Fintech Finance presents: The Fintech Magazine Issue 15

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MAGAZINE Making a rail difference

How Bank of America and others are tackling the gig economy

World of fintech THE



FINTECH 2020 Paris FinTech Forum

The industry assembles

Knowing me, knowing you

Digital theft and the best KYC we can do

Phygital fibs

Why digital natives really do love branch banking

SPECIAL FOCUS on the Asia hubs spreading festival fever!

INSIGHTS FROM Banking Circle ● Melissa ● Hampshire Trust Bank ● Equifax ● Post Office

Citi ● UL ● G+D ● Wells Fargo ● RBS ● SmartStream ● Apply Financial ● TSB ● Bank of Ireland

5 TH E D I T I O N




Is this the end, or just the beginning? Founder & CEO of Paris FinTech Forum, Laurent Nizri, reflects on where the industry has come from... and where it’s going

10 Showing the love for SMEs Banking Circle, looks at the challenges and opportunities ahead for SME payment providers

PHYGITAL & TRANSFORMATION 13 Virgin territory The first rebranded Virgin Money store signals branch banking may never be the same again

16 A comfortable compromise Today’s customers want to chill out in a bank branch, not fret about money. We put our feet up to chat to Glory about transformation

18 Post modern banking The UK Post Office has de facto become the country’s biggest high street bank – and it’s more relevant in 2020 than ever

20 Branching out Following the revelation that digital natives do actually enter banks, Bank of Ireland outlines its vision for a future-facing physical presence

24 Cash in the community Ron Delnevo, Chairman of Cash and Card World, argues that hard currency qualifies as a public utility

26 Keeping an‘open’mind TSB’s transformation hasn’t always been as smooth as it might have liked, but it’s now poised to reap the benefits of an open banking world

29 Vietnam in banking’s fast lane RBR’s flagship conference Self-Service Banking Asia 2020 will explore how innovation can transform growth challenges into new opportunities

KYC & REGTECH 33 All aboard (swiftly and securely)! RBS and NatWest are setting an example for seamless onboarding

37 Going global by staying local discusses strategies in the face of a fragmented global payments industry




Paris FinTech Forum is upon us – and what better way to kick off the new fintech decade! In this edition, the Forum’s everenergetic founder Laurent Nizri takes stock of the five years since it launched and offers some 20/20 vision on the shape of financial technology to come. While the world heads to Paris, for this issue of The Fintech Magazine, we sent our intrepid digital explorers to the far side of the earth to check out Asia’s dynamic, week-long fintech festivals in Singapore and Hong Kong where the innovation temperature is white hot. One of the sectors advancing in leaps and bounds across the world is lending, where open banking is having a big impact. We check out how lendtechs are using it to reduce risk for lenders while improving credit options for both businesses and individuals. In wealth management, too, disruption is in the air. No longer the

41 Knowing me, knowing you Melissa establishes who individuals and companies are beyond reasonable doubt in a shadowy world where certainty is hard to obtain

44 An issue of trust A proposed guideline framework for assessing digital ID systems could bring order to chaos and set the global standard for integrity, says Trulioo

LENDTECH 46 Debt & AI: A question of ethics Open banking and digital technology have helped HSBC dramatically extend access to credit. But it says those tools must be used thoughtfully to protect banks and customers

49 Credit where it’s due Equifax saw an early opportunity to demonstrate that open banking could have a positive impact on its clients’ lending. And its proactive approach has paid off

52 Bricks and clicks Specialist lender to the property market, Hampshire Trust Bank, is building a unique proposition based

privilege of the elite, platforms such as eToro and Aegon – one B2C, the other B2B2C – are improving even modest wealth management and extending trading to the masses, creating huge opportunities to companies that can excel in this space… And on that note, I’ll wish you a prosperous New Year! Did you recognise our last ‘spine tingler’? "Everyone has an agenda. Except me!” was by the late American author, screenwriter, film director and producer John Michael Crichton. on best-in-breed technology that’s literally knocking on the future’s door

DATA & AI 55 High hopes for low-code Netcall describes how low-code is paving the way for a fresh approach to change in financial services

56 Seeding ideas From sending executives to Silicon Valley to experience innovation, to asking customers to help with product development, Nordea Bank is on the path of cultural transformation

58 Doing the thinking for you In the post tap-and-pay world, businesses don’t have the luxury of time. With SmartStream’s portfolio of AI services, they don’t need it

60 Bringing data into custody At BNY Mellon, capturing and controlling ever larger volumes of data is crucial for customer protection and business efficiency

62 Smart work! A combination of human and artificial intelligence is rocket-charging invoice processing for Konica Minolta’s clients Issue 15 | TheFintechMagazine



Bank on us Offer your merchants immediate cash advances against the receivables they’re due. Our Instant Settlement service helps you develop new business while we bear the risk. THE NETWORK FOR GLOBAL COMMERCE


82 E-asy does it

DIGITAL ID 64 The great enabler Data drives the digital cogs that allow U.S. Bank to pursue an open banking model, but it knows everyone would benefit from better ID&V solutions

66 Monster of a problem Data industry specialist Refinitiv, believes there is only one way to defeat synthetic identity fraud

PAYMENTS 68 The safety catch UL has spent more than a century helping companies embrace innovation while keeping consumers safe and happy. And that’s a very useful skillset in financial services now

70 The greenhouse effect Wells Fargo was known for taming financial services in the Wild West. Now, it’s driving a coach (this time without the horses) through retail banking, using AI

72 The data merchants Retailing is all about making an emotional connection with customers, according to Valitor. And, you need data to feel the love

74 Spicing up realtime payments ACI Worldwide is looking east to develop a new wave of ‘overlay services’ – the secret ingredients that make alternative payment rails irresistible

76 Digging this gig With mobile treasury services, build-it-with-the-customer dev ops and an open mind on payment rails, Bank of America is meeting app-based corporate clients on their own terms

79 Rising to the challenge of global payments Visa Business Solutions is helping businesses find a way forward

80 Orchestrating payments

96 Fast, smart, secure…

G+D Mobile Security’s Convego s uite of solutions offers banks a way to future-proof their payments services against what appears to be an irresistible move among consumers to open their ewallets

CLOUD 98 Of banks and butterflies

84 Codes of conduct We’re all familiar with IBAN and BIC numbers, but would you know what a payments purpose code is – or who uses it? Payments validation software company Apply Financial does, so clients don’t need to

86 Changing fortunes Sanjiv Sawhney, Head of Global Custody and Fund Services at Citi, on the pressures facing the investment industry – and how it’s helping clients respond

WEALTHTECH 88 Getting in the game Online platform eToro has turned investing into a team sport with its social media-style community, copycat trading tool and even a campaign targeted at football fans

90 Don’t mention the P world How Aegon’s digital approach to ‘wage after work’ is changing attitudes to financial planning

93 Tick, tick, tick… Could AI-based digital platforms radically change people’s saving habits and defuse the pensions timebomb? Abaka, believes so

TRADE FINANCE 94 A new world trade order Barclays is using new technology to help steer through unpredictable economic seas. We explore how it’s applying blockchain, AI and the Cloud to give clients safer passage

FIME is uniting global payments in the quest of seamless card and mobile transactions

…are the ambitions driving Bank of America’s investment in digital infrastructure to facilitate transactions in the supply chain

Microsoft, discusses why moving to a Cloud-based platform is an evolutionary step that will help the banking industry soar on digital wings

101 Cloud cover Ciaran Chu, Head of Public Cloud for ACI Worldwide, explains what Microsoft Azure means for ACI and its customers

LOCATIONS 102 Smart city slickers Singapore is using technology to enhance its resilience and sustainability – not least in financial services. From investing US$2billion in green funds to collaborating over crossborder payments systems and setting up a National Office of AI, it’s determining its future with brave, bold steps

106 King Kong Hong Kong is uniquely positioned where China meets the western world – geographically, culturally and politically. And it’s where fintech is pushing the boundaries

LAST WORDS 110 Lodes of good There are plenty of bright ideas for tech-for-good, but finding funding for something that builds social rather than financial capital is desperately hard. David Hoghton-Carter challenges fintech to put its thinking cap on…

112 Why insurers should stop fearing technology Stephanie Smith, Chief Operating Officer at insurer Allianz, talks to financial data experts FinTech Global


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Issue 15 | TheFintechMagazine



Is this the end or just the beginning ? As Founder & CEO of Paris FinTech Forum, Laurent Nizri has seen a remarkable metamorphosis of the industry over the past five years. Here, he reflects on where it’s come from... and where it’s going 28 January 2016 was the first edition of Paris FinTech Forum. We were one of the first truly global events to launch in the industry. From the outset, even though we were a much smaller event than we are today, we were able to attract several future unicorns onstage. The CEOs and founders of N26, Revolut, Monzo, Qonto, Ledger, Iwoca, GoCardless, Lydia, and many more, took part in our first event. At the time, Paris FinTech Forum was only a one-day event. Our speakers did already include both the incumbents and fintechs, but the discussion between them was much less open than it is today, possibly partly due to the fact that few of the fintechs had been able to achieve real success with customers and investors. None of the companies mentioned above had raised more than a couple of million euros at the time. Then fintech started attracting investments (albeit small compared to today’s figures). Not long after that, we started seeing the first digital success stories, in retail banking and payments, with sizable customer adoption and usage figures. In some cases, the huge expectations from the business-toconsumer (B2C) models did not materialise and therefore many new players pivoted to different ones closer to technology providers – sometimes with


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good results. Many actors did remain in the direct-to-consumer market, but only a few in each market attracted most of the investments and media attention. As a result, we are seeing an increasing number of players in the B2B/B2B2C (business-to-business/business-tobusiness-to-consumer) markets – businesses like platform providers or application programming interface (API) vendors are so numerous that some of us are beginning to doubt how they will all find sustainable traction in the coming years. However, they are here today, and they bring real innovation to the table. These businesses are based across the globe and are quite well funded to face their ambitious objectives. Only the coming years will tell us who will succeed. During the last five years, we have also seen the ups and downs of the initial coin offerings (ICOs), the difficulties faced by insurtech and investment/wealth management startups in trying to find success at the same pace as retail banking challengers, especially in Europe, and the rise of regtech in response to the neverending complexity of financial regulations across the world. Importantly, we should not forget that, in some emerging markets,

The Forum provides the opportunity to meet a wide range of people working at the forefront of fintech in an atmosphere of co-operation and learning. I am really looking forward to seeing the mixture of debates, discussions and education that have made it one of the key events in my calendar

David Birch

Financial services author, advisor and commentator on digital financial

fintech did truly improve the lives of many people, addressing the inadequacy of existing financial services infrastructure, with new players directly filling the void left by the banks – as was underlined by Christine Lagarde, managing director of the International Monetary Fund at the time, on our stage in 2019, .

What was the DNA of our Forum from the outset – cooperation between incumbents and new players – has now become a shared objective all over the world in 2020

What was the DNA of our forum from the outset – cooperation between incumbents and new players – has now become a shared objective all over the world in 2020. All incumbent players are now trying to find the best way to work with fintechs to transform their businesses. So many incubators/ accelerators/hubs have appeared to support the growth of fintech startups , that it is not rare to find the same startup present in several of them at the same time. But first strains in this approach are appearing, as the magic recipe to get startups and corporates to collaborate successfully has proven to be hard to find. We are increasingly seeing some big banks or insurers looking more at Big Tech for cooperation than to fintechs. If you look at mainstream media, fintechs are everywhere: in ads online, in publications, on TV or in the subways and editorial articles, which seems to suggest that they have already won the battle to transform the financial industry.

Then there is the endless list of fintech conferences, from which you’d think everything has already changed. Many of us, seasoned actors in the space, learned the hard way, in 2001, that when everybody buys, you should sell. With fintech, are we at a tipping point where a small number of winners will take it all (like Google and Amazon in their day) and all the others will disappear without anyone really noticing? I do not have a crystal ball, but what I do see is still a huge will for transformation in the financial services industry – even by historical players that realise they need to change. I believe we are now entering the second phase of that so-called fintech revolution: the Fin&Tech Phase. We will see a profound transformation commence in core financial industry systems, while, at the same time, some key areas in the

As CEO of one of the world’s largest financial software providers, you get to attend many fintech fora around the world. If you expect a senior, vibrant, comprehensive, insightful view on the future of global financial services, from incumbents to attackers, banks to corporates, technology veterans to technology startups, nothing compares to what you find at PFF. I, for one, will be there

Simon Paris CEO, Finastra

Issue 15 | TheFintechMagazine



end-user markets will continue to be disrupted by key players as long as they have access to funds to fuel their growth. Journalists, social media addicts and (some) conference organisers will continue to have intense focus on artificial intelligence (AI), blockchain or some other latest buzztech. In the meantime, the majority of the professional industry players will work hard, be it the myriad of fintechs or the well-established incumbent banks and financial institutions to transform the future of our industry for real. So, to get back to the question: is this the end of fintech or just the beginning? The latter ,of course! The caterpillar’s time is

I always look forward to the Pitch Stage at PFF – it’s one of the best showcases for what’s new in fintech, how the thinking in the industry is evolving, and covers everything from wealth and investment to corporate and crypto. It’s a fast-paced, intense mini-master class in all things fintech, and can’t be missed if you’re at the Forum

Ghela Boskovich

over. Soon will be the time of the butterflies. How long will that take? No one can say exactly, but we know it will be much more than it takes for an influencer to write a few tweets or a talented entrepreneur to raise hundreds of millions. You may have noticed that, unlike the previous four editions, we do not announce the next show at the back of this magazine,. So, is the end or just the beginning for Paris FinTech Forum also? With the tremendous support of the fintech community, we built, in a few years, what is considered by many to be the most exclusive, and one of the best, global events for digital finance and fintech. The fintech industry has changed a lot in five years. We are an independent team of a few people; we do not want to join the cohort of events organised all over the world just to make money around the hype. Paris FinTech Forum must stay meaningful and useful to the community it has served since day one. We have never seen as much interest as we have for this fifth edition: be it requests to speak, sponsor interest or ticket sales, we have broken all our records! Three hundred-plus CEOs on stage from all over the world and all verticals, incumbents and fintechs; more than 2,600 attendees of 75 nationalities; exhibition space sold out

Are we at a tipping point where a small number of winners will take it all and the others will disappear without anyone really noticing? since the summer… We want to build on this success; to think about the future and the needs of the industry… and come back with a new concept that is able to support fintech and digital finance innovation for many years to come. To do that, we want to keep all options open, and to work with all of you on what the next edition should be. Perhaps it will be the same concept, or, indeed, another. The same venue, or not. The same time of year, or a different season. The same frequency or different? Let’s work together to build it. If you have an idea on the subject and want to discuss it, contact me at It was a pleasure and an honour helping fintech growth for the last five years. Stay tuned, we’ll be back! LAURENT NIZRI

Founder, FemTechGlobal


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PARIS FINTECH FORUM Heart of the matter: Each small business is unique and providers need to recognise that

G N I W O H S E V O L E TH s E M S R FO Body

Access to finance has undoubtedly improved in recent years, but for SMEs (small and medium-sized enterprises), this improvement is not enough.

Almost all of them need finance in their first few years, but while loans are an essential lifeline to many, they alone will not solve all the financial challenges that these small businesses face. At Banking Circle, we are dedicated to improving access to banking solutions for businesses of all sizes, in all industries and in all geographies, whether they trade nationally or internationally. As part of this commitment, we regularly speak to businesses to find out what issues and challenges they are facing, and what the banking pain points are today. Recently, we commissioned MagnaCarta Communications to carry out a series of studies for us, looking into financial exclusion and how different financial


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Anders la Cour, Co-founder and CEO of Banking Circle, looks at the challenges and opportunities ahead for SME payment providers, and their vital role in financial inclusion

provide up-to-the-minute feedback on the state of the industry, current provision, the challenges and what the road ahead looks like. By gathering this range of first-hand insights, we believe we can work together with the wider industry to find better solutions, which meet the current needs of SMEs facing potentially lethal financial exclusion.

The challenge of serving SMEs institutions can each play a role in supporting SMEs and improving access to banking and finance solutions. In 2019, we published a white paper, Financial Inclusion For Europe’s SMEs: Building A Circle Of Trust. Now we have published a payments-focussed insight paper, Pay, Set, Match! Payment Services For SMEs – Jump-starting A Virtuous Digital Payment Circle. Unique insights from experts working right in the heart of the payments sector

Effectively serving SMEs requires payment service providers (PSPs) and other financial institutions to have a true and meaningful understanding of the reality of small business life. Many PSPs are indeed SMEs themselves, which can be invaluable in assessing specific needs and the challenges SMEs might be facing. And this can put them in a strong position to develop solutions – working with like-minded partners – that exactly fit the bill.

But at the heart of the issue is the fact that PSPs must build solutions that are SME-specific, not based on a previous model built for larger businesses. And this is exacerbated by the fact that each SME is entirely unique – some are one-man bands, others have 249 employees; some are local businesses, others trade internationally; some are seasonal and others have a steady flow of income throughout the year. This immense variation creates a dilemma for financial institutions trying to build scalable solutions: no single payment solution can meet all the financial needs of every SME. There is no one-size-fits-all. One thing all SMEs have in common, though, is the need for banking accounts, and almost all will, at some point, need an injection of cash, to kick-start an expansion, purchase stock at the beginning of the season or replace broken equipment. A traditional business loan from a bank is generally too expensive, too inflexible and too slow to arrange for a fast-paced SME in today’s highly competitive, digital and international marketplace. As Kent Vorland, CEO of SmartTrade App, told us during our research: “Consumer products are not agile enough and providers have little knowledge of small businesses… Equally, the big boys have complicated functionalities, but nothing optimised for small merchants.”

Challenges facing SMEs

Nearly half of UK small businesses would be willing to move to a non-bank provider if their financial needs would be met in new and innovative ways

It didn’t take much investigation to establish that late payments, limited access to services and restricted credit lines are affecting the success and potential of SMEs of all sizes and stages. SMEs also commented that access to payment services is restricted, it takes too long to open a merchant account and there is little support for accounts payable. Each of these can have a significant impact on an SME’s ability to maintain and grow its client base and profit margin. In turn, this limits its ability to expand, reach new markets, increase product lines and better serve its customers. With 24 million SMEs in Europe making up 99 per

cent of private businesses in the region, employing around 60 per cent of the European workforce and contributing more than half of all business turnover, a problem holding back SMEs is a problem holding back the entire economy. David Selves, owner of the Selves Group of companies, commented: “Three to five banking days for card payments is still the norm, which causes considerable issues for many small businesses that need to restock rapidly.”

… for business: But existing financial services for SMEs don’t fit the bill

Michael Ault, CEO and Founder of Universal Transaction Processing, added: “SMEs have been through an arduous process to get a merchant services account, and then it takes days to get their funds.”

PSPs to the rescue

Ivo Gueorguiev, the chairman of Paynetics, told us: “Any service providers deploying digital technology are ideally placed to serve SMEs and address the problems of scalability, access, utilisation and viability.” Supporting this view is recent research from marketplace lender Growth Street that showed nearly half of UK small businesses would be willing to move to a non-bank provider if their financial

needs would be met in new and innovative ways. The research conducted by MagnaCarta Communications also showed that artificial intelligence (AI) is being used to reduce audit processing times, automatically match payments to invoices, identify suppliers most likely to pay late and reduce fraud. Speeding up the process in this way reduces manual intervention, cuts the risk of manual errors and, of course, significantly reduces application and risk assessment time. In turn, this brings down the cost, delivering a more affordable, faster service to SMEs. But a big part of the role PSPs need to play is in educating SMEs about it. We found that many are yet to be convinced of the benefits of digital technology in general. And this means they are not actively seeking digital banking and payment solutions, despite the fact that these could deliver a far better service than they receive from their current banking provider PSPs cannot change the minds of millions of SMEs overnight, or alone. So, while PSPs should see themselves as a key element in that change, education must be carried out via a collaboration of financial institutions across the entire industry. Each provider must share responsibility for kick-starting adoption rates among SMEs. With many PSPs and other providers already delivering innovative ‘point’ solutions, and many ambitious SMEs currently underserved by their existing bank, the opportunity to build bridges and connect solutions is ready and waiting. Each provider has a role to play and value to add if they build relationships across the board. As reported in our insight paper, financial inclusion based on digital technology occurs over a broad spectrum of technology, communication, collaboration and analytics. Innovation and real change is only possible in an ecosystem where each player knows its role and appreciates that of others. Dialogues must be kept open and innovation must continue, in order to find and develop successful, effective, affordable solutions that will work for SMEs of all types, increasing financial inclusion and benefitting our economies as a whole. ■ For a copy of the latest insight paper, visit Issue 15 | TheFintechMagazine


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VIRGINTERRITORY VIRGIN TERRITORY The first rebranded Virgin Money store signals branch banking may never be the same again. And that’s got to be a good thing, says Head of Retail Distribution Paul Titterton

If anyone knows anything about building a successful brand, it’s Sir Richard Branson. Who remembers now that the trademark, pillar box red Virgin Money logos covered up the former Northern Rock fascias after the company bought the North East bank eight years ago, so forceful is its presence. Now, the ultimate challenger brand, which itself was bought in 2018 by Clydesdale and Yorkshire Bank’s owners in a £1.7billion deal that leaves Branson with a 13 per cent stake, is planning to become the ultimate challenger bank on the high street. Following the banks’ integration, it is the Virgin Money marque that will drive development from now on. And that future is big, bold, and radically different to anything its nearest rivals – the Big Five – have to offer, by the look of its first flagship money stores. Having disrupted everything from travel to telecoms, the record to the retailing industry, it’s no surprise that Manchester, Birmingham and London woke up in December to find that next-generation branch banking looks radically different when it’s undergone a Virgin Money transformation. All previously run under CYB’s B brand, the Manchester makeover includes a platform for concerts, a social media studio for vloggers and influencers, and after-hours co-working spaces with advice and mentoring for would-be entrepreneurs. However, it’s not just for Generation Z-ers. “I think pretty much everyone’s trying to solve the same problem. We are seeing more and more customers use online

banking, with basic transactions migrating away from the store and, therefore, what is the role of the branch?” says Paul Titterton, head of retail distribution at Virgin Money, which launched its first digital account and mobile app around the same time as it’s big High Street reveal. The rest of the Virgin Money store roll out in 2020 will see all Virgin Money and CYB branches across the country brought under the same signature. The city centre flagships – some in new locations – will operate with hours to suit the locality, and offer facilities matched to their community – from early-morning yoga to late-night private business functions. Titterton explains that one of the main challenges for banks in the digital era is striking a balance between innovating and maintaining a high standard of service with face-to-face contact for customers. He points to notable efforts by banks around the world to solve that conundrum. “In Hong Kong, Standard Chartered has a very technology-based branch. At Umpqua Bank in the US, they’ve gone more down a very community-based

model. I like some of the things Barclays, HSBC and Nordea Bank are doing around guidance and advice, focussed on a very targeted customer segment . “Customers do a lot online, but at some point they need a bit of reassurance to give them the confidence to complete. Quite often that will be speaking to a human who they see as having expertise in that field. That’s what I see, more and more, as being the role of the branch.” The Virgin brand, of course, has a major advantage over many banks: namely, its 43 years of global retail experience. Its groundbreaking Megastore brand, which remains mega in the Middle East, and its empire of disruptive cross-industry interests, all operating under its ‘changing business for good’ ethos, allows it to offer a unique mix when it comes to redesigning the branch experience.

We don’t have to have a store network anymore, it’s a choice, it’s an investment, because we believe it serves a purpose for our customers Issue 15 | TheFintechMagazine


PHYGITAL & TRANSFORMATION For Virgin Money customers and non-customers (yes, they are also welcome into its revamped stores), there are comfortable spaces where they can stretch out with complimentary refreshments, socialise, read newspapers, use iPads and enjoy exclusive events. This physical presence, Virgin Money says, will remain central to the company’s offering as it looks to disrupt the UK banking status quo across all segments. “We’ve spent quite a lot of time researching what small business owners want from their high street bank, particularly in light of us launching a new

The group’s new, full-service digital current account, Virgin’s first foray into digital banking, can be opened in-app, online, over the phone, or in one of the Virgin Money stores. The account, which it claims will ‘break the big banks’ stranglehold on the UK’s stagnant current account market’ utilises Clydesdale’s successful B mobile banking platform technology. It offers money management tools and a ‘competitively priced’ linked savings product. Customers also benefit from fee-free debit card transactions and ATM withdrawals overseas. They also have an Apple Pay and Google Pay-enabled contactless debit card.

is the primary purpose of a digital branch,” says Titterton. “We don’t have to have a store network anymore, it’s a choice, it’s an investment, because we believe it serves a purpose for our customers. They tell us that they get value from being up to date and educated about how to use digital technology, particularly with banking, and I think they really value the fact that we’re there to help them get the most from us online. “The great thing about digital, is it takes away some of the heavy lifting of the basic transactional activity, so it frees our people up to do some of the deeper relationship-

“I think most of the things that you could ever possibly want to do with a bank, you’ll be able to do via your mobile banking app at some point in the near future; in fact, you can pretty much do most things today,” says Titterton. “But the caveat is that it’s quite difficult to deliver a very human service via your mobile banking app. There are some traits that are just absolutely human that people value, and they are empathy, understanding, creativity, passion; all those things that people can deliver face to face, I don’t think you’ll ever be able to replicate through a machine.” Virgin Money stores are, then, where the bank’s digital propositions can be ‘brought to life’. “We want a place where we can showcase that and create advocates for it through our people. That is what I’d say

building conversations with our customers, that actually add value.” Great brands have the ability to drive cultural change and redefine how we do business. No one thought the first Virgin Megastore, which was replicated across the world, would be as phenomenally successful as it was. The brand’s latest space-bound venture, Virgin Galactic, will likely transform the travel industry. And for Virgin Money’s now six million personal and small business customers, it’s just crossed another frontier. “We’re a really purpose-led organisation and incredibly customer centric,” says Titterton. “We give our people licence to surprise and delight customers, and that extends all the way through the history of the Virgin brand. That’s quite difficult to replicate in other organisations. That’s what sets us apart from the competition.”

Mega banking: Inside the new flagship Virgin Money stores

branch format in Manchester that was very much targeted at SMEs,” says Titterton. “They wanted a place where they could learn from and get access to people like them that have similar roles in the local community, and own similar types of businesses, and an ability to network and learn from industry experts. They wanted a place where small business owners could work from, because getting office space in big cities is an expensive business. And then, finally, they wanted somewhere they can go and do all their banking. “It’s a combination of those three things that we’ve put together for our store format in Manchester, and it’s proving to be very successful with small business owners.” This kind of experiential retailing for finance is all about creating a USP and using a physical presence to drive digital usage.


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If endless headlines are to be believed, the rise of the digital-first generation and ubiquity of mobile phones, mean the days of branch banking are numbered. But are they? Ben Thorpe of cash technology innovator Glory thinks not. Why? Mainly because a deeper look into the numbers reveals that even tech-savvy millennials want the comfort of being able to talk to human beings, face to face, when it comes to making some of the biggest financial decisions of their lives. But to build on that and persuade a digitally-enabled generation to trek to the high street, banks are going to have to wow them with a new kind of in-branch experience: something exciting and inviting that inspires confidence and trust. The World Branch Report 2019, published by Thynk Digital and The Financial Brand, contains some surprising revelations about the true state of face-to-face banking. Among these, the fact that half of consumers – 51 per cent – find branch presence a reassuring factor when judging the trustworthiness of a bank. Chiming with this, 70 per cent of bankers believe branches are inherent to their brand’s survival. A recent Banking Automation Bulletin published by retail banking and payments consultancy RBR, backs this up, stating that, worldwide, the fall in worldwide branch numbers during 2018 was actually modest, at 0.6 per cent, while their numbers grew in Asia-Pacific, the Middle East and Africa. Yet, as Glory’s director of global marketing, Paul Race, highlighted in a

Today’s customers want to chill out in a bank branch, not fret about money, says Glory. We invited MD for Asia Pacific, Ben Thorpe, to put his feet up and talk transformation… recent blog, ‘though customers obviously value the branch, the reality is that footfall is declining. Research from CACI shows that, as things stand, by 2022 customers will, on average, only visit their local branch four times a year’. As a result, banks worldwide are realising they need to fundamentally rethink their branch strategies – all of which was the main focus of last November’s RBR Branch Transformation conference, at which Glory was represented. And the consensus there was that human beings will be integral to these ‘branches of the future’ – both the customers dictating what experience they want to receive, and the staff delivering them, whose roles look certain to change. It’s a fact echoed by RBR’s post-event Banking Automation Bulletin: “It is tempting to characterise the changes to the branch as simply automation of processes that used to be done manually, but this is a massive simplification… people are at the heart of what is happening; staff roles are changing and customers are receiving an improved and much more personalised service.”

The challenge – and opportunity – for Glory, is how it can play an influential role in helping banking clients across the globe define and reflect that new world order.

Keeping the cash flowing Established more than 100 years ago, the Japanese-listed cash technology organisation with 10,000 employees, offices in 28 countries and revenues of around $2billion, works with all the major banks and retailers, ‘anyone, really, who touches cash’, according to MD for Asia Pacific, Ben Thorpe. Another reason demand for physical branches doesn’t seem set to fizzle out any time soon, according to Thorpe, is consumers’ ongoing preference for cash – despite a considerable amount of hype and effort to the contrary. If all else failed, he adds, branches would continue to fulfil a functional role in providing access to this important commodity. So, Glory is retaining its focus, very firmly, on enabling the flow of cash in the most efficient and costeffective way possible, and in more places. “We absolutely believe cash is still king, and we’re looking at how we ensure we help our customers reduce the cost of cash and make it more efficient,” he says. “We’re helping organisations to digitise cash and ensure they’re getting more information on where cash has come from, where it’s going to, the volume, the value, and making it easier to handle. “Contrary to lots of opinion, cash is still a big driver of transactions in the branch, not just in the UK, but, according to our research, in pretty much every

A comfortable compromise 16

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country. In research we’ve undertaken internationally, small and medium-sized enterprise customers say that more than 80 per cent of the transactions they undertake are cash-related and in-branch, and that’s driving challenges and opportunities for the banks, and for the businesses themselves.” Glory’s strategy involves helping its bank clients be there for all their customers, in more places, where and how they need them, to create a more personalised experience while optimising cost and efficiency. This includes servicing a new ‘hub and spoke’ model with master branches capable of offering a deeper, more personal and wide-ranging service, and satellite outlets – sometimes run jointly with other businesses – offering people more practical, often digital or self-service options, in more places but at lower cost. “One of the things we talked about at the RBR Conference was extending the reach for banks to both their personal and their business customers; creating more service points, closer to where their customers actually need and want them to be; extending the reach of the branch network and making the branches fit for the right kind of purpose,” Thorpe continues. “People aren’t using the branches so much anymore, and what they’re using them for has changed in the last 10 or 15 years, but by putting cash technology where customers want it to be, in petrol stations or, for small business customers, digitising cash transactions through smaller retailers, we can meet their needs while enabling branches to be better centres for customer service, reducing their footprint but giving

them a chance to focus more on the people coming in and extend their service.”

Come in and relax... What does Glory believe the future branch might look like, then? In the same blog, Race outlined his personal vision as being the kind of self-enhancing, ‘way-of- life’, social experiences delivered by venues from coffee shops to yoga studios. Flexible spaces suited to different activities, with cushions, wall art and sofas – as he puts it ‘more like a living room than a retail space’. He writes: “As banks re-examine their role and endeavour to create ‘sticky’ customer relationships, the focus has moved away from being a place to store money and sell financial products, to helping customers prepare for and manage life events. “It’s about giving people reasons to come in and helping build an affinity with the bank that converts into increased financial activity. The bottom line is that the real product that banks provide is trust and the branch plays a key role in that. However, the bank branch must change and evolve. One way of doing so is to become a ‘consumer destination of choice’.” That being the case, what services does Thorpe see branches offering and how can Glory help facilitate them? “The future purpose of branches might not be traditional transaction services, it could be advice, it could be as community centres, but helping people on their financial journey, literally from cradle to grave, assisting them in making better financial decisions. I think that will be what drives it in the future,” says Thorpe.

“Glory’s aim is to make sure we can provide the types of services banks need to offer their customers in those branches, keeping them secure, taking away the pain and hassle of dealing with cash and giving them more time for their customers and better face-to-face interaction.” And digital technology will, he believes, serve as an enabler of the human touch. “Branch transformation should be written in capital letters. It is a question of how organisations engage through all channels, and the internet has made everybody very impatient. We expect a consistent delivery of service, on a phone, via tablet, from a call centre or face-to-face. Many banks are spending a lot more time trying to make sure that consistency of service exists, digitally, yes, but people really still want to engage with people. “That might sound trite, but our research shows that, globally, despite technology getting better and better, 75 per cent of people, though happy to start digitally, if they hit a problem or want to complain, want to do it face-to-face with a person. If there’s a problem and they have a person to help them fix it, then really enjoy the experience, they’ll come back for more.” And Glory’s plans for supporting this evolution are ambitious ones. “We continue to invest significantly in next-generation technology,” says Thorpe. “We spend more, as a percentage of our revenue, than Apple on research and development. We may not have the iPhone 11, but we certainly have the next generation of cash automation solutions, and they are constantly evolving. So, keep watching this space.”

The real product that banks provide is trust and the branch plays a key role in that


Postmodernbanking The UK Post Office has de facto become the country’s biggest high street bank, acting as proxy for those that can’t maintain a presence there. As it enters a new era in 2020, the retailer’s Banking Director, Martin Kearsley, believes it’s more relevant than ever When the Post Office was founded in 1660, as the General Post Office, Charles II was reacquainting himself with the throne, Samuel Pepys was busy scribbling about plagues and fires, and the invention of the steam engine was still more than half a century away. Four industrial revolutions and nearly four centuries later, the Post Office remains omnipresent: one of the few bastions of the British high street to stubbornly maintain its grip in the face of digital migration. In fact, its 11,500 branches – more than all UK banks and building societies combined – make the nation’s humble, street-corner public services provider the largest retail network in Europe. Today, 93 per cent of the UK’s population lives within a mile of a Post Office branch; contrastingly, 80 per cent of Brits have a bank branch within two miles of their home. That’s not to say that the Post Office has had it easy. The majority of mail is now sent electronically, and the majority of services provided by the Post Office are now available online. A recent report from the National Federation of SubPostmasters revealed the extent of the Post Office’s revenue nosedive over the past decade: income from the provision of Government services – like DVLA forms and fishing licences – had plummeted from £576million in 2005 to only £99million in 2018. With the state-owned Post Office


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running larger and larger deficits, and cherished town centre branches closing across the country, the Government rushed through the Postal Services Act in 2011. The ruling separated Royal Mail from the Post Office, providing the latter with much-needed space to find new sources of revenue. As the firm’s Banking Director, Martin Kearsley, explains, that’s enabled the Post Office to adopt a hybrid business model, allowing the firm to continue serving millions of UK customers each week. “Our model, generally, is now an agency model,” he explains, “whereby most of our branches around the country are effectively running other businesses at the same time, be that a convenience store, a fish and chip shop, a pub – we have Post Offices in almost every type of local business you could imagine.” This model appears to be what saved the Post Office from suffering a similar fate to Woolworths and Northern Rock. And by renewing its bricks-and-mortar dominance, just as banks were abandoning rural and deprived-urban communities across the UK, a confluence of market forces began nudging the Post Office towards providing banking services on top of its more traditional offerings. Enter Post Office Money, so-named in 2015 after a decade-long partnership with the Bank of Ireland, during which the Post Office unfurled branded travel cards, loans, mortgages and other financial services used by more than 2.1 million UK

customers. This summer, the Post Office also announced the introduction of two new credit cards, partnering this time with Capital One UK, to further broaden its branded financial offerings. But the real banking breakthrough came in 2017, when the Post Office reached a negotiated agreement with 29 UK banks – including digital providers like Starling and Tide – that enabled banking customers to carry out basic over-the-counter transactions in Post Office branches. Backed by government committees concerned by the emerging last-bank-in-town phenomenon, the industry-wide move was quickly lauded as the ‘biggest expansion in face-to-face banking access in a generation’. Astonishingly, the agreement meant that 99 per cent of personal banking customers, and more than 75 per cent of business customers, could now perform basic banking functions over the counter at their local Post Office – more complex financial services being reserved for bank branches and their trained personnel. It’s a move Kearsley is understandably proud of: “It means you don’t have to get on a bus, or drive, and find somewhere to park, to go to a bank: you can access the services you need on a daily basis, through a local community hub. “It’s a fundamental part of supporting local and rural communities. We offer what is effectively a cash utility service for all banks, in a physical bricks-and-mortar

Here, there, everywhere: The Post Office has become a proxy bank with 11,000 branches

network, giving full access to financial transactional activities that all customers need.” The ‘proxy bank’ model, on top of the agency model already adopted by the Post Office, offers significant benefits. Many small business owners, for instance, can now deposit earnings on a Sunday or in the evening after most banks’ usual trading hours – and nearly all such traders can stroll to their Post Office branch to do it. Meanwhile, the agreement suited all manner of banks, as Kearsley explains. “Challenger banks are joining us, specifically to give their customers a physical branch network,” he says. “Looking at the mid-tier banks, we’re offering cash services where they simply don’t have the footprint, the spread of branches, to be able to offer, while the largest banks are reducing their branch networks quite dramatically and we’re stepping in to fill that gap, too.” In a bizarre twist, the Post Office has evolved into the UK’s most comprehensive provider of financial and other services – offering over 170 products and services to consumers of all types. However, earlier this year, Kearsley revealed that its groundbreaking agreement with UK banks was not profitable for the Post Office, which resulted, under government supervision, in a new, industry-wide pact, named the Banking Framework Agreement, which took effect on January 8, 2020. This provides postmasters with broadly three times more remuneration than previously and, despite a wobble, a brief exit, and a U-turn from Barclays, continues to involve the original 29 banks.

This extra revenue will enable the Post Office to continue playing its crucial role as a banking lifeline – funding the digitisation of services, and introducing new technologies into branches across the UK. For Kearsley, this is about enabling the tech-toting branch experience of the future. “The ability to offer new and innovative services to customers in non-bank branch locations is dependent on the kind of tech we can deploy,” he explains. “Whether you’re a small business looking to quickly deposit funds, or an elderly customer, an eBayer, or a multi-parcel sender, you all get the same experience at the counter. “Increasingly, the role of tech is to pull that transaction apart and say, if you want to come in, quickly deposit cash, wave at the postmaster and be gone, you can do it in an automated way. It gives that business customer a better journey, and, equally, offers the customer who requires some extra help at the counter the time and space they need.” While a 2019 survey conducted by Which? found that only 55 per cent of UK adults are aware they can use the Post Office for banking, the company nonetheless processed 130 million withdrawals, deposits and balance enquiries last year. Technology and training will help boost this number, as will more strategic partnerships, like that announced with Western Union last July, enabling

customers to make international digital payments at the Post Office. “Our aim is that, whatever account you have, with whatever financial institution, you can access it through a Post Office – which amounts to a huge democratisation of cash,” adds Kearsley. The Post Office is currently working as part of the Accenture Fintech Innovation Lab – likely on branded digital services, although the company is yet to announce its digital banking strategy. More excitingly, it looks set to become a leading player in the creation of digital identities in the UK. A traditional hub for processing passports and drivers’ licences, it is at the forefront of the Government’s flagship digital identity programme, Verify. This boasts six million registered users and, according to the Post Office’s managing director for identity services, Martin Edwards, has ‘proven the basic concept of digital identity in providing customers with an efficient and secure means to prove who they are’. A centuries-old organisation learning how to run in the digital age, the Post Office has somewhat surprisingly emerged as the services provider to watch as we enter a new decade of phygital banking. For so long a cornerstone of community life, this treasured UK institution appears ready to forge a future of fundamental financial importance for customers the length and breadth of the UK.

We offer what is effectively a cash utility service for all banks in a physical network

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A supportive network: You’d be surprised who appreciates having a local bank branch

Digital natives, we’re told, are so immersed in digital technology – so comfortable in the binary landscape that links their phones to their friends and their finances – that physical, real-life experiences feel dull, inconvenient and frankly outdated to them. It’s difficult to blame service providers of all stripes for responding to this apparent trend and taking a bulldozer to their physical, in-person provisions. But… it’s only half of the story. Despite the advancing avalanche of digitech, it appears that consumers, including millennials, do in fact value tactile, physical experiences. Digital natives, contrary to previous projections, prefer to straddle the digital and the physical worlds in their shopping and their socialising – and appreciate seeing a human face in-store. This thaw, following a digital white-out, has soaked decisively into the banking sector. Deloitte this year advised, after careful analysis of banking customers, that ‘banks should not completely give up on branches yet. Customers still prefer the human touch’. A Gallup survey from 2018


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Following the revelation that digital natives do actually enter banks, Áine McCleary, Director of Distribution Channels for Bank of Ireland, outlines its vision for a future-facing physical presence with branches to suit everyone underlined this point, finding, against prior assumptions, that 66 per cent of millennials had visited a bricks-and-mortar branch in the previous six months. And at November’s RBR Branch Transformation Conference, 580 delegates from mroe than 180 banks were told their branches need entirely reimagining for the 21st Century – not boarding up. That’s a movement that Áine McCleary, Bank of Ireland’s director of distribution channels, can buy into: she believes that, while one incarnation of the branch may be in decline, another is set to rise. She explains: “In the noughties, we saw a lot of consolidation and some branch

closures. But in recent years, we’ve seen something of a reversal.” Bank branch closures reached a peak of 70 per month in 2017 in the UK, a figure that research from Which? showed had halved by 2019 (although that stat was arrived at before TSB’s decision to close 82 outlets). The slowdown – while perhaps evidence that banks have now cut as close to the bone as they dare – appears to be EU-wide. And there are signs of some strategic branch reopenings taking place across the continent, including on the island or Ireland, where the Bank of Ireland currently has 265. As leader of a team of some 2,700 Bank of Ireland staff, McCleary’s focus has been on the best way to redeploy them to a customer base well-served by digital alternatives. As she explains, that requires the bank to listen. “In 2018, we expanded our cashier services by 40 per cent across our network, and that was on the back of what our customers were telling us they wanted,” she says. “Our branch footfall hasn’t reduced in the last couple of years – but how customers are using our branches has changed. We’re

100 self-service and advice branches.” Bank of Ireland is placing the latest automated banking services technology – like DocuSign, advanced ATMs and virtual meetings and workshops – into its self-service branches. Meanwhile, the flagships are flashy, masterclasses in community re-engagement.

Part of a movement

hearing from our customers that they want a blended banking experience: to be able to have the digital for their very easy and simple transactions, but to also hop on and off, and have that omnichannel experience with our physical contact centres, too.” This, then, is the branch of the future: generous sprinkles of digital services – such as the advanced ATMs that take cheques and process transfers – but with the surety of a friendly human guide should customers feel suddenly overwhelmed when attempting more complex financial tasks. In fact, peering into the recent past, the Bank of Ireland moved early to accommodate the shifting needs of its customers, and to correct the over-hasty branch closures that have come to define this decade. As McCleary outlines, the Bank of Ireland is promoting a branch strategy that covers all touch points required by our customers. “We opted for a dual model approach,” she explains, “whereby we’d have flagship branches and self-service and advice branches. So, across our 265 branches, we have 165 flagships and 100

This dual model is also being deployed internationally by the likes of Banca Bilbao Vizcaya Argentaria (BBVA), ING Bank and BNP Paribas. In the US, where Bank of Ireland also operates, a battle is emerging between Bank of America, JPMorgan Chase and Citibank to reclaim physical dominance in light of these new, innovative – and eminently successful – bank branches. Bank of America was due to modernise 2,500 branches by the end of 2019, while JPMorgan Chase, having brought the shutters down on Finn, its millennialfocussed banking app, has concentrated instead on opening no fewer than 90 new branches, including a stunning flagship in the centre of New York. Describing its own approach, McCleary says: “At Bank of Ireland, we’ve made our flagship branches multi-zonal. We have community spaces, we have digital areas, we have self-serve areas, we have welcome advisors to help out with any queries, and we also have areas for engaging with customers about their overall financial wellbeing.” At the very pinnacle of these Bank of Ireland flagships are the ultra-modern Workbench branches. First created in 2015 in Dublin, the initiative epitomises the bank’s continued ambition to remain a trusted physical centre in the communities it serves, rather than a purely banking space. “Workbench was set up by our innovation team, in keeping with our overall national champion ambition: that we want to enable our customers, our communities, and our colleagues to thrive,” says McCleary. “What better way to enable your community to thrive than to provide a space where they can come in, they can work – if they’re self-employed or they’re

startups – and really build that network of innovative culture in those areas.” She continues: “We have a Workbench now in Letterkenny, North Donegal, and one in Tralee, with 12 in total across the country. It’s really in areas where we feel there’s an innovative culture, where people can come in and help the local economy thrive.” It’s one of those digital age peculiarities, like analogue-film filters on Instagram feeds, or music fans turning back to vinyl in the age of streaming, that digital consumers seem, more than ever, interested in community. For the Bank of Ireland, it‘s never gone away. Community investment has been a dominant gene in its corporate DNA since the firm’s foundation back in 1783. A signed-up member of the UN Responsible Banking Principles, the bank has so far generated more than 27,000 KWH of solar energy in response to customer concerns about climate change; it has a €4.9million pot for community investments, and staff are supported to take volunteering days. So, a continued physical presence in those communities is a given.

The new-look branch In Germany, Deutsche Postbank has given its customers access to banking services in petrol station mini-branches. In Singapore, basic banking services are increasingly accessible in coffee shops, small retailers, and hawker centres. And in the UK, Virgin Money Manchester has evolved into a millennial-minded hybrid: a twisting maze of hyper-modern community spaces, work desks and touch points – and, true to Manchester’s spirit, a fully functional music venue in the back. If McCleary is right, where and how the bank branch will appear next will be determined as much by consumers as by the banks. While the race for the past decade has been to dismantle branches in the face of the approaching digital blizzard, the Bank of Ireland, and other future-facing banks like it, are showing just how important a strong physical presence and a warm welcome continue to be for customers of all types and all ages.

We expanded our cashier services by 40 per cent on the back of what our customers were telling us they wanted

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Cash in the community Ron Delnevo, Chairman of Cash and Card World, argues that hard currency qualifies as a public utility, so important is it to everyday life I have been making the case for a number of years that having only one access point for cash in any community is not an adequate provision. I reiterated this point at a round table event, sponsored by the UK Payment Systems Regulator In October 2019, only to have someone jump up to claim that having two sources of cash ‘is unlikely to be affordable’. Can you imagine someone from a water company telling any community that only one standpipe could be afforded to serve everyone locally? Or a power supplier saying that, for economic reasons, there could only be one power point for electricity, located on the village green? Of course, you can’t. Players in those markets would not dare to place such limitations on supply. But, where cash is concerned, it seems some in the supply chain are prepared to dare to claim that one source of cash is the only affordable option at a community level. Well, on this occasion, who dares cannot be allowed to win! And here’s why. From figures produced by UK Finance, a financial services trade association, it can be gleaned that British adults who use cash – and more than 90 per cent do – each, on average, spent around £4,000 in hard currency in 2018. That means that a community with 1,000 cash-using adults will, on average, need £4million in cash each year. Now, the average free-to-use ATM in this country dispenses around £3million in cash each year. So, it is clear that a single, free-to-use ATM is not adequate to meet the cash needs of a community – an urban suburb or a rural village – with 1,000 cash-using adults in the population.


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A second local source of cash is required to provide genuinely convenient local cash access. What could this source be? Assuming the existing ATM in the community is 24/7, there are a number of potentially viable solutions:

more might well be required to find the next available ATM. That is a recipe for poor customer service, forcing the public, who may well prefer to use cash, to use cards or other alternate methods of payment.

■ A second ATM, either free-to-use or pay-to-use ■ A Post Office, without an ATM but providing counter access to cash ■ At least one retailer or pub able to offer substantial cashback at point of sale.

Everyone understands these issues, but what we need to see quickly during 2020 is action to put in place readily identifiable solutions for every community in the UK. This cannot be left entirely in the hands of commercial enterprises. The Government and regulators, including the Bank of England, need to act in a coordinated manner to guarantee convenient access to cash for all. And, while they are at it, they also need to take steps to guarantee acceptance of cash by all businesses that accept in-person payments. Refusing to accept cash is, in my view, an infringement of the rights of individual citizens to use the sovereign currency of their country. Permanently safeguarding universal, convenient access to and acceptance of cash is not difficult to achieve, but it will require some careful attention from politicians and regulators if it is going to happen. After Brexit is finally resolved in 2020, it would be an appropriate opportunity to devote some UK parliamentary time to legislation focussed on cash access a nd payment choice. I am delighted to say that the UK Consumers’ Association – operating under its brand Which? – supports the need for just such legislation. And all this needs to happen while everyone still has 2020 vision, because delaying until 2021 could mean it is too late to stop the UK sleepwalking towards the nightmare of a cashless society.

The original ATM must be 24/7 for the potential cash provisions identified above to be adequate. This ATM should also provide deposit and recycling services, to allow both the public and local businesses to conveniently deposit cash. Such smart ATMs can also provide other functionality, helping to replace the local bank branches that have been lost forever.

A community with 1,000 cash-using adults will, on average, need £4million in cash each year The need to provide back-up to the single, free-to-use ATM in a community is quite obvious. ATMs are electro-mechanical devices which sometimes go out of service. This can be because of equipment failure or cash outages. The latter can be reduced where deposit/recycling ATMs are installed. The average UK free-to-use ATM is out of service for more than one day a month. This is likely to be longer in the case of ATMs located away from urban conurbations. Currently, a journey of several miles or

We need 2020 vision

Pound on the streets: 90 per cent of adults still use cash‌ but it's getting hard to find

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Embracing change: TSB is evolving through digital collaboration

Keeping an mind TSB’s transformation hasn’t always been as smooth as it might have liked, but Pol Navarro, Digital CIO at parent group Banco Sabadell, says it’s now poised to reap the benefits of an open banking world


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When TSB ran a snap online Twitter poll back in 2018, asking followers if banks opening their data to customers and authorised organisations was a good idea, the response wasn’t encouraging.

Although admittedly a small sample, 38 per cent saw it as a risk and 29 per cent weren’t sure. Around a third viewed the dawn of open banking in the UK as a

positive game changer. Two years on and, according to some of the big banks taking part in November’s Open Banking Expo in London, many customers are still none the wiser. Which perhaps makes delivering a recently-announced £120million, three-year transformation strategy at the bank a tough gig. Given low public awareness of the immense potential of open banking to

dramatically change everyone’s financial experience, it was no surprise that the following morning’s headlines almost exclusively concentrated on the closure of 82 of TSB’s 540 branches rather than plans to leverage open banking and the right third-party relationships to transform customer experience and improve access to finance. The £120million spend will be allocated to TSB’s mobile platform for in-app onboarding and sales, as well as investing in the automation of some of the bank’s branches. Part and parcel of that was an intention to take advantage of open banking reforms to foster deeper relationships with fintech startups offering innovative new services. Product providers such as Square which provides point of sale solutions to TSB’s business customers. “It’s impossible to keep up with the speed of transformation and customer expectation without an open mindset,” says Pol Navarro, who, as digital CIO at the bank’s parent group Banco Sabadell, is genuinely excited by the possibilities of a new banking era. For TSB, that is expressed in a renewed business purpose to ensure ‘money confidence for everyone, every day’. By 2022 it expects more than 90 per cent of transactions will be self-service and completed in real time. It forecasts that three-quarters of its customers will be digitally active by then. Like many, Navarro foresees that a retail banking customer’s experience of accessing financial services will become as fuss-free as buying the latest gadget from an Apple Store. “Whether you are interacting from your home or in the branch, our vision is that there will be one digital journey that is used everywhere, and we can make that experience completely seamless between channels. It’s sort of what happens in Apple Stores. You can go to an Apple Store and digitally buy some goods there in the same way that you would at home. We think the frontiers between the physical and digital experience are disappearing.” That ease of access, of course, is predicated on bullet-proof digital identification and verification (ID&V) and data sharing. “We are seeing more and more companies taking advantage of digital identities, whether it’s identities from big

players, like Amazon or Google, or smaller ones, to transform how they provide banking services at one click. I think digital identity will transform how financial services are provided,” says Navarro. TSB has already partnered with Jumio to reduce the time to open and start using a current account from seven days to 10 minutes, using a selfie. The AI-powered system also includes ‘liveness detection’ to prevent fraudsters fabricating an individual’s identity. The partnership is an example of what Navarro terms ‘thinking beyond your platform’. “Today, if you want to innovate in banking, you cannot do it on your own,” he says. “There are lots of things that are already in place today – you don’t need to reinvent the wheel and try to make them better, you can just leverage on those solutions to transform how you provide services to your customers, as with the

Banking is open, not only by definition, but also in the sense that you need to be open-minded to bundle solutions from different players to provide a better customer experience example of digital ID and verification. We’re combining the best of breed of those solutions, to provide that experience behind our brand. “Banking is open, not only by definition, but also in the sense that you need to be open-minded to bundle solutions from different players to provide a better customer experience. Open banking is pushing for open data, and being able to easily access data from other platforms,” Navarro adds. “We are also seeing lots of collaboration around fraud and security, with lots of banks starting to share data so that they can better protect customers and make their services more secure. “It’s clearly an opportunity for banks to leverage data from others and I think we will see more of it, not only between banks, but also between banks and other

platforms. So it could be Companies House or HMRC to speed up a loan application, for example. It could be any data platform that allows banks to speed up providing banking services.”

Gain through pain The hit TSB took from the spectacular systems meltdown during the last stages of transferring its core banking system to new owner Banco Sabadell in 2018, still hurts. But, despite the pain, Navarro says the transfer has allowed the bank to move forward digitally. “It allows us to develop new products and services quicker, especially being quite an open platform, in terms of adopting interesting solutions from third parties. What we did recently with Jumio and also with Square, are just two examples of the sorts of things we can now easily do, thanks to our new technology. “For us, it’s having the foundation to start thinking differently about banking and especially having the capabilities to deliver those solutions quicker.” TSB is a keen supporter of the annual FinTECHTalents conference, which takes place in London and São Paulo late next year, and which Navarro says provides an ideal platform to ‘combine fintech companies with talent and big organisations looking for new ways of delivering innovation’. And, in order to benefit from the best fintech innovations, TSB has formed a group innovation team that scours the industry’s ecosystem for both investment and leverage potential . “For example, we invested in Bud, here in the UK, as one of the startups that is using open banking to transform customer experience,” says Navarro. “We also look at potential partnerships. So, again using the example of Square, an existing product that we can leverage on the TSB brand and offer something better for our customers. “The third thing the team does is to try to understand how fintechs work and deliver a compelling difference to the market. For example, we try to learn how they design in a more customer-centric way. So, it’s investing, partnering, but also learning new ways of working, and how these startups are really transforming the customer experience.”

Issue 15 | TheFintechMagazine


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IN BANKING’S FAST LANE With demand for banking services in Southeast Asia increasing rapidly as populations and economies grow, RBR’s flagship conference Self-Service Banking Asia 2020 will explore how innovation in banking can transform growth challenges into new opportunities. We caught up with Gillian Shaw, the conference producer, to find out more about the region’s hot topics and what we can expect from the event

THE FINTECH MAGAZINE: Why will this year’s Self-Service Banking Asia conference be hosted in Vietnam and what exactly do you mean by self-service banking? GILLIAN SHAW: We are really excited to be holding this year’s edition of the conference in Vietnam, not least because it is one of the world’s fast-growing economies, due to its expanding consumer market and stable political situation. There’s lots of untapped potential here; 69 per cent of adults in Vietnam – or 50 million people – still don’t have a bank account. Vietnam is still a heavily

cash-based society, with close to 99 per cent of transactions conducted in cash, so the demand for other types of payments is growing with the economy. With all this in mind, the government has launched a number of financial inclusion measures over the last few years to expand cash and banking services to rural areas. While self-service banking used to just mean the more traditional options like ATMs and banking kiosks, it now includes a real mix of different banking channels, including internet and mobile. Customer behaviour is changing largely due to the impact of smartphones; bank customers expect to be able to transact as and when they choose.

Fast finance: Vietnam’s potential is growing

Issue 15 | TheFintechMagazine



Youthful and tech-driven: Vietnam is shaping up as a fintech hub

TFM: Is Vietnam fintech friendly? GS: Yes, absolutely! Vietnam is establishing itself as a hub of fintech innovation. There are currently around 100 fintechs operating in Vietnam and most of them are collaborating with banks. The government has been focussing on strengthening fintech in the country as it sees digital payments a s a quick way of bringing payment services to the unbanked. Vietnam has a youthful population, a large number of smartphone owners and a rapidly expanding ecommerce sector – all of which are helping to set the pace of digitisation. TFM: What are the most exciting innovations coming out of the Southeast Asia region? GS: The region is home to many innovative industry players which are adding state-of-the-art functionalities to ATMs such as biometrics, recycling and cardless cash withdrawal. Digital self-service banking solutions are also evolving quickly as fintechs race to capitalise on growing consumer demand. With the region’s population still heavily cash reliant, banks are looking for next-generation cash distribution models to take banking to


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the masses. Other forms of payment, particularly QR code payments, which are already so big in China, are taking off in Southeast Asia as merchants pick up on the low cost of adoption.

Vietnam is establishing itself as a hub of fintech innovation. There are currently around 100 fintechs operating in Vietnam and most of them are collaborating with banks TFM: What makes Self-Service Banking Asia unique and what’s on the agenda this year? GS: The banks at our Asia conference always bring an unparalleled level of enthusiasm with them, making the most of this unique opportunity to learn from each other and explore first hand the latest technology. With significant growth

challenges in the region, banks are keen to discuss best practices for extending digital offerings and refining self-service strategies. Topics on the agenda include financial inclusion, big data, branch transformation, customer experience, omnichannel and digital transformation. Thought leaders from institutions such as Bank Indonesia, Maybank, Land Bank of the Philippines, HSBC, Barclays, CIBC, Intesa Sanpaolo, Bank Muamalat Malaysia, soCash and Krungsri Finnovate will be giving their expert opinions on the region’s innovations. The conference also has a dynamic exhibition area, showcasing the latest self-service banking technology from leading international suppliers. TFM: When is the conference taking place and how can we find out more? GS: Self-Service Banking Asia 2020 takes place at the Windsor Plaza Hotel in Ho Chi Minh City, Vietnam, on 18 and 19 March 2020. For more information about how to get involved as an exhibitor, speaker or delegate, please email me directly at or visit

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(swiftly and securely)! With banks steadfastly moving their operations from branches to digital channels, onboarding is a vital stage in the sales process that is benefitting from the latest technology. Onboarding is typically challenging and time-consuming, involving numerous steps that can impact conversion rates and the cost of acquisition. However, banks must exercise due diligence and vet every new customer to comply with know your customer (KYC), anti-money laundering (AML) and other security regulations. Fast and secure onboarding is a huge advantage for customers and banks alike. The goal is to eliminate tedious manual processing, avoid the requirement to visit bank branches and reduce approval times, while also enhancing security. All this is now possible through digital innovations that are streamlining the way banks approve new customers. Angela Byrne, customer goal lead at RBS, describes faster and smoother onboarding as a huge business opportunity, driven by customer expectations. “Our customers expect things to be simple and easy,” she says, “and opening a bank account is no different. They expect it to be swift and straightforward, and for us to make it as seamless as possible.” Byrne says that a recent project with HooYu, the bank’s security partner, an expert in ID verification and investigation, is

RBS and NatWest, both part of the Royal Bank of Scotland Group, are setting an example for seamless onboarding. Angela Byrne, Customer Goal Lead at RBS, explains how creating big improvements in the customer onboarding journey. A key development is the use of selfies, which, in some cases, enables customers to be onboarded in minutes, rather than days or weeks. “We’ve enabled selfie technology to help with anti-money laundering (AML) and fraud checks,” says Byrne, “while reducing the time it takes to open an account to about three minutes for a savings account and seven minutes for a current account.” Byrne says the aim is to enable customers to open an account at their own leisure and in the way that they want. That means that they can go to a branch if that’s what suits them best, but taking advantage of technology. They can also do it remotely, on a computer or a mobile device, such as tablet or smartphone. “The important thing is the digital journey,” says Byrne. “No matter where customers join us, it will be exactly the same. Being simple and seamless is

crucial today; it’s what customers expect, and it’s what we’re delivering through our work with partners such as HooYu. Customer experience is a key focus, which is why we often use hackathons and research to get an inside view on what’s best for customers.” Adopting an agile way of working within RBS has helped increase the focus on customer experience. It has meant changing the way the bank works, says Byrne, and in particular has strengthened and refined its relationship with technology, regulatory and legal partners. “We take a minimum viable product approach,” says Byrne, “so we can approve and deliver value to customers as quickly as possible. In order to know what works, we actively test journeys with our customers, and everything is researched and proven before we go to scale.” Byrne adds that collaboration is the catalyst for improvements across the value chain and that relationships with organisations such as HooYu are mutually beneficial. “HooYu has long obsessed about customer journeys and removing pain points,” says Byrne, “so it’s helpful for us to work with an organisation that’s zoned in on common goals and all the areas where we want to help customers. This includes artificial intelligence and, specifically, technology that allows us to compare a selfie with a passport photo, to prevent fraud.” Issue 15 | TheFintechMagazine


KYC & REGTECH NatWest was the first major high street bank to allow customers to open an account using a selfie and one piece of photographic ID, removing the need for customers to visit a bank branch. HooYu’s artificial intelligence (AI) technology and real-time biometrics match the customer’s selfie with a valid form of photo ID, such as a driving licence or passport image, and the identification process is completed in minutes. As well as significantly reducing the time to open an account, so-called ‘selfie banking’ helps with fraud prevention. With AI and biometric recognition, the identity of customers can be assessed with greater precision and accuracy. It’s a marriage of compliance and convenience that Byrne says is enabling about a million accounts to be opened annually.

In addition to its selfie initiative, NatWest was the first UK bank to announce a biometric credit card at the end of 2019, in partnership with Mastercard and digital security company Gemalto, having previously trialled finger-enabled debit cards and declared them a success. Customer trials began at the end of 2019. According to a study in 2018 by Gemalto, 54 percent of UK consumers would be willing to use biometric payment cards if they were available at their bank. The cards provide contactless payment using fingerprint verification for transactions up to £100. Considering the current limit for non-biometric contactless payments is £30, this is a reflection of the trust placed in biometric technology. As with onboarding for new bank

Mettle. The digital bank account for SMEs, launched as a pilot in October 2019, is now being fully rolled out to the business banking community as NatWest’s solution for small firms who want fast and convenient access to digital financial services. Entirely mobile, the Mettle platform was developed in conjunction with Capco, the global business and technology management consultancy, and allows business customers to open an account when they download an app. In addition to a current account, the service includes invoicing, bookkeeping and a debit card. The aim with Mettle is to accelerate digitally-focussed business banking and simplify onboarding in the same way that Byrne says it is being simplified for consumers. To open a Mettle account,

Seamless digital journey: Customers should be free to open an account where and how they want

On-demand account opening Convenience is served by asking customers fewer questions during the onboarding process, but without compromising risk profiling and security, autofilling relevant data already held by the bank so there is no need to input the data again. The aim is for customers to be able to open an account on the spot and on the move, and to be able to use it within 24 hours. With mobile and omnichannel banking on the rise, banks view onboarding speed and flexibility as part of the service they have to offer if they are to remain competitive. Byrne says that RBS uses many different anti-fraud vendors and always ensures that security and customer experience are in balance, by taking the bugbear and delay out of essential admin. From a customer perspective, this is helping the bank to improve its net promoter score (NPS), a core metric of customer experience.


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HooYu has long obsessed about customer journeys and removing pain points, so it’s helpful for us to work with an organisation that’s zoned in on common goals accounts, card enrolment is simple and takes as little as five minutes. Once a digital fingerprint is transferred to a card, it remains locked and the biometric data cannot be accessed or used outside the card. It is never shared with the merchant or the bank, and fingerprints are not stored in the Cloud. Much of the innovation and customer focus that Byrne describes is being generated by NatWest Ventures. This creative team of engineers, designers, scrum leaders and business specialists is using digital technology to meet the needs of NatWest’s customers, but with an emphasis on the business community, which has tended to be neglected in comparison to innovations for the consumer sector. Notable recent SME projects include

customers need to show one of three types of ID: a UK passport, an EU passport or ID card, or a full driving licence. As well as Mettle, NatWest Ventures has a variety of other projects for the business sector, such as a merchant acquiring business called Tyl and an invoice payments business called Aptimise. Whether addressing the needs of the business community or millions of consumer customers, the RBS Group is committed to making banking easier and safer, says Byrne. “We can build digital solutions that make things simple for customers, while complying with regulations. And strategically, the great thing is we partner with many different fintechs and other firms to do this as quickly as possible.”


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Going global by staying local With a wealth of payment methods now available, the big challenge for ambitious merchants is efficiently integrating them all. Here, Matthieu Barral, SVP of Sales in the UK for discusses his company’s proprietary platform, growing KYC demands and the future of a fragmented payments industry There are now nearly as many different types of payment method and technology as there are types of merchant. Whether it’s Visa, Mastercard, Apple Pay, Google Pay, PayPal, or a little-known local payment superstar (of which there are legion), there’s an overwhelming plethora of options. The challenge for merchants, especially those operating globally, is how they now integrate with the world’s 50 or 60 different payment methods successfully. “The payments industry is really fragmented,” says Matthieu Barral, who leads’s commercial team in the UK. “In the UK it’s relatively simple; the challenge comes when you want to take payments elsewhere. One of our merchants came to us recently and said ‘I need that payment method in

Egypt’ – Fawry [the country’s leading, super-cool electronic payments company using more than 105,000 cash outlets, bank wallets, and the MyFawry mobile app to facilitate transactions]. So we developed it for them. That’s where we, as an enterprise, help you, as an enterprise, to be better locally. Having the correct payment method can, in certain markets, increase your revenue by 40 per cent.” has enjoyed spectacular growth in recent years, tripling its processing volume in 2018, fuelled by new partnerships with leading companies, including ecommerce platform Visualsoft. It has become one of the big payment powers behind the new, app-driven retail throne, occupied by players like Deliveroo and AnyVan with their often complex marketplace models and associated payment needs.

Headquartered in London, the company broke European funding records in 2019 when it announced a $230million funding round, which gave it a valuation of around $2billion. The fast-growing fintech helps companies worldwide to accept more payments through one integration –’s unified global payment processing platform, which features in-country acquiring, fraud filtering and more via just one application programming interface (API). Its 700 or so clients, including some of the planet’s biggest brands, use its technology for faster processing speeds, increased reliability and full visibility of transaction data, including a reconciliation tool showing costs per purchase so they can see where they are incurring the highest fees and take action to reduce them. Issue 15 | TheFintechMagazine


KYC & REGTECH Processing more than 150 currencies, has direct connections to Visa, Mastercard, American Express, all major international cards and relevant alternative and local payment methods in each market. It adopted an alternative fee structure and a high-touch approach, such as collaborating with client development teams on bespoke solutions, to swiftly grow European demand for its innovative online payments toolkit. Now, the ambitious fintech has entered the US market, opening offices in Boston and San Francisco, to compete with the likes of Stripe and Braintree, which own a rather sizable chunk of the ecommerce enablement market.

the business’s development. Onboarding these types of enterprise merchants swiftly and safely while giving them a good customer experience is still something of a know your business (KYB) challenge, says Barral: “Getting the datapoints is still one of the main issues in the industry. There are great companies working on it, but no company in the world does a full, automated KYB check quickly.” He believes biometric authentication, which has improved know your customer processes in the retail finance sector, will eventually be introduced to KYB. “In terms of onboarding, one of the main questions that we always ask is ‘who is the main UBO (ultimate beneficial owner)?’. If

us to always be live and connected. If a big merchant, like Facebook, calls us tomorrow and says ‘I want to process with you’, then we can call AWS and increase the amount of servers we have in less than a week. That’s crucial because our traffic will increase massively and we can’t have a negative impact on our other merchants.” In fact, according to Barral, has such GAFAs in its sights. “To really go after Google, Facebook and all those really big players, you obviously need to up your game. I joined the company four years ago when we were 25, 30 people. We’re now around 500 and we’re developing more and more engineers. The goal is to be 1,000 in the next year – so lots of hiring!”

I think every country will ultimately have its own domestic player, along with Visa, Mastercard and PayPal, which are here to stay The world in its hand: is a gateway, acquirer and processor in one

A gateway, acquirer and processor in one, has made its name by supporting businesses that have gained traction, creating a much larger portfolio of merchant service and payment solutions to accommodate their clients’ individual growth plans. It works with a business at the critical point where it’s looking to expand into a new jurisdiction or offer new, or a wider range, of payment methods. A case in point in the United Arab Emirates is Freedom Pizza delivery company. With 10 current locations, 250 employees and 135 drivers, it’s poised to go global – targeting high-value markets such as the UK. In moving away from bank-based gateway payment services, founder Ian Ohan said the company found a more collaborative partner in, which he describes as having a dramatic impact on


TheFintechMagazine | Issue 15

that person can show it’s them who owns the business through fingerprint or another unique identifier, then they don’t need to gather, say, council tax bills from the last few months. This makes it much easier because, with many businesses, someone other than the UBO takes care of the admin. I think biometrics will be important going forward, although perhaps more on the SME side than at the enterprise level.” At the same time, the Cloud is also proving increasingly important for compliance and anti-money laundering safeguards within the payments industry. “The amount of data we collect is absolutely huge, and we need to store it for a few years to meet regulatory requirements,” says Barral, who oversaw the company’s migration to Amazon Web Services. “They are really helping us to scale quickly. They help

He also predicts a busy time for the wider payments industry, driven by open banking. “I believe there will be many surprises to come,” he says. “I think businesses will converge – you can see how the likes of Visa and Mastercard are currently buying up companies to make sure that they’re ready. “You go to Portugal, and you have Multibanco. You go to the Netherlands, you have iDEAL. You go to Germany, you have SOFORT. You go to Sweden, you have Swish. It’s really hard to make people switch the way they pay, so I think that every country will ultimately have its own domestic player, along with Visa, Mastercard and PayPal, which are here to stay. These big multinational companies will simply buy the companies that are most relevant for them. “The future will be shaped by such partnerships and collaboration.”

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KNOWING ME, KNOWING YOU Intelligence solutions company Melissa is focussed on establishing who individuals and companies are beyond reasonable doubt. And in the shadowy world of online identity fraud, where the masks are always changing, that’s a level of proof that’s increasingly hard to obtain, as Barley Laing, its UK MD, outlines It’s perhaps hard for some to believe but, only a decade or so ago, most companies would happily accept a photocopy of an ID document to verify who you are. How times have changed… now it can be the blink of an eye on a selfie video. In 2020, the obligations to comply with increasingly demanding know your customer (KYC) and anti-money laundering (AML) regulations alongside a constant war of attrition with the digital bad guys, has led to the birth of an entire industry offering high-tech and constantly evolving ID and verification (ID&V) solutions. Financial services companies, of course, want the Holy Grail of near-instant onboarding for new customers, as well as bullet-proof identity verification. But this demand is also being made at a time when the world’s complex mix of financial databases remain hugely vulnerable to sophisticated criminals who operate at mind-boggling scale. So mainstream is money laundering now that, as well as being so hard to detect, it represents between two and five per cent of global gross domestic product (GDP), or $800billion to $2trillion, according to the United Nations Office on Drugs and Crime. One technology company heavily involved in trying to protect its customer firms both from fraudsters and falling foul of increasingly prescriptive regulations when onboarding customers, is California-based Melissa, which can count Bank of America, Aviva and MetaBank among its blue chip clients. Barley Laing, managing director of Melissa’s UK operations, acknowledges

that taking on cyber crooks is a war without end, and the industry must continually devise better ways to verify identities. “As soon as technology companies like ours come up with a solution, the fraudsters are thinking of ways to get round it,” he says. “That’s why it’s important we continue to develop our technological capabilities, to make not just a single check on one identity attribute, but all the surrounding attributes that add up to providing a good degree of confidence that the person a merchant is dealing with is a bona fide individual and not a fraudster.” Among the weapons in Melissa’s armoury is biometrics. For instance, potential customers may be asked to provide a selfie video that is

scrutinised for a blink to ensure proof-oflife while the image is then cross-matched against conventional ID photographs, such as passports or driving licences. Among its other capabilities is verifying emails to ensure they are not spam traps; checking the registration of mobile phones and whether they are callable, and checking the IP location of a device being used to make the application.

The real deal: Fake and hacked identities are a growing threat

Issue 15 | TheFintechMagazine


KYC & REGTECH None of this is a time-consuming process – in a world that demands almost instant onboarding, it can’t afford to be. It is carried out in seconds, in the background, as the potential customer’s finger hovers over the next step in their online application. Laing says: “One of the things we get asked for a lot is to ensure that the end user’s, or customer’s, experience is clean, quick and efficient. “So, a lot of the things we provide involve the ability to autocomplete some of that process. That makes the customer journey much smoother, the transition to a successful goal is achieved more quickly, and it is also better for the merchant because the less the end user has to do, the better you can avoid errors and bad data being brought into your system at the point of capture.”

technology solutions, are very simple to integrate, very easy-to-use tools. “We’ve spent a lot of time and energy making sure that process of embedding into their platform is very straightforward, and non-obtrusive to their customers. So, we would argue that, for the challengers, it’s a great time to get into these technologies, because they will give them a competitive advantage over some of the large corporates.” Laing also believes the days are gone when financial services organisations could employ several different firms to provide them with individual solutions, such is the continuing pace of change. “The best strategy is to go with a supplier that offers you the broadest range of capabilities,” he advises. “If you go with a one-trick pony supplier, you’re going to be

required in different marketplaces, in different jurisdictions around the world,” says Laing. Melissa, which has been in the business for more than 34 years, has recently formed a new division investigating particular areas of artificial intelligence (AI). “Semantic technologies are something we’re looking at very closely, to see how they can improve our identity verification capabilities by using those additional AI functions,” Laing says. But its new core focus is on developing ways to carry out identity verification for businesses – know your business or KYB – something Laing describes as a ‘new frontier’ and a capability that could eventually be used to root out rogue or shell companies set up specifically for criminal gain.

Consolidation for security Specialist firms like Melissa are seeing a growth in demand for their services as KYC and AML compliance and regulation become ever-more rigorous. Laing believes established giant financial corporations, more than neobanks or challenger banks, can find themselves most vulnerable to falling victim to fraud. “If you think of an established organisation, one of the big players, one of the big corporates, they have legacy systems that have been amended and added to over many decades,” he says. “That gives them a very complicated structure, so introducing new technologies takes a lot of time, a lot of effort, and can cause huge complications, as we’ve seen in the news most recently with some of the banks. A startup, a challenger or a neobank, has a golden opportunity to embrace new technology straightaway. They can be at the forefront of technologies that will enable them to most rapidly engage with customers in the way customers expect to be treated. They can embed that technology into their platform very easily. “Our services are delivered through web services, application programming interfaces (APIs), software development kits (SDKs) and apps; these things for a new company that is used to dealing with

We’re all very familiar with KYC, but the new frontier is KYB


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limited to being able to just deal with that area of your business. As your business evolves, you’re going to have to look for alternatives, or additional service providers. And that introduces complexity and issues, inefficiency and cost. So, choose a supplier with a broad range of capabilities that can grow with you as your business evolves.” Laing also advocates that firms, particularly smaller ones that operate internationally, should also fall back on a specialist to help them adhere to global regulations. “Trying to understand all of the global requirements is very difficult, and very time-consuming, so it’s important that these organisations reach out and use a supply chain that has knowledge of what is

The new ID&V frontier: Know your business

“This is a more complex area we’re developing but one we see huge potential for,” Laing says. “We’re all very familiar with KYC, but the new frontier is KYB. “There are already some checks we can do for this; obviously we can look at directors’ status to make sure, through AML, if individuals who are heading up these organisations have any sanctions or are politically exposed. But the future for our business is to make sure we have a clearer and cleaner KYB capability. “This is really determined by the availability of data from other countries. For countries like the UK and the US, the data is available to make these checks. It gets more complicated in some parts of the world and these are interesting growth areas. So, we’ve got some work to do, but it is a core focus for us.”



An issue of trust

A proposed guideline framework for assessing digital ID systems could bring order to chaos and set the global standard for integrity, says Trulioo COO Zac Cohen Exposed databases containing our most personal information – information that dark web dealers, security hackers and, by extension, money launderers, traffickers and terrorists – have been described as ‘the ugly elephant in the room that every security professional knows about, but doesn't want to talk about’. 2019 wasn’t a good year for those security professionals. Worldwide, the total number of data breaches rose by a third, according to research from Risk Based Security, with records kept by medical services, retailers and public entities most affected. It added up to 7.9 billion records being put at risk – and potentially millions of convincing but fake identities being used to slip past the know-your-customer (KYC) and anti-money laundering (AML) sentry boxes erected by financial services. It’s why digital ID systems are in the spotlight for 2020. There is already a lot of regulatory


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activity around identity and verification. Among other initiatives, the fifth AML Directive (AMLD 5) of the European Union (EU) will be implemented this month (January 2020), with AMLD 6 already on the table; the US Treasury will have international financial institutions around the world in its sights as it extends its counter-terrorism powers; and the UK is expanding the scope of its Money Laundering Act to the international affiliates of UK-based businesses. But it’s the Financial Action Task Force (FATF), a global intergovernmental body drawing together ministers from currently 39 countries to defend the world’s financial services from bad actors by making recommendations to policymakers, that could have the most impact. Because what its Draft Guidance On Digital Identity takes as its starting point, is that digital identity systems are a public good: they can extend financial services to people who find it difficult to access even basic banking; they save us all time and money in senseless duplication of information; and they transform the customer experience, especially around onboarding. At the end of the day, however great the corresponding vulnerabilities inherent in vast databases containing biometric and other personal information, you can’t wish this digital genie back into the bottle. And trying to control it with layers of regulation

could threaten to negate the advantages of having online ID in the first place as additional requirements for authentication frustrate consumer experience and add cost for providers. So, the FATF is taking a different tack. While it acknowledges that breaches associated with digital ID systems ‘can be more devastating than breaches associated with traditional ID systems due to the potential scale of the attacks’, it’s recommending a risk-based – and, importantly, universal – approach to the use of digital ID for customer due diligence (CDD). Its proposed digital ID assurance framework and standards for establishing the required attributes, identity evidence and processes for proving the identity of a ‘natural person’ are based on the US National Institute of Standards and Technology and the EU’s e-IDAS (International Defence and Security) regulation. The ultimate aim is for financial institutions and others to understand the assurance levels of a digital ID system technology’s main components, including its architecture and governance, in order to determine its reliability and independence. Companies can then make a broader, risk-based decision as to whether a particular digital ID system provides an appropriate level of reliability and independence in the face of the illicit financing risks an organisation faces.

Turning the identity key: The Financial Action Taskforce guidelines could set a global standard for risk-based digital identity systems

Zac Cohen, chief operating officer at realtime, crossborder identity verification provider Trulioo, accepts that ‘there are risks specific to digital ID systems – particularly in relation to cyberattacks and potential large-scale identity theft’. “On the other hand, digital ID systems that mitigate these risks in accordance with digital ID assurance frameworks and standards hold great promise for actually strengthening CDD, AML and combating the financing of terrorism (CFT) controls. Digital ID can cut down on fraud, improve customer experience and reduce costs for regulated entities.” It’s to protect the credibility of such digital ID programs and instil trust that the FATF recommends policymakers ‘develop clear guidelines or regulations allowing the appropriate, risk-based use of reliable, independent digital ID systems’ by regulated entities. International bodies are continually developing technical standards for digital ID; the International Organization for Standardization and the International

Providing structure and flexibility around how we can manage assurance levels and still be in compliance opens the doors for access to financial services

Electrotechnical Commission are both working on updating identity, IT security and privacy rules. While each country will determine its own path, at least the FATF’s guidance provides a mutual starting point. “Assurance levels are key,” agrees Cohen, “and providing structure and flexibility in how we can manage assurance levels and still be in compliance opens the doors for access to financial services and opportunities online.” Importantly, it could bring some order to the current chaos of standards and solutions facing financial providers. “The digital identity and document verification market is forecast to grow to $15billion by 2024. There are numerous solutions from various vendors, with different jurisdictions specifying divergent requirements,” says Cohen. “Digital identity is a complex proposition, so there will never be a one-size-fits-all solution. Instead, a holistic, global approach will help organisations optimise and synchronise their processes. The FATF’s guidance provides a high-level overview of how to coordinate standards and solutions for better digital identity for all. “Trulioo looks forward to helping to create this flexible digital identity standard that grows the market, provides security and compliance and meets the needs of consumers, businesses and government. It’s a holistic look at how we can collaborate to a standard that makes sense, regardless of the use case or scenario. And it aligns with our vision, the consortium view of identity where different technologies and solutions work together to build a better world for us all.”

Financial Action Task Force’s key recommendations For authorities… n Adopt principles, performance and/ or outcomes-based criteria when establishing the required attributes, identity evidence and processes for proving official identity for the purposes of CDD. Given the rapid evolution of digital ID technology, this will help promote responsible innovation and future-proof the regulatory requirements n Adopt policies, regulations and supervision and examination procedures that encourage regulated entities to develop an efficient, integrated approach to digital ID streaming-applicable digital processes across all relevant efforts.

For regulated entities… n If, as a matter of internal policy or practice, non-face-to-face customer identification is always classified as high-risk, review and revise those policies to take into account that customer identification/verification that relies on reliable, independent digital ID systems, with strong risk-mitigation measures in place, may be standard risk, and may even be lower-risk n Have a process to enable authorities to obtain the underlying identity information, and evidence or digital information needed, for identification and verification of individuals. Issue 15 | TheFintechMagazine




A question of ethics Open banking and digital technology have already helped HSBC dramatically extend access to credit as it begins to reimagine the lending model. But those tools must be used thoughtfully to protect banks and customers, says Raman Bhatia, former Head of HSBC’s Digital Banking arm in the UK and Europe The world of lending is on the cusp of a revolution. The new decade could see the emergence of lending widgets that sit wherever customers are, taking decisions on loan approvals based on the data accessed via application programming interfaces (APIs) from decentralised identity stores. Consumers would be pulled closer to lenders, with credit becoming seamless and topping up accounts in an instant. But what are safe levels of indebtedness? And how far should technology that can take greater control of customers’ personal finances go? Those are the kinds of questions that have been occupying minds at HSBC, as the bank tests technology that can create opportunities to expand credit to a larger population while holding the bank’s risk appetite constant. “In that sort of world, you can have lending everywhere, but it needs to be managed very thoughtfully because the conduct issues become far more complicated,” says Raman Bhatia, former head of HSBC’s digital banking arm in the UK and Europe. “We could be talking about a world where identity has been abstracted out and exists as a service, which means know your customer (KYC) checks can be done at the point of engagement, wherever the customer is. They take their identity with them and lending decision models exist as a service, as APIs.” The reform that made such a future possible in Europe and is now being adopted in various forms across the


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world, is open banking, which liberates data to be shared between independent parties with customer consent. HSBC identified the opportunities early on. Even before the UK Open Banking implementation and the European revised Payment Services Directive arrived in 2018, it offered its customers the ability to aggregate their accounts in one place using its Connected Money feature. Now it leverages open banking to reduce friction for customers, such as pulling in data to part-populate forms during onboarding. But where it’s had the biggest impact on both the bank’s business and its customers’ financial lives is in improving HSBC’s affordability decisionmaking process. This has resulted in a 30 per cent increase in loan approvals. The breakthrough, says Bhatia, was being given access to customers’ transaction data from non-HSBC accounts. It means the bank has enough information, even on thin file customers – those who don’t use HSBC as their primary bank but apply to it for a loan – to build up a full picture of their creditworthiness. “With open banking we have far better visibility,” says Bhatia. “HSBC uses a consent solution, digitally, and pulls in customers’ non-HSBC current account data, which goes through an automated categorisation and underwriting process.” Now, HSBC wants to further reimagine the lending model.

New, real-time data signals Lending traditionally employs three main data signals: identity, affordability and

creditworthiness, the latter two being backward-looking indicators. “But HSBC is beginning to frame and test some very innovative hypotheses,” says Bhatia. “For example, if there is a customer who is mobile, digitally engaged, and has a habit of checking their balance repeatedly, could that be a signal of that customer’s creditworthiness? Would the models around default incorporate that?” While open banking has created an infrastructure that allows lenders to ingest such new sources of data, the challenge now is in developing the technology to interpret more dynamic, real-time information to inform lending decisions. “There are a few innovative players that have emerged, whose raison d'être is to find better models using machine learning. Machine learning creates a new set of opportunities around decisionmaking, and we are working to apply machine learning models,” says Bhatia. There is one customer segment he believes could benefit from a more imaginative approach. Bhatia admits SMEs (small and medium-sized enterprises) have been chronically underserved by the UK’s established banks due to difficulties around assessing creditworthiness. But he is hopeful new digital signals can be found to improve that. He says: “It’s one area where we’re seeing a lot of innovation. On the challenger front, there are quite a few players that gaining scale in SME lending. But HSBC is doing the same. It is working on a new proposition for SMEs, which would have a new lending engine as part

of it. It is also asking whether it can find new signals of data for effective lending decisions for SMEs.” HSBC is beta testing Kinetic, a new SME bank due to launch in 2020, which integrates the Xero accounting package among other third-party apps. “I remain optimistic around HSBC’s ability to serve small businesses,” says Bhatia, “but it remains a challenging space, hence the open banking competition around it and grants for challengers.”

Big banks, having been dragged through the debt crisis, are particularly sensitised to the dangers of expanding credit, given the personal lending market is still dominated by them. How long that continues as new entrants find dynamic ways of using data for know your customer (KYC), creditworthiness and affordability checks tailored to individuals, not borrower categories, remains to be seen. But while paper has almost disappeared from lending processes (70 per cent of HSBC’s loans are now processed digitally from end to end), and comparison websites have reformed how consumers select who they apply to, fundamentally, little has changed for borrowers, says Bhatia.

must balance lending with providing advice around borrowing. “HSBC has done that through push notifications, which tell customers when they are likely to hit an overdraft, for instance,” says Bhatia. “Left to their own devices, many customers are likely to borrow beyond their means. The bank obviously has a credit risk policy, which is based on prudent conservatism around where it can lend. But it needs to use the power of digital and data to guide people around their credit score, engagement with money and saving enough, so that they don’t need to borrow, in effect."

A principled debate That conservatism has helped HSBC build a trusted brand, which extends to its cautious approach to using AI. It’s a member of the Veritas consortium working on an ethical AI framework,

A collaborative approach The biggest bank in the UK has been keen to collaborate to improve its decisionmaking process. Both Equifax and AccountScore work in partnership with HSBC to provide and analyse loan applicants’ current account transaction data. And Glasgow-based Castlight Financial provides an engine that categorises income and expenditure into 155 types to reveal an applicant’s monthly disposable income. Bhatia adds: “HSBC is also working with a company specialising in machine learning models to find pockets of lending opportunity around point of sale or buy now, pay later – although with that, the industry has to tread carefully because it could create a new debt trap.”

Digital, if not managed well, can create systemic, persistent debt, which means we must balance lending with providing advice around borrowing Challenger banks have improved customer experience but he believes internet-only players ‘have shown no appetite, no capability, to do lending at scale’. Open banking, he believes, could change that – but customers will need to be both educated and protected. “The flip side of this new era of lending is that there could be issues around persistent debt,” warns Bhatia. “Digital, if not managed well, can create systemic persistent debt, which means we

drawn together by the Monetary Authority of Singapore. “The bank wants to have a principles-based discussion around when and how AI should be applied in the world of credit and lending,” says Bhatia. “It’s having a very robust debate, internally, around its AI principles, and it wants to move cautiously. But where data can move seamlessly, identity is decentralised and decision-making can happen outside of your own estate – that is a future HSBC is preparing for.” Issue 15 | TheFintechMagazine


LENDTECH Top score: Open banking has improved credit assessment procedures

Credit where it’s due...

Equifax saw an early opportunity to demonstrate that open banking could have a positive impact on its clients’ lending. Solution Design Consultant Bis Das says its proactive approach has paid off Open banking in the UK has arguably yet to shake up financial services as dramatically as some expected, but one area in which it has certainly made an impact is credit scoring.

The open banking rules, which came into force for nine major UK banks and building societies (the so-called CMA 9) two years ago, are all about data; more specifically, acquiring and sharing data. By allowing their financial information to be shared between banks and third-party providers, customers can manage their money better. But while there is much written about the impact of open banking – and the related EU revised Payments Services Directive (PSD2) – on customer choice, there is somewhat less discussion about the benefits it offers when it comes to determining risk scoring and affordability for credit. In fact, one of open banking’s key benefits so far has been to provide those customers with little or no credit history – so-called ‘thin file’ customers – greater access to credit by broadening

the ways in which their reliability and affordability can be assessed – through third-party apps, for example. You could be forgiven for thinking that open banking’s promise of enabling more nuanced decision-making threatens to put credit reference agencies out of a job, but that’s far from the case, says Bis Das, a solution design consultant at leading credit scoring agency Equifax. Rather, he says the company believes there are a host of benefits to using open banking transaction data when determining credit affordability and risk – and it’s right at the front of providing those services for financial institutions. “Allowing access to credit to thin-file customers – such as those new to the country and young adults, who have minimal credit history, is a major advantage,” Das says. An additional impact of this, he adds, is that open banking helps to improve financial inclusion by increasing customers’ access to better products and services and making the market more competitive.

Having permissioned data, such as salary and disposable income, removes the need for manual processing of wage slips and bank account statements, while better authentication at the point of application, through digital ID verification, reduces the risk of fraud. In addition, open banking allows for specific transaction alerts to be sent to customers or companies who want them. Equifax has been staying ahead of the game by teaming up with other service providers to deliver these better customer outcomes. In July 2019, Equifax formed a strategic partnership with AccountScore and its account information service provider (AISP), Equifax’s clients can use’s solution to enable their customers to allow and control third-party access to their data, then use AccountScore’s technology to obtain and understand this information. Equifax and AccountScore chose to partner after successfully collaborating on early stage open banking projects. Issue 15 | TheFintechMagazine


LENDTECH “We wanted to be an early adopter of open banking. So our challenge was to ensure that we could implement innovative and agile solutions for our clients, through a trusted partner, to access open banking data. We could also offer a complete and transparent consent management portal to comply with PSD2 regulations,” says Das. The company took multiple factors, such as accuracy, consistency and speed, into consideration and found AccountScore’s categorisation engine to exceed in all areas. Its experience with transaction data prior to open banking’s launch also gave AccountScore an advantage over rivals, Das adds. The partnership has proved incredibly successful. Indeed, it ensured that HSBC, one of Equifax’s biggest clients, achieved its goal of being first to market in using open banking data in this way, according to Das.Key was collaboration and a willingness to learn on all sides. “The fact that it was a completely new source of rich data, we felt was important – for us to learn and grow, as we use transaction data in order to develop long-term sustainable solutions for our clients,” says Das. But the biggest achievement was speed, he adds. Historically, a customer would have been required to supply paper copies of bank statements, which breaks the flow of a digital application process and adds significant amounts of time as the customer has to find their statements or request them from their bank and then pass them on to the lender. There is an additional time lag when the statements are received, as the lender would then typically use an underwriter to manually go through the transactions and categorise the data to identify the payments of interest relevant to a credit and affordability assessment. Open banking allowed Equifax to streamline this significantly by enabling consistency and stability, as well as speed, and giving the company a competitive edge, Das says. “Working with AccountScore, we enabled access to live transaction data across the

CMA 9 banks, where the first solution was implemented within six weeks. HSBC achieved this by working collaboratively with Equifax and making a focussed investment to explore the benefits of open banking.” In addition to the project with HSBC, Equifax has been working with a number of other clients to prove the value of open banking to their customer journeys. For example, it is working with M&S Bank to enable it to become one of the first mortgage providers to offer customers an open banking-assisted application process. “Within the debt sector, we are also helping to improve the experience of customers struggling with debt,” says Das. Equifax is doing this by enabling the auto-population of the income and expenditure form, while also aligning it to

Number crunch: Data used for decisioning must treat the customer fairly

It’s all about making sure there is the right balance between what data is being looked at, versus what data is being used for decisioning


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creating a reverse look-up, comparing the sort code and account number taken from the customer’s online bank account to Equifax’s extensive current account database,” says Das. “This enables a seamless ID verification as part of the customer journey. We encourage clients to learn and understand the commercial importance of this data, before taking the leap with a fully-integrated solution.” He warns that this is not something that can be learned with retrospective data and instead relies on being trialled on live data. “Our recommendation is to start soon, but start small,” says Das. “Setting up the technology behind capturing the user’s data is costly, time-consuming and requires specialist analytical capabilities to release the value in the data. It’s one reason why banks enter into fintech partnerships.”

the standard financial statements. This, in turn, makes the data gathering process of both customers and clients much easier. But all this is just the tip of the iceberg, according to Das, who hints there is far more to come. “We are already working with a lot of other clients, in various sectors, to prove the value of having open banking as part of the customer journey,” he says. So, what has Equifax learned about open banking through such partnerships? “The key is to ensure strong value exchange, to ensure consent from the end customer. Without this, you simply won’t get customers to engage with you,” he responds. But the learning process hasn’t always been easy and keeping an open mind and being agile is important. “We discovered gaps in the account opening process, such as ID verification, which we have found solutions to by

With regard to the future, Das stresses that, open banking as a service alone will not provide all the answers. “It is important to harmonise open banking data with other external data, such as bureau data, to make sure that you have a complete picture of the customer. This will improve financial accessibility, consumer choice and customer experience.” But he adds that the services that will continue to thrive are those that give customers best transparency and control. “Customers need a compelling reason to share their data, and it is up to the business to make sure it enforces a strong value exchange to ensure that happens,” says Das. “It is all about making sure there is the right balance between what data is being looked at, versus what data is being used for decisioning. For instance, if someone missed a single payment, it does not necessarily mean they’ll miss payments in the future. It’s important to ensure that any kind of data used for decisioning does not treat the customer unfairly.”

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BRICKS & CLICKS Specialist lender to the property market, Hampshire Trust Bank, is building a unique proposition based on best-in-breed technology, open banking and human experience. Charles McDowell and Russ Fitzgerald explain how it’s knocking on the future’s door Decade retrospectives are usually playful affairs, hopping energetically across the biggest stories of the previous 10 years: royal weddings, sporting upsets, Kardashian bottoms, that kind of thing. So it’s telling that, in raking over the 2010s, what struck most commentators was the breathtaking technological progress we’ve made since the Blackberry-booming days of 2010. In a significant way, the past decade saw digital technology become the story. In the finance sector alone, we’ve covered a quantum leap – literally, for IBM and Google – in computing power ,which, combined with innovations

in financial services, precipitated the fintech revolution. Along the way, we’ve learned that the future is contradictory: that 100 per cent banking automation is possible, but not preferable; that staffed bank branches are redundant, but remain important. The hopes of the techno-optimists were realised, only to be tempered by a simultaneous consumer craving for a ‘human touch’. If one firm embodies this duality – of tech innovations and human advisors aimed at delivering top-drawer customer service – it’s the diminutive yet dynamic Hampshire Trust Bank (HTB): UK specialists in the property investment market. HTB, lending across asset finance, property development finance, and specialist mortgages, won Savings

Champion’s Customer Service Award in 2017 after refocussing on providing a best-in-field customer experience for brokers and their clients. The firm’s managing director of specialist mortgages, Charles McDowell, outlines the specificities of the market HTB operates within. “In the mortgage market, there are three ways to differentiate,” he explains. “Through price, through service or going up the risk curve.” Concluding that accepting riskier propositions and offering lower prices were both unsustainable strategies, HTB decided to pursue high-quality customer service as its unique attribute. As McDowell puts it: “All of our clients and our brokers deal with us because of who we are: we are completely passionate about giving a fantastic broker experience, and a fantastic client experience.”

Spotlight on data: Open banking integrations are informing property lending decisions


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But, as fintechs and financial institutions (FIs) learned over the course of the last decade, ringing every bell and blowing every whistle in the fintech innovation space does not necessarily lead to happier clients and customers. McDowell is refreshingly realistic about how his firm treats innovations and envisages change in the property investment lending market. “We’re not going to completely revolutionise the whole process,” he asserts. That’s largely because, in the specialist lending market, the human touch isn’t just reassuring, it’s vital for underwriting unique and bespoke loans. “We are dealing with complex borrowers, with complex needs and often complex properties,” McDowell explains, “so we need expert manual human underwriters to continually assess on a case-by-case basis.” But there’s an element, too, of HTB quickly finding answers to the questions that fintechs and financial institutions were busy grappling with in the 2010s. Founded in 1977, HTB was acquired in 2014 by private equity firm Alchemy Partners LLP. Over the next five years, it welcomed in a number of new, highly-qualified staff – McDowell among them – to help boot up an ambitious growth strategy. That strategy appears, in the cool light of 2020, to have been fortified by insights from the early fintech revolution: namely, that cherry-picking and bolting-on software-as-a-service (SaaS) innovations or low-code platforms is wiser than attempting those end-to-end innovations in-house. Russ Fitzgerald, HTB’s CIO and another experienced hand brought in to help realise the lender’s new strategy, is concise about HTB’s approach to new tech. “We operate a best-in-breed strategy, so we’re really clear: if we can commoditise it, we’ll buy it; if it’s part of our specialism, we’ll build it,” he explains. “We automate the processes we need to automate, but we don’t take away the face-to-face relationship that HTB has with its brokers and customers. Automation, for us, goes to a point then stops.” Among those service providers that HTB deems best-in-breed are Netcall, the low-code customer experience specialist whose partners include Network Rail, Nationwide, and a number of NHS trusts and universities. Netcall’s Create service enables HTB to automate the testing of its low-code software, reducing costs, manual

testing requirements and software blips. Last year, HTB also forged a partnership with SnapLogic, which again provides a low-code, intelligent integration platform; in November, HTB bought into Alfa Systems’ end-to-end asset finance software, which both parties anticipate will deliver a 300 per cent increase in functionality across HTB’s workflows. Fitzgerald believes it’s these smart, strategic partnerships that make the bank uniquely dynamic in the lending space. “There are many lenders that have come to market as what I would call bank-out-of-a-bag,” he explains. “They would’ve gone and bought a core banking platform, and will be largely operating off the back end of that. Where we’ve differentiated ourselves is we’ve brought in industry tools – low-code tools, such as what we get from Netcall. We use those to develop our own front-end systems, so what’s different for us is that we’ve built a lot of it ourselves, we’re not reliant on vendors to deliver it.”

Data-informed underwriting Converging in an extensive application programming interface (API) infrastructure, with scale and diversification enabled by the Cloud, HTB’s engagement with industry tools is aimed at removing the friction from the customer experience or, as McDowell puts it, ‘finding those little bits of grit in the process, and taking them out, so that it’s easier for us, for our brokers, and our clients’. “Our digital transformation allows us to identify those areas that are frustrating, and remove them,” he adds. A specialist lender with the power of a bank and the flexibility of a disruptor, HTB currently serves more than 27,000 customers in the UK, helping to boost a buoyant UK property development market while supporting SMEs with specialist mortgages – like student accommodation and buy-to-let housing. By automating simple processes – enabling e-signatures, for example – it’s asking less of those customers with each interaction. But there’s another aspect to superstar

customer service, and that’s getting the job done effectively and efficiently. HTB’s website is peppered with press releases detailing the speed at which some lending deals are finalised: a matter of days from initial agreement to the final signed contract. And herein lies another industry innovation, enabling super-fast and accurate underwriting, which HTB has been able to tap into, thanks to open banking. “A bank like HTB actually doesn’t have an awful lot of data, especially given we’re only five years old,” says Fitzgerald. “We leverage open banking through our relationship with AccountScore, and that gives us access to bank account data and categorised statement data, which improves our underwriting processes. “‘Through our partnership with fintech Realyse, it also gives us connectivity into publicly available APIs and data services,” he continues, “many of which we consume to enrich the process and improve the capability of our underwriters to get to a decision very, very quickly. We have a better understanding of the average price to sell, how long it takes to rent, what rental value it will go for, what the demographics are in the area, the average age of the individual, what their average income’s going to be – far more than any developer will ever know.” By using open banking to facilitate snappier decisions, HTB is delivering on speed to complement the resolutely human and responsive customer experience it has curated. While, elsewhere in the property investment market, all-digital startups like UOWN emerge to challenge the status quo, it’s clear that HTB has forged a comfortable niche for itself in the specialised property investment space. Looking to the future, Fitzgerald gives a taste of what to expect from HTB: more partnerships with best-in-field services and more low-code solutions. “Our next step, this year, is to offer a broker portal,” he says. “It’ll be fully integrated, through API services, into our back end; there’ll be end-to-end integration, the bit in the middle will be the underwriter, and that will be where we add that unique decision element.”

We operate a best-in-breed strategy, so we’re really clear: if we can commoditise it, we’ll buy it; if it’s part of our specialism, we’ll build it

Issue 15 | TheFintechMagazine



High hopes for low-code low-code Netcall’s Chief Technology Officer, Richard Billington, on how low-code is paving the way for a fresh approach to change in financial services High on the agenda in the finance sector is customer experience. So what’s stopping businesses in this competitive market meeting the increasing demands from its customers? Like many industries, finance has legacy systems and complex IT structures to contend with. It’s a recipe for disconnected processes and data silos, not to mention poor customer experience. One technology that is pioneering a new and effective approach to modernising front and back-office processes is low-code. We caught up with Netcall’s chief technology officer, Richard Billington, to explore how its low-code solution, Liberty Create, is successfully supporting transformation journeys for banking, finance and beyond. THE FINTECH MAGAZINE: Low-code is fast becoming a widely recognised technology, but for those who aren’t familiar with it, can you explain? RICHARD BILLINGTON: Low-code enables citizen developers (aka business users) and IT to collaborate on application development to radically improve processes without the need for complex code. This makes the whole process of delivering change faster and more accessible, even for non-IT professionals. By removing the requirement for developers, who have traditionally been needed to bring digital transformation to fruition, low-code is helping to overcome shortages in digital skills. We’re finding that the collaboration it facilitates between IT and business departments is very powerful, too. TFM: A common challenge in financial services is legacy technology and the restrictions of broken processes. How does low-code help with that? RB: Legacy is a big deal. Existing tech and core systems are mentioned in almost every customer conversation. Legacy tech is responsible for disconnected processes that have a big impact on operational efficiency.

The good news is that low-code doesn’t disrupt your existing IT infrastructure. It’s designed to complement core solutions, so you don’t have to ‘rip and replace’. Liberty Create integrates with a huge range of systems, from enterprise platforms to bespoke, internally-developed solutions. This, in turn, provides smoother processes, making them quicker, reducing costs and improving the experience for everyone involved, from start to finish. An example of this is Hampshire Trust Bank, which launched its low-code Property Finance solution four months ahead of schedule. This demonstrates the power of low-code in supporting even highly-regulated organisations to drive innovation and achieve transformation goals, one step at a time. TFM: Change isn’t just about tech, though. It’s about people and culture, too. How does low-code lend itself to cultural adoption? RB: With a low-code solution like Liberty Create, you don’t need to be a coder to build applications. This makes the tech accessible to a much broader range of users. It makes it a faster, more iterative process and project teams can introduce smaller step-changes and see results quicker, compared with traditional, largescale transformation. So, low-code aligns nicely to an agile approach to project and change management. It empowers teams to quickly prototype specific features and functions to demonstrate how a new process or application could work, then test, learn and evolve. We’ve seen among many of our clients that low-code fosters a collaborative approach between IT and line of business. This delivers change that is closely aligned to the needs of the organisation. It also helps to bring people on the journey, as they begin to imagine a better way of doing things.

Drag and drop: Low-code empowers business teams

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From sending executives to Silicon Valley so that they can experience innovation, to asking customers to help with product development, Nordea Bank is on a cultural transformation as much as a digital one… and that, says Chris Crespo, will be more enduring than technological change

THE FINTECH MAGAZINE: You have one of the coolest job titles in banking: you’re Nordea Group’s chief futurist. So, what does a futurist do for a living? CHRIS CRESPO: My role is essentially to work with the ecosystem, scan the market and understand what’s happening in terms of latest trends, customer disruption – not only in financial services, but in all other industries. I bring all that knowledge internally and work closely with our executives to ensure that our strategies are future-proofed against how customer behaviours and expectations are changing – and also what other industries are doing in response to that. Because the biggest disruptive force we’re facing, as an industry, is our customers. They are the ones that are dealing with companies outside financial services that treat them to supreme customer experiences because they're invested heavily in removing friction, in hyperpersonalising that experience, in integrating the online and offline experience. That expectation is spilling over into banking. TFM: So, do you think there are any elements of the financial services industry that other industries look at and think ‘I wish we could be like that’? CC: I have not come across one, to be honest! I think that’s because we have been heavily regulated for a very long time, which has, in some respects, stifled our ability to up our game. For example, in the use of data. Other regions in the world are more lax when it comes to data protection. The General Data Protection Regulation (GDPR) is only an issue for companies that want to store and use EU citizens’ data, but it does not apply for non-EU citizens. In China, for example, Tencent, Baidu, Ant Financial, etc, have all been able to innovate exponentially, due,


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in part, to the fact they are subject to less regulation. Meanwhile, retail companies, in most cases, have less of a regulatory burden, so they have been able to experiment with data in a way that financial services industries have not. TFM: Is it really only regulation that has held banks back from being able to utilise data as effectively as they could? CC: That and our legacy infrastructure. Banks have traditionally captured a lot of the data from customer transactions, but the problem is that the data is available in an unstructured way and it’s really difficult to derive any insights from it, let alone the foresights and predictive analytics. Newer companies are able to build that into their infrastructure from scratch – although what they lack is the richness of historical data that we have. TFM: When you are able to access that unstructured data, what opportunities does it create for you as a bank? CC: This all is about meeting the customer where they want to be met, serving them in the way they want to be served, personalising banks’ services to their particular needs. Monzo, for instance, allows them to customise the way in which they see their app. So, if you don’t like looking at your balance because it’s always bad news, you can put it further down the page. Then, there is the use of data to anticipate what the customer might need from you – hyperpersonalising the customer experience. Nordea has a unit dedicated to initiating dialogues with customers in a completely different way to understand the things that concern them in life and then try to match our capabilities to that, and develop new services that are able to address the specific needs they have – not just from a bank, but overall in life.

TFM: How might addressing customers’ broader – not just financial – needs create opportunities for future revenue streams for a bank? CC: Banks make the most of their revenue through commissions, fees, interests and penalties, and that’s been almost unchanged for 600 years. But now we’re seeing less and less demand for traditional banking services, and customers are saying 'you already know so much about me, how can you add new value to my experience?’. So I think this is not so much about what new lines of revenue we can find; it’s more about how we can serve our customer in new ways and deliver different value propositions to them. The revenue will follow. Data, of course, is one of the ways in which we can start offering new value. You have, for example, lifestyle banking – there are some banks in Asia that are doing this already. If, by using my data, the bank develops an understanding of my preferences as a consumer, that allows it to act as a concierge for me. The bank doesn’t profit from me directly, but can say: “We know you so well that we will help you by making you aware of things that you might be interested in buying, or services that you might be interested in consuming.” It then turns to the merchants and says: “I have a really fine-tuned, curated platform, with information about my customers. I will not give you the data, but I can help matchmake between you and customers that are most likely to buy your products and services. If you want to have access to that matchmaking capability, you will have to pay me.” We scale that up by developing a highly intelligent database, with a lot of AI and algorithms that are focussed on getting just one thing right: the likelihood of the consumer’s next decision being X or Y?

Creating a mindshift: Unless the thinking changes, technology will have limited impact

But this is just one example of ways in which banks can use data to deliver new value to customers. We’re also starting to see point-of-sale loans, for example, or even post-point-of-sale loans, where the bank says: “You’ve just spent €1,000 on this TV. We don’t need to take the money straight out of your account; would you like to defer payment in four instalments?” TFM: How does multibanking affect this new value proposition? CC: Banks can take the aggregator approach and give customers a full overview of all a customer’s accounts in one place. But, in reality, if you put the customer at the centre, I think there are better ways of addressing the issue of how they manage multiple accounts. Because, ultimately, it’s not that the customer wants to have them all; they do it because there are different value propositions that these cards offer. So, I think the issue that we should be trying to solve is how can we meet all the needs of customers, in one place, without forcing them to go to various providers, and make the experience as frictionless

and as convenient as possible? It’s a change of mindset. It’s not so much: there’s this problem, how do we solve it? It’s about understanding the customer need that is generating the problem and addressing that. It is only when banks realise that it’s not about pushing products and services, it’s more about serving a specific customer need, that we will be able to really turn the industry around and start unlocking all the possibilities that digital transformation holds. TFM: So, what’s on Nordea’s digital horizon in 2020? CC: Our digital transformation is happening in three steps. The first is the replacement of the core banking platform with T24, getting rid of redundant systems, slimming down infrastructure and our product portfolio, to allow us to become more responsive and agile. The next stage of our digital transformation is doing things differently. This is where we’ve taken the existing business model and thought, how can we improve the efficiency and the way in which we provide some of these services? That has led us to look into automation, robotics,

I think it is only when banks realise that it’s not about pushing the products and services, it’s more about serving a specific customer need, that we will be able to really turn the industry around

artificial intelligence (AI), and start deploying some services along these lines. But, for us, technology is disposable. It will continue to change and something else will replace what we’re seeing today. So, there are a number of things that we’re doing to complete a digital transformation, beyond technology. We’re starting to engage customers to see if they really want products we’re thinking to developing. That’s a huge departure from the traditional way of developing products in banks. We also believe that digital has to be experienced, so we expose our leaders to what we call experiential learning programmes. In some cases, we have taken them to Silicon Valley or China, to see what digital developments from leaders in other industries look like. We realise that we don’t have the monopoly on good ideas. There is fantastic innovation taking place outside the bank, and it makes very little sense for us to try to copy that when we have the option to partner with these companies. If we come up with really innovative solutions but fail to change the mindset, it will be like planting a seed on sterile ground. We need to make sure it’s fertile for these new ways of delivering value to customers to flourish. 2020 is very much about getting that mindset shift. Issue 15 | TheFintechMagazine



Doing the thinking for you With its specialisation in financial transaction lifecycle management, SmartStream’s dedicated innovations team, which is made up of highly skilled researchers, mathematicians, applied data and computer scientists, is constantly striving to plug the gaping holes in execution and operation of financial management systems. The team deploys artificial intelligence (AI), machine learning and blockchain, and evaluates how that helps to streamline functions, improve efficiency, reduce delivery time, boost productivity, and drive down costs. In October last year, SmartStream launched what has been hailed as a gamechanger in its field – the first Cloud-based reconciliation engine to be powered by AI that had been trained on real-world data from the world’s banks. What also sets SmartStream Air aside from other reconciliation engines in the market, is its immediate accessibility, and its use of transformative AI algorithms to auto-configure reconciliations of any data structure. SmartStream further sharpened its capability with another AI and machine learning module that simplified digital payments processing through its TLM Aurora solution. This opened up the possibility of improving rules matching in data for digital payments processing, so that what had taken up to two days would now be accomplished in a matter of seconds. One after the other, SmartStream is annexing the difficult domains in the lifecycle of financial transactions with its AI and machine learning capabilities. Now that it has the knowledge, the technology and the right audience and partners, the SmartStream leadership is set to expand its Cloud-based service capability further. The company wrapped up 2019 with a new partnership with Union Systems Limited,


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In the post tap-and-pay world, businesses don’t have the luxury of time to identify and correct problems in the lifecycle of a transaction. But with SmartStream’s new portfolio of AI services, they won’t need it, says Strategic Product Manager Roland Brandli which is a key provider of financial software solutions and professional services to major banks in East and West Africa. With this, SmartStream is taking solutions in liquidity transparency, operational risk management and digital payments processing to a whole new geography, one that has leapfrogged many of the legacy systems in the West. Strategic product manager for SmartStream, Roland Brandli, tells us what goes on behind the scenes and inside the brains of SmartStream. THE FINTECH MAGAZINE: Why was your product launch in late 2019 considered such a gamechanger? ROLAND BRANDLI: We launched two new products at Sibos in October. One was the transaction lifestyle management system, TLM Aurora, which is catapulting one of our original tools – digital payments processing – into the new age. The other was SmartStream Air, which is the world’s first AI reconciliation engine hosted in the Cloud. Air, because there’s just nothing else like it, is creating a really big buzz. Also because it’s literally solving problems that would normally take three to four weeks, within five minutes, and because it is completely Cloud enabled. Aurora has also had really good feedback and a great take-up. When we launched Aurora, we knew what was going on in

the market, and how customers use our software, but believed it needed a change in paradigm. Normally, users have to go and look for things. We’ve changed that around completely, so now the data looks for the user. The other important differentiation is, if we look at most business-to-business (B2B) solutions, they’re lagging behind in usability; they still tend to be quite complex. We decided we’re not going to get rid of any of the functionality a B2B solution needs, but we will make it feel much more like a business-to-consumer (B2C) solution, which is much easier to use. Users don’t have to think ‘what am I doing in the software?’. The software does it for them. It brings them to problems, so that all they have to do is focus on solving them. TFM: You were at Money20/20 in Las Vegas to unveil SmartStream Air to the American market. How does that market differ in terms of the challenges SmartStream is solving? RB: If we just look at digital payments , what’s interesting in the American market is that a lot is done over payment service providers. So, they tend to be much more interested in this sort of solution, whereas, in other countries, it would be the banks themselves that would be interested. It’s interesting because you obviously get to a much bigger market that way. Also, while there is a lot of automation in the Wall Street banks, there’s still quite a lot of manual work being done in the retail banks. And because we ultimately address exception management, which is traditionally a manual operation, and automate that, we’ve had huge feedback in the States, and a lot of really interesting conversations. A lot of our focus in the USA has been on potentially new clients – people who haven’t been aware of us or what we do. I think we’re quite unique here, because we work in

Reconciled with AI: SmartStream has more applications in the pipeline

Normally, users have to go and look for things. We’ve changed that around completely, so now the data looks for the user the post-tap, post-swipe world, whereas most of the products here are all based on the experience before that. In our world, if something goes wrong, it has to be fixed instantly. Previously, banks could afford to take time to fix it as we were in a T+1, +2, +3 environment, but everything’s now becoming instant. Five years ago, if you wanted to make a payment to the UK, it would’ve taken three days. If a mistake happened that takes five days to fix, you would hardly have noticed. Now it takes 15

seconds to do a payment. If you come back and say it’s taking you five days to fix something that went wrong, it’s just not what people expect anymore. So, if something goes wrong, it has to be fixed instantly. That’s the challenge. SmartStream is basically all about operational control. It’s all about managing exceptions and making sure processes operate as they should. It’s about keeping the promises that marketing makes to a customer, and making sure that when customers interact with banks and financial institutions, what they’ve ordered actually gets delivered. Issue 15 | TheFintechMagazine



Custodian banks have a special duty to protect the financial assets of their customers – and none more so than BNY Mellon. As the world’s largest custodian, it administers $35.8trillion of assets (as of Q3/19) on behalf of institutions and individuals worldwide. This requires a sophisticated approach to data management and analysis, using the latest technologies to safeguard customers, minimise risks and inspire trust. Over the last decade, custodians have benefitted from huge advances in technology and the globalisation of the investment industry. Data is at the heart of this transformation, says Saket Sharma, whose role as technology CIO of the New York-based bank’s treasury business involves overseeing data strategies across payments, supply chains, electronic banking and trade finance. “If you look at how data has evolved, it’s the three Vs: volume, variety, velocity,” says Sharma. “There’s no disputing the first one, as data volumes have been multiplying at a phenomenal rate every year. Variety means the growth of structured and unstructured data. And velocity is the speed at which information is moving in the digital world, shaped by the consumer expectations of real-time data and on-demand service. To harness the power of data and stay competitive, you must have a clear strategy for data.”

Saket Sharma, Chief Information Officer of Treasury Services Technology at BNY Mellon, explains why capturing and controlling ever larger volumes of data is crucial for customer protection and business efficiency It’s a challenge that faces all businesses today, and particularly custodian banks as the pressure on their middle offices increases. Effective data control means meeting regulatory requirements and ever-more demanding service levels. Through advanced data analytics and information management, BNY Mellon is building transparency, risk mitigation and market intelligence. “We need data to tell a story,” says Sharma. “We have to dig deep and understand everything from the customer perspective. To help customers in their journeys, we have to find the right insights, the right data for effective decisionmaking. “For example, when we do payments, they go

through multiple hubs before they are cleared and settled. You have to negotiate the Office of Foreign Assets Control (OFAC), know your customer (KYC) regulations, liquidity checks, fund control checks, and so on. In all these areas you must find ways to optimise and provide greater visibility.”

Trust and boundaries The type of data BNY Mellon captures comes from a wide variety of sources and covers, among other things, reporting on unencumbered assets, portfolio and asset-level transparency, hypothetical trading simulation and pricing models, and compliance monitoring and exceptions processing. Speed and accuracy are vital, as is the ability to manage data from disparate sources that may lack standardisation. But, above all, Sharma emphasises that trust is the foundation for all BNY Mellon’s activities. In a world increasingly shaped by technology, customers must feel confident that digital business also means ethical business. And, as artificial intelligence (AI), machine learning and data analytics became part of the financial fabric, there are concerns that they may undermine individual liberties as much as they empower banks and financial institutions to help their customers.

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BNY Mellon is fully aware of the need for clear boundaries between privacy and how data may be used, and is working closely with regulators and policymakers to ensure the right balance. For instance, it is part of a consortium recently formed by the Monetary Authority of Singapore (MAS), which is developing an ethical control framework called Veritas. With the aim of strengthening internal governance around AI and data management, the Veritas framework enables financial institutions to evaluate their AI and data analytics (AIDA), based on four main criteria: fairness, ethics, accountability and transparency (or FEAT). BNY Mellon’s guiding principle is being trusted to ‘always do the right thing’, which Sharma says is a fundamental part of its approach to KYC. “We look closely at the data points we’re validating,” he says, “to make sure the right KYC procedures are in place. And we make it seamless for our customers, so that they are more comfortable. Cloud technology is now a great enabler, bringing both agility and a solid platform for value-added products.” The bank operates a Cloud-based platform called Nexen. Launched in 2015, it is part of a digital transformation programme that began in 2012, to remove silos and streamline the bank’s systems. By consolidating systems and services through Nexen, supported by a development team of more than 10,000 technicians who are building apps to a common standard, everything is now easily and securely accessible by clients in their preferred format. Nexen is an open-source solution built with application programming interfaces (APIs), and includes data analytics

through a service called Digital Pulse. This tracks activities, processes and transactions within the bank, yielding predictive analytics that improve operational efficiency and address customer pain points. Sharma says that Cloud computing gives the bank an architecture to build systems that are elastic and can scale. He underlines another important feature, too – interoperability. “Whatever route a customer takes to interact with us, we need to make it smooth and seamless,” says Sharma. “Whether they come via an online portal or API connectivity, the channel must offer seamless integration with their products and services.” A vital part of the process is joining all the data dots, he says. “For any organisation to achieve optimum performance, it must develop a data-driven culture, to bring everything together and create the complete story. Data determines the decisions you make. If it’s unconnected, you won’t make the right decisions.

Data determines all the decisions you make, and if it’s unconnected and unstructured, you won’t make the right decisions “Data is your intellectual property, your core asset. Channels come and go, but everything flows from what you do with the data. How you apply it, and the capabilities you build on top, is what makes the difference.” Collaboration is one way to gain even greater value, says Sharma, and fintechs make this possible because their business model is based on integration with other service providers. APIs provide the glue to hold them all together. “You can integrate with third-party providers and so the ecosystem grows in size and value,” he says.

Collaboration is key To encourage innovation, BNY Mellon has launched its own fintech convention. The first event, Fintech Connect 2019, was held in early November and brought together a diverse group of fintech companies and private equity investors, venture capitalists, with BNY Mellon clients.

Fintech Connect explores new ideas and business opportunities for collaboration and innovation. The bank has its own innovation centres in the United States, Europe, the Middle East and Africa, and Asia Pacific. All have close contacts with thought leaders in the open-source culture and the digital economy with a key focus on machine learning, advanced data visualisation and semantic data modelling to power data and analytics tools. Sharma thinks BNY Mellon will always support collaborative models, and continually explore new partnerships that can build on the versatility of APIs. The Nexen platform is a prime example, as the open-source technology can generate a wide variety of API developments, and customers can access more than 100 APIs through the Nexen API store. Recent examples of collaboration include BNY Mellon’s announcement, in November 2019, that it is broadening its digital capability through partnerships with four platform providers. Working with EZOPS and Kingfield, the bank will be able

to use machine learning and AI for greater operational efficiency, while Caissa and Two Sigma will help provide enhanced risk solutions and transparency for customers. BNY Mellon has also announced that it is cleansing its data so that it can be used company-wide. The project will last a couple of years and will make data usable across different business units. Another initiative is to develop custodian-agnostic data capabilities, which involves gathering asset-servicing data from clients and competitors and using it outside the core custody business. This is an evolution of the bank’s Eagle data management business, which operates alongside custody. BNY Mellon sees itself as a technology company in the charter of a bank, working to improve the effectiveness not just of its own business but also that of the financial markets more broadly. With its commitment to transformation, reinforced in 2018 by a strategy called ‘Digitizing This Very Bank’, it’s setting itself a high standard. Issue 15 | TheFintechMagazine



In October 2019, Konica Minolta Business Solutions (UK) launched its smart invoice processing solution. A Cloud-based service, it aims to address and eliminate the two main troublesome areas of invoice processing – non-standardised invoice formats and the additional manual labour required to make up for accuracy issues created by last-gen automation.

Europe. We support finance teams in businesses of all shapes and sizes. In 2016, we bought a company called ProcessFlows, which has been creating automation and document management/workflow solutions for 30 years. We built on it to offer information management and automation solutions to all sectors, but our strength is invoice processing services, and that’s why we’ve launched the new platform.

Automation through artificial intelligence (AI) and machine learning doesn’t work well when the data is not standardised or is unstructured; it’s the reason most automation solutions available on the market have limits and fail to deliver impactful, accurate solutions, says Konica Minolta. It claims to have addressed this with accurate extraction and capturing of data from a wide range of sources, re-entering the data itself, if necessary, in a format recognised by the software, as part of its service offer, which is delivering huge value to clients The application of AI in tandem with human intelligence has, it says, combined to create amazing synergies, enabling its platform to reclaim the time an average accounts payable professional spends on so-called ‘automated’ transaction processing. And it is offering this as a service, on subscription, even to those not buying the invoice processing platform. The Fintech Magazine spoke to Francis Thornhill, marketing director for intelligent information management and managed IT services at Konica Minolta, to get a better understanding of how it’s working smarter.

TFM: Who are your ideal clients in invoice processing – big multinationals or smaller businesses? FT: We’re ideally placed to help companies that are processing 1,000 to tens of thousands of invoices a month. Basically, businesses of all sizes, including multinationals. Our platform and service is scalable and configurable to fit the largest customers – or, indeed, those that might not sign up to our platform. They could just take our capture service, for instance. But we also support smaller customers. Some businesses have very few invoices, but lots of line items, and they all have different delivery dates. All these present challenges when you get errors in data entry. We can handle all of that for our customers – even small businesses can leverage our Cloud service.

THE FINTECH MAGAZINE: How does the invoice processing solution fit into Konica Minolta’s wider strategy? FRANCIS THORNHILL: Well, we have some 31,700 customers for IT services across


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TFM: Why would a business want to outsource the core task of accounts payable? FT: In the accounts payable profession, people mostly find themselves doing data entry or verification of invoices. There’s no standard for invoices; every one invoice is different, sometimes even handwritten. So, when you put them through the automation pipe,

even if you are using AI, you start to get failures. What we’re trying to do is sort out the real heart of the issue, which is errors in capture. We do capture verification for our customers as a service so that they can focus on the real value-add within accounts payable. This way they don’t lose control of decisionmaking; the customer still makes the final decision, but right up until that point, it’s automated through our invoice processing solution. TFM: What makes your capture service so different? FT: We’ve developed a capture service where we do the verification and rekeying, if necessary, to improve automation levels, and address the real manual and repetitive burden that accounts payable teams are facing. Our core strength is in the capture side, making sure that the data, from whichever source, can be extracted. The data is captured, classified and then made ready for workflow automation. Key to any successful automaton project, whether they are finance related or any other, is the quality of data going into the workflow and automation. That is why the ability to capture, extract and classify data from any source is so important before the automation and workflow phase. Our platform and other solutions can use software robots that take data from web services and application programming

interfaces (APIs). We deliver all this as a Cloud-based service, with a subscription so that accounts payable teams aren’t faced with a massive capital investment, which is one of the key barriers to transformation. TFM: What is the motivation for businesses to automate accounts payable and invoicing? FT: I think there’s a whole collection of challenges and concerns. Mostly, they realise that the existing way of doing things is too manual and it’s preventing them from making the progress they need in

AI, by itself, isn’t really fool proof, just like humans. But, with a combination of human and artificial intelligence, we can get much better accuracy

terms of efficiencies, visibility or control. The one or two per cent improvement each year is no longer good enough and blocking progress. So, they realise they’ve got to make a step change in the way they do things to achieve new levels of efficiencies, or even new services. They recognise that it’s not just a case of buying software, or the quick fix, but that they’ve got to do it differently – properly – and that means across people, process and technology. TFM: How difficult is it to work with the banks, given their legacy systems and corporate culture? FT: We actually enjoy working with the banks, because they’re really methodical and robust. We insist on using a discovery assessment before we start any project. The discovery process maps out existing processes, identifies gaps and then models a future state. It’s quite a formal process, and it’s chargeable. It’s the best way of getting the necessary details, and the banks appreciate the equal robustness of our engagement. TFM: What potential does AI have in unstructured areas, such as invoice processing, and how can it spill into other areas? FT: AI, by itself, isn’t really fool proof, just like humans. But, with a combination of human and artificial intelligence, we can get much better accuracy in

the capture and verification stages of data, and that ensures that you’ll get higher automation levels. Today we do that just for invoice processing, but we’re going to extend it to a whole raft of other back-office services. Automation has basically pretty well reached its limit with structured data, so anything structured can easily be automated. But you’ve got this next low-hanging fruit, which is the unstructured data. And the technology is there as long as you provide some context to it. So, if you say ‘understand all the variables of this room and the context’, it’s very difficult for AI to make sense of that. But if you say, for example ‘you’re only going to receive an invoice’ and then give the learning around all the different variables associated with that invoice, in the next step, it can take another form, say, a mortgage application, and start comparing documents. The combination of AI and human intelligence in the handling of unstructured data started creating amazing synergies. The services available today are all based on the technology that was available in the past. The new technologies and approaches, new combinations of artificial and human intelligence, are going to unlock new services that weren’t previously possible. And that’s where our strength lies. Our core strength is our people, who do the end-toend consulting, implementation, support and integration. The software, by itself, does nothing, until it’s integrated with the people, processes and the technology. The key area we often focus on with this platform that has open APIs, is integrating with the customer’s systems, and evolving them. That’s the key challenge, and that’s how you get the best results.

Intelligent approach: Humans and machines in hamony

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Thegreatenabler Data drives the digital cogs that allow U.S. Bank to pursue an open banking model, but it knows better ID&V solutions are needed if everyone is to benefit fully. Executive VP of Omnichannel, Gareth Gaston,outlines the bank’s approach As the US grapples with the complex issue of how better to protect its citizens’ digital identities to thwart spiralling cybercrime, the bank that bears the nation’s name is forging into a new, ‘open’ world. U.S. Bank, the fifth largest in the US with about 3,000 branches, is sealing deals with fintech firms to offer services that range in scale from instantaneous person-to-person payments to mortgages in minutes, embracing the concept of ‘open banking’ through the sharing of data. And that rests on it having confidence in, and also being able to protect, the aforementioned digital identities of its customers. The two issues – data sharing to extend financial services’

reach, including to the under- and unbanked, and that of secure identity and verification (ID&V) – are inextricably linked and stirring up quite a debate in the US, which is yet to develop a federal regulatory framework for opening banking, such as Europe’s revised Payment Services Directive and the Open Banking initiative in the UK. The discussion comes against a background of rising financial fraud in the US. Federal Reserve figures show that losses to synthetic identity fraud, carried out by constructing fictitious individuals in full view of financial service providers and credit bureaux, totalled $6billion last year, with some estimates raising that to $8billion. Meanwhile,

new account fraud, whereby hackers steal, wholesale, another person’s personal information and good credit rating, also soared by 13 per cent, incurring losses of $4.3billion to the financial services industry. Banks are aware that for all the opportunities that open banking offers to create a great customer experience, it could leave them financially and legally exposed. Which is why, in 2018, firms across the financial services and fintech sectors, including U.S. Bank, formed the Better Identity Coalition (BIC) to lobby for the adoption of better solutions to identity verification and authentication.

Driving change: But debate is needed over ID&V if all the opportunities of open banking are to be delivered


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BIC has since laid out a five-point plan of action to try to fix the ‘critical vulnerabilities’ in the digital identity fabric, with the priority being the development of a ‘next generation’ remote identity proofing and verification system. Its coordinator, Jeremy Grant, recently warned the US House Financial Services Committee Task Force for Artificial Intelligence that government help was needed as industry could not do it alone. “Open banking is creating a need for more sophisticated industry solutions, as banks and fintech firms alike seek to enable consumers to authorise access to certain data or permissions in their accounts on a granular level, and enable consumers to revoke access at anytime,” Grant told the committee. “And getting identity right is key to making sure that the US leads the way in the next generation of banking solutions.” Gareth Gaston, U.S. Bank’s executive vice president of omnichannel, acknowledges there ‘is a great need for a more robust digital identity offering’. But, in the absence of federal ID&V policy, the bank is forming its own, considered approach.

Open to partnerships U.S. bank, which is embarking on a determined drive to transform the services it provides to customers through an open banking model, has surrounded itself with experts in the data sharing field – internally and externally. The bank has teamed up with Personetics, which has also worked with Tandem and Metro banks in the UK, to rebuild its app ‘from the ground up’, using the input of 5,000 of its customers. The result is a mobile banking service that features real-time spending analysis, cash flow tracking, recurring payment changes and reminders about forthcoming payments, as well as advice to encourage and boost savings. The bank has also partnered with US person-to-person (P2P) payments specialist Zelle and with mortgage specialist Blend, in doing so becoming one of the first banks to use Blend’s one-tap service to enable a mortgage decision in minutes. Gaston is excited about the potential of further collaborations. “In this country, the advent of open banking is still relatively in its infancy, we haven’t had the same regulatory pressures that PSD2 brought to Europe, but we certainly believe that our customers should

be able to share their data where they’d like to share their data, and that they should be able to have a rich experience, if they want to, with any given fintech,” he says. “We want to make sure, as we deliver that kind of service to our customers, that they are very aware of what information they’re sharing with third parties, and that they are able to revoke that information at any given point in time. “We also partner with fintechs directly, so we have a great partnership with Blend, for example, for our mortgage applications, and they’ve enabled us to go from what was ostensibly a paper-based process that took more than 30 days, to a fully digital process where, literally, if you are standing in the home of your dreams and you’re thinking that you would quite like to buy it, we can give you a firm offer of credit, right there and then. That's a great example of a fintech partnership that has helped us propel our mortgage experience forward. “We are extremely open to fintech partnerships. Many, we’ve found, are more business-to-business (B2B) in nature, and achieve success by partnering and empowering bank experiences. We are certainly not naïve enough to think we can

We believe our customers should be able to share their data where they’d like to share their data, and that they should be able to have a rich experience with any fintech do all this stuff ourselves. I have a saying, ‘spend your money on the wrapper, not the ingredients’ – where I think banks will be very successful is by having a lot of partnerships, vendors, and fintechs, underneath that wrapper, all brought together by the banks in a nice, seamless experience for the customer.” Gaston describes the arc of change in the industry as moving from the ‘brick era’, where all banking was done at branches, to the ‘glass era’ where PCs, laptops and phones came to the fore, and now, finally, the ‘air era’ where smart devices, such as

Amazon’s Alexa or Google Home, will be increasingly used for banking tasks using voice. But, despite that, he sees a continuing place for banks’ branches in their omnichannel future in which the vast majority of customers will have the ability and technology to ‘self serve’ routine banking tasks and transactions. “We know that our customers really value talking to people, and we know that even millennials, who everyone frames as being digital natives, actually value having a conversation,” he says. “But what we see, and what we think will be more apparent in the future, is that we will move away from branches and contact centres being about transactional tasks, because these transactional things are now able to be DIY. Then the conversation, which is very exciting for the customer and very exciting for our employees, can move much more towards being advice-based. “So, what we really want to be doing with customers is not cashing or depositing cheques and wiring money. What we want to be doing is understanding what they want to get out of their life, and how can we help them achieve their dreams and goals. “I think this concept of advice and goal setting, and achieving your hopes and dreams, can be done in person, as part of a really great conversation. But when you leave that conversation, you’ve a suite of digital tools to help you understand your financial health.” Gaston believes that U.S. Bank’s size – being big enough to afford to do what it needs to do, while being agile enough to make quick decisions – has put it in a sweet spot as the digital revolution continues to roll through the financial services industry. He says: “It’s actually about your ability to execute, and that comes in a couple of different forms. First, you have the speed of execution; secondly, there’s the quality of what it is that you’re producing. What we’ve found is that co-locating teams in the same place and having all the skillsets – not just designers and developers, but risk analysts and lawyers – and empowering them to make a decision, is enabling us to move really fast. So much so that you might be surprised to hear one of the big tech companies we work with said ‘you’re moving faster than we are!’. “We were certainly quite humbled to hear that.” Issue 15 | TheFintechMagazine


DIGITAL ID Sinister threat: Synthetic identity fraud is a growing concern

Monster of a problem It’s been described as the Frankenstein’s monster of ID theft because criminals don’t need all of your identity, just a piece of you, from which to construct a threat that is casting a sinister shadow over financial services. Synthetic identity fraud (SIF), to give it its real name, is the act of piecing together real and fake credentials to create seemingly legitimate accounts that are then used to carry out costly credit scams. The worst of it is that the constant industry battle to make onboarding new customers as frictionless as possible, could be handing criminals the keys to the vault. According to a recent report by industry analysts McKinsey, SIF is the fastest-growing branch of financial crime in the United States, with the Federal Reserve putting losses through SIF attacks to the credit card industry at $6billion in one year alone. The largest synthetic ID ring detected to date racked up losses for banks of $200million from


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Gena Boutin of data industry specialist Refinitiv, believes there is only one way to defeat synthetic identity fraud 7,000 synthetic IDs and 25,000 fraudulently-obtained credit cards. Many of those were verified using routine credit score checks of what were, in fact, composite individuals, created by bolting together real and fake (or sometimes entirely fake) information, including for example email and social media account details. McKinsey points out that, although an initial credit application will be rejected by a credit bureau because it cannot match the name in its records, the simple act of applying for credit automatically creates a file in the name of the synthetic ID. The fraudster can now set up accounts in this name and begin to build a credit

history, in effect bringing their creations to digital life. The fact that the credit file looks identical to those of many real people with limited or no credit history makes the scam nearly impossible to detect… until, that is, their credit line is maxed out and the repayments cease, or, in the jargon, the synthetic IDs ‘bust out’. Fraud rings sometimes establish thousands of these synthetic IDs, all waiting to default, creating what McKinsey describes as ‘hidden time bombs’. Businesses that rely on static personal identifiable information (PII) as a fraud gatekeeper are particularly vulnerable because, at the heart of the problem, are the inconsistencies that sit within the huge volume of structured and unstructured data that has been built up to establish our digital selves and is increasingly used during the onboarding process by financial institutions. The cracks between these online identities are the Achilles’ heel that allows cyber criminals to infiltrate the system.


So, what’s the answer? According to Gena Boutin, executive talent acquisition services manager for data industry specialist Refinitiv, the financial services industry is now at a crucial crossroads. It has two paths to choose from: to lobby for a federated approach to identity by financial services institutions and governments, or allow individual consumers to be responsible for protecting the integrity of their data, otherwise known as self-sovereign identity, which utilises technologies such as blockchain. Refinitiv is firmly in the former camp. “The scary thing is that synthetic identity is passing know your customer (KYC) checks, including sophisticated machine learning networks, 85 to 95 per cent of the time,” says Boutin. “That’s because the inconsistencies in data that we leave throughout the course of our lives are being exploited to get past the banks’ thresholds. “It’s why the provenance of data, trusted data, is important. It has to come from independent, reliable sources, not social media, and has to be comprehensive and complete. It has to capture each individual data attribute about you, across all spheres – the sum total of everything about you, from the day you were born to today. We’re currently not getting all of that because we’re just looking at bits and pieces. That’s where criminals exploit the gaps, specifically those inconsistencies.” Refinitiv recently teamed up with crossborder verification specialists Trulioo to launch Qual-ID, a digital identity verification and screening programme to plug the gaps. Developed as a direct response to the increasing intensity of cybercrime facing both companies’ customers, it encompasses a three-stage ID verification process utilising Refinitiv’s respected World-Check risk intelligence platform, and is available through a single application programming interface (API). “We felt that we had the ability to deliver a solution to our customers, with Trulioo, to turn the tide on financial crime,” says Boutin. While all financial institutions have to adhere to KYC regulations, the relative ease with which sophisticated criminality is passing these checks points to deep-seated flaws within databases. “We think that, between trusted data

and recalibrating what we believe is the appropriate way to verify an identity, we can shift financial institutions onto a positive footing, where they can not just compliantly and confidently know their customer, but also enhance customer experience in the process,” she adds. Boutin argues that the sheer scale of the data being held on systems at present means it’s virtually impossible to sort the good from the bad. Which is why Refinitiv is urging the world’s financial institutions to pursue the idea of a federated identity in which everyone cooperates in bringing together physical, digital and biological elements of each individual, so the slightest inconsistency can be spotted. Refinitiv’s head of digital ID and financial crime has previously said that the variety of ways in which governments are approaching citizens’ identity locally make it difficult for financial services firms operating in multiple markets, adding ‘we believe the best solution is an open, federated digital identity programme with consistent standards and a level of portability for consumers in their use of it’.

We need to minimise the amount of data that’s out there, because it’s effectively blurring the boundary between good and evil “We need to establish an infrastructure, an entire ecosystem around identity – no single entity or individual can do it themselves,” says Boutin. “We need to minimise the amount of data that’s out there, because it’s effectively blurring the boundary between good and evil. We don’t know where the data’s coming from – is it good data or bad data, has it been compromised? – making it that much harder to distinguish a legitimate consumer from a fraudster. “As an industry, we’re at an inflection point right now. We need to decide whether we have a federated identity model, meaning we establish a few trusted providers or issuers of identity that other institutions then rely on. That would minimise the amount of data that’s out

there and create efficiency, because we would no longer be recreating a verification over and over. The alternative concept is self-sovereign identity, where people would say ‘you know what? It’s my data, I should control it as an individual’. And there are some benefits to that. However, in the financial services sector, my personal opinion is that the value of self-sovereign ID is diminished.” Boutin believes identity, and the data it is comprised of, is the fundamental mechanism through which financial institutions establish the trust essential to their survival and prosperity. By using trusted data and recalibrating the way it’s verified, they can address what she describes as the ‘precarious position they’re in’. A survey on behalf of Refinitiv, among more than 3,000 managers with compliance-related responsibilities, last year, found that financial crime affects most organisations in one form or another. Conducted across 24 countries, it revealed that nearly three quarters (72 per cent) of those organisations were aware of financial crime in their global operations in the preceding 12 months, yet recovery of stolen funds is marginal. Emile Van Der Does De Willebois, the World Bank’s lead financial sector specialist and global lead for financial market integrity, has spoken of the gaping discrepancy between the number of suspicious activity reports (SARs) submitted by financial institutions (FIs) and money recouped. He calls the gap ‘formidable’, citing a special report from the Future of Financial Sharing programme that of more than two million SARs submitted in the US in one year, fewer than one per cent of criminal funds were frozen or confiscated. Clearly, identity fraud is not just a financial services industry problem. More than 446 million consumer records of all kinds were exposed in data breaches in 2018 alone in the US, an increase of 126 per cent on the previous year. But it’s FIs that are most severely impacted. Frankenstein’s monster chose to end its reign of terror by its own hand; those who seek to defraud others using synthetic identities can’t be expected to make such an honourable exit. The industry has to act, says Boutin: “It’s really become a matter of urgency.” Issue 15 | TheFintechMagazine



safety catch The

UL has spent more than a century helping companies embrace innovation while keeping consumers safe and happy. And that’s a very useful skillset in financial services right now, says Kevin Emery, Director of Cybersecurity Enablement On the face of it, ensuring vacuum cleaners don’t spontaneously combust and battery-operated toys don’t go rogue, has little to do with strong customer authentication or EMV (Europay, Mastercard and Visa)-supported transactions. But at UL, a company that issued its first safety certificate back in 1909 (for a vacuum cleaner, in fact), they’d politely disagree.

As the UL motto proclaims, it’s all about ‘making the world a safer place’ – and, given that 2019 was a record year for identity theft, with account takeovers, ‘smurfing’, and other nefarious frauds perpetrated against financial institutions, UL’s experience in testing and strengthening the safeguards around everything from national defence systems to solar panels and appliances, is very pertinent. Especially, says Kevin Emery, director of cybersecurity enablement, when it comes to the next era in transaction technology – voice-activated payments and the Internet of Things (IoT). Who better to make sure your fridge doesn’t lay your account wide open to a cyberattacker while it’s placing the weekly grocery order? Or prevent Alexa from getting duped into thinking you’ve just told her to move funds between banks. Such services aren't available... yet, but they are the holy grail of frictionless payments and, when they arrive, they have to be secure. UL strives to instil trust in organisations and help them make smarter decisions by progressing innovation safety standards, sustainability and connected security. A decade ago, it turned those skills to the financial services sector. “It’s all the same foundations: trust


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and security,” says Emery. “Our passion is safety and security. It’s not just about compliance, the tick in the box. It’s about ensuring that our customers’ risks are successfully mitigated.” As the world becomes ever more connected, UL’s presence in so many industries looks set to stand it in good stead, particularly in the area of smart homes and smart cities, the IoT and automated processes driving what is known as Industry 4.0, become mainstream. Enabling secure payments is key to the IoT business case but devices may have split loyalties (selfish vs altruistic) and multiple masters, so where is the liability for payments

We’re going to see payment services fragment and we’re going to see them converge, and that’s probably going to happen all at once made in error, failure to make a payment and disputes between shared owners? Will the IoT create new frauds and how can a consumer with multiple devices, networks, providers, employers, bank accounts and an extended family, stay in control? In a recent interview, Isabelle Noblanc, VP and general manager for identity management and security at UL, said traditional identity management and authentication models must be rethought and re-engineered, moving control from enterprise contexts into the hands of end users. “The minute a digital product starts

interacting with others, digital credentials become paramount,” she said. With more than 21 billion connected IoT devices and sensors in operation globally – the equivalent of nearly three devices for everyone on earth – security concerns related to them are getting increased attention from regulators. New laws scheduled to come into effect in both California and Oregon in January 2020, for instance, require manufacturers to design connected devices with ‘reasonable security features’. UL’s global IoT Security Rating is the first effort to objectively assess the security of consumer IoT devices. “Security should be an enabler,” says Emery. “Something that helps with the traction and use of a system, rather than detracting from it.”

Changing nature of threat The risk landscape for payments is in a state of constant change, says Emery. He cites experience of the humble personal identification number, or PIN. “The threat models that we’ve used for the last 30 years have dramatically changed in the last five years. The way we deal with PINs is now managed on a completely different level, depending on what they’re used for.” Whereas card-present payments used to simply involve entering your card and then your PIN in order to complete a transaction, such a code can now be used in a range of different ways. “It could be used for your online banking, for a mobile app or to generate a one-time passcode. “There are many changes and impacts in different areas, from a security aspect, from an interoperability aspect and from a compliance aspect,” adds Emery.

But, at the end of the day, all customers want is simplicity in the control they have over their money, how they work with multiple accounts and how they can secure those accounts. “It’s about implementing simple approaches to very complex systems,” says Emery. “To really help facilitate the customer interaction and address the fundamental customer need. “I don’t think I’ve ever thought ‘oh, that’s a new way to pay for something’,” he says, citing ride-hailing app Uber as an example. The key aim of a customer hailing an Uber is to easily get from A to Z, not the thrill of trying out a new, invisible payment method, after all. “From QR to open banking, all these new payment methods and frameworks provide the consumer with a tonne of choice, but they are also commoditising a previously bespoke area of the payments industry,” says Emery. “We’re going to see payment services fragment and we’re going to see them converge and that’s probably going to happen all at once in the sense that all this technology is causing a lot of confusion – where can I use it, where can’t I? At the end of the day, the customer only wants to be able to pay. So, let’s try to eliminate the technology for them.”

Telecoms has already achieved that, he says, highlighting the example of an iPhone user sending a message. “If I send a message to someone with an iPhone, it goes over iMessage. If I send a message to an Android user, it will go as a text message. There’s no choice there in terms of how I send that message. My phone knows what I want to do, at a fundamental level. I want to send a message, and then it works out the best way to do it.” And it should be exactly the same with payments, he argues. “I really think that’s the approach we need from a payments perspective. The customer will use their app, their phone, however they’re paying for something. And between that device and whoever they’re transmitting the payment to, the device will work out what’s best. “I think there’s going to be a lot of work and a lot of opportunity in looking at those pieces of the puzzle and working out where your risk is – if you change this piece, does it affect this piece? – and making sure all those pieces in the puzzle are certified. Once they know that – once they know it’s safe and secure – consumers

will be happy as long as they can have access to it, use it in the different ways they want to, and move it around to different areas if they need to, in an instant manner.” So, how close are we to realising an invisible world of payments? “I think crossing that chasm is the difficult part – how it gets from being an idea, then a pilot, to something which is really, suddenly, in the blink of an eye, being used everywhere. “IoT devices, but especially how you pay for things in the automotive space, is going to be really interesting and not just how you pay for things when you’re in your car, but things how the payment process works when you’re topping up your electric Tesla – actually through the charging cable, for instance? How does that work? What does it look like? How do payments really converge at the heart of this connected world we’re in?” It’s a long way from bagged vacuum cleaners, but if anyone can work out the answer to that question, it’s the securityby-design experts at UL.

A connected world: But what do payments in it look like?

Issue 15 | TheFintechMagazine



The Greenhouse Wells Fargo was known for taming financial services in the Wild West. Now, it’s driving a coach (this time without the horses) through retail banking, using AI to help customers manage money better, says Head of Innovation Lisa Frazier Artificial intelligence (AI) will revolutionise banking by helping people to improve their financial health. Not only will AI democratise financial services by providing them at a lower cost than traditional banking methods, it will also enable providers to offer realtime advice to customers in a way not previously possible. So says Lisa Frazier, head of innovation at the American bank Wells Fargo, who believes that data-driven experiences built on top of legacy systems will be core to the future of banking. But this change is driven not so much by innovation in itself, she believes. Instead, it is due to consumers demanding more from their banking providers. “It’s about digitisation, real time, ‘give me information that helps me manage my money and achieve my goals’,” she says. “The innovation has been coming a long time, through digitisation, and now we’re seeing new and even more exciting technologies that are bringing more information to customers – in their hands, on their mobile phones.” As to what’s triggered this change in customer demand, Frazier says it’s down to the world of money becoming more fragmented. This, in turn, has highlighted the limitations of traditional banking methods and consumers have noticed. In an increasingly connected and stressful world, they want to be able to carry out their financial business instantly. “Two-thirds of people say they’re either extremely stressed or somewhat stressed about money – it’s getting harder


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to manage it, and yet we have realtime access with our phone; so why can’t the phone help me?” she adds. That was the premise behind the Greenhouse app, which Wells Fargo describes as a mobile bank in the palm of your hand, particularly aimed at gig economy workers with no regular pay cheques to rely on. It offers customers two accounts – a Set Aside Account for bills and a Spending Account for day-to-day outgoings, linked to a debit card. By encouraging them to put money aside in ‘digital envelopes’, analysing user behaviour and offering customers insights into what disposable cash they have ‘in the moment’, the app, as one banking executive described it, helps customers ‘put the guard rails on themselves’. Greenhouse was built from the ground up after the bank’s research showed that many customers, particularly millennials, use various hacks to manage their money, such as alerts and notes on other mobile apps. “We are very passionate about financial health powered by AI and this is really going to be the next generation of the way banking goes forward,” says Frazier. “So, traditionally, banking has been about transactions, how you took the branch experience to online, then mobile,” she explains. “Now, we’re going to be using data and information to make it relevant to you; so, at a specific time, in a specific channel, asking your need is and using AI to help you make the best decision.” She believes that AI will be key to building the banking products of the future, with a particular focus on improving customers’ financial health. In addition to helping a bank’s customers to manage their money effectively, it could have wider ramifications for the industry. “The cost of providing financial services has historically been higher than it is

today, and that is a result of computing power and availability of data,” she explains. “We can provide real services to customers today at lower cost, so that’s one factor in the democratisation of financial services. Another example is advice, which used to only be available for people who had major assets, and is now available online for more people than ever before.” And by that she means realtime, behavioural advice, as opposed to just transaction-based budget analysis. “Traditionally, banking has been about setting a budget and then asking ‘did you meet the budget or not?’, and then expecting behaviours to change. But that’s not the way we work, or think, as people. So, AI in the future will be about realtime coaching, encouraging you to think about setting goals as you spend,” says Frazier. “If you come home on a Friday night and you don’t want to cook, you could potentially ask Wells Fargo ‘can I take the kids out for something to eat?’.” The bank will then be able to offer the customer some informed, albeit neutral, AI-generated advice. “We won’t judge, but we will potentially be looking at ways to give you more information to make that decision, real time,” says Frazier.

Bridging the gap Having been established amid the Gold Rush of 1852 and going on to famously operate the largest stagecoach company in the world to deliver customers’ business, what become the fourth biggest bank in the US, got through the 2007 financial crisis comparatively unscathed. But it‘s been under pressure recently, having been hit by record fines by the US Consumer Financial Protection Bureau, which also led to cost-cutting and staff changes at the highest level. This October it installed a new CEO in Charles W Scharf, who recently announced the

AI, in the future, will be about realtime coaching, ecouraging you to think about setting goals as you spend


appointment of former Bank of New York Mellon colleague and ex-Obama administration White House official, Bill Daley, as head of public affairs. Throughout the recent turbulence, however, Wells Fargo did not fail in its determination to keep innovating. Indeed, innovation could prove to be a vital part of its technological and reputational transformation. “Modernising our technology is very important to us; it enables us to be more nimble, achieve speed to market for customer experiences and reduce our cost to operate the bank,” says Frazier. “So, we use things like application programming interfaces (APIs), microservices… layered across the legacy technologies that we have today.” Wells Fargo is committed to working with external fintech providers and startups, too. Indeed, Frazier stresses the importance of collaboration for the benefit of both the bank and its partners – having been in the business for more than 160 years, it feels it can offer a lot to a fintech looking to build its own products. “Wells Fargo has a lot of information and data about customers’ current financial transactions and needs. Our scale in partnership with technology and fintech companies, that’s an amazing opportunity

Wise moves: The Wells Fargo app uses AI to nudge customers In the right direction

for the future,” adds Frazier. “We don’t believe any one of us has the single answer; it will be a partnership.” Wells Fargo seeks to build these partnerships through its own startup accelerator programme, which currently has 25 companies in its portfolio, all of which are actively creating proof of concepts and leveraging their solutions for the bank’s customers. “We invest up to a $1million in a startup,” explains Frazier. “They tend to be very early stage, so pre-series A venture capital companies, and they’ve been identified because of the teams and the solutions they have that meet a need that we have at Wells Fargo, either around a customer problem or a business problem.” The bank then works with the selected startups through a virtual six-month programme, helping them to develop a proof of concept and go on to pilot it with Wells Fargo customers. Throughout this

incubation period, the bank acts as a bridge between the early-stage company and the large-scale financial services industry. “The startup companies themselves are trying to learn a lot about financial services, their requirements, and what it means to operate in a big company,” says Frazier. “My team, the Wells Fargo Startup Accelerator team, is that bridge, talking two languages – the startup language and the big company language. The startups learn a lot about what is required to interact with a big company, and also a lot around the financial information and knowledge we have, whether it's regulatory, security, or whatever,” she adds. The result is a win-win for both parties, because it‘s ‘bringing the best of two worlds together’ to address the most pressing problems for the bank and its customers today – and tomorrow. Issue 15 | TheFintechMagazine



The DATA merchants Retailing is all about making an emotional connection with customers, according to Angus Burrell and Andrew Howell of global payments solutions specialist Valitor. And, in an omnichannel world, you need data to feel the love With Brexit uncertainty paired with a December election, the UK high street was bracing itself for a gloomy festive season in 2019. Visa’s Christmas marketing campaign even tried to drum up retailer footfall with a #whereyoushopmatters message following sluggish November sales figures. As consumers expect to be able to shop quicker and often cheaper than ever before, where do the traditional bricks and mortar stores fit into this new retail landscape? Well, according to Angus Burrell and Andrew Howell – respectively general manager for the UK and head of marketing in the omnichannel solutions division of global payments business Valitor – they won’t unless they embrace the shopper ‘experience’. “I think one of the biggest changes we’ve seen in the last two or three years is the emergence of the consumer who’s going shopping for an experience, not necessarily to buy something,” Burrell says. “People are


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buying into a lifestyle much more, they don’t want to be filling their lives with things.” He has an uncompromising message: “The high street as we have known it is probably a drawing to a close.” In other words, if bricks and mortar retailers in the UK ignore advice to maximise the customer experience, they could join the 9,300 stores that closed their doors in 2019. But the good news is that there are plenty of examples of native online businesses that have made the move into the high street – brands such as Missguided and Joe Browns – signalling that digital and physical have a complementary role, as long as you understand how the channels work together and master them correctly. This isn’t a multichannel strategy – discrete sales channels responsible for their own customers and marketing – but rather an omnichannel approach, whereby data is shared across an organisation to

build up at 360-degree view of an individual consumer. It’s about intelligently using data, from website, social media and store, to translate information into revenue. “Consumers really identify with brands and they’re able to do that due to social media, the sharing of everything on Instagram, Facebook, etc,” says Howell. “The question is, how do you translate your luxury, in-store shopping experience onto a social media feed? How do you map t hat romantic view of what it is to be part of a brand, to online, as part of your app, your content, your email marketing, push notifications, or whatever?” “I think that retailers can cross the divide between high street and digital by various means,” answers Burrell. “Maybe I give you an offer when you buy something in store to get a percentage off for buying online. That might entice you to go online and buy

something else. Maybe that works the other way round, too. Maybe retailers enable me when I buy something online to return it in store or if I buy in store, to return it online.” The reason retailers often fall short in this area is because there’s a data chasm. A shopper might receive great personal customer experience in store but then ‘there’s just this big cliff you drop off where you might get hammered by emails, or not receive any communication at all from the retailer, which is crazy’, says Howell. Since online retailer marketing is becoming more and more personalised, consumers are quick to be put off by blanket messaging or, indeed, a rude silence following the initial excitement of a purchase. Valitor calls this the after payment emotional experience (or APEX) and it sees it as being crucial to building the customer relationship. It’s the idea at the centre of Valitor’s omnichannel mission ‘because it’s a reality that 80 per cent of your revenue is going to come from 20 per cent of your customers. So, you need to keep those top customers really happy’, says Howell.

Payments hold the key Valitor believes that the only way a retailer can ensure it provides a seamless, hyper-personalised experience throughout the consumer journey, is by understanding customer behaviour through payments. Payments data is so much more than tracking expenditure; it gives a clue to the psyche of the shopper and, as such, Howell argues, the insights it provides should be available across an organisation to inform the ongoing relationship with that customer. So much so, in fact, that he believes successful retailers these days should aspire to being a personal concierge, curating the shopping experience over the customer’s mobile phone. Despite payments information having been available to retailers for a number of years, most have been poor at organising it and not good at explaining to the consumer why it’s to their benefit that they give it up. “I think retailers could really benefit from having a more purposeful education programme that says ‘this is how we’re going to use your data. This is how we’re going to keep it private. This is how we’re going to improve your experience. This is how it’s going to benefit you – we

The high street as we’ve known it is drawing to a close

can improve our service because we understand you better as our valued customer’,” says Howell. “If people understand that, by giving you their data, they’ll receive more in return, they’ll be much more likely to exchange their information.” The advent of open banking, which is having an enormous impact on data availability and analytics, makes it easier, in theory, to maximise intelligence about a consumer and to personalise the offer – which could, ultimately, extend to in-the-moment financial services, such as credit at point of purchase or product insurance. While there are notable examples of large brands with multiple channels, numerous outlets and high footfall that excel at creating sticky customers so loyal they’re superglued, Valitor believes payments data also offers smaller independent retailers – the ones fighting for survival on the high street – a radical way to boost customer engagement and drive more of them into town. By pooling their data, independent merchants in the same locality could also understand consumer behaviour better, allowing them to compete more effectively against the retail giants. Ultimately, says Howell, there’s going to be a singularity for retail, where ‘the dinosaurs all die, and from it will evolve a more intelligent, smarter species of retailer’.

Channelling success: In-store retailing can benefit from data sharing

Issue 15 | TheFintechMagazine



Inspiration from the East: ACI and India’s Mindgate are fusing expertise

Spicing up realtime payments ACI Worldwide’s Craig Ramsey explains how it’s looking east to develop a new wave of ‘overlay services’ – the secret ingredients that make alternative payment rails irresistible The urgent need for universal, realtime global payments has been recognised across the financial services industry and beyond for some time. And universal payments facilitator ACI Worldwide (ACI) has been helping to make them happen for some time. Now, it is looking east, to India, for inspiration in delivering not just speed, but added value to those crossborder transactions, in order to promote wider adoption among banks. Last June, ACI made a strategic investment in Mindgate, one of the solutions providers supporting India’s unified payments interface (UPI). It’s an example of how the rapid digitisation of payments in mobile-friendly Asia is becoming a lesson in how the rest of the world should do it. Backed by all of the country’s main retail banks, and the government with its drive to take the country cashless, UPI enables anyone who holds an account with a participating bank to send and receive money person-to-person, or consumer-to-business, via their


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smartphone, using a unique identifier. Thanks to this ease of use, it is now handling more than half of all India’s realtime, mobile bank-to-bank transfers, with Google Pay the biggest initiator. It’s been an amazing success story, attracting 100 million users since 2016. UPI provides an open architecture, allowing digital wallet apps, payment banks and startups to link freely to its platform, in contrast to the closed systems of China’s WeChat and Alipay. It simplifies transactions between apps and banks linked through a biometric ID system called Aadhaar. Regulated by India’s central bank, UPI allows the instant transfer of funds between bank accounts through a mobile device using a simple virtual handle, without sharing bank or personal details, and its creators are now looking to expand the platform beyond India, to facilitate payments in places such as Singapore and the Middle East. Dilip Asbe, chief executive of the National Payments Corporation of India, the government-backed umbrella organisation that developed the system, was recently quoted as saying that UPI

has had the fastest acceptance rate of any payment platform, adding that it aimed to expand the UPI base to 500 million users in the next three years. It is Mumbai-based Mindgate’s expertise, gained through supporting UPI, not just in providing simplified realtime payments but also by including added value information at the same time, that ACI has bought into. According to Craig Ramsey, ACI’s head of realtime payments, it is this ability to ‘overlay services’, rather than the inherent transaction speed of the new rails, that will persuade more financial institutions to adopt them. Its collaboration with Mindgate promises to be a powerful one, placing both Mindgate and ACI front and centre in what ACI describes as ‘a payments revolution’, potentially bringing enhanced transactions to more jurisdictions across the globe. ACI already facilitates electronic transactions for more than 5,100 organisations worldwide, handling $14trillion in payments and securities each day for major financial institutions

and merchants. It is well-established in India, providing solutions for eight out of the country’s 10 major banks and processing 60 per cent of its digital payments. Through ACI’s electronic bill presentation and payment services, as well as a myriad of related software solutions hosted on customer premises or its own private Cloud (and in future on the public Cloud through its partnership with Microsoft Azure), it offers ‘realtime, immediate payment capabilities’ and enables ‘the industry’s most complete omnichannel payments experience’. But it’s the additional products and services those payments can potentially bring with them in the transaction process, that the ACI/Mindgate partnership is focussed on. “What we are now going to see is the next stage; how banks will start to offer more products and services, or what we call overlay services,” says Ramsey. “Banks look, every day, at how they can improve their customers’ experience and that’s one of the things that realtime payments, in itself, won’t do. Realtime payments is just a clearing and settlement mechanism. It’s a set of rails that supports the idea that you can do an instant account-to-account transfer, but it’s the digital overlay products and services

that give the customers reason to want to use the realtime rails. So, that’s what we’re doing with our partner company, Mindgate. “Mindgate has been instrumental in driving realtime payments and UPI adoption in India, so we’re going to take its experience to all of our 100-plus customers around the world, and show them what an accelerant to realtime payments can look like, whether it’s request to pay or merchant services, or mobile software development kits (SDKs), all of these things will give the banks’ customers reason to need realtime payments, and that’s when we’ll see the accelerant and the transaction growth that we’re all expecting to see with real time.” ACI, which has been involved in SWIFT gpi from the outset, is also hoping to bring Mindgate’s experience in this area to that relationship, as SWIFT undergoes a sea-change in its payments offering. “Initially, when gpi came to market, banks thought it was just another compliance requirement as part of the SWIFT network. But as gpi has evolved

Banks look every day at how they can improve CX… realtime in itself won’t. It’s the overlay products and services that give customers reason to want to use the realtime rails and added more services to its framework, they’re beginning to realise the benefits it gives to the customer, such as transparency of message flow, transparency for the initiating customer and the beneficiary around where the transaction is, and now, with universal confirmations coming next year, we’ll see every bank providing confirmation that the beneficiary has received their money,” says Ramsey. “So, it’s a big shift in how the traditional, fire-and-forget model of correspondent

banking existed; now we’re seeing transparency as well as transactions settled, in many cases, within seconds and minutes, across the globe. That really does improve the customer experience. The whole cross-border payments model has changed for the better.” Adoption of faster payments is growing rapidly worldwide, confirms Ramsey. “We’re seeing fantastic adoption across the world. There are now 60 countries that are either already on their realtime journey, or live, or planning. Australia went live last year, Hungary is now in its pilot phase, most of Europe is live. And there are some really standout countries, like India, where they’ve gone from a few transactions to almost a billion transactions a month, which is huge growth in realtime payments. “I’ve seen commentary about realtime payments being the new normal. We all want a realtime experience – no one wants a payment finally getting there, at some point in the future,” he adds. “But people can now see where their payments have got to within the full, end-to-end processing – we’re giving more customers transparency of payments, and it’s that which improves the customer experience.” SWIFT gpi is one of the biggest drivers for that change, says Ramsey. “More transactions are gpi transactions than ever before, and now we’re seeing the next wave: interaction between gpi and instant payment schemes; corporates involved in gpi transactions; corporations doing self-service rather than having to phone the bank’s call centre. “The next step, which is universal confirmations, is coming in 2020, and every bank in SWIFT will be required to send confirmation to the payee that the beneficiary has received their money. Every bank will have a part to play in providing that realtime tracking of data.” ACI intends to remain at the cutting edge of such developments through its strategic partnerships. As former ACI president and CEO Phil Heasley put it at the time of its investment in Mindgate: “The global realtime and digital payments transaction opportunity is vast, and… we are well-positioned to capitalise on this growth opportunity – providing to banks, corporates, merchants and payments intermediaries the world’s leading realtime payments offering.” Issue 15 | TheFintechMagazine



With mobile treasury services, build-it-with-the-customer dev ops and an open mind when it comes to payment rails, Bank of America’s Brian Bonds says it’s meeting app-based corporate clients on their own terms

Hi-tech players expect a hi-tech bank: BoA is on the same glass page as its San Francisco clients

Paying suppliers instantly for their services has not been the traditional way that firms do business. But in the gig economy, it is becoming the norm – driven by a desire by companies to keep their suppliers on side in a fastgrowing and competitive marketplace. The ridesharing industry is a prime example where drivers expect rapid payment, and can easily switch platforms if they don't get it. Providing banking to the US tech giants has long been the focus of Bank of America (BoA) – which has a strong presence in the tech temple of San Francisco – and meeting their fast-changing needs has shaped how the bank does business. The app-based economy has created new demands on payment services for corporate customers, both


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business-to-consumer (B2C) and business-to-business (B2B), and each has different priorities as to the most important aspect of that payment, although realtime is often high on the list. “In the past, no one really wanted to pay anyone faster – in fact, you would probably want to pay them slower,” says Brian Bonds, the bank’s global industry vertical lead for tech, media and telecom in global transaction services. “Traditionally, banking customers would put cost above speed. But today, particularly with the gig economy, it’s the end-to-end experience that often matters most. “Taking the example of a ridesharing company, it’s very important that, if I’m getting the ride, my experience of making the payment as a customer is satisfactory to me. But it’s also very important that the person at the end of the transaction, the driver, gets the payment in a way that’s a

good experience for him or her. If not, both the customer and the driver will switch to a different platform that offers a better, faster, more seamless payment experience.” The services BoA’s customers provide are often revolutionary, their potential for growth phenomenal and scaleup almost instant – they can roll out services across the globe within months, not years. Bonds says: “In the old world, companies would have maybe five or six or countries, that they operated in, so currency management wasn’t a significant factor. Now, these companies, at least the ones in San Francisco’s Bay Area, could be operating in as many as 180 countries and making payments in multiple currencies. “For many tech companies, a large swath of their product offering is often provided to users through an app and so they are not confined by geography. Whether it’s a ridesharing, apartment-sharing or hotelling

for their unique business models. That pushes our product development teams to come up with cost-efficient, faster and more seamless ways of making payments,” says Bonds. “What’s most important to us, though, is not building products and pushing them to our clients, but rather working together with clients on proof of concepts when the architecture is open, allowing them to be part of the design.”

The $1.6billion breakthrough The tech companies that are taking over the world one app at a time naturally demand the most tech-savvy financial services. And it doesn’t get more impressive than the $1.6billion transaction carried out over a mobile device – the biggest ever recorded using mobile technology – conducted by a corporate treasurer using BoA’s CashPro Mobile app. Recognising the solid security offered by modern devices, and the desire by treasury staff to unchain themselves from their desks, CashPro Mobile allows employees to work remotely. Its users reportedly made $160billion of transactions in 2019. CashPro Mobile features include access to an automated clearing house for low-value, high-volume transactions. It lets users view, sign and share documents, and provides realtime payments in the US. Another function is digitised know-yourcustomer refresh, so that companies can upload the required documentation to the platform instead of using email. Bonds believes more people should trust the inherent security of mobile – he rarely pays by physical card himself, since the digital token system employed by digital wallets protects against fraud. He says: “The CashPro app allows a treasurer to check balances or approve a payment wherever they are, even using an Apple watch. “At the end of the day, treasury departments are not getting bigger. People are having to do a lot more with less and it’s become more than a

Our clients in the new economy are very demanding, and in order to survive we have to recognise the rapid change of pace in technology

concept, once a firm has got the model working here, they can pretty much offer the app anywhere in the world. That means currency management is a big deal for them.” Bonds explains that BoA now consults with clients at proof-of-concept stage, demonstrating ideas and getting feedback early about how solutions should perform. “San Francisco is the home of the legacy Bank of America – we’ve always had a huge presence here and we’ve been with many of the major tech names since their inception. They are the innovators of their own business models. Take rideshare and homeshare services – these weren't around 10 years ago. It’s all new. We work with these types of clients to provide solutions

nine-to-five job, so making it easier to accomplish some of their tasks will have a huge benefit regarding the way our clients interact with us, and the client experience. “So much of what our clients are asking for – and what we’re providing – is about realtime. Realtime payments, realtime reporting and realtime information. By using AI and robotics, digitalisation and dashboards, we are speeding up the flow of information to clients, allowing them to make better realtime decisions while also freeing them up to manage their business,” says Bonds. Another tool in the works for the bank’s corporate clients is Bank of America’s online chatbot Erica, which was originally built for personal banking customers. “Treasury staff will be able to ask Erica questions such as ‘what’s the balance of my accounts?’ or ‘can you follow up on this item?’,” Bonds explains. “Having bots providing answers means our clients don’t have to spend time making phone calls or typing emails. However, even if they still choose to type emails, we’ll have the ability to screen them as they come in, using AI and robotics to see what questions can be answered before having to go to a human. This improves the speed of response. Our customers will see more of these services deployed in the near future. “Our clients in the new economy are very demanding and, in order to survive, we have to recognise the rapid change of pace in technology. AI and robotics are vital to improving the client experience.” Looking to the future of payments, Bonds does not worry about the proliferation of platforms – because he believes it means clients can find a system that most closely meets their needs. He says: “Instead of pushing people to use a certain payment rail, we’re opening up their choices. The fact is, our clients’ customers want to have alternatives. “From a large corporate perspective, crossborder, automated clearing houses have arrived, so clients have access to onshore clearing houses to make lower value payments that we didn’t have in the past. It’s a great alternative to a high-value wire. Realtime payments is another alternative. I feel people really want to have the choice, based on what their underlying experience is. As the gig economy develops, people are pushing us to offer more, not less. I don’t see that changing.” Issue 15 | TheFintechMagazine



RISING TO THE CHALLENGE OF GLOBAL B2B PAYMENTS Alan Koenigsberg, Global Head of New Payment Flows at Visa Business Solutions, on how businesses can find a way forward

International businesses today increasingly expect global access to finance in real time. They also expect finance to be available to them in a way that works in any country and currency, without the process being stymied by the historical constraints of national boundaries. And they expect financial institutions they work with to make this a smooth, seamless process for them. Today, despite rapid progress in areas of payments processing on the consumer side, crossborder B2B payments remain complex, touching many intermediaries and often resulting in unpredictable delays. The traditional correspondent banking network operates on a mainly bilateral relationship structure that is often felt to be clunky and unreliable, offering limited visibility into the status of a transaction. In addition, the setup to support clients’ businesses in a new corridor or currency is often unwieldy. Receiving banks can’t be certain when payments will arrive and therefore cannot give status updates to their customers/suppliers – and the amount of money involved may change as a result of exchange calculations and various fees. As consumers, we increasingly have access to real-time payment opportunities with complete visibility of our transactions. The status quo around crossborder business-to-business (B2B) payments is no longer unacceptable as it is a logical expectation that fast-scaling companies should be in a position to offer their services or solutions across the world. The need for new models and technological solutions that are able to make this happen in a timely

way is therefore increasingly urgent. Financial institutions are already moving to adopt technology platforms that give their business customers a secure, fast and predictable way to process corporate crossborder B2B payments. This imperative is part of a real drive for change we are seeing across the B2B crossborder payments space. Regulation, especially around anti-money laundering (AML) and know your customer (KYC) is also helping to fuel this change. The level of regulatory risk created by money laundering can be significant in some countries but the tightness of controls and regulatory adherence varies. Across most of Europe, AML controls are well established. In parts of Africa, however, the risks are a lot higher as controls may be less defined or rigorous. This means the chances of money being delayed due to AML problems are higher. It is also key, of course, that any new approach enables banks to reduce the risk of money laundering in the first place. We are seeing a growing number of partnerships between fintechs and financial institutions. This is key because banks and fintechs can overcome B2B crossborder payments challenges by partnering to pool resources, share ideas and working together to develop new technology. Today, for example, it is possible to develop platforms that can reduce the risk and time spent on crossborder corporate transactions by facilitating transactions from the bank of origin directly to the beneficiary bank.

Security is being enhanced through digital identity features that tokenise an organisation’s sensitive business information, such as banking details and account numbers, giving them a unique identifier that can be used to facilitate transactions on the network. Technology today is significantly disrupting the B2B payments arena. A short time ago, only the largest multinationals were concerned about how to pay and get paid globally, so payment solutions were geared to large corporations. In our current, globalised business landscape, every business of every size needs to be able to make global payments quickly and securely. As businesses’ needs continue to grow, we’re going to see a corresponding evolution of digital solutions in all aspects of payments, from access to enablement to initiation. We also expect that the global nature of payments around the world will continue to evolve to address the need for speed, transparency and optionality. In line with all this, we expect to see banks and financial institutions generally moving over to these new payment solutions. Technology is evolving fast. The future vision of all B2B crossborder transactions happening in a simple and reliable way will inevitably become a reality.

The global nature of payments will continue to evolve to address the need for speed transparency and optionality Issue 15 | TheFintechMagazine



Fine-tuning finance: The principle conductor in Europe is PSD2

Orchestrating payments FIME is helping to coordinate and unite global payments. Raphaël Guilley, VP of Solutions, and Stéphanie Pietri, Marketing Communications Director, discuss the quest for seamless card and mobile transactions It’s not the destination, it’s the journey. This phrase could well describe FIME’s philosophy and approach to data security and customer experience in the rapidly changing and complex world of payments. The company enables its customers to bring user friendly, reliable and secure solutions to the payment and transport markets. To make this happen, it provides consulting services, technical training, technology design, test tools and


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certification testing across financial services. This places it firmly at the centre of the payments ecosystem, a vantage point that enables it to advise on the best strategies for efficient transactions and oversee standardisation. With payments undergoing huge changes as a result of technological progress, user expectation for a frictionless buying journey, and tighter regulations, FIME has a key facilitating role to play. It supports a wide range of technologies and industry developments,

such as contactless, EMV chip, QR code, tokenisation, biometrics, and open banking application programming interfaces (APIs). In addition, to ensure its services are always in tune with market requirements, it partners with a wide variety of international and national payment schemes and industry bodies. “Everyone is pushing electronic payments,” says Raphaël Guilley, VP of Solutions at FIME. “There are plenty of drops during the journey, especially at the payment checkout.”

A cautious note In a world that is increasingly digital, mobile, crossborder and interconnected, payment providers must ensure that innovation and regulation go hand in hand. And they also need to avoid the unwelcome side effect of facilitating fraud. So, as payment systems and practices evolve, particularly the growth of card-not-present (CNP) transactions, the goal is to balance frictionless commerce with the requirement for security. This is a global challenge, with regulations such as the EU’s revised Payment Services Directive (PSD2) defining new rules across the payments chain. PSD2 affects all European online payments, and it includes a rigorous framework for strong customer authentication (SCA). It is a highly technical and demanding area that requires clear guidance and advice. This is reflected in the recent deadline extension for SCA compliance because of poor industry readiness: going from insufficient understanding of the measures, multiple new technology companies and product to scan and select, to lack of time to roll out with end-user onboarding implications. Another significant development is the move to ISO 20022, a new global standard for payments messaging. While the transition will likely bring many opportunities for banks, a huge effort is required to achieve a smooth migration, and all global markets need to migrate to the new standard.

Navigating the marketplace Change is everywhere, and Guilley says that because of regional differences and the variety of technologies now available, it can be a bewildering marketplace. “Banks or merchants are dealing with different customer segments,” says Guilley, “you can provide different ways to answer their needs. Some people are perhaps more cautious of ecommerce shopping than others, and so will be grateful for an element of friction to make them feel reassured and confident about security. On the other hand, some people will be unconcerned and want a totally frictionless journey. Different segments, different needs to address. That’s why you have to segment the offering and build tailored journeys.

“For me,” says Guilley, “the major underlying trend is customer experience being directed by PSD2.” He believes that PSD2 is helping to push the agenda. This is because, apart from the heightened security that SCA will bring, it is also encouraging innovation and competition so no one ‘giant organisation’ dominates the marketplace. For Guilley, the important thing is to ask the right questions and have a wider vision, which means avoiding a narrow focus on ‘magic bullet’ solutions such as biometrics. He qualifies this by saying that, because of technology innovation pace, there will always be new ways to approach the customer, new challenges and opportunities, so it’s a continuous journey. FIME provides the expertise to make this kind of refinement possible and positions itself as the partner of choice to develop and launch products. Guilley explains that FIME occupies a central position in the financial landscape and is working with all the technology specialists, whether that’s biometrics,

Our value to the banks is to help them understand the overall landscape. Seeing the whole picture will help them to make the best choices, according to their strategy EMV 3-D Secure (3DS), or source code providers. Because of this, it has a commanding view of what is required to make all the parts fit together. “Our value to the banks,” says Guilley, “is to help them understand the overall landscape, performance limitations, regulatory developments and requirements, and standardisation bodies. Seeing the whole picture will help them to make the best choices, according to their strategy. FIME is not here to sell.” In particular, Guilley emphasises that FIME can help banks understand how technology is evolving on the global stage, what it means for standardisation

in different geographies and cultures, and thus assist with strategic planning. This is important because of the fragmented way mobile payments are developing. Depending on where you are in the world, cash and other traditional payment practices may prevail, and FIME is helping to bridge these gaps and unify payments.

A question of culture Culture is clearly a strong influence on which payment practices and technologies are preferred by customers, as FIME’s marketing communications director, Stéphanie Pietri, explains. “We see different approaches for authentication, whether sensor-on-card, sensor-on-reader, match-on-host, or match-on-card. We discuss different options with customers and fully appreciate that, due to cultural nuances, some solutions are more acceptable than others. For example, in Asia they are sensitive about physical contact and are not in favour of solutions where you must place your finger on the reader, where many other fingers will have been placed before. In other regions, the concern is more about security, and having match-on-host, where you put all your template and your biometric data on a host somewhere in the Cloud. “Elsewhere, there may simply be fear or mistrust of technology, which is something we must take into account when we want to deploy a technical solution.” Pietri comments on the paradox – certainly in Europe – of wanting data to be both more secure and easier to transmit. “In Europe, we are creating rules to protect our data, but go to China and there are no rules. In supermarkets and other locations in Shanghai, you can pay with facial recognition. Each audience, each culture, will have different needs and customs, which means you must know what works best for each country. Managing payments today, making sure everything flows smoothly, is a bit like conducting a global orchestra.” It's an analogy that serves well for FIME’s role at the centre of payments. As a testing and implementation partner, it is helping technology and service providers to unify and harmonise payments worldwide. In other words, play all the right financial notes in the right order. Issue 15 | TheFintechMagazine



Are wallets the future? The jury is definitely moving in their favour

G+D Mobile Security’s Convego suite of solutions offers banks a way to future-proof their payments services against what appears to be an irresistible move among consumers to open their ewallets. The company’s VP Jukka Yliuntinen shares his thoughts Consumers may still prefer plastic to pay, but ever-increasing smartphone use and a proliferation of industry players means digitisation of payments looks inevitable. Such a shift could have a massive impact on the wider industry and it may not be the banks that win this time. Jukka Yliuntinen is VP at Giesecke+Devrient Mobile Security (G+D), the Munich-based company that is a global powerhouse when it comes to payments. Billions of people unknowingly use G+D technology to carry out transactions – whether paying by cash, card or smartphone – every day, so Yliuntinen is well-placed t o comment on the future of the industry. And he has a near and long-term view: an immediate play-off between card-based mobile payments and account-to-account transfers or instant payments, followed by a more radical shift. “Payment will be related to your mobile phone or, at least to the devices that you carry or, potentially, purely the biometrics


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you have. But there will be no need to have any interaction with that device; it will automatically make the payment that’s pre-authorised by you and enabled by biometrics,” Yliuntinen forecasts. Whatever the technicalities, the fundamental principle of payments remains the same; goods and services are exchanged at a value deemed mutually acceptable to both buyer and seller. And, at this moment, cash provides some strong assets as a payment means. “It has an excellent user experience. You have it, you see it, you give it; it’s very tangible.” While G+D’s view is that cash will not disappear but continue to be an enabler for underbanked regions as well as an enabler of trustworthiness in the government space, the FIS Worldpay Global Payments Report 2018 shows its use is declining in every global region. It predicts that cash will be overtaken by debit cards as the leading point of sale (POS) payment method this year, and expects it to be relegated to fourth place behind debit cards, credit cards

and ewallets within the next four years. The question is: then what? In the era of the EU’s revised Payment Services Directive (PSD2), which demands strong customer authentication (SCA) features, plastic cards’ convenience, familiarity and reassuring physicality could increasingly be undermined by more frictionless and secure virtual payments platforms. And this is where digitised, or tokenised, payments, such as those used by Apple Pay or Google Pay, could play a more disruptive role. In fact, G+D is one of the major facilitators of this revolution: its Convego Hub is part of a suite of digital solutions that make it simpler for banks to manage the secure provisioning of cards to the many and varied wallets that are now emerging, with a single-service interface for financial institutions and wallet issuers. Nearly one billion people are said to have made a smartphone payment in 2018 and, while still a comparatively small payments segment, ewallets are the fastest-growing: by 2024 consumers are predicted to be happily opening their

digital wallets way more than their physical ones – led by China but with surging adoption in North America. It has to be said that not everyone is so convinced about the adoption of near-field/contactless mobile payments. According to research conducted by YouGov last year, 43 per cent of consumers don’t think mobile wallets are secure and 38 per cent are concerned about losing their device and being unable to make payments at all. But the market is moving incredibly fast, albeit it at different rates in different countries, hence the need for banks and payment providers, particularly global ones, to keep all their balls in the air – and for G+D to offer multichannel solutions. For consumers already wedded to a particular payment method, any alternative offered must answer a need. In a revealing piece of research into ewallets conducted by aggregator site Merchant Machine, adoption was shown to be rising fastest among users of payment platforms that are already established in the consumer’s mind as being super-convenient for their lifestyle – with Paypal, Alipay and WeChat Pay top of that list. A two-speed adoption rate is definitely emerging: according to GlobalData’s 2018 Consumer Payments Insight Survey, mobile wallet adoption in Asian markets such as China (64.9 per cent), India (60.5 per cent), Hong Kong (45.5 per cent) and Taiwan (37 per cent) is much higher than Western markets such as the UK (11.5 per cent), France (5.1 per cent), Germany (10.4 per cent) and Spain (10.5 per cent), where consumers predominantly use cards. Many of those Asian countries also leapfrogged card technology with the rapid take up of mobile wallets, which offered consumers QR-based payments for POS, for example, which also required less investment on behalf of the merchant. And Yliuntinen sees the balance of power shifting emphatically in the near term from payment provider to consumer in whose hands the technology, literally, now resides. The winners will be those methods that offer a good user experience, he says. And this is where ewallets could eventually win out over cards and cash, because the other main driver of adoption, despite the reservations already highlighted, is increased security. The

introduction, in Europe, of PSD2, which, along with opening up the payments infrastructure to alternative players, also mandates SCA, is a decisive feature of that trend, he says. The question is how to make a secure payment that incorporates SCA, which intentionally introduces additional stages to the transaction, user-friendly. “That’s the big challenge that I see at the moment around the implementation of PSD2,” says Yliuntinen. In the initial scramble to meet PSD2’s September 2019 cut-off for technical implementation, he says some SCA features were introduced that make it so cumbersome to use that consumers are irritated by it. “What happens then is that they might reach for another way to pay – which could be cash,” he says. Many banks were not ready for SCA, he notes, with most countries asking for an extension or waiver to full implementation. “Some of the banks introduced SCA in a way that, yes, complies with PSD2 requirements for strong authentication and gives me as a consumer a certain

If the UX between you and me is different, or it’s different when I use Apple Pay compared to my other wallet… I get confused. And a confused consumer is the last thing you want reassurance that, OK, something must now be secure because you need to have, for example, a secondary password. But if you need to start introducing that at point of sale… forget it. People start looking for something else.” Part of the problem for the industry, he says, is that the SCA regulation left a fair amount open to interpretation. “Ultimately, if the user experience (UX) between you and me is different, or if it’s different when I use my Apple Pay compared to my other wallet or my card-based contactless payment, I get confused. And a confused consumer is the last thing you want,” he says.

More harmonisation is needed. “But there is no good body, in my opinion, that could coordinate it.” So, payment providers are waiting to see what everyone else is doing. In this period of uncertainty, banks, he says, should seize the opportunity to differentiate themselves by being innovative around the user experience. This is where G+D’s Convego Hub can prove useful in future-proofing a bank or other issuer’s payments portfolio. “If they want their cards to be digitised, they can connect to us just once but have all the different schemes’ services available to them,” says Yliuntinen. The G+D Convego Hub extends support to local payment methods such as India’s RuPay, launched by the government as part of its effort to take the nation cashless, which has reached more than one billion transactions and put at least one international payment scheme under pressure there. Convego Hub makes it simple to implement the digitisation of payments: the means by which plastic card is replaced with the process of tokenisation, enabling banks and other wallet providers to increase security and flexibility in a cost-effective way. But payment and security should not be looked at in isolation, observes Yliuntinen. Instead, banks and other providers should consider how payment and authentication can sit in the wider context of a digital identity. “Data, after all, is the new money,” he says. And here’s where the opening up of banking and payment services, and the interaction with mobile hardware, gets interesting. Yliuntinen believes the GAFAs (Google, Amazon, Facebook and Apple) are in a strong position because they get to say how their devices and services are designed to make and protect a payment. “They can impact the user experience more than anyone else,” he says. But, at the same time, the relationship people have with their bank is not just around payments. “It’s a question of whether you’d be happy to put all your financial assets into an Apple account. Maybe not,” he says. “Currently, I think most people would stick with their existing bank. Then it’s a question of whether banks can provide a user experience that is good enough for people not just to use it, but to love it.” Issue 15 | TheFintechMagazine



CODESOFCONDUCT We’re all familiar with IBAN and BIC numbers, but would you know what a payments purpose code is – or who uses it? Payments validation software company Apply Financial has made it its business to find out, so clients don’t have to, using RESTful APIs to detect what’s needed to ensure straight-through, crossborder processing using its Validate tool. As bank-to-bank payments look set to emerge as the go-to transaction method, MD Mark Bradbury says banks have now learned a thing or two from fintechs

THE FINTECH MAGAZINE: How has the payments industry changed over the past couple of years? MARK BRADBURY: Payments has historically been the monopoly of banks and big card providers, like Mastercard and Visa, but we’ve seen a sea change over the past few years, with fintechs coming in and breaking up that monopoly, providing better solutions that are better marketed, slicker, easier to use, faster, and with much more of a customer experience. Obviously, they’ve listened to their clients and delivered a better solution. So now you’re seeing a much wider choice for consumers and companies to make payments, and it’s driven the banks and incumbent card providers to look at acquiring some of the fintechs so that they can get more into the bank-to-bank payment marketplace. I think the biggest change, actually, is the move away from card payments towards bank-to-bank, and we’ll see more and more of that in the coming years, thanks to the fintechs. TFM: How have you seen banks and fintechs grapple with these changes? MB: I think the fintechs set out to dislodge the banks, and then the reality hit both that the best way to move forward is to partner. So, it’s not unusual to see companies like Currencycloud and TransferWise working very well with the banks to provide new, slicker models. The most important thing for fintechs is being able to provide a very automated, straight-through processing method for payments while keeping costs down, because they’re working on very slim margins and don’t want to employ a myriad of staff in the back office, fixing problems. Apply Financial can help with that by automating the process


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of validating everything they need for a straight-through payment, so it goes through without human contact. TFM: What differences are there between fintechs’ and banks’ validation processes? MB: Fintechs came at it as greenfield. They’d learnt from the banks, which had to build up their own systems and tools, downloading data and coding rules. They did all the hard work to build validation solutions, but did so in the back office, not built around a modern-day, browser-based environment. The new fintechs thought ‘we don’t want to build it ourselves, we’ll go to a company that’s got global experience of this’, which is why they come to us. TFM: Do you think adapting to

Banks have accepted an API world, Cloud-based applications, speed of operation and customer-centric applications. We fit right into that instantly-validated payments is essential for the success of fintechs and banks? MB: The world is moving towards instant payments, so they have to adapt, and I think they’re embracing this because we all – companies and individuals – when we make a payment, want it to arrive the same day, even in a few hours. Instant is a revolution. However, adapting to this is a challenge because fintechs and banks have to make sure they do all the checks, including anti-money laundering, and the payment still leaves within seconds. Our clients are rising to that challenge.

TFM: Speaking of speed, how easy is it to implement your Validate system into an organisation? MB: We haven’t reinvented the wheel, it’s a RESTful application programming interface (API) with a relatively straightforward deployment. Our clients’ technical people can plug it in very quickly. We make sure that the different functions we provide are deployed correctly for them, tested for volume and latency, and pass compliance for regulated entities. It takes as little as four, and usually no more than eight, weeks to go live. TFM: What are the typical issues with validating crossborder payments? MB: It’s not just a bank account number and a bank code; many countries around the world have additional requirements. For example, there are 32 countries that have payment purpose codes. If you make a payment to India, for instance, which is one of those countries, you have to put in a mandated payment purpose code, which has certain wording. If you don’t, the payment will bounce back. In other countries, they need to see tax codes. So, we’ve built our application, within Validate, to be able to check those different elements. We provide fields for checking within our API, so that our clients don’t have to think ‘if we’re making a payment to Mexico, what do we have to put in?’. The system does it for them and we explain, to anybody who’s filling in those fields, exactly what they need to do to ensure a straightthrough process. For example, if they’re putting in a particular type of IBAN (international bank account number), Validate will tell them if it’s correct and, if it’s not, what is wrong with it. We’re trying to make it easy for our clients to provide an intuitive service

to their clients, so that the customer experience is much more enjoyable and it cuts out the human and data error that is causing one in eight payments to fail. TFM: Now that customers are getting used to instant payments domestically, how are you helping to increase their spread to areas further afield? MB: A lot of instant payment infrastructures are very similar to the one we have in the UK. The challenge is that you have to provide more detailed information to validate an overseas payment and do it with speed. We can help with that validation but, over the next few years, I think the authorities will come up with a more efficient way of using instant payments, in terms of the type of information that needs to be validated. TFM: Can you tell us a bit about the work you’re doing with Franx in the Netherlands? MB: Franx is a new challenger bank set up by ABN AMRO, aimed at small and medium-sized enterprises. It came to us about two years ago when it was looking to build out a payment solution for overseas payments for its clients, as efficiently as possible, with everything driven by APIs. It was a match made in heaven for us, as it wanted to do things the way that we could provide them. It was looking at validating payments anywhere in the world. We started with just IBANs for payments in Europe, but we’re now providing them with the ability to validate payments in 170 countries, within 225 financial jurisdictions. It’s been live for more than 12 months and Franx has everything it needs now, whatever payment requirements it’s presented with by its clients. TFM: How have changes in the payments industry impacted Apply Financial? MB: When we started the company in 2010, we were pitching our applications predominantly at banks. We very quickly realised that the better place to pitch would be to the new fintechs, because they were providing more customercentric solutions – and key for us is making the customer experience a lot easier and eradicating human and data errors as part of that process. So, for example, take the Cloud-based, crossborder payments for business

Applied intelligence: Managing director Mark Bradbury

provider, Currencycloud. We’ve been talking to it about this for quite some time and earlier this year we signed a deal to help Currencycloud validate, initially with IBANs, and then globally. We were very focussed on working with the fintech marketplace and companies like Currencycloud, but over the last couple of years I think the banks and card companies have looked at bank-to-bank payments,

particularly crossborder payments, learned some lessons from fintechs and probably even acquired some of them. So, we are now much more engaged with the banks than when we first started, because they have accepted an API world, Cloud-based applications, speed of operation and customer-centric applications. We fit right into that. Issue 15 | TheFintechMagazine



Changing fortunes The investment industry has undergone intense change over the last two years, with many businesses and individuals working in the sector searching for growth in an age of significant disruption. New fintechs and challenger banks offering an alternative to traditional wealth management by a trusted third party have been growing in the public consciousness for some time. They’re putting pressure on asset managers to maintain market share and reduce costs while also living up to the transparency demands of regulators and investors, including the desire for data on investment styles, fees and performance. As a result, the role of custodians is also changing: from straightforward safe-keepers of assets to strategic partners as clients reassess their business models. “We’ve gone through a lot of change and most of it has been driven by what our clients, the asset managers and pension providers, are facing in the industry,” says Sanjiv Sawhney, head of Citi’s global custody and fund services business. “They’re obviously figuring out the economics of their businesses in terms of whether they want to become a large player or a specialised one.

“In parallel, there are changes in the types of products they’re trying to build – so, the active versus passive debate remains. New asset classes have also come on board and lastly, and probably most importantly, the way they distribute their products or the way their end clients want to see those products, has also changed. So, transformation, expense control and digital ecosystems all link closely with the environment we are working in and are front of mind for C-suite asset managers, service providers or anyone who’s part of that overall ecosystem of investments.” On the face of it, the still hugely profitable asset management industry might not seem to be breaking a sweat. PricewaterhouseCoopers (PwC) predicts global assets under management will have grown from $84.9trillion in 2016 to $112.2trillion this year, and again to $145.4trillion by 2025. But those figures mask a downward pressure on fees, due to weak investment performance, greater price transparency, new regulatory controls and the ongoing trend towards

Sanjiv Sawhney, Head of Global Custody and Fund Services at Citi, on the pressures facing the investment industry – and how it’s helping clients respond passive-over active fund management. Meanwhile, costs are rising as managers keep pace with compliance and the process of digital transformation. Advances such as artificial intelligence (AI), blockchain, machine learning and data harvesting and processing have already begun to drive real change for them and the service industries that support them. Technology isn’t just fuelling change in asset management – it’s also facilitating a response from custodians, says Sawhney. “As the asset manager community looks at its operating model, it is looking to us as security services providers to do a lot more for it. And technology is a big enabler in us being able to do that. “In this environment of expense pressures, many technologies – natural language processing (NLP), machine learning, etc – are being used across our business to further automate what we do.” Citi’s award-winning data and analytics platform Citi Velocity Clarity is a good example of that. The platform uses big

A steadying influence: Custodians are in the thick of digital change and expectation


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data and private Cloud technology, delivered through an integrated suite of online capabilities to give clients fast, easily consumed information from a variety of sources, including Citi’s custody and fund services systems, clients’ own internal data and third-party data providers. “Data is becoming an important element for ensuring we have a single book of record between ourselves and our clients. Any technology that’s facilitating data being uniquely stored and shared is therefore important.” For that reason, Sawhney believes that blockchain will more than likely play a part in the future of asset management. Indeed, it’s already a vehicle for investing in cryptocurrencies, startups, and tokenised real-world assets, with global research and advisory firm Gartner forecasting that it will generate an annual business value of more than $3trillion over the next 10 years. But, as with any emerging technology, challenges and doubts exist around its reliability, speed, security and scalability. “There are important questions that remain unanswered,” says Sawhney. “Whether it could scale appropriately, cross geographical borders, and how an infrastructure of this sort would be regulated on a more global basis. But, conceptually, what it does can very much become part of our future. “It will ensure there is a single version of the truth, a single record, of any information across the different participants who use it; between the asset manager, the end investor and the service provider. ”The other side of it is that a number of market infrastructures are looking at

digitising certain asset classes with this underlying technology being used to facilitate that, so more asset types could be available to investors.” And what about more investors for asset managers? It’s been estimated that around 66 per cent of global financial assets, including individual securities and assets managed internally by institutions, and bank deposits, never touch the industry. If asset managers don’t find ways to explain what they do and use digital technology to do it better, then Sawhney thinks others will do their job for them.

As the asset manager community looks at its operating model, it is looking to us as security services providers to do a lot more for it “At the end of the day, the objective of the investments industry is to find a broader set of clients to sell its products to, provided they’re appropriate for their risk needs, their investment needs and so on. A lot of the social media-type companies have access to many, many more individuals than the traditional distribution network that an asset manager has access to,” says Sawhney. While none of the big tech companies has so far entered the investment market, they have penetrated lending, insurance, money transfer and payments – indeed, Citi itself has partnered with Google in America to facilitate the first

Google current accounts, due for launch this year. Uber, as Uber Money, wants to be a bank for its drivers, while Facebook recently announced Facebook Pay. And then there’s Libra, its attempt to build a global cryptocurrency payments network. Today, according to the Bank of England’s 2019 Future Finance report, the world’s largest financial service firm is China’s Ant Financial (formerly Alipay), with more than a billion clients. Its ecommerce affiliate Alibaba is pushing into social media with its hugely popular Taobao and investment in Snapchat. Imagine the impact Ant Financial could have if it turned its attention to the investment market. There is already a whole generation of investment services built on a ‘social’ model. Why shouldn’t it work the other way? “That’s something I would keep a close eye on – organisations that could disrupt in some shape or form,” says Sawhney.

Changing relationships Some in the investment industry are further along than others as they wrestle with the new norm of lower fees and higher costs. But there may be tough times ahead for those that fail to get a foothold in shifting sands – as well as opportunities for those that position themselves correctly, through acquisition in order to scale or, conversely, by unbundling services to focus on the niche, specialising in research or reporting, for example. Meanwhile, custodians like Citi will recalibrate their relationships with clients, even as those clients reevaluate their relationships with investors.

Issue 15 | TheFintechMagazine



Online platform eToro has turned investing into a team sport with its social media-style community, copycat trading tool and even a campaign targeted at football fans. UK Head of Marketing Stephanie Wilks-Wiffen explains the rules

Children learn at a young age in the classroom that copying their mate’s homework can be a neat shortcut to success – as long as your mate’s got the answers right, of course! This, in a nutshell, is the ethos behind eToro’s drive to attract new people to the world of retail investment. What began with ‘social trading’ (small investors discussing assets and strategy in internet chatrooms) has developed into the Copy Trading service, whereby eToro customers can observe and have the choice to replicate every move another makes. The trick, of course, is to follow a trader who knows what they are doing – and the eToro platform provides the tools needed to examine past performance, current positions, and ask questions directly of the copied trader. Copy Trading was developed by eToro to attract people previously unwilling or unable to enter the world of retail investing because they didn’t think they had the time or knowledge to do so. “People really enjoy our social trading tools – they come to the eToro platform, talk to other traders, ask questions. They can learn from them but, most importantly, they can also copy,” says Stephanie Wilks-Wiffen, eToro's UK head of marketing. “To take myself as an example, I work full-time, but I have an interest in tech stocks. I don’t have the time to do the research, to trade throughout the day, so I can go on to the eToro platform and find other investors with an interest in similar asset classes. I can see their past performance, what their attitude to risk is. I can assess whether this seems like it’s a good fit for me and, if so, I can copy them at the click of a button. That means that when they buy, I buy, when they sell, I sell, and


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that is completely free for customers to use.” The usual warnings of capital being at risk apply, of course – which is why, once aboard the eToro platform, users can lift the bonnet on other traders’ portfolios in order to minimise their exposure. eToro has a membership of 11 million people and investors’ histories are open for all to see, as are their annualised profits. There is a performance simulator that shows how your assets would have delivered – or not – had you started copying at various intervals. Beyond this, the platform offers the traditional tools provided by other online brokers, such as broker/analyst reports and charts. The focus is on providing access to buying stocks and cryptoassets, as well as the ability to trade major currencies, commodities, indices and ETFs. Algorithms

We’re trying to turn the world of investing on its head because people can see it as dull or scary track the performance of customers, and traders who allow themselves to be copied, and who are a part of the eToro's Popular Investor programme, are rewarded by receiving payment from eToro. Wilks-Wiffen says: “The great thing is that the people you’re copying actually have skin in the game. They are using their own funds to manage their own investments, and you are copying what they are trading with your own money. So this is different from buying into the services of a traditional asset manager who manages other people’s money.

“The onboarding process is pretty straightforward. You enter your name, email address, current address, and because we are a Financial Conduct Authority (FCA)-regulated platform in the UK, like other regulated platforms we have to ask for know your customer (KYC) information. This involves asking you about your income, attitude to risk, how much disposable income you have to invest, and what kind of things you’re looking to invest in. “Once you have registered on the platform, you have three choices. You can transfer money in and start investing in the products of your choice. If you’re not quite ready to invest, we offer a $100,000 demo account where you can play with fake money, but on the real-life market, so you can get a feel for the platform. Or you can just surf the feed, see what people are talking about and ask questions. We have an 11 million-strong global community, so there are lots of people to ask.”

The TripAdvisor model Set up in 2007 in Israel, eToro is regulated by the FCA in the UK, the Australian Securities & Investments Commission in Australia, and everyone else is covered by Cypriot regulation. While investing in stocks is commission-free, the business makes much of its money, as with all other brokers, through its spreads, and charges a $25 flat fee for withdrawing cash from an account. All accounts are held in US dollars. Wilks-Wiffen says eToro’s ultimate aim is to become the ‘Amazon of finance’ by using the social media-style community ethos that has made businesses such as TripAdvisor so successful. “eToro started out as a vanilla derivatives platform, however, we’ve progressed a lot

in the 12 years we've been around. There are a lot of websites and platforms that offer various opportunities to invest but there’s not really one platform that addresses all of your financial needs. “eToro can cater for people who are looking for long-term investing, short-term investing, investment in regulated assets such as commodities, indices, stocks, or unregulated assets such as cryptoassets. And they have choice. They can invest in anything, from crypto to stocks, to exchange traded funds (ETFs). We provide a one-stop shop for a lot of those investment needs, and we believe we’re the only platform where you can hold regulated and unregulated assets in one portfolio.” The aim is to ‘get everybody investing’ and Wilks-Wiffen believes there are three key pillars to achieving this. “A lot of fintechs are only tackling the first, usability,” she explains. “Most platforms have a lovely user interface – we’ve all seen the pie charts and sliders, it’s pretty much fintech 101. The other two pillars, which eToro addresses, are community knowledge and choice. Our customers can ask the community for advice on certain investment products, just like, when you’re going to book a restaurant or hotel, you go to TripAdvisor and ask your peers.” To achieve its growth targets, eToro’s marketing seeks to engage people who would otherwise consider investment as something only done by men in suits. And it’s employed a wide range of techniques and messaging to reach them. Its ‘goojybooboo’ advert, featuring A-list actor Alec Baldwin taunted: “Let me guess, you’re too busy to watch this ad. Like you were too busy to invest in Bitcoin or Ethereum.” Late last year it launched eToro FC, which built a community of UK football fans who were interested in investment and crypto assets. The firm ran the #WelcomeToTheClub Premier League marketing scheme, which involved partnerships with seven Premier League clubs – Tottenham Hotspur, Cardiff City, Crystal Palace, Brighton & Hove Albion, Leicester City, Newcastle United and Southampton. eToro

FC provides educational materials, tutorials and market news, plus access to unique football content and competitions. Deals were paid for in Bitcoin. It’s also hired digital marketing consultancy PMYB to run a campaign employing internet influencers. Thirty of them were recruited from the technology, lifestyle, gaming and sporting niches to introduce eToro to their followers. Their aim was to explain how fans’ knowledge of the brands they love could be put to use in an investment context. The agency used data to identify which brands were relevant to each group, then demonstrated how they could be invested in via the eToro platform. Wilks-Wiffen says: “We're

trying to turn the world of investing on its head because people can see it as dull or scary. Our campaign around investing in brands that you know and love aimed to take conversations from the dinner table to real life. So, if you’re talking about how much you love Uber or Airbnb, or how you really believe in a cause – for example, what the Body Shop stands for – why not invest in these brands? “We’re trying to connect on a different level. Everyone knows they need to invest for their future – there’s lots of education available, but it doesn’t necessarily translate into behaviour. We aim to connect in a meaningful way that makes sense to people.”

Investment goals: eToro FC built a trading community of UK football fans

Issue 15 | TheFintechMagazine


Don’t mention the ‘P’ word! Aegon’s Head of Customer and Workplace Propositions, Alasdair Rhind, explains how its digital approach to ‘wage after work’ is changing attitudes to financial planning

The fintech revolution has seen many financial services furnished with flashy new paintjobs and impressive under-the-hood innovations. But what’s that hidden behind the Bank Bugattis and Paytech Porches at the very back of the showroom? Pensions could be the Ferrari of the digital finance industry – after all, pensions providers manage an astonishing $44.1trillion in assets as of the end of 2018. But whether it’s because young people are ambivalent towards end-of-life planning, or because the clouds of gloom gathered around an ageing population’s pension predicaments have overshadowed the entire industry, pensions simply haven’t got the heart racing in the digital age. Nor are they particularly well understood. A 2018 survey by and OnePoll found that 35 per cent of the UK’s adult population say they don’t have a pension, and 43 per cent don’t know how much cash they’ll require in retirement. Just over half estimate £100,000 will enable them to retire comfortably; in fact, the recommended figure, proposed by pensions provider Royal London, is between £260,000 and £445,000.


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It’s clear that these two disorientating clouds – one bulging with cynicism, the other with profound confusion – must be dispersed if the pensions industry is to feel relevant and important in the minds of younger, digital native savers. Enter Aegon: a titan of the global pensions industry, with 29 million customers across 20 countries, including three million in the UK, representing a 27 per cent share in the country’s pensions market. Founded as Scottish Equitable way back in 1831 and now headquartered in Edinburgh, Aegon is well-placed to counter the challenges facing the pensions industry. The problem, as Aegon’s head of customer and workplace propositions, Alasdair Rhind, explains, is that consumers expect pensions savings to accumulate without any input of time or effort on their part. “Unlike banking,” says Rhind, “engaging with your pension isn’t something that you do every day.” He’s right, of course: there’s something

Lightbulb moment for savers: Aegon looked at pensions from the customers’ perspective

WEALTHTECH groan-inducing about those rare moments when you log in to manage your pension. But with so few contact points with customers – especially since the 2012 ruling obliging employers in the UK to auto-enrol staff in pensions programmes – where and how can firms improve their service and engagement? Aegon’s answer to this pressing question has been the wholesale rebranding of the pension, and a re-articulation of why pensions matter for young people. Focussing primarily on customer experiences, fleeting as they may be, and on the development of handy digital tools, Aegon wants to transform the very concept of pensions – starting with the word itself. “We don’t talk about pensions, we talk about a ‘wage after work’,” explains Rhind. “People are more engaged with that terminology, as everyone cares about how they’re going to get paid in the future. So, we’ve introduced our wage after work events, where we have face-to-face sessions with consumers – with advisors not dressed in suits, but polo necks, so we’re far more approachable. We’ve found that these have really cut down on the misunderstandings that customers have around pensions.” Aegon’s re-energising of the pension may start with terminology, but it doesn’t stop there. The firm, which manages around £140billion in UK assets, believes providing the best-possible customer service will brighten pensions’ funeral parlour pallor and make the experience more vibrant. All Aegon’s work in improving the customer experience (CX) is underpinned by insights drawn from frequent and large-scale customer feedback. “We are very customer-focussed here: that’s part of our brand’s DNA,” says Rhind. “We have a customer advocacy programme and a voice-of-the-customer survey programme. If we do receive negative feedback, we phone back those customers to understand why they had a poor experience and put things right. When we resurvey

them, typically, their satisfaction score goes back up.”

It's all about the CX The firm’s satisfaction surveys regularly receive more than 120,000 responses, and it maintains a special customer panel, consisting of more than 9,000 individuals, from whom it seeks feedback on all new messaging. Through these efforts, Aegon is chiselling away at the ideal pension customer experience, sculpting itself a new, more approachable public face. As a result, there’s an air of friendliness breezing through Aegon’s CX, even when things don’t go right, as Rhind explains. “Where we have really missed the mark with customers, our call handlers have the ability to send out something called an Aegon cares package –it’s essentially a little present from Aegon to say sorry for letting that customer down.” Then there is the use of behavioural science, which Aegon has made to its digital platforms. In driving digital engagement, Aegon knows that friction kills customer journeys before they have a chance to flourish – starting with the onboarding process. “A quick onboarding service is really critical,” says Rhind. “We say precisely how long onboarding will take – four minutes – and we set expectations about what information the customer will have to provide. Previously, our onboarding service asked for your National Insurance number; that was a real failure demand creator. Instead of asking for that information, we ask for stuff that’s top-of-mind, like surname, date of birth, address – things people will know off by heart. That ensures that customers go right through our onboarding service,” adds Rhind. Nevertheless, friction-free and streamlined services cannot on their own counter the pessimism around pensions. Despite the UK being the second-largest pension market in the OECD, at $2.8trillion assets, UK pensioners receive on average of only 29 per cent of a working wage when they retire. That’s the lowest in the OECD (Organisation for Economic Cooperation

and Development), and the average for EU member states is 71 per cent. Meanwhile, a British Social Attitudes survey recently found that only 65 per cent of British workers feel secure in their roles, and a troubling body of research suggests that, for people aged between 18 and 29, this figure is far lower. So, young people can be forgiven for putting their pension on the back-burner when their present financial security is far from guaranteed. PensionBee and Anorak Life – two online-only digital disruptors in the pensions space – have both made significant efforts to appeal to younger savers in recent years, but engagement remains low. Aegon’s solution has been to take a different tack: educating consumers, for free, using its retirement planning tool. The site is a one-stop gateway into the pensions universe, with clear signposts for web users to follow, such as ‘how prepared are you?’, as well as free calculators and interactive pension assessment tools to help build that deeper understanding in pensions that so many people don’t possess. Meanwhile, as Rhind explains, Aegon’s current customers also now enjoy greater transparency when monitoring their pension online. “Customers want us to demystify pensions and to understand precisely where their money is invested,” Rhind explains. “We have things like digital fund factsheets, which provide detailed insights into fund performance – there’s never been more information available.” Rhind also recognises that the new wave of pension investors will want their investments to be ethical. Moves like this keep it in step with societal changes. Another is its single retirement saving solution – where you have an ISA and Pension in one, for life regardless of your employment circumstances changing. There’s a strong sense that Aegon sees the pensions environment through the eyes of a customer, and has their back – especially at key times such as job changes. Says Rhind: “We’re focussed on providing nudges and support around those critical moments in life. We believe that more needs to be done in that space.”

We don’t talk about pensions, we talk about a ‘wage after work’. People are more engaged with that terminology

Issue 15 | TheFintechMagazine



Finance Transformation in a Digital World 1 S T & 2 N D J U LY 2 0 2 0 – O LY M P I A , L O N D O N

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Could AI-based digital platforms radically change people’s saving habits and defuse the pensions timebomb? Fahd Rachidy, CEO and Founder of Abaka, believes so

Ageing populations, growing at scales that have never been experienced before, are putting strains on economies across the globe. In the UK alone, the Office for National Statistics estimates that, by 2066, the number of residents aged 65 or more will rise to 20.4 million, more than a quarter of the population. And here's the rub: many won’t have properly planned or funded their retirements. In short, they are saving too little or, in many cases, not at all. And that’s not a problem unique to the UK. A report by the World Economic Forum (WEF) estimated that the pensions gap in eight countries (Australia, Canada, China, India, Japan, Netherlands, the UK and the US) had reached $50trillion by 2015. By 2050 that shortfall is forecast to have widened to $400trillion. “It’s a problem for the industry, for individuals, for pensions trustees, for employers, and it’s the issue we are fixing with Abaka,” says Fahd Rachidy, CEO and founder of the London-based artificial intelligence (AI)-powered retirement savings platform. It’s not that governments are failing to address the problem. In the UK, for example, auto-enrolment into a pension scheme is now mandatory for every employee earning £10,000 or more a year. But wealth management business Quilter has calculated that millennials will still face a 60 per cent shortfall in the amount of money they receive compared to people retiring now, with a real-terms income of only £5,600 a year. Separate number crunching by the WEF forecasts that UK women will outlive their savings by 12.6 years and men 10.3 years. The WEF acknowledges that the pensions

industry must reform. An industry that still relies heavily on paper methods to do business has to change fast to encourage more people to save for their older age. Cloud-based business-to-business platform Abaka is addressing the problem by making processes more accessible, quicker and easier, using what it calls Artificial Financial Intelligence. That includes conversational AI with which customers ‘share openly and honestly’ the information needed to develop advice and plan solutions – information they might be embarrassed to confess to a real advisor. “There is clearly a need to provide experiences that are very similar to what people have when they are at home

We provide, through a range of intelligent nudges, an engagement that is holistic watching Netflix, or shopping on Amazon. We live in a world of hyperpersonalisation. To get people engaged, you need to provide them with instant answers to questions,” says Rachidy. Abaka goes beyond pension management, although it improves that experience, too. “With one click of a button, you can increase your contribution, switch your funds, consolidate your assets and transfer your pension. Making it a frictionless customer experience is really important, but we provide, through a range of intelligent nudges, an engagement that is holistic. We are helping people with their

personal expenses, helping them to start saving on a yearly basis – for instance, to be able to buy a house – all in order to get them engaged in longer-term saving. “Abaka is a technology vendor; we do not sell financial products. We help our clients better understand their retail customers, in order for them to get access to a more suitable investment product, for example. “Working with a number of clients/ providers, what we create is a platform where you have access to technologies a nd artificial financial intelligence in order to provide affordable and scalable advice when people need it.” Rachidy has a successful track record in fintech. He was cofounder of Scientific Beta, now the leading European pension platform for smart beta indices with $40billion of assets under management. And he has big plans for Abaka in 2020, including expanding into overseas markets like the US, Canada and Asia, with offices opening in New York and Singapore. In December 2019, the firm also secured a further $6.5million of funding with joint investment by Thames Trust, Ace & Company and Downing Ventures, to increase research and development, including in its AI platform. “We are the only platform where providers can access technology across the world. Pensions in the UK are different to the US, which are different to Canada’s, etc. With our system, we can adapt the technologies for different markets and that’s really accelerating our growth. Rachidy adds: “There is a massive opportunity to create better insight and knowledge around issues in retirement. Our goal is to help build a secure financial future for everyone.” Issue 15 | TheFintechMagazine



A NEW WORLD TRADE ORDER? Barclays is using new technology to help steer through unpredictable economic seas. We explore how it’s applying blockchain, AI and the Cloud to give clients safer passage Global trade is slowing and, some say, could be on the point of stagnating, not least as a result of markets struggling to come to terms with shocks such as the Brexit vote (which wiped $2trillion off the markets in 2016) and the US/China trade standoff that rumbled on for most of last year. The new president of the European Central Bank, Christine Lagarde, was quoted in September as saying that the threat against trade is currently ‘the biggest hurdle for the global economy’, warning that ‘risks will come from where we don’t anticipate’. Meanwhile, Bank of England governor Mark Carney is watching the markets’ canary in the cage: China, which now makes up a third of global trade growth. If the economic dragon catches a cold, a three per cent shrinkage of growth in its

A global opportunity: Could Brexit be a ‘reset button’?


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economy will cause a one per cent fall in global growth and a 0.5 per cent fall in the UK’s, he told an audience last autumn. The 2019 US/China tension on its own was predicted to wipe 0.8 per cent off global economic prosperity in 2020, such is China’s influence, graphically illustrating how vulnerable business is to politics. All in all, many financial institutions and their clients are gazing with increasing trepidation into their crystal balls. But in such a world of deepening divisions, could technology be used to promote more inclusive and collaborative trading relationships, thereby protecting business against such existential threats? Banking giant Barclays thinks so, and it has already started to help its clients save and prosper by driving forward an ambitious technology programme in its trade finance business using blockchain, artificial intelligence (AI) and the Cloud. James Binns, who heads Barclays’ Global Trade and Working Capital

business, says such advancements have a huge role to play in what he concedes are uncertain times. “Clearly, there are lots of challenges out there for our clients – around trade wars, geopolitical uncertainty and economic volatility – and the challenge is how we, as banks and large trade finance organisations, can help our clients better navigate those risks and opportunities,” he says. Barclays intends to do that by leveraging the deep relationships it has with corporate customers and correspondent banks, increasing focus on sustainability and judicious application of new technology (as Binns says, AI in and of itself doesn’t solve everything). In particular, the bank has identified blockchain’s broad potential to bring financial institutions closer together and make global collaboration easier, as well as creating real efficiencies in the way it processes data. To that end, Barclays led a $5.5million investment package for Crowdz, a Silicon Valley-based startup behind a global blockchain-based invoice exchange. It has created a built-in business-to-business (B2B) payment gateway that allows

companies of all sizes to automatically digitise invoices, speed up invoice payment collections, accelerate the cash conversion cycle and automatically associate orders, invoices and payments with one another. The exchange’s proprietary auction platform also lets companies submit their invoices for bank or investor financing without filing additional paperwork, finding funders at the lowest possible rates. Barclays’ investment in the startup came after Crowdz took part in the bank’s 2018 Accelerator programme, which also led to a partnership with Barclaycard. Binns says: “I think technology can play a huge role in volatile and uncertain times, because it’s driving more and more transparency into the supply chain. So, instead of large corporates being able to look at just their biggest suppliers and help them access the right trade finance and funding solutions with technology, you can start to drive that penetration much deeper into the supply chain – not just to smaller suppliers, but suppliers of suppliers as well. “You can start to look at working capital and funding, not just at an individual entity level, but across the entire ecosystem of a supply chain, bringing benefits to all parties. It can drive a more sustainable and certain funding environment, which enables those suppliers and buyers to survive volatility more effectively.” Beyond that, he believes artificial intelligence will be pivotal in modernising financial transactions. “It’s early stages, but the impact will be huge,” he says. “For us, the first part of AI is optical character recognition (OCR). Trade is an inherently paper business and, to some extent, will remain so, but the moment you can start to digitise paper documents, you can start to use AI and robotics to automate their processing, which drives a lot of benefit – both in terms of taking cost out of trade finance transactions, and significantly increasing speed and certainty around those transactions, too.”

Cloud at the centre Core to the bank’s ambition to update, modernise and invest in its trade finance business, is to have its trade platform hosted by an external party and on a Cloud-based system.

Binns says: “Unless you have the right core, it’s very difficult to have the level of efficient connectivity with the outside world that you need to drive the trade finance technology solutions of tomorrow. Those will include blockchain, different external supply chain platforms, OCR/AI solutions and other technologies. “For us to really to deliver the value of that to our clients, we need to be highly connected, not just across banks, but across all counterparties in the trade finance and supply chain environment, so that we can start to offer clients more bank-agnostic solutions that leverage data throughout the supply chain.” He believes that, far from undermining the bank’s brand recognition and relationship with customers, employing the services of external partners will actually strengthen them by offering greater flexibility, adaptability and functionality.

Technology can play a huge role in volatile and uncertain times, because it’s driving more and more transparency into the supply chain “While we may be relying on other parties to provide or process data for us, for example via a third-party supply chain finance platform, we will still be very valuable to our customers in terms of mitigating the risks they face, such as counterparty risks, and providing them and their supply chains with the working capital funding they require to sustain their businesses,” he says. Barclays is also determined to use technology to encourage sustainability more broadly within trade finance. It has already introduced a green trade loans programme for clients who meet its environmental and social responsibility criteria. “Sustainability will become increasingly important,” says Binns. “We’re already starting to see this, with corporations, large buyers and certain industry sectors

adopting environmental, social and governance (ESG) criteria, around which they can judge suppliers based on their environmental friendliness and social responsibility record. "The moment you can start to do that more effectively, using technology, you can begin only dealing with certain types of suppliers, or incentivise your supply chains so that all suppliers become more responsible. You can then demonstrate to your consumer that you’re delivering a more responsible product.”

Swapping data for benefits Barclays is one of a consortium including BNP Paribas, Rabobank, Sainsbury’s, Standard Chartered and Unilever, which is led by the Cambridge Institute for Sustainability Leadership in creating a sustainable supply chain finance model called Trado. It uses blockchain and smart contracts to collect and record social or ecological data on suppliers, who in return get preferential access to trade finance – a so-called data-for-benefits swap. The idea was tested on a tea shipment from Malawi in early 2019. Binns is confident that technology will help create a brave new world in trade finance within which collaboration like this will be key. “The challenges we need to address now, to make sure that realisation comes true, are making sure that, wherever possible, we’ve standardisation in technology and technology standards so systems can talk to each other and connect with each other; also in terms of legal frameworks and rulebooks, so that you haven’t got lots of different people having to sign up to lots of different legal rulebooks to transact with other parties across different platforms.” Mark Carney would agree with that. He even believes that, if got right, a Brexit agreement on future trade could act as ‘quite a positive signal in terms of how the collective should structure trade and services, which is one of the solutions to a more inclusive globalisation... setting the rules and tailoring it to local circumstances’. The message seems to be that out of chaos could come a new world trade order. And technology will be at the heart of it. Issue 15 | TheFintechMagazine



Fast, smart, secure... ... are the ambitions driving Bank of America’s investment in digital infrastructure to facilitate transactions in the supply chain. Julie Harris, Head of Global Banking Digital Strategy, and Geoff Brady, Head of Global Trade & Supply Chain Finance for GTS, discuss the impact From bringing together global female leaders of economic growth and mentoring them at the Global Ambassadors Program in November, to being recognised for the seventh time as Institutional Investor’s Top Global Research Firm of the Year, the over 100-years old Bank of America remains relevant. One of the ways in which it achieves this is through investment in digital technology across its business divisions. More than 38 million digital users, 28 million of them mobile, are driving 26 per cent of the bank’s sales. We spoke to Julie Harris, head of global banking digital strategy, and Geoff Brady, global head of trade and supply chain finance for GTS, to understand how the digital wave is defining service and client expectations.


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THE FINTECH MAGAZINE: In this age of real-time everything, what emphasis does Bank of America put on achieving instant payments in its various verticals? GEOFF BRADY: Real-time payments have become such a ubiquitous topic that, globally, everyone’s getting in on this discussion. Everyone is looking for fast, efficient, real-time payments to more places. In trade finance, it’s not just about the payment, though; it’s also about the underlying commercial transaction that drives that payment. It’s incumbent upon us, as an industry, to be able to tie that commercial transaction to that payment, and make the two together go as quickly as possible. JULIE HARRIS: We’ve developed a treasury megatrends paper, which helps explain the need for real-time payments. When you think about the end-to-end supply chain,

from selling goods to ordering and delivering them, the value chain along the way needs to receive those payments quickly to take the credit risk out of the process. That’s driving the need for real-time payments. There is, also, the fact that there are multiple options for payments, and we have to deliver the capabilities for our clients to make and receive them across the entire platform. So, to enumerate how today’s pace of technology and customer expectations are driving us: number one is speed – our clients expect fast, they expect real time. Number two is smart: payments have to be intelligent along the way. And number three is secure – fast and smart cannot come at the expense of security. Those three expectations are really driving, not only payments but many other technology innovations at Bank of America.

Facilitating global trade: Digital is an irresistible force

more in the last two years than at any point in recent memory. Around the industry there’s an understanding that the goal is to be more digitized. We want to get to a point where we’re doing transactions on the blockchain or in a digital environment, and, at the end of the day, it’s not going to work unless everybody has access to it. It’s not unlike the internet. Everyone uses different internet providers, but once you get onto the internet, you’re all shopping on the same sites. I go back to the idea of having common standards and protocols, so, you don’t need to bet on one horse and say, ‘this is going to be the blockchain provider for the global community’. That’s where the collaboration is important. JH: Digital payment ecosystems are the way of the future. Many other companies are coming up with new infrastructures around payments, businessto-business, consumer-to-business, and business-to-consumer. The pace of that change (in digital payments and eco-systems) over the next few years is only going to increase, so those partnerships are really critical.

The trade finance community collaborated more in the last two years than at any point in recent memory

TFM: How powerful are collaborations and partnerships in moving towards the digitallytransformed world? GB: Trade finance is desperate for technology to carry it into its next state of play and collaborations are a good start. Over the next three to five years, it’s not just going to be about improving the payment rails, but also the commercial transactions that can tie back to those payment rails. The first step towards that is collaboration between banks and industry bodies. Next, we need to get the standards and the rules squared, so that we can make the connections. In the next 18 months, if the community starts to strengthen around standards and legal agreements, where the jurisdictional and institutional rails get laid, then we can start to do what I think is the interesting stuff, such as looking at the kinds of transactions we could be able to do. I think it’s a really positive sign that the trade finance community has collaborated

TFM: How is Bank of America preparing for that digital, inclusive future? JH: There’s no Chief Financial Officer (CFO) or treasurer I’ve met who doesn’t have digitisation or reducing manual processes somewhere in their strategy. So, we’ve really invested in four critical areas. Number one is simplifying access to digital; whether it’s mobile, iPad, laptop, or any type of device people want to use, we want to make it easy to go digital with us. Number two is interoperability, which means any time, anywhere, across any device, 24/7. Number three is consistent experience across our platform. We have eight lines of business and we want to deliver that digital experience across the platform seamlessly. And number four is intelligent digital: artificial intelligence (AI), bots, etc, telling customers what they need to know, when they need to know it, with notifications.

I think we’re just scratching the surface of AI. It’s going to be such a critical function in finance teams going forward. Having spent 20 years in finance myself, the days of downloading Excel spreadsheets, adding multiple columns and re-uploading that will be long gone for the next generation of people in the finance function. AI will be able to automate those tasks and add additional security. The ability to overlay AI and robotics on top of the systems and processes that finance teams have is really going to reduce manual processes and allow CFOs and treasury teams to focus on strategy and value-add. TFM: Bank of America has recently joined the Marco Polo Network, leveraging Corda distributed ledger (DLT) technology to work with major partner banks to improve trade finance. In the same way that Julie highlights AI as being key to treasury, is DLT going to be key to transforming trade finance? GB: In the last three to five years, the real story in trade finance has been in supply chain finance. Some of the smaller companies around the world don’t have the same access to trade finance that larger, global multinationals do. Supply chain finance has been a way for these smaller companies to access that capital. Within the same timeframe, we’ve also seen the advancement of technology like blockchain and DLT. I think this will facilitate more access between corporates and banks. I think we all look forward to the day when trade finance can be much more accessible to those small companies around the world that, right now, don’t have access to it. Fintechs are doing some good work in this area now: millions of these small companies, as suppliers to larger companies, are able to subscribe to their platforms. And I think the banks can take a cue from that, figure out how to use technology to be able to spread the capital out to where it needs to go. The key is how we onboard those small- and medium-sized enterprises; how we conduct the due diligence, as banks, around know your customer/know your business, in all the ways we need to, but also give them access to these platforms? I think there is a way we can achieve both, and technology will play a large role in that. That’s going to be the mission of the next three to five years. Issue 15 | TheFintechMagazine



Of banks and butterflies

Peter Hazou, Director of Solutions for Financial Services at Microsoft, discusses why moving to a Cloud-based platform is an evolutionary step that will help the banking industry soar on digital wings Banks today face the butterfly challenge: unless they entirely transform their business models to become fully-fledged digital beings, they will cease to be competitive and will be replaced by new entrants who are unencumbered by legacy systems. It’s the survival of the technologically fittest, which means banks must adapt to the new business environment and embrace the 4.0 economy. For the financial industry, and indeed all industries now, the Cloud represents one of the biggest changes to existing IT infrastructures. Among other things, it promises costs savings, greater business agility and performance, and a firm foundation on which to develop other transformative technologies, such as blockchain, artificial intelligence (AI) and


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machine learning. Few organisations understand this better than Microsoft, whose reputation is built on innovation and business transformation through the deployment of the latest technologies. When it comes to building infrastructure-as-a-service (IaaS) platforms, Microsoft stands tall. According to research firm Gartner’s latest IaaS Magic Quadrant report, Microsoft’s Azure Cloud is second only to Amazon Web Services as the platform of choice across industries. A recent partnership with financial technology specialist ACI Worldwide is designed to make it the pre-eminent one for banks. The banks’ Cloud journey is a fairly r ecent one, beginning just a few years ago with sales and marketing platforms such as Microsoft Dynamics. Next came the development of HR and finance platforms, and now we are seeing the biggest step of all as Cloud technology reaches into core activities such as payments. Microsoft appreciates that banks can’t make this technology leap alone. They need partners to help them shed their traditional – and now restrictive – IT skins and evolve into digital players. Peter Hazou, who is helping to develop Microsoft’s solutions for financial services, has the perfect vantage point over this

rapidly-changing marketplace. He firmly believes that the future belongs to those that are Cloud native and digitally enabled, and that incumbents must catch up before they are replaced by challengers. Nowhere is that more obvious than in payment services. “There’s a revolution in payments,” says Hazou, “and it’s being driven by non-bank institutions born in the Cloud. The fundamentals have changed, because customer expectations are now completely different. You could say the arrival of the smartphone was the turning point. The smartphone experience is shaping a new banking model that depends on speed, agility and ever-more-meaningful data to build services customers demand today. “The essence of payments is data,” he says. “Data insights are immensely powerful, but banks have never been very good at harnessing data to create new products. Some of the businesses coming out of Asia are actually data companies – such as WeChat, Alipay and Tencent – and are enormous non-bank competitors.” The ‘widget’ of a payment is not as important as the insights the data around it provides, says Hazou, creating not just the familiar cross-selling opportunities. “Now, with big data, it’s about risk, cashflow forecasting, budgeting and investing. The benefits span all types of payment and money management,” he says. And since payments is fundamentally a

technology business, Hazou says that Microsoft is an ideal agent for change because it knows how to extract that value from transaction data. He believes the days of banks running big, monolithic systems are numbered and that the traditional batch payment processing model, based on overnight business, is no longer sustainable in the era of open banking and versatility brought by application programming interfaces (APIs). Instead, the Cloud is the way forward for real-time payments and a new era of banking where technological change becomes all-embracing rather than incremental. A recent study by ACI Worldwide and the research firm Ovum, entitled the Culture of Innovation Index, confirms that view. In it, real-time payments are highlighted as a significant driver of innovation, with trailblazer organisations steadily moving their mission-critical activities to the Cloud. This is where Azure serves as a bridge between the past and the future. It breaks down the silos that have multiplied as a consequence of bank mergers and acquisitions, unlocking the data trapped within banking organisations, and then focusses everything centrally. Having migrated a bank’s data to Azure Cloud, real-time crossborder payments are possible, with data from every system available in a single view with single reporting and processing capability. Hazou describes Microsoft’s Azure Cloud as a versatile platform with many tools to help banks improve customer engagement and service levels. He calls it the ‘core for digital transformation’ and underlines that it is far more than a data centre in the sky.

Collaboration and the Cloud Partnership is the catalyst for Cloud innovations, believes Hazou, and Microsoft itself is teaming up with other technology innovators to accelerate the transformation and create even greater value for banks. Its partnership with ACI Worldwide, which supports electronic payments and banking for more than 5,000 organisations globally, is a case in point. ACI has joined Microsoft’s partner network programme – one of 10 global independent software vendors (ISVs) from the financial services industry – and is using Azure to deploy its Universal

Payments Portfolio service. One global Tier 1 banking customer is now using Azure, thanks to the collaboration and other ACI customers are planning to follow in 2020. Hazou emphasises that the great thing about many of the cross-industry collaborations that are now emerging, is that banks no longer have to handle product development themselves. “Technology collaboration and partnerships are now shaping the industry and helping banks to stay current and competitive,” he says. “We have a very strong relationship with ACI, and we are helping to support its clients and deliver new services that leverage the Cloud.” One of the reasons Azure is gaining attention from companies like ACI, is because Microsoft has already completed all the necessary work with regulators to ensure banks can satisfy compliance requirements associated with moving their core competencies to the Cloud. Microsoft works closely with scores of regulatory agencies worldwide and claims to be the highest certified Cloud provider for financial services, making Azure a highly robust, industry-compliant platform. Compliance, of course, has been a key concern when developing Cloud-based

is Bank of America, which has just announced that it is collaborating with IBM to create a ‘financial services-ready’ public Cloud that is designed to meet regulatory compliance and security requirements.

A new way of banking While there are many operational benefits to be gained from the Cloud, Hazou maintains there is a much greater prize on offer: it allows financial institutions to rethink their business model in response to the changing business models of their clients, which, according to consultancy Accenture, could potentially impact up to 80 per cent of current bank revenues. “What we are really talking about is opening the door to a whole new way of banking,” says Hazou. “It’s not just about being faster; it’s about all the products and services we can build on the back of the Cloud and real-time payments. It’s about product managers being creative and focussing on how one technology can lead to another. There are so many use cases out there, we’re only at the beginning of what’s possible.” Chief among those use cases are AI and blockchain. The Cloud provides a foundation to experiment and integrate technologies, and no business can afford

It’s not just about being faster; it’s about all the products and services that we can build on the back of the Cloud. It’s about product managers being creative and focussing on how one technology can lead to another banking solutions. While it is true financial regulators have not always viewed Cloud technology favourably, that is changing. Regulators are beginning to see the security merits of storing data in the Cloud rather than on physical systems, and are now encouraging Cloud providers to collaborate with the financial industry to build compliant systems that can minimise risk. This policy shift is reflected in a recent UK Financial Conduct Authority (FCA) update guide for firms outsourcing to the Cloud. The guide highlights security as one of the principal advantages of the Cloud, alongside other benefits such as cost efficiencies and ‘more flexible infrastructure capacity’. These benefits are attracting more banks to work with Cloud providers. An example

to ignore the potential. Among other advantages, AI can eliminate manual processing, automate compliance and risk management, and automate customer service, through tools such as chatbots. While the role of blockchain is still uncertain, few doubt that it will be transformative in the long run, with applications including trade finance, crossborder micropayments and know your customer standards. The clear message is that moving to the Cloud is the only way for banks to reinvent themselves and remain relevant. The question, then, is not ‘why migrate?’, but ‘how do we evolve quickly and compete with Cloud-native providers?’. Which is what Microsoft, with its crossindustry partnerships, seeks to address. Then banks can truly spread their wings. Issue 15 | TheFintechMagazine


CLOUD-READY PAYMENTS. MADE POSSIBLE BY ACI. When fast, flexible payments are critical to the success of your business, you need a payments solution that doesn’t slow you down. ACI’s cloud-ready payment solutions give you the ability to accelerate innovation to meet market demands— without requiring a substantial investment in infrastructure or IT resources. ACI’s solutions are simple to integrate and easily scalable to match transaction volumes while minimizing operational and regulatory burdens. To see how cloud-ready solutions from ACI deliver faster time to market at lower total cost of ownership, visit

ANY PAYMENT, EVERY POSSIBILITY.® © Copyright ACI Worldwide, Inc. 2020


CLOUDCOVER COVER As a global provider of real-time payment and banking solutions, ACI Worldwide fully appreciates how the Cloud can grow its business and help banks and other organisations become more agile and enhance their products and services. It’s why ACI is looking to the digital skies as part of a major overhaul of its core business.

“We’re responding to customer demand,” says the company’s Ciaran Chu. “And we’re doing it by focussing on the public Cloud.” In November, ACI Worldwide announced a strategic collaboration with Microsoft’s partner network programme, becoming one of Microsoft’s 10 global ISV partners in the financial services industry. This means it can expand its Universal Payments (UP) portfolio by licensing it for implementations powered by Azure. It’s a significant development which opens many Cloud opportunities for ACI. Banks and other organisations that embrace the Cloud can expect reduced total cost of ownership, greater scalability and improved speed to market. “We want clients to move away from monolithic systems, which often have high compliance and regulatory overheads,” says Chu, who heads up ACI’s public Cloud activities. “The result will be a much better customer experience, with the flexibility to access a wider range of applications and emerging technologies, such as artificial intelligence.” ACI’s first global Tier 1 bank has already gone live as a result of the Azure collaboration and a second customer is due to follow it during the first half of 2020. “We have a very busy schedule over the next 12 months,” Chu continues. “We’re going to build on the work done in 2019 to ensure we provide our clients with a simple path to realise the benefits of the Cloud at the pace their business demands. Many of our clients are very keen to migrate to the Cloud, but they don’t know how. By showing that we’re Cloud-enabled, we’re providing the way forward. Our aim is to

Ciaran Chu, Head of Public Cloud for ACI Worldwide, explains what Microsoft Azure means for ACI and its customers

cement the relationship with Microsoft and, by leveraging the Cloud, show that we are a valued partner to our clients.” He believes a Cloud-based data system holds some notable advantages when it comes to regulation, which is progressively more onerous as technology evolves and consumer experience becomes more important. “A decade or so ago, the regulatory environment meant you had to make changes maybe twice a quarter,” says Chu. “Now, we’re seeing more and more regulation, particularly around consumer experience and protection, and particularly in Europe. Thanks to the Cloud, banks can protect consumers without having to spend huge sums on running their own data centres, and they can meet the compliance requirements of card schemes and regulators in both Europe and the US. Cutting the cost of running on-premise data centres and servers is an important benefit of public Cloud computing.”

Many of our clients are keen to migrate to the Cloud, but they don’t know how. By showing we’re Cloud-enabled, we’re providing the way forward

Despite its growing popularity, many organisations continue, to keep one if not both feet firmly on the ground. Apart from any concerns they may still have around security and privacy, they might just wish to demur on ‘going public’ because they wish to realise existing investments. And Chu understands that. Not everyone will hit the off switch on data centres immediately, he says. A recent ACI study throws some light on the current thinking on, and approach to, migration. “We solicited views on the Cloud from 1,200 senior executives, 90 per cent of whom said their approach is Cloud-first because they clearly see the benefit,” says Chu. “So, I expect to see a progressive move away from data centres as banks commit to automating and optimising their processes in the Cloud. I’m not saying they’ll totally get rid of data centres, simply that they’ll move from a capex model to an opex model, which will help shareholders and the overall capital position of the bank.” For smaller financial organisations, and particularly startups, Chu says Cloud technology has lowered the entry level and is creating more opportunities, which in turn is a good thing for consumers. This is where ACI is helping to facilitate change across the payments ecosystem. “With our real-time focus, we’re harnessing the Cloud across payment scenarios,” says Chu. “That’s why we’re known as the ‘every payment, any possibility’ company – and collaborating with Cloud technology is what is helping us to achieve that level of service.”

Moving to an opex model: But not everyone will pull the switch immediately on data centres

Issue 15 | TheFintechMagazine



Looking to the future: FinTech Week revealed the full span of Singapore’s digital ambition

SMARTCITY SMART CITYSLICKERS SLICKERS Said to be the smartest city in the world, Singapore is using technology to enhance its resilience and sustainability – not least in financial services. From investing US$2billion in green funds to collaborating with near-neighbours in developing crossborder payments systems and setting up a National Office of AI to oversee artificial intelligence, it’s determining its future with brave, bold steps. The strategy was evident at the Singapore FinTech Festival, organised by the Monetary Authority of Singapore, where Neha Mehta, Founder of FemTech Partners, Singapore, filed this report With investment thriving and regulation just about playing catch-up, Singapore is rapidly emerging as a Southeast Asian hub for financial technology. The wealthy city-state played host, in November, to the world’s largest fintech festival, underscoring its ambitions as a regional springboard for innovation in the financial sector. Organised by the Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore, the Singapore FinTech Festival (SFF) saw participation grow from around 130 countries with 45,000 visitors in 2018, to 60,000 visitors from top financial institutions, fintech startups, policymakers and investors from across the world, in 2019. The festival featured more than 400 speakers and 900 exhibitors, with more than 40 international pavilions to showcase the latest trends in the fintech space. The key speakers included Heng Swee Keat, Singapore’s deputy prime minister and minister of finance; Queen Máxima of the Netherlands, the United Nations secretary


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general’s special advocate for inclusive finance for development; Agustin Carsten, general manager of the Bank of Internal Settlements, and Ong Ye Kung, the education minister of Singapore and MAS board member. The event was also attended by regulators and public agencies, unveiling the initiatives being undertaken to promote and regulate the fintech industry. Visitors also got chance to interact with 20 international financial regulators to learn about the business opportunities and regulations in their countries.


Growing concerns around sustainable development and climate change were reflected in the theme of SFF 2019, its content, the design of the event space and even the provision of food from sustainable sources. Around 50 speakers discussed the way

forward for a more sustainable future in the finance industry. Not least, Singapore announced that it would be investing US$2billion in green funds to further its objectives of achieving a greener financial system. The MAS also announced the development of various initiatives to encourage green and sustainability-linked loans and other schemes to ensure that financial services result in positive returns and environmentally positive outcomes. Minister Ong said climate change poses two main risks to the financial system. The first is the physical damage that could be caused by climate change itself. Damage to assets and properties could result in large insurance claims and lower the collateral value of bank loans. The second is transition risk arising from policy changes, technological advances or changes in consumer preferences. For example, old fossil fuel assets could become stranded and result in the devaluation of loans and investments in the energy sector. This could be further compounded by other risks, such as deforestation, land contamination, water

and air pollution, and could threaten the stability of the entire financial system. Financial institutions need to build up their resilience to climate change threats, he said, by measuring, mitigating and disclosing these risks. MAS is intensifying its supervisory focus in these areas, and is working with counterparts to enhance global practices. Mitigation involves fostering new financing practices. To this end, the Association of Banks in Singapore (ABS) has issued guidelines, and the three local Singapore banks have ceased financing new coal power plants and stepped up funding for renewable energy projects. Lastly, with regards to the disclosure of risks to better inform investors, the Asian exchanges have implemented sustainability reporting for listed companies to enhance transparency.

Financial institutions need to build up their resilience to climate change threats MAS introduced a Green Bond Grants scheme two years ago and, to date, more than S$6billion of green bonds have been issued. This scheme has recently been expanded in scope but, globally, more work needs to be done to harmonise standards for better comparability. MAS has been taking the lead in the following areas:

■ GREEN LOANS: There is a need to shift green lending into a mainstream activity for financial institutions. MAS will develop incentives to encourage growth in green and sustainability-linked loans. ■ RISK TRANSFER SOLUTIONS: In insurance, there is a need to develop a new risk transfer solution that will help meet disaster protection needs, while creating alternative investment opportunities. To catalyse growth in the insurance-linked securities (ILS) market in Singapore, MAS introduced an ILS Grant Scheme last year to fund upfront issuance costs. ■ GREEN FUNDS: MAS will launch a US$2billion Green Investment Programme (GIP) under which it will place funds to public market investment strategies that have a strong green focus, with asset managers who are committed to deepening green finance activities and capabilities in Singapore. As part of the GIP, MAS will allocate US$100million to the Bank for International Settlements’ Green Bond Fund, to support its global green finance initiatives. ■ GREEN CAPABILITIES: Singapore is collaborating with education institutions to build up capabilities among financial professionals. MAS will develop a scheme to support external reviewers and ratings agencies that assess and certify green financing instruments. It will work towards having a local Centre of Excellence to contribute to Asia-focussed climate research.

STARTUP AGENCY EXPANDS INTO LONDON Enterprise Singapore, a government agency supporting the development and internationalisation of Singapore startups and small and medium-sized enterprises (SMEs), has announced the expansion of its Global Innovation Alliance (GIA) network to London. Enterprise Singapore signed a memorandum of understanding with UK-based accelerator IoT Tribe, which will be running two GIA Acceleration Programmes. Enterprise Singapore is also working with three new GIA partners in Beijing, Jakarta and Tokyo. Enterprise Singapore and the Infocomm Media Development Authority (IMDA) run the Open Innovation Network (OIN), an online directory that aggregates nationwide open innovation challenges across sectors such as sustainable development and advanced manufacturing. The OIN aims to match corporates, government agencies, trade associations and chambers looking for tech and digital solutions, with solution providers including SMEs and innovative startups.


Among several major announcements at SFF 2019 was that a prototype blockchain-based platform would enable payments to be made in different countries, on the same network, with the aim of improving cost efficiency. The prototype network, developed by MAS in collaboration with J.P. Morgan and Temasek, is the fifth stage of Project Ubin – an industry collaboration, led by MAS, to explore the use of blockchain and distributed ledger technology for the clearing and settlement of payments and securities. The payments network will provide interfaces for other blockchain networks to connect and integrate with

seamlessly. It will also offer additional features to support use cases, such as delivery-versus-payment (DvP) settlement with private exchanges, conditional payments and escrow for trade, as well as payment commitments for trade finance. The project report on the prototype network will be published in early 2020. The applications that have so far been successfully tested were showcased at the Singapore FinTech Festival 2019 and the network is expected to be integrated with commercial blockchain applications after the testing period is over. Beyond technical tests, this fifth phase of Project Ubin sought to determine the commercial viability and value of the blockchain-based payments network.

All for one: A new, blockchain-based, crossborder network

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TRANSFERWISE LIFTS THE FINTECH PRIZE… AND GIVES IT AWAY The Monetary Authority of Singapore (MAS) announced the three winners of the Global FinTech Hackcelerator during the festival. MAS and the Association of Banks in Singapore also announced the 12 winners of the FinTech Awards. For the Hackcelerator, there were 200 submissions from 30 countries to address 70 problems in the categories of banking and finance, insurance, financial inclusion, and a general category of challenges. There were two tracks – local and global – with 10 finalists selected for each, who then went through a 12-week mentorship programme to further define their products for the ASEAN market. The winners of the Global FinTech Hackcelerator, supported by KPMG Digital Village, were selected at the Global FinTech Hackcelerator Demo Day. They were: MindBridge Analytics, Pula Advisors and DiligenceVault. The winners of the FinTech Awards, supported by PwC Singapore, were selected from a total of 245 submissions from more than 30 countries. Twelve winners were selected across four categories – Singapore Founder, ASEAN SME and ASEAN Open and Global, by an international panel of industry experts. TransferWise came first in the Global category but immediately announced it was giving the S$150,000 prize money to Singaporean individuals and small businesses hit by hidden bank fees at home and abroad. The money will be paid to those who can show they have suffered from hidden exchange rate markups by a bank in a crossborder transaction over the past year, up to a total of S$500 per applicant. A startup pitching competition, SLINGSHOT 2019, was also part of SFF 2019, focussing on providing opportunities for startups to connect with global investors.


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This year saw the inaugural SFF x SWITCH event, aimed at fintech and deep tech, which is intended to serve as a cross-industry platform for innovative technologies from sectors such as fintech, advanced manufacturing and engineering, biomedical and health sciences, urban solutions and sustainability and digital services. Part of SWITCH, the Innovation Lab Crawl provided opportunities to meet visiting research facilities and in-house labs from 53 partners in these sectors. The cross-sector focus highlighted Singapore’s ambition to use artificial intelligence (AI) to transform the economy and improve the quality of life of its citizens. To that end, the Singapore government has committed more than S$500million to deploy AI technology at a national scale. Singapore’s National AI Strategy maps out the various initiatives based on AI technology, machine learning and computer vision that are in the pipeline over the next decade. Five national projects cover transport and logistics, smart cities and estates, healthcare, education, and safety and security. They aim to guide investment in AI research, generate ‘lead demand’ to anchor talent and capabilities, and steer decision makers in building Singapore’s supporting digital infrastructure. In the area of smart cities and estates, plans to deploy sensors and AI algorithms to predict maintenance needs in public housing estates by 2025 were announced. For estate management, AI can help to anticipate problems so that housing estate maintenance can be better optimised, such

as using AI to analyse data to help predict the next lift breakdown in a building. The deputy prime minister of Singapore also revealed that artificially intelligent technology for reporting local municipal issues via a chatbot to identify the correct agency, would be available by 2022. A new National AI Office has been created under the Smart Nation and Digital Government Office to set priorities and help to build a pipeline of AI talent. Singapore also aims to train 25,000 professionals in basic AI coding and implementation by 2025. In children’s education, an AI-enabled automated marking system for English will be piloted next year with selected primary and secondary schools, before a full rollout in 2022. Education will also be personalised through an AI-enabled adaptive learning system, which uses machine learning to tell how each student responds to learning materials and activities, and recommends a step-by-step pathway, customised for that person. A plan to use AI to analyse clinical and genomic data, medical images and health behaviours to better assess the risk profile of patients, allowing for better prevention and care, was announced. For example, by 2022, the nation plans to deploy AI software system Selena+, which scans and analyses retinal photographs for signs of diabetic eye diseases. The deep-learning system is said to take a fraction of the time it currently takes humans, and is often more accurate. Similar efficiency is already being realised by using automated technology at Changi Airport Terminal 4, where facial recognition scanning is reported to achieve manpower and efficiency savings of up to 20 per cent. By 2025, a totally automated immigration clearance for all travellers could be ready so that no one will need to present their passports on departing Singapore.

The Singapore government has committed more than S$500million to deploy AI technology at a national scale

LOCATIONS: SINGAPORE The AI project covering transport and logistics will look at ensuring intelligent freight planning with the building of a common and trusted data exchange platform, including the intelligent routing and scheduling of trucks to optimise delivery processes by 2022. AI applications will also facilitate freight planning at ports by 2025, which will then be expanded to include air and land cargo operations by 2030.


The MAS will be working with industry partners on Veritas, a framework for promoting responsible AI and data analytics adoption by financial institutions, enabling them to evaluate solutions based on fairness, ethics, accountability and transparency. Meanwhile, MAS and Banque de France (BDF) announced that they would be deepening collaboration on areas such as cybersecurity, with BDF opening its second overseas office in Singapore this year. A Memorandum of Understanding was also signed between MAS, BDF and Autorité de Contrôle Prudentiel et de Résolution to increase cooperation in cybersecurity through information and staff exchange. In recognition of the growing demand for frictionless digital payments and the economic potential they could unlock, Singapore’s MAS intends to develop a real-time payments network with its ASEAN neighbours that would enable retail micro-payments using mobile numbers on smartphones, a potential boon for small businesses and migrant workers. India has further deepened its ties and signed various MOUs with Singapore during the festival, launching a pilot demo of the first international application of India’s Bharat Interface for Money (BHIM), United Payments Interface (UPI) for QR-based payments, which aims to be live by next month, covering thousands of terminals in Singapore. MAS’s e-know-your-customer (eKYC) project will also go ahead, creating a digital platform for supervisory tech solutions that central banks can use to try to solve regulatory problems by sourcing solutions from the fintech community.


Mastercard launched the Fintech Express Program in Asia Pacific, allowing selected fintech companies access to various digital-first products, based on flexible agreements, to promote and support their global scaling. Saxo Markets, a multi-asset trading and investment platform, and Quantifeed, a digital wealth management solutions provider, have partnered to launch a new wealthtech solution for financial advisors by 2020. The new platform, which will be built on Saxo’s open application programming interface (API), will include three core functions: portfolio and account management, actionable investment-related notices, and an interactive investment journey. The United Overseas Bank launched an AI-based digital banking service, enabling customers to track their expenses and savings. Digital insurer Singlife announced the launch of a mobile-first insurance savings plan, the Singlife Account. Every account comes with an optional Visa debit card that gives customers instant access to their account and allows them to make overseas transactions without incurring FX (foreign exchange) charges. Leading payments issuer/ processor, Global Processing Services (GPS), announced the launch of its Asia Pacific (APAC) hub in Singapore. GPS chose Singapore as its new regional headquarters to best support its existing clients and leading regional banking providers through its Apex platform. At the epicentre of Europe’s fintech revolution, GPS is recognised as ‘the tech behind the fintech’, having launched fintech unicorns including Revolut, Monzo and Starling Bank on the Apex platform

and now partnering with fintechs, such as Railsbank, in Singapore. The new hub will support existing client expansion and regional client needs as fintechs look for a platform partner to help them scale internationally. The Association of Banks in Singapore (ABS) announced that PayNow QR will adopt the Singapore Quick Response Code (SGQR) specifications, enabling businesses to collect payments via PayNow through the national unified payment QR code, SGQR. The adoption of the SGQR specifications enhances the PayNow experience and makes it simpler for consumers and businesses to use the mobile epayment service. As SGQR combines multiple payment QR codes into a single SGQR label, businesses do not need to generate and display a separate PayNow QR code to collect payments via PayNow. Consumers can simply spot the PayNow logo on an SGQR label, scan the QR code with their preferred bank app and pay via PayNow. Google Pay has tied up with DBS Bank and OCBC Bank to enhance Google Pay services in early 2020. DBS Bank is working with Singapore’s three public healthcare clusters on the payment infrastructure to transition all public hospitals, speciality centres and polyclinics to SGQR in 2020. Wirex announced that it is launching the Wirex Visa Travelcard, enabling customers to spend multiple crypto and fiat currencies across APAC. Compatible with more than 150 currencies, the card is enabled at 54 million outlets around the world where Visa is accepted. It also offers free international ATM withdrawals and up to 1.5 per cent back in Bitcoin on all in-store purchases. Issue 15 | TheFintechMagazine


Kon Kong KingKong Kong Kong LOCATIONS: HONG KONG

Hong Kong is uniquely positioned where China meets the Western world – geographically, culturally and politically. And it’s where fintech is pushing the boundaries, as The Fintech Magazine’s Doug McKenzie discovered Hong Kong’s annual Fintech Week might have gone under the radar due to its proximity in timing and geography to the Singapore FinTech Festival – the world’s biggest. But, given recent events in China’s special administrative region (SAR), there was no chance of that.

While democracy protestors were on the streets in 2019, Hong Kong regulators were working with the first eight startups to be given freedom to launch with virtual banking licences – including Ant SME and a Tencent joint venture. Meanwhile, rumours were rife that Ant Financial – the most valuable fintech in the world – was planning an IPO on the Hong Kong stock exchange, its affiliate company, the giant Chinese etailing conglomerate Alibaba, having done likewise earlier in the year Hong Kong is a different beast to Singapore and, as a result, its week plays a very different role. Comprised of three parts (a formal conference, visits to Hong Kong’s numerous innovation labs and a day trip to meet fintechs in China’s own ‘Silicon Valley’ of Schenzen), it’s designed to highlight the territory’s unique position as a bridge between two worlds: East and West. Thanks to its location, the event pulls in thousands of tech and financial entrepreneurs and industry experts from the world’s second most powerful economy, China, and thousands more fly into Hong Kong Airport from around the globe. So, with only a week to get an understanding of the Hong Kong fintech scene, I knew I was in for a challenge. There are at least 600 fintechs and more than 100 innovation labs operating in the vertigo-inducing city. However, I was tipped off that the first port of call when getting to know the tech scene here is Cyberport. The business park describes itself as a


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‘digital’ community, which might sound impossible when its physical presence totals 119, 000 square metres of office space. However the community that is incubated inside its Bond-villain-style campus really strives to embody the digital innovation revolution. From vertical, soil-less farms to coin repositories that convert your cash into your digital wallet, Cyberport screams the future. I was

Hong Kong already has all the traditional institutions, including banks and insurance firms, in place and ready to collaborate there, of course, to see fintechs and I spoke with nearly two dozen of them – all of whom really stretched the imagination of what fintechs could do… take Next Billion, a company that can help the millions of corner shops around the world achieve an effective stock check and inventory supply, and Sakai, a startup that helps connect informal modes of transport, such as tuk tuks, tricycles and e-jeeps, to your digital route planner. While there, I got the chance to interview Charles Ng, the executive director of InvestHK, which is the government arm behind Hong Kong FinTech Week and is driving foreign investment in the region. He gave me an idea of the appetite that Hong Kong now has when it comes to fintech. The Hong Kong Monetary Authority chief executive Eddie Yue had described the SAR’s

regulators as being traditionally conservative in their approach, but after hearing from Ng about plans for fintech in the near future, there is clearly a transformative reappraisal afoot. Ng also pointed to an important distinction between Hong Kong and its regional rivals – Hong Kong already has all the traditional institutions, including banks and insurance firms, in place and they’re ready to collaborate. The Hong Kong FinTech Week Conference, would be a graduation of sorts for many of the fintechs I had met over the first two days and would be the culmination and celebration of the industry as a whole in Hong Kong.

In March, Hong Kong hosts another fintech-focussed event: Blockchain Week. The event will look at the range of applications that distributed ledger technology (DLT) can offer across industry, and throw a spotlight on issues such as digital renminbi; digital asset management; regulatory hurdles across various jurisdictions; the latest DLT solutions for payment networks and banking; and the social impact and sustainability of blockchain projects (see This month, the subsidiaries of Hong Kong Interbank Clearing Ltd and the Institute of Digital Currency of the People’s Bank of China (PBoC) are due to start a proof-of-concept trial that aims to connect eTradeConnect, a blockchain-based trade finance platform funded by a consortium of 12 major banks in Hong Kong, and the PBoC Trade Finance Platform.

L ve Island for fintechs A myriad of financial services, all looking for a fintech to embrace, makes Hong Kong a great destination, says Charles Ng, Associate Director General at InvestHK THE FINTECH MAGAZINE: Can you tell us more about the fintech ecosystem in Hong Kong? CHARLES NG: We have 600-plus fintech companies in Hong Kong. It’s a sector that has enjoyed amazing growth. We see that from the survey we conduct with all the co-working spaces – innovation and research labs and accelerator programmers were only three co-working spaces here when we started the startup journey in 2013; now we’ve more than 100. And we’ve seen seven unicorns emerge – one, WeLab, was recently successful in applying for a virtual banking licence. More than 18 per cent of Hong Kong’s GDP is driven by financial services. They employ more than 230,000 professionals with many more in the sectors that support them – accounting firms, law firms, M&E firms, consulting firms, and so on. All of these help this ecosystem come together and grow. TFM: What sets Hong Kong FinTech Week apart from other events? CN: The recent fourth edition of Hong Kong FinTech Week attracted 200 speakers from more than 60 countries. An anticipated 10,000 participants connected with each other, engaged with each other. But for us, the numbers aren’t so important; it’s about quality, not quantity. The stakeholders that you meet at Hong Kong FinTech Week are senior executives from financial institutions,

banks, insurance companies, asset management, private equity brokerage firms. They are also from organisations like telcos and, through our engagement with various associations, accounting and law firms that represent the various industries in Hong Kong, from manufacturing to logistics.

More than 18 per cent of Hong Kong’s GDP is driven by financial services TFM: Why would fintechs choose Hong Kong over some of your neighbours as a base in Asia? CN: There are a couple of reasons. The first thing these companies are looking for is business opportunity. And we have 160 licensed banks, eight startups with new virtual banking licences, and 162 licenced insurance companies. Then there are the asset management companies, security firms, funds of funds, sovereign funds, family offices, you name it, they are here in Hong Kong. So, we have a very big range of financial companies, which we anticipate will attract more. The big technology giants in mainland China are also expected to make a second listing in Hong Kong. So, with that level of activity and momentum, we believe there is a need for financial companies to embrace fintech solutions and services. But that is only one part of it. Fintech is

not just for financial services; it cuts across other sectors, such as telcos. And we have a lot of telcos in Hong Kong! With the adoption of 5G in Asia, there are many synergies between them and the financial service companies and fintechs.

TFM: How does the Hong Kong financial service ecosystem fit into the wider financial services ecosystem in Asia? CN: We want a strong ecosystem, in Singapore, in Japan, Korea, India… we want all these countries around us, and in other hubs, to be flourishing, because that’s the only way there will be a good exchange of demand and supply. The world is big enough for everybody; there’s no such thing as pure competitors. We’re collaborators in many things – our regulators have a collaboration with Switzerland and with Singapore – and we’d love to see more of it. I would really urge any government who is interested in collaborating with us, to reach out… as we are.

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A safe haven of


Hong Kong’s Cyberport is a living lab where fintechs find all the help they need to push those digital envelopes, says Chairman Dr George Lam THE FINTECH MAGAZINE: How has Hong Kong’s role in financial services changed over the last decade? GEORGE LAM: Hong Kong has been very lucky; we have always been a key international financial centre because of our British common law heritage, strong governance and high level of transparency. Our financial services are very well regulated, very stable, rock solid even, so that’s a good foundation for

digital transformation. Over the past three years, in particular, Hong Kong has made huge progress. We have not been the earliest practitioners of fintech development, but we are running fast and on a very solid foundation. That’s why this international financial centre has not seen any disastrous cyber security attack. Cyber security is a big focus for us, as is blockchain, artificial intelligence (AI), big data, deep tech, and fintech – we are very

interested in all of them. The key driving force is innovation. We also see a lot of seasoned bankers, fund managers and venture capitalists, putting more money in to the tech sector. In fact, these days, I think it’s very difficult to find an investor who has not invested in Hong Kong! So, all this is how Hong Kong has managed to move so well from traditional financial services in to fintech.

Yes, we can! David Leung heads up SC Ventures for Standard Chartered Bank in Great China and North Asia, responsible for fintech investment and the bank’s eXellerator labs. SCV’s mission is to ‘rewire the DNA of banking’. Here he explains how it goes about it…

SC Ventures is the catalyst and the platform for Standard Chartered Bank to experiment in new ways of working and with new business models, and to invest in fintechs. It starts with our eXellerator. And, for me, what that embodies is engagement: engaging with people in the bank and our businesses, asking, ‘how can we solve problems in a new way? How can we engage in fintech and new ways of working? How can we put the customer at the heart of that problem-solving process?’. Then we have the Innovation Investment Fund, which is $100million,


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dedicated to investing in fintechs, but with a very specific purpose. We’re not a VC, we are investing in what we view as the future capabilities for banking. So, for example, new core banking systems for running a bank, in 2020, 2030, and beyond. We invest in future capabilities. That manifests itself as us only investing in companies that we work with, using the bank’s own capital – it’s not a public fund. The third thing we do is build new business models. We also do this for the future of the bank. We want to know how we can explore new ways to serve client needs in financial services that are outside the normal sense or strategy of

the bank. Which means, for example, we can explore a non-banking SME platform in India, called SOLV. It gives us another option for our business models, which is a variation on serving, fundamentally, client needs in financial services – in this case, SMEs. So these are the three pillars of our activity; the accelerator, the fund, and building business ventures. SC Ventures is all over the world now. We have an outstanding location on the West Coast, where we’ve formed close relationships with all of the names you’d expect to see there. We’re in London, which is focussed on market

TFM: How has Cyberport helped Hong Kong with this transition to fintech? GL: Cyberport is probably the most global tech hub in Asia. We have established connections with mainland China – that’s a very important, 1.4 billion people market, and growing fast. We are also the international gateway for the Greater Bay Area, which is made up of the nine top

Hong Kong is the golden bridge between East and West cities in Guangdong, the top economic performance province in China, plus Hong Kong and Macau, two SARs. This nine-plus-two setup is the new Silicon Valley for the world. So, any fintech entrepreneurs, who want to become a unicorn, or have impact, this is the place to do it. You have a real-life lab here, hungry for innovation, improvement, efficiency, and also making financial services more available to the community.

infrastructure; there we have a lot of relationships with asset managers and the insurers. That, obviously, scopes into the European ecosystem. But then we are also in Nairobi. There is a vibrant fintech ecosystem in Africa, which made the jump from no telco to mobile-only. If there’s a vibrant ecosystem there that is open-minded about the adoption of technology driven by mobile, surely we can be relevant there, too. In Asia, we’ve been working very closely with our retail bank in Hong Kong.

If we do fintech well, we can make our innovative solutions available to surrounding countries and help a lot of underbanked and underinsured people gain access to financial services. All they need is a smartphone and they have the universe. We have seen new champions emerge, such as virtual banks, virtual insurance companies, e-wallet companies, e-payment companies, robo trading, robo advisory companies, you name it, we have it. Hong Kong has a very strong regulatory background, making financial services rock solid, but we also need to change with the times. So, our fintech entrepreneurs are working hard, working smart – and we help them, by building an ecosystem. Because at Cyberport, not only are our startups working together, but we also bring in tech giants, top banks and insurance organisations, then we build strong relationships with our regulators – for instance the Central Bank, the Hong Kong Monetary Authority, the Hong Kong Insurance Authority, the Securities and Futures Commission, the stock exchange –

Can we bring fintechs out of China, to all of our other 60 markets? I think so, yes Singapore is the headquarters for SC Ventures, but then we’ve also opened in Shanghai recently to engage in that ecosystem, where the big question for fintechs is ‘do you think

making sure that our entrepreneurs are fully linked up with regulations. In turn, they can then become a good source of advocacy for law reform and for regulatory improvement. It should be a two-way street: entrepreneurs pushing the envelope and our regulatory organisations being very proactive, too. TFM: We’ve recently seen a trade war between China and the US. How does that affect Hong Kong when it comes to the digital industries? GL: Hong Kong is very well positioned in any such situation as the golden bridge between East and West – between China and the US, Japan, Korea, Australia, the Nordic countries and the EU. Not only are we the best positioned, geographically, but we are culturally and economically also very well linked. Although Hong Kong is part of China, we have our own currency, our own legal system, and our own customs zone status. We are a free port, so we should be a good place for the best of the world to come and do something together.

you’re really going to compete in China against big tech?’. The purpose of SC Ventures is as a platform for innovation. So, can we be relevant in partnerships that combine financial services and non-financial services? Yes, we can. Can we bring fintechs out of China, to all of our other 60 markets? I think so, yes. Can we take fintechs from those 60 markets in to China? Subject to language, I think we can do that, too. Issue 15 | TheFintechMagazine



Lodes ? d o o g f o

There are plenty of ideas for tech-for-good. But finding funding for something that builds social rather than financial capital is desperately hard. David HoghtonCarter challenges fintech to put its thinking cap on I’m wearing a few different hats at the moment – fintech founder, consultant, non-exec, occasional writer and advocate – and there’s an elephant in the room that I keep noticing across my different roles. There’s a big gap in the finance market for catalyst funding, especially for deep innovation, and particularly for anything that doesn’t look like it’s a potential unicorn with a snazzy minimum viable product (MVP) already designed.


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The deeper the impact and purpose alignment, it seems, the more difficult to get that crucial first infusion of cash. Even though there’s a steady stream of content on platforms like LinkedIn, highlighting how impact-focussed approaches are the future of business, and how all of us should be getting onboard, it’s nightmarishly tough to find someone who’s willing to stump up for something that might really change the game in a positive way. This cropped up in a recent conversation with a guy operating in the tech investment space, who was regularly sitting across from founders who were struggling with the chicken-and-egg, first-funding conundrum. We got into this a bit, shared some war stories and agreed that something needs to change. Too many of us are being forced into Captain Ahab mode: indefinitely, obsessively hunting for our own white whale, deeply driven to do something that might make a difference, solve a

problem we’ve experienced the hard way, but being thwarted by the cruel seas of investment funding. In the fintech space, it’s all about doing money and finance in new and better ways. So, why not try to solve this problem? Right now, the market context is a barrier to positive solutions. Investors are backing high-growth businesses with a clear path to high returns if the company performs as hoped. That may sound like a good thing, but think about it. That means that mission and impact-driven initiatives, which require patient funding, especially from a very early stage, lose out. Tech-for-good initiatives and zebra projects struggle to catalyse. That’s going to skew the outputs in favour of businesses that end up ‘making it’, further disincentivising investors to take part in funding the slow burners. And there’s another problem. As we’ve learned to our cost, some of the deepest impacts of tech giants like Facebook, Google and Twitter can be baleful. Yet the

rush to create a profitable product and establish a strong market position means that many developing tech businesses don’t factor this kind of risk analysis into their business planning. This can generate more problems than it solves, both for businesses and for society. Meanwhile, there are some well-known dynamics within tech-for-good, as a sub-set of the impact landscape. There’s a contrast between how independent founders experience the search for funding, and how those taking a lead on new tech in spin-outs or well-established non-profits, experience the market. Scale-up funding schemes are plentiful across multiple stages; yet absolute project-start-level funding is very difficult to

lock down. Independents often struggle, especially those that don’t have personal wealth to plough in. With interest rates from key impact investors at or around 10 per cent (thanks partly to Big Society Capital (BSC) and its questionable approach), there’s a high barrier to entry for anyone not already starting to scale. The nuances of how BSC’s partner-investors work vary, but they tend to structurally favour well-set programmes that are able to demonstrate veteran governance, solid support and additional financial backing. More broadly, startup loan schemes assume the potential to quickly develop a strong enough revenue stream to pay down the loan. The money that’s available isn’t enough to cover early development costs in full, and the assumption is that founders will make up the difference. The assumption that founders can afford to pay the rent, keep the lights on and put food on the table until something new is washing its face, is severely misplaced. To my mind, the focus of all these funding channels is far too keenly zeroed in on minimising risk: clear financials,

obvious comparators and competitors, developed markets, readily identifiable benchmarks for success. And yet strategic funders keep claiming that it’s tough to find fundable companies. With such deep risk-aversion, the bar to entry is set so high that it’s next to impossible for newbie innovators to meet it. Trans-nationally, the message from impact investors is that, to be fundable, you’ve got to be well-established, generating revenue, with the market potential of a unicorn but the mission and impact profile of a mature non-governmental organisation (NGO). Here in Britain, too many otherwise positive, existing tech-for-good funding streams cleave to solidly established organisations (venerable charities, university or NHS spin-outs, for example), and fund new tech that seeks to address well-worn issues. How does that square with true innovative thinking that spawns new solutions? With fintech companies changing the game in so many other ways, I think it’s time for some positive disruption here. Someone needs to take some real risks and build a funding approach that focusses on the untested, and on new founders. We need to see a platform that enables money to flow into positive deep-innovation tech and impact projects in which the primary return is likely to come from social impact – and then it’s probably going to take a while to realise. Rather than relying on the dubious hope that market dynamics will create the right environment for a better, shared future, we need to actively build the systems that can create it. Peer-to-peer lending and investment is one way to go, of course. Where I am, in Leeds, Rebuilding Society and UOWN are doing great work on democratising finance for SMEs and property investment respectively. And crowdfunding is ubiquitous, now, though with some caveats about the kinds of ideas, projects and approaches that tend to pull in the public’s money. That might be reinforced

with some form of ‘social credit’ system, which rewards investors who put their money into newly registered, non-spinout community interest companies and charitable incorporated organisations – perhaps by offering localised discounts on goods and services if they’re helping to build stronger local economies. I’ve been looking at similar ideas across two different projects, and I believe there’s room to catalyse some deep, systemic change by linking together new financial approaches. All it takes is for a first-funder with a fair bit of money and a genuine drive to do positive innovation to say ‘yes, let’s do this’ (I'm looking at you, challenger banks). The next niche to fill is going to be peer-to-peer impact innovation support. I think there’s room for a platform that draws impact-curious investors, provides their money to very new and early-development projects on a mixed grant/loan basis across multiple phases, and then tracks the impact path instead of focussing on the financial return. How you turn that into a viable business proposition is the question. But the fintech community has done big things with much thinner ideas, so I’m sure it can be made to work. So, to sum up. Risk aversion stifles genuine innovation. The predominant model for tech and impact funding relies too heavily on readily foreseeable financial growth and outcomes. There is too little room to proactively think around unplanned outputs, consider unintended consequences and think bigger. It’s not adding up to a sustainable model. A crucial piece of the puzzle is missing. That means we’re arguably storing up financial, economic and social volatility with every transaction made and we’re not creating a big enough pressure valve. This won’t build the sustainable society and economy we all want. The big-picture question, ultimately, is how far can current approaches stretch the fabric of our economy before it tears itself apart?

Someone needs to take some real risks and build a funding approach that focusses on the untested and on new founders

Issue 15 | TheFintechMagazine



Why insurers should stop fearing technology Insurtech has the potential to offer new revenue streams and to even help restore the public perception of the insurance industry, as Stephanie Smith, Chief Operating Officer at Allianz, explains to financial data experts FinTech Global

Protecting against the future: $13.5billion has been invested in insurtechs

The insurance industry is no stranger to using the latest technologies, giving rise to an entire new sector dubbed insurtech. The innovators in this industry are utilising blockchain, artificial intelligence (AI), natural language processing (NLP) and other new solutions to provide better services. By doing so, they are not only able to help consumers find more personalised coverage, but also empower insurers to


TheFintechMagazine | Issue 15

streamline and accelerate claims processing as well as, in some cases, even reunite clients with lost property. Clearly, technology has provided a wealth of opportunities for the industry. One of the people who has had first-hand experience of this technology revolution is Stephanie Smith, chief operating officer at Allianz, the financial services firm and insurance provider. “Much more exciting is what we’re getting off the back of data and connected data, because it’s opening up

new avenues for the industry,” she says. As an example, she points to how insurers can leverage geospatial data to identify land areas that are at high risk of flooding and how this enables personalised cover and better risk control. Several insurtechs are already utilising this geospatial data in their offering. Tensorflight is one of them. The company provides an AI-powered platform combining geospatial imagery with machine learning algorithms to help insurers better understand their risks. It

can account for building footprints, construction type, roof pitch, number of storeys and more. This does not mean technology can only help small segments of customers – collating publicly available information can, for example, reduce onboarding times for everyone. Not only is insurtech providing customers with new services, but it’s also easing their current interactions with insurance firms. “By connecting data available in the public domain, you can make customers’ lives easier,” Smith explains. “So, we don't have to ask them a suite of questions. We can draw information from public sources to make that process much slicker and simpler.”

Big data, big money Moving beyond publicly available data, technology has become ingrained into our daily life and is still finding more ways to play a part in what we do. Most of these interactions with technology can be turned into data and used by companies. Putting aside the fear that everything we do nowadays relies on technology and is hoarding information about us, there are a lot of new personalised services available because of this. Within the engineering inspection space, Allianz is using black boxes on wind turbines to help it take a more preventative position on risk. “By looking at how something is performing, you can actually stop someone having to claim because you can give them guidance up front,” Smith says. “So, I think that technology, the proactive enablement piece, is quite exciting as well.” Insurtech could also help insurers work on their image, which is something they seem to be in dire need of. A recent study from YouGov claimed that 68 per cent of Britons believe insurance companies would do whatever it takes to avoid paying out in the event of a legitimate claim. Another area of grievance from consumers is the use of complex language. Making use of data to create personalised and simplified experiences for consumers can help with this. For example, automatically collecting geospatial data after a flood or black box information from cars can quickly supply information on a potential claim. Not only will this ensure claims are paid out when

needed but it will alleviate the stress on claimants. “I think it’s important to remind ourselves of the fundamentals of why we’re here,” Smith adds. “It’s about giving people the confidence to get on with their lives and look to the future. That’s the bit that is core to what we do and it won’t change. But I think, if you look at the technology capabilities, you’ve got to help speed up that engagement, make people feel more comfortable and more confident, have a preventative focus as well, using things like the Internet of Things. In the future, insurance will be more technically enabled, but will never eradicate the need for us to support our customers and provide an assisted service for them.” Still, she points out that embracing and adopting new technology is not something that is done overnight. For Allianz, it has been a long process to welcome new innovations, which is understandable given the company is more than 100 years old and has a global presence. While this might have slowed down the insurer, it has not stopped it. Allianz has made efforts to embrace new technologies, even establishing a handful of investment arms which are taking a keen interest in the fintech sector. One of these is Allianz X, which has a total fund size of €1billion to invest into startups across the mobility, property, health, wealth management, data intelligence and cybersecurity spaces. As an example, the firm recently invested in the German open source software platform SDA SE Open Industry Solutions. The company supports the digitisation of businesses, enabling clients to integrate existing IT systems with new digital services. Through this, insurance firms can deploy new services quickly and bolster customer touchpoints. Smith says that Allianz is looking for partnerships where it can couple its traditional skills around underwriting with

new thinking coming through the fintech community. Such partnering with new insurtech startups can help incumbents re-engineer their customer interactions and create an environment and architecture that lets them put an interaction layer between customer activity and legacy systems. “I think the challenge for all businesses is that you don’t want to be a laggard,” adds Smith. “You’ve got to get with the programme and not be a Kodak where you sort of deny the fact that technology is changing and moving at an incredible pace. For Allianz, as a leader in this environment, it’s about getting the best balance between running the business day to day and investing in the future. And that is a not an easy balance to strike.” Allianz’s efforts are a sign that the anxiety about the fintech wave replacing traditional players has died and organisations are working together to evolve insurance. A few years back telematics was being heavily publicised as the new revolution in car insurance and it did change the segment, but in a niche way. There was no a dramatic overhaul. Realising this coexistence could be why insurtech has not witnessed the same crash as the dotcom bubble did. Investors’ interests have clearly been piqued, with more than $13.5billion being invested into the space since 2014, according to FinTech Global’s data. Smith reminds insurance companies that their role is to make consumers feel safe. “And in order for us to deliver that service, we need to make sure that it’s hassle-free and gives customers security,” she says. “So, from my perspective, if you keep true to those core principles of why we’re here and what insurance is about, actually, there’s opportunity that comes from tighter regulation and real focus on demand from our customer. Embracing that is the key.”

You’ve got to get with a programme and not be a Kodak... For Allianz it’s about getting the best balance between running the business day to day and investing in the future

Issue 15 | TheFintechMagazine


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