FinTech Magazine - July 2021

July 2021 | fintechmagazine.com

Global fintech hubs Compliance: How should FSIs reprioritise compliance?

Loyalty banking: A human touch Embedded finance: The future of fintech

RETURN OF THE ROCHE Stephen and Gabino Roche describe Saphyre’s progress in democratising the pre- and post trade space through sophisticated yet simple tech

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The FinTech Team EDITOR-IN-CHIEF

WILL GIRLING DEPUTY EDITOR

JOANNA ENGLAND EDITORIAL DIRECTOR

SCOTT BIRCH

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GEORGIA ALLEN DANIELA KIANICKOVÁ PRODUCTION MANAGERS

OWEN MARTIN PHILLINE VICENTE JENNIFER SMITH

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FOREWORD

IS EL SALVADOR GIVING THE WORLD A GLIMPSE OF THE FUTURE? News that El Salvador has made Bitcoin staterecognised legal tender should give us all pause for thought on the evolution of cryptocurrencies.

Is this small Central American nation providing everyone with an early glimpse of what’s to come?

“It’s clear that Bitcoin’s ability to reshuffle the balance of power in world finance is being realised”

Perhaps we shouldn’t be so surprised, as the politicosocial circumstances of El Salvador make it primed for such a pioneering decision. As a country, it has long suffered from multi-factor economic destabilisation that has threatened to bring it to the point of collapse.

Furthermore, El Savador’s reliance on the US Dollar since 2001 has placed its financial self-determination too often into international hands. This may help to clarify why 74% of its Congress voted in favour of President Nayib Bukele’s proposition.

After all, Bitcoin’s decentralised nature can wrest control of smaller nations back from larger ones, which subsequently casts the criticisms of those with a vested interest in fiat currency in a different light. As China clamps down on domestic crypto mining operations, which constitute 65% of the global total, it’s clear that Bitcoin’s ability to reshuffle the balance of power in world finance is being realised. Whether El Salvador becomes a success story or a cautionary tale remains to be seen.

WILL GIRLING FINTECH MAGAZINE IS PUBLISHED BY

william.girling@bizclikmedia.com

© 2021 | ALL RIGHTS RESERVED

fintechmagazine.com

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CONTENTS

Our Regular Upfront Section: 08 Big Picture 10 The Brief 12 Global News 14 People Moves 16 Timeline:

Deposits to regulations:

The long history of banking 18 Legend:

Satoshi Nakamoto 20 Five Mins With:

Dima Kats

24 Saphyre

Democratising trading through agnostic technology

36

Compliance

The Big Question from CFTE: How should FSIs reprioritise compliance?

44 Allianz Malaysia Berhad

Closer to customers through digital

66 HSBC

Putting Sustainability at the Heart of Global Finance

90 Technology

Barcley's embedded finance and the future of fintech

56 Loyalty banking

Tech with a human touch: A loyalty-led approach to banking

80 Payment Solutions

Transaction evolution and the IoT

98 Top 10

Global fintech hubs

BIG PICTURE

8

July 2021

Closing down the crypto mines Beijing, China

Beijing has sent shockwaves through the industry by announcing that it will be legislating harshly against cryptocurrency mining. China is currently the global nexus of such operations globally (65%), but the government insists its intervention is necessary to serve the ‘real economy’, control financial risks, and promote market reform. © Ieee Spectrum fintechmagazine.com

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THE BRIEF “Embedded finance creates new customer journeys that help solve real-world problems”

BY THE NUMBERS FinTech community poll from Linkedin with 282 participants

Who do you think will win the battle of the banks?

58%

19%

Tech companies

Incumbents

Mariquit Corcoran

Group Chief Innovation Officer, Barclays  READ MORE

20%

4%

Challengers

Other

“Banks that are loyalty-led hardwire the customer’s perspective into all of their important decisions: they elevate customer goals alongside shareholder returns” Katrina Cuthell

Senior Partner, Bain & Company 

< 40

CO2

$30mn+

The US has 30 billionaires under the age of 40, the most of any country in the world

In a study conducted

by Greenpeace and the WWF, the UK’s financial services sector was estimated to have contributed 805 million tonnes of CO2

London has over 4,000 ultra-high net-worth ($30m+) residents, the most of any global city

READ MORE

“The transformation and desire for people to have much easier payments has intensified and accelerated” David Myers

Financial Services Partner, Deloitte  READ MORE

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July 2021

Did you know? There is a cryptocurrency called Mooncoin whose supply is based on the relative distance between the Earth and the Moon

 OPAY focused fintech OPay is on-course to securing $400mn of investor capital. If successful, this would value the startup at $1.5bn, making it one of the fastest companies to achieve unicorn status (three years)  WISE Leading UK fintech Wise secured a $227mn capital boost. It currently serves over

THE DEATH OF BANKS?

10 million per month and processes more than $6.38bn in payments. Wise’s value is now approximately $5bn

What are you?

I’m the modern banking industry.

Ashes to ashes, dust to dust…

Hey! I’m not dead yet, you know.

Our community poll says different. If Big Tech can do everything you used to, what place do you have?

So I guess you’ve closed all your bank accounts by now, right?

Well, no. Not quite…

Exactly. Face it, you don’t trust giving all your worldly wealth to Silicon Valley just yet. Banks have been around for centuries and we’ll continue to be.

Is age the only advantage you’ve got?

That’ll get old real fast. Why don’t you try a little innovation?

That’s the plan. Banking is only going to get more digital, but the industry can learn from and integrate with Big Tech instead of just rolling over.

What could that mean?

More emphasis on CX, personalised products, faster and easier services through Open Banking…

I think I hear a heartbeat...it’s alive!

 BANK OF KOREA The bank has opened a tender for companies to pitch foundational technology for a potential CBDC. Although still in its infancy, the first phase of development could be complete by December 2021  HSBC After 40 years of trying to establish itself in the US, HSBC has announced the sale of its countrywide retail banking network. The division apparently operated at a loss for years prior to the decision  AIGIS BANCA Owing to its connections with

GOOD TIMES BAD TIMES

Chinese-backed, Africa-

JUL21

Greensill, Aigis Banca has been forced into liquidation by the Bank of Italy. Its assets will be purchased by Banca Ifs for the symbolic price of €1 fintechmagazine.com

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GLOBAL NEWS 1

US (WEST COAST)

Goldman Sachs partners with Visa on global payments The two leading FSIs will collaborate to improve services for Goldman’s B2B and B2C customers. The investment bank envisions a future where businesses can maintain realtime visibility of their payments' progress, can easily obtain vital compliance-related data, and improve cash flow.

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US (EAST COAST)

Flywire’s IPO triples its value to $3.5bn Cross-border payments fintech Flywire opened on Nasdaq at $34 per share and enjoyed a highly successful IPO. Despite this, it continues to suffer from ongoing profitability issues.

However, CEO Mike Massaro is optimistic of a long-term resolution to this issue.

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July 2021

2

UNITED KINGDOM

Two ex-Wise employees launch investment fintech Lightyear Martin Sokk and Mihkel Aamer, both former employees of Wise, have started a new London-based venture. Lightyear has been conceived as a no fee, easy access, and multicurrency investment platform.

Drawing plenty of high-profile capital during its seed round, the company hopes to rival US pioneers like Robinhood.

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5

NIGERIA

OPay to become Africa’s next unicorn?

Backed by Chinese software firm Opera, OPay is a Lagosbased fintech seeking to enhance financial inclusion in Africa.

Having successfully expanded to Egypt in January 2021, the company is now in talks to secure significant capital to drive even further growth.

EU

EU intends to provide every citizen with a digital wallet An ambitious plan devised by the EU will see an enormous roll out of digital payment infrastructure across the union. This is being developed in response to the COVID-19 pandemic, which underscored the necessity for greater access to digital finance and alternative payments.

fintechmagazine.com

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PEOPLE MOVES SHERRY ANN MOHAN FROM: GOLDMAN SACHS TO: JPMORGAN WAS: CFO OF MARCUS NOW: CFO, BUSINESS BANKING

Having worked at Goldman Sachs for almost 15 years - starting as an Associate in 2006 before being promoted to her first executive position in 2011 - Mohan’s exit marks a significant departure for the company.

Valedictorian of Amityville Memorial High School’s class of 1999 and holding a BSc in CPA Accounting and Finance from NYU Stern and an MBA from Wharton School, University of Pennsylvania, Mohan has both the drive and credentials to become an even greater figure in banking.

Sarah Youngwood, to whom Mohan will officially report at JPMorgan, called her “an exceptional leader whose talents I’ve long admired, and I’m thrilled to have her join our company.”

“Having intellectual curiosity caused me to seek out the why and how behind what I was learning, which paid dividends later on” [ source ]

MARK LAWRENCE FROM: GOLDMAN SACHS TO: UNITED FINTECH WAS: H EAD OF ELECTRONIC FICC DISTRIBUTION NOW: D IRECTOR AND HEAD OF AMERICAS

JEFF MOUTON

Lawrence is another long-term Goldman employee leaving for greener pastures. After 14 years at the leading investment bank, he has joined United Fintech (UF) to head up its American operations.

Working closely with UF’s London team, Lawrence will be headquartered in New York and help to grow the company’s presence in the lucrative US financial market.

“He has an impressive international profile, a strong track record in sales and a wide network of contacts worldwide,” said Christian Frahm, Founder and CEO of UF.

FROM: JULIUS BAER TO: MIRABAUD GROUP WAS: H EAD OF INTERMEDIARIES LUXEMBOURG NOW: CEO A true wealth management sector veteran, Mouton has over 30 years’ worth of experience earned at companies like Pictet & Cie and Julius Baer.

He is reportedly excited to be joining Mirabaud, a company with an enduring (200 year) heritage and an entrepreneurial spirit.

Of the hire, the Swiss company said that Mouton would play an important role in the development of key European markets from its Luxembourg office. fintechmagazine.com

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TIMELINE DEPOSITS TO REGULATIONS:

THE LONG HISTORY OF BANKING Banking is a mainstay of modern civilisation, but its origins stretch back over four recorded millenia and perhaps even further.

From simple deposits to concepts of interest, the creditor-debtor relationship, letters of credit, institutional independence, and the ongoing conversation of regulation, we track some key developments in the history of banking.

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July 2021

Babylonia gets the ball rolling on interest

Julius Caesar changes the creditor-debtor relationship

Although the concept of depositing wealth is likely to be even older, the palaces and temples in the Mesopotamian state of Babylonia are among the first to record a key innovation: interest.

The Romans brought banking out of the temples and made it a distinct sector. During Julius Caesar’s five year reign as dictator, he granted creditors the power to confiscate land from debtors who could not pay with money.

Those wishing to store their gold were required to pay 1.6% interest of its value to the institution.

This new dynamic consolidated the power of banking institutions for generations.

c.2000 BC

c.49 BC

Italian banks set a new standard Banking during the Renaissance era took on a new level of sophistication.

Hubs in Venice and Florence developed innovative credit products that enabled merchants to travel long distances without fear of financial ruin from their stores of cash being stolen. These were analogous to modern cheques. Florentine banks later also created treasury bonds.

c.14th century

The template for modern banking emerges Adam Smith conceptualised a model of banking that was independent of state oversight and self-regulated. Alexander Hamilton later developed this idea into the creation of a national bank and uniform currency in the US.

Retail banking grapples with regulation By now, retail banks offered customers three primary products: credit, deposit, and wealth management.

This created stability for a sector that had become notoriously parochial and ephemeral; local banks generally did not survive longer than five years.

Lack of regulation in banking precipitated both the 1929 Great Depression and the 2008 financial crisis. The conversation regarding what banks can and can’t do with depositor funds continues to this day.

18th and 19th centuries

20th and 21st centuries

fintechmagazine.com

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LEGEND

Satoshi NAKAMOTO The mastermind behind Bitcoin (Developer of Bitcoin)

W

hile some leading figures in finance are ‘legends’, the mysterious creator of Bitcoin, Satoshi Nakamoto, is truly ‘legendary’ in the sense that his/her/ their true identity remains unknown – it is currently presumed to be a pseudonym.

What is known is that Nakamoto developed Bitcoin, wrote the cryptocurrency’s original white paper, and deployed its reference implementation. Among their primary innovations was the resolution of digital currency’s ‘double spend’ flaw, wherein a single token could be transacted several times by one individual after already being used.

This was counternanced by employing a peer-to-peer network to accurately record coin exchanges.

The primary development period for Bitcoin began in 2007. During its first few years, all modifications of the crypto’s source code were carried out

by Nakamoto. However, in 2010, Gavin Andresen was given full control of its source code and Nakamoto reportedly ceased active involvement with Bitcoin.

Since the popular crypto's inception there has been copious speculation on Nakamoto’s true identity. Self proclamations of being born in 1975 18

July 2021

and living in Japan have been met with scepticism: a preference for British English spelling and colloquialisms in verified forum posts have led some to believe Nakamoto could actually be from the Commonwealth of Nations.

Similarly, timestamps between posts indicate that Nakamoto was most inactive between 2pm and 8pm Japanese time, even during weekends.

Presuming that Nakamoto slept during these six hours, this potentially lends credence to the idea that they are not based in Japan.

Some specific (but unverified) identities have also been put forward, generally computer science experts of international renown. They include Hal Finney, Nick Szabo, Craig Wright, and Dorian Satoshi Nakamoto. The latter assertion, despite having the same name and being a trained physicist and systems engineer, is still unsubstantiated by anything other than circumstantial evidence.

Others believe that Bitcoin’s code is too sophisticated to have been created by an individual, and therefore must have been the product of a collective.

Regardless, it is unlikely that Nakamoto’s true identity will be revealed unless they themselves choose to do so. With Bitcoin’s creation poised to be one of the most significant events in recent economic history – pathing the way, among other things, for the digitisation of currency and value – Nakamoto could one day be regarded as this century’s equivalent of the unnamed Chartres Cathedral architect.

“ The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust” fintechmagazine.com

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FIVE MINUTES WITH...

DIMA

KATS

CEO, CLEAR JUNCTION We all know the companies, but what about the people behind them? Kats extols the virtues of problem-solving, the exciting possibilities of UK fintech, and why Poland and Venice are top of his travel list Q. WHO WAS YOUR CHILDHOOD HERO AND WHY?

» My hero growing up was Robinson Crusoe.

I was always fascinated by this story of a man who must overcome every obstacle in front of him, no matter what it is. He doesn’t have a choice; he just perseveres and pushes through the hardship.

Q. WHAT'S THE BEST PIECE OF ADVICE YOU EVER RECEIVED?

» ‘The higher the barrier, the bigger the reward in overcoming it.’ This premise is where Clear Junction originated: we

found a niche that other companies weren’t willing to work within. This is why we built risk management capabilities into our proprietary technology to solve complex challenges.

Q. WHICH ACTIVITY ARE YOU MOST LOOKING FORWARD TO DOING WHEN THE PANDEMIC IS OVER?

» The restriction on travel means that

I haven’t met any of our new Polish office’s staff face-to-face. So, once that is possible, I’m looking forward to going out there and congratulating them on all their fantastic work. On a more personal level, Venice is one of my favourite places in the world. I never get tired of visiting it so I will be heading there as soon as I can.

Q. IS THERE AN ACHIEVEMENT FROM 2020 OF WHICH YOU ARE PARTICULARLY PROUD?

» 2020 was the year Clear Junction

started to scale up quickly because we had everything in order. Now, it’s just a matter of opportunity and there is no shortage of those in fintech right now.

The pandemic has also allowed me to spend more time with my family, especially my children. Post-pandemic, it is an important goal of mine to continue this increased focus on them.

Q. WHAT INSPIRES YOU IN FINTECH TODAY?

» UK fintechs managed to secure $4.1bn in

funding in 2020 and are a key growth driver

“IT’S AN INCREDIBLY EXCITING TIME TO BE INVOLVED IN FINTECH”

in the country’s finance sector. It’s also highly motivating to see the different ways fintechs and banks are working together around the world, from London to Africa and Japan.

Continued collaboration and partnerships between fintech companies and banks are essential for the future of the industry. It’s an incredibly exciting time to be involved in fintech: the endless possibilities and the rapid acceleration of financial services inspire me and the wider Clear Junction team every day.

“THE HIGHER THE BARRIER, THE BIGGER THE REWARD IN OVERCOMING IT.’ THIS PREMISE IS WHERE CLEAR JUNCTION ORIGINATED” fintechmagazine.com

21

Bringing the Community to LIVE Broadcast from London to the World

October

12th - 14th 2021 A BizClik Media Group Brand

Featuring:

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Over 5 Stages:

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Creating Digital Communities

SAPHYRE

24

July 2021

SAPHYRE

DEMOCRATISING TRADING THROUGH AGNOSTIC TECHNOLOGY WRITTEN BY: WILLIAM GIRLING

PRODUCED BY: MICHAEL BANYARD fintechmagazine.com

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July 2021

SAPHYRE

Stephen and Gabino Roche return to describe Saphyre’s progress as it democratises the pre- and post-trade space through sophisticated yet simple tech

W

hen Stephen and Gabino Roche (President and CEO respectively) at Saphyre spoke with us in 2020, they made it clear that the company was on a mission to overcome risk-aversion in finance and introduce critical innovation to a historically inefficient system. Having realised that silos and poor user experiences were benefitting no one in the pre-trade space, the brothers decided that nothing less than a wholesale disruption of the status quo would satisfy their desire to democratise trading. Saphyre subsequently achieved this ambition with the development of its integrated onboarding platform, but the story didn’t end there.

In a fresh interview, the Roche brothers updated us on what has transpired in the interim, the importance of interoperability, and why customer acquisition will be their primary focus moving forward.

One thing that’s certainly changed has been the COVID-19 pandemic: from not knowing how the situation would resolve in late 2020 to the development of vaccines in Q1 of 2021, Saphyre has weathered the storm and emerged stronger as a result. However, Gabino says, the journey wasn’t always an easy one. “We were a little nervous in the beginning because meeting face-to-face with clients is an important thing when building a business.

Saphyre is a technology company, so it wasn't hard for us to handle going remote, but we were afraid that would create a dip in our client

engagement.” They needn’t have worried; it didn’t. In fact, by utilising video conferencing software and saving travel time between engagements, Saphyre actually managed to create more opportunities than ever. Now, as a degree of normality is gradually restored to life and work in the US, Gabino states that lessons learned regarding remote working’s efficacy for the business will not be forgotten.

The autumn of 2020 brought Saphyre one of its greatest accomplishments to date: partnership with both BlackRock and JP Morgan, who opted to utilise the company’s artificial intelligence (AI) technology to automate account opening for securities services. Stephen makes it clear that important collaborations have continued to be formed, most recently with investment bank BNY Mellon. “Its asset servicing arm is now deploying the Saphyre solution on their platform and working with their counterparties. We’re also working on other partnerships and integrations that you'll be hearing about in the coming weeks and

“ Saphyre is a technology company, so it wasn't hard for us to handle going remote” GABINO ROCHE CEO, SAPHYRE

fintechmagazine.com

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SAPHYRE

Title of the video

months.” Besides this, the company has also been striving to improve the intelligence of its platform and building awareness. Gabino adds, “I think the firms that we're dealing with today understand the value proposition and benefits we bring to pre- and post-trading.”

Since it was founded in 2017, Saphyre has been committed to eliminating manual processes in pre-trade activities. It’s a point on which the company has been “evangelical” because, Stephen says, the

“ We've been trying to get people to think about how to do things in the pre-trade space differently” STEPHEN ROCHE

PRESIDENT, SAPHYRE

28

July 2021

problem is rooted in culture as much as technology. “We've been trying to get people to think about how to do things in the pretrade space differently. Traders want to fix failures or mismatches in post-trade and that’s generally where all the investment goes. Saphyre is telling everybody, ‘Hey, if you just set things up properly in the pretrade space, we can reuse that information during trading and post-trade.’” Essentially, the company believes in a ‘measure twice, cut once’ philosophy that emphasises integrating important protocols and safety measures in the first instance.

Stephen hints that Saphyre’s exploration of the post-trade space is about to yield some truly groundbreaking results for institutions. Until these are revealed, however, Saphyre will continue to break down the silos (or “fiefdoms” in Gabino’s words) that make trading the reserve of a privileged few. “The key difference is that previously we've been talking and evangelising, but

SAPHYRE

STEPHEN ROCHE TITLE: PRESIDENT INDUSTRY: FINANCIAL SERVICES LOCATION: NEW JERSEY, UNITED STATES Stephen has over 20 years of business development and consulting experience in the IT solution space. Working with Fortune 1000 companies and startups.

EXECUTIVE BIO

He spent eight years in the B2C retail environment successfully helping brick and mortar stores gain market share in the New York City region. In 2003 he transitioned his career with AT&T, working exclusively on B2B IT solutions, streamlining complicated global IT infrastructures with 50+ locations from midmarket up to Fortune 1000 clientele.

Always problem solving, Stephen successfully closed large deals concerning emerging technologies, such as 5G and Internet of Things (IoT) with Volvo Cars. In another example, he rolled out AT&T’s state-of-the-art media room, and the renovation of the IT infrastructure for the newly constructed Yankee Stadium in New York City. With Red Bull Racing, he Implemented the latest in racing communication and video technology, along with helping Axis Capital and Wyndham Hotels achieve their strategic IT growth initiatives.

During his AT&T career, he helped establish third-party cloud SaaS offerings for clients such as hosted ERP and ecommerce platforms to realise roughly

US$1mn+ in quarterly earnings. Advising the proper balance between scaling quickly while maintaining operation costs to a minimum has been one of the hallmarks of Stephen’s engagements.

While co-founding Saphyre and managing strategic relationships with the largest financial institutions in the world, Stephen has leveraged his B2B dealmaking experience to build a premiere, professional marketing arm of the upstart fintech firm.

SAPHYRE

2017 Company founded

30

Number of employees

30

July 2021

SAPHYRE

now we're showing a way that this data can be democratised. It's no longer a talking point; we're actually giving people the keys to try out this solution,” says Gabino.

Saphyre’s innovative buy-side portal is being constantly developed to align with and progress this overarching vision. Information that was previously siloed for the community – and therefore difficult to link – has been released through the company’s expanded offerings for the security services space. Now fund accountants, transfer agents, security services, and outsourced middle office teams can now work on behalf of the buy-side firms: “All this interoperability allows those players to collaborate on our platform using the same data in a very intuitive fashion,” explains Gabino. “They can then take that same data and enrich it for the broker dealers and the order management systems.” From a tech (and particularly an AI) perspective, Saphyre never stops evolving. Keen to correct what it views as a decades-long deterioration of the trading tech standard, the company is working to ensure AI fulfills its full potential: mapping data to create an intelligent forecast for how clients will need to use it. “When people say the word ‘to’, do they mean the number two, ‘to’, or ‘too’? Even when you read the word ‘fund’ in the industry, it can be difficult to distinguish what’s being referred to. Those are the nuances that we're actually mapping.”

Achieving this level of automated sophistication meant growing Saphyre’s number of patents from 48 to 67 in a matter of months. “Those patents encompass everything from the logic of how to memorise and understand conceptual relationships between words to an intuitive user interface (UI) where users actually can be lazy without even knowing it,” says Gabino. The result is an AI capable of being highly accurate throughout the entire trading life cycle. fintechmagazine.com

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SAPHYRE

SAPHYRE’S SECRET: EMBRACING INTEROPERABILITY When asked if there’s an important industry topic that no one seems to be paying attention to, Stephen opts to highlight ‘interoperability’ as a key trend:

DID YOU KNOW...

“Imagine having an iPhone with all your pictures on it, but you can’t port it to an Android phone. That's quite frustrating; they're your pictures; it’s your data and documents, and these pseudo monopolies perpetuate the problem.

“If you truly allow your clients to have a full experience and aren’t afraid of innovation, interoperability can help address that. It allows for the democratisation of data and it's going to provide better margins and superior problem-solving. This is what needs to happen and institutional players need to demand it from their vendors.”

Fundamentally, states Stephen, the same system is also technologically agnostic: it is capable of being mapped to a FIX protocol, smart contract, distributed ledger, etc. This provides an important competitive edge in a space where the wholehearted embrace of blockchain still eludes the industry. “One of the big reasons blockchain hasn't been adopted is the fear of adopting a ‘religion’ – a form of standardisation to which everyone has to conform.” Saphyre’s advantage is being able to provide the same operability without such a commitment.

It’s a smart move and one which demonstrates the company’s highly informed and people-centric way of working.

“Partnerships are the most important things for us, besides employees and investors,” Stephen clarifies. “Technology is our second priority, because you have to offer something of value, followed by the patents that come along with it.” Gabino states that many would probably be surprised by the extent that legacy tech mainframes continue to plague finance. Now with a software-tomarket speed that ranks among the fastest in contemporary fintech, Saphyre is primed

“ We're showing a way that this data can be democratised. It's no longer a talking point; we're actually giving people the keys to try out this solution” GABINO ROCHE CEO, SAPHYRE

SAPHYRE

GABINO ROCHE TITLE: CEO INDUSTRY: FINANCIAL SERVICES LOCATION: NEW YORK, UNITED STATES Gabino has over 20 years of experience in building technology solutions for Fortune 500 companies and start-ups from the 1990s Dot-com era till now.

He’s a former McKinsey & Company firm member, where he learned and was focused on delivering products faster to market. This enabled him to take on a role at NYSE as Managing Director of application development to help their startup division ramp towards a US$1bn revenue goal.

EXECUTIVE BIO

Later, he worked as a Senior VP at JP Morgan executing transformation programs in business operations, overseeing technology and operational process initiatives such as delivering a US$40mn product in their custody portfolio, and helping to revamp the Corporate Investment Bank’s (CIB) KYC/ AML operations.

That experience set him up for JPMorgan’s senior management to ask him to take on the Head of Product role at Clarient, a fintech startup consortium put together by JP Morgan, Goldman Sachs, State Street, Credit Suisse, Barclays and DTCC. While there, he oversaw an $80mn budget and transformed the company’s operations, technology, and product with his team

in under six months to meet market deadlines.

It was here where he unearthed valuable insights on how to structure pre-trade data and documents, invent an intuitive and expedited onboarding process powered by patented AI in order to resolve many of the trading and posttrade issues, leading to his creation of his own fintech startup: Saphyre.

SAPHYRE

“ People want things that are cutting-edge but simple enough to address the complexities between different financial institutions and the accompanying regulations” STEPHEN ROCHE

PRESIDENT, SAPHYRE

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July 2021

SAPHYRE

for an all-out focus on customer acquisition that emphasises its cutting-edge solutions.

Big-name partners like BlackRock help to solidify that reputation and the Roche brothers are convinced that their platform’s superior customer onboarding experience will ensure continuous uptake momentum.

Aware of the difficulty and expense of developing solutions comparable to Saphyre, Gabino suggests that introducing the company’s platform as a third-party

application is becoming an increasingly popular option. “Instead of spending millions to build something, it’s much easier for customers to ‘white label’ our technology, put their name on it, and then add ‘powered

by Saphyre.’” Doing so would enable even greater go-to-market agility for clients, a vital advantage as digital finance becomes evermore highly regulated. Positing that regulators act in broad motions because they cannot achieve a more intricate picture of data, Gabino claims that “Saphyre can change those behaviours by being forward-thinking and thereby saving institutions millions in fines.”

Asked to summarise what Saphyre’s primary goal for 2021/22 will be, Stephen emphatically replies, “Scale.” With the business growing and uptake increasing, the company is keen to shed the image that it’s only focused on pretrade. Instead, Saphyre will emphasise how diverse and complementary its solutions can be at a time when FSIs are searching for ways to upgrade their systems but unsure of how to do it. “For years, we’ve been saying that our model is sophisticated yet simple; people want things that are cutting-edge but simple enough to address the complexities between different financial institutions and the accompanying regulations.” It is Saphyre’s ability to marry realworld problem solving and interoperability that will ultimately produce its success, concludes Gabino. “A lot of firms are invested in pseudo monopolies that prevent data from being democratised because it's how they make money. Saphyre’s customers know that their data isn’t stuck on a single system. They retain ownership, they can port it, and they can demand innovation from their tech partners to keep data flowing end to end.”

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July 2021

COMPLIANCE

?

THE BIG QUESTION: HOW

SHOULD FSIs ?

REPRIORITISE COMPLIANCE? In light of several high-profile compliance controversies in finance, Huy Nguyen Trieu, Co-Founder of CFTE, helps us determine areas for improvement

?

I

WRITTEN BY: WILL GIRLING

n our May 2021 edition, we created a timeline of Greensill’s journey towards insolvency and its ultimate downfall. The event was a highly costly and devastating blow for the organisations connected to it and none more so than Credit Suisse, which subsequently found itself embroiled in the collapse of Archegos Capital Management shortly after.

With senior staff now reportedly leaving Credit Suisse en masse, triggered by its mishandling of two consecutive crises, which saw billions of dollars lost, a question arises: how should modern financial services institutions (FSIs) reprioritise compliance?

Helping FinTech Magazine answer this question is Huy Nguyen Trieu, Co-Founder of the Centre for Finance, Technology and Entrepreneurship (CFTE). Currently one of the largest knowledge platforms in fintech today,

CFTE is dedicated to exploring how technology could help reshape finance. So far, over 100,000 professionals have taken courses tackling industry ‘mega trends’ like blockchain, machine learning, Big Data, and more.

Trieu describes himself as “an entrepreneur turned banker turned entrepreneur.” Some of his previous roles include executive positions at Societe Generale CIB and Citi, fellowships at Imperial Business School and the University of Oxford’s Saïd Business School, as well as numerous mentorship, advisory, and industry committee roles.

“I have co-designed some of the largest fintech programmes in the world at Oxford’s Saïd Business School, Hong Kong University, and of course CFTE,” he says. “My role is to help the finance industry acquire the right skills in a world which is increasingly tech-driven.” fintechmagazine.com

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COMPLIANCE

THE BIG QUESTION: HOW SHOULD FSIs REPRIORITISE COMPLIANCE? FM: Recent events, such as those concerning Credit Suisse, have emphasised that focusing on compliance should be a high priority in finance. What objectives must a fully-developed compliance strategy include?

HNT: Compliance has always been a high priority in finance, and even more so after the 2008 subprime crisis. Banks spend around US$200bn on compliance per year, and tens of thousands of compliance officers were hired since 2008, so this focus is nothing new.

However, the biggest problem for Credit Suisse was less an issue of compliance (as in regulatory compliance or ‘tick the box’ exercises), but rather one of culture and risk management. All of this is linked, but it’s very easy for a bank to say, “This has passed compliance standards and adheres to internal processes,” while the risk is clearly still there.

“ The biggest problem for Credit Suisse was less an issue of compliance, but rather one of culture and risk management” HUY NGUYEN TRIEU CO-FOUNDER, CFTE

An education designed for the industry, by the industry Calling its courses "an education designed for the industry, by the industry," CFTE currently offers the following courses: • Fintech foundation • Payments • Open Banking and platforms • AI in finance • Intrapreneurship • Conversational AI Professionals can also access free masterclasses in fintech, AI, and platforms, as well as register for upcoming online courses.

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COMPLIANCE

In the case of Credit Suisse and Greensill, it was about concentration risk, which any risk manager should have recognised at that level. A culture of putting profits first made it difficult to highlight these risks. Therefore, integrating compliance together with culture is absolutely key.

FM: Which factors are causing compliance to be an issue, and how can they be resolved?

HNT: I’d say two issues: 1) Culture and 2) Knowledge.

The prevailing culture today, as I indicated, is that compliance should be considered a support function, a ‘tick the box’ exercise, whereas it should be part of the decisionmaking process.

Knowledge is the other big issue. In a digital world, compliance can’t be manually driven and therefore has to be digital.

However, most compliance officers are not tech-savvy. As such, bridging the knowledge gap and getting compliance officers to understand more about technology, as well as getting the organisation to try new tools, would be key.

FM: To what extent can developments in automation and data analytics facilitate greater adherence to financial regulations?

HNT: Greensill had a huge concentration risk that was made worse because a lot of the borrowers were related parties. Using artificial intelligence and network analysis could have identified that all these parties were related.

Automation and analytics could also enable banks to have a real-time view of their risks and metrics and exchange information in real-time with regulators.

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July 2021

What is ‘concentration risk’?

This term refers to the level of risk inherent to a bank’s portfolio as the result of undiversified interests, whether a fixation on a commodity, sector, market, etc. Naturally, if this focused point of investment falters for any reason, such as economic downturn or supply issues, this can cause significant financial ramifications for the organisation holding a concentrated interest in it.

COMPLIANCE

“ In a digital world, compliance can’t be manually driven and therefore has to be digital. However, most compliance officers are not tech-savvy” HUY NGUYEN TRIEU CO-FOUNDER, CFTE

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COMPLIANCE

“ Digital introduces a lot of new areas that are in the realm of ‘unknown unknowns’” HUY NGUYEN TRIEU CO-FOUNDER, CFTE

The Reskilling Urgency by Tram Anh Nguyen, Co-Founder at CFTE

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July 2021

At this current moment, neither of these things are happening.

FM: Will FSIs need to restructure in order to cope with the evolution of regulations?

HNT: I don’t think they will need to restructure but rather evolve and educate their organisations. Knowledge of compliance and financial transactions is already ingrained in them. However, the same cannot generally be said about technology. Therefore, upskilling the organisation in this area will be important.

FM: Regarding compliance, is there anything that’s not receiving much industry attention that you’d like to highlight?

HNT: Most people are unaware of new risks. Compliance, for example, would be around Know Your Customer (KYC), Anti Money Laundering (AML), etc., but what about the rise of cryptocurrencies? How do you identify the beneficial owner? What’s the risk of identity theft on a large scale?

Digital introduces a lot of new areas that are in the realm of ‘unknown unknowns,’ so it’s important for the industry to move quickly to ‘known unknowns’ and then finally ‘known knowns’ in the field of compliance. fintechmagazine.com

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Example of an image caption

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ALLIANZ MALAYSIA BERHAD

CLOSER TO CUSTOMERS THROUGH DIGITAL WRITTEN BY: WILL GIRLING

PRODUCED BY: JAKE MEGEARY

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ALLIANZ MALAYSIA BERHAD

Yorck Reuber, Chief IT Officer

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July 2021

ALLIANZ MALAYSIA BERHAD

Yorck Reuber, Chief IT Officer, helps us examine how digital is making insurance faster, better, and closer to customers than ever before

T

here has been much discussion about the insurance industry’s need to embrace digital transformation if it is to survive oncoming challenges from Big Tech competitors. Following the disruptive influence of the COVID-19 pandemic, most would agree that technology is an important part of insurance’s future. However, genuine leaders like Allianz know that it’s only half the story; more than anything, digital is an opportunity for foundational culture changes that can ultimately enrich the insurercustomer relationship like never before.

Yorck Reuber joined Allianz Malaysia as Chief Information Technology Officer in June 2020, during the pandemic’s first major global lockdown. Having built a career by working at some of the most prestigious technology, finance, and insurance-based companies in the world, always in international setups, he moved to Malaysian in 2018. What drew him to change jobs during such uncertain times? The answer is simple: the opportunity to make a difference. “I strongly felt that I wanted to work closer with customers and make a positive impact. Allianz Malaysia provided me with the perfect chance to do just that.”

Holding a degree in Ships Engineering, it's safe to say that Reuber has an expert grasp on the technical aspect of his work. However, when asked what transferable skills he has brought to Allianz, he chooses to emphasise the importance of his approach to leadership and the dedication to “cultural change” that

he has cultivated. “As a company, we may buy technology but the real impact is making a genuine change in the way people think and work,” Reuber explains. “My day-to-day role consists of working with the business on product development - determining which insurance offerings we want to bring to the market.” His perspective complements what is now a generally accepted truth regarding digital transformation, namely that it is as much about people as it is about systems or technology.

2020 brought about operational circumstances for insurance that made digital adoption practically essential. In this regard, Reuber states that Allianz Malaysia was generally well-prepared already, although there were still challenges to overcome. “Luckily, there was no paper being carried around the offices by that point, but people were still very ‘paper minded’. The big target was (and continues

“ [DIGITAL IS] ENABLING ALLIANZ TO DO THINGS FASTER AND TO BE MUCH CLOSER TO OUR CUSTOMERS” YORCK REUBER

CHIEF INFORMATION TECHNOLOGY OFFICER, ALLIANZ MALAYSIA fintechmagazine.com

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ALLIANZ MALAYSIA BERHAD

Title of the video

“ I STRONGLY FELT THAT I WANTED TO WORK CLOSER WITH CUSTOMERS AND MAKE A POSITIVE IMPACT. ALLIANZ PROVIDED ME WITH THE PERFECT CHANCE TO DO JUST THAT” YORCK REUBER

CHIEF INFORMATION TECHNOLOGY OFFICER, ALLIANZ MALAYSIA

to be) to use the benefits of digitalisation to speed up processes and to make things simpler.” As such, he and his team oversaw the distribution of laptops to all staff members to ensure business continuity and make working from home fully effective.

Some other challenges are more enduring in Malaysia, not least of which is the country’s 48

July 2021

highly regulated market. Already long familiar with EU regulatory standards and now immersed in Malaysia’s for over two years, Reuber states that the environment is difficult but not without signs of encouraging development, “To be very clear, regulation has changed a lot since the pandemic, but it serves to protect the business and should ultimately support Allianz Malaysia’s journey.” Another issue is resourcing the IT talent necessary to implement Allianz Malaysia’s broader vision, a gap that the domestic labour market has yet to adequately fill. “You can find all the classic IT skill sets here, but skills like computing on the edge, stuff that really brings digitalisation forward, are lacking.”

Reuber’s description of Allianz Malaysia’s digital roadmap makes it clear why working to resolve the skill issue will be crucial: “The group has been implementing a complex suite of digital tools over the last few years,

ALLIANZ MALAYSIA BERHAD

YORCK REUBER TITLE: CHIEF INFORMATION TECHNOLOGY OFFICER INDUSTRY: INSURANCE

the IT Master Platform (ITMP). Our priority is to change how we interact with customers by sharing data and scaling within the group, determining what’s working well in other countries and innovating locally to speed things up.” Based on cloud technology, the ITMP is the result of dedicated research on how to streamline operations, increase cost optimisation, and future-proof Allianz Malaysia’s business.

However, cloud isn’t the only technology that is proving particularly important both to the company and insurance generally.

“Although there are lots of really smart technologies in the market, I believe what's most relevant for insurance at this moment is RPA (robotic process automation),” says Reuber. Considering the full utilisation of RPA to still be far off, he enthuses the potential for automation tech to transform Allianz Malaysia’s internal processes by eliminating repetitive manual tasks.

“Whereas customers would previously have to make a phone call and potentially wait a long time for resolution, simple enquiries could be dealt with using tools like RPA. This is an area in which we have to invest more. Also, using artificial intelligence (AI) to analyse data, we will be able to shape our products in a better way: more personalised value for customers and simplified policy contracts molded to fit a particular purpose.”

EXECUTIVE BIO

LOCATION: KUALA LUMPUR Yorck Reuber joined Allianz Malaysia as Chief InformationTechnology Officer in June 2020. Previously he served as Head of Operations ASIA as well as Chief Technology Officer North Europe with AXA. He also held positions as Vice President Service Delivery Management EMEA (T-Systems), Global Service Director (Verizon) and various Senior Management positions at IBM as well as being Chief Engineering Officer and Diving Officer in the German NAVY. All these roles incl. his personal entrepreneural activities ensured he could gain wide experience in positions from Sales via General Management to Technical. He has always been focussing on turning profitability and customer satisfaction from negative to positive as well as implementing cultural change in organisations, transforming to agile and digital mindset while strengthening cyber defense and enabling multicloud scenarios and global servicing.

Reach exponential value with technology.

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The COVID-19 pandemic brought about significant changes to the way we live, work, and do business. Digital transformation now tops the agendas of CIOs across the globe.

Organizations across all industries and verticals are challenged by creating a long-term satisfying relationship with their customer. Meeting customers’ digital needs has only come into sharper focus as a competitive differentiator.

Insurance providers have been historically slow to adapt to the digital revolution.

However they can no longer afford to continue to rely on legacy systems: digital is the future of insurance.

“When faced with a digital transformation, businesses often struggle to maintain excellence in customer experience.

With more digital customer interactions comes the growing expectation of digital self-service,” says Rafael Sweary, President & Co-Founder of WalkMe. “When consumers don’t easily find the help they need, their loyalty is compromised and their risk of churn increases” notes Sweary. This is where digital adoption comes in.

Digital adoption means achieving a state in which users gain the ability to use digital tools as they are intended and to the fullest extent. When users achieve digital adoption they not only learn basic functions on a given software they also maximize advanced features to unlock innovative new ideas and processes.

WalkMe is the world’s leading Digital Adoption Platform, created with a clear vision: to make technology adapt to people. With its patented proprietary technology, WalkMe allows businesses

to maximize user adoption of their digital assets by constantly identifying gaps and problem areas to ensure adoption issues are addressed in real-time.

By partnering with WalkMe, Allianz has been able to deliver digital transformation at scale for the benefit of its customers. This includes building seamless digital experiences to allow customers to access targeted help in their moment of need, and simplifying the customer experience to drive engagement and adoption with in-app guidance and support directly from the WalkMe platform.

With WalkMe, organizations worldwide can accelerate the impact of their digital transformation initiatives. WalkMe is trusted by 2,000 customers, including 31% of the Fortune 500, and boasts over 35M customers in 42+ countries.

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ALLIANZ MALAYSIA BERHAD

2001

Year founded

2,000

Number of employees globally as of April 2021

RM 5.31bn

Revenue Allianz Malaysia Berhad earned in Gross Written Premiums (GWP) in 2020

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ALLIANZ MALAYSIA BERHAD

“ AS A COMPANY, WE MAY BUY TECHNOLOGY BUT THE REAL IMPACT IS MAKING A GENUINE CHANGE IN THE WAY PEOPLE THINK AND WORK” YORCK REUBER

CHIEF INFORMATION TECHNOLOGY OFFICER, ALLIANZ MALAYSIA

Cybersecurity is an aspect of Allianz’s operations which has always been given high priority. “The only thing we sell is trust. So, if we can't secure the data of our customers, why should they buy from us?” With incidences of cyber criminal activity tangibly on the rise, Allianz continues to place paramount importance on security while also exploring methods for accelerating speed-to-market.

“Again, automation technologies are very important with regards to security. Before, we tended to just lock things down and subsequently make things even more complicated. Now, things have to be easy yet secure to access, and it’s only by using new technologies that both those aims are achievable.”

For Reuber, the decision to embrace digital adoption goes beyond mere operational optimisation and actually represents an existential requirement for Allianz’s continuity. “The companies that don't adopt digital will soon not be in the market anymore,” he cautions. “Startups competent in data analytics are already starting to sell insurance.” The move, then, demonstrates that Allianz is preparing to become more like a tech company that primarily operates within insurance (as fintechmagazine.com

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ALLIANZ MALAYSIA BERHAD

THE IMPORTANCE OF INNOVATION PARTNERS Allianz Malaysia is teaming with various innovative partners to drive its digital adoption.

Using a Digital Adoption Platform (DAP), the company supports users to effortlessly navigate complex software, websites, and apps. By supplementing proactive and comprehensive guidance for customers, these tools can ensure that any problems can be resolved easily in-situ.

DID YOU KNOW...

“Having a partner that is able to help bridge the knowledge gap when using digital tools in areas that you haven't previously been exploring is really key,” states Reuber. He notes that innovation partners have been particularly helpful during the roll out of automation tech like activitybots at Allianz.

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“As an insurance business, our target is not to use technology to keep people away from interacting with us. We simply want to take care of any issues they have in the fastest and easiest way possible.

“Digital adoption is difficult and complex, but it doesn’t need to be anymore when there are tools in the market that can do that work in the background. That's the magic of these partnerships,” he said.

July 2021

opposed to the opposite). In addition to enhanced relevancy to its customers’ lives, Reuber adds that Allianz will always retain the quality that has ensured its success since 1890, “Our slogan remains, ‘We secure your future.’” This message is being adapted to meet the requirements of the digital era, he reasons, and that is why the company continually reexamines its priorities.

Therefore, as Allianz continues on its transformation journey, Reuber is determined to instill the digital mentality

ALLIANZ MALAYSIA BERHAD

“ OUR PRIORITY IS TO CHANGE HOW WE INTERACT WITH CUSTOMERS

BY SHARING DATA AND SCALING WITHIN THE GROUP, DETERMINING WHAT’S WORKING WELL IN OTHER COUNTRIES AND INNOVATING LOCALLY TO SPEED THINGS UP”

in its employees as the company pushes for further growth and superior market performance. “Digital is the future,” he poignantly concludes. “It's more than just buying hardware or software; it's changing the way people think and the way we cooperate with each other. At the end of the day, it's enabling Allianz to do things faster and to be much closer to our customers.”

YORCK REUBER

CHIEF INFORMATION TECHNOLOGY OFFICER, ALLIANZ MALAYSIA

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LOYALTY BANKING

TECH WITH A HUMAN TOUCH: A LOYALTY-LED

APPROACH TO BANKING 56

July 2021

LOYALTY BANKING

Commentators from Bain & Co and loyalBe help us determine the best approach for building, maintaining, and reclaiming customer loyalty in banking

WRITTEN BY: WILL GIRLING

T

rust: it can take years to build but only seconds to lose.

When it comes down to whom a customer entrusts with their money, banks have always needed to prove the superior value of their products and services. Loyalty and an enduring relationship were their rewards, yet banking in the pre-digital era had one distinct advantage: there was largely no alternative.

Then in 2008, as the financial crisis brought public trust in high street banks to a new nadir, digital native banks (challenger or neobanks) began to emerge. Featuring easy-to-use customer interfaces, techenhanced functionality, app-based convenience, personalisation options, and much more, global leaders such as Chime, Nubank, Starling, Monzo, and N26 continue to reshape what customers expect from a banking experience.

With a large proportion of adults in some markets still convinced that banks do not work for the betterment of society at large, what can incumbents do to regain their loyalty? Furthermore, how can the incumbent sector prevent disruption from both challenger banks and Big Tech firms?

To find out, we spoke with Katrina Cuthell, Senior Partner at Bain & Company, and Cormac Quinn, Founder and CEO of loyalBe. fintechmagazine.com

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LOYALTY BANKING

Better Business Decisions FICO powers decisions that help people and businesses around the world prosper. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

LEARN MORE 58

July 2021

© 2019 Fair Isaac Corporation. All rights reserved.

CONTACT US

LOYALTY BANKING

“ Combining loyalty rewards with a frictionless customer experience can be a way for brands to set themselves apart and drive lasting loyalty” KATRINA CUTHELL SENIOR PARTNER, BAIN & COMPANY

Closing the loyalty gap As part of its ongoing research on customer loyalty in retail banking, Cuthell reports that Bain has noted three key trends in the last 10 years: 1. Traditional banks have noticeably struggled to make up the shortfall in their customer loyalty performance compared to digital banks. “In the US, the average Net Promoter Score [ranging from -100 to +100] in 2019 for national banks was 23 and 36 for regional banks.

By comparison, direct and digital banks scored an average of 69.”

2. Digital adoption among traditional banks is at record levels as they seek to

emulate the fast, fluid, and convenient digital offerings of tech competitors.

“While virtually all banks have moved the majority of routine transactions to digital, only a few have successfully converted complex interactions involving sales or advice. However, in 2020, we saw a significant improvement in the performance of digital channels.”

3. Digital channels are fast becoming customers’ de facto preference. As such, Cuthell notes a rise in “hidden defection”, whereby customers buy products from banks and providers not affiliated with their primary bank. “Our 2020 research found that between 25% and 51% of all banking product purchases [follow this trend]. Hidden defection may also increase in many countries as Open Banking regulations make consumer data portable and therefore encourage competition.” fintechmagazine.com

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LOYALTY BANKING

Top three challenges of customer retention

#1

Establishing a digital presence

Clearly, the advent of a more digital techfocused milieu is having a significant impact on customer loyalty. Continuing to offer the same experience is a strategy guaranteed to lose traditional banks business, particularly when newcomers can bring a price and technical advantage to the fight. For now, incumbents are on the back foot and essentially playing catch-up with the competition.

The meaning of ‘loyalty-led’ banking To truly turn the tide, banks will need to match the status quo and then push further to emerge as leaders. For Quinn, this means providing customised offerings capable of meeting individual needs and preferences.

“In order to be truly ‘loyalty-led’, loyalBe suggests that banks employ tools like continued recognition, which is the feeling of being individually acknowledged and valued as a customer and rewarded for investment in the brand over time.”

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#2

Deploying online tools to incentivise custom retention

#3

Lack of customer relevance in available loyalty plans

The phenomenon of incentivising the onboarding of new customers to the detriment of maintaining existing customers is well known and certainly not constrained only to banking. Nonetheless, ensuring that this disparity is healed should be of prime importance; Quinn cites reports from Bond and Citi that found 71% of customers considered loyalty programmes meaningful and 86% felt more compelled to be brand loyal while participating in such schemes.

LOYALTY BANKING

“ Banks that are loyaltyled hardwire the customer’s perspective into all of their important decisions: they elevate customer goals alongside shareholder returns” KATRINA CUTHELL SENIOR PARTNER, BAIN & COMPANY

“Combining loyalty rewards with a frictionless customer experience can be a way for brands to set themselves apart and drive lasting loyalty,” he states, and these can easily be tailored to suit each bank’s objectives. However, Cuthell contends that loyalty should not just be restricted to a single programme but rather inform the overarching philosophy of the bank itself. “Banks that are loyalty-led hardwire the customer’s perspective into all of their important decisions: they elevate customer goals alongside shareholder returns. Our research has demonstrated that doing so pays off with customers staying longer, buying more, and recommending the bank to friends, therefore achieving higher revenues.”

The danger of alienating future customers When it comes down to whether traditional banks are alienating millennial and Gen-Z customers, both Cuthell and Quinn are in agreement: yes. “While consumers’

Katrina Cuthell TITLE: SENIOR PARTNER COMPANY: BAIN & COMPANY INDUSTRY: MANAGEMENT CONSULTING LOCATION: AUSTRALIA Katrina Cuthell is a partner in Bain & Company's Sydney office. She is a leader in Bain's Financial Services practice, with a focus on customer strategy, customer experience, loyalty and digital transformation. Cuthell also has significant experience in working across the payments value chain for both issuers and acquirers.

Cuthell has more than 20 years of management consulting experience in both Australia and the UK.

willingness to try banking products with technology companies varies, it is consistently higher among younger consumers,” explains Cuthell. “In the UK, our 2019 research found that 65% of 18 to 34 year-olds were open to banking with an established technology company, versus 34% of consumers aged 55 and over.” The impact of the COVID-19 pandemic, which made physical branches unusable and digital platforms all but essential, has likely boosted these statistics across every demographic. fintechmagazine.com

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Cormac Quinn TITLE: FOUNDER AND CEO COMPANY: LOYALBE INDUSTRY: INFORMATION TECHNOLOGY & SERVICESG LOCATION: UNITED KINGDOM An experienced engineering professional with a Masters (First Class Honours/4.0 GPA) in Computer Science from Queen's University Belfast. Masters thesis on Machine Learning. Demonstrated history of working as an engineer in the US, China, Ireland & the UK, including companies such as American Express.

Quinn calls these younger, more techsavvy customers ‘NEOs’ and emphasises that they are generally “quick adapters, demanding, and desire transactions that are frictionless, flexible, hassle-free.” Cuthell concurs, adding: “At any point through the experience, a defect or failure can cause a prospective customer to drop out. Younger consumers have even higher expectations for ease and convenience.”

It would appear, then, that NEOs are not likely to be placated by mundane digital features like real-time push notifications -

LOYALTY BANKING

“ Banks need to infuse humanity and personalisation into these digital channels” CORMAC QUINN

FOUNDER AND CEO, LOYALBE

“table stakes,” as Quinn calls them. Indeed, with Morgan Stanley claiming that 80% of Gen-Z customers are already actively exploring mobile finance options, the ability of banks to ‘wow’ this demographic with anything less than cutting-edge technology is unlikely. “Banks need to begin thinking and acting like tech companies who experiment, move quickly, and build the future products and services today. If they don’t act fast, they risk tech companies encroaching into financial services and disrupting them,” says Quinn.

Capitalising on inherent advantages A positive future for traditional banks will be predicated on learning to adapt and also capitalising on their own strengths.

Challenger banks, although increasingly popular, have a distinct profitability issue that Cuthell links back to their origins as secondary, lower-deposit alternatives for initial adopters. Early investment, she continues, has generally been allocated to customer acquisition in the short- and medium-term. While this weakness remains, incumbents will retain the advantage of market longevity and financial security, a foundational component of loyalty. More recent studies have even found that 83% of customers find traditional banks more trustworthy overall.

However, Cuthell cautions that failure to capitalise on this and introduce the best aspects of digital banking into the traditional sector will be a losing strategy. “Many digital attacker (disruptor) banks are now expanding from retail to small business accounts, from deposits and basic transactions to lending.

This is diversifying revenue streams, and Bain’s analysis conducted with Thought Machine indicates that a digital attacker launched on a modern, cloud-native platform could have a cost base that is 60% to 70% lower than a mid-tier legacy bank.” fintechmagazine.com

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LOYALTY BANKING

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LOYALTY BANKING

Annex Cloud’s seven recommended loyalty programme features

#1

Account specific perks

#2

Omnichannel capabilities

#3

Comprehensive rewards structure

#4

Regular and timely new offers

#5

Rewards based on customer participation in tasks, events, etc.

#6

Priority benefits

#7

An ‘elite club’

Reclaiming lost trust There is a discernible race between the two banking factions to resolve their customer pain points, and it is a competition in which neither is fast-emerging as the victor. In terms of building loyalty generally, Quinn emphasises that banks must infuse relevancy into their offerings above all else. “Banks need to invest in technology, provide services and products that are harmonious with key segments’ needs, increase transparency through the customer journey, and infuse humanity and personalisation into these digital channels.” Fundamentally, technology needs to be at the heart of banking and not a periphery concern.

Following traditional banking’s positive response during the pandemic, Cuthell is more optimistic about its continued ability to build customer loyalty. “Our research of 20,000 US consumers in June 2020 found that 30% of respondents were more likely to recommend their bank based on their experience during the pandemic,” she reports. “However, direct banks still maintain a significant lead in loyalty, so it will take more than the pandemic to erode that advantage.” In conclusion, Cuthell agrees with Quinn’s sentiment that combining “a human touch” with technology is the most valuable strategy moving forward. “To do this, banks will need to continue migrating customers to digital self-service for simple interactions, thereby freeing up front line bankers to handle moments of truth.” This should remind one of a core truth in business: a customer doesn’t owe any business their loyalty; it is the natural reward of empathetic service, quality products, and superior benefits to competitors. fintechmagazine.com

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HSBC

HSBC: Putting Sustainability at the Heart of Global Finance WRITTEN BY: SCOTT BIRCH

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July 2021

PRODUCED BY: GLEN WHITE

HSBC

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HSBC

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HSBC

Kelly Fisher, Head of Corporate Sustainability, HSBC Bank USA, tells us how finance can play a leading role in achieving net zero and global equity

F

Kelly Fisher, Head of Corporate Sustainability, HSBC Bank USA

rom pilot renewable energy initiatives in Asia to innovative startups addressing climate change in the UK and farmers in the Upper Mississippi River Basin adopting regenerative agriculture practices – HSBC is taking sustainability seriously.

Those three examples are a snapshot of the Climate Solutions Partnership HSBC has embarked upon, backed by US$100mn of philanthropic funding over five years.

HSBC has also committed to be net zero of their own operations by 2030 and of their financed emissions, which includes a US$750bn to $1tn in sustainable finance and investments to help their clients transition.

It’s an ambitious environmental stance, yet if any banking and financial services organisation can do it, it’s HSBC – with a global footprint spanning 64 countries and with assets of US$2,959bn (as of 31 March 2021).

HSBC has transitioned from being The World’s Local Bank to truly acting locally to benefit globally.

With everything else going on in the world right now, it would be easy to do nothing, but it has been a busy 2021 so far for HSBC. In Q1 it raised a record US$68bn through its Green, Social, Sustainability and Sustainability-linked (GSSS) bond to pay for green projects and new technology to enable and accelerate the race to zero. fintechmagazine.com

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HSBC

HSBC’s Operational Transformation to Digitalise the Customer Journey

At the 2021 AGM, a “HSBC has been “I AM SO GRATEFUL special resolution on around for 157 years.

THAT I HAVE A JOB THAT And we connect the climate change was passed, committing to world through the EVEN WHEN I'M DOING phasing out financing power of finance.

THE SMALLEST THING, of polluting industries And I think that such as coal mining that is profoundly I FEEL LIKE I'M DOING and coal-fired power. important as we SOMETHING THAT It’s more than a solid see that the world is start, fuelled by the becoming incredibly MATTERS” desire to build a interconnected in better world. In the both good ways KELLY FISHER global fight against and bad,” says Kelly, HEAD OF CORPORATE SUSTAINABILITY, climate change, HSBC speaking from her HSBC BANK USA is working with its home office in customers to support Queens, New York. their transition to lower carbon emissions.

“What HSBC does best is connect the Kelly W Fisher is Head of Corporate world through trade, through finance and Sustainability, HSBC Bank USA, and it is on the ground in both developing and celebrates six years with the banking giant developed nations. And while I think finance this month, having previously worked at has been criticised – that industry has been Toyota, Goldman Sachs and Ogilvy PR. So criticised, and certainly deserves scrutiny – how have things changed during her time? there is a profoundly positive impact that 70

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financing can have, particularly in some of the developing countries where we're really on the ground and helping serve people.

In countries like Vietnam and Bangladesh, we have a powerful banking presence there that can change lives. So that's a little bit of what I try to capitalise on from a sustainability perspective.”

Times have certainly changed in what the business world used to call Corporate Social Responsibility – an umbrella term that essentially covered any activities firms became involved in ‘doing good’.

Fisher says that with some notable exceptions, many companies used CSR almost as an apology for how things were being done, giving away millions of dollars to cover up how they were operating as a business in certain countries and communities.

“I think because of social media, because of consumer activism, because of investor activism, that's not permitted anymore,” she says. “What I see is the role of a corporate philanthropist as an apology or cover up is almost completely eradicated at leading companies. And now the first and foremost attention is how that company operates.”

In the six years that Fisher has been at HSBC, she has seen the financial giant transition, even though HSBC was

64

Number of countries HSBC operates in

226,000 Number of HSBC employees globally

TITLE: HEAD OF CORPORATE SUSTAINABILITY COMPANY: HSBC BANK LOCATION: USA

EXECUTIVE BIO

1965

Year HSBC was founded

KELLY FISHER

As a corporate social responsibility, inclusion, and sustainability advocate, Kelly has dedicated her career to helping companies strive for responsibility, generosity and inclusion. The goal?

To have a tremendous impact on communities, employees and clients, while improving corporate reputation and consumer engagement. Now Kelly is helping to embed sustainability into the work of one of the world’s leading banks with the goal of helping the company and its clients to transition to a low carbon economy.

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“ WHAT HSBC DOES BEST IS CONNECT THE WORLD THROUGH TRADE, THROUGH FINANCE AND IT IS ON THE GROUND IN BOTH DEVELOPING AND DEVELOPED NATIONS” KELLY FISHER

HEAD OF CORPORATE SUSTAINABILITY, HSBC BANK USA

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already one of the few banks of its size globally that was already talking about sustainability or climate change and helping clients transition.

“I remember my first day I went through an orientation and they told a story about a huge client that was the leading destroyer of rainforests to make paper products,” Fisher recalls. “And we could have walked away from them and a dozen other banks would have snatched them up and started financing them exactly as-is. And instead we transitioned them. And now they're the leading FSC provider of paper goods. And that was astonishing to me that that was part of my HR process day one – not ‘here's the bathroom’ and ‘here's where your computer is’, but that story.

“Now I feel like if anything, the world has changed and we have to retain that leadership role and push ourselves harder than we've ever pushed. We've always known that sustainability and sustainable finance were key to us being around for another 150 plus years. And now every other bank is saying the same.”

Sustainability is a constantly evolving challenge and so even though HSBC may have been a pioneer and enjoys a leadership position right now, it has to keep developing to maintain its pole position. This is not something lost on Fisher, who agrees that a leading bank can quickly become “a laggard” if they don’t invest in their own efforts and set ambitious yet attainable goals.

So right now HSBC has an aggressive net zero strategy and has hired a PhD scientist as its new Group Chief Sustainability Officer. Dr Celine Herweijer joins this month (July 2021) from PwC where she held roles including Global Climate Change Leader. Herweijer has held fintechmagazine.com

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DID YOU KNOW...

KELLY FISHER – MY CAREER JOURNEY

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“When I started out, this was an almost non-existent career. There was no logical career path to becoming a sustainability expert or a CSR expert. I was a classical ballet dancer, my whole life. And that's what brought me from the Midwest to New York City.

Luckily I had a personal friend, who was a recruiter for Goldman Sachs. And luckily, because she knew me as a person instead as the professional on my resume, she twisted my arm and said ‘there's this really interesting job. I know you've been volunteering with nonprofits since you were a little kid, it's kind of doing that, but for this investment bank. Just go in and talk to them about it.’

And I never looked back. I loved it so much. I spent four years at Goldman helping to lead what I still think is one of the best of the industry volunteer programmes. I also helped do the entire internal global marketing campaign to promote that to employees.

From there, I went to Toyota, and had a very different experience. Volunteering on work time was not something that was really in the culture of a Japanese-led company, and so instead I oversaw massive philanthropic programs – Toyota's incredibly generous. In the US they have a hundred-million-dollar endowed foundation. In addition, we spent 30, 40, 50mn in corporate donations.

By the end, we were doing some incredibly innovative things, even around skill sharing, meaning taking the world famous Toyota production system and applying it for free to nonprofits. So the same system that made Toyota famous for building their cars effectively, efficiently without waste, very environmentally friendly, we would take and then teach to nonprofits for free.

July 2021

Things like people standing in line in the freezing cold for a meal for 75 minutes – our engineers would go in for three days and that line would go down to 10 minutes because they were applying Just-In-Time and all these incredible production systems. Another example was an organisation in New Orleans started rebuilding people's homes that were destroyed after Hurricane Katrina 60% faster because of spending time with Toyota engineers.

That was really a light bulb moment for me, which was that the same things that make a company successful can make the world a better place if they're applied in the right way.

I was hired by HSBC and this role has pulled on everything I've ever done. It's really strategic, philanthropic giving that's tied to the business. I also oversee sustainable operations and sustainable finance, and I'm helping make sure that the US achieves that net zero commitment.

I really love what I do. I don't wake up and have bluebirds braid my hair and live in a cartoon fantasy world. But I am so grateful that I have a job that even when I'm doing the smallest thing, I feel like I'm doing something that matters.”

HSBC

sustainability advisory roles for the United Nations, World Economic Forum, G20, the World Bank, and the European Union.

Impressive credentials indeed.

“The challenge and the opportunity for HSBC is immense,” said Herweijer.

“Achieving net zero means we need to see a fundamental reshaping of industries and therefore of the global economy. Getting there requires bold action, new partnerships and ways of engaging with customers and stakeholders to accelerate the new solutions the world requires.”

So, the trillion-dollar question is, how exactly is HSBC planning on reaching this net zero target, and how realistic is it in

the first place? HSBC’s commitment is to make its own operations net zero by 2030.

While there are hundreds of marginal gains to be had along that path covering every aspect of operations, Fisher says it fundamentally comes down to three things – with the largest being its supply

“WE ALL NEED TO REENTER THE WORLD NOT LOSING HOW IMPORTANT CLIMATE CHANGE AND EQUITY BECAME TO US DURING THE PANDEMIC” KELLY FISHER

HEAD OF CORPORATE SUSTAINABILITY, HSBC BANK USA fintechmagazine.com

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chain, accounting for around 78%. Second comes the energy output of HSBC’s many buildings, and the third being travel.

The COVID-19 pandemic has certainly caused a shift in business travel behaviours which could be here to stay, with no need for executives to fly around the world for face-to-face meetings that have made a successful transition to virtual.

“I think it's realistic,” says Fisher. “I was on the phone with a company yesterday that had set a net zero target by 2022 and they're already there. While they're not a financial services company, they have a similar energy footprint to ours. The best advice I could give is don't set a long-term goal alone. Success is in interim micro goals. Don’t just set an aggressive goal by a certain end date, set achievable micro goals.”

HSBC has been widely recognised as a leader in sustainable finance – but what has it done to deserve such praise, and what does it do that makes it stand above the efforts of its competitors? Six years ago when Fisher walked through the doors, sustainable finance meant green bonds, and that was pretty much it, but HSBC was the world leader. However, since then, its bankers have been creatively uncovering new and exciting financial products and incentives – that Fisher says are “going to change the world and get us where we need to go”.

“In 2017, we did the world's first SDG bond that instead of being green proceeds, it was around equality and poverty and all these things that now everyone's talking about. It was three times over-subscribed,” Fisher explains.

“Last year during the height of the pandemic, we did the world's first plastic waste reduction bond. But it's not just bonds. Being a bank with its roots in trade, we are the expert in how trade routes and supply chains work.

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2030

HSBC has commited to be net zero of their own operations by 2030

2050

HSBC has commited to be net zero of their finance emissions by 2050

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“DON’T JUST SET AN AGGRESSIVE GOAL BY A CERTAIN END DATE, SET ACHIEVABLE MICRO GOALS” KELLY FISHER

HEAD OF CORPORATE SUSTAINABILITY, HSBC BANK USA

Most companies, their “The next year or so is biggest footprint is profoundly important,” HSBC'S NET ZERO their supply chain. So agrees Fisher. “We all MISSION STATEMENT when we can apply a need to reenter the lens to it and pay your We want to do more than simply play world without losing suppliers differently to our part in the transition to a more how important climate incentivise sustainable sustainable world. This pillar of our change and equity change, that's a product strategy outlines how we will help to became to us during where impact happens lead it. We have committed to: the pandemic. If we let almost immediately.” go of these two things A great example of • Become a net-zero bank as priorities, it will have that is with the retail • Support our customers to been for nothing, what behemoth Walmart – transition to a low carbon we've all gone through. which has introduced future, especially in carbon “I think too often a finance programme challenged industries companies are devalued that peg’s a supplier’s • Accelerate new climate solutions for how profound of an financing rate to its • Inspire our customers to invest to impact they can have on sustainability standards. support positive change the world. In that way, It’s a simple yet there was a great Harvard powerful concept that Business Review quote sees more sustainable companies being from years ago that said when companies rewarded with improved HSBC financing. It’s share their expertise and their resources and a win-win for the suppliers, for Walmart, and address the spinal issues, they have a greater for the planet. potential to solve those problems than Diversity and Inclusion, Equity and governments and non-profits put together.

Sustainability are never far from the lips of “So companies can't just go back to the top executives globally right now, as the Milton Friedman way of thinking where so world emerges from the grips of the COVIDlong as we are making a profit, that’s all that 19 pandemic into a physical and social matters. We have to finally own the impact environment very different from even 18 and the responsibility that we have.” short months ago. Which in a way shows how hard it is to plan for the future and take steps now that will have a meaningful impact. fintechmagazine.com

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TRANSACTION

EVOLUTION AND THE IOT 80

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Controlling the movement of money has reached new heights through greater connectivity and the IoT WRITTEN BY: JOANNA ENGLAND

“ Real-time machine learning (ML) is the key to ensuring personal touch in a digital world” JOHN DESJARDINS CTO OF HAZELCAST

A

visual representation of just how vast today’s online payment network is worldwide would be mind-boggling.

According to data by the Nilson Report, there were 368.92 billion digital purchase transactions for goods and services globally in 2019 – translating into 1.01bn credit card transactions alone, daily.

Since the pandemic, consumer behaviour has shifted dramatically, and that figure has risen substantially. Global ecommerce sales rose to US$26.7trn in 2020, making up 19% of all retail sales. A report by GlobalPayments Inc estimates that online shopping sales increased by 71% in 2020 and are continuing to rise at the same rate in 2021.

As omnichannel payment options increase, experts also predict that by 2024, 27% of all digital commerce transactions globally will be made via QR codes. And since the pandemic began, 46% of UK consumers purchased a product online that they had previously only ever purchased in store.

The use of cash is diminishing fast, and in its place, increasingly innovative payment gateways, commerce platforms and inventive currencies are emerging.

IoT payment solutions Stan Cole, Head of Financial Institutions at Inpay, believes digital banking has been a driving force behind the virtual payments revolution because it has altered the way people and their money interact. fintechmagazine.com

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“People can access their account 24/7 on any internet-connected device they have. So, not offering this functionality to customers automatically means falling behind and losing them in bulk,” he says.

Cole is correct. The universal availability of digital technology and devices has grown the size of the payments space manifold. “The space has become increasingly competitive, with leaders and laggards and the inevitable shakeouts of weak hands. The more choices people have, the less tolerant they are of a subpar digital experience – app, device or provider,” Cole says.

Though technology has played its part in the march towards an increasingly cashless society, the past 12 months have also been massively instrumental, points out Libby James, co-founder of Merchant Advice Service, a UK-based expert advisory service for digital payment merchants.

She explains, “Consumers have become accustomed to using smart technology as a preferred payment method as opposed to cash. For instance, many of our clients within the hospitality sector have noticed a shift towards using order and payment apps

Open Banking One of the biggest disruptors of the digital payments revolution has been the emergence of Open Banking, a financial services term that refers to the use of open APIs that enable third-party developers to build applications and services around the financial institution. Open Banking results in greater financial transparency options for account holders ranging from open data to private data.

Service providers can use Open Banking to arrange faster finance for their customers.

in bars, restaurants and hotels since the pandemic began, which has allowed these businesses to adjust and trade as normal where allowed.”

QR codes are one contactless payment example that has seen a huge uptick in usage since the pandemic. James says that despite having been around since 1994, QR codes have never seen so much activity as they have in the past 12 months.

“Many businesses, including hospitality brands, have been forced to adopt QR codes in order to provide truly contactless experiences, and we will only continue to see their usage rise.”

She adds, “This includes the implementation of QR code payments, where customers can attach a chosen payment method to a QR code, and upon scanning that code, trigger a payment and allow for a real-time reward to be delivered.

But seamless, digital, IoT-driven payments won’t only be those we consciously make, points out David Myers, Financial Services Partner at Deloitte. Instead, payments will fintechmagazine.com

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evolve to become part of a much wider and more integrated system as technology develops.

He explains, “Machine to machine payments have various guises. One example is electricity service providers or utilities that use smart meters to track usage and automatically bill. Fast forward some of the thinking, a more sophisticated machine to machine set up will be electric cars.

“If I want to charge my electric car, does that charging station then agree to a contract with the local power station? You can see a chain of events starting to line themselves up.”

Such changes are inevitable – and something to be embraced, says Myers, because they will make life easier and more efficient for people. “These are simple ideas that are beginning to mature and grow as systems become more intertwined and combined. The aim is to simplify people’s lives and make things a lot more straightforward.”

Customer centricity and digital payment solutions While digital payment methods were fully embedded and increasing in popularity prior to COVID-19, the pandemic has made them a necessity, and often the only way businesses can manage their revenues. Many more companies have switched to online-only services, and person to person contact has been minimised.

But what does that mean in terms of customer services, and is there a disconnect between services providers and customers?

David John, CEO and founder of Loyalize, a white label customer engagement service platform, believes the opposite is true.

He says that recent innovations in digital technologies have “put the power in the hands of the consumer” and that personalisation of services for customers is now the greatest 84

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challenge for providers. “The challenge around personalisation is that it’s fast-moving beyond basic product recommendations,” John explains.

“Personalisation is now about creating a tailored experience that is inclusive of consumer likes and dislikes, which can become more difficult if the right technology is not in place. The key to this success is insight.”

But Myers believes companies and organisations are yet to achieve the perfect balance between the technical and the personal, implying that customer service will always require the option of a human being.

“I think there are times when people say ‘I

PAYMENT SOLUTIONS

“ The introduction of Open Banking has sped up and improved the affordability decision when applying for credit” JASON O'SHAUGHNESSY

HEAD OF INTERNATIONAL SALES AT ENVESTNET, YODLEE

need and want to speak to a human being’ and the handoff isn't always as slick as it could be from one to the other [technology to person].

“There's a moment when we all say ‘I've gone as far as I can, on the automated system or the digital solution, I actually need to speak to somebody,’ because it's more complicated than adding in a few numbers.”

Payment tools Having the right tools and data analytics capabilities to capture and use these insights, says Johns, is vital to the ongoing success of retailers – especially in a climate where high levels of personalisation are an expectation.

“Many brands are therefore investing heavily in new technologies that help them to create tailored messaging and personalised recommendations that combine the online and offline channels to improve the overall customer experience,” he points out.

Examples of this include the implementation of touchscreen systems in stores that allow for a more engaging checkout experience, with real-time offers and communications delivered to the customer directly at the point of sale. If done correctly, these systems should connect both online and offline channels to ensure that customers receive a completely seamless, omnichannel experience.

Johns also points out that the role of new technologies such as AI has become fundamental to enhancing the customer experience in “collecting and harnessing data and using predictive analytics to understand what customers want, how the market is performing and identifying future trends.”

Although banks have contributed massively to the digital payments culture through taking services online and encouraging customers to manage their money remotely, they are now, ironically, at the mercy of their own genius, says Cole. fintechmagazine.com

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“Being able to digest big data in order to understand customer trends and needs is the first step, then finding the right technology provider to support these needs comes second.

“For example, banks are increasingly losing their customers to fintechs for crossborder payments; if banks want to keep up, they need to team up with a low-cost crossborder payment provider to compete.”

Top 10 digital transaction platforms The best online payment methods for SMEs in 2021 according to Expert Market 1.

2.

3.

4.

5.

6.

Stripe: best for flexibility PayPal: best for worldwide reach Worldpay: best all-rounder Sage Pay: best for quick payouts Square: best for simplicity Braintree: best method for ecommerce entrepreneurs 7. takepayments: best for shortterm contracts 8. Handepay: best for cost-effectiveness 9. Shopify: best for creative newcomers 10. GoCardless: Best for recurring payments

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Personalised customer experience But how can companies ensure a personalised customer experience if the only point of contact with the customer is through technology? Some experts believe the answer lies in better technology and the collection of data.

John DesJardins, CTO of Hazelcast, the fast-cloud application platform based in Silicon Valley, explains, “Real-time machine learning (ML) is the key to ensuring the personal touch in a digital world. With realtime ML, you can create AI-first autonomous experiences where personalisation is driven by [the] depth of data about the customer and their needs and interests.”

This also opens up new possibilities to dynamically and autonomously present relevant, meaningful, and valuable offers to the right customers at the right moment – the moment of interaction, says DesJardins, referencing the success of BNP Paribas Bank Polska.

Using real-time enabled responsiveness from existing banking infrastructures, BNP Paribas Bank Polska increased personal loan offer conversions four-fold – including the promotion of loans to customers whose low account balance has stopped them from getting their cash via ATM. According to DesJardins, the bank’s IT team used Hazelcast’s Jet stream processing

PAYMENT SOLUTIONS

“ Digital technologies have put the power in the hands of the consumer” DAVID JOHN

CEO AND FOUNDER OF LOYALIZE

engine to act in real-time on 'events' such as an ATM visit and send those customers loan offers by SMS immediately afterwards.

This new timeliness contrasted with using the CRM and data warehouse-based infrastructure, which previously could take up to two days to make such an offer.

"The IT team has also estimated that data streaming costs only one-tenth of taking a data warehouse-focused approach,” he says.

The Open Banking revolution Using technology to make transactions easier for the customer is key in keeping a loyal base of repeat users. Open Banking has been a big contributing factor in streamlining the transactional process for customers seeking finance for products and services.

Myers believes open banking is a natural progression driven by demand for flexibility. He says, “Open Banking allows choice. When consumers have a choice in terms of how and with whom they are banking and paying, it simplifies that world.

“What had in the past potentially been quite an onerous exercise has become straightforward, so

people are able to purchase different services and products from a variety of different providers in a matter of clicks.

“Having that flexibility to choose when you do it and how you do it has changed and, for many, accelerated during the pandemic. The transformation and desire for people to have much easier payments has intensified and accelerated to effectively move much more quickly to a digital solution set.”

Jason O'Shaughnessy, Head of International Sales at Envestnet, Yodle agrees.

He says, “The introduction of Open Banking has sped up and improved the affordability decision when applying for credit. Previously, this would have been an offline experience, delaying the process for hours or even days.”

However, he says, there should always be a call to action should the customer require a real person to resolve an issue. “Technology should always be used to make interaction easier and more convenient for the customer.

Through technology, companies are able to send personalised messages and offers that provide real value to the customer, improving the customer service and experience.”

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“ The transformation and desire for people to have much easier payments has intensified and accelerated” DAVID MYERS

FINANCIAL SERVICES PARTNER, DELOITTE

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and its use for payments and settlements and fiat currencies.

• QR codes: The past 12 months have seen considerable adoption of QR code usage as contactless payment methods have become necessary for millions of businesses. Experts believe their usage will continue to rise as they’re cheap to implement, can contain large amounts of data and are fast becoming a very comfortable channel of engagement.

• CBDC: Central Bank Digital Currencies.

Experts believe these can and will disintermediate banks at a massive scale with a likely hit to their balance sheets.

Digital remittances: This market is growing, despite dire predictions the market would drop due to COVID-19. Senders are demanding more from their payment providers.

New payment trends The digital payments sphere is constantly evolving with dynamic new platforms, and currencies are entering the fray. As cold hard cash transactions diminish, new trends for the coming decade are emerging.

These include: • Blockchain: Currently helping cryptocurrencies enter the mainstream

• Big Tech: Google Pay has partnered with Western Union and Wise, while Opera has launched its own fintech. These new market entrants will most likely hit the banks hard as they offer transparent, lowcost remittances from the US. It’s worth remembering that any of the big platforms that control vast networks can stake a claim in the payments space. And this is even before Big Tech goes into obtaining banking licenses.

• More partnerships: Greater numbers of banks will partner with niche payments fintech players that offer turnkey remittance solutions on a white-label basis, thus enabling banks to compete directly with brand name fintech’s that are currently taking their business. fintechmagazine.com

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Did you know?

Mariquit Corcoran ranked

#11

in our ‘Top 100 Women in Fintech’ list?

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Embedded Finance and the Future of Fintech Mariquit Corcoran, Group CIO at Barclays, contextualises the benefits that embedded finance is bringing to customers and how it could shape fintech overall WRITTEN BY: WILL GIRLING

T

he capacity for fintech to go beyond optimising the status quo and actually help solve pain points, both historic and emerging, is what makes it so exciting. After all, the world has undergone such a profound shift towards digital finance following the COVID19 pandemic that simply maintaining past paradigms is apt to leave customers alienated and companies uncompetitive. True visionaries focus on the future, and in that spirit, there are few more forward-thinking than Barclays and its latest global fintech platform, Rise.

Rise was established in 2015 as Barclays’ vision for incubating the “ultimate conditions” for fintech’s growth and development. It does this by linking a global community of thought leaders dedicated to challenging industry norms and pushing boundaries.

Operating from two physical hubs in New York and London, the venture is able to combine Barclays’ formidable industry expertise with the agile mindset of a startup. Rise has 130 community members and in 2020 conducted more than 600 mentoring sessions and brought in more than 5,500 virtual event attendees. So far, Rise members have raised US$1.31bn in capital. fintechmagazine.com

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How Citizens Bank Digitally Transformed Credit Card Fraud and Claims Processes In an era where customer experience can make or break your financial institution, banks have to optimize and automate or risk getting left behind.

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FinTech Magazine spoke with Mariquit Corcoran, Group Chief Innovation Officer (CIO) at Barclays, about how Rise is helping the bank to identify and work with emerging startups, foster innovation, and develop an exciting trend: embedded finance.

Solving real-world problems A highly experienced financial executive, Corcoran first joined Barclays in 2018 and took on the Group CIO role in October 2020.

Possessing a talent for strategy and a keen eye for potential, she identifies embedded finance as one of the industry’s most exciting trends. “[It] creates new customer journeys that help solve real-world problems. It allows for seamless experiences that reduce friction and provide customers with more options to pay for goods and services from their favourite retailers.”

Essentially, embedded finance is the integration of API-driven banking or payments software with commercial services not strictly focused on finance, such as retail. It is re-centring the emphasis from ‘fin’ to ‘tech’ and its effects can be

“ Embedded finance creates new customer journeys that help solve real-world problems” MARIQUIT CORCORAN

GROUP CHIEF INNOVATION OFFICER, BARCLAYS

seen everywhere from ride-hailing apps to digital wallets, P2P providers, e-commerce, and more. “There's reciprocity in this, too,” continues Corcoran. The improved customer experience (CX) helps merchants grow their own loyalty, deepen client relationships, and provides data that can be used to personalise CX further.” Indeed, this trend is also facilitating a greater emphasis on specialisation and ecosystem expansion: companies can focus on their core service and select third-party partners to deliver the financial infrastructure.

Subsequently, CX can become faster, easier, and more transparent than ever

Rise charts the future of embedded finance In the ‘Embedded Finance: Creating a seamless future for financial services’ section of its report, Rise cites Forbes that embedded finance in the payments sector is worth $16.1bn and could grow to $140.8bn by 2025. This scale, it reasons, can materialise if three criteria are met: • FSIs open their core technology stack • Fintechs continue innovating and integrating with the broader financial services sector • Direct collaboration between fintechs and FSIs fintechmagazine.com

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before. The implications of this are farreaching and expansive, “embedded finance isn't just in traditional finance anymore; it's impacting all types of industries.” For instance, a recently released report from Rise helps characterise the positive changes that the trend can and is bringing to the music industry from the perspective of two companies, Kobalt Music and DICE. Corcoran explains: “Kobalt helps artists define a basic financial framework to 94

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make it easier to predict their financial unknowns. DICE uses embedded finance to simplify and streamline the promotional and performative process, giving musicians access to a quick, seamless purchase system and helping fans discover gigs and artists via a personalised experience.”

Embedded finance is a powerful tool for placing the payment process firmly in the performer’s hands. “There's real dissatisfaction within the current music

SPECIAL REPORT

“ The improved CX helps merchants grow their own loyalty, deepen client relationships, and provides data that can be used to personalise CX further” MARIQUIT CORCORAN

GROUP CHIEF INNOVATION OFFICER, BARCLAYS

industry,” states Corcoran. “Getting paid by concert promoters as an artist or creator can take a long time. Sometimes, even seeing what you're owed is really difficult. The lack of transparency means artists can't budget, and their banks can't rate them for credit.” As the live music industry seeks to rebuild itself following protracted difficulties in 2020, embedded finance raises the possibility for genuine reform.

It should also be noted that this change is widely applicable to many disparate industries. Another sector Corcoran puts forward as primed for transformation is agriculture: “Startups like FarmGuide in India are embedding intelligence into financial services for the domestic farming community. That data can then be used by farmers, banks, insurance companies, and state governments to model a wideranging set of outcomes from crop success to insurance risk on a farm-by-farm basis.”

Furthermore, according to FarmGuide’s Co-Founder Ankit Gupta, this data stack can be used to support 140 million farmers, a multitude that would have formerly been underserved or overlooked by the traditional credit industry.

The future of finance The potential for digital technology to transform finance has, in some cases, been a double-edged sword for some FSIs: the customer benefits are readily apparent, but the shifting dynamic that gives the tech sector a more prominent role has been intimidating. Corcoran declares that this certainly isn’t the case with Barclays, which has “fully embraced” the future hinted at by embedded finance. “Barclays US Consumer Bank recently announced a new strategic partnership with Amount, a leading technology provider for financial institutions, to expand our point of sale (POS) financing suite.” This is a growing market for Barclays and one it is rigorously developing; in the bank’s 2021 Q1 results, Group CEO Jes Staley announced that its contract as POS engine for Amazon Germany is being extended to the UK. This supplements another high-profile partnership the bank shares with Apple UK.

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Female FinTech Collective: Rise’s approach to diversity A staunch champion of diversity within fintech, Rise’s own ‘Female FinTech Collective’ strives to bridge the underrepresentation for women that continues to blight the sector.

Specific opportunities include: • The Female Innovators Lab • Mentorship opportunities with FinTech Friday • Investment partnership with Angel Academe (an award-winning angel investor network)

“Barclays also has embedded finance and insurance applications, a work loyalty programme, mobile banking, and we're really leveraging Rise to develop forward-thinking and modern solutions by supporting promising startups and fintechs,” says Corcoran. “Barclays will continue to stay at the cutting edge of finance’s future.” Rise has truly been pivotal to maintaining this philosophy, and in a world where ecosystems are fast becoming dominant players in global finance, its ability to bring leading innovators together is invaluable.

When she considers the latent possibilities within finance, particularly with regards to embedded finance, Corcoran is adamant that we’ve barely scratched the surface of technology’s power to disrupt and transform the world. It is, in her view, “a true win-win-win scenario for banks, startups, and consumers alike.” The future of finance is set to include improved CX, a new era of rapid embedded finance integration, and a new customer journey that solves real-world problems for consumers across myriad sectors. “Barclays is truly just getting started,” she concludes, “and the possibilities are endless.”

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TOP TEN 10

GLOBAL FINTECH HUBS WRITTEN BY: WILL GIRLING

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We travel through North America, Europe, and APAC in search of the Top 10 global fintech hubs arranged by the value of their largest startup From financial inclusion to wealth management and ‘buy now, pay later’, there are a handful of key locations, in most cases cities, fostering the greatest innovations in fintech. Almost invariably, these hubs succeed by combining tech-focused skill sets with an accommodating regulatory environment and inclusive cultural dynamic.

Although there were myriad ways to arrange the entries, such as by capital raised or the total number of startups in each location, for this list we have selected the largest fintech in each hub and ranked them according to value.

Special thanks go to Deloitte and CB Insights for providing data that assisted our decision-making.

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TOP 10

10 Beijing

Most valuable fintech: Waterdrop Value (in USD): $2.88bn

Beijing’s status as a fintech hub is difficult to contend with – it has a substantial consumer market, cutting-edge technology, and is already ahead of many other nations in terms of emerging trends like CBDCs and blockchain.

However, with the CCP taking a hard stance on monopolistic behaviour, such as the cancellation of Ant Financial’s IPO in 2020, harsh regulation could have a deleterious effect on development and innovation.

Regardless, Beijing will likely remain a global fintech hub for the foreseeable future.

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09 Jakarta

Most valuable fintech: OVO Value (in USD): $2.9bn

Indonesia has historically struggled with financial inclusion, and it is perhaps to remedy this that Jakarta’s fintech sector has begun making promising gains in recent years.

Payment service OVO (not to be confused with the energy company) is an individual highlight of the city’s growth as a fintech hub. Alternative, digital-based finance has also proved vital to the country’s postCOVID recovery roadmap, filling in the capacity that traditional banks, for instance, cannot accommodate.

TOP 10

08 Bengaluru

Most valuable fintech: Razorpay Value (in USD): $3bn

Mumbai might be one of the first Indian cities that come to mind as a finance hub, yet Bengaluru has recently been given the accolade of the fastest-growing tech hub since 2016.

One of the reasons for this is goverment-led efforts to increase digital adoption throughout the country, including internet and smartphone penetration.

Bengaluru’s workforce demographic is also perfectly configured to function as a fintech hub: technical skills in both finance and technology are readily available.

07 Berlin

Most valuable fintech: N26 Value (in USD): $3.5bn

Berlin generates the second-highest amount of fintech investment in Europe per year, overtaken only

by London.

In fact, this German city might be poised to become London’s successor as the EU’s prime financial hub. A strong pool of skilled labour is available and leading challenger bank N26 is a testament to its technological development.

With other Big Tech firms (Facebook and Airbnb) also opting to open offices in Berlin, we may indeed be witnessing its growth into a fintech hub of even greater renown.

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TOP 10

06

New York City

Most valuable fintech: Better.com Value (in USD): $6bn

The most densely populated city in the US, NYC is arguably the world’s leading finance hub and until very recently was second only to Silicon Valley in terms of overall fintech investment. However, that changed in 2019 when its $1.9bn year-end result was pipped by London’s $3bn.

Today, it is particularly notable for housing two of the most successful insurtechs in the space so far: Lemonade and Oscar.

05 London

Most valuable fintech: Checkout.com Value (in USD): $15bn

London is one of the world’s largest financial services markets.

Such is the value of its unique blend of capabilities that Deloitte compared it to a hybrid of the New York’s ‘fin’ and the US’ West Coast ‘tech’ sectors respectively.

With almost 1,000 startups reportedly taking up residence in the city and an estimated talent pool of 61,000, London’s reputation as a simultaneously established but also up-andcoming fintech hub is wellfounded.

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TOP 10

04 São Paulo

Most valuable fintech: Nubank Value (in USD): $25bn

Breaking up the standard hegemony of Europe and North America in the fintech scene, Latin America is emerging as a force to be reckoned with, and São Paulo is its key hub.

Brazil currently accounts for 51% of all fintech investment on the continent, with São Paulo housing some of the sector’s greatest success stories, including Nubank.

Beyond banking, the city provides a robust and diverse ecosystem of capabilities, including payments, cryptocurrencies, lending, and more.

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03 Melbourne

Most valuable fintech: Afterpay Value (in USD): $28.7bn

As fintech began gaining significant momentum around 2015/2016, Australia quickly established itself as a key player. Sydney might have a larger financial sector overall, but it is Melbourne that houses one of the world’s most valuable startups, Afterpay.

Notably, Melbourne is also the country’s most tech-focused city.

Driven by a highly skilled and diverse workforce, the city has over 330 fintechs and its top five alone are collectively valued at over $30bn.

02

TOP 10

Stockholm

Most valuable fintech: Klarna Value (in USD): $31bn

This Swedish fintech hub is producing some of the most highly valued startups in the world and its success is no secret.

Attracting approximately 20% of all sector investment across Europe, the foundations for Stockholm’s achievements were laid by prescient digital adoption, big-picture strategic planning, and an inclusive cultural backdrop.

Although arguably not quite in the same technical league as our number one pick, the city is still home to several fintech leaders – Klarna and iZettle – as well as other big names in tech such as Spotify and Skype.

Now with over 400 startups residing in Stockholm and over $1bn in capital flooding the market, it’s a tech-friendly hub that fosters innovation and generates world-leading results.

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TOP 10

The Big Score: The Billion-Dollar Story of Silicon Valley

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Silicon Valley Most valuable fintech: Stripe Value (in USD): $95bn Silicon Valley is practically synonymous with technology, so it’s probably no surprise that this Northern Californian nexus for global innovation claims the top spot on our list.

The area has a fintech talent pool of approximately 74,000 people, over 300 startups (at the time of writing), and has so far attracted over $5bn in capital. Its reputation as a prime investment hub is further supplemented by 17,000 angel investors.

There’s no shortage of big-name fintechs in the area; Square, Robinhood, Coinbase, and Stripe – currently the US’ most valuable startup – are just some of the global leaders housed in the Valley’s 47 square miles. Ranked as having the thirdhighest GDP per capita in the world, it’s clear that Silicon Valley has the resources and talent to maintain its position as the world’s foremost fintech hub for the foreseeable future.

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