banks to monetise data. Highlights include: • An overview of why investment in