Fintech Finance Magazine Summer 2016

Page 1

Issue 1

Summer 2016

Fintech in Focus

Frontier banking

Exploring Mongolia

Big data daddies

UniCredit fights back

Rise of the challengers

Preparing for takeoff with Starling's Anne Boden

Frank Abagnale

On cyber theft and the fight against fraud

Jordan Belfort

Following the money with the Wolf of Wall Street Plus INsIGHTs FRom RBS ● The Just Group ● Barclays ● Envestnet ● DBS ● Saxo Payments Metro Bank ● UBS ● Santander ● NBAD ● LV ● Innovate Finance ● Moven ● ACI ● Smart Engine







140% increase in transaction volumes from Australia to Asia for a leading bank using iGTB The digital financial technology you’ve always needed to leverage your expertise and on-field innovation is here. Realize your GTB ambitions with iGTB today. Contact Phil Cantor, CMO, iGTB to know more. e:

iGTB is your platform to seize the tremendous global transaction banking opportunity, estimated at $2.1 trillion by 2023. Seamlessly integrate all transaction needs of your corporate customers, delighting them with superb experience through a consolidated next generation front-end portal with Corporate Banking Exchange and powerful back-end product processors designed for operational efficiency across Payments & Cash Management, Liquidity, Supply Chain & Trade and Commercial Risk. With leading global transaction banks running on Intellect designed solutions, we are the authority progressive banks rely on to realize their GTB ambitions. Realize your GTB ambitions today.

RUN THE BANK. CHANGE THE BANK. DESIGN THE BANK. iGTB helps banks maximize corporate wealth with the world's first integrated transaction banking platform serving 100+ live installations across 85 countries. Leveraging its out-of-the-box digital 360 approach, banks help businesses optimize surplus liquidity, digitize the financial supply chain and trade, enable anytime universal payments and remove concerns from risk.

Sydney • Tokyo • Hong Kong • Singapore • Mumbai • Dubai • London • New York • Toronto


Special report


The rise of modern banking in Mongolia

A country where everyone has a bank account and branches are open 24/7

paYMeNtS & iNNoVatioN

10 Safety in numbers

The rapid rise of crowdfunding has changed the face of equity funding

12 Chain reaction

How blockchain technology could facilitate a revolution in trade finance

14 An interconnected

world of payments

Fixing an outdated ‘many-to-many’ model by introducing a ‘hub-and-spoke’

16 The battle for fintech

Banks versus fintechs overlooks the real challenger… China

18 A global digital market

A sharp rise in cross-border electronic payments has opened up the market for transaction providers

20 A collaborative approach Global giant UBS is finding innovative ways of becoming a leader in the digital space

22 The future of payments The challenge of an evolving payment ecosystem

25 The emperor with no clothes What we can learn from the spectacular collapse of paytech startup POWA?

26 Planet of the apps

Android-based card payment terminal Albert is bringing merchants closer to customers

28 The voice of banking

Santander is determined to talk to customers across every channel – not least with its voice-led mobile service

30 Flexible friends

Contis Group is making its name as an agile player in alternative banking

32 Rising to the challengers

The disruptive influence of low-cost, digital banks could actually be good news for institutional dinosaurs

cuStoMer experieNce

34 Bridging the Gulf in banking

The National Bank of Abu Dhabi aims to being the World’s Best Arab Bank

Summer 2016

TheFintechView iSSUe #1

SUmmer 2016

Welcome to the first issue of Fintech Finance Magazine, a companion to our popular Fintech Finance channel, in which we give a platform to some of the sharpest players shaping the industry today. From disruptive start-ups to established operators sharing a sometimes surprisingly new perspective, we hope you find it a stimulating mix of opinions and information on the technology that’s transforming not just finance, but the way we live our lives. Find out why Neal Cross of DBS Bank is looking forward to a Chinese revolution and Anne Boden is having her cake and eating it at Starling. What does the FBI’s favourite fraudster, poacherturned-gamekeeper, Frank Abagnale, have to teach us about identity theft and are there any lessons Wall Street can learn from its famous wolf? It would be wrong to think that traditional areas of banking, including the branch, are not evolving. But where does face-to-face banking fit in? We discover how big data is improving the

36 Evolution not revolution The internet of Value is forcing rapid change on the way corporate banks do business

38 Digitally dressed to impress rBS is leading the way in wearable technologies

customer experience – be it through the creation of the new RTM by KAL, or the development of real-time financial transactions assisted by ACI – and empowering staff at the front desk. The breadth of the content in this issue illustrates how digital technology is impacting on every transaction – in branch, online and via next-generation hand-held devices. Who knows what the future will bring, but speaking to both mainstream bankers and the newest entrepreneurs, I’m convinced that fintech will have a big hand in shaping it. I hope you enjoy this edition – and let us know what YOU think!

Ali Paterson |

48 Fintastic fun

Australia’s Sandstone Technology was a fintech before fintech was invented

50 The fortune hunters

investor search platform Fundbird is poised to make the most of changes to UK banking laws

40 The price of digital loyalty?

53 Listen up!

42 Push me, pull me


intelligent technology is creating great relationships between banks, merchants and customers

UniCredit is nudging customers towards starting a conversation on line

44 Lost for words

Teaching banks how to talk to customers using a new digital lexicon

46 The bank that keeps on giving Nationwide has a lot of happy customers…it plans to keep them

Analytics specialist Nexidia his its ear to the ground and a view on how banks should be talking to customers

54 Malaysia’s digital powerhouse

malaysia Digital economy Corporation is positioning the country as one of the world’s biggest data centre hubs

56 Humanising digital

iT shouldn’t be about taking people out of the process; it’s about enabling them to play a greater part in it |







Doubled transaction banking corporate customer base in just 9 months for a middle-eastern bank Pioneer innovation with Corporate Banking Exchange (CBX) giving your corporate clients a seamless experience across account services, payments, receivables, liqudity and trade. The true omni-channel apps-based customer engagement platform is revolutionizing digital access to banking, with an e-banking portal that actually understands what the business needs. Spearhead your digital innovation with iGTB today.

Be the über-banker by tailoring experience for your customers at no extra cost to you, any country, any currency, any sector, any segment.

Contact Phil Cantor, CMO, iGTB to know more. e:

Allow clients to connect with you how they choose – and with self service, with omnichannel features across web, laptops, Android, iPhone, iPad, tablets and even wearable technologies. CBX is now on Apple Watch too. Experience it today.

RUN THE BANK. CHANGE THE BANK. DESIGN THE BANK. iGTB helps banks maximize corporate wealth with the world's first integrated transaction banking platform serving 100+ live installations across 85 countries. Leveraging its out-of-the-box digital 360 approach, banks help businesses optimize surplus liquidity, digitize the financial supply chain and trade, enable anytime universal payments and remove concerns from risk.

Sydney • Tokyo • Hong Kong • Singapore • Mumbai • Dubai • London • New York • Toronto


59 App-iness is the truth

retail banks won’t fully realise the transformative power of fintech without widespread adoption of APis

61 20/20 vision

The latest solutions in payment validation

84 Staying ahead of the hackers

62 The big daddies of big data Global banks aren’t late to the digital party, they’re just figuring out what next to do with it

Data breach is fuelling organised crime and undermining consumer confidence

64 Less pain, more gains

87 10 commandments of customer ID authentication

How to find the gain in BFSi customer service

The essential questions every financial service should be asking of their authentication system provider

Grc & traDiNG

66 Running with the pack

The Wolf of Wall Street has turned from predator to penitent

cuStoMer experieNce – braNcH

68 Up in the Cloud

88 Keeping an eye to the future

The Alcatraz data depository is propelling Actiance to the forefront of next-gen archive technology

New kid on the block metro Bank has an ambition to be a truly omnichannel service

70 Wall Street to mainstreet

90 Branch transformation: a strategic perspective

How would Brexit affect your investments? One of the coolest fintechs might just have the answer

The branch is not dead, but it does need resuscitating

72 Finessing fintech

92 In search of the golden nuggets

Fast-growing system integration company Finesse’s bright ideas are helping banks work smarter

Santander’s Portuguese bank has had to fight hard for the hearts and minds of its customers


75 Access denied

94 Who wants a cashless economy?

Passwords are a necessary evil, but they won’t be around forever The former identity thief-turned-FBi consultant Frank Abagnale Jr is going beyond the 41st Parameter

79 Advice from above

Supporting independent financial advisors through a Cloud-based platform

FintechFiNANCe ExECUTIVE EDIToR Ali Paterson EDIToR Sue Scott ART DIRECToR Chris Swales PAyMEnTS DIRECToR Doug macKenzie

CoMMERICAL DIRECToR Jason Williams SECURITy DIRECToR Nikheel Solanki FEATURE WRITERS Dylan Jones, richard Crombie, Graysen Hall PHoToGRAPHER Jordan “Dusty” Drew

FeatureSpace’s AriC engine is revolutionising the way that banking businesses combat fraud

82 Applied thinking

Four key takeaways from this year’s money20/20 europe conference

76 Catch them before they can

80 Challenging behaviour

in an age of digital financial enlightenment we appear to have overlooked one crucial truth… the public prefers cold, hard cash

97 KAL of the wild

The company behind many of the world’s ATms is on a mission to make banking and cash accessible to the remotest communities

issue #1 summer 2016 Fintech Finance is published by ADVERTAInMEnT MEDIA LTD. Advertainment media Ltd. riverside Business Centre, riverside Lawn, Tonbridge Kent, TN9 1eP ConTACT US www.Fintech.Finance Tel: +44 208 626 3619

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

Summer 2016

98 The branch is dead… long live the branch!

Branch banking as we know it has been transformed at Nationwide


101 Identity crisis

intelligent personal technology could drive traditional banking towards a precipice

103 Fintech vs fintech

The big daddies of finance aren’t quite as slow as the challengers make out

104 Why the apple cart needs upsetting

New online lenders have made significant inroads into the territory once held by the banking giants

107 The mighty Atom

mark mullen, CeO of the UK’s first app-based bank talks digital transformation… and life in Durham

109 Taking a slice of the cake

Starling joins the flock of new banks getting airborne this year

111 Follow the money

is corporate venture capital the new smart money in fintech?

113 The view from the bridge

Bridging the gap between technology and business in banking

115 CCC comes of age

Competence Call Center is celebrating in 2016

116 Helping the little guys think big

A small loans company for Smes in the UK is now giving big banks across europe a run for their money

iNSiGHt & GlobaliSatioN

120 A question of leadership Banks cannot delegate their digital future – they must install technological expertise at the top

122 Carpe fintech!

Susanne Chishti of Fintech Circle and The Fintech Book reflects on the industry’s transformation

125 Kickstarting fintechs

Connecting entrepreneurs with investors, mentors and partners at Startupbootcamp

126 Virtualised expertise

introducing the virtual advisor |


Onon Orkhon, CEO of TDB Bank, is also the president of the Mongolian Banking Association, whose goal is to spearhead sustainable growth across all sectors. “Mongolia is a cyclical economy – it depends on the mining and commodity price cycles. We all know that," he says. "So this is the challenge, not only for banking but all the sectors in Mongolia. The economy needs to be diversified (which) will help the banks diversify their risk profiles.”

Cardless ATMs During my time in Mongolia I found a number of financial practises surprising. One was the ability to get cash from an ATM without a card, something that hasn’t yet taken Europe by storm. Using a mobile phone and the menu on an ATM, a customer only has to follow a few simple instructions on screen and enter a security number sent via SMS to collect cash. The other surprise was 24-hour branches, which, ironically, were originally introduced to save on the cost of installing ATMs. Mirroring experience in the West, Mongolian banks have seen reduced footfall in their branches as a result of offering customers alternative channels. But they've also recognised the importance of maintaining a branch network to carry out more complex transactions with customers. In a country of three million people there are now more branches and ATMs per person then anywhere else in the world. But that may not last, according to Bataa Ganbold of State Bank, which operates the biggest branch network. "We observe that very gradually customers are changing from the branch to mobile application, internet bank or ATM, but it takes some time," he says. The number of branches, paired with the implementation of mobile banking and the


Bolormaa Luvsandorj, CEO of Golomt Bank

introduction of a core banking system in both Golomt and State banks, has led to rapid innovation and exceptional access to banking services, even in rural areas. “Almost every citizen of Mongolia has a bank account,” says Orkhon. “It’s a phenomenon of Mongolia because during the last several elections, money was promised to every citizen by major political parties. For example, every child, almost from the day of his birth, receives money from the government and the elderly receive handouts every month. It was policy for some time when the mining sector was booming. Now it’s changing, but it created a basis for banks.” Orkhon would like to see a more integrated banking industry, specifically an agreed system for mobile and electronic payments – an idea he says most of the banks support. “The payment systems, the marketing and other operations could be done together – unfortunately, the banks spent so much money developing those systems alone and competing with each other. Now they have certain market shares in

their segments, we could integrate some of the operations which we don’t need to compete on anymore. Doing that will be beneficial for our customers; it will save costs, save time for them, and boost their confidence in the sector.” The common goal for many of the banks is to become more client-centric. Simple changes, such as the introduction of uniforms in Golomt Bank branches have transformed the perception Mongolians had of their banks, almost overnight, says Luvsandorj. “All of a sudden, people started to see the bank as a service industry and feel that they can demand better services, approaches and products,” she says. “That in itself helped tremendously the growth of the banking sector. People stopped seeing the banks as a bureaucratic entity and rather as a service, which can be changed through customer input.”

Outward looking For an emerging market such as Mongolia, international networks are crucial to its development. Many of the banks have signed

Banking for everyone: Branches open 24/7 in Ulaanbaatar



Summer 2016

Payments & InnovatIon

We need to work with international banks to create a favourable environment for investing in Mongolia correspondent relationship agreements with others across Europe, which is likely to facilitate access to technologies from both Europe and Asia. The first foreign bank moved into Mongolia in 2008 and Goldman Sachs took a 4.8 per cent stake in TDB in 2012. With these new relationships, come new deals. “The largest undeveloped projects – mining projects, the supply of energy and infrastructure logistics to those gigantic projects – need a lot of funding,” says Orkhan. “Basically, Mongolian banks alone cannot provide sufficient financing, so we need to partner, we need to work with international banks to create a favourable environment for investing in Mongolia and to earn the trust of international investors. Contrasts: Mongolia is a wild frontier

"Obviously, they will come through banks and financial institutions, so we need to really expand our relationship with those international banks and start large project financing in Mongolia, the syndicated lending market, and to develop the local capital market so that not only banks but other institutional investors and players could have an access to the market. "So we can develop this country and its huge natural resources by cooperating with foreign banks and investors. That’s the next area of development of the financial sector in Mongolia.” The government has been working towards creating a more diversified economy since 2008. “Being dependent on only commodity prices makes our economy quite volatile, so I think that policy is starting to pay off, " says Luvsandorj. "This year, for example, the agriculture sector is becoming very interesting. Golomt Bank is the sole implementer of many projects in agriculture; we see increasing operations and export of cashmere wool products and dairy products, finally taking off. We believe meat production is going to be quite important in the coming few years, too.” Some of Mongolia’s banks have started attending international events, such as Onon Orkhon, CEO of TDB

Diversity is key:

those organised by the European Bank for Reconstruction and Development, not only to enhance their own reputation on the world stage, but also to help promote Mongolia as a brand. TDB in particular plans to expand into Hong Kong, Singapore and other Asian financial centres before moving its ventures to London or New York. All three banks have very similar goals, which are predominantly to focus on customer care while delivering profits to shareholders and developing networks with foreign investors. One of the interesting developments to look forward to as Mongolia’s banking infrastructure continues to catch up with the West, will be what edge their core banking system gives them and whether the same or different app-driven technology will benefit them to the same degree. Either way, the country's banks are keen to learn, says Luvsandorj. Her bank is already using social media to connect to customers. “Social media is already becoming incorporated in many activities," she says. "All these new technological advances that we could bring or learn from other countries are very important. "The operating environment of the banking sector is improving year over year," she adds. "The supervisory duties of the central bank are significantly strengthened. Compared to what we were 20 years ago, I think the Mongolian banking sector is really now on par with international standards and with international practices of supervision as well.” I'm sure the rulers in Khan Square would have been impressed. ■ Ali Paterson had the opportunity to visit Mongolia while reporting at Future Banking Magazine Branch loyalty: State Bank CEO

Bataa Ganbold

Summer 2016 |


Payments & InnovatIon

Safety in numbers The rapid rise of crowdfunding has changed the face of equity finance, but it’s not without risk. Matthew Gammond, of corporate finance house Racefields, believes the company's come up with a solution to load the dice in investors’ favour “We should be in no doubt that there will be failures like Rebus (but)… the question is whether people understand the risks they are taking,” is how Julia Groves, founding chair of the UK Crowdfunding Association, reacted to the collapse of claims management group Rebus earlier this year. The company appointed administrators in February after hitting trouble. It had raised £816,790 via crowdfunding platform Crowdcube and more than 100 individuals, some of whom made £135,000 contributions, stand to lose their investment. Nesta, which monitors the crowdfunding and peer-to-peer lending sectors, described the collapse as the largest equity crowdfunding failure in UK history. The industry is still in its infancy, but the question remains: are the risks understood? Put simply, crowdfunding is a way for businesses and individuals to raise capital from a large group of people via internet portals. First-generation platforms, like rewards-based Kickstarter, gave the industry a reputation for helping quirky start-ups, but now companies of all sizes and intentions can participate and it’s not uncommon for multi-million pound deals to pass through a platform alongside much smaller raisings. All of which helps to build and maintain the ‘community’ feel of crowdfunding – one of the industry’s goals from the outset.

There are even some, such as SyndicateRoom (who recently partnered with the London Stock Exchange), that pioneer new ideas and open up fresh avenues for investors and businesses to connect. Crowdfunding is changing the finance world: some commentators now see it as the way for small businesses to fund their ideas and growth. Some even claim that it could easily rival traditional funding in the near future. There’s no doubt that this is an immensely successful industry that’s on a rapid rise. Last year, the UK’s alternative finance market was worth £3.2billion, an 84 per cent increase on 2014’s figure, and a study commissioned by the World Bank predicted that it could have a global value in excess of $93billion by 2025. Capital should always be considered to be at risk, though. The Rebus collapse highlights the inherent dangers of equity investment and, while the peer-to-peer side of the industry is considered to be far less hazardous, it doesn’t mean we don’t need to address the issue.

Information is key

David Gammond, who has worked for more than 20 years in corporate and property finance. It mixes seasoned experience with young creatives and go-getters and it lives and breathes crowdfunding, offering numerous services to both businesses and investors. Its latest offering tackles the question of risk head on. “We want to provide individuals with the kind of information they need to help them make a more informed investment decision,” says David Gammond. “We want them to completely understand the risks they are taking before they commit any capital. This passion to provide transparency and to nurture trust led us to create our independent research service.” That research goes beyond what you’d normally expect to see on a crowdfunding platform. “We’ll check bank statements to ensure they are operating within their limits. We’ll examine any contracts and intellectual property rights as well as look at what HMRC is told when the company obtains EIS/SEIS status to see if it matches what they’re actually doing,” explains Gammond.

Racefields is an FCA-authorised corporate finance house based in Manchester’s vibrant Northern Quarter. It’s a family business run by

Wisdom of the crowd There are more than 1,000 active platforms in the world and more appear with each passing week. Larger names, such as Seedrs, Indiegogo and GoFundMe, get a lot of press, but there are many more that specialise in niche markets and cater v to specific audiences.



Summer 2016

“On top of this, we’ll report on the company’s premises to make sure that they are fit for purpose and that no clauses in any leases are being broken, and we’ll also look into the experience of the directors, including their time at previous businesses, and ask questions if we find any bad history.” All of these details are compiled into a document and automatically emailed to subscribers as and when they become available. To ensure impartiality, neither the platform nor the business that’s being reviewed is charged for this service. “We believe that is very important from an investor’s point of view,” says Gammond.

The investment world is inherently risky and some investments will always turn sour... we want to protect as much investor capital as possible

hasn’t been reviewed, subscribers will be able to notify us by hitting the request button and filling in a short form. If we produce the report, we’ll email them when it’s available to download from our website. Using this request button means we can provide our subscribers with exactly what they want and that’s very important to us. We intend to Investor insight launch this part of the service Subscribers should have a in the coming months." clearer view on exactly what Peer-to-peer and an investment opportunity Ceo: David Gammond crowdfunding platforms are can offer and whether or not revolutionising the finance industry by they are financially sound. But it doesn’t enabling businesses to overcome their stop there. We don’t just pick and choose companies reliance on banks while enabling private investors to increase their that are live on a platform; we will be giving returns but, without the right subscribers a say in who we research in insight, investors cannot be the near future. "Our database of reports will soon be supplemented by requests from our subscriber base," says Gammon. " If there’s a business that

Summer 2016

certain what they're getting themselves into. “By providing comprehensive research on businesses looking to raise funds, Racefields will provide a much-needed layer of transparency to the peer-to-peer and crowdfunding market, enabling investors to be more confident of their decisions," says Gammond. He believes recent moves by the Financial Conduct Authority to regulate the peer-to-peer market are a positive sign that the industry is beginning to mature. “It’s great news for both the investors and businesses involved. Racefields will enhance this further by providing a level of information that the platforms themselves don’t always achieve alone." The investing world is inherently risky and some investments will always turn sour. That’s the industry’s biggest problem. Whilst it may be impossible to accurately predict which businesses will fail and which will prosper, we believe our research service goes some way towards giving investors greater peace of mind. Situations like the Rebus collapse are almost guaranteed to be repeated. At Racefields we want to protect as much investor capital as possible by making sure they have the ability to pick and choose where they make their investment with a greater level of background knowledge than they would have had if they weren’t a subscriber. ■ To find out more, visit www.racefields. com and follow us across social media |


Payments & InnovatIon

Chain reaction

Simon Taylor (right), VP of a Research and Development at Barclays, and named one of the Top 10 most influential people in fintech, explains how blockchain technology could facilitate a revolution in trade finance Without question, the biggest challenges at an industry level right now are cost and compliance. Compliance describes the need for ever-increasing transparency and ever-increasing fairness for customers. On the flip side, there’s a commercial need to deliver back to the shareholders. The key way to do that is to take cost out of the business.

Without question, cost is the battleground. Can you reduce it and once you’ve done that, how do you still maintain or improve the service that the customer is receiving? Having set a goal to be the world’s most automated bank, Barclays has been looking into new technologies and automation with the aim of reducing cost while enhancing the customer experience. And one of the best ways we think we can do that is through digital technology, including in trade finance with a genuinely different, potentially transformational technology called blockchain.

Banking on the move Trade finance is centuries old and yet essentially the process on which it is based hasn’t changed in all that time. It starts with a piece of paper, called the bill of lading, a document that describes everything that’s been loaded onto a shipment. In 2015, that piece of paper might be sent by, say DHL, to five different people, although there’s still only one original copy. This allows the opportunity not only for fraud, but also error and a host of operational risks in which the customer, ultimately, loses out. What blockchain allows Barclays to do is to



digitise that piece of paper in a way that hasn’t been possible before. Historically, the bank had two choices. It could either use a centralised system for issuing a bill of lading, with everyone using the same service, or it could standardise – a good example of that being Swift – with everybody using the same messaging format. In trade finance you might have agriculture and shipping, road transport and banking, and all these different industries need to be able to talk to each other. That’s what blockchain offers: a universal fabric for parties in a transaction to communicate with each other, but with

Barclays has been looking into new technologies and automation with the aim of reducing cost while enhancing the customer experience enhanced assurance and enhanced security. What’s really special about blockchain is the ability it offers for as many parties as are needed to validate a transaction. For example, suppose you are asked to declare that inside a container in a ship there are 100 blue Lego bricks. You no

longer need to sign that declaration on a piece of paper, you sign it with your computer. Then you want the bank to sign it, the customer, and a fourth party involved in the shipment. But now you don't need four copies; the one they all sign is the original and they can all see it instantly. Now, while it is absolutely possible to do this with a centralised service today, the problem comes with getting everyone to agree to it. With blockchain, somebody simply creates the paperless transaction, and if you choose to adopt it and enough of your counter-parties, enough banks, adopt it for it to be worthwhile, then you get viral adoption, which is very compelling. In effect, we’re using a computer algorithm to create a consensus around the truth rather than everyone in the transaction chain having their own paper version of it. If we could rely on maths to “sync” the truth between us all, we could cut out a lot of wasted paper going back and forth – and we’d have taken a step closer to the holy grail of removing paper from the economy. Barclays recently announced that it was going to pilot blockchain next year with a company called Wave. It’s time to move from small experiments to pilot stage and seeing if the business case stacks up. We’re moving from ‘What if?’ to making it real.

Immediate solutions Some people say blockchain is a technology to solve a problem that hasn’t been created yet. We think in trade finance there's a problem it can solve right now. Barclays is fortunate to have a team of innovative minds, who collectively have

Summer 2016

the power of technology: Barclays is ready to roll out a blockchain pilot

hundreds of years of experience in trade finance. They were initially cynical about blockchain, as attempts to centralise and standardise the lading process have failed before. They are now in constructive dialogue with Barclays’ partners at other banks and when the most cynical people in the room start to ‘get it’, you know there’s something there. Blockchain isn’t the only innovation on Barclays’ digital agenda. Last year, it launched its first Barclays Accelerator, a 13-week open innovation programme for technology-focussed start-ups whom it matches with some of the finest fintech minds in the world. There are now three programmes running in the UK and the US with more planned for Cape Town and Tel Aviv.

Summer 2016

It’s also recently announced that, following huge demand from customers, it is now possible to set up a payee through its mobile banking app and it is likely that we will see continuing richness of those features and continuing collaborations with the industry on a wider level. Blockchain is just the start. |


No borders: Current payment systems struggle to cope



Summer 2016

PaymeNts & INNovatIoN

An interconnected world of payments Earthport CEO Hank Uberoi, and Peter Klein, the global head of FX, explain the particular challenges in cross-border payments and how the company is fixing an outdated 'many-to-many' model by introducing a 'hub-and-spoke' As expected, payments was a hot topic at this year’s Money20/20 in Copenhagen. Fintech is driving change across the entire payments space and traditional players, looking to keep pace, are collaborating with innovative companies to deliver transparent and cost-effective solutions. Among these innovators is Earthport, which provides a global payment network through partnerships in more than 70 countries and has a customer base made up of eight of the top 20 global banks, including Bank of America and HSBC. With offices in major financial centres, Earthport’s model is determinately global, reflecting the needs of the global economy. In CEO Hank Uberoi’s words: “The whole correspondent banking infrastructure was designed on a many-to-many model, where banks have relationships and connections with each other to satisfy a low-volume, high-value payment demand. Now, with the interconnected global economy, you need a hub and spoke model.

A sharing economy “E-commerce, the sharing economy, app stores et al are driving a massive and massively growing flood of low-value, cross-border payments. It is new, happening fast and the 40-year-old correspondent

Summer 2016

system cannot cope cost effectively… Nobody imagined AirBnb in 1978!” Uberoi says Earthport is creating “a completely new paradigm where payments are faster, cheaper and more transparent”, a shift from the model which was built when high-volume, low-value payments were relatively rare. Earthport’s clients are given a single API connection through which they can deposit money into any bank account in 70-plus countries, with no principal deduction, typically in a T+1 time frame or even same day. The model is structured on key strategic partnerships with banks and businesses around the globe. Relationships are central to this business model and Earthport has to comply with the regulations of each country in which it operates. Technology is obviously at the core of what the company offers but deep understanding of the heterogeneous global regulations environment is also critical. Earthport’s latest technology is the distributed ledger hub, which uses Ripple technology and allows for real-time transactions. “If you apply distributed ledger technology to international transfers it’s really challenging, because of the complexity of regulatory and compliance infrastructure of 200 regulators around

the world,” says Uberoi. “With our partnership with Ripple we are able to act as the hub, providing the infrastructure and compliance, allowing banks to set live with minimal cost and internal build.” Peter Klein, Earthport’s global head of FX, says the company also offers "a strong FX utility where people cannot only leverage our cross-border payment rails, but also use us for FX risk management and revenue optimisation. “This allows our customers to attain the best possible pricing in terms of optimising liquidity management and cash flow.” Earthport has built a new, fast payments infrastructure for our new, global interconnected world.

E-commerce, the sharing economy, app stores et al are driving a massive and growing flood of low-value, cross-border payments |


Payments & InnovatIon

The battle for

fiN T eCh

The concept of banks vs fintechs is outdated, says Neal Cross, Chief Innovation Officer for Singapore’s DBS Bank and it risks Europe overlooking the real challenger… The media likes to portray the fintech revolution as a bunch of upstart challenger banks seeking to bring down the entire banking edifice. The more cynical view it as an internecine spat between two siblings fighting over the financial market like a toy.

“It’s a lot more complex than that. I think there is a fundamental misunderstanding of what’s happening in this very volatile industry,” says Neal Cross, Chief Innovation Officer of the Singapore-based DBS Bank. According to Cross, there are five types of fintech player, the largest and most successful of which are the banks themselves. “They’ve done financial technology for a very long time. What they’re doing now is putting in place innovation heads, running fintech accelerators and trying to bring in the tools of fintechs, like lean start-up, experimentation, design thinking, to react and to improve customer experience.” Then there are the ones nobody ever talks about – the traditional suppliers of financial technology; The Misys, Sungards and Fisevs of the world, who have accumulated



billions of dollars embedding themselves with the five trillion dollar financial services industry globally. Next comes two types of neo fintech – one more benign than the other. “The first ones want to partner with banks. They sell technology or services or potential business to financial services. "The others are the ones who fundamentally want to kill banks. They go out with a model and marketing that is very anti-bank; they don’t really want to partner, they want to take back share. These are the ones which will affect our industry the most,” says Cross. Finally, we have the dark horse GAFA, a powerful segment yet to realise its full potential made up of Google, Amazon/ Alibaba, Facebook and Apple. “Apple, for example, has 850 million cards on file, and so already they’re the biggest bank on the planet, technically," says Cross. "Google’s moved into financial services payments, it’s doing recommendation tools around property. Obviously, Amazon’s building out off its e-commerce structure, but there’s an interesting split here. The tech companies are going (for the)

consumer, so Google and Apple are too. The big e-commerce giants, like Alibaba and Amazon, they’re focussing on small businesses. Because so many businesses utilise them as their platform for sales and distribution anyway, they’re building banking around that.” And if you think New York, London and Silicon Valley are where the fintech battle is at, then wake up and smell the kopi. “There is a misconception that (these) places are fintech capitals of the world. They’re not by some way. They are so far behind what’s happening in China, just by the numbers alone," says Cross. "There are more than 3,000, and this is a conservative estimate, of peer-to-peer lending platforms in China. The government-investment fund for start-ups

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is $337billion US. Even if 10 per cent of that was for fintech, it’s double what the rest of the world invests. “One bank has been open a little over a year, it’s got 30 million customers. They’ll have 300 million in another two years. The success of the fintech, the scale, the amount of people in the fintech, the investment

means that China is way ahead on every single measure I can think of.”

A disruptive dragon The Chinese banking revolution is a lesson in customer ownership and the speed and scale of change is eyewatering. Banks there realise customers are on a journey, says Cross, and they’re determined to make it with them. In some cases, literally. “They have partnerships or direct ownership of holiday websites, of transport, of airlines. The same with medical, and they do the same with commerce, and they do the same with house moving. They even have moving companies and places where you can buy furniture. The Chinese banks

Can these Chinese fintechs scale outside of China? Will they wholesale jump into Europe and the US? I hope so are doing some amazing work. That’s the epicentre of digital disruption in financial services,” he says. The country’s leading third-party online payment platform, Alipay, launched by Alibaba in 2004 and operated by its affiliate Ant Financial Services, recently announced it has in excess than 450 million users, more than double US-owned PayPal’s. And it’s likely to benefit from further investment following a $4.5billion private finance deal struck in April by Ant, which is now the world’s most valuable privately owned internet company, valued at $60billion. The question is, can the rest of the Chinese fintechs follow suit? “That’s the big thing that everyone’s thinking,” says Cross. “Can these Chinese fintechs scale outside of China? Obviously, they’re moving out through places like Hong Kong, Taiwan, Singapore, but will they wholesale jump into Europe and the US? I hope so. I like competition, it’s good for everyone, so my guidance is watch this space.”

eastern promise: China's the epicentre of digital disruption in financial services

Summer 2016 |


Payments & InnovatIon

A global digital market

A sharp rise in cross-border electronic payments has opened up the market for transaction providers – but most have been found wanting. Anders la Cour, CEO of Saxo Payments, is busy finding solutions Saxo Payments is what you might call a digital utility on purpose. And if you are a utility, you really need to have scale.

Fortunately for the global transactions services provider, the trade winds are blowing in its favour. According to a recent McKinsey report, cross-border electronic payments are expected to account for 81 per cent of the value of all global payments flows in 2016 – up 16 per cent in a decade. “The world is getting connected to a higher level every day and that era of connectivity has increased the tendency to bring a global, single, digital market to the world,” says Anders la Cour, Saxo Payments co-founder and CEO. “The consumer does not care whether he is based in Denmark and buys something on ASOS in the UK. He just wants the ability to purchase and receive goods. Then you have a financial tech industry that’s trying to help the ecommerce industry meet these demands and all these players are merging together into one market. “We have increased our service to make sure we can support players on that global single digital market with cross-border transfers all over the world. That’s what we are underpinning and that’s what our strategy over the last couple of years has been part of.”

out pretty much where it is heading – and it knows there are some big hills to climb. The report revealed 63 per cent of payments-related businesses were dissatisfied with the speed of cross border payments and only 38 per cent believed they got a competitive FX rate. It also showed they would be willing to switch provider if they could see the benefits, three-quarters saying they’d change if it cost less, while two-thirds would make the move if it provided faster transactions. The results of the survey provide a compelling business case for change – one that Saxo is driving. “We’re basically trying to rebuild transactional banking as we think it should be done,” says La Cour. “That’s why we’ve set up a brand new platform from Oracle, but customised it to meet the demand and the needs of businesses in 2016. We’re trying to work with the banks and with the

financial tech industry because I believe there’s a lot of good stuff with the banks, and there’s a lot of good stuff within fintech. We have chosen a path where we think a cross-border payment should be a utility over a couple of years.”

A one-pay world Saxo’s Oracle platform is bespoked to cope with multiple layers of regulation; its legal and compliance team stay on top of changes to the legislative framework in the regions in which it operates; and its customer service team is manned 24/7 to respond to demand, wherever it arises in the world. “In general, the cost savings by using our platform are significant compared to what

Reshaping the market A conduit for money transfers, Saxo Payments, part of the Denmark-headquartered Saxo Banking Group, enables fintech businesses with international client bases to plug in directly to the global banking infrastructure via the Oracle Flexcube banking system. But Saxo isn’t just in the global financial transaction market; it’s reshaping it. The company’s recent white paper on cross-border B2B payments, Today’s Landscape; Tomorrow’s Opportunity, spelled



a world of choice: Cross-border e-transactions are expected to count for 81 per cent of all global payments in 2016

Summer 2016

you would usually see,” says la Cour. But it's not all about cost. “From an alternative perspective, you have an entire fintech industry that is doing a very good job trying both to lower the prices but also to increase convenience. Of course, price is important, but a lot of very good fintech businesses come with a brilliant user interface." The introduction of the Single Euro Payments Area (SEPA) in 2014, allowing more than 500 million consumers and more than 20 million businesses and organisations to make and receive seamless payments in euros under equal terms, demonstrated what a single global digital market could look like. The real battle in the next few years will be over who owns the customer relationship in those transactions, believes la Cour. Fintech has already staked its claim, but banks haven't thrown in the towel yet. “We’ve seen BBVA, in Spain acquire a stake in Atom Bank, we’ve seen Santander move into that market. Goldman is trying to. And I think you will see on the other part of the value chain, utilities like us providing the cross-border pipe to all these businesses. Someone could be providing a lending pipe, someone could be providing the FX pipe. I think that’s the trend you will see. A huge battle to win that digital relationship towards the clients, and then the pipes coming in from the other side, trying to deliver cross-border payments, FX, lending, wealth management, whatever it is. "I think they will enter this area as well and try - as the tech giants are - to own the relationship with the client. It would be exciting to see because they are already controlling another part of the value chain - like Amazon and Alibaba control the distribution level as well as the products.

Of course, price is important, but a lot of very good fintech businesses come with a brilliant user interface It would be exciting to see if they can use that to their advantage when they enter the market.“Over the next couple of years the Internet of Things will see that connectivity moving into other products. So one could imagine your fridge ordering milk directly from Ocado and this could basically be done by Amazon. Amazon would act like your payment engine.” Summer 2016 |


Payments & InnovatIon

A collaborative approach In pursuit of becoming a leader in the digital space, global giant UBS is working with smaller collaborators and taking on board suggestions from customers and staff. Dirk Klee, COO at UBS Wealth Management, and Andreas Kubli, UBS Head of Multichannel, explain Among the core challenges within today’s financial services market are regulation and building trust – or rather rebuilding trust – with clients. Both are linked to the financial crisis. But there is a third element, which is, if anything, even more disruptive. Technology has raised clients’ expectations of their relationship with banks; instead of the bank deciding what to take to the client, it’s now about what the client is asking of us. UBS is using social media channels to engage with its clients on investment content. Using what it calls the CIO (chief investment officer) House View, it’s presenting its best new ideas on social media platforms, including LinkedIn, and actively seeking client feedback. UBS also uses social media to connect with the fintech community, to exchange ideas, to learn from others and find potential partners among the start-ups. Historically, within private banking, transaction channels were the first to be digitised; UBS is now starting to digitise more of the content that would traditionally have been communicated to an advisor and communicating that content direct with clients. Digitising the so-called last mile, giving the client an additional channel to the product, backed by direct communication from the CIO, has led to more engaged customers, which in turn has seen UBS’s retention rate increasing. Digitalisation is not about substituting robots for client advisors; rather it’s about engaging with better data and making smarter investment decisions for clients by using the full range of technology at our disposal. And we have to be a multichannel, 24/7 service, reachable from wherever the client is and always ready to respond. As a result, we’ve seen a significant uptake on UBS’s digital channels and the key performance indicators are encouraging. UBS is the only bank in



Switzerland to receive a five-star rating for its apps on the App Store. It has a 700 per cent higher growth rate among clients that use e-banking and mobile banking. Retention rates among those clients are 25 per cent higher than among those who don’t use digital services. And our experience has been that return on investment in these clients is also higher. UBS led the field in rolling out these digital channels to clients; now it’s going further by embracing technology as a business enabler, working with innovation labs to create a whole environment around the technology. As part of this, UBS has built an intranet site called Innovation Central where employees can contribute ideas and have them validated internally before being challenged by external experts. If an idea passes that hurdle, UBS takes it to the market for testing. It is part of our aim to be a leader among banks in the digital space. That said, we realise not all services are appropriate to all channels and we distinguish clearly between simple transactions and more sophisticated products. Clients can choose to engage in some transactions on a fully digital basis. When it comes to more sophisticated services, UBS adopts a multichannel approach.

Improved client services UBS has always been a high-touch business, with client advisors relentlessly focussed on bringing the best services to the customer. A consequence of the move to more digital services has been to allow our advisors, relieved of routine transactions, to focus on investment ideas and quality interaction with clients. An example of this is UBS Advice. Under the UBS Advice contract, the bank undertook to conduct daily, overnight health checks on client accounts and arrange for a client advisor to call them the following morning to report any event that needed their attention. This

generated significant workload for client advisors but was, infact, a service that the bank could easily have provided, at least in part, digitally. Now we send an SMS or email to the client, inviting them to log into e-banking to check the account where they will find a summary of the situation and options to fix it. We are not removing the choice to contact a client advisor but they can now address the issue entirely online if that is what they choose to do and it has been very successful. Digitisation of UBS Advice recently won UBS the Banking Innovation Award of the University of St Gallen.

High-touch plus high-tech A consequence of this move was to free up client advisors to focus time on other areas where, being in the investment advisory business, UBS has concentrated on developing the client relationship. Technology allows us to elevate this relationship to high-touch plus,high-tech, giving clients access to better data, better information and better advice. The digital channel is not replacing, but rather, supplementing the client advisor role and it follows the trends clients are used to seeing in other areas, such as e-commerce. As an experience, dealing with your bank shouldn’t be seen ranked alongside a visit to the dentist. It needs to be one that enhances the way you look at your finance and your life. We want to partner our clients through the lifecycle of his or her investments. This partnership approach extends to other spheres of the bank’s operation, too. Where there was a tendency in the past to build everything by ourselves, in future we will be partnering more with others as part of a dynamic ecosystem where banks and external providers collaborate to deliver perfect services to clients. UBS has already demonstrated the value of that approach; it recently won the Best of Swiss App Award in a joint venture with a start-up. Summer 2016

Hand in hand: UBS has a partnership approach to both clients and developers

We use social media to connect with the fintech community, to exchange ideas and learn from others Summer 2016 |


Payments & InnovatIon

Exposed: The emperor with no clothes Tony Craddock, Director General of the Emerging Payments Association, looks at what we can learn from the spectacular collapse of paytech startup POWA You may have heard about Dan Wagner, the CEO of POWA Technologies, and the recent liquidation of his company. He raised and spent more than $200million of investors’ money in a company once valued at $1.9billion and endorsed by David Cameron for its ability to create 250 jobs. The investors in POWA were not stupid. They evaluated the opportunity and concluded that it was worth a punt (as all investments in early-stage technology companies should be viewed). The staff were not stupid. They decided to join a company with good pay and conditions and nice offices and flash parties to follow a dream, a vision created by one man. And in the end, people out in the markets were not stupid. They decided that the product was not attractive enough to buy. So the company folded. What is amazing is that the first two groups – the investors and the staff – firstly followed a dream created by Dan Wagner, a PM-endorsed and VC-supported businessman with a track record of founding Dialog, which was dubbed “dial-a-dog” by City wags after its share price crashed 95 per cent on Nasdaq, New York’s technology-heavy market. And, secondly, they did not challenge someone who, in the end, delivered so little of commercial value with his investors' money. I believe it is a perfect example of ‘the Emperor has no clothes’ – you remember, the fairy tale where nobody dare accuse the Emperor of parading in front of his subjects naked, until an innocent little boy shouted: “But that man has no clothes!” And then everyone realised that their hero was, indeed, parading in the nude. What I want to understand, however, is why, when more than $200million of shareholders’ money was being ‘spent’ in around two years on a company that never Summer 2016

actually made ANY money (that is, revenue, let alone profit), that there were not more little boys out there, calling time on a flamboyant, smart-suited David Brent figure. They should have spotted it coming. And why, now that evidence is emerging of some clearly inaccurate claims having been made about ‘contracts’ that were actually LOIs and deals with China Union Pay(that clearly were not deal, let alone actual engagements with CUP), that people as well-intentioned and connected as Julie Meyers at Ariadne Capital are supporting Mr Wagner for being a courageous, brave entrepreneur, to be applauded for his bravery, creativity and genius.

Irresponsible behaviour Their positive support and now their silence is endorsing what I believe is irresponsible entrepreneurialism – jingoistic salesmanship in the name of capitalism – when they should accept that, as difficult is it seems, this emperor really had no clothes. I fear it is because they are scared of looking stupid. But now is the time when

they should come clean, accept that they were duped, and endorse a principle of responsible entrepreneurship, where investors' money is not spent on flash offices in Heron Tower and videos that patronise staff and make inaccurate claims, but is spent on generating real revenue from real customers. We should not be proud of the POWA story. As a passionate advocate of business as a means to improving the world around us, as the main means of creating value and improving lives everywhere, I have watched the POWA story unfold. I am embarrassed to see such value destruction in the name of the UK technology industry. I fear for what all investors in my industry, paytech, might now wonder: “How do we know this is not just another POWA?” I believe we should be rallying around to see what we can learn from this and to do what we can to make sure other ‘POWAs’ do not happen again.

They should come clean, accept that they were duped, and endorse a principle of responsible entrepreneurship Come on, you responsible entrepreneurs out there. Stake your claim on what is right. Accept that we were, indeed, stupid, but that we have learned how not to do it again. And that we can go out to invest in responsible technology entrepreneurs, who are not raising money to spend money, but raising money to make money. It’s about time we learned to spot the emperors that are wearing no clothes. |


Payments & InnovatIon

Planet of the apps AEVI set out with a vision to revolutionise commerce by bringing banks and acquirers closer to their merchants, and merchants closer to their consumers‌ now, with its new Android-based card payment terminal Albert, it’s living the dream

a world of ideas: Albert is redefining payment systems



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Apps were a fantasy that have been exploited by visionaries to become one of the most frequently used systems in the technologically connected world. At fintech company AEVI, the fantasy was even more full-blown. It set out to be the “open platform that helps everyone to be successful” by acquiring hundreds and eventually thousands of apps in the payment channel marketplace and linking banks, acquirers and solution providers to figure out ways of adding value and generating new revenue streams. Now, two years since forming an enabling partnership with the secure payment solutions specialist EVO Payments International, the dream is close to becoming a reality. With everyone from multiple retailers to independent SMEs in its sights, AEVI is set to fundamentally change the payment service industry by giving clients the ability to work on a white label basis via what it describes as “the coolest B2B app store in the world". Through this groundbreaking ambition, a completely new payment service has emerged. Albert is an unspectacular name for a piece of technology that promises to rapidly transform not only the payments industry but bricks-and-mortar retailers and the customers’ experience of them.

Gamechanging POS The reason for all the excitement around Albert is because it is the world’s first Android-based, PCI-certified touch-screen payment terminal, meaning it works in a similar way to tablets and smart phones. Thanks to AEVI’s open platform, Albert will be fully customisable through the app marketplace, which will allow businesses that use it to do everything, from promoting themselves over social media, to managing stock and ordering supplies. With further programming from companies that are excited about using Albert, it’s hard to imagine a direction the device can’t go in. “You will see a lot of kickass in the market, and we’ll see a lot of customers going, ‘Wow, what I experience on the internet, I now experience in the face-to-face world, as well? That’s so cool. I don’t have to queue anymore in a stupid row and say when can I pay?’ "says AEVI Chief Commercial Officer, Left-right: Mike Camerling, Gerd Laufens and Hans Langenhuizen

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Hans Langenhuizen. He reaches for an illustration and comes up with… a Martian. “Just pretend you’re coming from Mars, you’re wearing your jeans and you want new ones. I’m Dutch, when you’re in a Dutch store, they shout at you. ‘Oh, sorry, I was just here to buy something…’ You find your jeans and finally you have to queue up to pay. Paying is the worst thing; you have to wait for 10 minutes. If somebody comes to you with a service device that said, ‘Hey, which jeans do you want? This is how they look on you. You want to pay? Don’t worry, pay here and you’re done’. I like that.” Acting as the Swiss army knife of the payment channel marketplace, Albert’s core physical features include a smart card reader, magnetic stripe reader, NFC reader and a printer module. But due to AEVI’s associated marketplace, Albert’s potential as a payment device is more than the sum of its parts. Fast and effective innovation from acquirers of the technology will deliver apps that promise enhanced control and flexibility, which in turn will reduce the total cost of ownership. Customers, too, can influence development through queries, suggestions and even pro-active polls, while features such as a

already in the market, and domain experts in the merchant space. These are small companies that already have software and apps or mobile devices, or they could go all the way up to big companies that have been in the market for years.”

Added-value services From EVO’s perspective, it’s the powerful combination of Albert and the supporting eco-system developed by AEVI to deliver value-added apps and services to merchants and acquirers that takes it into a new dimension. “Pan-European on an e-commerce space is quite easy to achieve, but on a POS and card-present basis, that’s a totally different game,” says Gerd Laufens, Head of Global Products Europe at EVO Payments International. “AEVI could enable us to go in that direction, which brings a lot of benefits to our clients, which are financial institutions, big retailers to small SMEs. The retailer can really benefit from this offering in terms of cash flow optimisation and having centralised partners rather than having multiple suppliers in multiple countries.” And in the merchant acquiring business, its effects could be profound.

Pan-European on an e-commerce space is quite easy to achieve, but on a POS and card-present basis, that’s a totally different game split-pay app, for example, to work out how to divvy up a restaurant bill, will endear it both to them and to business. “We provide our merchant acquirers and banks with new ways to provide models and services to their customers via our smart apps and services, but in order to do that, you need a developer community that creates content,” says Mike Camerling, Director of Business Line Marketplace for AEVI. “Those developers exist, they’re

“We will see multiple additional payment methods – not the standard acquiring services that you had in the past – evolve massively,” says Laufens. “From a standard merchant acquiring business, where you have a supplier/client relationship and the client pays for a service, we turn this business around into a relationship where the client also gains from the service that the acquirer is providing, because of the additional value-added services that we can offer through the marketplace. This is turning this business from a cost centre into a profit centre for the client.” And you don’t have to be a Martian to appreciate that. n AEVI’s Mike Camerling, Hans Langenhuizen and EVO’s Gerd Laufens were talking to Fintech Finance Magazine’s Dylan Jones |


Payments & InnovatIon

The voice of banking Santander is determined to talk to customers across every channel – not least with its voice-led mobile service, says Head of Innovation Sigridur Sigurdardottir In the race to embrace a digital future, Santander’s Head of Innovation is determined not to see a hierarchy of services that privileges any single channel or customer above the rest. Rather, says Sigridur Sigurdardottir, it’s about developing a “seamless and frictionless” experience for everyone, from those using the bank's 850 branches to the latest Apple Watch wearer – and it's partnering with whoever has the hottest ideas to deliver it. “We’re really focussed on providing simple, personal and fair services to our customers in their channel of choice,” says Sigurdardottir. “We design for mobile but we then make sure it flows through into all the other channels. “In terms of our overall innovation agenda, we think about the holistic experience, then partner with fintechs and start-ups to bring the external view into the bank, get pilots out quickly and integrate those that are successful into that experience. “We see this as a core part of our strategy. The start-ups really bring a disruptive mindset to the table. They bring speed and agility and an incredible focus on the customer. It helps us think through problems in a different way. What we bring to the table is scale, resilience and robust infrastructure – and that fantastic Santander brand that’s so widely recognised.” Among its most recent innovations has been Spendlytics, which coincided with Santander being among the first wave of banks to adopt Apple Pay last year. A mobile app, Spendlytics is an example of smart use of the existing data on customers held by the bank, made available to them in a dynamic way. Spendlytics allows users to track spending on their credit cards and analyse their own financial behaviour, rather than have the bank do it for them. “We have close to 200,000 active



customers on Apple Pay already. Our customers love it – they’re using it across merchants and across industry,” says Sigurdardottir. “We launched Spendlytics to allow people to track their card spending and be able to see that on the go. I think providing a solution on the go and providing the ability to pay on the go is exactly where the industry is heading.” Coming along behind and still in the pilot stage is what Sigurdardottir describes as the “Siri of banking” – a pioneering voice-activated service linked to Santander’s existing SmartBank app on iPhone. It doesn’t go as far as using voice biometrics, relying instead on existing security logins, but it does allow customers to interrogate information about transactions made on their accounts over the previous 12 months simply by talking to their phone. “They can ask how much they’ve spent in the last month on a specific category or even ‘How much have I spent in Café Nero in the last 30 days?’” says Sigurdardottir. “In phase two later this year, people can give payment recommendations or payment instructions. We’re seeking to understand how customers can adapt to this and we can enhance the service as we go. We are engaged in a lot of education around using it, but from a security perspective it’s absolutely safe.”

A new demographic The more customers use such services, the more they provide the bank with the data it needs to drive more innovation. It's a virtuous circle. “It’s understanding the behavioural versus the classic age/income demographic," says Sigurdardottir. "The key is really analysing the data. It’s about making sure that we know what their needs are, having a really single-minded view of the customer and then being able offer them great products, services and

experience. It’s leveraging what their interests are, how they’re transacting with us, how do we make sure that we’re making the right recommendations based on who the customer is? We are experimenting with other things, like geolocation, to offer people different services based on what we are seeing in terms of behaviour.” In the commercial banking division, too, big data is playing its part in speeding up approval processes by giving a more comprehensive picture of the customer and their risk profile. “We’re looking at data from Experian and exploring how we leverage social media data to provide insights and information, aggregating data that is available to us to help make better decisions for our customers,” says Sigurdardottir.

Don't forget the branch Those 850 branches are an integral part of the strategy, too. “While we absolutely want to make sure that we are providing great service in our mobile channel, we see customers really like the personal touch. So while the services that people seek in the branches might change in terms of advice, we certainly see branch as a key part of our distribution channel. "We are digitising our branches, so staff now have iPads to be able to demonstrate to customers how they can access (the bank) through the app or mobile. We are continually talking to customers and making sure we take in what customers like in terms of how we evolve our service. “We need to be led by our customers. We need to be led by where our customers want to be, able to access the financial services, whether it’s on the go in the mobile phone, through the watch, or coming into a branch to get the service. It’s all about providing that seamless and frictionless experience.”

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multi-channel: Santander is the first to trial voice banking to the UK

The start-ups really bring a disruptive mindset to the table. They bring speed and agility and an incredible focus on the customer Summer 2016 |


Payments & InnovatIon

Flexible friends Contis Group is making its name as an agile player in the alternative banking market, as Group CEO Thomas Gregory and MD Mike Fromant explain “There’s a whole group of people today who have been on the internet before they could walk,” says Thomas Gregory, the newly installed CEO of Contis Group, which has carved out a niche in end-to-end payment solutions in a market hungry for fresh ideas. With a fistful of awards for its prepaid cards, it really is the industry’s flexible friend. Acting as a fully-integrated, alternative banking and payment solution, Contis Group offers a complete one-stop service for businesses looking to develop Visa prepaid/debit card solutions – from issuing, licensing and payment processing through to programme management and consultancy. A true ‘total control’ offering for business needs, it is aiming at driving the alternative banking and payment market in the UK and Europe, helping to democratise and transform financial services. Its core targets are financial inclusion, travel and FX, payroll and gift and loyalty, and, having built the technology stack over the past four years, it’s now growing services fast and winning recognition. “We don’t provide direct banking services to consumers, we do it via clients or partners who want to play in this space but don’t have the technology themselves,” explains Gregory. “We believe we’re bringing something that’s unique to the market. There are not many people with our agility, with our technology stack, who do the whole range of end-to-end alternative banking, current account or debit card issuing services. We are our own processor, our own BIN sponsor, a principal member of Visa and bring those things together in a very agile way.”

Bespoke solutions Alternative banking is what the Contis Group is all about. “For so long, we’ve had a



number of large banks, which are predominantly very similar,” says Gregory. “Alternative banks, such as Starling Bank and Atom Bank, are trying to provide a new style of banking, fit for purpose for today’s environment, so that’s mobile, it’s digital, it’s for millennials, it’s for people who don’t want to walk into branches. “I can’t remember the last time I either wrote a cheque or received a cheque. There’s a whole group of people today who were brought up in that environment. They were bought their first smartphone aged five or seven, and that segment of people don’t see the appeal of a branch-based network. That’s the opportunity for us here at Contis Group.” The company’s plug-in-and-play technology stack is easy to use and integrate through simple APIs, avoiding the legacy infrastructure of traditional providers. “We can move very quickly and dynamically, we can bespoke our solutions to what our client needs are and we can make sure that we can move in a very agile way, which is fit for purpose for today’s fintech environment,” says Gregory. “All our technology is in house; we have our own development centre, so we can build and develop the solutions and the services that we need to keep one step ahead of the market. If we see the market shifting in one direction, we have our own technology stack and we can build modules, or develop it, in whichever way we want to go. That gives us flexibility.” A good example of that is its market-leading Credecard, widely adopted by smaller players promoting financial inclusion. The card is used as the basis for an online current account with front-loaded card payment facilities, bundled in with savings and a loyalty programme. It helped Contis pick up the

Trust will come through using the technology and brand will become less important

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award for Annual Card and Payments Best Prepaid Product of the Year award with its client Ffrees, whose Credecard-based account is aimed at the millions of people in the UK unable to access high street banking facilities. Contis also offers Engage, a dedicated card for European credit unions, Travel Seasons, billed as the travel industry card of the future, and a white label prepaid option allowing Contis to tap into a market of new players busily building their own brands as they reinvent consumer financial services. Meanwhile, it’s gift and loyalty programme portfolio includes blue-chip clients, such as Virgin, Pizza Express and Goodwood. “It’s about being slick to the mark, it’s about being able to innovate and provide the services that the clients are looking for through mobile payment, through internet banking, and providing a better and different level of service,” says MD Mike Fromant.

Demise of the brand

Payment options: Contis offers a white label card

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As more of these alternative providers of financial services enter the market, the key question is whether consumers will switch. Fromant believes consumers of the future will put their faith less in brand and more in technology, leaving a big question mark for traditional high street banks and creating a huge opportunity for next-gen companies, like Contis. “Trust comes with brand and it also comes with using a product and seeing that it works,” says Fromant.“The mobile phone is something the younger generation are used to using – my grandchildren of four and five years of age are using mobile phones to play games on. They just pick them up as a natural form of communication. As we get that generational change, I think trust will come through just using the technology and brand will become less important.” |


Payments & InnovatIon

Rising to the challengers The disruptive influence of low-cost, digital banks could actually be good news for institutional dinosaurs, which is why an accord with the challengers is better for the big four than outright war, says Daryl Wilkinson founder of DW Consulting and officially one of the most powerful Top 50 in fintech Challenger banks have been a black cloud looming over the “big four” for the past few years. The traditional high street banks have been braced for these challengers to shake things up and create an entirely new environment, just as budget airlines did to the aviation industry in the Nineties. And with the FCA keen to see consumers benefit from “effective competition” for regulated financial services, the time seems right. However, while those working in the industry are tracking every move of the challengers and what they offer, this awareness has yet to filter down to customers. With the big four still holding more than 90 per cent of the UK market, and consumer awareness of challenger brands failing to gain momentum, is the impending shake-up going to happen, and if so, when? The big four are portrayed as clunky behemoths, held back from innovating by complicated legacy infrastructure that is creaking at the seams. In just the first few months of 2016, customers of some of the major banks have experienced cashpoint

outages, data breaches and system failures. What is interesting, and at odds with consumer behaviour in other industries, is that customers are not reacting by switching brands in their droves to new suppliers – despite the seven-day switch service introduced by the Government in 2013, which makes switching current accounts easier than ever. So why the complacency?

The path of least resistance? New challengers are offering faster, cheaper transactions with greater flexibility than ever – yet customers are still hesitant to switch. Banking is seen by customers as a chore and many customers lack confidence in financial planning matters. Consequently, spending time researching and understanding different banking products, switching to a new bank or account, and then getting used to a different way of doing things, is something that many customers avoid. This is why UK customers are collectively losing out on £3billion through money sitting in low-interest savings accounts. And it’s why the

challengers may well continue to struggle to gain traction against the tried-and-tested big banks.

Step forward the challengers The challengers to traditional retail banking take several forms. Supermarket retailers, such as Tesco, M&S and Sainsbury’s, were quick to head into the banking space with uncomplicated current and savings accounts. It made sense; these are heavily data-rich organisations, putting them in prime position to offer customer-centric services. They have the on-street presence through stores across the UK and can interact directly with their customers without huge start-up costs. The next wave of challengers concentrated on putting the customer at the centre of their communications. Virgin crashed into the market in 1995 with Virgin Money, branding their high street outlets as stores, rather than branches, with a new focus on customers’ individual needs. Metro Bank arrived in 2010, introducing a

The new breed is tapping into cultural trends, such as social networking and online communities… Fidor even links its number of social followers to its interest rates 32


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softer side to the retail banking market with their mission to create “fans not customers”. Growth for these new players has not proven easy, however – Virgin Money only has 75 stores nationally, compared to Lloyds’ network of nearly 1,300 branches. There has also been a string of banking start-ups that have failed during the same period, the most well-known of which is Prudential Banking’s internet bank, Egg, established in 1998. The costs of creating a high street presence to rival that of the big four make the direct high street challenge almost impossible and, without a high street presence to back them up online, banks have historically struggled to gain traction and retain customers for the long term.

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Don’t talk, tap A new breed of mobile-only and mobile-first banks is hoping to reverse these trends and succeed where others have struggled. And in an age where laptops are being replaced by mobile devices, where people trust new brands like never before (think Uber, Netflix and Airbnb) and where we are moving to mobile for more and more of our daily tasks and activities, these new banks may just have their timing right. Atom bank intends to build relationships with customers by never being more than one atom away from them, using mobile technology to enable seamless integration into everyday life. Atom, along with Starling, Fidor and Open Bank, all recognise that the new age of customers demands to use services on the go. These customers live on their mobile phones and expect to be able to complete all of their transactions that way.

These new players hope that customers will value the fast and convenient features and services, from biometric authentication to digital wallets, above a traditional high street presence. This low cost-base proposition allows the mobile banks to lead with low-interest loans and high-interest savings. And the new breed is also tapping into cultural trends, such as social networking and online communities, to appeal further to today’s customers and to help them self-serve. Fidor even links its number of social followers to its interest rates and is using a community-centric model to help enable it to serve its 300,000 customers with just 32 employees.

Unify to achieve scale Whether the challengers succeed or not, customers will benefit from this period of market disruption, as it is forcing traditional banks to reassess their services and ensure they remain competitive. My view on the future of retail banking is ultimately one of unity. I expect there will be further challenges to the incumbent banks, but there will be two long-term survival strategies for the newcomers: stick to a niche market, serve that market well and own the space; or work together with the traditional banks to gain scale. The incumbents will need to innovate faster and faster, but tied down by legacy systems and processes, they cannot do it alone. The challengers offer technological innovation and slick customer experience in spades, but may struggle to gain traction against customer inertia and to navigate the regulatory banking landscape. Joining forces would be mutually beneficial to both the incumbent and the start-up – and ultimately to the customer. |



Bridging the Gulf in banking The National Bank of Abu Dhabi aspires to being the World’s Best Arab Bank by putting customers at the centre of everything it does, as Dylan Jones reports ‘The customer is always right’, the words all retail industries hold as gospel, is a mantra banks are finally beginning to adopt in Euro-American markets. But what of the rest of the world? The National Bank of Abu Dhabi (NBAD) is known in the Middle East for offering exceptional customer experience, validated by several awards. Its mission is to become the “World’s Best Arab Bank” and right now its main focus is on achieving total transparency in cross-channel customer engagement.



Additional investment this year has gone into enhancing its digital platform, increasing distribution capacity and capability with significant upgrades planned for its online banking system as well as ATM and CDM platforms. Personalising customer interactions and managing end-to-end customer experience is crucial for a bank that offers multiple ways to use its services, from phone and online banking to a mobile banking app, and which operates one of the UAE’s largest branch and ATM networks. Its work in branch is as important as that of any channel. In 2012 it created a Service Ambassador Programme to distinguish it from the customer services provided by competing banks, training a team of staff

ambassadors dedicated to looking after NBAD clients in branch. Service ambassadors greet the customer in the welcome zone and direct them to the appropriate part of the branch for their needs. The ambassador is the human face of the bank, creating a space that ensures privacy and comfort and giving the customer confidence that they can have an intimate dialogue with the bank. A year later NBAD teamed up with NCR Corporation, a global leader in consumer transaction technologies, to introduce a sleek, in-branch ATM in order to migrate low-value transactions from the teller line to self-service, freeing branch staff to focus on sales and customer support.

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“At NBAD we believe that to be recognised as the 'World’s Best Arab Bank', we need to put our customers at the forefront and do the right things, the right way,” the bank said at the time. “Consumer experience at the bank branch is about to change more dramatically than it has in more than a generation. Additional software will unlock even greater capabilities as financial institutions move their associates into the open to directly interact with consumers and provide in person assistance, similar to what we experience while shopping or checking in to the airport.”

Multilingual call centres On the road to continuously improving its customer experience, NBAD has also implemented 24-hour internet banking services and call centre support, with multilingual advisors speaking Arabic, English and Urdu, competent in handling financial and non-financial queries. The 24/7 call centre was made possible through NBAD’s partnership with Fujitsu in 2013. The project included modernising the

UNIX operating system, which runs under Solaris, in anticipation of future growth. One of the achievements of which NBAD is most proud is maintaining its presence in Global Finance’s list of the ‘World’s 50 Safest Banks’ – the only bank from the UAE to have achieved the status – since 2009. The bank has adopted multi-factor authentication for online access using password, image ID and an RSA secure ID token (a physical device that generates a random six digit code) for several years. In 2012 it became the first bank in the region to launch a security service that sent all cardholders – not just those operating nbadOnline accounts – a dynamic code via SMS for each online purchase to protect against possible fraud. More recently the bank introduced stronger risk controls in its commercial division. With one of the most extensive networks of ATMs in the region, NBAD was one of several UAE banks which was reported to be investigating the introduction of biometric iris scanning in 2008 following a spate of cash machine fraud that was thought to have affected nearly half of all

users. So far, only Abu Dhabi Commercial Bank has gone so far as to introduce voice authentication for customer transactions in Arabic, English and Hindi, saying that it could offer more convenience and security than knowledge-based answers.

Gulf's fintech future But with aspirations for Abu Dhabi to become the fintech capital of the Gulf it’s likely to be only a matter of time before NBAD adds biometrics to a suite of services being introduced as part of a five-year transformation plan for a bank that's putting customers at the centre of everything it does. “NBAD recognises that it has a responsibility to deliver value for not only our customers and shareholders but also the UAE as a whole,” says Chairman Nasser Alsowaidi told investors in the bank’s upbeat Q1 2016 report. “I am pleased to see the bank continuing to support the people that have made the UAE what it is today by providing them with effective and responsible banking services.”

Personalising customer interactions and managing end-to-end customer experience is crucial

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Adapt or die: Corporate banks need survival strategies

Evolution not revolution The Internet of Value is forcing rapid change on the way corporate banks do business. You can fight it or embrace it. But to benefit from it, you must follow the first rule of survival and adapt, says Phil Cantor of Intellect In 1957 a longshoreman at a Hawaiian port could be part of a 370-man team, loading 125lb sacks of sugar onto a ship, a job that would take seven days. One year later, the team would be down to just 35 men, hoisting new steel shipping containers onto the ship with steam-driven machinery – a job that took just 11 hours and cost 97 per cent less. Nearly 60 years later, it’s well understood that standardization of shipping containers revolutionized industry, opened the doors for China’s exports and paved the way to today’s global trade economy. That was the power of ‘The Box.1’ Now we have a new, digital ‘box’ that’s impacting not just on banking, but on all industries. More than that, it’s redefining the value exchange. Speaking at MEFTECH 2016, leading fintech commentator Chris Skinner acutely



described the challenge for banks: “Banks have buildings and humans and tend to think of digitization as working out how to layer software and services on top. The right thinking is to design the bank based on software and services and only add buildings and humans on top where necessary.” In his book, ValueWeb , Skinner expands on this, showing how the development of mobile technologies and cryptocurrencies have established potential for a cheaper value exchange system, an “Internet of Value”. It means non-bank fintech challengers are now able to participate in value and payment exchange networks, compelling banks to re-invent themselves to compete.

Own the customer experience Deutsche Bank has already taken drastic steps, declaring that it will eliminate 35,000 positions by 2020 and shut down

operations in 10 countries. Deutsche, RBS and even Citi – some of the biggest banks in the world – are eschewing geographical expansion in a flight for quality and focus. Challenger banks are small, nimble and maintain mostly an online-only presence. They aim to win profitable market share from their larger counterparts with promises of better products and better service and, on the most part, are able to deliver. Challengers aren’t sacrificing customer service to tend to their aging and overly complex legacy systems because they don’t have them. Even bricks-andmortar new players, such as Metro Bank, are able to slaughter some sacred cows, as evidenced by their “no stupid rules” policy. Your competitors are banks and non-banks alike, evolving as rapidly as a software start-up, which is, arguably, what many of them are. Many target a niche piece of the Summer 2016

value chain, leaving the (less profitable) rest of the chain to others. Some corporate customers are accustomed to the inefficiencies and inadequacies of your current offerings. With a simple search online they can find a specilalised, non-bank offering to execute a specific function more quickly and cost-effectively. Many of your competitors integrate directly with corporate clients, sometimes removing the bank entirely from the process. “In two decades, we will go from 20,000 ‘analogue’ banks today worldwide to no more than several dozen ‘digital’ banks,” wrote Francisco Gonzalez of the Spanish banking group BBVA in late 2013 in The Financial Times. He has since mapped out BBVA’s future identity as a software company. Frank Bria, an authority on the digitization of banking, predicts the future will hold not several dozen, but seven billion banks – one for everyone on the planet. Contradictory? No. At the heart of both assertions is an assumption that banking of the future must be agile, lean, designed around optimal user experience, and, most of all, personal.

The digital vortex Goldman Sachs reported in March 2015 that banks stand to lose at least $4.7trillion in financial services revenue, which will migrate to new fintech firms. The increased complexity of supply chain management and optimization of working capital suggest the specialised requirements of the corporate treasurer have outgrown the bank. Doom and gloom then? Actually, no. I see a rosy future for the fast-acting, self-cannibalising bank. The reality is that the variety of niche technology firms presents both additional complexity and additional value creation that can be exploited. Financial services specialists solve very specific pain points, but at the expense of losing sight of the big picture. Corporations that opt out of the bank’s services have to live with a lot more vendor management, oversight, compliance, risk, fraud liabilities, and management of fragmented financial data spread across multiple vendors, all on top of financial accounts still held at the bank. As a corporate banker, you have immense power and opportunity to define not only how your institution participates in this new value model, but where, when, and with whom. With trading taking place on the Summer 2016

value web, how will your institution participate? What value can your institution offer that few others can? Because, despite all the bad press following the global financial crisis, you’re still trusted. Customers may not like you, but their money stays with you.

presenting a singular bank brand. Offer solutions as components in a way that allows any corporate client to fit the bank’s offerings with its needs, thus turning the threat of niche competition into your upstream supply chain.

Your blueprint for survival


Just as intermodal containers transformed the shipping industry, the Internet of Value will transform financial services. So, here are four key strategies for corporate banks to survive the upheaval:


Modernize (or else). If your institution is mired in the muck of legacy systems and processes, it’s time for an overhaul. Only by adopting an agile design can the corporate bank be modern enough to participate in the value web. Update and design the corporate bank’s functions from scratch and in such a way that any product or service component can be ripped out, upgraded or replaced quickly without disruption to service and, importantly, without the involvement of the corporate’s IT team or provider. Several banks are daunted by evolution and, scarily, now talking revolution, nurturing new, in-house digital banking models and grooming them for matricide on maturity. Don’t lose control of your e-banking; it’s your proposition.

Banks stand to lose at least $4.7trillion in financial services revenue, which will migrate to new fintech firms


Partner with fintech to compete with fintech. Vietnam-based fintech company Momo has integrated with more than 100 providers to supply its payment apps. Venmo, a service of US-based PayPal, links a user’s credit, debit, and checking accounts into one digital wallet. Dubai-based Beehive provides a service to match finance-seeking SMEs with crowdsourced investors. Banks can similarly partner with competitive, white-label financial services to integrate their capabilities via application programming interfaces (APIs) while still

Prioritize the customer journey. Work out what your customers are actually trying to achieve and draw upon Web 3.0 to help them. Simplify your corporate client’s experience to solidify the bank’s role, not only as a fintech partner, but also as a trusted advisor. Digitisation affords banks opportunities to leverage predictive technologies, artificial intelligence, standard data, sexy data visualisation, exploratory data analysis and analytical insights to understand a client’s risk profile, anticipate a client’s banking needs and offer highly contextual and relevant solutions. You have the data, leverage it.


Think like a startup. If your institution is not prepared to flexibly assimilate the newest technology or innovation, you will not survive. There will be regulatory changes. There will be complications. Prepare for unforeseeable adaptations by taking a page from lean startups: iterate quickly, allow for error, measure your results, and pivot as needed. If there aren’t innovators within your organization, now’s the time to bring them onboard as partners or employees. Corporate banks with an industry focus should investigate deeper integration with trade software. Always remember the transaction bank is a parasite on global trade; it only exists and survives as a consequence of movement of value. That action is now taking place in direct API-to-API, real-time, millisecond proposition fulfillment, and the bank’s challenge is how to participate in a billion such fleeting digital deal handshakes. The longshoreman of 1957 could not have predicted how dramatically his work would change. He had not experienced as much technology disruption in his lifetime as you, today’s corporate banker. Although the pathway to participate in the future of transaction banking will never be fully clear, we know where to start.

1 The Box: How The Shipping Container Made The World Smaller And The World Economy Bigger. Levinson, M. (2008). Princeton University Press. |



Wearable technology: Customers don't want a bank on their wrist, but RBS believes there is a role for Apple Watch

RBS... digitally dressed to impress RBS aims to become the easiest bank to work with’, which is why it’s leading the way in wearable technologies, as Chris Popple, MD of Digital Services, explains In the last few years, the financial services industry has implemented some of the biggest changes in its history with the introduction of digital services and mobile banking. The evolution of mobile technology has changed the way customers manage their finances and the way they interact with their bank. But with the acceleration



of contactless payment and now the advancement of wearables, the need for security has become a focal point for both the customer and the industry. RBS was one of the first banks to adopt fingerprint readers and it's led the way in experimenting with wearable technology. It acknowledges that the need to simplify product sets is paramount while it is also

setting itself the goal of becoming the number one bank for customer trust and advocacy. Its continued investment in mobile technology has yielded some impressive results. Just two years ago the bank was in the early stages of mobile banking adoption, with around two million customers using its mobile services. Every year since, it has Summer 2016

added around a million new customers to the system: now four million of them log into RBS mobile banking almost 40 times a month. Its most recent innovation, the Natwest app, Touch ID, which uses a fingerprint to securely access personal accounts, saw more than a million customers embrace it within six months. Now, 90 per cent of those who could use it, do through an iPhone with an enabled fingerprint scanner. “It’s because it’s so incredibly easy,” says RBS MD of digital services, Chris Popple.“The thing that has changed, not just in banking, but in all digital services, is the number of things that customers need to remember to access their energy company, their bank, their credit card, etc. On average, customers have to remember 20 different usernames and passwords, so anything we can do to help keep them safe and secure but makes it very easy for customers to access takes off. “People do definitely ask the question ‘Is it safe? Is it secure?’ and the answer is ‘Yes’. Mobile banking actually gives us more information about customer usage than we have if they’re using a website. We can tell the particular device that’s accessing the service and if it’s the device they usually use to do that with. It gives us confidence that it is the right person accessing the account.” He’s personally a big fan of Apple Pay, predicting it will be adopted quicker than contactless. “I use it to pay for coffee, on the Tube. It’s just easier to tap it with my thumb print. We’re definitely through the early adopters now. I think it’ll be a bit more slow to get into the next wave of customers. A good sign though is that we’re moving through contactless so fast; Apple Pay or the like will grow faster than contactless did.

Known unknowns According to Popple, the bank has two main reasons for joining the digital revolution. “We do things first because we think it’s going to make a difference to customers, The fingerprint Touch ID was definitely that. "We also do things because we’re not quite sure what benefit they will have for customers. Wearables and Apple Watch in particular fits into that. “The Apple Watch is a new device at the beginning of a journey. We wanted to put something on the market where we can learn and what we’ve learned is that looking up your balances isn’t what wearables or watches are for.” Summer 2016

What they are good at is helping the bank communicate with customers. “An Apple Watch is good at telling the time in new, interesting ways, but it’s also a really good vehicle to proactively notify you. Wearables will definitely be useful in that regard,” says Popple. All these new data points has allowed RBS, not only to enhance security through its relationships with mobile providers, but also to accelerate improvements in the entire customer experience across the full range of bank services - not just in mobile. “What we’ve started to do over the last year is use our own data about how customers use branches and telephones and webchat and mobile and online to establish patterns, to figure out where we might be able to do things better,” says Popple.

People do definitely ask the question ‘Is it safe? Is it secure?’ and the answer is ‘Yes’ Mobile banking actually gives us more information about customer usage than we have if they’re using a website “A really interesting insight we’ve been working on lately is that when customers call us, at least half them have been using online banking a couple hours previously. Why would they do that? They’re obviously not calling because they want to transact over the phone, they’re calling us because they’ve seen something online that they’re confused by. So, rather than focus necessarily on the phone call, we’re really using the data we have and usage across channels to figure out what we’re not doing so well, to do it better, so that customers don’t have to do more. “We’re really trying to be best in customer experience, which means we are

probably more focussed on where the pain points are. Using the behaviour of what customers do across channels really helps.”

Customer behaviour Part of that requires a much more nuanced approach to information gathering.Take its call centres. It now builds a story around customer interaction with its advisors and feeds those events into the number crunching team that analyzes data for patterns of behaviour. “In call centres now we do two things. We measure, compared to events in other channels, and we also ask our agents to record the context around a call, so we can marry up the story behind the events. Those two things together allow us to say, so we can do something about it, right?” Sometimes the answers are relatively simple. One tangible result was to make changes to the website, making it much clearer to customers what information they needed ready before making an international payment. Other fixes aren’t so simple – particularly when it comes to educating customers about security. “We need to find ways to get it into customers’ minds that they need to be careful about what they do with their own data,” says Popple. “No amount of barriers that we can put in front of technology can get around the fact that sometimes it’s really easy to fool a customer. We’re talking about traditional con artists who can either, by calling or sending you an email, convince you that person is from the bank and you then volunteer a piece of your information. “There’s some really important pieces of software and technology that we use, but what we’re finding is that customer education is by far the most effective vehicle to making sure that customers keep their own data safe. “Ultimately, we want to be the easiest bank to bank with, therefore the one that is the most trusted and the most focussed on what customers really need. That is our honest ambition. We think in the next two, three, four years we can get there. We hope we're demonstrating that through simplifying our products, making them more valuable, through reward, and being the first with innovation that really matters.” Chris Popple was talking to Fintech Finance Magazine’s Richard Crombie |



What is the price of digital loyalty? Christian Bacher, CEO and managing partner of Smart Engine, on how intelligent technology is creating great relationships between banks, merchants and customers Banks have been slow to tap into customer loyalty schemes, perhaps largely because customers have, until recently, steadfastly refused to be unfaithful. But with more bed-hopping between accounts an unsettling possibility, banks are increasingly seeing the value of wooing them with rewards. They rely on proxy lotharios, of course, like innovator Smart Engine, to do their courting for them. A European Fintech 100 company, Smart Engine provides digital loyalty marketing solutions for banks and financial services. It aims to address the biggest challenge in today’s environment – gaining customers and keeping them – by helping clients deepen their alliances with merchants and build new ones in order to present customers with meaningful offers. The system is based on a mobile strategy that securely analyses and matches data from the sources provided by the owner of the loyalty programme. As far as the bank customer is concerned, of course, these overtures come from the financial institution under which the apps, portals and internet banking integration facilities are all branded for the outside world. Smart Engine merely acts as a background enabler, but by using its platform, expertise and strategy, banks form coalitions with businesses where points can be redeemed as well as extending rewards to customers who take advantage of the bank’s other services. The aim is to surprise and delight customers, like an attentive lover in the hope that the relationship will last. Smart Engine’s state-of-the-art software platform is provided to banks and the payment industry investment-free, giving



them from both commercial and technical flexibility. And, being a service provider to banks in the European and North American markets means it supports a multi-language system and operates within European data privacy laws. The Smart Engine platform is a long way from the early days of loyalty schemes when, in order to claim their rewards, customers were required to trawl through pages of coupons or navigate company websites in search of offers and coupons most relevant to them. The marketplace has also moved away from expecting merchants to give discounts on all of their products, all of the time. By integrating with their cashier systems to load productrelated data, Smart Engine gives them the opportunity to run campaigns for specific products or product groups with linked rewards automatically redeemed by the customer.

The new Smart Ads Now Smart Engine is going one step further by creating a digital advertising platform for mobile payments, called Smart Ads. In this new digital marketplace publishers can not only upload offers and advertisements onto the platform but the most relevant ads and offers to the customer can also be triggered by a payment. Picture yourself buying a coffee at Starbucks and paying for it with your mobile wallet. The bookstore across the street has a linked offer to Starbucks customers and as soon as you pay, you receive an alert, telling

you there’s an exclusive offer waiting for you across the road to come in and redeem right now. It’s instant, relevant and exciting – and it provides a great basis for relationship building. Customer reactions to the digital advertising platform and the loyalty benefits it provides have been very positive, especially the ability it gives them to choose where they spend rewards. Whereas before, customers could only benefit from loyalty schemes in the physical form in store, Smart Engine allows customers to collect loyalty points across all channels and use them across all channels. It’s now busy integrating with payment providers, wallet providers and POS providers, specifically those devices on which apps can be deployed, and it’s currently rolling out its marketplace for instant digital advertising for mobile payments across different markets in the UK, Germany and France. It’s also looking to introduce the system to the United States where it could be the start of more beautiful friendships.

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The aim is to surprise and delight customers like an attentive lover in the hope that the relationship will last

Instant gratification: Payments across Smart Engine trigger immediate rewards

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Push me, pull me UniCredit’s Head of Digital for Central Eastern Europe, Paolo Barbesino, is nudging customers towards starting a conversation on line How do you move from macro to micro? That’s the pressing question at the top of every institutional bank’s agenda and it’s occupying the mind of UniCredit’s Paolo Barbesino. The man responsible for UniCredit Group’s digital transformation project, CEE 2020, has the challenge of entirely redefining the bank’s online customer services in Central Eastern Europe. Or, as he puts it, creating more ‘push’ than ‘pull’ in the compulsively connected world of mobile personal finance where the shift is from macro interactions with very high volume to many daily micro interactions of limited value. “Customers are increasingly 24/7. We see they bank at night, they bank during the weekend, they leverage every micro moment to check their balance or do small transactions,” says Barbesino. “The shift to micro moments is also a shift in getting more time out of our customers. “Originally, digital banking services were mostly pull services – the customer has to go to a website, log in to internet banking, or switch the mobile banking application on. The way we understand the shift is that we move from a pull to a push model, where we will see a growing number of interactions with our customers that are triggered by a message that is originated by the bank – or by a behaviour from the customer – a message coming from the bank saying, ‘Hey, what’s happening?’ ‘Hey, you just made a transaction… is this transaction the best transaction you could have made?’”

Starting the conversation The territory in which Barbesino works is both scary and stimulating. “In Central Eastern Europe, customers are by definition unloyal and I really love it,” says Barbesino. “Why? Because it’s a good

opportunity for us to learn a different way of doing banking. Our customers are on average much younger, much more digitised than the average customers in Western Europe. They started banking pretty much the same time they started surfing the internet.” These millennials are used to searching for products online, being savvy about finding better offers from different financial institutions through aggregators or social media and they are driving reinvention in the banking sector. Barbesino describes the challenge for all banks as moving from an “inside-out approach, where the bank is basically projecting the complexity onto the front end” , to what he characterises as an ‘inside-in’ model where services and products are designed and deployed around customers, who are much more informed and potentially smarter than they ever used to be. Even in Western Europe and the US, these customers are interacting with their bank not just several times a week, but up to five times a day. And while there may advantages to being in bed with them, on the train, at work and in the pub with them, such an intimate relationship creates its own problems. “Let’s assume that you have five opportunities to talk to your customers on a daily basis,” says Barbesino. “What on earth are you going to tell this guy? How can you start a relevant conversation? Do you really think that the way banks have been presenting their content so far can be relevant when you shift from, say, a micro interaction once every six months, to something that happens on a daily basis? I bet not.” His way round the problem is to share it with others. Through CEE 2020, he is

setting out to create an “innovation ecosystem, sustained by the development of new digital platforms where all countries can contribute with innovations and ideas from the bottom up”. “These ideas and innovation get systematised at central level and deployed at local level. It’s the aim of CEE 2020 to achieve business agility, reduce time to market, and get ready to compete in a digital age,” he says. UniCredit is already working with third-party companies, including intelligent technology experts Smart Engine, to facilitate the selling of financial products and it’s using all the micro moments created by the digital loyalty specialists to create a dynamic new relationship with customers. It’s all part of understanding what will come next, says Barbesino, “in terms of new features, new products, new services, new service models, a new way of interacting". And it is a journey, he believes, every bank needs to make. What lies at the end of it remains to be seen.

We can significantly improve by designing services that mimic the logic of big internet players 42


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“There is quite a big discussion as to whether banking is facing what gurus call an unbundling. "You have a bunch of players coming in with a digital value proposition that resonates with digital consumers better than banks, so a discussion now is whether this unbundling will go on in the future or whether at some point – after a big tsunami that was originated by the financial crisis, by the increasing pace of change in technology and by demographics – some banks can start re-bundling again.”

The Amazon factor Barbesino is looking to non-banking models for inspiration in the constant battle to retain and acquire customers. “I do not think that serving our customers 24/7 and achieving a very high quality in the service necessarily means that we have to serve in a manned way. I believe there is quite a lot of room for self-service interaction, provided the services we design

online are putting the customer at the very centre of their proposition,” he says. “How many times have you been talking to someone sitting at Amazon or Expedia or Google? You give them a lot of money every month, but you never feel the urge to talk to a sales representative of these companies. Why? Because the services they offer are so well-designed to work in a pure self-service mode on a digital screen. There’s a lot we can do to significantly improve the quality of our services by designing services that mimic the logic of big internet players.” Paolo Barbesino was talking to Fintech Finance Magazine’s Dylan Jones

The push factor: Banks can nudge the conversation with customers online

Summer 2016 |



Lost for words?

Communication software specialist Persado teaches banks how to talk to customers. Chief Revenue Officer Lawrence Whittle throws light on the new lexicon Fintech pioneers, such as E*Trade and Apple Pay, are significantly altering customer expectations around banking, transactions and investing – but fundamentally they are changing the language of customer communication.

“The over arching theme of today is this massive rush towards a digitised customer experience. This is especially true for the financial services arena, in which brands will have to compete on experience going forward,” says Lawrence Whittle, Chief Revenue Office for Persado. “Any digital experience is all about understanding exactly how to address the customer in every situation, whether I’m trying to move money around on my mobile banking app, or when I receive an email from someone saying, ‘Would you like to do paperless?’, or an ad on Facebook saying, ‘Would you like to hear about our new credit card?’” Persado, which works with some of the top financial institutions in the world (including customers-turned-investors Citi and American Express), created a science around communication in the digital world. With digital marketing real estate steadily shrinking to accommodate mobile screens and the din of competition



overwhelming, it’s more important than ever to make a great first impression, fast. Using a “smart system” powered by natural language processing (NLP) and machine learning algorithms, Persado draws from its proprietary database of marketing language – the largest of its kind – to generate the optimal phrases that will inspire anyone, in any situation, to act. The result is greater consumer engagement because the communication is more emotionally resonant and personally relevant to the customer. This ability to effectively communicate offers, rates and transparency are the ammunition of tomorrow’s world. “We use this term ‘cognitive content'," says Whittle. "If you think about the average display ad, or the average email, or even something as simple as an SMS, when you break it down to its elements of product features, how many ways can you describe a credit card? When you want to appeal to the heart, as well as mind of the consumer, what type of emotional language would resonate? There are literally thousands and often millions of permutations, so in very simple terms, what we’ve developed is a data model around language." Emotion, by its subjective nature, is one

of the most difficult things to communicate, especially when you have a range of them to choose from. When coupled with the number of synonyms for every emotion, the lexis increases substantially. Persado fuses these words and phrases within a digital impression to give emotional language context that its smart machine can read. “We’ve got this massive data set of five elements that go into a digital communication – emotional language, product features, formatting, positioning and the call to action. These main elements are scored against billions of real-world digital impressions,” explains Whittle. Persado allows the platform to test every possible variable of a message and identifies the words and phrases that are proven to move an audience to act, opening up the potential to redesign the way financial marketing programs work. Summer 2016

Smart talk: Persado combines the science of language and data

Success right from the start It’s a pick-up-and-go model. With the ability to leverage existing knowledge from its database and applying it to new campaigns, customers generate uplifts from the start. The Persado engine feeds off the results of every subsequent campaign, building up a continuous learning experience, based on how audiences react to the wording of specific offers as well as what is generally trending in the marketplace. With an overwhelming amount of information being transmitted at any given time, the engine self-selects and scales it down to give relevant and practical insight. Whittle gives a Persado-generated banner ad on a financial services website as an example. “As that ad is served to a visitor to the site, all we need to know are the content of that ad and audience response data that the financial services company will have to supply. Did customers click? Did they then apply and, ultimately, did they buy?” Persado is then able to match the impressions to the various elements of an

ad and show the client company what aspects of the creative, from headline to image to colours to phrasing, moved customers to act.

Nothing artificial about AI We have seen the flip side of this technology – artificial intelligence that went awry, as with Microsoft’s Tay bot that, left to learn on its own, interacted with Twitter users with dire results. But sentient robots are not Persado’s end goal; rather it uses “cognitive computing,” an assisted type of machine learning that uses science and data to amplify the effectiveness of human creativity. It still relies on human guidance regarding the financial brand’s individual personality and voice, which Persado’s platform then accounts for. “The difference between artificial intelligence and our type of machine learning is that, ultimately, it’s the audience that tells our machine what is working, as opposed to what an artificial intelligence-type bot is doing, which is basically trying to guess at scale,” says Whittle. “Persado acts with the confidence of data, freeing human creatives from bias and subjectivity that have hampered their decisions in the past.” The engine doesn’t feature the entire spectrum of human emotion, such

Any digital experience is all about understanding exactly how to address the customer in every situation Summer 2016

as disgust or vengeance, only ones that are proven to inspire action because in financial services, those types of emotions have no validity based on data. The good news is this means customers won’t be interacting with a sarcastic version of Siri or be served by a version of Skynet from the Terminator films. According to Whittle, the end game for Persado is to turbocharge what financial institutions are doing on a manual basis, which is brainstorming, testing, coming up with hypotheses, and generate comparatively huge volumes of content.

Innovative times call for innovative practices Whittle believes that the future needs to be optimised to the digital age and those who are innovative and early adopters of transformative technologies, much like the consumers they seek to engage, will be the eventual winners in the financial market. “I think there will be a number of start-up financial services organisations coming into play, but they need very deep pockets and they need very long time frames to really build the customer base of a traditional bank," he says. "Most of the more established banks will ultimately remain successful if they can figure out how to adopt and reliably generate success through the use of these new technologies.” Lawrence Whittle was talking to Fintech Finance Magazine’s Dylan Jones |



The bank that keeps on giving If you’re with Nationwide Building Society chances are you are a happy customer. Ian Thompson, Head of Customer Operations explains how he plans to maintain the bank’s award-winning service Are you having issues with your current branch? Do you constantly feel confused and like a statistic? Then maybe a switch to the bank that consistently polls top of the respected Financial Research Survey is in order. For two years now the customer feedback survey has put Nationwide Building Society in prime position and Ian Thompson, Head of Customer Operations, plans to keep it there. Visualise in the heart of Nationwide’s offices, Thompson pulling on all the strings. This is the beating heart of the branch network: it handles the savings, mortgages, banking and current accounts. The front desks act as its eyes. Nationwide has managed to fight its way to the top for customer service through a successful collaboration of people and IT; excellent technology systems partnered with employees that share similar values. This unity has created an easy-to-access platform being micromanaged by colleagues who are available to help customers in real-time. Such service can only be attained through testing.“Within our organisation, any change we make, we absolutely, robustly test,” says Thompson. “'What’s going to be the impact on the customer of that change?’ If it’s negative, we really think about why we should be doing it. That inculcates all of our management processes.”

People-facing With roughly half a billion pound profit this half year, Nationwide has been able to invest in long-term decisions for the benefit of customers, including just over a year ago, implementing real-time online banking. That said, the current campaign for the branch is ‘People make the world go round’. “The way people deliver frontline, and



actually backline service, is absolutely incredibly important to remain number one for customer service, but they have to be supported by fantastic IT systems, and those systems fall into two categories, for me,” says Thompson. He describes the first as being the big, heavy lifting, batch machines that churn through Nationwide’s 16 million accounts and calculate the interest while making all the payments and running core services for a large financial services organisation. “If you’re in a back office IT environment, to use my phrase, you’re playing not to lose there," says Thompson. "You must make sure changes go in, that they work, and the system must stay absolutely reliable. Our change framework that covers that, the types of people who work on it have that as their headset and there will be all sorts of different checkpoints and compliance sign-offs and so on, before anything could ever get implemented on the systems." The other customer-facing function is more nimble, more adaptable. “There is an ability for somebody in our branches, or somebody on our telephones, to be able to raise a request using an intelligent form, rather than filling in a piece of paper; the ability for our customers to be able to find out where their mortgage application is through our online track and trace services. "In the front office systems, you clearly don’t want to introduce errors, but I think your mind-set is much more about play to win. So there’s a different change framework we use. It still has control points and authority proceed gates, but a different team will work on that. They can very quickly put and test changes. Sometimes we’ll put them in one branch or area, then roll them out. If they're not right, we’ll correct them quickly. It’s much more of a dynamic test-and-learn approach in those front-office systems.”

A social bank The bank has purposefully moved away from silo-ing the teams who deal with different customer interfaces. “Our Twitter services, our Facebook services, our telephony services, our back-office services, are now all in one function. It’s the product operations function that I run, so there is interaction between our front-of-house facing employees and our back office people. “Our vision of the future is that the systems that our employees use are exactly the same as the systems that our customers use, so that if you’re having a conversation through a web chat, or through a phone, or through a Twitter feed, actually you’re looking at the same thing. In that way, you’re breaking down the barriers both within our organisation, because we’re all

Summer 2016

using the same systems, but also between the front office, the customer themselves and the back office systems. That’s part of our investment in the digital society.” Nationwide’s work with MatsSoft is already moving it in that direction. “MatsSoft provides a number of services for us. It originally started off as our track and trace system for mortgages and we’ve extended that service to savings products and banking products, so the customers can see the status of their application. That’s really important to them; it lets them know where things are and actually stops them phoning us up or going to branches. "We’ve also used MatsSoft as an internal workflow system, so in terms of joining up the front and the back office, it’s provided real advantage to us. We use it to create intelligent forms at the front end, so people in the branches or on telephony can fill in a form and ask for something to be done and it will be in the next two, three, four hours, and they can see where it’s gone.” Customer-facing IT, including social media, has a critical role in two-way communication, which can be both a blessing and a curse, says Thompson. “Only five or 10 years ago, if you had an outage in your payment systems, for example, it was probably a day or two before the customer would notice. Now it’s literally

minutes. If our ATMs stop working, then the Twitter feeds start to hit immediately, it’s in the open. But it also gives us a fantastic opportunity to communicate with customers, because we can take control of those tweets, explain to customers where we’re at, what the prognosis is, what their alternatives might be. We can give them phone numbers, access to emergency cash, if it’s one of our payment systems. But having those things does mean you have to be on your toes and the world very quickly finds out if you’ve got any problems.”

Track and trace There are other advantages that come with an integrated system. The popular track and trace facility that operates around ISA transfer season, for example. “It can take two or three weeks to collect all the money, match up references and so on, and our customers, a few years ago, were saying, ‘I’ve sent in my application and I’ve heard nothing, what’s going on? I’m trying to capture a really good rate, interest rates tend not to be there for very long’. They were phoning us up, ringing the branches,” explains Thompson. So the bank implemented a customer monitoring system with alerts sent via SMS

and an online facility for them to check where the application was in the system. “It didn’t take us very much to do, created a very good customer experience and actually saved us money, because people didn’t phone up, go to branches and so on,” he says. “Customers will not understand the complexities of Nationwide, that there’s a savings department, or a change of address department, or indeed that the branch staff are different to the telephony staff, are different to the back office staff, and I wouldn’t expect a customer to,. “A customer would think,‘Well, you know me. Join all that up, please’. It makes it easier for us, but much more importantly, it gives a better service for the customer. The last thing a customer wants is to go into a branch and then phone us the next day and the person on the phone doesn’t know they’ve been in. That creates a view of a very disaggregated organisation and not one that’s linked to service. Linking those systems together is absolutely critical.”

Our vision of the future is that the systems that our employees use are exactly the same as the systems that our customers use

Communication: It's all about removing barriers

Summer 2016 |



Fintastic fun

Australia’s Sandstone Technology was a fintech before fintech was invented. It’s been around longer than some of the banks seeking its software solutions, which gives CEO Sam Plowman a unique perspective Banks aren’t the only ones who’ve had to reinvent themselves to keep pace with consumers over the past decade. Software development companies also felt their pain. According to Sam Plowman, CEO of Australia’s Sandstone Technology, founded two years after a bookseller called Amazon went on line and just as dotcoms began inflating that famous bubble, suppliers had to look at their legacy systems, too. “The response that leading software companies had to make, especially ourselves, was to become a lot more consumer-centric. A lot of the old 90s-style software development programs that were spat out were very focussed on rich functionality, but didn’t really spend a lot of time and invest enough in consumer experience,” he says.



Sandstone, which specialises in the finance industry and describes itself as having a niche relationship with banks, works on two levels: digital banking solutions, which includes internet and mobile banking, personal financial management tools and digital origination; and an omnichannel service, which features customer on-boarding and product origination.

A digital journey Its latest, Travel Kaddy, a mobile banking app that adapts as customers travel across countries and currencies, allows banks to enhance security and carry on a real-time conversation with customers as they manage their money abroad. It’s an example of how banks are extending their reach into every aspect of a customer’s life and it’s made possible by mobile devices.

“The shift of transaction banking to mobile has been prolific,” says Plowman. “The key that we’re seeing right now is that instead of thinking of digital as a standalone property, more and more banks are looking at it as a strategy. How it becomes an extension of their valuable, face-to-face or contact centre channels, how it complements their third-party or broker channels, how it helps originate or cross-sell products to new or existing customers. Rather than having to set up a standalone technology to perform standalone processes that don’t interface with anything else, the terms multichannel or omnichannel are becoming prevalent everywhere and we’re playing strongly into that space.” The exceptional impact of the internet on banking has made it “more viable, accessible, simpler, faster, and actually a Summer 2016

Partnership working: Solutions will come from sharing IPs

little bit more fun”, says Plowman. It’s handed power from banks to consumers; but it’s also reshaped the old hierarchies within the banks. “We’re certainly seeing the CIOs, CTOs and chief architects are very much in hand with the business in setting the agenda, the strategy and the roadmaps for their products," says Plowman.“Technology used to be very much a back-of-house operations 20 years ago and now it’s leading the innovation. "The technology has caught up the strategy and is providing opportunities for businesses. All these fintechs are now leveraging the fact that technology enablers are giving them a way of presenting things better... the boys and girls from the back of house, the technologists, are starting to dance more at the front and set the tone. I think that is very significant.”

New social engagement Plowman himself has been working in and around dotcoms, including banks and non-banks, since the early 90s. Back then banks were the only place you could manage your finances and from such Summer 2016

a privileged position they could arguably ignore customer complaints and negativity. Social media changed that for good and, according to Plowman, that’s no bad thing. “Banks are becoming socially engaged and good banks are becoming socially aware by listening, not by telling. If they’re a smart bank, they will be receptive to what’s being said socially about them, their competitors and about their industry. And if they’re able to come in, in a relevant way and offer a solution to an issue that’s been presented through any new channel, such as social media, wow, what a turnaround.” What this new enthusiasm for engagement means for companies such as Sandstone is that closed IPs are opening up, allowing for more flexibility for the banks. Not only this, but open API is becoming more commonplace, enabling the banks and their technologists even more flexibility and agility, allowing them to leverage the core functionality from some of the main providers, but also to build out from it. It gets around the problem of many general ledger (GL) systems, which are weighing down banks with complexity and risk. Open APIs limit risk and bring banks closer to the consumer, argues Plowman. “Where a lot of the API and opening up is happening is probably at a layer closer to the customer. We’ve found with all of our origination and digital platforms, for all of those products, the more we can open those up now you can incorporate fantastic mobile apps – new technology products and services that can be offered by either

The creation of mobile banking and other financial apps has meant banks have had to look for new ways to protect clients. This can come in a variety of forms, such as encryption and authorisation techniques, which they are continuously advised to research. Businesses such as Sandstone are constantly having to monitor industry bulletins and looking at newly identified vulnerabilities. “We’ve got continuously running automated software analysis tools to scan those vulnerabilities,” says Plowman. The company also outsources to third parties to “conduct all forms of testing, penetration” and its chief security officer is an in-house expert with a finger on the pulse of what’s happening externally. “The CSO is able to not only keep us informed, internally, but also keep our clients engaged. This is a critical role for us; it’s a critical role for the banks.”

Smart working Plowman is leading the company’s expansion into Asia, the UK and mainland Europe on the back of a suite of innovative products that will increasingly be developed not just for the banks but alongside them. “One of our greatest competitors in the marketplace, ironically, is the banks' internal technology teams,” says Plowman. “We think that a solution moving forward is working much more in association with them and leveraging the strengths of both. You know, the internal teams know the

The internal teams know the bank better than we know the bank, but we know the industry better than the bank knows the industry the banks themselves building it, or smaller vendors, smaller start-ups that can access the data or access part of the functionality. “The good thing about doing it at this layer where you’ve got internet banking, whilst it’s integrated down into your core systems, it provides the security, the structured functionality. In principle, it also provides a portal window whereby other modules can just come and sit there, so you can extend your services and your offerings to your customers, be they retail or business.”

bank better than we know the bank, but we know the industry better than the bank knows the industry in terms of some of the technology points and the trends. “When you bring the two together, you can provide world-class solutions that are a combination of Sandstone’s IP and the bank’s IP. "I think it’s the hybrid outcomes that will be a winning solution in the future. So we’re going to be a lot more flexible, adaptive, and sort of, in technology terms, extensible, in the next 12-plus months.” |



The fortune hunters Investor search platform Fundbird is poised to make the most of UK legislation that insists banks offer to pass failed SME loan applications to alternative lenders. CEO Sharon Argov is confident it can rise to the challenge If there was one thing being in the gaming industry taught Sharon Argov it’s that you don’t leave anything to chance. As a former director of, the online poker, casino and bingo platform that floated for $1.5million in 2005, she learned the value of measuring performance in a competitive environment. She’s adopted a similar approach to Fundbird, the investment platform established with co-founder Noa Wolfson, which sets out to match SMEs to alternative lenders – although in this case the odds of coming out a winner are more favourable. The conversion rate for small businesses who are

paired with a lender via Fundbird and go on to secure a loan is running at 40-60 per cent. There is no charge to the business and every acquirer pays the same flat fee. “We are a mediator in the alternative lending world, improving the quality process from both sides,” says Argov. “For the small businesses, rather than filling in three to five applications and negotiating his deal, he comes with one application and gets access to the most relevant lenders for him. From the lenders’ side, we are dramatically improving the conversion rate, which, of course, improves their user acquisition costs and their access to market." Almost half of the six million businesses in the UK, the vast majority of which are SMEs, look for a loan every year, says Argov. “When we started, we realised two things: one is that alternative lending groups are

solving a critical problem of access to capital that commercial companies are struggling with. The other thing we understood was that a lot of businesses are not aware of this alternative, so we’re opening the funnel, marketing it through distribution partners and bringing this revolution of funding to the awareness of SMEs.”

Financial matchmaker The London-based start-up uses smart algorithms to matchmake between lenders and cash-hungry entrepreneurs who are typically looking for a short-term fix of around £15,000 to £20,000, although Fundbird’s biggest sign-off to date has been £130,000 and it handles bids of up to £1million. So far, 20 of the UK’s lenders have joined Fundbird, including MarketInvoice and iwoca. “I’ve talked to a lot of investors and with most of them I realized that their

Attracting investors: Fundbird's conversion rate for loans is 40-60 per cent



Summer 2016

biggest problem is acquisition and awareness. It’s how to take these products and services and market them – because when it comes to financials, small businesses are very conservative. She’s convinced that SMEs stand to gain the most from fintech, if they could just raise their heads from the desk to find out more about it. Fundbird’s model lays it out for them on a stall. “Most businesses during their lifetime, or during the year, would work with two lenders, probably with a long-term solution, like invoice factoring or working capital or security, and then, parallel to that, a short-term loan. A lot of them will come to us to compare the options, browse around and then they will come back in two or three weeks’ time after they have made a decision.” She believes there is gap in the market for providing sub-£200,000 loans to small business that the banks would prefer

not to service. “It’s too heavy on their risk management,” says Argov. “I’ll give you an example. We had a cleaning company that won a five-year government contract and they needed a loan for equipment and rebranding. It was a guaranteed agreement with the UK Government – they were definitely going to pay and fulfill. They went to their bank, a bank they’d worked with for 20 years, and got declined. It took them two months (to make the decision). “Then they went to iwoca through us and it took them less than a week to get the money in the bank. No phone calls, everything was purely online. This is exactly what I’m talking about. It’s a real revolution that helps a business grow. “Money is one of those areas where we are super-intimidated. Most people are afraid to take risks, so they will stay in their comfort area, rather than changing to something that they might be better for them or cheaper for them or more efficient for them.”

Responsible lending The Fundbird algorithm includes a responsible loan mechanism to come up with a deal that’s “not only the easiest but the healthiest” for a business. It’s already integrated with QuickBooks and is in the process of adding Sage and Xero, the biggest accounting platforms in the UK.

information available that the banks are not using to validate the loans or do the KYC process, from Facebook to Companies House, through Experian to the VAT reports," says Argov. By the end of the year Fundbird hopes to have launched a follow-up product based on an API that will transform the service into a true comparison site. “We will send lenders the information about a specific business in real time and they will return a real quote with a specific condition of the loans,” says Argov. “We’ll have for the first time ever real comparison between different products. “It will compare on the most important things. Hidden fees, for instance. Also the monthly pay out, which is sometimes more important than the level of interest because you really need to know what are your limits. We took the five important things that the business needs to know and these are the criteria that we will compare. It’s not simple, but I think this will be the revolutionary product for businesses.” With the big four banks still accounting for 80 per cent of SME lending in the UK, Fundbird is well placed to make the most of forthcoming changes under the Small Business, Enterprise and Employment Act (2015). The new rules will require banks who reject SMEs for finance to ask them whether they want their details to be shared with websites, who will then refer

We are a mediator in the alternative lending world, improving the quality process from both sides By partnering with fintech third parties, it taps into KYC data that’s been largely ignored so far by the banks, including information gathering over social networks, as well as sophisticated anti-fraud assessments provided by, among others, the Israel start-up Biofeedback. "If it’s fraud with intention, then they (the lenders) manage to prevent it. If a company went bankrupt or haven’t managed to fulfill their commitment, most of them will be able to help through a secondary market for loans to cover their debt through a personal guarantees mechanism, for instance. “Part of the lenders’ IP is how they’re doing their underwriting process and their risk management. There is a lot of data Summer 2016

companies to challenger banks and alternative lenders. The regulations, which Argov expects to be enacted within the next year, follow several failed attempts by Government to improve bank lending to the SME sector. “It’s a major gap that needs to be solved and it’s in our own interest that those businesses will grow and succeed and manage to be active and successful,” says Argov. “I think there will be more niche solutions; loans against property; loans for verticals in industry; you are already seeing companies that only give loans for working in specific areas, or specific verticals, or willing to give specific guarantees. So I think this industry is here to stay.” |


Navigating the future of innovative banking 15-16 June 2016, Singapore

Profitable customer engagement

For further details please contact: Nadine Placzek at Tel +44 (0)20 7936 6945


Listen up!

Jonathan Wax, head of EMEA operations at Nexidia, the US-based advanced speech and interaction analytics company, is a man with his ear to the ground and a view on how banks should be talking to customers

Jonathan Wax is good at listening. It’s his job. As head of EMEA operations for Nexidia, the US-based advanced speech and interaction analytics company, he eavesdrops on organisations’ conversations with customers every day – through call centres, on social media and over a myriad of other digital channels. He helps them gather, understand and use those conversations to predict what customers will do or want next. And what he’s learned is that customers want choice. “I think one of the challenges with any form of self-service is that there is normally a view from an organisation saying, ‘Oh, those are really classic transactions, they’re very simple things, they’ll be far more effective or efficient, having them as self-service.’ There may be a percentage of customers who are delighted to do that, there may be a percentage of customers who never want to – they always want to ring up for a balance, that’s just one of the things they do. “So while I think there is huge ability to improve the cost models through moving a lot of these things to intelligent channels, the danger is if you say the only way to do X is through that channel, then you can start to alienate your customers.” And with just over two million people moving accounts in the UK since seven-day switching was introduced in 2013, banks can’t afford to do that.

Communicating value Deciding what is appropriate for whom starts with segmenting the customer base, says Wax, and then implementing a good communications strategy to make sure customers are aware of the options – be it phone, webchat, app or social media. And as any fan of TV detective shows will tell you, every contact leaves a trace. For banks, the records of these contacts for clues to business performance, regulatory compliance and customer behaviour. “One of the strong sectors for us has been contact centres because we can show Summer 2016

people what’s happening in their calls to do things like process improvement or to understand the voice of the customer or use it as a performance tool,” says Wax. “Where it becomes particularly relevant to the financial services industry is regulatory oversight. Whilst we’ve always been able to improve the contact centre performance now we can take all your interactions and analyse them and present data so that you can go back to the regulator (with them).”

you’ve got to check the consistency; the regulatory compliance. So there’s been a whole ecosystem supporting the way the contact centres work. The digital, social media channels are normally being run separately and the danger is all of the lessons learned from the development of contact centres are forgotten. Then people will make the same mistakes. “We did some research about two years ago and (around) 90 per cent of call centres had some form of performance and quality monitoring going on. Social channels was under 20 per cent.”

Integration is key

90 per cent of call centres had some form of performance and quality monitoring. Social channels was under 20 per cent Wax is an advocate of banks integrating social and digital channels into their mainstream operations rather than leave them where they usually sit, out on a limb in the marketing department. “The challenge for the banks is to integrate them into their operations and not have to re-learn all the lessons from the contact centres,” he says. “Contact centres have been going 30, 40 years, and people have slowly worked out you’ve got to check the quality of the service you deliver;

Wax argues that without fully integrating all the many ways customers can talk to them and subjecting those channels to the same scrutiny, banks will only ever have half a picture of who their customers really are. Seeing the full portrait is much more powerful. “The integration of channels means I actually get a complete view of the customer. It will mean that there will be far more data that’s available at the point of contact, so the people who are in contact centres will be more than just processing transactions. I think it’s been a nirvana for a long time that we want to have the really important conversations with customers, and I think that’s what we’ll see happening. We’ll see the contacts that are still happening on a one-to-one relationship, and it doesn’t necessarily have to be voice, it could still be chat or whatever technology, but when you’ve got a one-to-one transaction, people have far more ability to deal with a customer, take responsibility and to deliver a better service “I think you’re going to have to empower people to do far more at the point of contact. One of the primary changes we are going to see is people moving away from the old command and control type of environment in call centres. They're going to be able to do that because of the wealth of information that’s available is being tapped for the first time.” |



Humanising digital Information technology shouldn’t be about taking people out of the process; it’s about enabling them to play a greater part in it – that's where true innovation begins, argues Saul Judah, Research Director of IT advisory consultants Gartner “Banks can’t differentiate on whether their current account is better than the next bank anymore. They have to look at something quite different; they have to look at how they can innovate with their information and create some value that the customers and the market truly need,” says Saul Judah. Welcome to digital humanism – harnessing the power of information technology, not to depersonalise the customer experience but put people back at the centre of it. To make every interaction hyper human. As Research Director at consultants Gartner, it's Judah’s job not only to work out what the information clients receive from billions of smart devices and other channels says about their customers and whether or not it’s to be trusted; he also shows them how to build their organisations around it. Because if there is one asset that banks are not short of, it’s data. Their problem is not knowing too little, it’s knowing too much and that creates a challenge for “digital leadership”, says Judah. “Chief information officers, chief data officers and information leaders widely need to re-establish and look at the people they have in the organisation, retrain them, redesign them and make them future facing,” he adds. And if that sounds a bit Ex Machina to you, Judah believes it’s justified. “I’m seeing new ways of differentiation through things like personalised products, making products that are very specific to the individuals and that requires vast amounts of information. It requires new processes and frameworks to think about information, therefore driving the need to have better information management. “We used to look at structured systems – databases, data warehousing and so on –

but now there’s also the very urgent need to look at unstructured data, semi-structured data, inside and outside the organisation. Having large volumes of structured and unstructured data by itself can only address some types of business scenarios. Where organisations want to achieve true digital transformation and where they want to differentiate (they need) to be able to link those things up with their master data. “Linking the Internet of Things to master data is going to be crucial. That’s a technological aspect. There is also the need to have digital leadership, that is to understand what it is to differentiate, what the identity of the organisation is going to be, and create and harness all the information and technologies to deliver that objective.”

People-centric focus Judah’s boss Betsy Burton, Garton’s vice-president, has described “digital humanism as “the notion that people are the central focus in the manifestation of digital businesses and digital workplaces”. “In the past we’ve seen the purpose of technology as being to automate things, remove people from processes,” says Judah. “Digital humanism (is) where the purpose of technology allows a human being to flourish, to do their best, to innovate, to be creative in the organisation. That’s where invention and differentiation is going to come from.” The sheer volume of data is one challenge; its variety and veracity are others. “Knowing how and where data is going to emerge is incredibly hard, which requires different responses than assuming that the data is going to be uniform and consistent. “The evolution of information, the complexity, means they have to re-establish and re-evaluate how they think about information trust, especially when much of this information is coming from outside;

they have to consider its origin and lineage and what it means to their data insight.” Which brings us to strategy and risk. Judah believes digital business strategy needs to be far more options-based than it is now. “We still find that many organisations look at strategy as being something that they do as an activity and then move on to real work. This can’t be the case anymore. It has to be an options-based, always-on strategy that is revisited frequently and also considerate to the changing business needs and the evolving circumstances of the market. Where organisations are able to do that, they are far more able to understand and predict challenges.” The framework for assessing risk similarly needs to change. “We’re seeing the rise of a focus on information related to people and processes more than we were," says Judah. "In the old days it was very much a case of, ‘We’re facing risk, let’s establish greater controls’ but the complexity of organisations is such that it can’t just be controls now, it has to be other responses, and people-centric information risk, people-centric information security, is far more important,” says Judah. He is in favour of a metrics-based approach to measuring data quality, but not in isolation. “Beyond that, they also need very good policies, very good standards, a very effective compliance framework, a risk management framework, and a way of measuring with respect to business outcomes, that enable that data quality not only to get clean but also to be kept clean. Without those, it’s ineffective spend. “So, organisations will need to ask what data means in terms of consistency, conformity, effectiveness, all those good things, but also subjective measures, like 'Is it timely? Is it useable?' These are the things that business users, who are the consumers of information, need to define.”

Technology allows a human being to flourish, to do their best, to innovate, to be creative in the organisation 56


Summer 2016

In control: There's a greater need for digital leadership

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API-ness is the truth Retail banks won't fully realise the transformative power of fintech without the widespread adoption of APIs, argues Konstantin Rabin, CMO of financial data aggregation specialist Kontomatik Financial services and banking have traditionally been among the most conservative industries. Then fintech happened. Companies composed of just a few talented and motivated developers started taking slices of the financial pie and “disruption” became a media buzzword applied to what used to be an ultra-cautious sector. And yet, while a number of banks have joined in the innovation, one key issue remains – banks do not provide APIs, or, to give them their full name, application programming interfaces.

What is a banking API? A banking API is a tool that lets applications access the financial data of users with their consent. The process is similar to using Facebook or LinkedIn to log in to a third-party app, but in the realm of financial services. Instead of filling out a bulky registration form on a website, users just click a button and the browser grabs data from the current Facebook or LinkedIn session. With banking APIs the process is different, due to the security measures involved, but not that different. An application that wants to access banking data will ask users to authenticate it with their bank, using their login credentials. This is the case even if they are already logged in to internet banking in another tab. Once authenticated, an application gets access to that user’s registration, account and transactional data.

benefits of a banking API 3main

1. Know-your-customer Most companies that offer financial services are required to perform know-your-customer (KYC) procedures. Typically, this is a time-consuming, labourintensive process. When done offline, it might require customers to visit a bank branch, wait in line and, potentially, not have all the required documents with Summer 2016

them. To perform KYC online, users have to supply scanned copies of documents, such as a utility bill. Whether online or offline, having to authenticate yourself is an inconvenient process that delays the use of an actual product or a service. But why do you need to be identified every time you register at a new company? Wouldn’t it be better if these companies could somehow communicate and perform KYC based on the data obtained from the source of your registration? This is where banking APIs come in handy. In the last two years, for example, German online microlender Kreditech doubled its conversion rate using such technology. Instead of requesting a client to upload the documents and proofs of residence, Kreditech was able to verify the identity of a client with just a few clicks.

Banking APIs will be the fuel of financial innovation over the next few years 2. Understand your customer Identifying your customers does not necessarily mean you understand them. Google asks you for hardly any information and sometimes only requests a phone verification. Nevertheless, this company tracks your searches, behaviour, interests and so on. Based on the data obtained through the usage of its services, Google can display ads that are more likely to be compelling to the user. The same can happen in the financial industry. If a company can access a customer’s transactional data and analyse their spending habits, it can present them with truly tailor-made offers that are more

likely to be useful and therefore adopted more often by customers. 3. Provide more convenience Do you remember when upgrading your phone took forever? Unless you had all your contacts backed up to a SIM card, you’d need to spend hours copying contacts, re-sending important messages and so on. The process is still much the same today when it comes to finances. Your bank has all of the predefined payments, address book and other features that you have spent years setting up. With a banking API, a user can import all of his settings with a single authentication. When Alior bank launched AliorSync, for example, it managed to attract new clients by ensuring that all of their current banking settings would not be lost when importing data via Kontomatik banking API.

The verdict Banking APIs will be the fuel of financial innovation over the next few years. This technology will power-up new services that will transform the way we treat our financials as well as assist in developing banking systems and enabling merchants to gain access to the customers and data they need more easily. KNOW-YOUR-CUSTOMER Performing identity checks is simpler with APIs |


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

...make your Customer Experience your legacy. Flawless customer experience management email: @TPmarketingUK TeleperformanceUK TeleperformanceUK


20/20 vision

Brian Costello, VP and Chief Information Security Officer at software company Yodlee gives four key takeaways from this year’s Money20/20 Europe conference in Copenhagen

Recently, I attended Money20/20 Europe – the world’s largest fintech conference held in Copenhagen, Denmark. As I talked with several attendees from financial institutions and fintech innovators, I noticed some common themes emerging. They’re the same conversations we’re having across Europe with banks and technology companies and it shows that everyone is focussed on similar topics. 1. Responsible fintech innovation Everyone in the industry recognizes that responsible fintech innovation is a force for good. According to the Office of the Comptroller of Currency, responsible innovation is defined as: “The use of new or improved financial products, services, and processes to meet the evolving needs of consumers, businesses, and communities in a manner that is consistent with sound risk management and is aligned with the bank’s overall business strategy.” Consumers and small to medium enterprises (SMEs) benefit by getting data-driven services that are personalised just for them. Banks benefit because they get reliable and timely data that helps them improve their product and service offerings. And the market benefits from the improved financial health and wellness of its members.

PSD2‚ the European Parliament’s Directive on Payment Services, was a big part of conversations at Money20/20 and it’s having a major impact on our interactions with EU banks and innovators. The recognition that account information service providers are different from payment providers allows Envestnet/Yodlee and other platforms to better understand their legal requirements and craft appropriate solutions that serve our customers. It also supports a key principle of consumer protection, namely that a consumer owns their financial data. This principle allows consumers to choose how they use their data to improve their financial wellness by engaging with service providers they choose. 4. Financial services most impacted by fintech Lastly, fintech is still having a dramatic impact on financial services across Europe. There are four primary use cases getting the most attention:

2. Fintech Innovation is evolutionary, not revolutionary Yes, certain technologies, such as blockchain, are revolutionary. But the financial ecosystem, balanced by responsible innovators, banks and regulators, helps to influence it in a more evolutionary direction and ensure that fintech initiatives don’t cause systemic risk. All stakeholders benefit from this, especially consumers.

■ Personal finance management apps, including those that use behaviour-based triggers that are targeted to key segments, like students, women and those nearing retirement ■ Payment providers using aggregation for account verification and risk management ■ Lenders using bank statement data for personalized underwriting and affordability checks in a streamlined application experience ■ Financial advisors using account data to provide better advice and to comply with industry requirements like retail distribution review (RDR), a new set of UK regulations that provide transparency and fairness to clients of financial advisors

3. Increasing consumer protection and regulation Consumer enablement and protection is another common theme, driven by fintech innovators and financial institutions with increasing input from regulators.

Events like Money20/20 play an important role by connecting innovators and service providers to support the continued evolution of fintech and discuss some of these issues. Responsible innovation means that all stakeholders working in the service of

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consumers have a role to play in protecting them. We will see PSD2 and the new General Data Protection Regulation (GDPR) continue to inform these issues and drive standards for a balanced financial ecosystem. Also, service providers and app developers that leverage financial data to power their solutions have the critical responsibility to protect consumers.

Fintech is still having a dramatic impact on financial services across Europe As such, financial institutions and data aggregators must do everything possible to fortify their defences against possible threats to enable secure, aggregation-powered applications. ■ See the Fintech Magazine interview with Brian Costello at Money20/20 by going to brian-costello-envestnet-yodlee. Download the white paper on Account Aggregation and Security: What You Need to Know at resource/account-aggregation-andsecurity/ or visit for more information. |



The big daddies of

big daTa

Global banks aren’t late to the digital party, according to george Stein, UniCredit’s head of global transaction banking for the UK. They were managing big data when fintech was still in nappies. They’re just figuring out what next to do with it “Thirty years ago the then chairman of a major international bank said: ‘Money is information on the move.’ He got it right. But no one back then could have imagined the bandwidth and processing capability that market participants

have these days,” says George Stein, the recently appointed head of global transaction banking for UniCredit in the UK. With UniCredit having pledged to spend 1.2 billion euros on digital innovation by 2018, Stein is looking for ways to make the

most of the information at the bank’s disposal in order to serve clients with the most modern cash management and trade finance services available. Far from playing catch-up with the new challenger banks and financial service providers, Stein’s of the view that banks

Information: The challenge for banks and customers is working out how best to use it



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were the true innovators in this field – the big big daddies of big data and information exchange. Their challenge is not so much mastering big data as figuring out how best to use it to create value for their clients. “Big data is a new name for something we’ve always dealt with. We’re banks. How many transactions do we process a day? We already do big data,” he says. “I would argue that since we started using computers, banks have been in the digital business. We’ve digitised the money transfer industry. If you think about the preponderance of cashless payments right now, and in my area, wholesale banking, we have become highly automated. “It’s a bit of a cliché, but straight through processing (STP), is still, in my view, entirely appropriate to use as a goal, both on the bank side and on the client side. On the bank side, by making our processes more efficient, we save cost and we can pass that efficiency on to our customers. On the customer side, well, what do the customers want? They want information and reporting, which is digitalisation in my mind. They want information reporting from us that enables them to process transactions on their side as straight through as possible, therefore achieving efficiencies. Every single business in the world wants to be more efficient and, through digitalisation, banks have been helping customers do that and we will continue to do that.”

A new landscape The question, now that the financial ecosystem has changed, is how. Blockchain, the payment system underlying bitcoin exchange, which is based on a decentralised ledger that in theory could encroach on part of banks’ role as a trusted third party intermediary, is one area of intense scrutiny. The technology’s potential to reduce risk and transaction costs and to improve speed and transparency in capital markets has persuaded some of the biggest banks to collaborate to harness this particular digital beast. “Blockchain is an interesting new technology, and it’s one where I think the banking market, in particular, is trying to work out exactly where it’s applicable,”

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says Stein. “UniCredit has teams working on the concept, as do other banks. Trade finance is a very important business for UniCredit. Our strategy is to do a lot more with our customers and a lot more with other banks, including in London, so we are building up our capability and our capacity. Whether Blockchain becomes a part of that… I definitely think we’ll find out in the next few years.” Meanwhile, he sees a more immediate challenge in sifting and interrogating big data for the bank’s own and ultimately the customers’ benefit. “We have an amazing wealth of knowledge about our customers that we use to do things like we’re doing in London to develop new products and new capabilities to serve our clients better. On the customer side, to turn that equation

better understanding of what the other’s needs are and what the other’s capabilities are, and in the end, we think we can deliver a better service to our customers that way. “It’s easy to believe that transaction banking is purely a technology business. Fundamentally, I believe it’s a people business, like every other business. In bringing our technology colleagues together with our clients, we think it makes it that much easier for us to get a better understanding across all areas of the bank of what our customers want to do,” says Stein. “At UniCredit in London right now we’re investing to build our capability and our capacity to serve customers in this market, so the continuous process of understanding what your customers want from you and then putting the investment

Big data is a new name for something we’ve always dealt with. We’re banks. How many transactions do we process a day? around is a huge challenge. Customers are traditionally used to receiving data from their banks about their activities, but sitting down with customers and working out exactly how to use all the additional data that they’re maybe not used to looking at – things that go beyond daily reporting and balance and transaction reporting– that’s a challenge for our customers as well as for us. How do you use all this data? What is there that is relevant for me? What’s relevant for one client may not be relevant for another client. The challenge is for customers to understand what’s available and how they think they can use it, and our challenge is to follow our customers in that endeavour.” That’s why UniCredit met clients at last year’s SIBOS conference in Singapore with a joint delegation, including both bankers and IT specialists, to discuss the possibilities.

Customer-first banking "Getting our technology colleagues together directly with customers is an important way for everyone to get a

behind it, is absolutely vital to us remaining competitive and succeeding in the market. " The pace of change in banking is only going to accelerate, says Stein. “We have a huge network of customers and we have a very large geographic footprint in some of the strongest economies in the world and the UK, as an important financial market, is vital for us, because our customers want us to follow them here. "So, we’re investing to meet our customers’ needs here as part of keeping up with the change and the efficiency pressures that we see in the business. A good example of that is on the trade finance side where UniCredit has been actively working with customers to make use of the bank payment obligation (BPO) instrument in trade finance, which combines the safety of a letter of credit with the efficiency of open account trading. “Going forward, there will be continued pressure to manage costs, but deliver more capability with advances in technology. I think we can do that.” |



Less pain, more gains Anand Subramaniam, Senior Vice President Marketing at eGain Corporation, addresses the pain, the cure and how to find the gain in BFSI customer service What are the biggest pain points in customer service in the banking, financial services and insurance sectors, aka BFSI? According to a recent survey of 5,000 consumers conducted by Forrester Research on behalf of eGain, “Can’t find answers on company websites", “Different agents give



different answers” (each mentioned by 40 per cent of respondents), and “Agents didn’t know the answer” (27 per cent) were the culprits, followed remotely by “other” issues (the respondents were only allowed to pick up to two pain points in their responses). The result is increased customer effort and resultant defections. In fact, 34 per cent of

customers said they switched or were likely to switch banks due to poor customer service, according to Accenture’s recent Global Consumer Pulse Survey. The same survey reported that 39 per cent of insurance consumers had either fully or partially switched their provider, which meant $470billion worth of premiums were up for grabs just last year. Summer 2016


Improve findability It is one thing to have content and another thing to be able to find the proverbial needle in the haystack, i.e. the answer when a customer is waiting on the line. While content management (CM) systems are good at content creation and maintenance, they are not good at findability. It’s important to have a knowledge management (KM) system that offers multiple ways for agents (and end customers) to find answers – dynamic FAQs, keyword and natural language search with or without chatbot front-end, topic tree browse, guided search, etc. If you already have a CM system in place, you are well-advised to add a findability layer to it with KM.


Leverage artificial intelligence (AI) You can’t address today’s business challenges with yesterday’s technologies. The need for smarter knowledge calls for the use of AI and here is the good news. Purpose-built AI, applied in conjunction with best practices, is guaranteed to deliver transformational business value. An example is eGain’s patented Case-Based Reasoning (CBR) technology, which has simultaneously improved multiple customer service metrics for blue-chip companies across industries.


Next-gen KM: It can transform your business

The Cure So what is the cure for customer service pain in BFSI? If you look closely at the consumer responses, you’ll find a common thread across them – all the issues can be addressed by infusing smarter knowledge across customer touchpoints. So what is driving the need for smarter knowledge? It is the increasing breadth and depth of customer queries, preference of next-gen customers for self-service, and the increasing ability of self-service systems to handle routine questions, which leaves the hard questions for the agents. Here are four steps to pain relief: Summer 2016

Unify across touchpoints Inconsistency of answers and process across touchpoints not only frustrates customers but also creates compliance risk for the BFSI sector, one of the most regulated among industries. The problem can be addressed by enforcing regulatory and best-practice compliance across content, interactions, and service fulfillment processes with robust omnichannel KM, infused with AI for guidance.


Optimise for performance It is important to expand and maintain your KM system on an ongoing basis to ensure its relevance and expand its business value. Make sure you leverage knowledge analytics to continuously improve the accuracy and scope of your knowledge base content. At the same time, measure the performance of your agents and customer self-service systems before and after deploying KM to quantify the business value of knowledge. Sample metrics include First-Contact Resolution

(FCR), Average Speed to Answer (ASA), customer satisfaction (e.g. NPS), reduction in training time, speed to competency, and call deflection rate (in the case of digital self-service).

The Gain Done with the right technology and best practices, knowledge, infused with AI, can transform any business while alleviating customer pain. Here are some examples from our blue-chip clients: Global BFSI giant: Scales to meet 100 per cent increase in demand for customer service without adding any advisors, improves FCR by 36 per cent, slashes training time by 60 per cent, and enforces regulatory compliance Premier US financial services firms: One improves FCR by 72 per cent, and another speeds up response time by 47 per cent and improves compliance attainment by 30 per cent, while reducing classroom training time by 30 per cent

You can’t address today’s business challenges with yesterday’s technologies Pan-African BFSI firm: Ascends from #3 to #1 in customer service NPS, cuts agent training time by 50 per cent, reduces agent churn to less than one per cent, and enables any agent to handle any customer query, even as it expands to 11 countries Transformational? Yes, that is exactly what next-gen KM can do for any BFSI company, and, in fact, for any business.

The Path What is the safest and best path to customer service transformation with next-gen KM? A proven approach our clients have taken is to start with eGain Try+Buy, a cloud pilot in a production environment, guided by best-practice experts for success, all free of charge with no obligation to buy. Once business value is established, these clients engaged with our experts to expand the value in rapid sprints. Agile transformation of BFSI customer service is, after all, no oxymoron. |



Running with the pack Jordan Belfort, the Wall Street broker whose spectacular rise was mirrored by a spectacular fall from grace, has turned from predator to penitent… “Don’t hang up until the customer buys or dies” was the mantra Jordan Belfort and his wolves of Wall Street lived by. The bender of rules, the once seeker of the grey area, the alpha wolf, is now on a straight and narrow path to redemption. Since Martin Scorsese turned his memoir The Wolf of Wall Street into a film, Belfort has mined another niche – as a public speaker, reliving his morally questionable past and commenting on regulations designed to prevent another wolf emerging. The ascension to the throne for Belfort was made possible by “pump and dump” schemes, “ratholes” and his manufactured Straight Line System of selling. Pump and dump (P&D) is a form of microcap stock fraud, which seeks to boost the price of a stock through recommendations based on misleading and greatly exaggerated statements. Those who commit this fraud already own investments in the company’s stock and sell their share once the upselling of it leads to a higher share price. The consequence of that, of course, is capital flight, the share price in freefall and big losses. Rathole was a code word coined among traders at Belfort’s Stratton Oakmont brokerage house for a nominee, a person who owned shares of stock on paper but was nothing more than a front man. There was nothing inherently illegal about being a nominee, as long as the appropriate taxes were being paid and the nominee arrangement didn’t violate any securities laws. According to Belfort’s memoir: “As long as you didn’t acquire more than five per cent of any one company – at which point



you’d be required to file a 13D disclosing your ownership and intentions – it was all perfectly legal”. One of the many issues that the US Security and Exchange Commission (SEC) had was the engineering of its lawsuit against Stratton Oakmont for being a penny-stock firm because Belfort’s firm bore no resemblance to one. Traditionally, these firms are decentralised and have many offices, whereas Stratton Oakmont only had one. The genius behind the firm was its targeting of wealthy individuals. Penny-stock firms would normally target people with little or no net worth and encourage them to spend a few thousand dollars; Stratton Oakmont would convince the wealthy to invest millions ,which meant that the “SEC couldn’t make the usual claim that Stratton’s clients weren’t suitable to risk their money in speculative stock”, according to Belfort. At the peak of his reign on Wall Street, Belfort employed more than 1,000 stockbrokers and raised an outstanding $1.5billion while starting more than 30 million-dollar companies from scratch and consulting for more than 50 public companies. Belfort’s personal salary during this time was $50million a year, which he used for instant gratification, as famously depicted by Leonardo DiCaprio in Scorsese's film. Much has been made of Belfort’s drug abuse and addiction; it doesn’t however define him. The fact of the matter is that what Belfort managed to accomplish was incredible. Although it all came to an end with a jail sentence and his broker’s licence revoked, he continues to achieve. During his time in prison, he was cell mates with

Excess: Acadamy Award winner Leonardo DiCaprio portrayed Belfort in Martin Scorsese's The Wolf of Wall Street

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Much has been made of Belfort’s drug abuse and addiction; it doesn’t however define him Summer 2016

Tommy Chong, most famous for his role in the ‘Cheech and Chong’ movies about cannabis smokers. Chong is the person who convinced Belfort to write the two memoirs that for him became an act of atonement. He is regularly quoted as saying the books are a “cautionary tale” rather than a glorification of his actions. Since his incarceration, Belfort has been on the road to paying back the $110million he owes to the victims of his fraud. During an interview with Bloomberg, Belfort was asked how he was corrupted. He’s quoted as saying that “it started with one gigantic rationalisation that it was OK to take a bag of cash for someone to hide it, trade it and have it make sense on paper... everyone on Wall Street does it”. Through desensitisation, Belfort became the man he was portrayed in the movie. With the philosophy of hindsight, he says there is an “emptiness” to the money traders on Wall Street accumulate and they try to fill that void in whatever way they can. For decades, the media has demonised Wall Street and the people who work there. And, to be fair, up until 2008 there wasn’t much evidence that the excess had been reigned in. When interviewed by The Sacramento Bee Belfort was asked whether it is better or worse today than when he was running Stratton Oakmont. “It was going on and got much worse leading up to the GFC (global financial crisis). The whole industry was running amok,” he said. The association between greed, excess and Wall Street may never go away but time in jail made Belfort at least “realign” his values. Losing everything – his money, his wife, his children – forced him to focus on a more legitimate line of work. These days, Belfort has directed his attention to speaking at seminars and corporate events about his Straight Line System, employed so successfully to persuade people to part with millions of dollars, now turned into a self-development tool, earning him considerably less. Most of the profit goes towards compensating those he wronged. He now insists Straight Line is a technique that should be used ‘ethically’ to convince someone to take any action, thereby increasing your income, sales, closing rate and confidence. A wolf in sheep’s clothing? Maybe. |



Secure: Alcatraz offers limitless storage of communication across multiple channels

Up in the Cloud

Brian Perfect (right), looks at how the Alcatraz data depository – a context aware object store – is propelling Actiance to the forefront of next-generation archive technology In recent years, the financial services industry has faced some of its biggest challenges, from the 2008 financial crash through to the LIBOR and foreign exchange scandals.

In the wake of ever-increasing regulation, the market has been forced to evolve. The announcement of revisions to the European Markets in Financial Instruments Directive, in the form of MiFID II, is such a large change in regulation for most in the financial services industry, people have begun to look differently at their business processes, their operations, and the markets they operate and position themselves within. MiFID II removes some of the systemic risk, preventing investors from being abused by any potential market malpractice. In terms of customers, this means the market should be a safer place for investors,



promoting a growth in confidence, with investors investing more due to the market being, essentially, safer than it was prior to the introduction of MiFID II. With more stringent rules for record keeping, financial services firms have felt an increasing need for supervision and trade reconstruction, causing the industry to move towards a greater balance between transparency and security. This is where Actiance has been leading the way, helping businesses communicate and cooperate across an array of highly regulated industries, by creating the first system that allows complete capture of all business communications, and the data it generates, on a single platform.

Unique proposition The unique selling point of the Alcatraz system is that, being Cloud-based, it’s unlike

any of the current archives available today. The majority of archiving technology presently in use is based on email archiving, which is becoming increasingly swamped with the additions of instant and other types of electronic messaging. Designed and built from the ground up a few years ago by Actiance, Alcatraz is not, strictly speaking, a traditional archive, but a context aware object store, this allows for faster ingesting and exporting of data. With the ability to build applications for eDiscovery and supervision, it offers a much faster case management than other alternatives and, because of context awareness, a richer experience of supervision functionality, allowing its users to benefit from analytics. Most financial services firms like to keep their core information systems onsite, the premise for this primarily being reasons Summer 2016

relating to data security and performance. But with increasing costs of data storage and advancements in Cloud-based technology, there has been a shift away from the tradition of archiving in this way. An example of this is the email system; as people have moved their email into the Cloud, they have begun to move the archiving and compliance for those Cloud functions into the Cloud as well. Although some argue that there may be technical advantages to being onsite in terms of storing data safely, these appear to be psychological and the advantages of a Cloud-based system, like Alcatraz, is becoming increasingly recognised as the more practical and more efficient alternative.

The data dilemma One of the biggest complications that a lot of banks face is the problem of siloing and legacy. Through archiving and compliance, the Cloud is being used to break down the barriers between these departments. In the past, there just used to be email, then various different types of electronic messaging arrived on the scene, including instant messaging, unified communications, financial networks like Bloomberg and Reuters, and then there’s also collaboration platforms, enterprise social and public social. When the compliance and archiving of all of these individual channels is done using different systems the costs can be expensive. With Alcatraz, all of that data can be brought together in the Cloud, allowing easier access and the ability to perform

captured, monitored and archived in the same way that email and other forms of instant messaging have to be controlled. Due to the expanding growth of social media, both smaller and larger financial services firms are beginning to take into account the importance of using it to correspond with their customers. If they want to make use of more modern, unified communications techniques, such as Skype, then they have to be particularly careful. The communications analytics offered by Alcatraz allows the user insight across all of their social networks and communications channels. Built using the same distributed elastic technologies as Netflix and Google, Alcatraz is Actiance’s next-generation archiving technology. It is, at heart, a highly performant context-aware, object-based store, which is able to stay ahead of compliance and uncover patterns and relationships hidden within the user’s data. The advantage of this is noticed when it comes to the time taken to do complete searches of records, which had been cut from weeks and days, to just hours and minutes.

Everything in context Compared to the old email-based archiving that is widely in use today, Alcatraz holds a number of advantages. Apart from the increased speed and performance, the context awareness means that the conversation is captured within the context of the different channels that it might have taken place across and the events preceding and succeeding it. This is something that is

develop a very powerful long-term archive. In terms of limits, the performance offered by the Cloud doesn’t degrade with scale. With no impact on performance caused by the amount of data in its archive, the Cloud has a potentially limitless capacity when it comes to data storage. In terms of actually storing data, most, if not all, US and European banks require their data to stay within their jurisdictions, often requesting that only European citizens work on European data. Actiance operates a datacentre in Frankfurt that employs European citizens to manage the data within it.

Future conversations So what do the next few years have in store for the financial services market? Whether the industry agrees or disagrees, it will be increasingly regulated. With increasing pressures from governments and regulators to ensure the safety of the world economy, the banking industry is likely to be shaped around greater customer expectations. Social mobile and Cloud technologies are enabling global organisations to energize their businesses. By placing people back at the centre of business, this new technology is driving higher performance and increasing engagement, which is ultimately leading to greater business results. Over the last 10 years, bank branches have become less important and the costs inherent within them, increasingly harder to justify. Customers are becoming used to the idea of dealing with their bank in

One of the biggest complications that banks face is the problem of siloing and legacy. The Cloud is being used to break down the barriers between these departments eDiscovery and supervision, with a single pane of glass across all of the channels. This has tremendous business benefits in terms of efficiency, not to mention the lower total cost of ownership that comes with having a single system. Being able to access all the channels on one system means it’s easier to access all of the data, making it simpler to gain a unified view of all of the information. The rise of social media has brought with it compliance issues. Counted as another form of electronic communication, as far as the regulator is concerned, if anything that occurs on social media leads to, or is relevant to a business transaction, then it has to be Summer 2016

quite difficult to achieve, if converting every message into an email. The way the Alcatraz technology centralises the data, enables Actiance to build applications for eDiscovery and supervision, which have a range of features and performance that is completely different from the technologies that have been in use for the last few years. Actiance itself is well-established in the active compliance market, and its Vantage product performs email archives for many of the top banks in the world. The genesis of Alcatraz was to offer the same functionality as Vantage, but using state-of-the-art, web-scale technology to

different ways. The surprising growth of smartphone and internet banking is changing the way the industry operates and with the adoption of different ways of communicating, such as Skype and Facetime, looking more and more likely, the need for compliance within these channels is absolutely vital. The financial service industry has had to become better at something that it hasn’t always done well with in the past, putting the customer first. The market is looking geared towards the need for a single archive, such as Alcatraz, that has the ability to capture conversation across multiple channels. |



From Wall Street to main street How would Brexit or a Trump victory affect your investments? One of the coolest self-financed fintechs to emerge from Wall Street, might just have the answers, says HiddenLevers co-founder Raj Udeshi With big data comes big responsibility. The catalyst for all future personalisation within the finance sector, big data is being used across business to personalise customer experiences and improve efficiency for both customer and provider. But how could it be used to prevent you falling victim to another financial disaster? That’s the question the portfolio stress tester HiddenLevers set out to answer. Understanding psychology is critical to an understanding of the stock market and one of the ways HiddenLevers wanted to improve financial services was to allow people to view their options if a stock started to fall in a safe, hypothetical setting. The idea was that this would guard against ‘panic selling,’ which was a huge contributor to the 2008 market crash. HiddenLever attempts to removes the financially unreliable and sometimes dangerously unpredictable element of human emotion by utilizing big data to measure millions of relationships between the economy and investments and using it as the basis for a 'stress test' - both psychological and economic. Areas such as interest rates affecting home sales, which affects stock held in real estate companies, is just one example from more than 35,000 investment links built into the company’s algorithms. The genius of this software is its clever use of scenarios. Take the hypothetical financial impact of an economic slowdown in China – not so hard to imagine now – or the rise of a dictator in some far-flung part of the world. By modelling future what-ifs on known

historical events, HiddenLevers stress tests an investment by using regression analysis. It gives advisers and their clients an idea of not only how the market is likely to react and which investment products are the most vulnerable and the most safe, but also whether an investor is likely to be panicked by big swings, giving advisors a chance to rehearse talking them down off the ledge. With visual aids and funky tools to help guide client portfolio decisions, users can customize their own ‘what ifs’. It adopts what co-founder Raj Udeshi describes as a “ Sesame Street, really-easy-tounderstand, nobody’s talking over my head” approach.“Nothing that’s fear mongering, but actually reassuring," he says. HiddenLevers is not a robo advisor, Udeshi stresses, it just wants to “make sure the macro conversation is part of every conversation” with an investor. Coming from Wall Street, Udeshi knew there must be a way to make financials as addictively exciting for everyone as they were for him. Or, as he puts it, he wanted to make macro economics “super sexy”. The way he did it was by building a tool backed up by clever big data analytics that showed how stocks performed visually and in the context of world headlines ‘”We have had help, you know," he laughs. "The whole second season of House of Cards was about economics, currency trading and currency manipulation. All those things have become really interesting topics now. They’re in the zeitgeist.” HiddenLevers is built on economic assumptions, which are subjected to big variables. "So, first we start with, ‘OK, let’s separate this into a good, bad and ugly

future and have those be real names that make sense to people, as opposed to just some index that we’re measuring," says Udeshi. “So, number one (is) risk parity. Number two, we find a historical analogy… where do major economic indicators move and how far? Number three (is) the short-term correlation between the levers. Number four (is) technical analysis. And then analyst opinion. So we synthesise analyst opinions, throw out ones that don’t make sense and then, of course, in the research component, we talk about those. Now I can take this conversation and make it portfolio-specific.” It's exactly the same model used day-in, day-out on Wall Street. "At the private client level they have a team of 10 doing, serving maybe one customer with a $400million portfolio, now I’m doing this for somebody who is much less than that," says Udeshi. "I don’t have to have an economist, because let’s face it, the economic research is a commodity, so I’ve put that all in here. I can see my palette of scenarios, just like an Instagram palette.” And even the Cookie Monster would understand that.

The whole second season of House of Cards was about economics, currency trading and currency manipulation Summer 2016 |


Customer Acquisition & Retention

Banking Technology & Strategy - Security & Risk

11-12 May 2016, Vienna

12-13 October 2016, Vienna

Digitisation and disruption: enhancing distribution channels to support customer loyalty

Navigating the future of innovative banking

For further details please contact: Nadine Placzek at Tel +44 (0)20 7936 6945


Access denied

Passwords are a necessary evil, but they won’t be around forever, says Yaniv Oz, CEO and Co-Founder of the ‘passwordless pioneer’ Hermetic The average internet user has 90 online accounts and research suggests he or she regularly forgets the passwords for 37 of them. They might be a headache to remember, but in combination with a secure login, they’ve worked well enough for years, not least because no one’s been able to come up with an alternative method of protecting a customer’s details that works across any and all the mobile devices they’re likely to use. Until now. “Hermetic realized that the main barrier to mass adoption of passwordless authentication and transaction signing has been device fragmentation, namely the huge variety of device models in the market,” says Yaniv Oz, CEO and Co-founder of Hermetic. “Whereas only a small minority of devices are equipped with fingerprint scanners, even fewer devices allow apps to securely store sensitive credentials, like passwords and signature keys. The latter ability is essential for using devices as trustworthy means of authentication.” The technology created by Hermetic is designed to overcome the problem by enabling apps to securely store sensitive credentials on any given device. Signature keys or passwords are kept on the device but only accessible via a PIN, pattern or fingerprint, making it more secure against someone with the phone. It might solve the problem but don’t all sigh with relief. The password is going to be around for a while yet. “I don’t think it’s going to become obsolete very soon,” says Oz. “There is always this balance that you have to strike between usability and security. We are certain this is going to happen, but you know, it will be gradual. You’re going to see a lot more of it in five years, maybe 10 years from now.” Hermetic’s Turnkey Mobile Login, underpinned by its ØK-Vault technology, will enable service providers to move beyond passwords without compromising Summer 2016

security. The design goal was to ensure credentials remain secure against brute-force attacks, as well as attacks on lost or stolen devices and server hacking. And it doesn’t matter what make, model or operating system the customer is using because the app is the interface and it can be integrated with a bank’s system with a few lines of code. “We achieve that by locking the existing credentials, that is the username and the password, and binding them to the user’s own device, so you can log in only from the device the user authorised, and they stay locked and encrypted on it,” says Oz. The purpose for this turnkey model is to

There is always this balance that you have to strike between usability and security

take advantage of the core technology for protecting the account credentials. Using a cryptographic service, which itself is 'zero-knowledge' which means that it is never exposed to information about the end user or other sensitive data like the access code or credentials. This is what makes the service resistant to hacking attempts. “Breaking the policy that the service provider, the bank, has set will block the user’s device. You then have to go through the regular bank procedure,” says Oz. Building these ‘Hermetically sealed’ walls between the device, the user and the data takes security “to a whole different level”, says Oz, and one that will become increasingly important as more services move from bank branches and the web towards mobile. As agreements and instructions that currently require the customer’s manual signature, are confirmed and signed via user devices, and mobile payments and peer-to-peer fund transfers replace credit cards, paper money and coins, Hermetic stands ready for the revolution. Yaniv Oz was talking to Fintech Finance Magazine’s Dylan Jones |



Catch them before they can The former identity thief-turned-FBI consultant and white hat hacker Frank Abagnale Jr is going beyond the 41st Parameter to improve security in the financial world and beat the conmen at their own game You feel distinctly uncomfortable talking to Frank Abagnale Jr, the world’s most infamous white hat hacker. He’s the man who knows who you really are, where you are… if you’re to be trusted. And when he describes data breaches as being deadly, he means it. Forget Talk-Talk and Target, he sees hackers shutting off your pacemaker, taking over your car’s computer with you on board, terrorists seizing power grids. “Absolutely, five years from now, they will have the ability to stop your pacemaker from thousands of miles away. So, if I want to kill you I’m going to get into your pacemaker, or any embedded device you may have in your body that’s controlled by a computer, and speed it up or shut it down. If you’re driving down the highway and I want to turn on your airbags, shut off your power steering, cancel your brakes – everything in the car is controlled by computer. Everything I’m telling you, we literally can do now, but we

have to be within 35 feet of the victim; five years from now, you’ll be able to do it from thousands of miles away. Those kind of things bother me.” The former confidence trickster, who inspired the Hollywood film Catch Me If You Can, is now a full-time digital security consultant and one of the FBI’s most trusted associates. He teaches the US government how to beat the hackers and he’s let some of the biggest data holding companies in the world into that same secret – which, as it turns out, isn’t such a big secret after all. It all comes down to making sure no one in the organisation does anything stupid. “I have been involved in just about every major breach that has occurred within the United States, from Anthem, which was 80 million people just a few weeks ago, to Chase, to Sony, to Target, to you name it. Every breach I’ve

ever incurred, occurred because someone inside that company did something they weren’t supposed to do,” he says. “Look, if I’m a hacker, I can’t get into Chase Bank’s infrastructure. They spend $250million every year just on software to keep me out. However, they also employ 200,000 people around the world and somebody, somewhere, is going to do something they’re not supposed to do – read email they shouldn’t have read, go on line when they shouldn’t have gone on line. That’s how these breaches occur.” The car parks of companies where he’s been invited to lecture on the subject of

To catch a thief: Staff are the first line of defence



Summer 2016

digital security are littered with Abagnale data sticks. It’s a little party trick he plays to test an organisation’s first line of defence. “They all say, ‘Confidential.’ Then at lunchtime in the cafeteria I open my laptop to see how many employees picked up that stick, put it in the computer in their office to see what it said, which is ‘This is a test and you’ve failed’," says Abagnale. "In the afternoon, I talk about what if that had been malware? What if I was going to take over your system? You have to bring home the point to your employees that they have the most important job on the face of the earth. If you work at a bank, I don’t care if you’re the receptionist or the telephone operator, your job is very important – people have entrusted their personal information with you. You have to protect that information and you have to protect it as best as you can.” He travels all over the world, giving the same advice. Abagnale has being working on the right side of the law for the last 40 years, helping companies safe-proof themselves from fraud. Ten of those years have been devoted to developing a technology called the 41st Parameter, with Ori Eisen, former Head of Corporate Security for American Express. The 41st Parameter detects with 99.9 per cent accuracy, claims Abagnale, whether the person behind a digital device the other side of the globe is who they claim to be. “When we started the company, we knew there were 40 parameters used around the world to

Summer 2016

identify an individual. Name, social security number, date of birth, address, etc. We knew you had to go beyond those 40 parameters and come up with the 41st,” explains Abagnale. “What that technology did when you signed in at the bank was tell it within just a millionth of a second everything above that 41st parameter – the resolution of your screen, the power source, the time of day where your computer is, the location of your computer, the language your computer was in. “So, if Amazon got 80 orders, and each order had a different credit card number, a different address to ship to a different name, Amazon would know instantly that all 80 orders came off a Russian computer.

Five years from now they'll be able to stop your pacemaker from thousands of miles away |



Security: Who really is the other side of the screen?

“It also works in the opposite way. Every year Visa and MasterCard turn down more than $40billion payments because you were probably somewhere they didn’t know you were, or you looked suspicious to them, and when they turn down a charge, two people are out. The customer is out, and the retailer is out. The 41st Parameter says to Visa and MasterCard, ‘I can tell you with 99.9 per cent accuracy this is, in fact, your customer online purchasing this item’.” In 2013, having persuaded eight of the top 10 US banks, all the major airlines and a significant number of retailers to adopt the software, Abagnale and Eisen sold 41st Parameter to the British-based credit checking and information services company Experian in a reported $324million deal. Experian said at the time that 41st Parameter’s device detection capabilities added “another layer” to its fraud prevention. Earlier this year, the same company reported that Britain was now ready for biometric banking with almost one in three people believing biometric ID was just as secure or more secure than passwords; 40 per cent were happy to use fingerprint scanning to access online accounts. Abagnale isn’t one of them. “I’m not big on fingerprint technology,” he says.“A number of years ago, IBM was demonstrating for me a laptop that allowed you to do away with a password. I’d taken some Play-Doh with me and put it over my fingerprint, which left an impression. Then I put the Play-Doh on top of the laptop, it read the impression and opened the computer. Think of all the places you leave your



fingerprint. On the glass we had lunch today, everything you’ve touched in this room. If I pick up your fingerprint it would be like taking your identity, but a lot simpler. We’re a little more protective about our personal information, but we’re not protective about our fingerprints. We leave them everywhere. “Obviously, technologies are getting better. For example, there are certain parts of government buildings in Washington I go where you have to put all 10 fingerprints down and they read your eye retina, etc. But then you get into privacy issues. Am I going to trust my DNA with Visa? I don’t think so. So there are limits to what information people are going to be willing to give up for their personal security,” says Abagnale.

You have to stay one step ahead of the criminal when you develop a technology Which is why, in his view, data security comes back to education. During a recent speech in Spain to 60 top European bank security officers, he asked how many of them had a degree in computer science. “I have to admit I was impressed,” he says. “About 50 per cent of them raised their hands – they had four-year degrees, five-year degrees in computer science. Then

I asked the second question: ‘How many of you had any training in malware, breaches, intrusions?’ Nobody raised a hand. So, I think we have to do a much better job when we teach computer science. Beyond writing code, we have to teach people how to detect malwares, understand malware intrusions and things of that nature.” Abagnale began his career forging cheques – reputedly, $2.6million of them. He’s moved on. Earlier this year he re-joined his 41st Parameter partner Ori Eisen in Eisen’s fledgling stealth cybersecurity start-up Trusona, which has the ambitious aim of solving the problem of online identity and authentication by “shedding light on the darkest corners of the internet”. But there are plenty more young Abagnales coming up behind to worry about. “In the US, cheque forgery is still about $20billion a year, because technology has made it easier," he says. "People always ask me when we’re going to see the paperless society, I always tell them, ‘When you see the paperless toilet.’ No time soon. But technology is getting better and we are constantly developing things to make it more difficult for people. "You have to stay one step ahead of the criminal when you develop a technology. You can’t just say, ‘Oh I developed it,’ and walk away. You have to always constantly go back and make it better, because someone’s always going to be trying to attack it, find a weakness in it. "It’s like a chess game, you just constantly play back and forth and try to make sure you protect your side.” Summer 2016


Advice from above

A Fintech Finance Magazine Q&A with Jay Hummel, MD, Strategic Initiatives and Thought Leadership for Envestnet Inc, which supports independent financial advisors through a Cloud-based solutions platform FF: Envestnet has been growing quite rapidly over the last year. What have been the changes in the financial industry that have facilitated that growth? JH: When we were founded in 1999, we were one of the first Cloud-based financial services companies. With the general acceptance of Cloud-based technology, firms are realising that they don’t have to do it themselves. Actually, in a lot of ways, doing it themselves may put them at a competitive disadvantage. They’re looking to us as a partner that can stay ahead of trends, that can be nimble, that can innovate and use our experience across the globe. FF: How have the financial organisations you work with reacted to Cloud technologies? Has there been any apprehension? JH: Not really. Obviously, cyber security is a hot topic, but I think there’s much more of a general acceptance of what the Cloud is. I mean, in 1999 when the company was founded nobody even knew what that meant. They thought clouds brought rain, they didn’t think clouds brought technology, so I think there’s been a global shift and that’s been a benefit for us as a company. FF: How does the Envestnet Advisor Suite enable your clients to run a better portfolio? JH: Not only do we help them run a better portfolio that brings better outcomes to their consumers, but we also help them run their firms and their practices more effectively. Our system can go all the way from proposal to portfolio design. It has the ability to research and actually put Summer 2016

that in the portfolio. Not only that, but it can also do very sophisticated data analytics. It can even analyse what the portfolio attributes would be. So we can go from the proposal all the way to billing the end consumer, which allows our advisors and financial institutions to really scale their business, because doing these manually or over multiple systems is ineffective. We believe the productivity gain that we provide to financial institutions allows their advisors to grow their business, spend more time with clients, and build deeper relationships. We believe that the relationship with the end consumer is going to be even more important in a digital world and we believe our technology allows the advisor to spend time on that.

financial services industry is far behind in many ways, as financial institutions were, in being able to deliver what the consumer expects. Many of our advisors and financial institutions we serve I think have been surprised by the change of pace. That’s why they look to us to be their strategic partner, to make sure that we’re sitting there, helping them stay ahead of what the consumer ultimately is going to want. FF: What are you planning in the next 12 months? JH: There’s going to be a lot more transparency around fees. But what I’m excited about in the future is that we’re going to have better educated clients. I think people are talking about big data

Many of our advisors and financial institutions we serve have been surprised by the change of pace FF: How do you ensure that your clients not only have state-of-the-art technology and support from you but are also flexible and future-proofed enough for unforeseen circumstances? JH: The first thing we do is we listen a lot. We’re day in and day out listening to our clients and listening to the challenges of what’s coming to their desk. We have a market research group that is constantly focussed on what is going on in the industry, what is going on in the behaviour of advisors, what’s going on in the behaviour of the consumers, what’s going on with our competition, so that we’re constantly assuring our group and our management team that we’re ahead of the macro trends that exist. I think the

and all the cool things you can do with analytics, but if you can’t get it into a process that actually changes the life of an end consumer, you’ve spent a lot of money on something that doesn’t really matter. Then I think it’ll be interesting to see it play out. I hope the digital movement and all the things that we’re doing in Envestnet as a company are going to widen the number of people that can access advice, because we believe very strongly that advice, good financial advice, is essential for people to be able to reach their goals. If the use of technology allows advisors and financial institutions to be more efficient, the number of people that can access affordable advice is going to increase. |



Challenging behaviour FeatureSpace’s ARIC Engine is revolutionising the way that banking businesses combat fraud and security threats. Luke Reynolds, the company's Fraud Director, talks through its capabilities FeatureSpace is the world’s leading producer of adaptive behaviour analytics, with ARIC, its fraud-fighting engine, helping to keep organisations safe in 180 countries across the globe. By profiling customers using the mass of unstructured data that banks receive daily, ARIC identifies anomalies more efficiently than previous technology, while the engine’s self-learning capability, means new fraud attacks are combatted by a constant upload of new information surrounding the threats. FeatureSpace’s main focus when engineering ARIC was the vital importance of understanding the consumer and identifying unusual behaviour patterns upstream before a transaction takes place. From how they log in, to what they do on their screen, ARIC uses these many pathways of information to build up a profile – and with customer-not-present fraud forecast to cost retailers and financial institutions $7billion by 2020 in the US alone, knowing who your customer is has never been more important.

Data overload Due to the vast technological advances that the western world has acquired for convenience, large banking businesses find it difficult to develop an individual profile of the thousands of consumers that utilise their many products. Having multiple devices and using them all in different ways to process transactions, means that organisations end up with a huge wealth of data, but much it is not well-defined or well-structured.



The questions that are being thwarted by this influx of unstructured data are vital ones: How do you know your customer? How do you build a profile? How do you understand what’s normal behaviour for a customer when potentially you never see them? FeatureSpace’s response to these questions is to use data collected prior to any monetary transaction to build up a detailed picture of the customer, so when he or she logs into their mobile app, for instance, the way that they type in their passcode, followed by the way that they navigate through their screens, creates a footprint that allows ARIC to determine if the person accessing the account is genuine. Technology that preceded ARIC used expensive means of understanding normal behaviour for the consumer, based on multiple layers of defender technology to build a rich behavioural profile score. ARIC gathers information from many channels but flows it directly into one engine in order to produce a non-monetary consumer file long before a transaction has even taken place.

Social engineering The most challenging fraud to detect and combat is customers under duress being forced to use their banking technology to transfer funds to their attacker. Otherwise known as social engineering it’s a difficult case to solve, because how do you know it’s fraud if the person has logged in, using the details as they would normally do? Thanks to ARIC’s profiling system, FeatureSpace is able to identify nuanced screen behaviour, such as logging in slower or navigating the screen with a different Summer 2016

Behaviour patterns: Aric can detect imposters based on the slightest change

pattern. And its ability to navigate through data prior to a monetary transaction gives it a head start on the competition. No data goes to waste, allowing the engine to produce a more accurate real-time score for the consumer based on their device use. ARIC takes take all of the raw, unstructured data to profile a customer’s spend, pattern and behaviour, and uses it to provide a score. It then compares the session score against the customer’s personal profile and against their peer group. By comparing one individuals’ monetary or transaction data to their peer group, ARIC is able to ensure that even though a particular transaction may appear to be anomalous in comparison with previous transactions the individual has made, the data can in fact be explained. This makes ARIC extremely efficient at detecting fraud, as it is these anomalies that would usually be suspected as fraudulent behaviour by its strict rule-based predecessors. In addition to its ability to profile consumers via non-monetary data, ARIC is a self-learning engine. Every new transaction, whether it be monetary or non-monetary, lays down more statistical data, which is used to update the profile.

Technology that preceded ARIC used expensive means of understanding normal behaviour for the consumer The benefit of ARIC learning from new data input is that it rules out the need for manual handling of potential fraudulent behaviour. Where there are humans handling data there is potential for human error, or for the issue even to be forgotten if the paper trail gets lost. ARIC’s ability to pinpoint data immediately, due to its profiling system places it head and shoulders above previous manual handling methods. As mobile app devices grow, functionality will become more and more vital for companies to utilise the data that flows from them to undermine fraudsters. Summer 2016 |



Applied thinking

A Fintech Finance Magazine Q&A with Mark Bradbury, MD of global payments provider Apply Financial Fintech Finance: What’s shaping the landscape around global payments and how is that likely to change over the next 12 months? Mark Bradbury: The problem, particularly with overseas payments, is that banks are engaged in a race to the bottom with fintechs because they’re cutting margins to the bone to win business. Some of their margins are paper thin, so they’re looking to get volume. They want to get the best deal they can at the lowest cost. They’re basically offering near-zero spread with a small fee-type model, which the banks haven’t offered in the past. The banks we deal with are trimming their costs so that they can be competitive in this new landscape and deliver better services. That’s why they use us, because Apply Financial automates what essentially used to be a manual process of fixing payments. We already do faster payments in the UK, but I think that real-time, instant payments, will become more of a global phenomenon over the coming years.



FF: Why have the banks not achieved optimum efficiency in global payments yet? MB: Because it’s not easy. The banks, the big foreign exchange brokers, built an infrastructure that supported a certain business model. The fintechs have come along and disrupted that. In the past you could get away with a fee and a spread, so even if the infrastructure they had was quite costly, they were still making bigger margins. Now they’re having to cut back. I’m not saying that using things like blockchain is the route, I’m just saying automate where there used to be manual intervention, streamline, but still remain compliant. FF: Why is payment validation required and how does your system differ to what’s happened previously? MB: Payment validation has been with us for a long time. If you go back many years, people used to check a payment by opening up a book and referring to a bank

and a branch and getting all the details – the SWIFT, BIC and account forma, etc. That went from book to a CD to a flat file. The problem is you’re still dealing with human error or erroneous data. The user that’s putting in that information – whether it be a customer or a bank employee – doesn’t know if they’ve got erroneous information. What you do when you validate it is check to see if the account number is in the right structure. Does it work with the bank code, the BIC code and is that BIC code the correct code for payment, because certain institutions ask for different types of BICs? There’s a head office BIC, there’s a branch BIC, there’s an IBAN BIC. So what we’ve done is taken everything that would have been a manual process to either fix a payment before it goes out or fix a payment when it fails, using a combination of all the global reference data that’s changing daily and added algorithmic functions that use that data intelligently. It allows us to get all our clients as near to a 100 per cent straight Summer 2016

through process. That’s a big cost saving. We estimate that a payment that fails costs between £50 and £100, depending on the procedure they have. FF: What about scalability? Can it work for very large organisations? MB: We’re dealing with a range of clients, from those that do 1,000 payments a year to those that do millions and we provide a ‘five nines’ environment – 99.999 per cent, highly robust, highly secure and scalable. We can scale 100 per cent at the flick of a switch at peak times, if needed. We could easily double our transaction levels in a day without it touching the sides. But it’s also about customer experience. The new major players in the foreign exchange payments world are using our technology, because their goal in life is to provide a much better customer experience, more efficient and at lower cost. Using the Apply Validate API gives them the opportunity to do that. FF: What’s the advantage of operating a Cloud-based system such as yours? MB: The systems clients have built in the past are all very clunky; they’re having to provide their own hardware, they’ve got their own operating systems, maintenance issues, patches, updates, upgrades. It’s a little department in itself with its own infrastructure. We just replace all of that completely. You plug in the API and it does it all for you. All you’ve got to do is manage the implementation of the API and support that internally. Whenever somebody’s making a payment, filling in a payment instruction or sending a payment file, it sends out a sub-second web call to our client system and we validate it. If it’s correct, we send it through; if it’s a caution or a fail, it’s up to the client how they handle that. We let them know the details and either the client can fix it on the portal themselves if they’re making a payment, or the bank can alert them and fix it for them. We give them lots of flexibility. FF: What’s the advantage of using open APIs? MB: I’ve been sitting on the Open Bank workgroup, the government initiative looking at the management and governance of open APIs and I think having an open API environment is a real winner for businesses or private individuals. Ours is Summer 2016

highly standard; we use a RESTful environment and give people access to a test sandbox that’s secure. They can test our API working within their systems and that’s the route that open APIs will go. It will allow vendors to test their application working in line with the bank’s systems. It’s a great initiative and one that I fully support. FF: How should banks make sure the validation systems they use are sufficiently future-proofed? MB: People choose us because we take that out of their hands so they don’t have to worry about it. We make sure that we are in line with all the regulations, that we’re compliant with SEPA regulations and the non-SEPA related area, IBANs and non-IBAN countries. Apply Financial enables a payment company to be compliant in nearly 200 countries and with a number of those countries we can also take care of domestic validation.

Blockchain is the technology that stimulated better ideas and more efficient infrastructures. It might not be the infrastructure itself FF: Being based in the Cloud, do you work out of multiple datacentres all over the world? MB: Currently our datacentre provider is in the UK and all our clients are happy with that. However, if a client says the datacentre needs to be in the US or in Germany or Singapore, because of the global nature of our infrastructure provider, we can literally, at the flick of a switch, enable a distributed data topology. So we can localise connectivity. There are certain parts of the world as well, where it helps to have a local centre, because the internet connections are not brilliant. FF: What can we expect from Apply Financial in the next 12 months? MB: We have just released a new version

with automated tools to enable our clients to work out how much time and money we’ve saved them, look at the velocity of payments, how they’ve grown and in which countries; where they’re getting the most errors country by country, or by user. Then we are expanding our data management side to enable our clients not just to use our data, but to manage their own. They’ve got their own data sets for payments, so correspondence banks, for instance, is a big area. They call them standard settlement instructions, SSIs. Our banking clients could use our data hub and store their own SSIs in there and use them integrated with our solution. That’s quite important. So we’re talking not just about validating payments now, we’re talking about managing data sources for clients, so that they have more accuracy in payment validation. We’re also looking at adding the ability to manage sanctioned payments, so anti-money laundering, at a very front-end stage, when you’re capturing the beneficiary, giving an early warning for sanctions, rather than the typical way that people do anti-money laundering at the moment, when you get the payment ready to go, that’s when you check for AML. It would be a lower cost, early warning on a sanctioned payment. That’s going to be in the next 12 months. FF: Finally, what are some of your predictions for the industry on a macro level? MB: More moves to more efficient payment models, better customer experience, and real-time payments, even cross-border payments with more experiments with blockchain, although I have a healthy scepticism about blockchain and Bitcoin. I do think that people will build far more efficient infrastructures over the coming years, but whether blockchain will be part of that, I don’t know. There may be something that’s post-blockchain. Blockchain is basically the technology that stimulated better ideas and more efficient infrastructures. It might not be the actual infrastructure itself. A lot of money’s been invested in it, but I’ve been 30-odd years in the business and I’ve seen all these changes in infrastructure to centralised, then distributed, then back to centralised, so who knows? |



Staying ahead of the hackers

Data breach is fuelling organised crime and undermining consumer confidence, says Martin Milliner, Claims Director at LV “I think some companies, not all, have put making money ahead of doing what’s right for the consumer and also for their own people. So I think the challenge over the next two or three years for the industry is to do the right thing by that consumer and make sure they understand that we’re not putting making money over and above their interests.”

Martin Milliner, Claims Director at LV, one of Britain’s largest mutual societies, doesn’t mince words. But then trust takes high priority with an insurer and in his view it’s “gradually been eroded over the last few years, since the recession in particular”. It doesn’t help that high-profile data breaches have contributed to the flight of consumer confidence. “One of the areas of concern is that many people in the industry are probably using legacy systems and legacy technology, which at the time were fit for purpose but today are probably more vulnerable to cybercrime and hacking and various other external pressures that maybe require additional investment,” says Milliner. “In times where choices for the industry are pretty stark – in a sense of, do you invest in defending your data, defending your security, or invest in your products and your portfolio to grow the business – from a regulatory perspective, you’ve got to put your customer first and that’s security above all else.”

National taskforce More needs to be done, he believes, to protect corporations and their customers against cybercrime, both at a national policy and company process level. “People have to take a risk-based approach (but) you’ve got to look at what the country is doing.



"There’s recently been a publication by the Metropolitan Police around tightening the net. There are some good insights, which probably lead us to conclude that at a national level we’re not prepared for the next five to 10 years and the potential threats on the horizon. If you look across the Atlantic, back in 2013, I think it was, President Obama gave a speech where he was pulling together the public and the private sectors to create a joint approach to solving this issue. "I think the industry needs to get together with government and work more closely to tackle this across the public and private sectors.” For its part, LV is already co-operating with industry and government on a number of fronts. It worked with others in the insurance sector to create the Insurance Fraud Bureau, which acts as a hub for data to be shared, matched and reported to individual insurers, who can then use it to track criminal activity, and it has funded the Insurance Fraud Enforcement Department (IFED) within the Economic Crime Directorate of the City of London Police.

You’ve got to put your customer first and that’s security above all else “It became very clear that there was a real appetite to do something to crack down and disrupt organised crime, not just in the sense of solving a problem as an insurance industry, but because of the links with other criminal activities, such as drug trafficking and also terrorism,” says Milliner. “Since we formed in 2012, 262 people have

been arrested and more than 1,000 people have been either interviewed or disrupted in the context of organised car crash fraud.”

Cash for crash A scam known to insurers for years, crash for cash, or contrived collisions, has risen to “epidemic” proportions over the past few years in the UK. “It’s an organised criminal activity where professionals are coming into the marketplace and either causing crashes with innocent motorists, or creating paper accidents that never happened between themselves and reporting them to insurers or via solicitors,” says Milliner. “We work hard with the police to stop it, not just in the interests of honest motorists, but in a sense of preventing crime in wider society.” There are serious concerns in the insurance industry about data leakage, too. The announcement in last year’s Autumn Statement, which abolished the right to cash compensation for minor whiplash injuries, masks a much deeper issue. LV’s own research showed the average driver received five calls or texts following a crash, promising compensation with some claims management companies pressurising motorists into making an application. Eight per cent told LV they had been contacted even before they reported the incident to their insurer with 57 per cent of people receiving calls saying they had no idea how their details had been sourced. Last year, Milliner was quoted as saying that the insurance industry had played cat and mouse with fraudsters for years “when what we need is a multi-pronged solution that will benefit the consumer once and for all”. But he concedes the criminals will always be one step ahead. “You can have the most secure vehicle in the world, but they’ll come up with

Summer 2016

some way of disrupting the key fob when it tries to lock your car, or they’ll be scanning the vehicle for signs of an iPad being stuck in the boot.”

Responsible hacking White hat hack hackers have a limited role, he believes, when used as a defence force. “They’re great at putting a mirror to your face and reflecting back on you in a more direct way the risks that potentially are there. But it probably only tells you what you may already know,” he says. Where bringing in white hackers can be useful is looking along your process or supply chain or highlighting the weakness in your hiring policy. “There’s a kind of a cause and effect to some of these things. Looking at your processes from end to end when you engage with your supply chain, you may have the right processes up front, but how do you know that they’re following

the same sort of thread as you are? Are they recruiting to the same standards, doing the same checks as you are when you hire your own people? When they’re out with customers in the field, for example, what are they actually doing? How can they access data that perhaps they shouldn’t be? “For me, a white hat hacker will almost be a fortune teller for you as a business, creating an opportunity for you to be more proactive in defending your data instead of being reactive when somebody gets caught out and then gets fined by the Financial Conduct Authority as a consequence." He believes the industry is starting to take its responsibilities to educate the public more seriously. “Financial services are starting to be more educational around how they interact with their customers; there’s

more information about cold calling, or people that may be fishing, or trying to get information out of you that you shouldn’t be giving. There are more warnings, literature and more advice out there for consumers. “That said, I don’t think that’s gone far enough and we should be doing more in that space, telling consumers they should report instances to the Information Commissioners Office, or to their bank or insurer; they should be warned that if they’re not registered with the Telephone Preference Service, they probably should be," says Milliner. "All of these things are very short, sharp clear messages that we can educate consumers about, which, if they were taken advantage of, could improve the overall security, not just for them as individuals, but for the industry overall.”

Security: Education is key to protecting data

Summer 2016 |


Marketforce’s 3rd Annual Conference

Customer Experience

SUMMIT A CROSS-SECTOR PERSPECTIVE ON WHAT MATTERS FOR CX RIGHT NOW: Engagement / Loyalty / Customer-centric operations / Return on investment / Personalisation / Channel innovations / Disruption and differentiation


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@2020_CX #2020CX John Humpish Chief Customer Officer Starling Bank





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commandments of customer ID authentication

Ofer Friedman, VP Marketing at AU10TIX, lists the essential questions every financial service should be asking of its authentication system provider So you are a financial service provider and you realize that KYC/AML regulations are leaving you no choice. You already know that if you don’t respond quickly enough, you are bound to see 50 to 70 per cent of your prospects abandoning. You definitely want to survive, which means you must automate customer ID authentication and onboarding. So here are the 10 commandments that will help you make the right choice between the different solutions out there:


Choose the right technology generation There are first-generation solutions and second-generation solutions out there. Second generation is 100 per cent automated, forgery checks go beyond data checking and algorithms are better at handling off-template ID images. If OCR and basics checks are good, while response time may not be critical for you, then go for simple first generation. If strong authentication, fast-response and higher tolerance to image quality variability are important than second-generation solutions are the ones for you.


Make sure you know what the common forgeries are Check with your risk/compliance people which are the common forgeries out there. These are not necessarily the most complex ones, but it may be that some solutions are actually not designed to detect them. Ask your people how many fraudsters make typos, how many change face picture, how many miss the checksum, etc. Then look at the different solutions and ask for a tested proof to see how well they cover all the options.


Data-based authentication is not enough Any solution will probably be able to read the data off the ID image. Just

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check how well data cropping is done with documents that do not have MRZ lines or barcodes. There are many of them out there, but since many fraudsters do use legitimate data, check also that you have forensic image tampering checks in your solution. The data might make sense, but may also be planted by the fraudster.


Check how good they are with borderline quality images Online and mobile are a whole different ball game. You are bound to receive ID images at any conceivable quality, including such off-template ones that regular technologies will not be able to handle them. You may want to look at machine-learning enhanced solutions and to test with genuine traffic.

How many fraudsters make typos, change the face picture, miss the checksum?


Remember the world doesn't speak only English You are promised extensive coverage. Hundreds, perhaps thousands of documents. Really? Have a good look at the list. Does it cover Cyrillic document texts, Chinese, other?


Know your image quality before you rely on the results Who doesn’t want a simple go-no-go answer? But obviously, the ability to process and authenticate an online submitted picture of an ID is as good as the quality of the image. One way to handle the challenge is to tell you what percentage of certainty there is behind the system’s ruling. But what can you make

out of 85 per cent certainty? Isn’t it better to have a built-in threshold of image quality and differential weighing of each factor checked?


Make sure that exception reporting is workable OK. So the system put up some quality or suspicion flags on a certain ID image. Is that flag specific enough to be able to investigate the case quickly and effectively? Test-drive your solution with extra care on how specific your exceptions are. Make sure that either your back office can handle it effectively or that you system can even ping back a re-do request to the client without bothering your back office.


You want technology to screen noise, not pass it through Customer-NotPresent (CNP) ID authentication and onboarding is a whole different ball game. Depending on the type of service and geography, you may well be facing a sizeable amount of “garbage”. This means images of documents that are not an ID document (say, cash register slip), a non regulatory acceptable ID (say, a library card), and even pictures of cats and dogs. Without the right solution, your back-office team will need to review each and every one of those pictures. But what if your ID authentication solution is smart enough to sort out most of that “noise”? Well, this capability does exist in second-generation solutions.


Prefer a technology that can handle all channels How many channels can a customer be onboarded with? Branch, online, mobile, kiosk... If you need to have all those covered then you’d obviously be asking about an ability to have one core brain, capable of handling different image sources. There are not many of those around but this capability does exist. Better ask the right questions. |



Keeping an eye to the future New kid on the block Metro Bank has an ambition to be a truly omnichannel service… and that starts with the branch, says CEO Craig Donaldson Four billion in deposits, three billion in lending and more than 600,000 customers strong, Metro Bank is now a serious competitor in the financial services market. What once was a purely London-based business has now expanded into ‘commuter land’, its reach extending from Brighton to Milton Keynes and west as far as Reading. Its real estate requirements are exacting. It specifically targets buildings of between 3,000 and 5,000 square feet with around 16-foot high ceilings and on a corner. The preference for the latter is obvious – corners increase visibility and drive footfall; the spacious operating environment has two purposes. The open-plan interior is more welcoming to customers, but it also allows for the high-resolution security cameras to see more. Pinprick cameras are embedded into the walls, the ceilings and into the counters in every branch, or 'stores' as Metro CEO Craig Donaldson prefers them to be called. Aesthetics are important for Metro Bank. But so is technology. “We’ve an agreement with Microsoft who have provided a full Microsoft stack on the desktops,” says Donaldson. “We’ve got a surface device where our colleagues and our customers can do things together, touch-screen. From this, around 77 per cent of our customers, from first keystroke to last keystroke, get their account opened in 15 minutes.”

Fast and secure This entirely paperless process – the customer signs on a tablet and is emailed account information and Ts & Cs – not only speeds up acquisition rates, but keeps everything secure. It also saves on a few acres of trees. “In the past, we’d have to print out 20 pages of application forms and this and that, but now it really is just us talking to you,” says



Donaldson.“The key thing about moving away from the big screen on the desk to a surface device is it’s breaking down the barriers. We’ve removed the barriers so we can engage with our customers in a much more detailed way. You turn the screen around and the customer can move it themselves. It’s giving power and choice to the customer.” Making more self-service options available is all part of the plan to extend that choice. “Do you want to talk to somebody? Do you want to use self-service? Do you want to do more on the mobile app? I want to be able to fulfill through every channel, but the customer decides how they want to do it,” says Donaldson. “I worry automation has become about forcing customers to do things rather than letting them own how they interact with you.” That, however, inevitably increases the burden of security on the bank – another area of branch technology where Metro is leading the field. “We’ve been looking at things like iBeacons, which you could use by pulling through from the card, to identify the customer as they walk into a store. Therefore, you know who’s there and you’ll be able to service them because CRM should pull straight through to the surface device. And because we take photos of our customers, I can see whether it’s you or not.” Donaldson is keen to accelerate other customer services processes, so it's "as fast as humanly possible" by exploring new, frictionless security – replacing a lost card, for instance. “I could go on my mobile app and order it to be delivered to my house, order it so I can pick it up at the store straight away. Or why not in the future, wouldn’t I be able to send you a temporary card online so you could purchase things straight away while you waited to get your plastic?" Metro Bank is already faster than a lot of

Focus on the customer: iBeacons could identify you as you walk into a Metro store

Summer 2016

the competition, claims Donaldson. “A lot of the large incumbents have big batch processing systems, that mean to move from phase one to phase two, you’ve got to wait overnight, and then from phase two to phase three, overnight. We do it straight through, which allows us, on average, less than an hour for a business account to be opened.”

Truly omnichannel His objective is for Metro Bank to be truly omnichannel within the next two years. Part of the way the bank will achieve that is by integrating the CRM software Microsoft Dynamics and Marketing Dynamics into its social media and telephony platforms. “Say you tweet that you’ve lost your card and then you walk into a store. I should be able to see that you’ve put on social media you’ve lost your card, I should be able to identify you because I can pull the data to the screen, and the person should be able to say, ‘Hello, can I help you? Do you want me to get you a…,’ so it’s joining up all the different

I worry automation has become about forcing customers to do things rather than letting them own how they interact with you interaction points so that the person who’s dealing with you can have a proper conversation from an informed position.” This dream extends in future to a customer being able to choose whether to freeze or unfreeze their card. These are the ambitions of a truly omnichannel provider, says Donaldson. “It’s about putting power in the customer’s hands, giving them the choice of what channels they want to use to interact with you, then making sure you move the data and the information to where the customer needs to be, so they feel whatever channel they come to you through you’re joined up and that the customer gets amazing service.” Craig Donaldson was talking to Fintech Finance Magazine’s Dylan Jones Summer 2016 |



Branch transformation: a strategic imperative It’s true to say that how people bank has changed in recent years, but although customers are increasingly becoming multi-channel users, a 2014 Novartis study confirmed that “for things that matter most, people still prefer the branch”. The relationship with the customer is key. People talk about teller-less branches, but it is not the same as no-staff branches. The branch remains at the core of retail banking and provides opportunities for interactions that are highly valued by customers. Recent research carried out by YouGov for Glory Global Solutions in five countries (Great Britain, United States, Australia, France and the Netherlands) found that in each instance what customers valued most was face-to-face interaction, followed by convenience and simplicity. What they didn’t value was long queues or a lack of specialist staff or personalised service. For many, the message is clear – the branch is important but it needs to change. The branch is central to customer service and this is something banks ignore at their peril. A recent report from Accenture shows that 34 per cent of customers who switched financial providers in the last year did so because of poor customer service experience.

A challenging environment The recent financial crisis has brought both challenges and opportunities for technology-focussed companies. In the area of banking, for example, some countries have seen an increasing number of mergers and a reduction in branch numbers as bank margins come under pressure, but that’s only part of the story. As customers expect more choice and higher levels of service delivery, the challenge that banks face is how they position the branch as part of their retail offer. Innovative solutions have a key role in enabling institutions facing cost pressures in a rapidly changing market environment to meet the needs of increasingly demanding consumers. The retail banking



The bank branch is not dead, but it does need resuscitating, says Paul Race, Director of Global Marketing Operations at Glory Global Solutions complicated multi-step transaction or financial advice about a new banking product. What the bank wants from its branch is cost-effective high footfall and the highest levels of customer experience. Using innovative technologies is essential to this process. Automation enables transformation. It opens up opportunities for a more Long live the branch sales-centric experience and ensures the Location is one part of the branch network bank can achieve this cost-effectively, solution; the other is service delivery. potentially in a smaller space “The branch will not die,” with fewer people, or the says Javed Anjum, Branch same number of people Transformation Specialist focussed on higher value at Glory Global Solutions. activities. Of course, the bank “It is evolving to better meet has to take into account the consumers’ needs. The focus fact that not all customers is no longer on enabling will be comfortable using transactions but rather Optimistic: "The branch will self-service, some will on human interaction. not die," says Javed Anjum continue to want or need the The modern branch is about assistance of a teller. In this instance the providing advice and income generation use of TCRs (Teller Cash Recyclers) in the and the key to all this is customer branch will speed up transactions, reduce experience. Glory’s technology and global queues, lower overall transaction costs, experience are key to revitalising the improve security and enable more branch channel. We see our role as an effective customer interaction. Removing adviser and a facilitator of change.” Today’s customers want easy transactions the need for security screens also enables the adoption of a more welcoming, and a personal, customised service. They open-plan environment at the branch are at ease with self-service technology, As Javed Anjum explains:“While there can whether that’s ATMs, online or mobile be ‘no transformation without automation’, banking, and are able to do more for automation of transactions should not lead themselves. That said, the role of the bank to the elimination of human interaction. branch remains clear; it is the only channel The challenge then is to get the balance where every type of transaction can be completed successfully, whether it is a more right, to achieve the cost savings associated with self-service, to ensure customers have the re-assurance necessary to carry out more complex transactions and also to preserve the opportunity for customer interaction with a member of staff, free from minor administrative duties.” New branches that provide a positive customer experience have the potential to drive increased revenue and this is the industry needs to provide the type of service customers require, where they need it. Old-style branches were based in high streets and were focussed on transactions. Today’s branches need to be located where the customers are and this is one area where they can learn from the retail sector.

The branch focus is no longer on enabling transactions, but on human interaction

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market model adopted by innovative institutions, like Metro Bank in the UK. In the past, the customer perception of bank branches has been fairly negative, with a focus on slower manual transactions and resultant queues. The focus now, with the help of innovative technology, is to make the branch somewhere the customer will want to visit, with a more open-plan design and for it to become an effective advice centre.

Technology for the future? Despite various claims that we are about to embark on a cashless future, for the foreseeable at least, cash is here to stay. In the UK, cash still accounts for 48 per cent of all transactions by volume and the number of bank notes in circulation continues to increase. According to the Payments Council, there will still be 14 billion cash payments in the UK in 2022. Automated cash handling at the branch will continue to provide an essential means of improving security, releasing resources, enabling speedier transactions and lowering costs. Some things have changed and will Summer 2016

impact on future developments. Most bank customers are now multi-channel users and it is important that there is a consistent look and feel between the branch and other channels. There is also increasing pressure for what has been termed ‘infotainment’, whereby consumers expect to be entertained while being informed. Expect future products to be designed in a way that does both. In this and other areas, Glory is already ahead of the game. Javed Anjum says: “In everything Glory does we are looking forward. As our tagline states, ‘We secure the future’. By enabling positive customer experiences we help our clients increase customer loyalty while lowering costs, maximising sales and improving the bottom line. It’s no accident – we are in a unique position to do so.”

A unique perspective Glory has long experience of working in the branch channel rather than on one specific solution type. This unique background means Glory has a deep understanding of cash – back office,

middle and front office. Unrivalled knowledge of the requirements of interacting with cash across the organisation enables Glory to tailor the right solution for each client, delivering the maximum benefits by optimising the processing and management of cash, not just in silos, but across the whole branch. Glory Global Solutions is a global leader in secure cash technology solutions in more than 100 countries, operating across the financial, retail, cash centre and gaming industries. Solutions are about choice and ensuring that banking customers are served in ways that will enhance the overall branch experience. The company’s research demonstrated that significant numbers of customers remain uncomfortable about using self-service, particularly for more complicated transactions at the branch. This is where assisted self-service, whereby staff stand ready to help customers to use the machines, is important. One thing you do not want to do is lose those customers more wary of using technology. Staff intervention, when required, is cost-effective in that it involves a ‘one to many’ ratio. Moreover, Glory’s TellerInfinity product enables customers to carry out a wide range of transactions themselves, including transactions that were not previously available through traditional ATMs – those that typically would require some level of staff intervention. Another important feature of Glory’s solutions is that its software connects to the branch platform. This integration with the core banking system enables a wider range of automated services at the branch, avoiding limitations associated with the ATM switch. For customers wishing to open an account or acquire a new product the process couldn’t be easier or more convenient. As the software is linked to a staff member’s tablet PC, they are able to intervene and validate the customer’s identity. There is no doubt the branch is changing in terms of location, appearance and functionality. But what is also evident is that these new branches have a continued essential role to play in terms of the banks' service delivery. Working with Glory, banks worldwide have rejuvenated the channel – and there’s more to come. |



In search of the golden nuggets Santander’s Portuguese bank has had to fight hard for the hearts and minds of customers following the financial crash. Miguel Paixão, former Director of Innovation and Commercial for Santader Totta, explains how he set about the challenge One of the worst affected economies following the financial crash of 2008, Portugal has struggled to rebuild faith in its banking system through a series of aftershocks – most notably, the collapse of its largest listed lender as recently as 2014. So, the bar was set dauntingly high for Santander Totta – the Spanish bank’s regional arm – when it began introducing a series of innovations designed to win back customer confidence. It decided to take things personally – not hard in a country of just 10 million people – and started by focussing on the face-to-face branch relationship. “The branches are still fundamental,” says Miguel Paixão, until recently Director of Innovation and Commercial, responsible for branch redesign and rethinking the bank’s distribution models. “We abolished the desk concept – it sounded cold, merely transactional and that’s not what we wanted. The aim was for ‘clients’ space’, a more emotional approach.” Paixão’s shopping list was long and detailed and set against a complex backdrop that sounds familiar to banks in the UK, but all the while the chairs on the deck were being reorganized as the country took several steps forward and many more back. “Portugal is a small country that got out of a major economic crisis and the lack of confidence in its banking is extremely high,” says Paixão. “Portuguese customers were used to having a highly evolved banking system, one that offered good products and good services.” In the years since the crash, they had not only become more sceptical of financial institutions, but more demanding of them, too. “The new digital era had a clear influence on our clients’ behaviour,” says Paixão.“Firstly, it introduces us to the notion of “I want what I



want when I want it’. Clients can also search for the answers to whatever they want and have become more knowledgeable.” At the same time, the environment in which the bank operated had and continues to change. “We have three big challenges. The first is to incorporate the clients’ say into the bank’s processes. The second relates to the new players that are starting to appear in the markets, plus the excessive regulations we are suffering. And finally we need to know what are our channels’ capacities so that we can reach our clients faster and better,” says Paixão. Fundamental to all that, driving behaviour and potentially offering a solution, was digitisation. “Digital allows us to know the clients; to identify every client so that he or she feels unique to the bank. What the digital era is pointing us to is ‘know every client’ as opposed to ‘know every client group’. “Nowadays we have many players in our market that are not bankers but offering banking services. They make our relationship with our clients more difficult. On the other hand, we know that if we don’t listen to our customers, get to the root of what they want and if we don’t incorporate the client in our process, we create distance between us. That is why we wanted to create a bank that is closer, more simple and fair to clients.” At the back end of the organisation that meant working closely with the IT department and forming partnerships with the distribution network, not least because they were responsible for the mechanisms that would tell the bank what clients wanted to see developed. In branch, the new philosophy meant not only doing away with desks but also giving staff tablets that are enabled with biometric software. “The tablets allowed us to change the

paradigm of being with clients,” says Paixão. “We no longer sit on opposite sides of the table; we sit side by side with a tablet infront of us. It also facilitates mobility – we can open an account at the branch, at our client’s office, wherever and whenever they want.” Biometric signature identification provides the necessary security. “Biometric translates as having the rhythm, velocity, pressure, acceleration and movement for any signature we collect. This detail distinguishes any signature from any other. We can both sign exactly the same name, but the system will always know when you signed it and when I signed it. It’s really easy to use but extremely safe,” says Paixão. “The tablet introduces a new way of being with the client – we create golden moments with our client, allowing us to know them more and better.” The ‘clients’ space’ is both a physical and a virtual concept based on a number of key principals. “Firstly, it’s important for the physical and the digital space to be one space,” Paixão. “As a client, if I am at the branch or at my digital desk I’ll have the same experience.” Secondly, the bank is sensitive to regional contexts.“Attention to the physical space is important; In Lisbon I will have to communicate differently than I would in Oporto,” says Paixão.“Thirdly, it is extremely important that the client is able to live the experiences but at the same time that he remembers and accumulates them. The forth is that communication must be possible at any time; and last, you (the bank) need to know who you're communicating with. “We need to understand that clients, nowadays buy less based on the product itself and more for the experience,” says Paixão. “Today we are doing much better. We’re successfully managing to win the clients’ confidence back.” Summer 2016

a rich seam: Technology has allowed the bank to mine the customer experience

We create golden moments with the client, allowing us to know them better Summer 2016 |



Who wants a cashless economy? In an age of digital financial enlightenment we appear to have overlooked one crucial truth… the public prefers cold, hard cash. Always have and, if Ron Delnevo, chairman of Cash & Card World, has his way, they always will. Denying them that choice, he warns, could be an industry own goal Let’s be honest, most of us opt for the easy life when we can. Part of that option is not to think about the future – or, at least, not beyond our next birthday, or holiday or Christmas. Living for the moment has become the norm. No one wants to worry about the long run because in it we are all dead. This rampant short-termism infects every aspect of our society, from interest-only mortgages, through delayed development of airports, right up to not knowing where our next nuclear power station is coming from. What do we care? Today is OK – or better – so tomorrow can take care of itself. Only it won’t. Who can we really trust to look after the future, if we don’t care about it much ourselves? Why should anyone be mindful of our interests if our own minds are otherwise engaged? Can we rely on politicians (expenses scandal)? Bankers (Libor-fixing-plus)? The media (phone tappers united)? I cannot hear a chorus of “ayes” in the dusty trail of this recent history. So, it is time for all of us to take the hankies off our heads, struggle out of our deckchairs and start doing a bit of thinking – and doing. And that brings me to payment choice. In the 1950s – and for the preceding 2,500 years or so – choice in day-to-day payments wasn’t really an issue. There was cash and there were cheques. Full stop. Were we happier then, with no choices to make? Possibly.



What happened to change the situation? Three things, primarily. Firstly, people started to get their wages paid into their bank accounts, rather than in cash. Employees did not ask for this change, it was forced on them by employers and meant that access to cash was not so convenient. That presented an opening for cards, which had barely been seen before. Secondly, in the swinging Sixties, many of us wanted to live a little. Love may have been free but not much else was, so living a little often meant spending a LOT more than you could earn, at least in the short term. Enter the credit card, with the luxury of delayed payment. Thirdly, the first ATM did not come along until 1967 and the machines were really not that user-friendly until well into the 1970s. This, coupled with wages increasingly not being paid in cash, meant there was a convenience gap. Once again, an alternative was on the cards. So credit cards arrived, followed by ATM cards and, then, fully-fledged debit cards. This meant people had a choice. However, cash still accounted for 80 per cent of all day-to-day payments. The next major change was the world-wide web during the 1990s and, as the third millennium dawned, this brought with it the first flush of online banking and, of course, internet shopping. Internet shopping was a real boost for card issuers in the UK. Consumers wanting to shop on the internet had no choice: it was cards or nothing. So much competition for cash now. Yet, as recently as 2005, more than

70 per cent of all day-to-day payments were still made using it. Internet shopping has continued its growth, to a point where it now accounts for 15 per cent-plus of all UK retail sales. Much of the decline in the last decade in cash use is accounted for by internet shopping, not through consumers in the high street switching to cards from cash. In short, where consumers have a choice, they still mostly opt to use cash.

The rise of contactless So, the card issuers had to come up with something else. That something else was a little surprising, because for years those issuers had been drumming into the public that PIN numbers were vital to validate card use in shops. However, the card marketeers decided that good security got in the way of increasing card use, so out went PIN numbers (largely) and in rushed contactless. Contactless is very simple in principle. The customer waves the card at a reader adjacent to the shopkeeper’s till and, hey presto, the transaction is approved. Once in a while, the customer will be asked to use a PIN number, but not very often. Sounds good, doesn’t it? Yes. Though the UK public didn’t buy the goodness for a long time. Contactless was introduced into the UK in 2008, but didn’t really make any inroads for years. People were happy enough with traditional card use and, of course, cash. The card marketeers were scratching their heads by this time. What could they do? How could they get the UK public to change their ways? Enter London Summer 2016

Liberty: The paying public's freedom of choice shouldn't be denied

and credit cards. This not only improved the statistics for contactless use, which had been pretty dismal up until then, but it also made the new users more likely to resort to their contactless cards when making other purchases. Contactless use on TfL was further enhanced by its ban on using cash on London buses. In backwaters such as Los Angeles, the public can use both cash and cards, but it is all too much trouble for TfL to offer that choice to its customers.

Tender is our right

When the public have been allowed an unmanipulated choice, we have most often chosen to use cash. And we continue to do so Transport – or Transport for London (TfL), as they prefer to call themselves. TfL had introduced its own contactless card, the Oyster card, in 2003. This had proved very popular, in particular for pay-as-you-go travel (although this only accounts for around 15 per cent of all TfL journeys). By 2012, more than 43 million Oyster cards had been issued. A winner, then. Why would you change the formula? In a word: money. Along came the card Issuers, deal in hand. They easily had the financial clout to persuade TfL to gradually Summer 2016

phase out Oyster, in favour of travellers being able to use contactless debit and credit cards on all TfL transport. There are, of course, a number of disadvantages for the long-suffering London public in moving away from Oyster. Control of expenditure, ease of use and card clash, to name but three. But money talks and the phasing out of Oyster is in train (or is it going down the Tube?). Why is this so important to those card marketeers? Because by September 2015, 650,000 journeys a day on the TfL network were being made using contactless debit

What does all this tell us? Firstly, when the public have been allowed an unmanipulated choice, we have most often chosen to use cash. And we continue to do so. Secondly, organisations such as Transport for London will arrogantly remove the public’s right to choose, if we allow them to do so. Not just in payments, of course, but in every way. Thirdly, card schemes, in rightly focussing on increasing profits for shareholders, will pursue strategies that are not necessarily in the interests of society as a whole. What’s happening in transportation in London is simply one small example of choice being removed. So, remain in that deckchair at your peril. It may seem easy to accept the diktats of big businesses, especially when those businesses can afford to spend hundreds of millions of dollars to persuade you to alter your judgement. We long ago lost the right to be paid in cash. We have lost the right to use cash to pay our bus fares. Soon, if vested interests have their way, we will lose the right to use cash at all. Don’t think other businesses haven’t seen what TfL has got away with; some of them will want to follow that lead. Choice is one small word. Not worried? Then think independence; freedom; privacy. Bigger words, containing massively important principles. Time now to tell the TfLs of this world that we – the public – will decide how we pay. It could be using card, or ApplePay, or cash. The message will be clear: if you take away our choice, we will take away our business. Time is short. Act now. Whilst you still have that choice. |


Global Digital Banking Conference 2016


THURSDAY 16 JUNE THE BANKING HALL, LONDON Global business intelligence and media provider RFi Group is launching its Global Digital Banking Conference Series which includes London on 16 June 2016. This event series will also be running in Toronto, Dubai, Singapore and Sydney and has been designed to optimise RFi Group’s global research expertise and provide an opportunity to share insightful global best practice and thought leadership. The Global Digital Banking Conference - UK edition, will examine and investigate the latest insights, best practice and success stories for digital engagement and innovation across retail banking. This will include: acquisition, the importance of main bank relationship, share of wallet, targeting consumer segments, marketplace lending and new forms of payments.

Speakers include: Jason Bates, Co-founder, Mondo (Co-founder & former CCO, Starling Bank) - UK Anne Boden, Chief Executive Officer, Starling Bank - UK Lee Jay Burningham, Head of Financial Services UK & EMEA, Facebook and Instagram Steven Cooper, CEO - Personal Banking, Barclays

For more information on the event programme and sponsorship opportunities or to register please contact:

Natasha Dochniak

Matthew Walsh

Commercial Director - Media & Events

Financial Reports and Events Executive

Direct: +44 203 862 2143 Mobile: +44 755 206 0507

Direct: +44 203 862 2142 Mobile: +44 742 928 8938

Lead sponsor:

Sophie Guibaud, Vice President, Fidor Germany Rhydian Lewis, CEO, Ratesetter David Millington, Head of Current Accounts, Tesco Bank

Media partners:

Global Retail Banker

Mark Mullen, Chief Executive Officer, Atom Bank - UK Jay Sidhu, Chairman and CEO, BankMobile and Customers Bank (USA) Valentin Stalf, CEO, Number26 - Germany

Supporting partners:

UK Retail Banking Council


KAL of the wild

The company behind many of the world’s ATMs is on a mission to make banking and cash accessible to the remotest communities. Aravinda Korala, founder and CEO of KAL explains how he plans to broaden banking’s horizons Imagine you’re in a bar in Beijing late at night. The metro closed at 10pm and you need to pay for a cab back to the hotel but you don’t have any local currency – or indeed any currency. If you offer the driver plastic, you know he’ll tell you to take a walk. Even if you could find an ATM in downtown Beijing, half of them don’t accept foreign cards.

Now suppose there’s a KAL Remote Teller Machine in the lobby. It will scan your card and issue you a note of creditworthiness, which is good to exchange for 100 yuan at the bar. The beauty of it is, by the time you walk back from the lobby, the money is already in the vendor’s account. It’s instant fulfillment. These RTMs are a revolution in branchless banking. A cashless ATM that gives you instant access to cash but are a tenth of the cost to run, so banking RTMs can have them everywhere. KAL has been promoting RTMs for the past four years as a way of reducing costs for branches and customers, and reducing the time for people waiting to carry out transactions. It eliminates the need to find an ATM when traveling abroad and reduces the fees for currency exchange and withdrawal in a foreign country. CEO Aravinda Korala sees bars, restaurants and hotels as prime locations. “Hotels are ideal because they are already carrying a certain amount of cash in order that their customers can convert US dollars or whatever to the local currency. “The difference between an ATM and the RTM is that at the point at which an ATM would dispense cash, the RTM Summer 2016

dispenses a secure ticket. This secure ticket is telling the person at reception in the hotel, or behind the till in a store, that you’re good for $20, £20 or whatever it is. So you hand over this ticket and they give you back the cash.”

Cost savings With roughly 3 million ATMs around the world, each costing 20,000 euros to maintain per year, the cost saving to banks is significant. The RTMs run on the same KAL software as its ATM machines, so they interface with the bank’s network in

Banks have a big, big challenge about how to do financial services in rural areas because the cost is very high exactly the same way. And because they are cheaper to install and maintain, banks can roll out a lot more of them, allowing people to carry out more complex transactions without holding up others, who will only take 30 seconds. But the possibilities don’t end there. An RTM’s 17-inch LCD or an attached video topper can also be used to offer video conferencing with a real teller. “Should I repay my mortgage or should I

put it in a savings account, and what’s the interest rate?’ that kind of conversation has to be done by a real expert and the kind of person that the bank might not always have in the branch,” says Korala. “But with the remote teller-assisted transaction, because you can route the call to somebody across the country, anywhere nationwide, or even in another country, it means that you can always have the expert to answer that question.” The idea is the technology will free up time for both banks and consumers and create a more fluid banking process around the world.

Rural challenge It would be self-defeating if the RTMs were permanently busy, so several would have to be placed in close proximity, so the customer doesn’t have a negative experience, points out Korala. But for a tenth of the price, banks could afford to. The initial assumption was that the RTM would be more popular in poorer countries, such as China and India, where governments are encouraging the use of personal banking. But KAL found a surprisingly high level of interest from banks in the West, too. “They have a big, big challenge about how to do financial services in rural areas, because the cost is very high in rich countries to do that and, of course, you can’t justify ATMs in all of those locations,” says Korala. In those areas the RTM can act as a mini branch, to those unable to visit a physical one – in effect, bringing banking to everyone’s doorstep. |



The branch is dead... long live the branch

Branch banking as we know it has been transformed at Nationwide – and it’s all thanks to fintech, according to Barnaby Davis, Group Retail Strategy Director at Nationwide Building Society “Nothing excites me more in banking than a customer who’s been empowered by technology, because it tends to take customers back to high street banks to say, ‘Now I’m in control, I would like to talk to somebody on my own terms about information that I have now got access to,” says Barnaby Davis.

Talking to the Retail Strategy Director at Nationwide Building Society in the week that Microsoft opened a store on Fifth Avenue and Amazon started selling books from a real shop makes you think he’s got a point. “That tells me there is a real need for physical locations and those locations need to be comfortable places for customers to go and feel they can have the right level of knowledgeable discussion,” says Davis. After 14 months of creating just such an environment, he is no longer using the phrase ‘branch of the future’, conscious perhaps that the future in banking is not yet ready to be defined. Instead, he prefers to describe the radical path he's chosen as ‘branch design transition’. “I think with age and experience probably comes a greater degree of wanting to take a bit of a risk because if you play it safe, you’re going to design the same branch that everyone else has done,” says Davis. So the brief he gave the bank’s designers was to turn Nationwide’s 600-plus branches into an extension of the customer’s own home – somewhere where they primarily felt

comfortable but which also offered a degree of privacy. “We call the self-service area the tool shed and the central hub is the living area. The seating down the left hand side is very much based around living room seating. We wanted to make the offices look more like the study where you’d go and have a sensible discussion with a business advisor,” says Davis. The investment in the bank’s high street network wasn’t about turning the clock back; it was part of a carefully structured plan to move Nationwide forward. Because if reports of the death of the branch have been much exaggerated, so are reports of who uses them and how. Contrary to popular belief, says Davis, there is no divide between digitally savvy but remote millennials and their digitally illiterate grandparents. “Anyone over a certain age gets classified as ‘They won’t want to do digital’, and then you’ll be in a branch and a 95-year-old man will be telling you how excited they are that they can use Facetime to speak to their great grandson in Australia. They don’t have an issue with technology because it’s become useful to them at a certain time in their life. "Likewise, Nationwide has launched a new youth account, FlexOne. We’ve

opened 150,000 in a very short space of time and the vast majority of 11- to 18-year-olds opening that account are doing it in branch because their perception is that isn’t the sort of thing you do on your own at home via technology – you go and talk to someone, because you don’t really know anything about opening a bank account.” That's led him to build the bank’s offline and online retail strategy around a segment of one. “You’ve got a person, they’re of a certain sex, they’re of a certain age, they’ll have a certain experience of both banking and technology, and you find out where they are and what they want to do,” says Davis.

If you can find the sweet spot between machines and people, that’s the winning experience 98


Summer 2016

That might be choosing to visit a branch where staff and customers have access to a full range of digital devices and data, or interacting with the bank from home over their smart phone or wearable device. The strategy for the future of the branch in Davis’ eyes comes in a three-tier plan: n A floor layout that both “customers and colleagues find helps what they’re trying to do on a daily basis” n Improving the branches' “digital assets, which is fundamentally supportive of what colleagues and customers are trying to do" n A “real harnessing and usage of customer data and consumer insight to create a proper relationship with a customer”, which can now be achieved through mobile banking The branch design transition Davis is currently engaged in is part of a much wider evolution in banking services, which can be summed up as 'the easier you make

something for a customer, the more they will do it'. One way Nationwide has been making it easier for customers is through mobile banking app features, such as Quick Balance and Impulse Saver, which allows them to view their balance and transfer cash into a deposit account without logging in. Well over half of Nationwide’s one billion digital transactions a year are now made using a mobile device and later this year it plans to boost that with the introduction of Android Pay. It was the first bank to embrace Android Wear and introduced Quick Balance on Apple Watch, too.“Wearables, for me, are an extension of the smartphone,” says Davis. ”The smartphone is an incredible empowerer of people, financially. Whether it’s a watch or a phone, it’s one more thing they’ve got on them when they come into a branch to have a discussion about something. If you begin to add alerts and notifications onto wearables in particular, that’s when you’re truly creating a digital relationship with your customer, helpfully bringing their attention to things,

which in many cases is going to lead them straight back to us.” Davis sees wearables as part of a technological democratisaton of banking that started with the introduction of modern accounting systems in the Sixties and Seventies. But in his view, people remain at the heart of it. “Machines are really good at doing repetitive tasks that need absolute accuracy. I think people are really good at serving people, creating rapport, finding things out and making sure something really is sorted. If you can find the sweet spot between getting the machines to do what they’re good at and getting the people to do what they’re good at, then that’s the winning experience. It’s not just digital and it’s not just people, it’s a bit of both.”

home from home: Nationwide has transformed its branches

Summer 2016 |


When you have to be right

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Identity crisis

Intelligent personal technology could drive traditional banking towards a precipice, says Brett King, CEO of Moven and all-round digital banking guru. Because in the new crowdsourced economy, it's not just a matter of knowing 'who' but 'what' your customer is... Traditional banking has had its day, according to Brett King, CEO of Moven and host of Breaking Banks.

In the mid-Nineties, consumers would visit their local branch a couple of times a month. Today, in almost all markets, it’s closer to once per year, with the average customer calling an agent maybe five times a year and logging onto their web-based channels an average of once per day. This is where Moven comes in. Founded in 2011, Moven’s system relies heavily on digital technologies. “We’ve used the term ‘digital bank’ in the press when we talk about those banks who are ready to do that, but there’s really only a handful of really digital banks,” says King. “I think you’ve got to ask ‘What is the baseline of a digital bank?’ and, if you’re a bank today, looking at all of this technology, then it’s pretty simple.”

The mobile revolution Moven is finding that customers are accessing upward of three transactions per day using their phones and King believes that customer service will evolve to focus on the provision of an unparalleled banking experience. “That’s going to be a significant requirement for human interfacing – when I talk to a human it’s going to be because I really need a problem solved and I really need great service,“ he says. King is focussed on future generations,

generations that are never going to write a cheque, never going to have a plastic card, never going to own a car. “They may have two or three jobs, they may have 10 different jobs by the time they have been in a career for a decade. It’s going to be a very dynamic world, a very crowdsourced world.”

Rethinking KYC Ten years out, King invites us to think of a self-driving car that’s owned by a community of friends, who are sharing a home. This self-driving car picks them up and drops them at their place of work for the day. It’s got a few hours before it needs to collect them again, so it clocks on to an Uber-like service and acts as a network vehicle. “It gets paid for that, then it has to go and recharge because it’s an electric vehicle. So it goes to a parking lot and hooks up to a supercharger, pays for that electricity, maybe generated through solar, and then gets back on the road and picks up its owners and drops them at home,” says King. “If you think about that from a Bitcoin, or a blockchain, or a technology perspective, that self-driving car has its own wallet, it’s earning an income, it’s transacting, and it’s doing all of that independent of the identities of the owners. “You’re not going to get 10 people down to a bank branch to KYC them for a

wallet in a car. You’re not going to link 10 debit cards to a wallet in a self-driving car. We have to handle this in a different way and the current financial system, the big banks, are not well-equipped to imagine this world of payments and innovative things and different transacting and account and identity paradigms that are coming down the stream.”

The future is here For a long time bankers have thought that people need banks to help them understand complex banking products and interest rates. In reality, most people’s banking requirements are quite simple “But that still means you need to be able to provide every core retail banking product, whatever field you’re in,” says King. “You need to be able to provide that product or service in real time, over a device, without requiring a signature on a piece of paper, or a physical identify verification moment, right? Now, if you can’t do that, you’re screwed in five years’ time. That is the baseline. A digital bank has to be able to execute revenue and relationship in real time across a device. “You know, fintech is here,” King adds. “This is fintech’s moment and it’s about time that banks actually recognised that technology, not fin, is where the future of banking is.” Brett King was talking to Fintech Finance Magazine’s Ali Paterson

It’s about time that banks actually recognised that technology, not fin, is where the future of banking is Summer 2016 |



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Fintech vs fintech

Don’t write off the dinosaurs just yet. The big daddies of finance aren’t quite as slow as the challengers make out. They’re catching up with new kids on the block and fast, says Praful Krishna, CEO of cognitive technology company Coseer In the battle for relevance between traditional financial institutions and fintech disruptors, the best ally for the old-guard is turning out to be, unsurprisingly, fintech.

Cognitive technology companies, such as IBM and Coseer, are helping banks, wealth managers, insurance companies and other financial enterprises win against new-age technology-driven fintech startups. Detractors point out, rightly so, to the difference in experiences for a common task, like sending a friend $100. With PayPal or Square pay, you just take a snap of your card, type out your friend’s phone number and you are done. With a Bank, you may have to fill in forms, pay $35 and wait three to five days. There are similar stories in each aspect of finance – lending, investing, plan administration, etc. It’s not that the banks hate consumers. On the contrary. If they could afford it, they would rather have a personal teller who would speak to you in natural language, clarify what you mean, leverage on your personal history and complete the task right away. If they could afford it, they would have a team to anticipate your every need and advise you at every step with sound options.

It turns out, for the first time in the history of banking, now they can finally afford it. Thanks to technologies like Watson and Coseer, the traditional financial institutions are redefining both their consumer product and the consumer experience. They are being more intelligent, more personalized and more human by being more automated. Combined with their millions of long-standing trust-based relationships, this puts the traditional financial enterprises in an enviable position. I live in San Francisco, so here’s an example from my backyard: when Charles Schwab launched its Robo-Advisor, within months the assets under management overtook the Silicon Valley favourites, like Wealth Front and Betterment, that have been around for years.

Thinking ahead As always, in truth the story unfolds not by a magician’s sweep and pixie dust, but through a series of blocking and tackling steps. Cognitive technology is being applied to multiple facets of a financial enterprise. For example, cognitive computers are beginning to interact with customers, giving them

better, quicker answers. Or, in the back office, qualitative information, especially social, is being folded in with quantitative information for far superior risk analytics. Or, finance professionals are becoming disruptively productive using the idea of artificial interns. Two distinct models are emerging in the nascent market of cognitive computing. IBM’s Watson takes an investment of time and money worthy of a super computer, but then combines text, speech, visual signals and others to solve foundational challenges. Other companies may have a light footprint, but go after specific problems to achieve high accuracy within weeks. For example, Coseer focusses on language only and scales language-driven workflows; Sentient focuses on images. Either model is beating fintech at its own game. The general-purpose nature and adaptability of these technologies allow financial giants emulate a startup very quickly, with or without big budgets. Then they have all the data, the life blood of any modern technology, and the relationships, the soul of any business. In this battle of Fintech vs Fintech, it is too soon to write off the old guard.

Traditional institutions are being more intelligent, more personalized, and more human by being more automated Winners: Forward thinking financial enterprises are in pole position

Summer 2016 |



Why the apple cart needs upsetting New online lenders have made significant inroads into the territory once held by the banking giants – but they can’t all claim to have been a success. Here, John Davies, CEO of one firmly established disruptor The Just Loans Group Plc, gives his thoughts on servicing the financial needs of SMEs Picture the scene – a small business owner is enjoying breakfast and announces to the family: “I think today is the day when I am going to introduce fintech into my business.” This amusing and totally unrealistic picture popped into my mind after reading a recent report calling for more SMEs to adopt fintech. I could see where the author was coming from but this simply isn’t the way the world works. Fintech shouldn’t be evident to customers but what they should notice is how much easier it makes running their businesses. This, in a nutshell, is what has driven The Just Loans Group Plc strategy since we opened for business in 2012 and the multi-million pound investment we have made in integrating fintech into our back office and customer journey. We’ve already achieved two notable European successes, being the first European alternative lender to provide card access to business finance at the point of sale and the first to provide customers with a mobile app, enabling on-the-move transactions.

New customer relationship There is a lot of talk about how new fintech companies are either going to replace services provided by traditional banks or find smart ways of working together. However, what seems to have slipped from people’s minds and from today’s business agenda are: lifetime value, one-stop solutions and long-term relationships. Let’s get back to fundamentals – we know our customers demand a fast but high-quality service and value for money. But today they need more than this – they



want the seamless, invisible financial tools to make running their businesses easier in a time-starved environment, such as easy access to short-term funding, control of their business finances from their smart phone, a corporate card with a business account that has free transactions. They want faster payments and everything else they would expect from a leading finance provider – including the ability to take payments from their customers either at point of sale or whilst mobile – raise an invoice while on the move and, if necessary, raise additional funding on that invoice. And they want all this from one app. One provider, one contact, one relationship – a customer for life. A bold aim but one that we have total confidence in achieving. We have built and extensively tested our multi-currency, multi-language lending platform that allows us to lend confidently using our proprietary PropensityPlus® technology underwriting module. PropensityPlus® technology is invisible but enabling to the customer, whilst we derive the benefits of being able to make faster, more informed lending decisions. Our immediate focus is on lending in the UK but our modelling strategy is designed to support full-service business banking and to be the springboard for European expansion. Today, The Just Loans Group lends to growing UK businesses through three wholly owned subsidiaries. ■ Just Cash Flow Plc (Just Cashflow) provides a secured, flexible revolving credit facility, similar to a traditional bank overdraft

■ Just Bridging Loans Plc (Just Bridging) provides specialist second-charge lending in the commercial property sector ■ Just Finance Loans and Investments Plc (Just Finance) takes equity investment in companies in conjunction with longer term loan repayments. Increasingly, the focus is on fintech companies that can enhance the Group’s core business model

On the Plus side I am often asked to give more details on our PropensityPlus® underwriting module that, to date, has allowed us to record zero capital losses. We have invested millions in designing and building this platform that provides us with a unique and unparalleled level of predictive business analysis, personal behavioural characteristics and credit intelligence. This is a major competitive advantage as it drives a comprehensive underwriting module, boosted by latest technology, providing a wide variety of current and historical data points, many of which are not used by traditional banks or other lenders. This provides extensive insight into the propensity for both the directors and businesses to be successful in the future. The ‘Plus’ comes from highly experienced underwriters’ insightful questioning, designed to give them a good understanding of the business, the directors and their objectives. PropensityPlus® has allowed Just Cashflow to significantly speed up the finance application process and record zero capital losses to date. So how does all of this fintech investment help the end customer? It is well documented that UK SMEs have problems with accessing the finance they need to grow and develop their businesses. Summer 2016

It can take weeks to get a bank appointment and often several more weeks to get an answer. PropensityPlus® allows us to make an initial loan decision within 6.5 minutes. Businesses that are turned down know exactly where they stand and can spend the time saved looking for alternative sources of finance or taking steps to improve their credit worthiness for future applications. We are proud to be the first European alternative lender to provide card access to business finance at the point of sale through The BusinessPlus Prepaid MasterCard® from Just Cashflow and to support this with a mobile app that allows customers to manage their finances on the go. Our new card facility has already received external endorsement by being highly commended in the Business Product Innovation of the Year category at the Business Moneyfacts 2016 Awards. Many of our customers will be using the new app to move money on to their card for use at point of sale. It’s not enough to simply provide SMEs with much-needed funding – they also need quick, convenient and time-saving access.

Fintech solutions for SMEs We are anticipating strong demand for The BusinessPlus Prepaid MasterCard® as even when SMEs are provided with bank finance it’s difficult for them to get a business card as a traditional bank will want to see at least

two years trading history. Even then, they are more likely to be provided with a charge card that has to be repaid in full at the end of every month – not ideally suited to managing cash flow challenges. I am convinced that alternative lenders that build full-service solutions like this will do well. Fintech underpins and is rapidly changing how we do business and I believe the ability to quickly adopt and adapt is what is going to enable disrupters like ourselves to be in the winning category. To ensure we can keep pace with this rapidly evolving world, Susanne Chishti, one of Europe’s leading fintech experts, has joined The Just Loans Group board as a non-executive director. She is CEO at Fintech Circle, chairperson of Fintech Circle Innovate and has been recognised in the European Digital Services ‘Power 50’ 2015. She will make a great contribution to accelerating our involvement in the most promising and customer-focussed fintech technologies and companies that will see us take a lead in the European digital lending space. Fintech has helped drive our success to date and will be key to ensuring we are a successful and innovative disruptor.

It’s not enough to simply provide SMEs with much-needed funding – they also need quick, convenient and time-saving access

Summer 2016 |


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the mighty

Atom Fresh from the buzz of launching the UK’s first app-based bank, Atom CEO mark mullen talks to Fintech Finance about digital transformation… and life in Durham The future is here. That’s how, Mark Mullen CEO of the UK’s first bank designed for digital from the ground up, saw the arrival of Atom in the UK last month (April). The newly licensed, branchless bank has been given permission to start rolling out products, starting with a fixed saver account, although its offer will eventually include current accounts, overdraft, demand deposits, mortgages, business lending and term deposits. Initially, exclusively available via iOS, its pre-registered customers are now being invited to join Atom on the journey into banking’s unknown. What promises to be a tech-based, primarily app-distributed model, does in fact feature a contact centre at the company’s HQ in Durham, England, which will provide round-the-clock support in acknowledgement that customers might, at some point, want human interaction over a medium that isn’t a screen.

Location, location The decision to base the UK’s most innovative challenger bank to date about as far away as it could get from the City seems to have been more a case of personal preference than an act of tactical warfare. “A direct bank doesn’t need to be based in a country’s most expensive hub, so choosing the north of England really wasn’t a difficult decision,” says Mullen. “We’ve got a whole bunch of people who want

Summer 2016

to build careers where they live, without having to move to the big cities. There’s a great culture, it’s a wonderful part of the world and it doesn’t take me forever to get to and from work.” Until Atom matures, the only account individuals are able to open are fixed savers. A customer may harbour as many of these accounts as they like and deposits can be made by electronic transfer from another bank or building society – although there has been talk of plans to allow cash and cheque deposits via a high street partner. There are currently four rates, varying between a one- or two-year fixed saver and a choice between monthly or annually accrued interest. Each option has a different gross rate and AER. Because the majority of the service revolves around the mobile app, it is easy for Atom to create a VoiceID, FaceID and a passcode for a user when they set up the account. One of these methods will be required for a user to access their account and, depending on the transaction, they may be required to enter more biometric information as further authentication. The app itself is secured by cryptographic technology, so information moving from

I think news of the demise of the big banks is a little premature

the phone to the end user is protected, making security more advanced, compared to physical branch standards.

Personalised banking Despite the bank’s name, Mullen doesn’t see himself as the Oppenheimer of the banking industry – in its early sales pitch the atom was in fact used to describe the proximity of this highly personalised bank to its customers (“We never want to be more than one atom away from you"). Nevertheless, the former CEO of HSBC’s online and telephone bank First Direct does describe packing an entire bank into an app whose design was based on gaming technology and relies on voice recognition and selfies for biometric security as a “transformation of the banking landscape”. Although that will be gradual. “I think news of the demise of the big banks is a little premature,” he says. “Fintech’s not a fad. I think there are a number of ideas that will enter the mainstream. There are a number of the big banks that are already investing hugely in trying to transform themselves from their traditional distribution models to something that looks a little bit more modern and is more aligned to how customers are banking on the move. I think all of the players are going to get on this train in one way or the other or they’re going to get left behind.” Mark Mullen was talking to Fintech Finance Magazine’s Dylan Jones |






Life without stress testing... Innovative risk technology loss tolerance ● macro stress tests ● risk monitor ●


FINTECH Layers: Starling works on a full-stack banking model

Taking a slice of the cake Anne Boden often describes the model for her new Starling bank as being like the layers of a cake; the icing is the mobile app that sits at the top. She even promises some ‘cherries’ to sweeten the customer experience. It’s built on what’s known as a ‘full-stack banking’ model, which takes its name from the “technology stack” – imagine a set of products sitting on top of each other, each dealing with a different set of functions for the bank. A ‘full-stack engineer’ is someone who has the ability to work on the development of all those levels, ranging from engineering the app to developing the back-end systems. “In banking, above any other industry, the full-stack business model is more critical to the overall customer experience,” says Boden, who set up Starling on leaving Allied Irish Banks where she was chief operating officer. “The regulatory framework enforces a discipline of customer ownership and rigid responsibilities for ensuring that processes are in place to prevent money laundering, fraud and (most importantly) to protect the customer from being mis-sold financial products.” But she acknowledges that this “strict division of responsibilities is at odds with the objective of a seamless customer experience”, which is, after all the holy grail, not just for Starling but every other challenger. The difference is, many of them

Among the flock of new banks getting airborne this year is Starling. Chief Executive Anne Boden is busy sweetening this challenger's offer are not full-stack banks. Starling will receive its full banking licence this year and plans to launch with the “best current account in the world” in late 2016. So has Boden managed to square the full stack with her ambition to deliver “something really differentiating that would be a step-change in banking experience”? We’ll have to wait and see. “We’re definitely in the banking camp, but we’re also a fintech. We’re also a start-up and we also create something very different and very new for our customers,” says Boden. “It’s all about managing your everyday financial affairs and when we manage our everyday financial affairs we get a better financial life. Money really matters and its fairness is fundamental. "We believe that offering a fantastic service to our customers in a very fair and transparent way is so important.” Starling dedicates an entire day a week to listening to customers and discussing their financial matters. The rest of the week is spent analysing what they’ve said and working on ways to incorporate it into a service model that hasn’t been seen before. “The days of lots of big banks all offering exactly the same to a customer base are really long gone. It’s all about

listening to customers and giving the customer what they really need and really want,” says Boden. The three main unique selling points for Starling are ‘real-time intelligence’, which gives the customer the ability to understand their money in the present while allowing them to view such things as spending for the previous week or forecasting if they can afford a holiday; ‘complete personalisation’, meaning the customer can shape their finances around the type of life they lead; and finally ‘smart simplicity’ with an easy-touse platform that allows a customer to micromanage their money.

A brave new world Boden believes it will put Starling at the heart of the new banking era. “I believe that the industry could disaggregate. We’ll have lots of players in an ecosystem of financial products, all getting together to serve customer needs,” she says. “Starling will be the heart of that process, the heart of people’s financial lives, and we’re looking forward to working with customers for the rest of the year until we launch. “ Anne Boden was talking to Fintech Finance Magazine’s Dylan Jones

I believe that the industry could disaggregate.We’ll have lots of players all getting together to serve customer needs Summer 2016 |



Follow the money

Lawrence Wintermeyer, CEO of Innovate Finance, asks if corporate venture capital is the new smart money in fintech as deals rise to an estimated $1billion According to data crunchers PitchBook, UK venture capital (VC) investment rose by 35 per cent to $901million in 2015, led by large funding rounds from Innovate Finance members Funding Circle, Transferwise, WorldRemit, eToro, RateSetter, Azimo, The Currency Cloud, MoneyFarm and Seedrs,

There were a total of 72 VC deals done in the UK, second only to the US, with a total of 860 deals completed globally, representing an investment of $12.5billion. This was up only slightly on the 2014 VC investment of $12.3billion. Two of the top 20 global VC deals in fintech involved UK companies Funding Circle ($150million) and Atom Bank ($125million). Top funding rounds were also financed by Seedcamp, Index Ventures, Techstars, Augmentum, Balderton, Anthemis and GLI, demonstrating an increasing depth of bench in UK and European venture capital firms. More than 60 per cent of the UK VC investment in fintech has been in the peer-to-peer, alternative finance and payment and remittance segments, with challenger banks pushing investment volume above 74 per cent. The balance of investment is spread across wealth management (Robo-Advice), capital markets, data analytics, crowd funding, and a number of emerging categories. Much of the investment in fintech to date has been in segments with no, or light regulatory friction. The P2P segment voluntarily submitted to the FCA to be regulated and the new round of challenger banks have been part of a more ‘expedient’ regulatory process, led by Treasury thinking. With the ‘future of advice’ and ‘blockchain’ flirting on the periphery of regulated products, it is likely that regulation will consume greater capital investment in future fintech. Fintech IPOs of note include Lending Club ($8.9billion) and OnDeck ($1.3billion), both issued in December of 2014. These



stock prices have more than halved in 2015, in line with the banking sector as a whole where a number of European bank stocks have more than halved in the past year. WorldPay’s stock price has defended its ground. Its $7.7billion listing on the London Stock Exchange in October 2015 is an important signal to UK fintechs on their IPO journey from Level 39 to the LSE, and was the biggest tech IPO of 2015.

Institutional investment One of the big trends in 2015 is investment in fintech by financial institutions in incubators, accelerators, labs, talent, partnerships, digital M&A, and corporate venture funds. A couple of years ago, entrepreneurs in the community were looking for introductions to VCs. Last year, they were interested in introductions to institutions. Investment sums in fintech and innovation in financial institutions are difficult to find in the public domain, though estimates of $1billion in investments over three-to five-year programmes have been mooted by industry insiders. The continuing rise of the Corporate Venture Capital (CVC) fund has seen a number of funds earmark sums starting at $100million using the institution’s balance sheet. Santander InnoVentures, a $100million fund headed by Mariano Belinky, is leading the charge in Europe with investments in Ripple, MyCheck, Digital Asset Holdings, iZettle, Cyanogen & Kabbage. CommerzVentures, which makes individual investments of €2million to €10million, has made investments in iwoca, eToro, GetSafe, Mambu, Marqeta. HSBC allocated up to $200million for early-stage fintech. AXA Strategic Ventures has set up a fund of €200million and Aviva Ventures has earmarked £100million. In the US, Citi Ventures makes individual investments of $500,000 to $5million and has investments across big data, payments, behavioural finance and security, including Jumio, Linkable, Square, Betterment,

TradeIT and LiveNinja. CME Ventures has made investments to date in Ripple, Digital Asset Holdings, IQBit, Digital Currency Group, Dwolla, Fortscale, Nervana, Powerlytics and Wickr. A number of investment targets across CVCs are in the payments, data and analytics, identity, and infrastructure segments, likely reflecting a deeper understanding of the requirement and/or urgency for institutional legacy systems replacement. This is best evidenced in investments in distributed ledger technologies, commonly referred to as the blockchain, unheard of by most bankers in February of last year and which was the talk of the town at Sibos last year.

A global leader The rise of these investment funds raises the question of whether corporate venture capital is the new smart money in fintech. A report from Ernst & Young (EY) ranked the UK first among the world’s seven leading fintech hubs this year. It compared the country’s availability of talent, investment, government and regulatory policy, and the demand for fintech services. Commenting on the EY report, Chancellor George Osborne said: “In 2014, I said I wanted Britain to be the global capital of fintech. This report says that we have delivered exactly that: we have the most supportive tax and regulatory regimes in the world for fintech and we have the world’s leading fintech ecosystem. “But we’re not going to rest on our laurels. I know that we need to do more if we want to maintain this position and so I welcome the report’s recommendations.” At Innovate Finance, we are doing all we can to ensure that the UK remains the leader in fintech and to help tackle some of the areas where the UK can improve, including diversity in the workforce and greater investment. We do this by bringing together the fintech community and supporting and championing the innovators that are helping to shape a better financial services future for everyone. Summer 2016

Investment: UK cash in fintech is growing

A report from Ernst & Young ranked the UK first among the world’s seven leading fintech hubs this year

Summer 2016 |



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The view from the bridge Stéphane Eyraud & Patrick Bucquet of the global financial services advisor Chappuis Halder & Co share their views on bridging the gap between technology and business in banking

One of the two key trends in banking since the financial crisis has been the change from a product and trading model to a client advisor model. The other has been the increasing burden of regulatory reform. Fundamentally changing the way they did business was a difficult transition for banks and so what we saw was a fixation on regulatory issues, rather than innovation in client services. This lack of effort in developing the client-focussed side of their business allowed newcomers a huge opportunity. Apple Pay and Moven did not disrupt the industry by changing the product or the back office where the banks were busy; they started reinventing banking by changing the front office – at the customer interface. By focussing purely on the user experience, giving people a banking service that reflected what customers were doing in other areas of their day-to-day lives, these newcomers didn’t need to concern themselves with the regulatory problems thrown up by the financial crisis. Instead, they could concentrate on where the value is – in the relationship with the client.

Regulation and innovation Fintech claimed this territory because it was good at innovating, making distinctions in the market and better Summer 2016

understanding what would make the customer’s life easier. Banks, meanwhile, are increasingly having their role redefined as being service providers to other financial institutions, a trend that’s likely to continue. Chappuis Hadler & Co is involved in advising banks in both spheres – ensuring compliance while minimizing impact on profitability and increasing revenue through digital service innovation. While the imperative to reform was driven by regulation, it’s fintech that’s helping banks recover from the impact on the bottom line, bridging the gap between the legacy of the past and the promise of the future. By better understanding and introducing structure to the innovation process and exploring and adopting elements of fintech and other start-up technologies, banks can add value to what they already do. This is especially important in investment banking, which took the brunt of post-crash regulation and experienced uniformly dampened profitability. As margins are reduced, so investment banks strive to increase volume, which in turn means they have to work on their distribution channels. That requires first an insight into the new needs of the customer and then adopting a

specific digital strategy to meet those needs. It’s a culture change as much as a technical one and its global footprint means Chappuis Hadler & Co can leverage relationships with associates around the world to identify and share not only trends and bright ideas, but best practice with management to find the right organizational fit.

Defining a new role At the same time, the company has focussed resource on monitoring rapid changes in the global financial industry, dedicating a large team to keeping regulatory watch on authorities, such as EBA, FED and FCA. And it co-ordinates conferences around fintech and its specific application to the banking industry. Positioning itself between the regulators, financial institutions and fintech gives Chappuis Hadler & Co a unique view from the bridge. What does it think the future holds for the financial industry? In terms of investment banking, with prices of assets and margins severely squeezed, if not collapsed, there is an urgent need to increase volume, so we are likely to see more mergers and less players. In the near future, banks look set to become more of a service provider, with fintech and start-ups taking on more front-end services, increasing the need for firms like Chappuis Hadler & Co to continue building bridges between technology and business. |


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CCC comes of age

Competence Call Center is inviting exclusive international guests to its Executive Day and 18th Anniversary at the end of June in Vienna. Here’s what to expect… On 23 June Competence Call Center (CCC) will hold the CCC Executive Day with Dr Stephan Sigrist in the Austria Trend Hotel Park Royal Palace in Vienna.

The strategy expert will talk to the international audience on the topic of “Rebooting business – innovation in the age of the digital economy”. Dr Sigrist, the founder and head of the W.I.R.E. thinktank, has spent many years analysing interdisciplinary developments in business and society, focussing on trends in the healthcare system and life sciences, among others. He is the publisher of the ABSTRAKT book series, author of a number of publications and a keynote speaker at international conferences. With W.I.R.E. he advises companies and institutions in the political and scientific

spheres on the development of long-term strategies and innovation projects. He works in cooperation with Julius Bär – the leading international private bank with strong Swiss roots as – well as with the Collegium Helveticum (laboratory for transdisciplinary research), based in Zurich. After studying biochemistry at the ETH Zurich, Dr Sigrist initially joined Hoffman-La Roche’s medical research team. He subsequently went on to work at Roland Berger Strategy Consultants as a management consultant and at the Gottlieb Duttweiler Institute. He is a member of the Governing Board of the aha! Swiss Allergy Centre and the Foundation Board of Science et Cité. Following the CCC Executive Day, CCC will celebrate the 18th CCC Anniversary

in the exclusive atmosphere of the impressive Viennesse Gloriette in the park of Castle Schönbrunn. CCC stands for high-quality BPO solutions in customer care. It has more than 5,000 employees and operates from locations in eight countries. A winner of 51 international awards, it has business partnerships with global brands and enjoys continuous growth. It operates from six locations in Germany where it has been for 15 years. CCC recently announced the opening of its16th international location in Biel, Switzerland, in May 2016.

The CCC Executive Day: Dr Stephan Sigrist (above) is guest speaker at the Park Royal Palace in Vienna

Summer 2016 |


Ambitious: Iwoca aims to offer flexible funding to all of Europe's 20 million SMEs

Helping the little guys think




Summer 2016


What started as a small loans company for SMEs in the UK, is now giving big banks across Europe a run for their money. iwoca CEO and Co-founder Christoph Rieche is leading the race Every small businesses has big dreams. Unfortunately, in Christoph Rieche’s experience, raising the funds to realise them often proves something of a nightmare. It takes weeks – sometimes months – to be approved for a start-up loan through a mainstream lender, which is frustrating for any keen entrepreneur and potentially devastating if you’ve a time-sensitive business model. It’s here that Rieche, CEO and Co-founder of lender Iwoca, saw an opportunity to intervene – to help small companies turn some of their dreams into reality… and fast. The company focusses entirely on extending short-term credit facilities of between £1,000 and £100,000 to small business within a 24-hour timeframe and it has already lent more than £70million since its birth in 2012. It thrives on customer feedback, good and bad, even sharing its Trustpilot page and providing links to articles and websites that host open reviews about the company. The result? Overall positive rating for Iwoca is a triumphant 9.6/10. It suggests it’s serious about getting things right. “We want to become a material player and create real economic growth,” says Rieche, formerly of Goldman Sachs, who with co-founder James Dear recently topped up the £20million raised through two previous funding rounds with a private deal for an undisclosed amount. One of a new crop of B2B fintechs, including Funding Circle, Funding Bird, MarketInvoice and Ebury, that are rewriting the business loans ledger, Iwoca's USP is its method of automated data collection to drive a model that takes customer intelligence to a new level. “We started in the e-commerce sector where there are half a million professional merchants earning their living by trading on platforms like eBay and Amazon,” says

Summer 2016

Rieche. “They can share this information with us in an electronic way when they are applying for funding. Using this granular trading information is incredibly valuable to understand exactly what they do and how they do it.”

Beyond credit checking The process also allows Iwoca to gather information from linked accounts, such as PayPal and VAT returns, building a comprehensive picture of the business and how it compares to similar in its field, taking their risk research way beyond credit checking. Data capture on this scale significantly increases efficiency and provides Iwoca with more information in a few minutes than traditional lenders would have after weeks of manual processing. Having collected it, Iwoca is then in a unique position to use it. “ This is simply data that hasn’t been used at all in the past,” says Rieche. “Collecting it digitally enables us to process it in a very different way and by just understanding your customers better, asking more relevant questions, you also provide at the same time a much better user experience. The user feels that you really know what you are talking about, rather than just generically providing information or asking generic information from them. “Small businesses find it really hard to go through the traditional process that might take many, many weeks. They’re very happy if things are processed quickly and swiftly and have the certitude of a decision,” says Rieche.

Low-cost model Having a 360-degree view of the business and the landscape in which it operates significantly helps reduce the cost, which underpins Iwoca’s interest-only pricing policy – there are no underwriting or retaining fees. Iwoca’s generalised loan rate varies from 2 per cent to 6 per cent per month as

standard. Clients can contact Iwoca to receive a more tailored quote or use the loan calculator on the website. An easy-to-read table highlights the initial loan, the interest to be paid and the total amount of the loan to be repaid, broken down into monthly amounts. Interest accrues daily and repayment periods are determined by the type of business, the maximum being 12 months. Businesses are allowed to make early repayments and there is an opportunity to top up. Repeat borrowers may be given a higher credit limit or benefit from reduced interest rates. Now operating in the UK, Spain, Poland and Germany, the lending platform also has Ireland and France in its sights with the eventual aim of offering flexible funding to all of Europe’s 20 million small businesses. In December it signed a deal with the European Investment Fund to facilitate £40million of loans just to those SMEs in the UK. But it clearly sees an

We want to become a material player and create real economic growth opportunity to accelerate its reach by building alliances. “Scaling the business is a priority,” says Rieche. “We have more funds available and we’ll continue to raise more funding that we can deploy to our customers. “I think [banks] are really warming to the idea that there are new players like Iwoca to help them provide, eventually, a better service to their customers. I think there will be a lot more cooperation in the future. We are looking at engaging with a number of strategic partners and I think we will have very exciting news on that front over the next few months." |



GLOBAL EXPANSION SUMMIT 17-18 October @ Intercontinental O2, London, UK

Panni Morshedi Global Head of International Expansion Funding Circle

Nikolay Storonsky Founder & CEO, Revolut

Eugene Danilkis Co-Founder & CEO, Mambu

Sanjin Beloberk Chief Infrastructure Officer & Advisor, Ebury

Cristina De Villeneuve Chief Digital Officer BNP Paribas

150+ speakers will discuss the latest growth opportunities with fintech and highlight stories of success in international expansion. With a mix of keynotes, fireside chats and lively panel discussions, #gxpsummit will explore digital transformation in financial services, the evolution of payments, the emergence of blockchain, alternative finance and security.



Bankers engage your brains! Thinking in siloes is bad for business. Rivi Varghese, CEO of CustomerXP Software, urges an intelligent approach to cross-channel fraud management Banking is the only industry in the world where the entire life of the customer flows through it – you know how much they earn, where they live, where they visit, how much they spend, who’s part of the family, whether or not they own their own home, even how much gas they put in the car. No other industry has the privilege of seeing such a 360-degree view of a customer’s life. This could make banking the smartest industry on the planet, but bankers the world over don’t realise this potential – they still believe they are in the transactions business and so every decision is siloed. These siloed decisions are proving to be costly and impacts both the top line and bottom line of banks The time has come for bankers to use the collective insight they have gained about every individual customer and bring it to bear in the split second when the transaction occurs – to influence, modify or stop the transaction across channels in real time. We need to use this brain-like central nervous system approach to make a segment of one decision every time in real time. For example, if a customer card present transaction is detected in a far-off location, a siloed card-only

The time has come for bankers to use the collective insight they have gained about every individual customer Summer 2016

solution will make the decision based on data gleaned just from cards. However, a brain-like, real-time, cross-channel approach will know that the customer logged in to internet banking in London, logged into mobile banking via Vodafone in London and hence will question the possibility of how he/she can simultaneously be thousands of miles away. It will then figure out what to do, thus making every such interaction contextual and real time. One can see that this brain now has a segment of one intelligence, every time for every customer interaction, and this is very hard to replicate for anyone – especially for hackers, who typically carry

out large segment attacks, which leverages the siloed nature of the underlying system. In this brain-like approach, the hacker will now need to understand every customer individually across channels to perpetrate serious fraud, as not only the fraudulent transaction should be channel-wise correct but it should also be correct from the collective intelligence perspective of the customer. One of the reasons why banks still think in siloes is because vendors who provide such systems also continue to think in siloes. Vendors need to think about integrating the wealth of intelligence available in core banking calls and invest in re-architecting their products to go from a legacy approach to a Google-like system; from thinking in terms of monolithic machines that work by running and optimizing complex queries to a system that is doing distributed in-memory computing using commodity processors that scale horizontally. From a bank’s perspective, this impact is externalized, as such a smart system will be able to leverage the existing investments made by the bank and will minimize the overall impact by ensuring business-as-usual processes are not changed. Bankers, please think like Google and use this brain-like intelligence that you have about every customer in-line, real-time for every transaction. Only you have this ability, so make it your sustainable competitive advantage. |


Digital challenge: Banks lack technology leadership



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A question of leadership Banks cannot delegate their digital future; they have to install technological expertise at the top, argues Chris Skinner, Chairman of the Financial Services Club and best-selling author of Digital Bank and ValueWeb Talking about transformation at conferences every day gets you into a mantra. My mantra is leadership and how banks lack technological leadership. The pushback is that we have too many technologists without banking knowledge; we need banks run by people who understand money and they can tell the technologists what to do. I’m not so sure. A bank cannot delegate its future and that, to me, is the fundamental flaw in the argument over banks being led by bankers. If banks are digitalising and have to be fit for the internet age by unbundling their vertically integrated structures to open-source finance, can a control freak really understand this fundamental change in operations? I say control freak purposefully, as there are few big banks that delegate their IT externally. They may use solutions from external providers, but do they truly put their IT out to the markets or are they adapting such systems to their internal needs and making them proprietary again? I suspect the latter. In fact, it amuses me when we talk about legacy structures, as

are able to narrow-target every piece of banking, componentise and open-source it. This is why we have narrow peer-to-peer structures for payments, credit and advice emerging which seem innocuous on the surface, but may be truly transformational within. It is the true innovator’s dilemma. Banks believe that they must control the value chain and process of finance but fintech is breaking that vertically integrated value chain apart.

Functional friendships Now what the truly visionary and innovative banks are doing is recognising that fintech firms are just widgets of capability. They are taking their capabilities, evaluating their functionalities and, where necessary, copying or partnering to bring that functionality to their clients. White labelling and partnering with fintech firms is not an embarrassment. It’s not an admittance of weakness. It is more a recognition that someone can do a narrow-line function better than you and, as a company with centuries of brand recognition and millions of customers, bringing that capability to your client base is visionary.

and most of what they do can be provided by an alternative far cheaper and easier, because the alternative players are replacing buildings and humans with software and servers.

The open source challenge So this is where the leadership has to be created. Leading incumbent banks from their traditional command and control structures to open-sourced operations that are shared, cooperative and inclusive. This is the core of conversion to digitalisation and, as most bank leadership is immersed in risk management and control structures, open-sourcing the bank is a really tough ask. Many banks will fail to meet this challenge, not because their bank is weak or unable to adapt, but more because their leadership is weak and unable to adapt. Open-sourcing finance is the shared economy business model of partnering, white labelling and integrating components to create a new business model of aggregated components of product and service. Any bank resisting such change will not survive and, to understand such change, truly requires a leadership with technological

Banks are hugely reluctant to open-source their operations and that’s where the fintech community is scoring points banks have legacy IT; their providers have even greater legacies in many instances. Add a bank bespoke implementation of a legacy solution and you have a legacy upon a legacy. Or is it a heritage? Whatever. Anyway, back to the main point: banks are hugely reluctant to open-source their operations and that’s where the fintech community is scoring points. By taking the vertically integrated, proprietary and legacy structures of finance, fintech firms

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These banks will be the ones that survive the transition from last-century distributors of paper through a physical network to this-century distributors of data through a digital network. The challenged banks, rather than the challengers, will be those that try to keep their vertically integrated control of operations. Banks no longer control any part of their value chain. They do not own the customer; they have zero digital relationship, unless they earn it;

prowess, not just banking knowledge. Hence, when I come back to this thought of banks not needing technological leadership, just good leadership, who can delegate the change to the right advisors, whether internal or externally, I fundamentally disagree. You cannot delegate the future of the bank. You cannot ignore your obligations to lead the change. Should your bank leadership think that’s the way to go, I’d leave the bank. |


insight & gLobaLisation

Carpe fintech! Susanne Chishti, CEO & Founder of Fintech Circle and Co-founder of The Fintech Book, reflects on the industry's transformation What an unforgettable moment when our global fintech entrepreneurs, investors and visionaries arrived in London in March to meet for the first time at the global signing of 200 copies of The Fintech Book. The group arrived at The Shard to celebrate a dream that had turned into reality. By end of April 2016, The Fintech Book had become an Amazon bestseller and was selected as the “hottest new release” among finance books in the USA. One of the first things I did when I left banking in 2014 and wanted to learn more about the fintech sector was to go to Amazon to buy such a book. I was surprised to find nothing; not a single one was available describing this new industry, which has seen an inflow of $22billion of investments in 2015. So, Janos Barberis, founder of Fintech Hong Kong, and I decided to create our own, using the fintech principle of crowdsourcing. Our idea was to invite the best fintech thinkers globally, no matter if they came from a small fintech start-up or a multi-billion pound bank or tech giant. Each contributor was invited to propose an abstract in the form of a teaser for a full article that would then be written if the fintech community voted for their content. We did not know if we would attract 10 or 20 authors. A few months later we had almost 170 from 27 countries, contributing almost 190 articles on the most cutting-edge fintech topics and disruptive technologies. Our fintech community helped us select the best abstracts from a diverse group. Contributors ranged from established banks, such as Citi and Lloyds, to challenger banks, such as Fidor and CheBanca; from top consulting companies, such as KPMG and PwC, to specialist fintech research firms, such as Banking Reports and Fintech Daily. We had global tech giants, including Microsoft, global fintech firms, such as Strands, Avoka, eToro and Kantox participate, and European fintech firms, such as Econob (Austria), Scaled Risk (France), BIW Bank and (Germany) and Kontomatik



(Poland) to name just a few. We had fintech leaders from the USA and Canada (Digitalfutures and Koreconx) and from South America ( contribute great articles. Equally fintech entrepreneurs and thought leaders participated from Asia, for example, from HK & Singapore (Extractalpha), to India (Centre for Innovation Incubation and Entrepreneurship) to Australia (DragonBill). Thus The Fintech Book, is the first crowd-sourced book on the global fintech sector. Published by Wiley in April 2016, it contains the most holistic, cutting-edge thinking globally to not only truly understand how the global fintech sector works today but to learn how it will revolutionise financial services in the next 10 years.

The fintech future belongs to all of us, both in developed countries and emerging markets And it’s what people wanted to hear; The Fintech Book had received pre-orders of more than 2,500 copies even before its official launch. My personal fintech journey started 20 years ago when I studied in Berkeley, California, and later worked for a tech company in the Silicon Valley. I recognized the special atmosphere in London in 2014 because it was the same excitement that we all felt when the internet boom was being born in California. I was there, saw what happened and how the internet changed our world for the better. What the internet did for us in the last 20 years, fintech will do to our lives in the next 20. Now again we are at the beginning of a new, gigantic wave of innovation: the digital

revolution in financial services, often referred to as the fintech revolution. It will change the financial services sector forever, the same way the music, video and travel industries were disrupted. It will impact all financial services businesses, from banking to insurance, globally, and will include business to consumer (B2C), business to business (B2B) and business to business to consumer (B2B2C). The impact will often be painful for established large players and it cannot be stopped. I founded Fintech Circle in the second half of 2014 in London after a long career in banking. I decided to leave because I felt so passionate about this new, emerging financial world order, which we are all creating together. Banking colleagues often approached me who wanted to invest in these new fintech start-ups and fintech founders asked me for advice in how to attract smart money, i.e. angel investors who truly understand their fintech businesses and who can not only fund them but help them grow. I experienced how difficult it was for fintech firms to raise seed funding when angel investors did not understand their sector well enough. Most of fintech is complex, thus deep domain expertise is very valuable and often hard to find among both private and institutional investors.

What is Fintech Circle? Fintech Circle is Europe’s first Angel Network focussed on fintech investments. Our goal is to connect the best fintech startups with the best fintech angels (private investors) and bring them together in person during regular Angel Network Evenings in London as the fintech capital of the world. During these evenings, the top six fintech firms (which have passed our multi-stage selection process) are invited to present to our angel investors. Normally, they will be asking to raise up to £500,000 in equity capital. As part of our selection process, the top 10 applicants are invited to Fintech Circle Selection Days where the fintech founders Summer 2016

present to our selection panel, followed by a Q&A. The six winners are then invited to a Coaching Day to help the entrepreneurs to finetune their presentation. When you pitch for investment, you normally have only one chance to get it right, so preparation is key. In order to help create a fintech community for our entrepreneurs and investors, we also set up the Fintech Circle LinkedIn group and Twitter account (@fintechcircle). Our goal was to create a platform of sharing the many successes of fintech leaders, including their exciting disruptive business models and products/ services, creating a collaborative atmosphere of working together. Our group is growing rapidly since we launched in October 2014 and now has 12,000 members, including many C-level executives across financial services, technology, telecoms and consulting firms, who want to engage with and learn from fintech entrepreneurs globally. In addition to this online group, we have also set up a Fintech Circle Alumni Group consisting of the best fintech firms who have passed our selection process. Here we meet face to face with the goal to identify and encourage synergies between our portfolio companies. On a regular basis, we organize educational fintech events for our fintech members, ranging from industry specific events, such as providing “fintech deep dives”, to angel investor seminars on tax incentives or specific disruptive technologies, such as blockchain.

helping fintech firms set up their business in London and lots of networking with other fintech entrepreneurs. Signup is simply by completing an application form online.

Fintech Circle Innovate To close our own “circle” we realised that we would like to work closer with established financial services players who often are just realising the opportunities and challenges that fintech trends pose. The focus of Fintech Circle Innovate is to accelerate innovation, connect ecosystems and shape the new generation of financial services. We also advise established players and support their internal educational needs to enable their C-level executives, specialists and teams to truly understand fintech innovation, new business models and technologies and decide on the best strategies for effective engagement. Our training portfolio for retail, corporate and investment bankers can be customised to the requirements of our corporate clients and can be viewed online. In April 2016 we launched a dedicated Wealth Tech Platform to help select the best fintech firms across asset and wealth management and combine them with the best fintech experts in this space for the benefit of our institutional clients. Across financial services, collaboration with fintech

firms is of paramount importance and we are able to source fintech firms to address specific external and internal challenges and to shape and meet the requirements of investment mandates as part of corporate venturing activities. In summary, the fintech future belongs to all of us, both in developed countries and emerging markets. You might be deeply involved in the fintech sector already or you simply consume financial products and services. You might already save or borrow on a peer-to-peer (P2P) platform and invest or raise capital on a crowdfunding platform. Some of you might get asset allocation advice via robo-advisory services, or make payments via your mobile phone or simply transfer your holiday money internationally with the help of fintech FX and remittance payment providers, such as Azimo or Transferwise, to save on fees. We are all part of the fintech ecosystem as consumers, investors, entrepreneurs, service providers or established players. We have all left the shore behind us in order to moving to a bright future of finance. Let’s together seize this enormous fintech opportunity – carpe diem, carpe fintech!

London Fintech Tours In 2015 we launched London Fintech Tours to invite international fintech firms to London’s fintech ecosystem, introduce them to investors, business development opportunities and empower them with the knowledge and contacts to set up a business here in order to tap into the UK capital market when raising funds and to create an important network of contacts to grow their fintech business in the UK. The next two-day fintech tours are on 16 and 17 May and 15 and 16 September 2016. The programme includes pitch training and a business plan workshop, meetings with investors and potential partners and an opportunity to present their fintech business, everything start-ups need to know about fundraising options in the UK, overview of the best fintech accelerators, presentations by and extensive Q&A with companies Summer 2016

an eye on the future: Everyone is part of the fintech revolution |


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Kickstarting fintechs

A Fintech Finance Magazine Q&A with Francisco Lorca, MD of Startupbootcamp, which connects startups with investors, mentors and partners in more than 30 countries FF: What are some of the biggest challenges facing the finance industry? Francisco Lorca: One of the them is understanding what millennials demand from their bank. They don’t know whether they will exist in the same way they do now or just be a utility platform. Another challenge is banks being able to offer a personalised service while operating with legacy business processes, technology, infrastructure and compliance systems. As new features are added to improve their service in the digital age, none of the existing systems are retired. This means banks need to have the capacity to support branches, call centres, online and mobile customer channels all at once. This increases the cost and complexity of banking and to offset this, the banks need to find ways to interact with customers that make routine processes as automatic and defect-free as possible. In addition, there has been an increase in regulatory requirements and banks need to spend more on building compliance systems. Banks are definitely under threat from disruptive fintech startups. This creates a challenge for incumbents because they are not able to adjust quickly to changes in the sector, not just in technology and services but also in operations and culture. Banks are failing to deliver the seamless level of service consumers have come to

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expect from other Internet companies and other easy-to-use technology.

many more in addition to our extensive mentor network from around the globe.

FF: Are the startups you see in the disruptive category or are they keen to work with incumbent banks? FL: At Startupbootcamp Fintech we have seen both types. However, most both want and need to collaborate with incumbent banks and other financial institutions. During our accelerator, we help startups perform their proof of concept with one or more of our corporate partners. The startups selected for the programme will have the chance to work with our partners, such as Mastercard, Rabobank, Lloyds Banking Group, Intesa Sanpaolo, PwC, and

FF: Tell us a little about the accelerator programme and what you have planned over the next 12 months. FL: Startupbootcamp was founded in 2010 and each programme invites 20 start-ups to its Selection Days from where the top 10 will progress to the three-month accelerator programme. During these three months the start-ups undergo mentoring. The first month is all about intense, mentor-driven development of the team, idea, solution, business model and development plan. The second focusses on forming actionable plans to create a product that solves customer’s problems. And the third drives traction to gain initial revenue and viral growth. We have recently opened applications for our 2016 Startupbootcamp Fintech accelerator. We are now on the look out for a variety of fintech startups to attend one of our FastTrack events that we are holding in Europe, Asia, Israel and the US. Attending one of these events means startups are on the Startupbootcamp Fintech watch list for life, giving them a greater chance of being selected for a global programme. We choose 10 to 12 successful startups by the end of July for our accelerator programme, which will run from September to December.

Banks don’t know if they will exist in the same way they do now or just be a utility platform |


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Virtualised expertise: a true win/win Simon Blissett, Head of Financial Services Solutions & Innovation EMEAR at the multi-technology company Cisco, introduces the virtual advisor How many times have you gone into your local branch to see someone about a mortgage or a pension or a current account and no one is available to see you right away? It happens more often than you think and the bank often doesn’t know how much business it is losing as these initial requests are often not tracked or recorded. Of course, you can make an appointment but why should you have to wait? In reality, it is difficult for the bank to match the supply of expertise with fluctuating levels of demand from customers. And it is increasingly expensive for them to provide expertise on a local basis due to increased demand for quality advisors and the growing cost burden of regulation and supervision. That is why many banks are looking to virtualise their sales forces. How? By using fully immersive video-based capability to project their centralised expertise into local branches, homes and places of work. At Cisco we are seeing an increased demand from banks asking how digital face-to-face capability can enhance their customer experience, lower their cost to



sell/serve and reduce revenue leakage. It has another strategic impact, too. None of us can predict how channel usage will change in the future. Sure, there is a clear trend to move from branches to self-service channels for everyday transactional banking but not so much yet for complex advisory services. We don’t know how quickly people will want to conduct their mortgage discussion from home over their smart TV, for example.

Changing models Banks need to build agility into their operating model and that is what centralising their sales (and service) expertise achieves when it can be projected digitally into branches, places of work and homes alike. The biggest challenge in this is not the technology but the change in operating model and sales culture that is required. Customers also win as they are better protected as virtual interactions can be recorded and referenced if sales conduct or product suitability is challenged in the future. They are also more likely to be ‘seen’ by an advisor at a time and place that is more suited to them.

The banks win by reducing costs, driving improved revenue and reducing distribution risk. It is not often that everyone wins but this is one of those times and analysts at Forrester appear to agree. Its recent Implement Video Banking To Drive Digital Sales report by Alyson Clarke urges banks to consider weaving human advisors and digital technologies together with video banking. Clarke says: “Success will require more than just a simple video call. eBusiness and channel strategy executives need to ensure that video banking capabilities let prospects collaborate effectively with an expert when and where they choose and that experts are supported by the right processes, tools, and training.”

Banks win by reducing costs, driving improved revenue and reducing distribution risk

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