Who’s pulling the strings?

Who’s pullingthe strings?

Banking, as a concept, has been fragmented, brought back together and is now being offered out to consumers via a new breed of super-apps. We asked

TSB Bank, Curve, and SunTec Business Solutions who’s in control now as the industry moves towards a marketplace-based approach – banks, fintechs or Big Techs?

As the role – and perception – of a bank changes profoundly, the more forward-looking financial institutions have responded by seeking maximum value from their relationships with the fintech community, while at the same time keeping an eye on the Big Techs and other non-financial organisations that are muscling into their space, thanks to the rise of embedded finance.

Edinburgh-headquartered TSB is one such bank. Under its new CEO and former chief customer officer, Robin Bulloch, it’s signalled not just a desire to adopt a more customer-centric approach, but to become a super-app, partnering with a carefully curated range of fintechs to provide a suite of value-adding services to its five million users.

In March of this year, software intelligence company Dynatrace announced that TSB will use its platform to accelerate innovation and underpin its drive to become an all-digital organisation. Having built a multi-Cloud banking platform, Dynatrace is now providing AI-powered answers and intelligent automation, aiding optimisation of front and back-end applications for the bank.

In September, the bank launched the TSB Marketplace on its mobile app, a new service connecting customers to fintechs to help them make more informed financial decisions.

TSB Marketplace currently hosts 11 fintechs across both retail and business banking, with services that range from investing to saving and borrowing. Reflecting changing consumer behaviours, it helps retail customers to focus initially on saving money, then logically moves them on to growing their investments through a holistic approach to the customer lifecycle and the combined competencies afforded by different partnerships.

“I came across some figures recently that showed 67 per cent of consumers now want a super-app to consolidate all of their digital activities,” says Aruna Bhalla, head of open banking and partnerships at TSB.

“That’s huge. It’s on the banks now to

In control: Banks could dictate their future role

Of the large banks, with more than $1billion in revenue, Gartner predicts that more than 30 per cent will start offering BaaS in the next two years

Amit Dua, SunTec Business Solutions

make sure they’re attractive for partners to work with. At TSB, we’ve spent the last couple of years setting up the foundations for that, introducing slicker contracts and onboarding processes, and keeping partners engaged with regular sessions, bringing them into our camp to talk about what’s needed from a regulatory and legal perspective. “TSB Bank draws on Google Salesforce and e-commerce Cloud technologies to power its Marketplace. The Salesforce link allows TSB to conduct tests, provide bundles and vary pricing, as there is no reliance on in-house technology.

“By being able to offer bespoke pricing, we are trying to give customers more while also using our brand and our credibility to be able to allow customers access to a variety of innovative partnership offerings,” explains Bhalla.

The TSB Marketplace is a prominent example of the evolving relationship between banks and fintechs, which continue to team up to offer innovative propositions. By working together, fintechs have the opportunity to grow, learn, and gain confidence while leveraging the clout of established banks to put their services in front of consumers looking for financial guidance.

“Banks have got access to the customers, a reputation built up over years, and the regulatory licences,” explains Bhalla. “A lot of hard work and effort has gone into that. We can say to fintechs ‘look – we’ve got access to a huge customer base, but we recognise our customers want choice and convenience’.

“Banks need to do this quickly, though. At TSB, we’ve recognised we need to offer a marketplace – an ecosystem of goods and services – to our customers because they expect it.”

In this way, she believes, banks can re-model themselves as banking-as-a-

Service (BaaS) providers, and pull the financial strings, orchestrating selected fintechs to help them enhance their customer experience offering and plugging in everything from rewards to personal finance management tools, while attracting and retaining more customers to maintain their under-pressure balance sheets – TSB itself turned in a good performance in H1 2022.

This approach is a trend that SunTec Business Solutions, one of the world’s leading relationship-based pricing and billing companies, has picked up on.

Established in 1990, SunTec sets out to create value for banks and other enterprises through its Cloud-based products, enabling them to adopt customer-first strategies, increase revenue and deliver far better customer experiences.

“There are three buckets of players emerging in the BaaS ecosystem,” says Amit Dua, president of SunTec Business

Sixty-seven per cent of consumers now want a super-app to consolidate their digital activities… that’s huge. Banks must ensure they are attractive for partners to work with

Aruna Bhalla, TSB Bank

Solutions. “Firstly, the banks themselves – and of the large banks, with more than $1billion in revenue, Gartner predicts that more than 30 per cent will start offering BaaS in the next two years.

“Then there is a second set of players, which are the fintechs or enablers, who can use their technology and customer insights to provide a personalised and holistic customer experience.

“Finally, there’s the customer, who benefits from more choice and that integrated experience.

“For this ecosystem to flourish, every player must be rewarded appropriately for its contribution. So, are the service level agreements (SLAs) being adhered to? Are the contracts between partners being appropriately managed and monitored? But, if the players work together well, then they can create a frictionless experience for the customer.”

Exploring BaaS capabilities can help banks like TSB to rebuild much-needed revenue by maintaining and deepening their own customer relationships through better, digitally enabled UX.

Perhaps less anticipated, though, is how it is potentially also opening up new possibilities for them to act as financial service providers for the biggest of the Big Tech names.

Some believe the Amazons and Googles of the world are less interested in usurping banks than may have originally been expected. Not wanting the regulatory hassle, they may instead coalesce with banks to provide the payment services they need, while continuing to bring the customer experience delivery and flair they are so adept at. This could be a marriage made in heaven.

“I think, and hope, they recognise the power of working together,” says Bhalla. “They’re the experts in their field, and we’re the experts in compliance, regulation and protecting our customers – so there’s so much value it.”

I don’t know why Google didn’t become a bank, but my suspicion is that they don’t fancy that style of regulation

Paul Harrald, Curve

Consumer Duty being placed on financial services providers from next year, based on the principle that firms must act to deliver good outcomes for retail customers, will likely accelerate a desire for those partnerships, adds Bhalla.

“I don’t know why Google didn’t become a bank, but my suspicion is that they don’t fancy that style of regulation,” says Paul Harrald, group CIO of ‘financial super-app’ Curve. “There is a significant difference between the culture at a technology company and the culture at a bank. The idea of agile software development, for example, doesn’t fit well with operational risk and the duty of care that banks are bound by.

“This makes it very difficult for banks to adopt the kind of open-innovation style that‘s common in the technology world. It’s not a lack of hardware or a lack of skills, it’s just not that easy to make it work in a regulated environment,” he adds.

Curve is already seeking to do something similar to TSB. The fintech’s mission is to become a one-stop shop for all the financial needs of a consumer, bundling their money together into ‘one smart card and an even smarter app’.

So, if competition has lessened from the Big Techs, is it increasing from fintechs like this – can they be friend or foe?

“It’s true that customers no longer necessarily want to be served by single institutions; they want choice,” observes Harrald. “And I think we all agree that modern technology has enabled that in financial services. The entry costs are much lower, so what comes along with that is this concept of an ecosystem that’s served in the background by banking institutions.

“Curve was founded on the use cases of trying to make sense of this ecosystem; to address the tyranny of choice – which is, if it’s relatively inexpensive now to enter retail financial services because you can use the regulatory permissions and the balance sheets of banks, then you have a plethora of fintechs available to the consumer.

“Curve doesn’t want to provide retail financial services; we just want to make them pleasantly accessible and comparable.”

Last year, Curve closed the largest-ever equity raise on Crowdcube, breaking multiple records during the campaign. It’s using these funds, and its recent Series C round, to execute its ambitious growth strategy, focussed on international expansion and product innovation.

For example, Curve recently launched its suite of Autopilot features that help customers take more control of their money management. These features include the appropriately-named ‘anti-embarrassment mode’, where customers can decide which debit or credit cards serve as an automatic back-up, just in case their default card gets declined at the point of sale.

“I love the idea of a financial services marketplace,” continues Harrald. “It doesn’t really exist, outside of Lloyds and TSB.

“Our goal is to create a marketplace in the same way. We want to provide customers with a way to make sense of, and search through, the explosion of fintech choices. However the data we gather should make us attractive to other fintech partners as well, because they will get more suitable customers.”

It seems the vision of the future of banking looks similar whether viewed from the perspectives of a traditional bank like TSB, or a fintech like Curve: an accessible marketplace built on the foundations of choice, convenience and customer experience – great news for those who are looking for less friction when it comes to financial services.

So, could the rise of BaaS and these marketplace models finally overcome the limitations that legacy systems have placed on banks?

“In theory, yes,” says Dua. “Due to legacy challenges surrounding application architecture, I’d say many banks have remained product-centric – so loans, deposits, credit cards – instead of becoming client-centric. And not every large bank can assume they can become an effective BaaS provider, because it will require them to open up their APIs and modernise their traditional landscapes.

“But banks can use customer data for making more personalised and relevant offers. With open banking in place, the wider ecosystem could buy in to that.

Banks’ tendency to work in product lines needs to change. We have to start recognising that it’s actually one product – it’s an ecosystem. The culture shift [behind that] will be so important

Aruna Bhalla, TSB Bank

“Banks’ tendency to work in product lines needs to change,” he adds. “We have to start recognising that it’s actually one product – it’s an ecosystem rather than the siloed thinking of ‘I’m just going to work in my savings team, or my mortgages team’. The culture shift will be so important.”

So, there’s some way still to go. But with pioneers like TSB Bank forging new paths, and a growing appetite from fintechs like Curve and Big Techs to work with them to provide new customer propositions, it’s entirely possible that Future Market Insights’ forecast of 15.7 per cent market growth in BaaS between 2021 and 2031 will be realised.

It’s certainly an area to watch as we forge ahead into 2023.