Fintech Finance presents: Discover Money 20/20 Europe 2021 by Fintech Finance

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SUNSET ON THE OFFICE AutoRek helped two of the UK’s biggest banks transition to remote working – but is tech their biggest challenge?

DO-ING THE RIGHT THING How G+D and Doconomy teamed up to create ‘conscious’ payments

THINKING THE UNTHINKABLE Scarlett Sieber on M20/20’s future vision

WHY FIDELITY IS OVERRATED Deutsche Bank has made a virtue out of corporate customers that like to share

SWEET DREAMS ARE MADE OF THIS…

A RAIL-TIME OPPORTUNITY Bottomline and JPMorgan Chase on the known unknowns of ISO 20022

AS CTOs AND CIOs REVEAL WHAT’S KEEPING THEM AWAKE AT NIGHT, BANKING CIRCLE BOSS ANDERS LA COUR OFFERS A PARTNERSHIP TONIC FOR PAYMENT NIGHTMARES

WELCOME TO

t’s time for honest conversations – brave ones, even. They are a theme of this special supplement and it looks like there will be plenty of others taking place at the reimagined Money20/20 Europe event in Amsterdam. After an enforced break, during which it went online for the hugely successful live-streamed MoneyFest last year, the show is back with a new feel and a new mission. Gone are the ‘lecture-style’ presentations; 2021 is the year of the Big Conversation. Inclusivity and co-creation top the agenda when it comes to figuring out the next challenges on the fintech frontier. And, no matter how masterful your Googlemeets, how in the zone you are for Zoom, there’s no substitute for doing that kind of work in the flesh. Spontaneity, just as much as necessity, is the mother of invention and, as Money20/20’s Scarlett Sieber says on page 4, the ‘magic is in the moment’. So, let’s go create some, people!

How? Who? What? Where? Money2020 Europe’s live comeback event doesn’t promise to have all the answers to the big questions facing financial services. But the new format will absolutely make sure everyone’s part of the debate, says Money20/20’s Scarlett Sieber

Easing the load on CIOs and CTOs Executives in these roles have had more than enough to cope recently. Now, Banking Circle wants to know what about ‘the next normal’ is keeping them awake at night

A moving target A core issue for business has always been how to predict and respond to customers’ changing needs. Silicon Valley Bank and Technisys discuss how to go about it

Sunset on the office As home working becomes a permanent arrangement for many, AutoRek’s Nick Botha, Tony Warren from Lloyds Banking Group and Robert Swales at Nationwide consider how regulated industries will build around it DO-ing the right thing The ‘Greta effect’ forced governments to listen over climate change. Another Swedish activist is having the same impact on the financial system. Doconomy’s Mathias Wikström and G+D’s Ruediger Vogt explain

Doh… It’s the data, stupid! Celent’s new report on what corporate clients really want from their banking relationship throws a spotlight on an asset that ISO 20022 will make increasingly valuable

At your service Jörg Howein of Solarisbank and Pedro Barata from Feedzai on the benefits of platform services – whatever your niche

EXECUTIVE EDITOR Ali Paterson

GENERAL MANAGER Chloe Butler

PHOTOGRAPHER Jordan “Dusty” Drew

EDITOR Sue Scott

US CORRESPONDENT Jacob Bouer

ART DIRECTOR Chris Swales

ONLINE EDITOR Eleanor Hazelton Lauren Towner

SALES TEAM Tom Dickinson Karen Estcourt Serena Khemaney Shaun Routledge

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

FEATURE WRITERS David Firth ● Martin Heminway ● Natalie Marchant ● Martin Morris John Reynolds ● Sue Scott ● James Tall ● Frank Tennyson

Cool to be kind Could banks change from being wealth repositories to uber-forces for good? Yes, if they become digital lifestyle enablers that help save the planet, according to our green finance round tablers as they discuss Mobiquity’s revealing new report

Squaring the PSP circle The ‘super correspondent bank for the new economy’ has been signing up PSPs so fast that it’s now settling six per cent of all Europe’s B2C e-commerce transactions

Striking a balance Legacy relationships and innovative technology, infrastructure and front-end services, uni- and multi-banking... Dennis de Weerdt and Kerstin Montiegel from Deutsche Bank weigh up the choices for incumbents with ProgressSoft’s Carole Elias

TSB lays out its stall The first of the UK’s high street banks to launch an API-driven marketplace for customers, TSB is leveraging its Cloud-based platform to reap the rewards of open banking

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

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: SHOW TIME

How?

Who? ? t a h Where? W

Money20/20 Europe’s comeback live event doesn’t promise to answer all the big questions facing financial services. But the new format will absolutely make sure everyone’s part of the debate, says Chief Strategy and Growth Officer Scarlett Sieber If financial services hadn’t already learned it from the crash of 2008, then 2020 hammered home the business case for imagining the unimaginable. Scarlett Sieber saw that evidenced in boardrooms, where – who’d have thought it? – something other than the P&L began dominating discussions. “Digital adoption went from a nice-to-have to a must-have. Pre-COVID, you’d see it on board decks but it would typically be down the list of priorities at

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number eight or nine out of 10. And it was generally the first to be cut. More recently, I’ve seen net promoter scores, consumer experience and integrated experiences ranking as top priorities, in some cases even higher than the P&L,” she says. A veteran of those boardrooms, having been in the role of startup founder and banker and, latterly, commentator and consultant to both, in May, Sieber took on the full-time job of helping to steer Money20/20’s enterprise-wide response to the change coursing through financial

services as a result of the pandemic. The format for Money20/20’s live comeback event in Amsterdam this September – after a forced, but successful transition to a virtual interactive MoneyFest platform last year – was already shaping up to be something rather different. Much like the future, it will be full of surprises. Planning for the show was well under way by the time Sieber joined and she applauds the ‘brilliant minds of the European content team’ for taking a radical new approach – one that moves away from keynote www.fintech.finance

addresses in which audiences are generally talked at, to a forum in which they are very much part of, and even lead, the discussion. “We knew we wanted to come back in a different way – one that reflects how the industry has changed,” says Sieber. “The stages are not set up for the traditional key notes – it’s much more of an open conversation, with more interactive content.” The agenda items, too, are brave. Posited as burning questions, they force ideas that just two years ago might have been considered implausible, subversive even, into the limelight. Nothing is relegated to the fringe; everything is up for debate in 2021. “We were very strategic in choosing who we have in those sessions,” says Sieber, pointing to the phalanx of C-suites and more senior executives that the team has persuaded to talk publicly about topics that could be seen to threaten the very premise on which their companies are built. In many cases, they are prepared to share those thoughts on the same stage as their rivals.

We knew we wanted to come back in a different way – one that reflects how the industry has changed It’s a signal, perhaps, that no one is now as sure as they once were of the immediate future, let alone of having the answers to it, making a joined-up, collaborative response the only possible one. Sessions badged under the agenda themes of The How: developing a regenerative gene, The What: creating products you can’t imagine, The Who: defining a new cast, and The Where; designing an intelligent environment, set out to help companies navigate questions that will shape every

business in every ecosystem over the next few years. Sieber will be listening intently to three in particular. What Would It Take To Let ‘Libras’ Happen? brings together Michael Kent, founder and chairman of remittance service Azimo, Ran Goldi, CEO of digital assets group First, and Alexandra Maniati of the European Banking Federation, to look at what is required from private companies and regulators to allow such outrageously ambitious cross-industry and cross-market projects to move us closer to the future of money. In A World Where Cards Don’t Exist, What Would A Payment Solution Look Like? features a cast of players from incumbent and startup payment providers. “Historically, they would never have been on the same stage together, so it’s pretty special to have them all there to discuss what could happen,” observes Sieber. If We Were Writing A Paris Agreement For The Financial Services Industry, What Would We Put In It?, led by the European Banking Federation’s chief executive Wim Mijs and Marion Laboure, a Harvard professor and senior economist at Deutsche Bank, invites speakers and the audience to consider what ethical principles the industry should agree and adhere to when building and distributing financial products. “Those are the kinds of things that people are talking about but not in a public forum,” says Sieber. “They might explore them privately over a drink. We want to put them on a platform where there are very different voices.” After Money20/20 Amsterdam and the upcoming Vegas show, Sieber is eyeing the future of the brand. “When we couldn’t run these large events last year, the team had to go back to the drawing board to consider how we could continue to engage with the industry

in a meaningful way. It took a step back to reimagine the show and challenge conventional thinking,” she says. In the interim, they migrated to an online forum, creating a new, virtual show, MoneyFest, which saw 10,000 people in multiple time zones engaging with sessions that featured one of the strongest-ever rosters of speakers. The two spin-offs from that event were the M20/20 Moneypot podcast and the Money20/20 LinkedIn live streamings. Sieber’s job now is to look at how it can use those digital learnings to engage with the ecosystem on a more consistent basis.

We fundamentally believe that the physical, in-person piece is crucial to our strategy going forward “We believe the physical, in-person piece is crucial to our strategy going forward, and COVID-19 has not changed that. But, as part of the larger conversation, we are moving to more of a 365-days-a-year, 24/7 model. You’ll see evidence of that later this year, and more in 2022,” says Sieber. The response from businesses across the world to the Amsterdam event leaves her in no doubt that digital can’t match the ‘magic of being together in that moment’, though. Some lucky visitors will even be pinged with invitations that unlock features they weren’t expecting to access, reveals Sieber, because spontaneity is what we really missed with live events. As she says: “You don’t know who you are going to meet, or the conversations you will have.” Nor, indeed, what next big idea they will lead to.

SCARLETT SIEBER’S TOP PICKS What? If We Were Writing A Paris Agreement For The Financial Services Industry, What Would We Put In It? Who? Marion Laboure, Harvard University/Deutsche Bank; Wim Mijs, European Banking Federation; Katherine Brown, Visa Where? The Core When? Tuesday, 09:55 – 10:35

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What? What Would It Take To Let ‘Libras’ Happen And Learn From Their Results? Who? Michael Kent, Azimo; Alexandra Mariati, European Banking Federation; Ran Goldi, First (Digital Asset Group) Where? The Core When? Tuesday, 15:45 – 16:25

What? In A World Where Cards Don’t Exist, What Would A Payment Solution Look Like? Who? Two sessions including a wide range of issuers, card schemes and PSPs Where/when? The Hive, Tuesday, 15:45 – 16:25 Where/when? The Speakeasy, Wednesday, 11:30 – 12:30

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: PAYMENTS INFRASTRUCTURE

Easing the load on CIOs and CTOs Executives in these roles have had more than enough to cope with over the last 18 months. But, having come through the fire, Banking Circle wanted to know what it is about ‘the next normal’ that still keeps them awake at night. Its CEO, Anders la Cour(right), suggests how a financial infrastructure platform can help lighten the load “Technology leaders are being called upon to serve as kinetic leaders – a super-charged change instigator, pursuing transformation while ensuring resilience.” That rallying call to chief technology (CT) and chief information (CI) officers came from Deloitte’s 2020 Global Technology Leadership Study, based on results gathered just as the world shifted under the feet of financial services, the pandemic catapulting them faster than anyone ever thought possible into a digital-first future. Eighteen gruelling months later and Banking Circle decided it was time to ask what, of their many ‘super-charged’

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responsibilities, was keeping CTOs and CIOs awake at night. It turns out that the answer largely depends on whether they’re instigating change for a fintech or inside a bank. Of the 600 office holders that Banking Circle interviewed across the UK, Benelux and DACH regions, those employed by the former, including challenger banks and payment service providers (PSPs), mostly fretted into the wee hours about potential tech outages, whereas those employed by the latter couldn’t sleep for intrusive thoughts about their digital transformation projects. A good solution, the researchers suggested, was to find a new partner – not to share their bed with, but rather their technology troubles. “Working in partnership with external providers will ease the burden on CIOs and CTOs, by spreading the load,” says Anders la Cour, CEO of Banking Circle, the Luxembourg-based ‘super-correspondent bank’, which aims to relieve them of at least one of the stresses of the job… that of ensuring clients’ cross-border payments are settled securely in minutes, rather than days, for a fraction of the standard cost incurred in the traditional correspondent banking chain. It’s the long-winded process, with potentially multiple regulatory checkpoints at which a payment could be detained or rejected (often erroneously) that makes transfers – of smaller amounts, in particular – uneconomical for all concerned,

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disappointing customers and choking off international trade for small businesses. A fully-licensed bank, working solely for financial institutions and payment processors, Banking Circle’s aim is to reduce the number of stages in any transaction by providing payment rails through a combination of direct clearing with central banks and a strong correspondent banking network.

digital payment services accelerated by a pandemic, with budgets that, while increasing, were not enough for a complete overhaul of the infrastructure required, many saw partnering with external providers as a way to futureproof their organisations. Overall, two-thirds of those surveyed in both banks, fintechs and payment service providers said partnerships featured in their future plans. MEETING THE CHALLENGE “The CIOs and CTOs we surveyed In 2020, it processed a record six per are facing some significant internal cent of Europe’s business-to-consumer challenges that are hampering their (B2C) e-commerce flow, a total of ability to meet business objectives in €155billion in payments on behalf of some areas,” says la Cour. “The biggest financial institutions. The uplift in volume challenge was the lack of integration was a reflection of its fast-growing client with customer-facing departments, base – including the onboarding of that was true for around half of all significant global payment players respondents, and only slightly fewer, Stripe, Alibaba and Paysafe – which saw around 45 per cent, highlighted a lack it double the number of companies it of data consistency between internal worked with during the year. systems, and a lack of consistency across Banking Circle’s latest white country operations. So, clearly, data paper, Futureproofing Payments consistency and system integrations Tech: The Challenges Keeping CIOs are areas that need to change, and And CTOs Awake At Night, indicated that, partnership with having successfully external providers adapted to the intense could help solve demands of 2020, the issues without a they were fairly significant investment confident in the ability of internal time of their organisations and money.” to investigate and When it came to procure new payment external challenges, and related IT systems, inconsistent regulations to cope with not just across geographies the new normal but Anders la Cour, ranked equally also the next normal CEO, Banking Circle with the threat of (whatever that might money laundering – the latter weighing be). That said, they weren’t as convinced particularly on the minds of CIOs of their businesses’ resilience in other concerned about the consequences areas that they were responsible for, for the whole enterprise. including artificial intelligence and Two-thirds of all respondents planned machine learning, data security, systems to build the necessary payment tech migration and training, to name a few. in-house, while the same number said Although 63 per cent of office holders they’d buy it off the shelf and 65 per cent at fintechs, and 56 per cent of those at would outsource or utilise partnerships, banks, expected to see their payments IT which indicates that many firms will make resource increase in the next 12 months, the decision to build, buy or partner on a many, it appeared, were still wrestling case-by-case basis. As the white paper with boards that underestimated the points out, a payments infrastructure technical challenge and financial resource provider with compliance systems already needed to deliver what they were in place across multiple jurisdictions, expected to deliver over the next few and sophisticated fraud detection, years. Faced with the impossible task of is a compelling proposition. squaring the additional demand for

Working in partnership with external providers will ease the burden on CIOs and CTOs, by spreading the load

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: PAYMENTS INFRASTRUCTURE Fleshing out those findings, la Cour says: “In terms of payment technology, many of our respondents are planning to spread their budgets across a number of platforms, not just utilising one resource. Banks are most likely to buy off-the-shelf, that was around 71 per cent; PSPs and fintechs are most likely to build solutions in-house, that was true for somewhere around 70 per cent.” All respondents agreed that the area that will see the most new funding, compared to pre-COVID levels, is API technology, with 44 per cent planning more investment, which the report’s authors interpreted as ‘a desire for better integration/usability to improve experience’. The good news – if you’re a glass-half-full kind of observer – is that 56 per cent of all respondents said that at least half of their IT and payment systems are already in the Cloud. On closer inspection, Banking Circle found – perhaps to even its surprise – that banks were ahead of fintechs in that regard. Sixty per cent of banks said at least half of their payment systems were Cloud-based, compared to 52 per cent of fintechs. None of the fintechs questioned had a 100 per cent Cloud-based payments system. As la Cour knows only too well, such infrastructure investments are hugely costly and complex, which makes working with a Cloud-based partner that has already done the heavy tech lifting, an efficient way to future-proof the business without weighing down the balance sheet. There is another issue that points to the logic of partnering. “All of the fintech respondents confirmed that they have skills gaps in their organisations,” says la Cour. “The most common was in Cloud skills, which was a problem even for 60 per cent of fintechs, followed by AI and machine learning, at around 53 per cent. Thirty-four per cent of banks lack skills in programming, compared with 27 per cent of fintechs. And when we asked which skills the organisations felt were most crucial, banks and fintechs agreed on data warehousing, followed by technology management and architecture.” As analysts at Gartner pointed out at the beginning of this year: “The culture of digital ‘haves and have-nots’ in finance will deepen if finance leaders don’t address digital finance skill gaps. It will also make it harder to capture returns on digital investments. But even when finance

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leaders are committed to improvements, it can be challenging to identify and install the specific digital finance skills and competencies needed.” Partners, on the other hand, tend to be a cauldron for such talents, with staff exposed to a wider range of experiences across client organisations, bring mutual benefits.

Addressing the skills gap: Both banks and fintechs would benefit from expert external support, says la Cour

For the CTO, the white paper said, the most common driver for investment is ‘offering a superior customer experience’, at 37 per cent, while for CIOs it’s ‘overcoming resource limitations’ at 33 per cent’, which researchers suggested was reflective of CTOs’ typically more outward-looking roles. Interestingly, the second most selected internal challenge by CTOs, after a lack of integration between customer-facing departments, was a lack of C-suite support for the role (46 per cent), ‘revealing that their peers have differing focusses and CTOs have their work cut out to convince them for more backing’. There was another important divergence of opinion when it came to outsourcing, where CTOs were noticeably less willing (58 per cent) than CIOs (71 per cent) to work with a third party, indicating a potentially uncomfortable conflict for anyone caught in the middle. CTOs, the paper observed, would rather build in-house, ‘perhaps in order to build purely bespoke for themselves and customers or keep perceived third-party costs down. CIOs see it differently, understanding the huge time and investment required to get in-house infrastructure built and operational’. There was, however, more agreement when asked what their priorities were for the next year, the most common high priority being improving data quality (43.7 per cent), closely followed by improving the customer experience (43 per cent) and migrating to digital delivery of services (42.2 per cent); CTOs, in particular, seeing ‘keeping customers happy’ as crucial to remaining competitive, the white paper said. Given the demands of the jobs, it’s not surprising that just over half of all CIOs and CTOs admitted to feeling stressed – those employed by organisations with a turnover of between £1million and £50million noticeably more so than those toiling in small companies or £100million-plus corporates. Diamonds are made under incredible pressure, but, given there are payment technology firms that can help, would you rather sparkle… or sleep?

Given the demands of the jobs, it’s not surprising that just over half of CIOs and CTOs admitted to feeling stressed

While, historically, the CTO reports to the CIO, many clearly hold very different opinions to the boss, which was most obvious when it came to the part of the survey that asked about investment and the decision to buy or build – important, perhaps, for a prospective supplier/partner to know.

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After a white-knuckle ride of a year for the global economy, Greg Becker, president and CEO, of Silicon Valley Bank (SVB) Financial Group, must have been delighted – and perhaps a little surprised – to be able to announce, in July, that the Group had nearly doubled the size of its balance sheet over 2020/21 and added a record 1,700-plus new clients in the most recent quarter. He credited that increase to ‘consistent focus on client engagement and expanding the range of services we offer. These investments – in people, technology, and infrastructure – are directly supporting our growth and peer-leading profitability’. The importance of responding to client needs was a recurring theme in his earnings statement. And, after nearly 40 years of observing the behaviour of the entrepreneurs, enterprises and investors it supports, the ‘bank to the innovation economy’ has apparently become very good at it. Meanwhile, technology company Technisys, also had a notable year. With $50million of venture capital backing from Redwood Capital and five clients (with more in the pipeline) in North America, the company established an HQ in Miami in June and began adding to its teams across the Americas. To date, it has enabled banks and fintechs to elevate customer engagement for more than 100 million banking customers in 16 countries, including its birthplace of Argentina, with its next-gen digital and core banking platforms. Commenting on its move into the US at the time, the company said that

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Whether the old adage ‘the customer is always right’ is valid or not, the core issue for business has always been how to predict and respond to their changing needs. David McHenry from Silicon Valley Bank and Michael Haney at Technisys share their views what differentiated it from other existing large and very well-known platform operators there was its more flexible approach. It aims to help clients focus on their individual customers, working out not just what they are trying to do and enabling that, but understanding the motivation behind it – how they are feeling, what they’re likely to do next – and then helps clients respond appropriately. “Banks are no longer just transaction processing corporations, centred around the financial product itself,” says Michael Haney, who joined Technisys to lead its Digital Core business in North America last year. “It’s about providing insights into their customers’ financial health, providing actionable data that they can use to achieve their goals, meet their needs and, ultimately, improve their financial health. “So, banking becomes an enabler, rather than just something a person needs to do. We’re now assembling various deposit, lending and payment products into a capability that addresses a specific customer need, such as early pay/early wage access products, which are really taking hold.”

Technisys’ target companies are challengers, speedboat launches by legacy banks and non-financial services businesses that want to embed banking processes into their customer journeys. Its foundation product is its Cyberbank Core platform which, along with what it calls a digital engagement accelerator (Cyberbank Digital), gives banks access to a Cloud-native and API-centric, end-to-end digital architecture and thirdparty API marketplace that allows them to dynamically change and scale their products, based on customers’ behaviours and needs. Those behaviours and needs changed dramatically, of course, during 2020, and amplified calls to improve banking for the under- or unbanked segments of the US economy (people and business) using better data and innovative personal financial management (PFM) and business financial management (BFM) tools. Among Technisys’ first customers outside Latam was Rellevate, a neo bank concept built around earned wage access solutions, which is reaching out to the underbanked through employers. Technisys’ platform underpins Rellevate’s Pay Any-Day service, which was launched last year in the US. Targeted at the hourly waged, it works with employers to provide staff with access to money they’ve already earned without having to wait for their regular monthly payroll cheque. In this way it hopes to reduce reliance on traditional pay-day lenders with their sky-high interest and service charge fees.

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: CUSTOMER FOCUS In Canada, the Cyberbank platform is powering the country’s newest digital banking app, Brightside, from ATB Financial, designed to enable customers to spend and save without switching banks. It has also enabled Brightside to give customers the ability to order and activate a payment card, and set up savings features like Round Ups and Save Automagically, all within the app on their phones. Haney believes those mobile devices are going to start being supplemented by other ways of interacting with a bank, too – via smart speakers and smart watches. In short, where customer banking actually needs to be. And data will be fundamental to both determining and driving that customer behaviour and informing product development.

Picking the right things to develop, devise and prioritise is all based on data and that’s something the banks are making a better job of David McHenry, SVB (UK)

“Picking the right things to develop, devise and prioritise is all based on data and that’s something the banks are making a better job of,” says David McHenry, head of global treasury and payments advisory for the UK at SVB. “Maybe we sat on data in the past and didn’t use it as well as might have; but it’s going to be our success in the future.” Silicon Valley Bank sees customer demand from two perspectives: its own in serving entrepreneurs and business customers, and as an investor in startups and scaleups that are focussed on, and driven by, their customers. It claims that around half of US-based, venture-backed tech and life science companies bank with it, and 65 per cent of VCs themselves. It moved into the UK to build a similar portfolio a couple of years ago. “We have an amazing set of clients, who are driving their businesses, and doing a lot of these things that we’re talking about. From a competitive standpoint, it’s these hyper-focussed platforms that are growing and scaling rapidly,” says McHenry. “It’s that idea of making data influence

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decisions and drive your user interface, your user experience and your go-to-market strategy. That’s what we mean when we talk about iterative development, picking the way a client expects to work with a financial institution. “At SVB, I think we have a fantastic engagement model, in terms of how we go to market, how we support early-stage companies, growing companies and multinationals, and their investors. When we talk about product development, we use data to tell us about our click-through rates, identify our challenges and failures and what’s happening on our platform. And we use it to make decisions about what we prioritise, what we streamline, what we enhance, and to identify the new areas that clients are looking to financial platforms to use. That means we are building the right integration and interaction into the future.” The high net worth individuals that SVB has helped create in the tech space, for example, will have their private banking services enhanced by the recent purchase by SVB Financial Group of Boston Private Financial Holdings, which it hopes will capture a larger portion of an estimated $400billion opportunity among the bank’s clients. They will benefit from integrated wealth management, trust and banking services, with bespoke solutions and what’s described as a next-generation, digital wealth access portal. Meanwhile, the bank is broadening its corporate account holder services through third-party deals and API integrations with a wide range of solutions providers. A referral agreement struck between SVB and payments service software provider Modern Treasury in May, for example, provides mutual clients with the ability to process payments directly through their SVB bank accounts. It will enable users to send, receive, reconcile and approve payments using SVB’s domestic and international payment methods and currencies. The integration is aimed at increasing efficiency and providing transparency around the full payments process for clients, adding to the portfolio of specialised banking services that are tailored to fast-growth companies. In July, SVB also extended its Europe, Middle East and Africa (EMEA) partnership with currency management automation software provider, Kantox, to its

corporate account holders in the US. They’ll now also be able to leverage the Kantox Dynamic Hedging solution to automate the management of their currency risk and give them instant visibility into both macro and micro foreign exchange exposures. Risk is automatically offset by booking, reporting and reconciling hedging transactions in real-time – and all with minimal human intervention. According to KPMG, the US now accounts for more than 70 per cent of global fintech funding. The latest PitchBook-NVCA Venture Monitor quarterly report shows venture capital activity there was up across all sectors in the first half of this year. Figures showed total deals in H1 2021, reached $150billion across 8,406 targets, while non-traditional investors were on track to have raised a further $115.9 billion. On the fundraising side of the equation, $73.5billion was raised by 337 venture funds during H1 2021 – not far off the $80.5billion in the whole of 2020. So, it was against a background of those metrics that, in July, SVB Financial Group also announced a joint venture with Nasdaq and a consortium of leading investment banks to create Nasdaq Private Market, an institutional-grade, secondary

We’re now assembling various deposit, lending and payment products into a capability that addresses a specific customer need Michael Haney, Technisys

trading venue for private company stock. The aim is to give SVB’s fast-growth companies more liquidity options and broader access to investment – which, in terms of responding to client needs, is of another order of magnitude all together. SVB Group CEO Greg Becker said he expects it to make more and more frequent strategic investments of that type in future. “Markets and moods may change,” he told stakeholders. “What won’t change, however, is our faith in and focus on innovators and the innovation economy.” If customer needs are a moving target, then both SVB and Technisys look to be keeping them in their sights. www.fintech.finance

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: REMOTE WORKING

Sunset on the office on the Sunset

As home working becomes a permanent arrangement for many, AutoRek’s Nick Botha, Tony Warren from Lloyds Banking Group and Robert Swales at Nationwide consider how regulated industries will build around it One in four of the UK’s one million financial services employees wants to work from home full-time, while 69 per cent don’t want to spend more than two days a week in the office.

The figures, revealed in a survey this summer from Accenture, suggest that, despite Zoom fatigue, and pets, partners and kids doing their best to distract them, staff won’t be rushing back to their old desks any time soon. Is that a problem? Quite the opposite, say the researchers. In an earlier study – during the last lockdown in February – they suggested that a remote or hybrid workplace policy would a) save firms a fortune, b) improve productivity and retention and c) give the industry access to a borderless talent pool. Many employers that had gone through the pain of rapidly transitioning the majority of staff to home working during the pandemic had already, in fact, come to broadly the same conclusions.

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By March this year, Nationwide had told 13,000 staff they could choose to work interchangeably from home, their local branch or the bank’s HQ. Its own internal survey suggested more than half would opt for the first, permanently. Lloyds Banking Group is currently also working on a pick’n’mix approach; a strategy that will allow staff to choose between home/hub/hybrid locations, which could see the organisation slash office space by 20 per cent over three years, according to management. The freedom to ‘locate for your day’ speaks to a progressive new era in industrial relations, but it’s far from simple to achieve in a heavily-regulated environment like financial services. Under pressure to relentlessly raise the bar on cybersecurity, while coming up with new and improved products and services, institutions were forced during the pandemic to rely more on third-party providers as they coped with this new way of working.

“No matter how defined the rules and regulations are, or how robust you think your internal systems are, there’s always the next thing lurking around the corner,” observes Nick Botha, business development manager for Scottish regtech AutoRek. The fatality of that argument was proved in March 2020, since when, says Botha, there’s been something of a sea-change in financial institutions’ attitudes towards partnering with companies like his own. The change has been for the better, he says, allowing banks to focus on their key activities, while their technology partners can focus on what they do best. “Financial institutions need to shift their mindset, from controlling everything in their boundaries to really partnering with the right organisations,” says Botha. Regulatory and financial controls are where AutoRek is focussed – and that's very much middle-and back office territory, where banks have been guilty of building high walls around their IT www.fintech.finance

Location, location: Financial districts like the City of London might look very different, devoid of staff

systems in the past and not engaging particularly well with third-party providers, particularly younger fintechs. The government-backed Fintech Pledge, launched last year, aimed to address that by encouraging enhanced collaboration between banks and fintech firms, thereby ensuring the UK’s continued position as a global fintech hub. Both Lloyds Banking Group and Nationwide are signatories to the Pledge and, when the pandemic hit, were already deconstructing their organisational models as part of ongoing digitisation journeys. Nationwide had, in fact, rolled out Microsoft’s collaboration tools Office 365 and Teams in 2019 and, as both banks were clients of AutoRek, compliance was not compromised in the shift to remote working as processes were in place. Tony Warren, senior manager for automation at Lloyds Banking Group, says that in the last 12 months the bank had ‘probably moved on 10 years’ worth of technology, speed and working in a more agile way… and we will not be going back to the way we were’. If that’s the case, then any temporary spotlight thrown on the particular https://europe.money2020.com

challenges of compliance in a crisis, particularly to do with home working, will be turned on to full beam. Back in March 2020, the UK’s Financial Conduct Authority initially indicated an easing of rules governing data privacy, fraud and money laundering, offering some ‘flexibility within existing requirements’ around, for example, identity verification. But that didn’t last long. As far as monitoring and compliance are concerned, it now expects working from home to be equivalent to working in the office. In October, it reminded firms that it expected them ‘to have updated their policies, refreshed their training and put in place rigorous oversight reflecting

Firms need to shift their mindset, from controlling everything in their boundaries to really partnering with the right organisations Nick Botha, AutoRek

the new environment – particularly regarding the risk of use of privately owned devices’. It was against this background of heightened operational risk, in fact, that AutoRek struck a new partnership with iSoftware4Banks, a US-based provider of services to support effective financial reporting and compliance. At the time, AutoRek said that the rapid shift in company-wide working from home had ‘resulted in various operational issues surfacing across banks, credit unions, investment managers and insurance firms, thereby requiring IT infrastructure, systems and outsourced services to be reviewed globally to future-proof robust operational resilience strategies to ensure uninterrupted service’. “A lot of this is still new to the regulator as well,” says Robert Swales, a senior finance systems manager at Nationwide. “As the regulator’s understanding of the markets’ needs – Cloud technology, for example – improves, it allows us to do more than we’ve been able to in the past.

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: REMOTE WORKING experience we’ve had at Nationwide is that “What’s acceptable to the regulator is we’ve not dropped the ball. The projects something that we have to be mindful of I’m involved in are keeping the same pace as we look at new technology. We don’t of delivery that we would’ve had in a want to take a punt on something, because normal situation,” says Swales. stability is so important to finance. Making “The biggest challenge is more on the sure we’re buying the right products, the people side; teams that were used to ones that are secure and resilient, is key. working together, day in, day out, in the It’s why we have to work hand-in-hand office, just don’t have that same experience with the regulator on some of this.” now that they’re working from home. There are other risk factors, too, such For back office and as how to limit internal middle office, that’s fraud when staff are really where the operating out of private work is now, just premises where the in terms of how usual monitoring and we embed people constraints don’t apply; and culture in this and how employers new world.” in regulated industries certify the suitability Tony Warren, Lloyds of new employees, and Banking Group whether, in future, that will cause more intrusive background checks into their domestic lives. Tony Warren believes financial institutions’ in-bred awareness of enterprise-wide risk management means they will move fast to find answers to all this and more. “I’m not going to say it’s easy, because 15 months ago, no one was foreseeing this, but we do have that ability,” he says. “A lot of it comes down to the tech we use; the stronger the tech, the greater our control. But it’s also about the culture of the organisation and what we want our risk appetite to be. Underpinning that is a strong business model of risk management.” Given the quantum leap in technology Time for a change: over the past 18 months, neither Tony But how will the Warren nor Robert Swales, believes that, in culture cope? the medium term, technology will be the principle limiting factor for banks adapting With Cloud-based to the new norms, though – it will be applications now the finding the best way for staff to interact. direction of travel They both found video conferencing for a lot of companies, platforms like Microsoft Teams and Zoom ‘making sure we’ve got invaluable in maintaining communication security and control and continuing projects during lockdown. is really key’, says In particular, they helped Nationwide Warren. “But all of that Robert Swales, progress its partnership with AutoRek, the is underpinned by the Nationwide often logistical nightmare of trying to get collaboration tools, various super-busy senior executives from because without the two organisations into a room together, ability to collaborate effectively, we won’t replaced by a simple virtual meeting they be able to deliver much at all.” could attend from anywhere. He is unclear how managing employees “Some of the collaboration tends to be a in disparate locations will work best. Then bit more challenging, and sometimes you there is the challenge of building remote end up having to have more meetings to teams and bringing new people into the get the same points across, but, overall, the organisation. It saddens Swales that the next

Without the ability to collaborate effectively, we won’t be able to deliver much at all

generation’s experience of the industry will be very different to that of his own. “Those of us who are some way into our careers have built networks, know how the organisation works, know how to get things done. That’s something that’s been built up over time, through working with people, and networking. In the new world, though, how is that going to be possible? “That’s the big challenge that no one’s really answered yet,” says Swales. “Because you don’t have those coffee conversations or corridor meetings; where you are introduced to somebody who’s on your periphery, who then opens doors to different conversations and opportunities to network. In this Teams world, this Zoom world, you very much do the work and speak to the people you need to speak to; you don’t necessarily stray from that path. “We’ve a new staff member starting in the team next week whom I’ve never met in person and maybe I never will, because now we’re starting to recruit people from a much wider area who don’t need to commute to London or Swindon. The pros and cons of that are you get a much wider pool of talent, more diversity, new ideas, new ways of working and thinking. But the challenge will be how to develop them. I imagine that’s something most organisations are really going to be grappling with, over the coming months and years.” Despite the pain and the as-yet-unanswered questions, Botha is convinced that the industry won’t regret the changes it’s made. “This time last year,;when everything started to become quite manic, we saw clients particularly stressed and worried about what their world would look like – their business-as-usual processes completely changed,” he says. “But I think now everyone’s a bit more comfortable with the home working environment, everyone’s done what they needed to do in the last 12 months to remain ahead of the game, and I think the general consensus, from everyone I’ve spoken to in the industry, is that they’ve been quite successful. We’ve paved the way for a new way of working for generations to come.”

The biggest challenge is the people; teams that were used to working together, day in, day out, in the office, just don’t have that same experience now

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: ENVIRONMENT

DO-ing the right th thing

The ‘Greta effect’ forced governments to listen up on climate change. Another Swedish activist is having the same impact on the financial system. Mathias Wikström, CEO and Co-founder of Doconomy, and Ruediger Vogt G+D’s Head of Payment 4.0, explain “If nature were a bank, they would have already rescued it” is a phrase coined by one of the great radical writers of Latin America, Eduardo Galeano and later appropriated (albeit slightly altered) by US politician Bernie Sanders.

Mathias Wikström, CEO and co-founder of Swedish B2B Doconomy, reaches for it now to illustrate the pressing need for action to tackle climate change, drawing a parallel between the urgent measures brought in by governments to rescue the financial system in 2008, and the comparable inertia in dealing with the environmental catastrophe that is on our

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collective doorsteps today. That means it falls to each of us, on an individual level, he believes, to effect change. Fully launched in 2019 – the same year that the best-known climate activist of modern times, a then 15-year-old Greta Thunberg, addressed the United Nations Climate Change Conference – Doconomy set out to help her fellow Swedes be the change she wanted to see by reducing and/or offsetting their carbon footprint through the spending choices they make. A ‘tool, an ecosystem and a constantly evolving platform’, Doconomy has since influenced millions of people across the world through the vector of banks and other institutions as it attempts to bring

about structural change to the financial system, as Wikström explains. “Our ambition is to enable a sustainable lifestyle for all, because we think, at the core, most people want to do good, but there just aren’t sufficient tools to assist them in driving the change of behaviour that we see is needed. Our job is to provide those tools. We have two core services; one that calculates the environmental footprint of every transaction, and one that calculates the cradle-to-gate footprint of a product.” Doconomy’s mission is to take people and banks outside of their comfort zone, and challenge the way things have always been done. “It’s important that is done in a credible and a trustworthy fashion,” adds Wikström.

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So, fundamental to the Doconomy offering is the Åland Index – a joint venture with Ålandsbanken which, through partnerships with other banks and payment providers, now touches 360 million users in 18 countries. The Index measures the carbon impact of financial transactions. “Sixty per cent of an individual’s carbon footprint is linked to the choices they make in daily consumption. The Åland Index has the ability to calculate the CO2 footprint of each and every transaction, using the data available to us,” says Wikström.

We can shape a new kind of brand preference, a new kind of loyalty, driven not by incentivising more consumption, but by incentivising greater responsibility

Mathias Wikström, Doconomy

“The Index puts together a sort of scorecard of CO2 emissions per merchant category, so you get your individual spending’s representation in that industry’s total carbon footprint. Then we convert that back from CO2 equivalent emissions measured in kilos,to the local currency, using the societal cost of carbon at approximately US$130 US. “So, every purchase gets two metrics: damage done to your wallet and the impact that your consumption has had on the resources of the planet.” Using payments to effect change, gives Doconomy maximum leverage, as Wikström goes on to explain. “You have a buyer and you have a seller, and at the very core of that transaction is the payment. We want to address the issue and educate people at that moment, so that it’s manifested as an opportunity for both the seller and the buyer to take greater responsibility. “That’s where we can also work to shape a new kind of brand preference, a new kind of loyalty, driven not by incentivising more consumption, but by incentivising a greater sense of responsibility.” In Sweden, the DO mobile banking app is connected to a credit card that enables the https://europe.money2020.com

cardholder to track and measure the carbon footprint for every purchase. It also allows for the consumer to save and invest in UN-certified environmental projects worldwide to compensate for their carbon impact. In what it claims is a world first, Doconomy launched DO Black, a premium credit card with a pre-set ‘carbon spending’ limit beyond which the card will be declined. It was an innovation that so impressed Mastercard that it subsequently made an equity investment in the startup and rolled out a carbon calculator that its issuers can integrate into their apps. It’s not only a practical instrument to mitigate climate impact, but it also provides banks with a product to attract potential customers who are keen to do their bit for the environment. A recurrent theme across so many climate change projects is that individual responsibility is, of course, important but collaboration between big institutions to tackle a massive global problem is an imperative. Any bank can use the Åland Index via an API and Doconomy has partnered with many entities apart from Mastercard, including Standard Chartered, S&P Global, Klarna and DirectID. A recent partnership with payments specialist Giesecke+Devrient (G+D) continues this trend. G+D's intention is to find opportunities to provide more sustainable payment solutions, also impacting the card lifecycle itself. Whether in production and choice of material, such as recycled PVC or ocean plastic, to fulfilment or recycling stages, its efforts to become even more eco-friendly is an indispensable journey. With Juniper Research in 2019 saying that, despite virtual cards processing more than $1billion by 2025, less than 20 per cent of people making purchases will use them, such a significant move to make production of traditional cards ‘cleaner’ can only be welcomed. But G+D head of payment 4.0 Ruediger Vogt says that the partnership with Doconomy is about more than just providing cards that are climate-kind. “About two years ago, two of my colleagues were looking into how we can create an offering that combines eco-friendly payment cards with a tool for the client to manage and improve their CO2 footprint,” he says. “That’s when we first came across Doconomy and the great work it’s doing in the field of everyday

climate action. And now, by jointly offering to track consumers’ carbon footprints, G+D and Doconomy will address the needs of banks and fintechs that have ambitious environmental goals, and a strong focus on innovation. The joint offering of the two companies will enable banks to build a strong brand loyalty, through sustainable solutions, and a have visible commitment to climate protection.” The Åland Index gives that credibility. “The Index is a great way of not only creating awareness of how what you’re doing as a consumer in your everyday life is influencing your CO2 footprint, but it also gives you a tool in order to act. And that’s important because consumers really want to take the next step and change for the better. Studies show they are really willing to pay more for environmentally-friendly products and they are willing to contribute to making a positive impact. Customers really are asking for change.” Banks need to be in tune with that, believes Vogt.

Environmental issues have really shifted general attitudes, so it’s really now a key value proposition that banks can and are driving

Ruediger Vogt, G+D

“Environmental issues have really shifted general attitudes, so it’s really now a key value proposition that banks can and are driving. In the World Economic Forum’s 2020 Global Risk Report, for example, the top three risks identified are all climate related, and the report strongly requests that financial institutions work to improve these risks, so that shows you how important this is for the financial sector, too.” “I think a lot of the challenges that we are facing today as a species on this planet needs a new narrative,” adds Wikström. “It needs a new story to be told, it needs hope, it needs tech, it needs data, and it needs commitment. All of those factors we’ve found in G+D, and that’s why we think this has the potential to be a very fruitful partnership for us, but also for the world.”

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: CORPORATE PAYMENTS Cross-border payments have long been hampered by the friction associated with the use of different, incompatible data messaging formats. This explains why standardised data formats, such as ISO 20022 and, increasingly, APIs, are now recommended as banks seek to streamline, improve and automate their processes. In fact, you can’t really talk about payments modernisation – and the potential of payments data monetisation – without first considering ISO 20022, an emerging global and open standard for payments messaging. ISO 20022 creates a common language and model for payments data across the world’s markets; one that provides higher quality data than other standards, which should translate into higher quality payments for all. Sounds good, doesn’t it? Whilst it’s no longer considered a ‘new’ standard as such, its profile has certainly been heightened by the global push for payments innovation and escalating preparations for SWIFT’s ISO 20022 payment message changeover in November 2022. It’s become very clear that banks are at different levels of readiness, though. Some are fully prepared and have ensured they’ll be compliant in time for the transition. The others should want to catch up – because while migration to ISO 20022 is a significant challenge, with big cost and logistical implications for financial institutions and for corporates that need to upgrade their systems to support it, the standard can also bring in a raft of competitive advantages that outweigh the investment.

Doh... it’s the data, stupid! Celent’s new report on what corporate clients really want from their banking relationship throws a spotlight on an asset that ISO 20022 will make increasingly valuable 20 FintechFinancePresents–

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Through its greatly improved data structure, extensible message set, and ability to interoperate between domestic and international payment systems, ISO 20022 conquers a number of crucial pain points. But, perhaps more importantly, it also gives banks valuable insight into customer behaviour and expectations, and how they’re changing over time. And because the standardised approach to payment messaging that ISO 20022 encapsulates applies to every type of

What’s important about payments data is the value that it creates, and that value is usually intelligence

Krystle Ritchens, J.P. Morgan

payment, from corporate to consumer, cross-border, and everything in between, its potential is virtually limitless in terms of the scope of insights it contains to feed future business development. We recently tackled this topic in a wide-ranging webinar with experts from Celent, Icon Solutions, MongoDB, and J.P. Morgan, which explored how ISO 20022 and other industry developments have created a head of steam and shunted the role of payments data in organisations’ strategic development right to the top of the agenda, raising the data’s worth exponentially. “What’s important about payments data is the value that it creates, and that value is usually intelligence,” said panellist Krystle Ritchens, an executive director at J.P. Morgan who leads the Payments Industry, Regulatory and Network function for EMEA. “From an investment perspective, the focus on payments data is growing because a lot of enablers have been introduced recently, things like ISO 20022, open banking and real-time payments. They’re all here – or soon to be here, in the case of ISO 20022.” “I think, as an industry, we were consumed with the issue of real-time payments, but it’s so much more than that. There’s another enabler as well,” added https://europe.money2020.com

Kieran Hines, a senior analyst in Celent’s banking team. “It’s stepping back and looking at this from a whole-of-bank perspective. More and more institutions are viewing data as a truly strategic asset, and that also feeds into this conversation about payments data monetisation, because payments data is some of the most valuable data the banks have access to.” It’s no secret that the world’s banks are sitting on more data than any of the new fintech players snapping at their heels, so can they use it to replace their dwindling margins with new, paid services based around partnerships rather than volume product pushing? There’s a school of thought that perhaps data monetisation can provide a life raft for banks that are struggling in the choppy waters of today’s highly competitive marketplace. “It’s recently been announced that Klarna has a valuation that’s bigger than Barclays,” said Toine van Beusekom, director of the Payments Centre of Excellence for Icon Solutions. “Stripe has a valuation that’s bigger than BNP. So what do the banks have left? The data. They need to ask ‘what are the use cases and how can we monetise this?’. That’s why it’s so important to look at it more strategically.” All of the speakers agreed that there’s little value in the data each organisation owns from a transactional perspective, for things like cross-selling, because of the limitations imposed by the wide-ranging jurisdiction of the EU’s General Data Protection Regulation (GDPR). However, it’s a priceless resource when it comes to better understanding customer behaviour in order to anticipate and react to industry trends and steal a march on competitors. “You can’t simply sell somebody’s data,” said Boris Bialek, global head of enterprise modernisation at MongoDB. “That’s illegal. But the derived information you can generate from data drives additional value, whether it’s for credit scoring or better, more personalised customer service. So, there are a lot of reasons to enrich data to ultimately drive monetisation.”

Delivering on data monetisation Earlier this year, Celent was commissioned by Icon Solutions and MongoDB to prepare a new industry report called Expectation Versus Reality For Payments Data Monetisation: Identifying The Data-led Services Corporates Want.

The report is particularly bullish about Bialeck’s last point – how ‘now is the right time to invest in payments data monetisation’ and, specifically, the leveraging of that data to enhance services for corporate clients. It highlights that payments data monetisation is an increasingly key strategic priority for banks, with 38 per cent of those surveyed saying that it’s an objective of technology transformation investments. This is being driven by growing margin pressure and competition, evolving customer expectations and migration to real-time payment infrastructures and ISO 20022. To properly examine the scale of the payments data monetisation opportunity, Celent surveyed a combination of banks and corporate end users. Interviews with treasurers and CFOs at 217 large corporate entities identified common business challenges, demand for new services, and – crucially – a growing willingness to pay for service enhancements. In parallel, a survey of 168 senior bank executives has provided a unique understanding of exactly how banks plan to address these growing customer needs.

Klarna has a valuation that’s bigger than Barclays. Stripe has a valuation that’s bigger than BNP. So, what do the banks have left? The data

Toine van Beusekom, Icon Solutions

“What we’ve done with this report was to look at what banks are doing, but also how this maps back to the needs of corporate customers,” explained Hines. “So we spoke with corporate treasurers and CFOs, and found that what they want is all about automation – getting data faster, taking out manual workarounds and manual processes in workflows. That’s where the opportunity is for the banks – to provide enhancements that deliver on those needs. We then went back to the banks to say ‘well, what do you think about this – and what are you doing about it?’.

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: CORPORATE PAYMENTS “We found out a lot of very interesting things about what it is that corporate clients really want from their banking relationships, and the role that data can play in that. There are some extremely important messages that have come through this work.” There are two findings in particular from the research that Hines is keen to highlight. The first is that inaction on the part of banks is no longer a viable option. While corporate clients are prepared to pay for many value-adding service enhancements – like enhanced security and fraud prevention and a single, real-time balance dashboard across multiple bank partners

Clients are no longer willing to pay for what they deem to be base services. It’s what I call the ‘Googleisation’ of banking. This is why financial institutions need to be more clever about what they can do with the data afterwards

Boris Bialek, MongoDB

– there are several additional areas that are becoming expected hygiene factors, such as virtual accounts, improved onboarding, and ISO 20022 compliance support. Corporates expect these free of charge and a failure to deliver them will simply see clients moving their business to new partners that can. So, while there’s a strong case for investing to support revenue growth, there’s an equally strong case for investing to protect existing business because corporates are more demanding than ever. “Clients are no longer willing to pay for what they deem to be base services,” said Bialek. “It’s what I call the ‘Googleisation’ of banking. People want to have base payments for free, and this is why financial institutions need to be more clever about what they can do with the data afterwards, to fulfil that monetisation angle.” “It’s all about the basics,” added van Beusekom, by which he specifically means faster processing. “As the report shows, banking doesn’t need to change as such. Corporates still want their cash balances, but

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now want them in real time. They want to do their payments and access their data, in real time, around the clock and on a Sunday.That’s the biggest challenge. “The biggest surprise for me, around monetisation, is that it’s more about customer churn. That goes back to the commodity cycle nature of it all. You will walk away from your electricity supplier if your power is always down, or your utilities provider if your water turns brown. There’s no magic touch required, no screaming from corporate clients for things to be completely new, or a massive team of data scientists to develop algorithms on top. That’s all very cool stuff but, first and foremost, corporates just want their data in real time.” The report’s second key finding is that data monetisation is not a product, it’s a product strategy and needs to be treated as such. Banks that view data monetisation through the lens of one-off initiatives and tactical product enhancements will struggle to achieve return on their investment and miss the much larger competitive opportunity that data presents.. “Banks need to see data as a strategic asset,” explained Hines. “You can’t think of this like traditional product development – you know, ‘we’ll improve this piece here this year, then maybe next year we’ll do this piece and then this piece’. This is about creating an approach towards data use that can support enhancements in the long term, and this will be one of the big differentiators in the market over the next three to four years – the banks that get this right will be the ones that succeed.” The real opportunity is about much more than revenue - it’s about moving the relationship with corporate clients away from the consumption of banking products and towards acting as true partners for customers; providers that can deliver a wider suite of services, rooted in the power of data. “Gone are the days of a traditional product manager, who’s managing a single set of rails,” said Ritchens. “It’s now more about a client experience manager with a wider remit. A client, for example, may want your instant and standard SEPA rails, but is also searching for value-added service, like wallet products or other alternative payment methods.”

Expectation versus reality We rounded off the webinar by asking the panellists their views on expectations

against current payments data reality, with some interesting results. For example, while banks are busy creating API interfaces for clients and – thanks to open banking – trying to create interfaces around data, there are differing expectations around the pace of change. “The expectation is that data is readily available and real-time today,” said Ritchens. “But while, in some instances, this is the case, the wider reality is that there’s still a lot of work to be done as an industry – from scheme rules to legacy applications and industry practices – to get there.” “Banks’ expectation that there’s a lot of money to be made through data is there,” added van Beusekom. “But the reality is that clients will take a lot of it as ‘table stakes’ and won’t be willing to pay for it. And if you’re not offering it, you can be certain one of your competitors will – and your clients will willingly walk to them. “The monetisation will happen on the front-end cycle, not the commodity cycle. That realisation really needs to sink in at banks, and they will need to lower costs and transform while thinking carefully about where they want to, and can, compete.”

Banks need to be thinking about data as a strategic asset [not] through the prism of traditional product development. This is going to be one of the big differentiators in the market – banks that get this right will be the ones that succeed

Kieran Hines, Celent

While there are challenges to overcome, Bialek is in no doubt where the future of payments lies. “Data will become the centre of payments more and more,” he explained. “What was once an afterthought will become the new centre of how people understand the value of a payment.” ISO 20022 is primed to unlock the full potential of payments data monetisation. But promise will only turn into reality through real strategic thinking. www.fintech.finance

Bridging real life to digital. At BPC, we are bridging real life to digital by equipping our clients with the right technology to create payments services that fit right into the customers’ lives. Real life needs of people who make payments or do business transactions converge into digital services. Is it a traditional card payment, mobile wallet or an instant payment, is it initiated via a mobile, through an agent or embedded into an app via an API? It no longer matters; everyone wants it fast, easy and secure, and not having to think about it. We have been doing this for 25 years, for more than 350 clients in over 95 countries, using the model that best fits the business objectives – be it in house, managed services or complete outsource.

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At your service Jörg Howein, Chief Product Officer at Solarisbank, and Pedro Barata, Head of Customer Success at Feedzai, on the benefits of platform services – whatever your niche The niche banks of today might well be the mainstream providers of the not-too-distant future. In particular, 'purpose-driven’ challengers – ‘purpose’ being shorthand for whichever environmental and societal benefits feature on their triple bottom line of profit, people and the planet – have made huge strides in customer acquisition over the past year and a half. Such neos might focus on the underbanked, for instance, the environmentally-conscious or an ethnic group. They appeal to people across the generations who’ve had cause to re-examine their values of late and seek out a bank that more closely reflects them. Accenture calls this emerging demographic the ‘reimagined consumer’, following its survey of 25,000 people across 22 countries, which found the pandemic had made half reconsider their personal purpose. Among other things, that’s driven unprecedented interest in ethical investments. According to Triodus Bank, a pioneer of sustainable finance since the 1980s, COVID-19 has motivated one-in-five UK adults to explore ethical funds, a figure that increases to

Banking on a plate: Platform services take the strain

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35 per cent among the under-35s. Tomorrow – a German sustainable finance startup that’s put yesterday’s banking model behind it and uses account holders’ money exclusively to invest in sustainable projects – has seen the impact of the world ‘resetting the dial’ on its account opening, too. Since launching its mobile current account in March 2019, it’s attracted more than 80,000 customers, 20,000 of them in the first half of 2021. So, how do it and others cope with such rapid expansion while maintaining the same level of innovation, all the while doubling down on compliance and security as regulated processes come under the

pressure of numbers? Like many next-gen startups, it’s decided to be selective about what it builds, what it buys and where it partners to achieve its goals. So, while its in-house team continues to concentrate on developing analytics around carbon-neutral spending and investment, and designing sustainable products, the architecture on which that all hangs is devolved to European banking-as-a-service (BaaS) provider, Solarisbank – which also acts as issuer for

Tomorrow's eye-catching wooden debit card. Solarisbank, in turn, now relies on global financial crime gladiator, Feedzai, to ensure that its systems are robust and compliant in every territory for which Solarisbank provides its banking, transaction and lending services. In an ‘as-a-service’ world, whether you’re a standalone startup, a speedboat launch from a legacy bank, or, indeed, a platform provider, 2020 demonstrated that it makes little sense doing everything yourself. “Around 80 per cent of our accounts have been opened in the last 12 months or so. We are growing quicker, every month,” says Jörg Howein, chief product officer at Solarisbank, who’s overseen the building of a broad product suite, ranging from accounts to cards, lending and digital assets, and to which will soon be added brokerage services. “When we started, in 2016, it was all about going to the market quickly and one decision we took at the time was to make ourselves responsible for transaction monitoring and compliance processes,” says Howein. But as Solarisbank clients rapidly expanded their customer base during the pandemic and traffic across its platform increased, it recognised that approach was unsustainable. “So, last year, we brought in Feedzai as a provider for a specific part of our infrastructure.” At the same time, Solarisbank became the first German bank to shift its entire operation to the public Cloud, migrating its core systems, digital products and databases to the Amazon Web Services (AWS) platform. The two moves, combined, positioned it to scale across Europe in 2021. The bank’s decision to partner with Feedzai has not only relieved pressure internally, but has also given Solarisbank access to financial crime data that could reveal way more about emerging threat patterns than it could ever hope to discover from its own platform. Now, it benefits from insights gained from Feedzai’s artificial intelligence monitoring hundreds of millions of transactions every second of every day.

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: PLATFORM SERVICES any type of bank or for anybody who wants “We’re learning from the very big boys, to embed financial services in any way into because Feedzai has banks that are larger their product offerings – going with a than us on its platform [four of the five provider can take much of that burden off largest US banks included]. That helps us to your shoulders and enable a quick launch. get better quicker, and that’s what matters, “With Solarisbank, you can build and go in the end,” says Howein. to market in six months maximum and, For Pedro Barata, head of customer with us in the background, you will always success for EMEA at Feedzai, there’s mutual be more efficient, because we do this benefit in the partnership. already for close to two million accounts. “For us, internally, it was such a strong proposition and such an ambitious project,” So, in effect, you’re not starting from scratch; you can leverage the efficiency we he says. “And we knew that we could learn have already built and benefit from where from Solarisbank because I think the we have been bank-as-a-service is the investing to create future, and we believe an efficient platform, we can contribute at very low cost, at to that future with the per account/ our technology per card level.” and know-how.” And not just to individual banks, but to the way finance develops more broadly. Pedro Barata, Feedzai “Look at the problem of the underbanked,” says Barata. “You have a lot of people who want access to financial services, and one of the reasons they are not allowed it, I believe, is because banks look at onboarding through a very traditional lens. “One bank we worked with that wanted to go from a 50 per cent acceptance rate to a 95 per cent acceptance rate, came Scale on demand… to realise that if its fraud levels weren’t to Through a combination increase tenfold, it had to redesign its entire of Cloud and BaaS fraud and fincrime strategy. “We’ve seen some people try to build In that way, Howein the technology and processes themselves. argues, even the nichest They realise how complex it is, to not just of neos, with a potential build but also to maintain, because it’s market capped in the not enough to just have something up hundreds or even tens of and running; you need to continue to thousands of customers, innovate, continue to adapt. It’s a huge, can build a business huge resource hog and even well-known proposition that makes tech companies, that might have tried it financial and operational once, are coming to us now and saying ‘you sense, allowing it a foot know what? This is too hard. It takes too on the first rung of a much time. Let’s do it together.” ladder that might Jörg Howein, The same logic applies to using a otherwise be out of Solarisbank third-party banking platform, says Howein. reach. And so, the “Building a bank, in all its dimensions banking-as-a-service model is creating (compliance, risk, the core banking system, a choice of financial service providers as etc), making sure those processes are nuanced and individual as today’s super-stable, super-solid, getting a licence, ‘reimagined consumers’. fulfilling all the requirements, and then the Barata believes the movement towards effort needed to scale such an organisation, banking that’s more representative of make it efficient, automate things on the consumer’s values, as well as a service account and cards side… for a neobank that’s more personal and more intuitive to that is starting in the market – in fact, for experience, is now unstoppable.

BaaS is the future, and we believe we can contribute to that future with our technology and know-how

“If you look at the adoption curve, these banks have moved from that early adopter clique, to the general population; you’re seeing older generations, more traditional generations coming in. I think these banks will continue to gain market share by going into different demographics. This is a very hard-to-stop trend. The fact that you have incumbents launching digital spin-offs is just recognition that this is the new normal.” And the inevitable pressures caused by such growth can be passed back to a platform provider. “Bottlenecks happen on many different levels as you scale,” says Howein. “While with a few thousand customers, you will still be able to handle some things manually, at 10,000 or 100,000, those manual processes don’t work anymore, and suddenly you need to invest all your resources in automating them. At the same time, you need to keep your regulator and supervisory bodies happy, who will be questioning your processes all the time, and forcing you to make them better. “Building and growing a banking business can be a tedious process and going with a BaaS provider can take much of the burden off your shoulders.” The unexpected flush of business during the pandemic, forced Solarisbank to embrace the Cloud, and, in Barata’s opinion, it’s the only way financial organisations can now build for change. “The fact that you don’t have to worry ‘is my database ready for this, is my network scaling at this point, is the monitoring in place or not?’ means everything is much easier,” he says. It’s also much better from a cost management perspective. Over the last 18 months, for instance, banks needed to focus on how to capitalise, how to help clients – not how to change hard disks and scale up databases.” Cloud-based services were a god-send in a time of unprecedented stress and, given that experience, Barata’s advice to any neo is this: “Build knowing that whatever you believe is going to happen, there’s a 50 per cent chance you’re wrong, so you might as well factor that into the technology.”

Building and growing a banking business can be a tedious process... going with a BaaS provider can take much of the burden off your shoulders

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www.fintech.finance

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: SUSTAINABILITY

COOL TO BE KIND Could banks change from being wealth repositories to uber-forces for good, putting them on the right side of history? Yes, if they become digital lifestyle enablers that help save the planet. That’s according to our green finance round tablers as they discuss Mobiquity’s revealing Benchmark For Sustainable Banking report The heat dome over North America. Devastating floods in Europe’s Rhineland. Shrinking Alpine glaciers and polar ice caps. Wildfires ripping through communities along the US west coast. The dangers brought by climate change are clear to see and are having an impact on lives right now, not in some distant timeframe. Flipping from the main news to the business pages, we read of the reaction in the financial sector – the growth of sustainability funds, pledges to cut carbon footprints and taper out investments in fossil fuel production and other environmentally harmful activities. But how committed is the sector to tackling climate change and, equally important, social issues? Digital transformation enabler Mobiquity asked that question of 300 banking executives in the UK, Germany and the Netherlands, and concluded that too many were ‘saying, but not doing’. Its Benchmark For Sustainable Banking report found 78 per cent of British and 91

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per cent of Dutch executives recognised sustainability as an important part of a bank’s business strategy. But less than a third of banks – 31 per cent in the UK, 28 per cent in the Netherlands and 24 per cent in Germany – viewed it as a top concern at board level. This meant fewer than half of banking executives were actually planning sustainability measures across all regions. Among the reasons cited was a lack of environment, social and governance (ESG) framework from governments, on which they could build company strategy. Another hurdle was the current focus on COVID-19. Some executives also admitted their knowledge of ESG was poor.

Specifically, when it came to the environment, Mobiquity spotted a trend among UK banks for championing sustainability but relying on carbon credits to offset their impact, rather than tackling the root causes of emissions. The consultancy, which surveyed executives across the industry, from startups and challenger banks to incumbents, concluded that banks were guilty of greenwashing – making claims www.fintech.finance

of environmental friendliness that don’t withstand scrutiny. It warned that will not only undermine efforts to stall climate change but, as we all become more ‘conscious’, it will make attracting customers and retaining talent difficult. And yet change is happening. In April, the Glasgow Financial Alliance for Net Zero (GFANZ), chaired by former Bank of England governor Mark Carney, announced a pledge by banks and financial institutions with combined assets of more than £50trillion to cut greenhouse gas emissions and ensure their investment portfolios align with climate science. HSBC, Lloyds, Barclays, Citi, Morgan Stanley and Bank of America, and insurers Axa, Munich Re and Swiss Re, were among those https://europe.money2020.com

signing up. Carney hailed the move, backed by US climate envoy John Kerry, as the ‘gold standard for net-zero commitments’, with the ultimate aim of net-zero emissions by 2050. But the challenge is immense – and at risk of being undermined. Environmental campaigners continue to find apparent contradictions. A report by a coalition of non-governmental organisations in March said the world’s 60 biggest banks (including some of the signatories to the Pledge) had provided $3.8trillion of financing to fossil fuel companies since the 2015 Paris Climate Change Agreement. Carney himself has echoed one of the issues that bank executives in the Mobiquity report cited as a reason for inadequacy: that governments must do more to provide an ESG framework for the financial sector to operate within. He argued that, without state intervention, markets would fail to tackle the crisis, adding: “It won’t happen spontaneously within the financial sector... but we can’t get there without it.” In June, there was news of a new UK Treasury unit, the Green Technical Advisory Group, to advise government on setting standards for green investments so that neither it, nor private investors, are duped. Similarly, the EU launched the Sustainable Finance Disclosure Regulation in March, to compel fund managers to disclose information about ESG credentials and the risks that their investments pose to society and planet. UK regulator the Financial Conduct Authority has also seized upon the issue, demanding that fund management firms improve ‘poorly drafted’ ESG fund applications. It also criticised funds for misleading statements, which risk bringing the sector into disrepute, although as the head of sustainability research at Morningstar has pointed out: “It’s not hard to see why asset managers might be tempted to over-claim, because ESG sells.” The public appetite for ESG funds is huge – they accounted for £73.2billion of the UK industry’s assets in May, up from £37.5billion a year earlier, according to trade body, The Investment Association. And, if its members want to continue to make hay while the sun shines too hot, clarity and consistency are key. A report by New York consultancy Duff & Phelps underlined that a single, coherent

framework for ESG investment was vital after it identified 14 different frameworks being used by fund managers, which means neither financial advisors nor private investors can effectively compare one fund against another. So we decided to ask a big bank, a new 'super app for the conscious consumer’, and the authors of the Benchmark For Sustainable Banking report about the sector’s ESG performance. In talking to Ricardo Laiseca, head of Spanish giant BBVA’s Global Sustainability Office, Hristian Nedyalkov, founder of UK ethical payments newcomer Novus, and Mobiquity’s VP of Global Financial Services, Matthew Williamson, two themes emerged: even if the financial industry genuinely wants to do the right thing, change is hard; secondly, digitisation is the only way to achieve it.

Two in five UK banks reported cost savings and customer retention growth through harnessing sustainability initiatives... customers will navigate towards banks that align with their own values Matthew Williamson, Mobiquity

“We are in a transition from concepts that were well-founded,” says Laiseca. "Definitions are changing. Sustainability was defined as inked to company values and close to social responsibility. This is fine, but it’s not enough. Sustainability is about meeting the needs of the current generation, without sacrificing the ability of future generations to meet theirs. It’s about promoting economic and social progress while respecting the natural environment. This is all super-complex and, in my view, the way to do it is incorporate sustainability into your internal processes. A deep transformation programme must be carried out.” He speaks from experience. BBVA declared it had achieved carbon-neutrality last year, joining a club that includes HSBC, Santander and Bank of America.

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: SUSTAINABILITY For Hristian Nedyalkov from Novus, banks are not just in danger of moral failure but also of missing a business opportunity. “A really striking statistic for me is that less than two per cent of total bank deposits are really deemed sustainable, whereas around 50 per cent of people want to be more conscious, associate with brands that do good, and have their money put to good use," he says. But he believes banks can do more than stop funding firms that prioritise profits over the planet. “As per the IPCC’s (Intergovernmental Panel on Climate Change) 2021 Climate Report, unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach. We need more scalable innovations like Novus to help

Less than two per cent of total bank deposits are really deemed sustainable, whereas around 50 per cent of people want their money put to good use

Hristian Nedyalkov, Novus

provide a step change. We can teach people about the power they hold, to harness their money for more positive outcomes.” Novus aims to launch this year as a sustainable alternative to mainstream banks, offering peer-to-peer instant payments, money management apps and a debit card that allows users to donate to good causes. One of its key propositions is informing and teaching consumers about how they can consciously make a positive difference to the world through their lifestyle. A core feature of Novus is an in-app marketplace of sustainable brands that have earned a place there by employing business practices that measure up to the UN Sustainable Development Goals. It uses B Corp certification – which measures a company’s entire social and environmental performance – to validate them. Transparency is a key metric. “The first businesses to adopt ESG principles and put them up next to their financial reports, will be the ones to carve out their brands as responsible companies,” observes Nedyalkov.

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Mobiquity's Williamson agrees that the tide is only going one way, but insists that the role of the bank in society is changing. “Banks and fintechs have a social obligation to their customers, and by extension the wider community,” says Williamson. “And we’ve seen examples of that, with the community banking model set up in the UK last year to provide services to those who can’t travel to the nearest town, and a phenomenal scheme by HSBC, the No Fixed Address account.” The Benchmark for Sustainable Banking report found banks that had adopted sustainable practices experienced numerous business benefits, including cost savings, customer retention, growth, operational efficiencies and improved brand reputation, with more than 40 per cent of banks across all three countries benefitting from some or all of those. That chimes with recent research by investment giant Fidelity International, which claimed that businesses with high ESG ratings proved more resilient to COVID-19 and the resulting lockdowns. “So, we’re seeing a market shift,” says Williamson. “Customers will increasingly navigate towards banks that align with their own values.” There was another lesson from COVID, too: the huge swing to digital engagement had a profound impact on the environment, contributing to a 10.7 per cent reduction in UK carbon emissions, according to government figures. “Companies leveraged digital technologies to replace carbon-emitting activities,” says Williamson. ”So there is a chance now to frame sustainability as an opportunity to solve business frictions. Awareness-building is needed, internally, to communicate the far-reaching environmental and operational benefits.” Laiseca agrees the pandemic proved sustainable finance and digital transformation are a ‘win-win alliance’ that could help the financial system tackle the environmental crisis. “It’s also about capturing business opportunities, and this is BBVA’s focus right now. In our case, we have doubled our commitment to green finance, with a target of channelling around €200billion up to 2025, to fight against climate change, as well as promoting inclusive growth in some emerging markets. There are opportunities for expansion – renewables, sustainable

housing, sustainable mobility – as we see a transformation in the way we consume, in the way we produce, in the way we live. Banking will be a profitable business if we participate in this fully. New sectors and new financing for those sectors will be a key driver of this economic transformation.” But he points out that ‘the sustainable transition requires new information that financial institutions don’t have internally. New data tools will be part of the transition’. All this data, of course, must be processed somewhere. In Ireland – a data centre hot spot – the government has predicted this will consume as much as 31 per cent of the country’s electricity by 2027. Nedyalkov’s business offsets its third-party data processing, while Williamson points to a Swedish initiative that uses the heat generated by Stockholm Data Parks to power local homes. But he insists best practice is not just about carbon offsetting. “Our research has identified this golden opportunity for banking and the finance industry to drive sustainability through digital technologies. We call it sustainable digitisation. I think banks are starting to realise that digital needs to be viewed as part of their sustainable banking strategy.

The sustainable transition requires new information that financial institutions don't currently have internally, so new data tools will be a major part of the transition

Ricardo Laiseca

They’re not two separate initiatives. We see that two in five banks are using intelligent automation and digitising all their paper processes; some are helping customers be greener by encouraging less travel to the branch and completing the customer journey through an app or online; others are working with suppliers and partners to extract maximum value via machine learning and data centre configuration.” The last word goes to Laiseca, whose bank is changing its entire business model to embrace sustainability: “It can be a real game changer. It provides an opportunity to reshape the whole of finance.” www.fintech.finance

: INTEROPERABILITY Smooth passage: ISO 20022 will unlock greater choice of payment system

Ridingtherails Interoperability between payment systems might be the defacto outcome of them adopting a common messaging standard, but it’s the future business models that ISO 20022 could unlock which really interest Cyrus Bhathawalla at JPMorgan Chase and Bottomline’s Edward Ireland “People don’t generally do things for free; they do it to make a profit, they do it to make money. And that means payments exist everywhere we look, in almost every corner of an organisation.” Thus Cyrus Bhathawalla, global head of real-time payments at JPMorgan Chase, a bank that every year handles 27 billion transactions to a value of US$1.4trillion on behalf of its clients, sums up the challenge and the opportunity that exists if you’re in the business of transactions. You don’t have to tell him that the world is in the midst of a payments revolution, as digital rapidly replaces cash or cheque. “The whole mantra of our leadership is ‘any payment, anywhere, anytime’,” Bhathawalla says. And JPMorgan Chase is moving rapidly to achieve it. By 2024, global digital payment volume is expected to grow by 64 per cent to 1.1 trillion transactions across consumer segments, borders and currencies. And, as the leading payment provider in the US for the seventh consecutive year,

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according to the 2021 Nilson Report, JPMorgan Chase is keen to secure an even more significant slice of that pie, skidding transactions ever faster across whatever rails are most suitable for a particular user and circumstance. “Real-time payments is one of the higher priorities in our wholesale payments business, it’s probably one of three top things that hit Jamie’s [Jamie Dimon, CEO] desk on a frequent basis,” says Bhathawalla. “We are expanding rapidly, growing our product set quite aggressively and applying real-time payments, in the correct use cases, across our treasury services product suite.” Among a dizzying range of digital payment options for its corporate and smaller business clients, the bank recently launched a pilot for a real-time payments tool called Request For Pay, which lets corporates send payment requests to the bank’s approximately 57 million retail customers who use its app or website, cutting the cost and time it takes for those companies to get paid. And its

QuickAccept service, introduced in 2020, lets businesses take card payments, either through a mobile app or a contactless card reader, and merchants see sales hit their accounts on the same day. But that’s just scratching the surface of what might be possible, following the universal adoption of payments messaging standard ISO 20022, a data-rich format that is being embedded in global financial markets with the aim of improving not just speed, but also transparency, efficiency and – what’s often thought of as the holy grail of money movement – interoperability between both domestic and international payments systems. It will, says Edward Ireland, ISO 20022 programme lead for payments technology firm Bottomline, create opportunities, both known and as-yet unknown, for financial services companies like JPMorgan Chase – for them to even, ultimately, remodel their payments businesses. “The key thing is what new business ideas are going to come from ISO 20022,” says Ireland. “We have some ideas… we www.fintech.finance

can see benefits around fraud monitoring and sanctions screening. We can get better visibility around foreign exchange; we can link through to trade documentation; we can see advantages in being able to offer credit off the back o f transactions. But I don’t think we necessarily know all the benefits that are going to accrue from ISO 20022. “What we do know is that if you put in place analytics to review the information that comes with those messages, then the business ideas will flow. What we do know is that, if you don’t do that and try to do some sort of mapping exercise instead to reduce what you have to process using ISO 20022, then you won’t see that information. And, if you don’t see it, then you won’t know what more you can do with it, and you’ll miss out on the opportunities that exist.” “That’s the most honest response anyone can give,” agrees Bhathawalla. “The reality is that this is not a traditional return on investment for an institution; it is not easy to see the long-term benefits from a dollar perspective.

Interoperability no longer becomes just a question of connecting systems together

Cyrus Bhathawalla, JPMorgan Chase

“I agree that there will be benefits in reconciliation, automation and reducing manual operations inefficiencies, where you have people ticking and flicking registers. What’s more exciting, though, is in the areas of data analytics, forecasting and modelling, because you’re consuming, in some cases, a hundred times more data than you would in a traditional, batch, automated clearing house-style payment, where you’re limited to, in the US, somewhere between 16 and 18 characters in the payment message.” That will unlock, he believes, a whole new revenue-generating opportunity for banks like his. If it knows the precise reason for a payment, it can offer a customer relevant, related financial products – for instance, insurance or warranties on the back of a car purchase. https://europe.money2020.com

“When you remove the friction in payments, all of a sudden they become an enabler of value-added services that banks, fintechs, other third parties and retailers can offer,” he explains. “And, as soon as that becomes the case, it will open up the market to a significant amount of change and evolution.” Digital-first organisations are primed to capitalise on that; established financial players will have to work through a significant infrastructure upheaval first, observes Ireland. “This is forcing a real root-and-branch upgrade, which is a good thing because what we’ll get out of this is solid foundations for payment solutions of the future,” he says. “Then, it won’t be payment processing that’s talked about, but transaction processing – the payment will simply be part of it. Today, in a BACS payment in the UK, for example, all we get is a line of somebody’s name and how much money is being paid to them – that’s it. What we’ll see in the future is the underlying transaction, the terms, when it’s going to be paid, what it has to be paid against, the foreign exchange that might go with it, and so on.” According to Bhathawalla, this will be the real transformation. “Interoperability no longer becomes just a question of connecting systems together,” he says. “While that may very well be the long-term outcome we achieve, I think we will see players who participate in more than one network becoming the pivot points for interoperability. “JPMorgan is part of Zelle, we are part of The Clearing House’s RTP network, and we will be part of the Fed’s FedNow network in 2023, the Federal Reserve’s new real-time payment environment – we’re part of their pilot right now. And, as a result, we become this pivot point – the top of the pyramid, if you will – where transactions can flow to us, from our clients, and we can then help serve them across multiple rails. “We shouldn’t be selling rails to clients; we should be selling a payment product that’s fast, that carries a certain amount of data, that meets their specific requirements, and then we determine, on the basis of account reach, cost, and functionality, which is the correct payment rail to use.

“So, interoperability is actually more about how we service our customers, reaching the correct endpoints with the right functionality.” Ireland is already seeing that shift from ‘which rail and product?’ to ‘what’s the customer criteria for this payment?’, outside of the US. “We’re seeing customers moving away from telling people ‘this is a CHAPS payment’ [in the UK] or this is a SWIFT payment’. They’re just saying ‘this is a fast payment’ or ‘this is a cheap payment’, then helping them to decide which rail is most appropriate in the background.” But it’s nevertheless true that the standardisation offered by ISO 20022 over the next couple of years is going to make it far easier to manage that process In that way, he agrees with Bhathawalla that it will be the banks and other payment service providers triaging transactions and selecting the most appropriate route, rather than market infrastructures moving significantly closer, which will ease the passage of a transaction, both domestically and across borders.

ISO 20022 is forcing a root and branch upgrade, which is good because what we’ll get out of this is solid foundations for payment solutions of the future

Edward Ireland, Bottomline

“We’re already seeing enormous consolidation in Europe, with the drive towards [the pan-European instant payments schemes] Target Instant Payments (TIPS) and EBA Clearing’s RT1. P27 is another initiative, this time in the Nordics, which is breaking down the barriers between countries and the settlement of different currencies,” he explains. “But when we go beyond those initiatives and look to solve the customers’ pain points, we find it’s the role of the banks and the payment service providers to be the glue between regions. And I don’t see that changing.”

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A compelling offer: Banking Circle settles six per cent of Europe’s B2C e-commerce

Squaring the PSP circle The ‘super correspondent bank for the new economy’ has been signing up PSPs so fast that it’s now settling six per cent of all Europe’s B2C e-commerce transactions. We asked Banking Circle’s CIO, Michel André, what’s attracting them Realising improvements in settlement times, reconciliations and processing is a business imperative for payment service providers (PSPs) facilitating cross-border transactions on behalf of their clients. But delivering it via a network of rails and a shrinking international correspondent banking system where every foreign exchange (FX) conversion and handling charge erodes your margin, https://europe.money2020.com

is challenging – and diverts resource from more profitable endeavours, such as data insight and enrichment aimed at increasing conversion rates and improving efficiency for clients. Which probably explains why PSPs have been forming a queue to join Banking Circle’s ‘super correspondent bank for the new economy’. Among them are an increasing number that lift and shift payments for e-commerce marketplaces – including muscular outfits such as Alibaba and Shopify and, recently, the Dutch Online Payment Platform (OPP), which currently serves more than 170 such consumer sites across Europe and is looking to expand its geographic reach. Having access to real-time local settlement in 25 currencies, via one bank that has eyes on the ground in terms of compliance in every territory, is a compelling proposition for such businesses. It’s certainly helped to build Banking Circle’s transaction volumes considerably over the past two years.

Now working with more than 150 financial institutions and looking to process $250billion of payments by the end of 2021, it already settles six per cent of Europe’s B2C e-commerce payments on behalf of banks, fintechs and PSPs. Payments has always been a scale business – more so since mobile pay, various contactless payment regulations, a pandemic and a growing trend towards spreading larger transactions over buy now, pay later agreements has considerably increased the number, and lowered the individual value, of transactions. Banking Circle’s CEO Anders la Cour made clear, at a panel discussion hosted by Paris Fintech Forum at the start of this year, that building volume was a priority for businesses like his. And it’s achieving it. As fast as Banking Circle onboards banks and fintechs – it has no direct relationship with individual SMEs and corporates – it is also making technology links with central banks and local settlement schemes to attract more.

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: PSPs In addition to SWIFT, Faster Payments, CHAPS and SEPA, in July 2021, through a partnership with SIAnet, the low-latency fibre optic network provider, the bank launched a new instant payment service, connecting to Europe’s TARGET Instant Payment Settlement (TIPS) service. It means its European customers can execute instant payments in less than 10 seconds, up to a maximum of €100,000 per transaction, 365-days-a-year, 24/7. While TIPS currently only settles transfers in euros, other currencies can be used for settlement if the central bank concerned is connected to the platform and is willing to add its currency. This year, Banking Circle also joined the Nordics’ soon-to-launch cross-border payments network, P27, saying that it saw membership as ‘a crucial piece of the jigsaw to remove the cost and time currently experienced in domestic and cross-border payments to and from the region’. “Banking Circle specialises in this specific segment, building a super-correspondent network, allowing you to connect to local payment rails in a seamless way by easily integrating this into your core payments system,” says Banking Circle CIO Michel André. “It can help banks and PSPs meet their client demands, based on a Cloud-based, decoupled architecture, built for driving low-cost, real-time, cross-border payments. That’s its sole purpose. “Instead of going through the old correspondent banking network, where a cross-border payment might take three days to go from you to the final destination, because it jumps through multiple hoops, if you partner with Banking Circle, it takes one jump and reaches the destination almost immediately, via a single API. And it’s our clients’ clients – the merchants – that are the ultimate beneficiaries of that.” That was certainly front-of-mind for the Netherlands’ OPP. “The marketplaces we support are used by thousands of merchants who make and receive numerous payments in and from several countries, and in different currencies, every day. It is therefore crucial that buyers can withdraw funds to marketplace sellers as quickly as possible, and that traders’ profits are not reduced by fees or FX costs. By working with Banking Circle, we are capitalising on its ‘real-time’ payments proposition, which cuts out cost

and time,” Maurice Jongmans, CEO of Online Payment Platform, commented following the deal. In other words, merchants get their money faster and pay less for the privilege, and, as marketplaces are where many of them congregate, such tie-ups serve Banking Circle’s long-held ambition of empowering the world’s SME economies.

SUPPORTING GLOBAL SMEs Anders la Cour has described his company as being on a mission to improve small business’ access to global financial services, and to give firms the freedom to trade wherever they see opportunity. “We believe it’s our duty to help make this a reality,” he said. “We have built a solution that allows businesses like Online Payment Platform to give their marketplace customers access to transparent local ONE FOR ALL: E-commerce marketplaces are a route to SMEs

It’s our clients’ clients – the merchants – that are the ultimate beneficiaries

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Safenetpay, which provides its customers – mainly UK SMEs – with a single platform that offers multi-currency accounts, FX, card payment processing and merchant accounts; and mobile payments solution provider HIPS Payment Group. All of the above cited the ability to access local clearing through one connection, and improved internal efficiency, as key reasons to partner. And, as they grow, Banking Circle’s Cloud-based architecture will flex with them and respond with bespoke solutions, says André. “Since we have purposely built our payment infrastructure and payment rails in the Cloud, in a decoupled, event-driven manner, we can cater for flexibility, build new services and make those available for our downstream clients. You might hear that a primary driver for building something that’s Cloud based is cost, but

payments and collections across borders, without the need for a physical presence or a relationship with a correspondent bank in that region. And that means increased speed of settlement as well as reduced cost.” Smoother, faster reconciliation is achieved through dedicated multi-currency virtual IBANs in multiple jurisdictions, which the bank promises will improve reconciliation, consolidation, risk management, operational efficiency, transaction processing and liquidity management. Other notable new PSP clients over the past 12 months are PPRO, the UK-based payments infrastructure provider; Paymaster24, the full-service, multi-channel gateway for local e-payment solutions;

I think the most important thing you gain is the flexibility to build things on a higher level than when you start with your own servers and networks. You can focus on building services on top of a secure, state-of-the-art technology base, which you have in a Cloud environment, from the get-go. And, because you start at a higher level, you can move faster and experiment.” With an increasingly competitive – not to say predatory – payments landscape, PSPs need to create the headspace and resources to differentiate themselves with added-value services, putting Banking Circle in a sweet spot. Not even a global pandemic could stop the growing tide of global transactions – total volumes fell nowhere near as far and recovered much quicker than the World Bank predicted. The logic of using one utility to process them all is hard to refute. www.fintech.finance

: LEGACY & PARTNERSHIP

Striking a balance Striking Legacy relationships and innovative technology, infrastructure and front-end services, uni- and multi-banking... incumbent institutions must weigh up all these and more, as Dennis de Weerdt and Kerstin Montiegel from Deutsche Bank discuss with ProgressSoft’s Carole Elias For decades, incumbent banks have provided a regulated, safe environment for a business to operate in. And, as the complexity and geographic reach of a business increased, it often resulted in the corporate treasury managing not just a single but several banking relationships.

Each aware that there was more than one partner in this marriage, institutions hunkered down on getting ever closer and more dependable. But, while critically important, that steadfastness will not, in itself, be enough in future, according to Dennis de Weerdt, Deutsche Bank’s global of client service, implementations and client connectivity products. In his view, institutions like his own must offer clients value-added digital services (with real-time

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as standard) that are multi-bank by design. That doesn’t just help solve a headache for the client, but, particularly in the area of payment fraud, it is also very much in the interest of the financial institution offering the technology. In March this year, Deutsche Bank entered a strategic partnership with Treasury Intelligence Solutions (TIS) to develop and distribute multi-bank services for corporate treasury and finance. Their first focus is on providing an innovative payment fraud prevention plug-in, using TIS’ Cloud platform and leveraging the bank’s long-established expertise in keeping client money safe. With payment fraud becoming a major issue for CFOs and finance departments, the software service will extend beyond the payment data of individual customers to

mutualise the knowledge of all corporates using the service, while the shared data remains anonymised. The regtech solution will help improve the detection of potential fraud, before the payment instruction even leaves a client’s system – thereby ticking de Weerdt’s two essential requirements for corporate banking solutions of the future: that they add value to the client’s business by embracing the idea of multiple, concurrent banking partnerships. “Multi-bank solutions are the key things that corporates are looking for,” he explains, adding that it doesn’t mean CFOs value the personal relationship they have with any one bank less. “They would still like to have core advisory and value-add conversations on a person-by-person basis. That’s something that will continue to exist, in my view,” says de Weerdt. www.fintech.finance

It’s one of the many ‘balancing acts’ that banks must perform, he adds – in this case between providing best-in-class digital as well as personal relationships, because these institutions are still seen as ‘a trustworthy environment for safe conversation, safe instruction, and where payments are executed in a safe way’. “We are turning the corner in achieving that balance with the right multi-bank solutions, working with partners to make it happen,” says de Weerdt. “It’s in that mix that the future of client differentiation and client satisfaction will exist.” Crucial to achieving that is what he describes as a ‘multi-purpose middle layer’ where normal electronic banking channels, sit comfortably next to two-way API integrations with third party providers, and direct connections between the bank and a client’s enterprise resource planning (ERP) and treasury management systems (TMS).

Multibank solutions are the key things that corporates and clients are looking for

Dennis de Weerdt, Deutsche Bank

“You can see that the middle layer is where the real difficulty sits, on the one hand, but also the opportunity if you handle it really well,” says de Weerdt. “Banks should focus on going beyond traditional banking services,” agrees Carole Elias, business development and strategy officer at payment solutions provider ProgressSoft. It has just launched a digital banking platform over which banks can offer both corporate and retail clients the ability to manage a range of treasury and payment functions, wherever their accounts reside. “Because the more banks are in touch with their customers, the more likely they are able to retain those customers or attract new ones,” Elias explains. She urges banks to be ‘very meticulous and careful, and focus on the flexibility and resilience of the infrastructure they choose – by utilising smart, modular solutions, built on microservices architecture, for example, for the middleware’. “These are the engines connecting the front-end channels of the banks with the bank end, and you need to be able https://europe.money2020.com

to upgrade them to ensure that whatever will be needed in the future can be seamlessly and easily implemented.” Kerstin Montiegel is head of digital client access channels at Deutsche Bank, and says that when it comes to payments, just looking at the number of touchpoints clients have with banks, means it’s critically important that they get this part of the relationship right. “Client access channels are really the most tangible, day-to-day insight for us into what they need – our cash portal alone transacts €600billion of transactions every month. And what we see is that clients really want us to strike the balance between the old and the new. “Clients want business continuity with a connectivity backup solution – which has obviously been very important during the pandemic. They want us to continue to ensure that they can handle large volumes, that we are there 24/7, and that we can help them also in the conversion services. When it comes to the new, they really want easy ways to access and consume our products – at any time and anywhere.”

Our aim is to help clients on their own digitisation journey, when it comes to driving their own efficiencies: reducing their manual work and improving integration with banks

Kerstin Montiegel, Deutsche Bank

One such tool to help them do that is digital signatures, which Deutsche Bank originally introduced in 2018 to make it easier for corporate clients to do business with the bank by eliminating a lot of the time and complexity involved in document and contract signing, especially in areas where the bank did not have a physical presence. Having piloted the service in the Benelux region, digital signatures using DocuSign technology were extended to countries across much of Europe, the US and Asia Pacific where Unilever began using the solution for its global cash management activities with the bank. Daimler soon followed. Deutsche Bank has since said it's keen to extend electronic signing in other

areas of its corporate clients’ businesses. “Our aim is to help clients on their own digitisation journey, when it comes to driving their own efficiencies, reducing their manual work, improving integration with banks,” says Montiegel. When it comes to payments, though, she believes that innovation is best achieved at a network level. “Banks already co-operate over payments, just look at SWIFT,” says Montiegel. “With more standardisation and more joint innovation, payment processes will be driven very efficiently – which has benefit for the client because when banks co-create, they can spend the money they’ve saved on other new solutions.” Elias suggests that while, on the face of it, digital challengers are better equipped to respond to client needs, with the right technology choices incumbents are in an even stronger place. “From our perspective, neobanks benefit from the digital framework that they have built to cater for these new market needs,” she says. “Traditional banks would require transformational efforts to be able to achieve the same, but solutions such as ProgressSoft’s Payments Hub exist that are able to achieve it with a seamless shift to legacy systems and minimal disruption to their existing infrastructure.” In fact, being the white beards of banking when it comes to regulatory experience – dealing with clearings at a local level in particular – means challengers, even if they have the tech, increasingly defer to them for advice, says de Weerdt.

Banks need to be very meticulous and careful, and focus on the flexibility and resilience of the infrastructure they choose

Carole Elias, ProgressSoft

“Often they seek our cooperation. Five years ago, we would maybe have seen that as a threat, but those partnerships are growing. That’s also why I believe multi-bank solutions, the front end and the infrastructure, and the regulatory and security components, all need to go hand in hand. It comes back to that balancing act.”

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The first of the UK’s high street banks to launch an API-driven marketplace for customers, TSB is leveraging its Cloud-based platform to reap the rewards of open banking, says Jason Wilkinson Brown Back in 2018, TSB must have thought the sky had fallen in after a move, heralded as the start of a brave new world, ended up nothing short of an IT, customer service and PR disaster. The UK bank’s migration of its five million customers and their 1.3 billion records from a banking platform it was renting from former owner Lloyds Banking Group, to its new state-of-the-art platform developed by its Spanish parent company Sabadell, left nearly two million customers unable to access their accounts. As a result, TSB made a thumping year-on-year loss. At the time, it said that the ordeal

would make it stronger. Fast-forward three years and the evidence very much points to that being the case. TSB is now widely acknowledged as having one of the most technically-advanced (and resilient) platforms of any of the UK’s high street banks. A jewel in its offering is the new TSB marketplace – a conduit for customers to access a number of third party-provided products and services, designed to make personal and business customers feel more confident about their money. TSB was the first of the mainstream banks to launch such a service, but the concept was one that was very familiar to its head of digital propositions, partnerships and open banking, Jason Wilkinson Brown. He’d previously spent time with the UK’s Starling bank, which made the marketplace concept central to its challenger model. “In essence, we have a one-stop shop, where the approved partners we work with can help customers improve their financial wellbeing and have better money confidence, outside of traditional banking products and services,” explains Wilkinson Brown.

Giving customers greater choice and freedoms ‘points to us recognising that the smartest ideas aren’t always inside TSB’, he adds. “By having a marketplace, we can bring best-in-class propositions to our customers, both retail and small business.” TSB had originally introduced a lending marketplace in partnership with Funding Options, just for its small business customers, in 2018. This year, it teamed up with ApTap to help personal customers save money on their bills; Wealthify to help them invest, and Legal & General to offer them life protection, while also giving businesses access through its app to Square card payment services and Enterprise Nation support. The timeliness of TSB’s marketplace can be seen in the context of changing customer needs, prompted by the coronavirus pandemic. That proved to be the ‘rocket fuel’ propelling TSB’s work with partners, according to Wilkinson Brown.

lays out its stall

https://europe.money2020.com

FintechFinancePresents–

: APIs ONS figures, released in April, showed that there have been distinct winners and losers in the UK population as a result of the uneven economic impact of the COVID-19 crisis. Many have suffered financially through changes in job circumstance, while others have been able to save money (through reduced spending) and are, on the face of it, better off. The first providers to appear this summer in the personal banking TSB marketplace, says Wilkinson Brown, were selected to address both these changes of circumstance and they are already delivering results for customers. “We’ve seen the pandemic widen the social divide in the UK over the last 18 months. Unfortunately, due to the pandemic, a number of customers had lost their jobs or had been furloughed and were financially finding life tougher. At TSB, we needed to help them find opportunities to save money, and therefore we stood up the subscription management partnership with ApTap, where they could connect their accounts using open banking, get that really quick understanding of their money and where they were spending, and identify opportunities to save. So, those forgotten gym memberships, or Spotify or Netflix subscriptions, could be picked up, but also, crucially, they could compare their broadband, gas and energy providers, and look to save some money there, too. Through that subscription management partnership, we’ve seen, on average, customers save £170 on their bills, and one customer saved as much as £400. “Then you have those customers who were lucky enough not to be put on furlough and carried on working. These people also had changing needs because they were saving more, so our partnership with Wealthify helped them put that extra money into, say, an investment or junior ISA. “And we’ve a partnership with Legal & General around life insurance because it’s important we help customers not just for today, but also for the long term. “We’ve more partnerships in the pipeline in the personal banking space. There’s an exciting number of things we want to do.” For business customers operating in the new economy, post-COVID, Square offers not just secure mobile and contactless payments, online and in-store, with automated admin, but following its acquisition of buy now, pay later leader

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Afterpay, a way for them to keep pace with customer expectations for greater buying options. Small businesses can also join Enterprise Nation’s community of fellow owners and industry pioneers who share their knowledge and support. The marketplace is a win-win for all concerned, then – customers get added-value services, the providers get top slot on a mainstream banking platform with all the credibility that accrues, and a route to five million potential new customers, while TSB gets to strengthen its relationship with account holders by providing them with a one-stop shop. But for the bank, there are also existential market forces propelling this stage of its evolution. The pandemic served to consolidate the hierarchical position of the UK’s big four banks – latest full-year earnings reported by HSBC, Barclays, Lloyds and NatWest revealed that their domestic customers deposited £221billion of extra cash. That will not be lost on Tier 2 institutions like TSB. Open

By having a marketplace, we can bring best-in-class propositions to our customers, both retail and small business banking, upon which the marketplace concept rests, was driven by regulators precisely to prise market supremacy away from those behemoths. And Wilkinson Brown points to another, broader trend that might also influence strategy – that of non-financial organisations morphing into quasi and even fully-fledged financial services companies. “We all have to be increasingly customer-focussed operations,” he says. “Southeast Asia and the Far East are really good examples of where financial services is heading. Look at Grab – they initially started off as a ride sharing firm and now they have a super app that covers financial services, groceries and taxis. It’s a reflection that you always have to be mindful of how things change, and how customer’s needs are evolving.” TSB’s commitment to change and innovation is evidenced by its willingness to work with partners, large or small, and the fact that it has signed the Fintech Pledge, the government-backed framework

for partnership working between bigger banks and small technology suppliers. Wilkinson Brown is sympathetic to fintechs who’ve had a poor experience of working with much larger companies. “The amount of times we speak to fintechs who have gone into a company really excited, do a pitch, and the company says ‘yeah, that’s great, let’s do something’, but they never hear back. So, they go on this perennial first-dates cycle. We don’t work like that. If we like what we see, then we will take the fintech through our partnership curation framework. If it’s a very young startup, we’ll put it onto our TSB Labs programme and give it access to people inside the organisation, to shape its growth, get insights and give it an idea of what working with a bank is like. We did that with four companies last year and one has progressed to a full customer launch. “In that process, we reduce the risk by doing a staff pilot followed by a small customer pilot – and throughout we stop, measure and learn.” So what more can customers – and indeed fintechs – expect of the marketplace? “The good news is that TSB’s target is to deliver a number of partnerships per quarter, so we can guarantee the marketplace will be growing,” says Wilkinson Brown. “I think it reflects that we’re really pushing forward, as an organisation, to be innovative.” That’s not to say that TSB has forgotten its roots as a community bank. While, in September 2020, it announced it was closing 164 branches, it pledged to increase investment in the remaining 290. “There will be some customers for whom the digital marketplace isn’t appropriate, so it’s important we’re multi-channel,” says Wilkinson Brown. For them, TSB is planning a pilot, using open banking data to trigger money confidence conversations in-branch. Self-serve or assisted, Wilkinson Brown is confident that customer choice will increase rapidly as the marketplace expands. “We’re on a really strong transformation platform. We stood up a Cloud-based data store, we stood up our open banking APIs, which means it’s easy for us now to introduce premium, private and public APIs to integrate with partners. Open banking is the best way to quickly introduce functionality with customers – that’s what it was designed for.” www.fintech.finance

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