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Issue 7

Winter 2018

Invisible banking

How to perform a vanishing act

Contactless in the USA Will NFC never catch up?

Location, location

Toronto, Ohio, Leeds... the up-and-coming hubs

Fintech chic

Paris flies the flag for digital finance

Galileo Processing Rewriting the rules Galileo & Friends review the four top disruptive technologies in 2018; take a critical look at UX; and ask what's the enduring appeal of prepaid?

PLUS INSIGHTS FROM NatWest ● Baader Bank ● Matica ● N26 ● GPS ● Finastra ● Mambu Revolut ● Starling Bank ● Invoice Cycle ● New10 ● FireEye ● Proteus Cyber ● Idex ● Monzo

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Fintech chic What you can expect from two days of intense networking in one of the most enigmatic locations

15 Embracing the digital 'you' Ghela Boskovic and Helene Panzarino explore the banks’ role in defining and managing digital ID

18 Border cheques? How Monese founder Norris Koppel is tearing down barriers

PHIGITAL 21 Holding all the aces Matica Technologies reveals its instant card issuance for branches

25 A fine romance (and the dog comes free) A personal view of high street heartthrob Metro Bank

26 Points mean prizes Banks will be the ultimate winners if they invest in rewarding customers, argues Welcome Real Time

28 The comfort zone Traditional banks are using automation to create a more relaxing experience with Glory

30 Branching out Millennium BCP's ambitious physical and digital transformation process is bearing fruit




We're kicking off 2018 and an exciting new season of major digital finance events, by heading to France for the popular Paris Fintech Forum. There is an impressive line-up of speakers, not least ministers of European finance who are charged with overseeing implementation of a raft of regulation this year – the revised Markets In Financial Instruments Directive (MiFID II), Open Banking, the General Data Protection Regulation (GDPR) and, of course, the second Payment Services Directive (PSD2). This issue of Fintech Finance looks in depth at some of the technologies – biometrics and cybersecurity systems among them – that can all help a bank take advantage of what these new rules have to offer. Just as important as the digital presence for many institutional banks is their physical presence. In our special ‘phigital’ section, we look at branches, cards and all other physical touch points a bank has with its customers.

We also take a look at the payments infrastructure for neo-banks, invisible banking, and some of the highlights from Money 20/20 – not least the second Fintech Finance Payments Race from Toronto to Vegas, and compare the North American payments infrastructure to Europe. Ali Paterson | Did you recognise last issue’s ‘spine tingler’:

"You get more with a kind word and a gun in your hand then just a kind word" Al Capone, American mobster, crime boss and businessman*

*Our previous edition was printed before the Vegas shooting. We apologise if any offence was caused. To submit a ‘spine tingling’ quote for the next Fintech Finance magazine, please email your suggestions to

33 Pressing all the right buttons The self-service branch is the embodiment of 'phigital' banking, according to Parabit

34 Next stop: The future With a new CEO at the helm and an accelerated R&D programme, FIME is setting the pace for innovation in payments

37 Tapping into Indonesia RBR's flagship ATM conference Self-Service Banking Asia 2018 returns to Indonesia in March to address cash recycling, branch transformation, omnichannel integration and ATM innovations

38 And then there were none... Ron Delnevo, Europe Executive Director for ATMIA, believes pressure to reduce bank interchange fees is a sinister twist in the ongoing ATM network row over

18 25

33 Issue 7 |


The world's largest payments and financial services innovation event is launching in Asia Money20/20 is where the smartest Asian innovators and leaders in payments, FinTech and financial services come together to connect and create the future of money. Join us at the prestigious Marina Bay Sands in Singapore on March 13-15th 2018 to experience original insight, trailblazing enterprise and high-impact networking.

Agenda themes include:


Bits & Blocks: Coins & Ledgers

Data, AI & AlgorithmBased Innovation

Financial Inclusion

Mobile Payments & Wallets

Processing, Instant Payments & Open Platform

Senior Director Mobile Payments

Co-Chairman & CEO

Greg Gibb,

Jonathan Larsen, CIO

Cheng Li,

Lucy Liu,

Nadiem Makarim,

Ning Tang,

Pieter van der Does,

Karla Allen,

COO & Co-Founder

CEO & Founder

Chairman & CEO



Co-Founder/President & CEO



52 66

58 40

MONEY20/20 REVIEW 40 Follow the Money Money20/20 Las Vegas was the destination for the second Payments Race organised by Fintech Finance. But the outcome saw a dramatic reversal of fortunes

42 Immediate gratification Money20/20 race sponsor Finastra’s Eran Vitkon ponders what is likely to emerge as the dominant means of payment worldwide... and why you can’t go contactless in the USA!

GALILEO & FRIENDS 44 Rewriting the rules It was a question of 'what's the hottest acronym?' at Money20/20 Las Vegas in October, with the clear frontrunners being APIs, AI and DLT. Galileo Processing, the 'tech for fintech' guys, eavesdropped on the conversations and helped us to translate

SECURITY, BIOMETRICS & COMPLIANCE 52 All in favour, say AI! US bank Wells Fargo made a conscious decision last year to invest in artificial intelligence and apply it across the business. Now it’s beginning to reap the rewards

54 Defusing the GDPR time bomb With just four months before new data protection rules kick in, John Clelland and Chris Greenslade of Proteus-Cyber explain how to stay cool, calm and compliant

56 The ‘new economy’ Brown Brothers Harriman has been facilitating trade for 200 years, but for Mike McGovern, head of the firm's fintech arm, the most important commodity now is data

58 The cyber ninjas Limiting the damage of a cyber security breach is as important as preventing unauthorised access in the first place – perhaps more so. But you need to be smart and fast, says FireEye’s Mike Hart

60 The only way is up Baader Bank grew out of a modest stockbroking firm to become an investment bank to Europe’s largest players in online asset management. Director Oliver Riedel explains how digitisation helped it get there

62 The Midas touch Fingerprint-enabled cards have unlocked a new era in plastic payments and IDEX is set to reap the rewards

64 Data: A strategic view Can a single platform handle the growing complexity of regulation and compliance across all geographies and jurisdictions? AxiomSL, believes its technology can meet the challenge

66 Safe as houses Damian Richardson, Head of Payment Innovation and Strategic Initiatives at NatWest, discusses how the bank is using biometric technology to secure customer data

CUSTOMER RELATIONSHIP MANAGEMENT 68 Banking on a better side of business Why should organisations with a social conscience face bigger barriers to finance? asks Unity Trust Bank's Daryl Wilkinson

70 Digitising Greece Piraeus Bank is beginning to emerge from a Greek financial tragedy – and taking customers with it

INVISIBLE BANKING 72 Now you see it, now you don't If banks are to survive, will they have to perform the ultimate 'white rabbit trick' and make themselves invisible?

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DIGITAL BANKING 78 It's SME first! Cooperation is the name of the game for Christoph Rieche, CEO at iwoca, the ground-breaking lender to small businesses


80 On a digital fast track Metro Bank is clearly still committed to growing its physical estate... but app users are also now promised a faster, smoother ride


82 Heaven sent Is 'celestial' banking the answer to our payments prayers? It is according to Darryl Proctor of Temenos

84 Getting it right first time Customer input errors are frustrating, costly and can mean they abandon your onboarding process. Chris Boaz at address verification service PCA Predict says there are lessons to be learned from the Black Friday behemoths


86 Keeping the wheels on 2018 is the year of open banking and for SMEs that could mean a faster, smoother lending journey, says Invoice Cycle’s David Cockle

94 The power of 10

88 Getting real

Germany's N26 mobile-only bank is going on an awfully big adventure. Co-founder and chief executive Valentin Stalf can't wait

104 From textiles to tech style 200 years ago, Leeds was a UK hub for investment and innovation in the textile industry. Now, it's back in fashion with entrepreneurs powering a second industrial revolution

96 Buckeye fizz Valentina Isakina of regional development agency JobsOhio explains why 'The Buckeye State' is bubbling up to be North America's newest fintech hub

92 Lego not legacy! Cloud-based software-as-a-service provider Mambu is building new banking models one brick at a time. CEO Eugene Danilkis is the architect of its growth

101 Next stop, Toronto

LAST WORDS 106 All-you-can-eat AI... in 112 minutes

Salman Khan at Toronto Global, makes the case for Canada's fintech-friendly region being your new business destination


BankservAfric's Chris Hamilton and Martin Grunewald look to the future of payments and their potential role in financial inclusion


90 Have phone, will travel


102 Crossing the divide

When Dutch giant ABN Amro launched New10, its Cloud-based funding spin-off for SMEs in 2017, it turned traditional business banking on its head, as its co-founders explain

As a former banker and now a Director at Microsoft, Peter Hazou is uniquely placed to understand the impact of technology on financial institutions – and their reluctance to adopt it

FEATURE WRITERS Tracy Fletcher, Will Dove David Firth, Sean Martin, Andrew Sharp, Tori Hywel-Davies, Rimma Tverskoy

Will Dove matches his appetite for pastries with a thirst for machine learning in Steven Finlay’s new book

ISSUE #7 WINTER 2018 VIDEO TEAM Douglas Mackenzie, Lea Jakobiak, Daniel Curnme, James Butcher, Shaun Routledge, Lewis Averillo-Singh,

Fintech Finance is published by ADVERTAINMENT MEDIA LTD. Advertainment Media Ltd. Riverside Business Centre, Riverside Lawn, Tonbridge Kent, TN9 1EP

CONTACT US www.Fintech.Finance Tel: +44 208 626 3619 DESIGN & PRODUCTION www.yorkshire


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

Issue 7 |


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Cosmopolitan, stylish and with plenty of French fizz, the Paris Fintech Forum is two days of intense networking in one of the most enigmatic locations

It’s interesting that, given the number of times the ‘B’ word comes up in conversation these days, there is only one mention of Brexit on this year’s Paris Fintech Forum agenda. Which is, perhaps, testament to the fact that the industry has much bigger things on its mind. The UK’s spat with Europe is a little local difficulty when set against the potential global impact of distributed ledger technologies, the Internet of Things and artificial intelligence, after all. But the beauty of this show is that it gets right down to the details. So there’s room for the big questions, yes, but if you’re a startup trying to scale, a fintech frustrated by access to digital skills, or a challenger wondering how to hitch your wagon to an incumbent bank, then there’s a takeaway from the Forum for you, too. All those topics and more will be addressed within the historic walls of the opulent Palais Brongniart, which was –appropriately enough – the former Paris Stock Exchange, put exclusively at the disposal of Forum organisers, Altéir, for January 30 and 31. More than 2,200 participants from 61 countries have elected to take part in the two days of debate, exchange and networking. On stage, 240 CEOs of banks, insurance companies, telecom operators, regulators and more than 150 fintechs are poised for some provocative panel discussions and interviews. Meanwhile, 120 dedicated sessions will give startups and scale-ups the opportunity to pitch and showcase their latest ideas. The Forum describes itself as the


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‘Davos of digital finance and fintech’ and there’s certainly a powerful line-up of European finance ministers (France, Belgium, Luxemburg, Lithuania), institutional leaders (the European Banking Authority, central banks), CEOs of international banks and global fintech unicorns. Many of them feature on the seven stages where topics range from the thought-provoking – ‘Challenger banks: and now what?' – to the probing – ‘Blockchain & Bitcoin: What's behind the buzz?’ – and the challenging – ‘Is Goliath still agile enough to fight with David?’. Two floors are given over to exhibition space with more than 130 exhibitors in a unique ‘all the same stand’ setting, be they a big bank or a fintech. But there are also networking lounges and innovation areas to retreat to. And if you make a point of talking to your fellow delegates

– which, after all, is what we’re all here for – you’ll likely land an invitation to one of the many private champagne breakfasts, lunches and cocktails, hosted by the Forum’s partners. Of course Paris wouldn't be Paris without outstanding evening parties. A speaker dinner in an astonishing cocktail bar, the champagne gala dinner in the ballroom of the 5-star Intercontinental Opera and last but not least, the Paris Fintech Night to close those astonishing two days. Then there’s the famous petit déjeuner – the networking breakfasts, open to all delegates – where you can find yourself breaking croissant with anyone from Anne Boden, founder of UK challenger bank Starling, to German neobank N26’s CEO Valentin Stalf, and Joseph Lubin, co-founder of cryptocurrency, Ethereum. Now, get those three around a café au lait and that would be some start to the day!

The Davos of Digital Finance Laurent Nizri (@LNizri) CEO Altéir Consulting & Altéir Event, founder of Paris Fintech Forum

Forum founder: Laurent Nizri

What are the key highlights of the programme for this third edition of Paris Fintech Forum? That’s a tough question because we have more than 70 sessions and 120 pitches over two days on seven stages – almost exclusively featuring CEOs of fintechs and key financial players, . It’s hard to highlight keynotes because it’s mainly panel sessions. So, let’s mention some of them. The opening panel is on ‘unbundling/rebundling finance’ with the CEOs of Kabbage and Transferwise and the chairman of Zopa. We’ll then welcome on stage the CEOs of Société Générale (FR) and BankMobile (US) to debate on ‘Why can’t banks be as easy as Uber?’. Of course, the session with four ministers of finance of four European countries to debate the future of finance in Europe in the digital and fintech age will be a not-to-miss event. Brett King will also host a panel on ‘Finance as a platform’ with the CEOs of ClearBank, Cross River Bank, Saxo Bank and Fidor. And last but not least, I will have the pleasure to host a panel on insurtech with the CEOs of Lemonade, Trov, Roadzen, Kamet Ventures and Allianz France.

You told us you’ve travelled more than twice around the world to find the fintechs you wanted to see on stage this year. Tell us what trends you see in fintech across the globe? Two main ones. cooperation and rebundling of finance by fintechs. To focus on the first one, cooperation – which has been the motto of Paris Fintech Forum since day one in early 2016 – is opposite to the old vision of fintech fighting against the financial industry, and it is still a key trend everywhere in the world, especially in continental Europe. More and more fintechs are pivoting to add B2C offers to their platform and/ or white label one. Business reality is the main driver of those changes due to the

extensive costs and low margins in many B2C markets targeted by fintechs. As a result, we no longer speak of ‘banking as a platform’ but of ‘finance as a platform’ as all kinds of finance offers can now be had ‘off the shelf’ on a platform-like model. These fintechs find this a much easier and more profitable market to address. And the incumbents discover the pleasure of myriads of new service providers, who are more innovative and agile – and, of course, far cheaper.

What's your next big project? The 4th edition of Paris Fintech Forum to be held January 29 & 30, 2019, in the same astonishing venue. ■ Find more info and videos of the event on

PARIS FINTECH FORUM 2018: Highlights 240 CEOs on stage

180 fintechs

2300 attendees

63 countries

∞ networking

7 stages

70+ keynotes, panels & interviews, pitches & showcases,

7 innovation & networking lounges

120 Fintech pitches

3 outstanding parties

2 exhibition halls

so many side events...

by their CEOs

120 exhibitors

Altéir Fintech Selection Book 2018 edition with 140 fintechs from 33 countries presented in detail.

Issue 7 |



Bruno Le Maire

Minister of Economy & Finance (France)

Johan Van Overtveldt Minister of Finance (Belgium)

Pierre Gramegna

Vilius Šapoka

Minister of Finance (luxembourg)

Minister of Finance (Lithuania)

F. Villeroy de Galhau

Adam Farkas


Executive Director

Banque de France (FR)


JL . Bonnafé

François Pérol

Frédéric Oudéa

Gottfried Leibbrandt

Stéphane Richard

Stéphane Boujnah

BNP Paribas (FR)


Société Générale (FR)


Orange (FR)

Euronext (NL)

Wim Mijs

Yves Perrier

E. Fernandez-Bollo

Markus Braun

Jacques Richier

Ronan Le Moal

European Banking Federation (BE)

Amundi (FR)


Wirecard (DE)

Allianz France (FR)

Crédit Mutuel Arkéa (FR)






Secretary General







PARIS FINTECH FORUM : 220+ leaders


David Rutter

Pascal Demurger

Rana Kapoor

Nicolas Théry

Teppo Paavola

Saxo Bank (DK)

R3 (US)



Crédit Mutuel M11 (FR)

BBVA New Digital Businesses (ES)

Arnaud Caudoux

Jay Sidhu

Philippe Vallée

Gilles Gade

Promoth Manghat

Stéphane Guinet

Bpifrance (FR)

BankMobile (US)

Gemalto (NL)

Cross River (US)

UAE Exchange (AE)

Kamet (FR)

Philippe Botteri

John Rosenberg

Ramin Niroumand

David Blumberg

Sean Park

Jay Reinemann

Accel (US)


FinLeap (DE)

Blumberg Capital (US)

Anthemis (UK)

Propel Venture Partners (US)


Deputy CEO





General Partner

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Managing Partner





Managing Partner


Kristo Käärmann

Rob Frohwein

Giles Andrews

Anne Boden

Jacob de Geer

Valentin Stalf

TransferWise (UK)

Kabbage (US)

Zopa (UK)

Starling Bank (UK)

iZettle (SE)

N26 (DE)

Nikolay Storonsky

Ismail Ahmed

Daniel Schreiber

Olivier Goy

Shivani Siroya

Scott Walchek

Revolut (UK)

WorldRemit (UK)

Lemonade (US)

Lendix (FR)

Tala (US)

Trov (US)

Joseph Lubin

Brett King

Tamaz Georgadze

Ben Milne

Hiroki Takeuchi

Geoffroy Guigou

Ethereum (US)

Moven (US)

Raisin (DE)

Dwolla (US)

GoCardless (UK)

Younited Credit (FR)



















on stage from 45 countries

Christian Faes

Alejandro Cosentino

Dr. Julian Hosp

Lasse Mäkelä

Bundeep Singh Rangar

Viola Llewellyn

LendInvest (UK)

Afluenta (AR)

TenX (SG)

Invesdor (FI)

PremFina (UK)

Ovamba (CM)

Ivan Glazachev

Yashish Dahiya

Olga Feldmeier

Philippe Gelis

Geoffroy de Schrevel

Jason Gardner

Yandex.Money (RU)

PolicyBazaar (IN)

Smart Valor (CH)

Kantox (UK)

Birdee (BE)

Marqeta (US)

Rania Belkahia

Daniel Peled

Carlos Sanchez

Matthias Knecht

Jake Tyler

Ludovic Le Moan

Afrimarket (FR)

PayKey (IL)

ipagoo (UK)

Billie (DE) (CA)

Sigfox (FR)
















Issue 7 |






Embracing the digital ‘you’ Ghela Boskovich, Head of Fintech & Regtech at Rainmaking Innovation, and Helene Panzarino, Managing Director of Rainmaking Colab, argue that the quest to define what constitutes our ‘digital identity’ is critical to economic stability

Identity is on the cusp of great change. And many in financial services are not yet sure how to manage the new technologies promising to revolutionise the process by which they determine who we – the customers – really are. Identity is currently straddling the worlds of analogue and digital, but we are more and more reliant on the latter to open up access and participate in the modern economy, meaning that we are increasingly vulnerable to sophisticated data theft and impersonation,too.

Digital identity in banking If you think central government or the police are the biggest buyers of identity management technology, you would be mistaken. Banks alone are now spending more than $1billion a year on identity management solutions. And financial institutions are well-placed to capitalise on the identity opportunity. Banks are seeking new business openings by exploring know-your-customer (KYC) and anti-money laundering (AML) solutions, biometrics, anti-fraud and identity theft technologies, as well as advanced authentication solutions. The aim is to increase customer insights and service relevance, while reducing fraud and market abuse. Digital identity sits at the heart of two important regulatory developments, too – the second Payment Services Directive (PSD2) and the open banking initiative, which aims to increase competition in retail banks by opening up data to allow fintech challengers to emerge. And this doesn’t touch on the challenge of tackling online fraud or the complexities of keeping this data exchange secure.

Better than you know yourself: Dynamic data gives companies even greater insight

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PARIS FINTECH FORUM For both PSD2 and open banking, identity is what lets us authorise and authenticate a transaction; but it also means that the data, biometrics, behaviour and transactions that define us in the digital space are being managed by multiple parties. The risk associated with multiple parties managing that data is what defining digital identity is meant to mitigate. One other complexity in this regulatory mix is the General Data Protection Regulation (GDPR) that comes into effect in May 2018. GDPR deals with legal privacy and a customer’s ownership of the data that frames their digital identity, including the right to be forgotten by firms who once managed that data. Aspects of PSD2 and GDPR are in direct conflict, for example disclosure of a receiving party’s data when the authentication to release that data is only granted by the payment issuer, not the receiver. The challenge of maintaining GDPR compliance for both (or all) parties in a payment transaction is not addressed by the open application programming interface (API) exchange relationship between third-party payment providers and the banks (PSD2’s Account Initiation Service Provider). The race to reconcile the legislation will determine what actually constitutes digital identity.

fingerprints can serve as passwords and a selfie is part of proving we match our passport picture. We are slowly adapting to parts of what constitute our digital identity, but big data and our interactions online contribute to it in a way that still confounds most of us – leading to some companies knowing us better than we know ourselves. Security remains an issue, but will be paramount to get right, as consumers naturally lean on their banks to provide seamless access and an intuitive experience. Cyber security remains critical, as evidenced by multiple significant data breaches in the last few years. Regardless of the alternative technologies on offer to consumers by fintech companies, consumers will turn to their bank as a trusted custodian of their transactions, as they have been doing for centuries, Digital identity: Will consumers 'get it'?

Physical or virtual? We, as individuals, still rely heavily on the analogue world, and produce copies of our identification as proof of who we are on a regular basis, just to open a bank account for example. Many companies are starting to move away from the heavy reliance on the analogue, but there are concerns over how identity is handled in the digital world. Despite many of us living a large portion of our lives online, do we still have a tendency to trust the physical over the virtual? Jesse McWaters, financial innovation lead at the World Economic Forum (WEF), and lead author of the 2016 WEF report A Blueprint For Digital Identity, says most people are so used to the current process of establishing identity that it is difficult to predict how strange it will seem in a digital environment. Yet we accept that our

Essentially, banks are in a prime position to manage, to be custodians of, our digital identities


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because banks’ shouldered the liability for fraudulent transactions. In a digital economy, banks still are trusted to ensure our money is managed well, accurately and, most importantly, safely. Digital identity will assist with the onboarding of customers: making it faster and more efficient, and reducing fraud. By playing an active role in a customer’s life – for example in the process of renting a flat, including proving who they are, credit scoring, paying rent, setting up of utility services, etc – a bank can add value and be part of the digital identity ecosystem. Essentially, banks are in a prime position to manage, to be custodians of, our digital identities across the board.

The future: dynamic identity The identity opportunity is there for the taking. It is also there for the losing. The disintermediation threat is significant from the long-tail of technology providers with their own solutions; global technology companies such as Google, Amazon, Facebook and Apple (GAFA) are also eying the identity prize. GAFA is in a position to capitalise on the other half of what constitutes digital identity: our dynamic identity. Dynamic identity is contextual and it uses alternative data to inform customer profiling, for example, risk profiling based on publicly available social media data, or actual product consumption data. Remember when the US retailer Target predicted a young woman’s pregnancy – and broke the news to her father – before she even knew? It was as a result of a prediction score based on the consumption pattern of 25 specific products. This type of deep pattern insight gives a different meaning to know-yourcustomer (KYC), which often enables providers to meet the customer at the point of need with contextual offers and underwriting the risk of the service based on the individual customer risk profile, rather than a set of market-aggregated markers that typically define the risk model. But banks have one advantage over the likes of GAFA: institutional trust and regulatory oversight, as well as a tremendous amount of transactional data. How financial services influence the management of our digital identities will have significant and long-term impact on how we, and our data, define who we are and how we transact. The quest for the right definition of digital identity is critical to the stability of the world economy. ■ Ghela Boskovich will be speaking at the Paris Fintech Forum on January 30 & 31.

WEF A Blueprint For Digital Identity: http:// Blueprint _for_Digital_Identity.pdf 2Knowledge @ Wharton Why The Internet Knows Us Better Than We Know Ourselves: http://knowledge. 3The Banker: http://www. Will-the-digital-world-solve-the-identitycrisis 4Payments Cards and Mobile: http:// www.paymentscardsand 1


No barrier: News that the UK was to leave the EU, boosted applications for Monese accounts


A bank built by a migrant worker for migrants is tearing down financial barriers, despite Brexit – as Monese founder Norris Koppel explains When the UK voted to leave the EU, Norris Koppel wasn’t celebrating. His business, Monese, is on a mission to build the world’s most inclusive bank, by serving the needs of people who traditionally find it tough to open an account with the high street giants. But despite the potential complications of being outside the free trade area, Brexit has been good for the current account provider. Panic about borders closing sparked a surge in new customers signing up for the app-based banking service following the June 2016 vote. And


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despite warnings that the shutters would come down on British business it’s also pressed on with expanding into 19 European countries. “We are not big fans of Brexit because it’s going to create more barriers,” says Estonia-born Koppel. “We, as a business, stand for the complete opposite; we’re here to remove archaic barriers, reduce friction and tear down the walls of bureaucracy.” More than a year into the Brexit process, he and others like him in the financial services industry are still trying to make sense of it all.

“Brexit is impacting many banks and fintechs. Everyone is working out what they’re going to be doing next and where they’re going to be regulated in the future. It’s a pretty big mess at the moment. But eventually everyone will find a way and things will settle down. There will be more friction for sure but I’m hoping that, in terms of financial services at least, new technologies will help to keep things open.”

Turning the tables on Brexit Monese initially launched in 2015 as the UK’s first mobile-only banking service and

was inspired by the experiences of Koppel’s own struggle to open a bank account when he first moved to Britain in 2000 – a process he’s described as ‘humiliating’. While the high-street players are not easily able to provide bank accounts for those coming from abroad, typically due to missing proofs of address and missing credit history, Monese’s super-slick know your customer (KYC) technology allows it to verify an applicant’s identity in a few minutes and open an account instantly. Last year saw some huge developments: Monese offered customers the ability to pay their bills by direct debit and it linked up with Post Office and PayPoint counters so that customers could deposit cash in more than 40,000 locations across the UK. Next it launched euro-denominated IBAN accounts in 19 European countries and publicised the move with a terrific stunt – hiring Boris Johnson’s old Leave campaign bus and changing the controversial ‘We send the EU £350billion a week’ slogan to ‘Send €350million with zero fees’ before hitting the road. The €350million referred to an introductory offer for moving cash between customers’ sterling and new euro accounts. “We saw the opportunity to promote our €350million fee giveaway, so we painted the bus in Monese blue colours and toured Europe,” says Koppel. “We went to see the French prime minister, and took the bus to Brussels, Frankfurt and the European Central Bank. Our goal was to underline the absurdity of the whole Brexit situation and obviously raise awareness about Monese, which stands for openness and unity.”

Banking without frontiers The buzz around Brexit, despite most of it being negative for EU immigrants, lit the touch paper for Monese, with customer numbers surging as workers headed to Britain while they still could. The firm now has 270,000 registered users and 1,000 new users join every day. The word-of-mouth marketing, which spilled over into social media, was an extremely cost effective way to grow numbers, too. But beyond the frustration of Britain’s EU divorce, Koppel’s gaze is focussed on expansion far beyond the EU’s borders. He points out that two billion people globally are still excluded from mainstream banking services and his vision remains one of financial inclusion for previously

marginalised groups. Koppel believes that access to banking services is a basic human right and should be available to everyone – bureaucracy should not get in the way. Although Monese is a regulated business, there are no plans for Monese to chase a full banking licence – it will continue to concentrate on light current account provision and outsource, or form partnerships, for anything else. Koppel says: “We are moving towards providing inclusive banking services on a global scale and we are now providing bank accounts in 20 countries. There is no need to reinvent the wheel or acquire a capital-intensive bank licence. So, for example, when it comes to credit and other essential products, we don’t necessarily need to become a bank to lend ourselves in every jurisdiction. In a new country it makes sense for us to partner with a bank or another lender, effectively giving customers more choice, saving them money and providing a better experience. He underlines again and again that Monese is customer-driven. “Whenever we expand to a new country we ask ourselves ‘what do our customers need to live their lives?’ The needs of our typical customers are often different to those of challenger and high street banks. They typically live in a country where they have not been born, they typically don’t speak the language of that country as their first language. They want to be part of their new society and for that they need a place to live, a job and a bank account, of course. Having a bank account is such as basic prerequisite that it is very difficult to live life without having access to one – you can’t really receive your salary or pay bills. “At the moment we are looking quite far from Europe for the next stage of expansion, notably Asia.” A big part of the Monese success story has been the performance of its app, which Koppel says will remain at the centre of its customer experience. And he is keen to work with other fintechs to keep the technology moving forward. Regarding biometrics, this chief executive is a keen watcher of what works in all walks of life. He says: “You have to look

at it from the customer’s perspective. For example, if you’re forcing customers to take out their smartphones and, in a busy train, to say some words aloud, then maybe the product doesn’t work the way it should. “Technology should be convenient and frictionless. So, in everything we do, we’re trying to find technologies that are reducing the friction and making life easier. It could be biometrics, it could be video, it could be voice, it could be fingerprints. “When we launched it was all about making it super-easy to onboard and focussing on that, making sure that our support team is able to serve customers in a variety of languages and customers can use the product in their own language and so on. We are starting to optimise now as we mature, so the key points are the app and the payment channels. “The app is always going to be our core focus as it enables customers to control their entire financial life, whether it’s mobile notifications, money management features, or giving them something extra in exchange for information – we’re always trying to improve there.” Asked how Monese will deliver innovation in the future, he is clear – on top of the company’s own proprietary technology, it is on a constant lookout for others that help it best serve its customers. It’s a strategy he believes is right not just for a newcomer to financial services, but for the major retail banks, too. He says: “For example, there are excellent companies out there that provide identity document scanning or face recognition technologies. So, there is no reason to reinvent some of the components; you can combine the functionality already built by other amazing companies with your own technology to get the best results. It’s the same with providing various payments channels, credit, savings and other products. As a business that is obsessed with financial inclusion, we are putting all these technologies and product lines together in a way that enables us to make life easier for people that banks are unable to serve. It would be much more difficult to do without partnering with innovative companies that share our values.”

You don’t need to build absolutely everything yourself in order to provide a great experience

Issue 7 |


Holding all the aces revealing its hand


What do we want? Cards! When do we want them? Now!

Matica Technologies will use TrusTech 2017 to officially present its new instant card issuance concept – a must-have if branches are to keep delighting customers, says CEO Sandro Camilleri Matica Technologies couldn’t have chosen a better year to officially unveil a new line in desktop instant issuance card machines. The 50th anniversary of the ATM has focussed attention like never before on our flexible friends – including the overwhelming majority linked to debit accounts. According to RBR’s Global Payment Cards Data And Forecasts To 2021 study, they now represent 70 per cent of payment cards globally and, despite


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competition from the digital wallet, blockchain and cryptocurrency, there’s no sign of their popularity slowing. In fact, these muscle men of the financial system – responsible for lifting and shifting £41billion of spending a month in the UK alone – are likely to single-handedly drive up the total amount of payment cards worldwide, says RBR. And why? It’s simple, according to Matica Technologies’ chief executive Sandro Camilleri. “Cards work well. They’re easy to carry

around and people understand them. International standardisation makes this form of payment very easy and universal, aided by the ongoing move from magnetic stripe to chip and PIN (Europay, Mastercard and Visa standard). The speed at which card payments can now be made, some instantaneous, is brilliant and the card is seen as reliable and convenient by consumers who may be resistant to changing to other payment methods. “The card is now part of our global payments infrastructure.”

Which is the reason so many customers want to get their hands on them – and fast.

The heart of ‘phigital’ As a leading card issuance specialist, Matica is at the core of ‘phigital’ banking, supplying both central issuance machines geared to large volume production in a variety of online and offline industries, and now a new mini modular system of desktop hardware and software that allows bank branches to respond instantly to the customer standing in front of them. The Matica Desktop Modules Architecture concept will be presented for the first time officially at TrusTech 2017. “Taking new products to market when the market is changing so rapidly has presented our engineers and designers with some considerable challenges,”

admits Camilleri, “which is why we’ve made adaptability and modularity a central theme of our new launches.” It’s been wise to do so, especially in an era of rapid branch transformation where everyone is on a journey and no one truly knows the destination. “As more competitor banks disrupted the market, the high street banks realised they needed to invest in strategies that would radically shake up their customer service,” says Camilleri. “One of those strategies was about the speed and convenience of banking. By bringing card issuance – a previously industrial-scale process – into the bank branch itself, the banks can save significant money and court and retain current customers while recruiting new ones.” It helped that Matica had a mature network of global partners in the financial industry to shape its response to these changes – among them Mellon Technologies (the Athens-based IT integrator with a large banking client base) with whom it had worked for more than 20 years and collaborated on a number of significant projects. “Our relationship started with some big instant issuance projects in Eastern Europe and most recently we were involved with Mellon in delivering a wearables project for the Bank of Cyprus,” says Camilleri. “Consultation with our partners and the financial sector more widely helped us to shape and design the instant issuance technology so that it answered the industry’s wish-list; it drove the design and engineering of new technology. So we were one of the first to offer the financial market the sort of technology that one would ordinarily see in a central issuance system in a desktop card issuance printer, such as the S3500 and the S3800 machines. “The technology for financial instant issuance has been refined over the years so although volume will never equal that

of central issuance, it’s more than enough for one branch. It’s easy to use and highly secure – it includes high-level security features – and it maximises space.”

A changing industry As a global supplier to the financial services industry, not only must Matica be alert to a revolving door of start-up banks and third-party relationships between existing players and incumbents, but it’s also squarely in the frame when it comes to challenges and opportunities created by the Revised Payment Services Directive (PSD2). “It will eventually have a significant impact on the way data is communicated, stored and deployed – and as part of the industry, Matica can’t not be a significant part of that change,” recognises Camilleri. That is especially true as the cards themselves become increasingly personalised and sophisticated, even capable of carrying biodata. Camilleri has previously referred to payment cards becoming ‘little PCs’ with their use extended into other areas of our lives – acting in effect as our personal identity cards. Built-in anti fraud measures are driving innovation in this area, particularly around two-factor identification before a transaction is authorised by the bank. “We see two clear trends in terms of two-factor authentication – the one-time password (OTP) and biometrics,” says Camilleri. “OTPs are normally sent to a mobile phone via SMS in order to finish the card transaction but in some of the newest cards the code is displayed in the card itself.” With instant issuance allowing for cards to be personalised to the individual – even carrying images of pets and family members – while embedded technology links them to our most personal information, payment cards are increasingly looking less like a flexible friend and more like a partner for life. Which has to be good news for the card industry and its suppliers.

By bringing a previously industrial-scale process into the bank branch itself the banks can save significant money and court and retain current customers while recruiting new ones

Issue 7 |



A fine romance

(and the dog comes free) Stricter regulations are conspiring to make online account opening a headache for many banks. By contrast, high street heartthrob Metro Bank appears to have perfected the seductive art of onboarding, as Fintech Finance’s Lewis Averillo-Singh discovered We all want to make a great impression on a first date… and when that first date is between a customer and a bank – quite possibly an encounter that will turn into a lifelong relationship – it’s worth the bank observing the rules of financial courtship. Don’t keep your intended waiting while you shuffle through endless verification forms – they might just decide to go off with someone else. Be genuinely interested in who they are – this isn’t a Tinder try-out and for know-your-customer to be meaningful it requires more than an identity check. And among all the clearly articulated advantages of this match, schmooze them with a generous gesture – it helps build trust and repartee. Simple, eh? Well, it’s surprising how many financial institutions appear to get it wrong. According to one research firm, ‘effective onboarding and activation that emphasises customer engagement can help financial institutions boost profitability by $212 per customer’. And yet, in another global study, one third of banks considered their onboarding programme to be less successful than desired. As rivalry among challenger banks for consumer affection grows, overcoming that potentially awkward getting-to-know-you moment is clearly key. A clunky onboarding experience is a fast turnoff for consumers and damaging for future brand perception, with the attendant lost opportunities for cross-selling and up-selling. According to the Digital Banking Report, based on both cost and results, of all the onboarding channels banks could use, initial branch engagement with the customer drives the best returns. Which is a bummer for online-only banks, but good news for the only one to have entered the UK high street in the past 150 years.

So just how wow is Metro Bank at wooing? Our globe-trotting Lewis AverilloSingh found it pretty irresistible when he went shopping on London’s Cheapside for a Metro Bank current account. Already a client of HSBC and Monzo, and with a commonwealth account in Australia, he was primarily interested in a bank that wouldn’t penalise him with charges when travelling abroad.

A real bow WOW! Within seconds of stepping across the threshold, he’d been greeted, his professional and personal life gently explored and the Ts & Cs explained in plain English, while a single passport ID was verified and AML background checks run. A new picture was taken for biometric identification, which allows account holders to transact in branch – or in store,

as Metro Bank prefers to describe it – without a card, and a mobile account set up and ready to go. He left with an activated debit card, still warm from the desk-top instant issuance machine, in his wallet. In less than the time it takes to queue for a Starbucks, Lewis was on board. The walk-in process had taken all of 15 minutes and, by the time he left, he’d been shown the seven-day vaults for customer use, the meeting rooms available for SME clients to hire, and ‘introduced’ to the CEO Craig Donaldson and founder Vernon Hill, who set out to build a retail bank with personality, believing that customers were willing to pay more for superior service because they enjoy the experience. And then there was the picture of Duffy – Hill’s Yorkshire Terrier, which is emblematic of the bank’s corporate social responsibility (CSR) policy. A supporter of Battersea Dogs and Cats Home from its outset in 2010, the bank reimburses customers with rehoming fees if they agree to take a mutt out of care. It even hosts free chipping events for any customer’s hound in its dog-friendly stores. When he re-entered Cheapside, Lewis not only had an account he could use Europe-wide with no extra charges, but was also half way to adopting a stray for his mum. And that’s the kind of warm glow no digital bank with an onboarding chatbot can achieve. As he’d sat down, Lewis noted an old picture of Cheapside covering one wall. Taken in 1915, it captured the City in its heyday. “It was a lot busier then,” Lewis’ real-life onboarding assistant observed. “A lot of the other bankers who work here have been in banking for 45 years or so and when they come into Cheapside, they see this and remember how it used to be… almost.” Issue 7 |



Points mean prizes Banks will be the ultimate winners if they invest in rewarding customers for their loyalty, argues Pierre Boces, Head of Product Marketing and Consulting at Welcome Real Time Like every business orbiting bank transformation, customer loyalty specialists are feeling the winds of change, not least since a number of big names cut back on this well-established spend. RBS, Capital One, M&S, NatWest, Tesco Bank and Santander have all announced unexpectedly dramatic changes to their loyalty programmes over the last three years. In 2016, M&S Bank reduced its customers’ entitlements from one point for every £2 earned to one point for every £5 spent outside of M&S while Santander capped the cashback on its 123 credit card to £9 a month. Tesco had already halved its credit card holders’ earnings overnight, Capital One and RBS having closed their YourPoints card schemes


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altogether. This summer, NatWest slashed the cashback for 1.7 million existing Reward current account holders from three per cent to two per cent, while limiting new customers’ benefits. But out of adversity comes great innovation and opportunity in a competitive marketplace. Business loyalty solutions provider Welcome Real Time is one such innovator and an award-winning one – it garnered four prestigious awards this year alone, having stayed ahead of the curve in creating payment-based loyalty programmes. Its primary focus is on providing robust omnichannel systems (increasingly that means via social and mobile payment platforms) that identify a customer and then instantly reward them

for every interaction with their bank in ‘real time.’ That also means customers have the chance to redeem that reward there and then. Welcome Real Time has delivered this across five continents for more than 23 clients, demonstrating to more than 36 million bank customers and more than one million merchants that loyalty pays.

Time for a fight back Launched in 1996 to develop marketing solutions for payment cards and now a market leader in machine learning and big data analysis, Welcome Real Time has come a long way. In 2014, global marketing specialists, Collinson Group, acquired the company and injected its own area of expertise into Welcome Real

Time as leaders in influencing customer behaviour to drive revenue and add client value. As such, Welcome Real Time is now one of a handful of expert companies in the CG family, benefitting from a hive mind and powerful network. Given its credentials in relation to the customer loyalty piece, its views on bank loyalty programmes are worth hearing. And Pierre Boces, head of product marketing and consulting, is blunt. “The customer relationship is the next battlefield, with customers facing more attractive, more agile and useful solutions from players competing with banks. Banks must rethink their strategies and give their customers new reasons to engage with them directly.” There are external forces coming into play that make that more urgent still. “Delivering a robust and successful loyalty programme to re-engage banking customers is one of the solutions to the challenges posed by the revised Payment Services Directive (PSD2). Regulatory initiatives like PSD2 or open banking are aimed at breaking the monopoly of the banks in terms of the customer relationship and should lead to an explosion of new services. Yet research from Collinson Group shows that banks could be doing far more to deliver loyalty initiatives that their customers truly value and use. “The market for the payments industry is becoming more and more fragmented in terms of new solutions, for example with instant payments, while new players constantly challenge the incumbents,” says Boces. “That said, we’re also starting to see consolidation as some fintechs are being absorbed by large banks.” "Then, of course, there is China. The western world has started to realise the power of the Chinese digital giants, Alibaba and Alipay.” It’s against this background that the Collinson Group’s research among mass affluent bank customers revealed that 68 per cent of millennials demand digital experiences in exchange for their loyalty; 66 per cent still want to be able to collect points; and 82 per cent of consumers who are active with their bank loyalty programme, spend more as a result. Given customers’ clear preferences and behaviours, and growing competition for their spend, it seems counter intuitive

that bank investment in such reward schemes has been slowing.

uptake. In the credit card space, it fell from 65 per cent to 48 per cent.

Rethinking loyalty

Memorable experiences

Welcome Real Time has come to understand that banks need to better personalise their customer loyalty programmes; provide choice – put the customer in the driving seat; get to know their customer’s customer; provide alternative earning redemption methods in-store and online; make sure there is more than just merchandise on offer (such as charitable donations or experience-based rewards); and that there needs to be omnichannel communication and delivery, which now has to cover social as well as mobile payments. And this isn’t even getting into the extra value that big data and machine learning are increasingly expected to deliver. “Since the 2008 crisis, it’s been a rocky decade for the financial services industry,” says Boces. “Customers have come to expect more from financial services brands as they continue to rebuild consumer trust and confidence and

But Welcome Real Time is embracing the challenges – and opportunities – that the industry with all its reconstructive surgery can throw at them. “The new regulations enable us to constantly rethink, develop, and enhance loyalty marketing strategies,” says Boces. “They’ll affect our products at front-end and back-end. PSD2, for example, will be about providing frictionless and intuitive apps allowing users to access a range of incredible new services, like aggregating banking and loyalty accounts; calculating the financial needs of households based on banking and social data; and selecting the best payment method based on the financial situation of individuals. “Because the General Data Protection Regulation (GDPR) is about handling data in ways that comply with the new rights of the customers, it will impact processes and solutions already put in place.” Boces believes that digital giants will move further into the financial services industry in Europe, as they compete with fintechs and traditional incumbents. “They’ll use PSD2 as a strategic opportunity and it will also enable a wide range of new applications, fighting for a winner-takes-all position,” he says. “Social payment will grow stronger, posing similar challenges to banks on the verge of losing the customer relationship to social media.” For Welcome Real Time, 2017 has been a year of consolidation in its product portfolio where it has iterated some modules and components to newer, features-rich versions, particularly around its mobile application for mobile point-of-sale (mPOS) devices. “Our newer version provides more opportunities for merchants to create promotions and monitor their payment and promotional activities, and we’ve focussed on building more modern REST APIs into our back-end, too,” says Boces. “2018 will see our product roadmap focus on mobile, social and communication. “Being at the crossroads of payment and loyalty, we plan to support banks in winning the customer relationship battle with memorable, practical experiences.”

Banks must rethink their strategies and give their customers new reasons to engage with them directly. The customer relationship is the next battlefield compete with the dynamic fintech sector. Loyalty programmes help them to differentiate. Customers expect personalised experiences in real time, which generate opportunities to create more engagement with them. In the Collinson Group study, it showed 80 per cent of mass affluent consumers spend more as loyalty programme members. Yet, it also showed there’s been a 20 per cent decrease in membership since 2014.” In fact, this 2016 study also revealed that, among all the main customer loyalty programmes, banks fared worst, seeing a drop from 47 per cent to 30 per cent

Issue 7 |




Traditional banks are using automation not to distance themselves from customers, but to create a more personal and relaxing experience. Javed Anjum, EMEA Branch Transformation Sales Leader at Glory, gets settled in… Once upon a time, bank branches were places where everyone went to handle their financial affairs and make plans for the future. Now, we have online banking, mobile money and a growing range of non-bank payment services, all of which are eroding their familiar high street role.

But all is not what it seems. Although Bill Gates predicted the end of banks some 20 years ago, and the rise of digital money is irresistible, we won’t be saying goodbye to bricks and mortar banks or notes and coins any time soon. Indeed, cash is still the most popular means of payment worldwide and, rather than closing their shutters, branches are evolving into something else. It is a trend that Javed Anjum is well-placed to comment on. As a branch transformation expert at Glory, a leading supplier of cash technology solutions, Anjum is keenly involved in redefining the role of branches in today’s online and mobile-first world. “We want branches to be cosy, comfortable places to discuss your financial needs,” says Anjum, “and it’s automation that makes this possible. Old-school branches, dominated by manual processing, must give way to smart branches – technologically sophisticated with automation creating the environment for a more satisfying and engaging customer experience.”

Automation, of course, is nothing new: it has been changing the banking world for decades. ATMs, for example, were introduced 50 years ago and since then we’ve seen technology revolutionise payments and the way money is handled. Technology has certainly undermined the personal relationship between customers and banks, so we must draw a distinction between automation that removes the human element and automation that enhances it. “When you enter a branch today,” says Anjum, “or manage your finances externally, you quickly see how technology has simplified the movement of money and day-to-day financial transactions. Often, however, something has been lost as well as gained – and that loss is the human factor. “For instance, take the Middle East. Every time a new technology is developed, the first thought is ‘let’s take people out of the equation, let’s have an unmanned branch and automate everything.’ When this happens, it seldom lasts long. Although it’s an approach seen elsewhere, such as across the Benelux countries, one thing is becoming increasingly clear: automation may be a boon for all standard or basic transactions, but when it comes to more complex banking and financial needs, there’s no substitute for talking to a person.”

If automation is here to help customers, it’s also here to help banking staff. But, more to the point, it’s not here to replace bank staff in their advisory roles; instead, it can release them to concentrate on customer-facing activities where they can add value to every branch visit. “In-branch staff shouldn’t be using their time for simple things, like processing transactions,” says Anjum. “Managing bank notes, coins and cheques is labour-intensive and repetitive. It’s an unnecessary burden that can be removed with the right sort of automation.” This is where Glory’s technology comes in. A key element is cash recycling, where tasks such as accepting and dispensing cash, storing it securely and keeping accurate cash inventories are all done automatically.

Investing in quality time Glory is the leading provider globally of teller cash recycling units in 18 countries and manufactures a range of recyclers and dispensers. Banks are now using this technology as a key part of their strategies for increased customer focus and operational efficiency. In moving away from traditional teller windows, the banks can improve straight-through processing, as well as security and accuracy, and redeploy staff in advisory roles. “Without automation,” says Anjum, “you’re left with staff sitting in the back office, counting and recounting cash,

Cash and comfort: Branches should make you feel relaxed and secure


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preoccupied with time-consuming activities. If you didn’t have this distraction, if you were to streamline and automate the cash-handling and management process, you could deliver more value and a better service to customers in the front office. Then you could focus on face-to-face time instead of worrying about the books not balancing because £10 has gone astray.” Glory takes a holistic view of banking. It looks at the entire cash chain and removes manual processing at every stage and for all types of activity that would otherwise require human intervention. And then it looks at how that time could be better used elsewhere. “We handle both cash and coins,” says Anjum, “and although coins are sometimes neglected, they are pretty high on the agenda of most branch managers. If you see a lot of coins, you need a solution to manage them quickly and cost effectively. Often, the cost of handling coins is higher than the value of the coins themselves!” Recent figures from the strategic research firm RBR underline the growing market for teller technology. In its latest Teller Automation And Branch Transformation report, RBR reviewed teller installations up to the end of 2016 and made forecasts for 2021. RBR says that there are more than 185,000 installations worldwide, of which 69 per cent are recyclers and 31 per cent dispensers. It predicts that the number of automated tellers installed worldwide will exceed 196,000 by the end of 2021, with the USA being the largest market. The challenge for transformation is to automate the back office while reinventing the front office with the right mix of technology and personal interaction. When Anjum talks about the need to be

‘cosy and comfortable’, he’s referring to the human face of banking. Banks must provide all the digital channels that customers expect today, while also ensuring that they are still personally approachable and responsive, and that staff are ready to help with anything that requires a personal touch. “We design customer journeys to maximise the benefit of human contact,” says Anjum. “When you walk into a branch you should have the reassurance that personal advisors will step in and help you with a wide range of financial topics, while your everyday cash management needs are being sorted in the background by automated tellers. Nothing should get in the way of

In an industry that is all about trust you need people to reinforce a sense of wellbeing and security meaningful contact with the customer. Tellers shouldn’t be seen with their heads down, counting, reconciling and securing cash; they should be out front, free to help you and to cross-sell services.”

Role of assisted service Technology enables banks to build their role as advice centres. It provides the connections and the context for a better understanding of customers and their individual needs. This is the so-called single view where big data, structured data, is enriching the client-customer relationship.

One aspect of this is assisted service, something that is an important part of Glory’s offering. “We bring everything together to create a seamless service area,” says Anjum. “Customers can perform practically any transaction independently, with bank layouts and technology designed for comfort and ease of use. Tellers will intervene at those times when you need help or advice, enhancing the overall in-branch experience with the right combination of speed, convenience, and expert attention from personal advisers. The result is a more collaborative, welcoming environment.” Today, as in the past, the fundamental charter of a bank is to handle deposits and withdrawals, to make transfers and obtain credit and, above all, to provide security. However, the digital economy is changing customer expectations and banks need to adapt and be flexible. But one thing should not change: despite the growth of online banking and mobile services, banks must continue to be physical spaces where customers can go for advice and support. Branches represent something real, something human and reassuring. “In an industry that’s all about trust,” says Anjum, “you need people to reinforce a sense of well-being and security. The best way to do that is to use automation to give bank staff a more engaging and interactive role in the front office. Positive customer experiences are essential for incumbent banks now that they are increasingly under pressure from alternative digital financial service providers.” Fortunately, banks can harness the same digital technologies that have been threatening to erode their familiar roles. The old high street branch with tellers sequestered behind screens may be a thing of the past, but traditional banking values persist – invigorated by the right blend of high tech and high touch.

Issue 7 |



Branching out After a decade in the doldrums and an EU bail-out totalling billions of euros, Portugal’s economy is at last on the rise again. Natural, then, that its biggest privately owned bank, Millennium BCP, should see this as a basis for taking stock. Having undergone its own financial revival, MBCP is now asking itself, in a healthier, freshly-growing economy, what products and services its customers want, delivered in which kind of environment. Its answer centres on an impressive Closer to the Customer business transformation, featuring measures from clearer client segmentation, to a root-and-branch review of products and strategy. And it’s working. Like the country in which it is based, MBCP’s interim results for the first half of 2017 show it is experiencing a marked turnaround of fortunes – with net profit of €89.9million compared to a €197million loss in the same period of 2016. A growing band of customers, enticed by its fresh approach to meeting their needs, has directly contributed to this, boosting the bank’s net interest income. This has coincided with a reduction in its non-performing loans and a successful capital-raising exercise that enabled it to pay back the expensive contingent convertible bonds (CoCos) it had taken from the Portuguese government, ready for an even rosier future. So, for this retail-focussed organisation with 596 branches across Portugal, serving more than 5.6 million people, what does getting closer to customers actually mean? According to Sérgio Magalhães, head of its Branch of the Future project, it starts with understanding who they are and what they want, then delivering on it. “Why? Because we truly believe that the customer experience leaders are going to outperform the market, as understanding the customer is the way to be more effective, in terms of sales and results,” he says. “If we get to know our customers better, we can digitalise our processes and products better. The first step is to understand which personas we are working for, how many digital clients we have and how many traditional customers. Then,


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Millennium BCP’s Sérgio Magalhães describes how the bank’s ambitious physical and digital transformation process is bearing fruit which channels do each of these prefer? Starting from that, we can create better processes and products for them and consequently better results for Millennium.” For MBCP, which also has a footprint in Macau, Poland, Angola and Mozambique, it’s not a question of branch or digital; it’s both, because it believes digital customers may also be branch customers, and vice versa, depending on what they need at any particular time. Therefore, one priority of its change process is to offer comfortable, welcoming and functional environments that cater for every need. Helpful by-products of this process, it hopes, will be future-proofing and reduced operating costs.

We’re basically reducing the customer effort index by creating the best journey possible in every channel Banking without boundaries MBCP has built its reputation on a commitment to innovation, speed and personal service for customers ranging from everyday consumers to prestige and business clients, as well as younger ones looking for innovations such as mobile-based service provision. Magalhães adds: “We believe in a very integrated system, between the physical and digital capabilities we are building. While we need to move with the digital times, branches will continue to have an important role. That’s why we started to renovate ours, to create a new customer journey involving several environments within one setting.“

And there is a harder edge to the innovations MBCP is trying to implement. Digital pricing displays are designed to be informative, convenient and transparent for its customers, while also fulfilling Banco de Portugal regulatory requirements to clearly display current charges to its customers. MBCP has introduced 700 of the displays into all its branches, allowing for automatic and real-time product updates. This is also contributing to the bank’s improved bottom line by eliminating wasted admin time and print costs, projected to save €230,000 every five years. And this is just one example of the seamless physical/digital crossover MBCP is trying to achieve with the help of technology from cash management specialist Glory Global Solutions, according to Magalhães. “We are trying to make our branches a new, digital step in the process, through self-assisted ways of doing things,” he says. “We offer a range of features through self-service, even creating unique offerings for customers, like instant cheque issuance, statement provision and even obtaining travel insurance. “The motivation behind introducing self-service technology was our commitment to providing service excellence to our customers. The strategy promises not only a simple and convenient solution, but enables us to free up teller time to focus on other customer service requirements.” And it doesn’t end there. “We’re also looking at other areas, such as a 100 per cent digital account opening process,” he adds. “We are redesigning all the steps in the process, to become as integrated as possible and have our branches, our call centre, the internet and mobile all working together. “For example, if someone does a mortgage illustration on our website, our branch will know, and will call them to ask if they need any help. Meanwhile, the call centre is ready, 24/7, to answer questions they have about the mortgage illustration and application they’ve submitted via our app. We’re basically reducing the customer

effort index by creating the best journey possible in every channel.”

The challenge of change As well as the emphatic vote of confidence from the customers themselves, MBCP’s efforts have been recognised with industry awards, including, in 2017, a ‘bank customer experience best brand experience’ award for its transformation of 33 of its Portuguese branches, incorporating innovations like paperless transactions via tablets; cardless ATMs operated using multi-channel codes; free wifi and digital zones allowing access to its apps – all against the backdrop of comfortable, welcoming environments. Magalhães doesn’t underestimate the challenge change represents. “The big challenges are everywhere, because customers want everything. They go to a branch and expect to be served immediately, free of charge. They even want to be served with things they haven’t thought of, because they expect us to guess what they want. They expect us to have cash available 24-hours-a-day and to allow them to withdraw a cheque or make a deposit up until midnight.” To cater for this, Millennium is also offering a diverse range of branches. “We will have several with different formats. Some will be self-assisted, allowing clients to do everything by machine in self-service areas. Others will offer all our services, including direct deposits for companies. Others might cater

for more affluent customers and some might be in alternative locations, like shopping centres, to reach people where they are.” Tech will play a large role in the delivery of this vision, says Magalhães. “We have what we call the Millennium Teller Machine, different types of teller-assisted units that enable customers to make withdrawals and deposits 24-hours-a-day, seven-days-a-week. While our branches are open, they can transact via these machines with assistance from branch staff. Out of hours, our contact centre can make authorisations or video teller with them, to personalise the interaction with the machine. “All of this is something we’re very proud of. The branch of the future is really a very important project for us because one of the things we know is that cash is still the king here in Portugal and we have to cater for that.”

MBCP puts the same attention to detail into the process of getting to know its customers and what they want in the first place. “We are now much more aware of the moments when we collect data,” he says. “In every process we redesign, we pay a lot of attention to how we collect everything, from a customer’s birth date to their ID, in a seamless and non-invasive way. Then we can reach them via email direct marketing, SMS, or phone. Everything is collected via our onboarding systems within our CRM, from when someone opens an account, to taking out a mortgage or buying insurance. We can then see the best opportunities for us, as a bank, to be present in their lives, and fulfil their financial needs.” He’s aware that internal change is not the only kind MBCP will need to contend with. “We have to keep an open mind, understanding that the banking system is going to work on partnerships, particularly with fintechs. Our traditional business model is going. It has to expand, to give us other avenues of profitability in the future, and partnership is part of that equation – especially in Portugal because we have been in a recession for so many years and we now need to create a stable base for our stakeholders as a whole, based on a better business model. There are so many areas where we as a bank can be more useful to our customers.”

The money tree: Branches are an essential part of Millennium BCP’s new growth

Issue 7 |


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Pressing all the right buttons The self-service branch is the embodiment of ‘phigital’ banking, as Rob Leiponis, President & CEO of Parabit, explains Fintech Finance: What have been some of the biggest changes to branch and ATM security and how well have banks dealt with these challenges? Rob Leiponis: Until recently there was a big disparity between security supporting the customer walking into a traditional branch to withdraw cash, versus walking into an ATM lobby or tellerless branch. Technology was previously geared more towards a staffed retail environment and not the 24-hour self-service model. Since 2010 and the rapid change of customer behaviour towards mobile banking, we’ve seen a shift in philosophy, where banks are investing more resources into self-service, leveraging surveillance, near-field communication (NFC), Bluetooth, beacons and biometrics for access, authentication and remote facilities supervision. This shift has generated a huge synergy between security and self service. One supports the other to the extent that the line between customer experience and security is becoming blurred. Mobile devices that provide contactless payment, capturing customer data, are now also providing access control, thereby improving the customer experience and reducing the risk of fraud. Utilising Bluetooth low energy (BLE) beacon technology to communicate with various digital touch points throughout the branch, banks can now execute and capture a myriad of data points – from cueing access control to customer counting and tracking where and how long customers are spending time. They can then use this information to generate a targeted marketing campaign around relevant customer interests. FF: How much automation is being introduced into the branch, both for customers and for staff? RL: We see a dramatic increase in the

amount banks are spending on technology in 24-hour, self-service environments as well as added security to support, protect and supervise these facilities. In the US, there is a huge increase in 24-hour self-service – tellerless branches with access control that works with contactless tech as well HD cameras that provide a facial recognition plug-in for identification. In terms of the staff, automation allows a bank to be much more efficient with its tellers, so they can be utilised in more challenging positions. It allows them to focus on providing a better customer experience. There are economies, of course, but also opportunities to cross-train staff on more platforms.

The line between customer experience and security is becoming blurred FF: We hear a lot about the ‘branch of the future’. What does this mean to you? RL: With ever-increasing innovation in cryptocurrency, mobile and online banking, there will be a reduced footprint of bricks-and-mortar retail branches. That said, many institutions are moving to a hub-and-spoke topology for their retail locations, which are more than ever providing new interactive digital and remote access technology. Successful models are being tested and deployed that showcase customer-centric experiences with interactive user touch points that are easy to navigate. Digital access channels are continually evolving to meet the lifestyle demands of different customer segments. In turn, institutions must maintain a mechanism or service provider that supports real-time evaluation of customer behaviour data to identify, adapt and

modify locations and digital touch points to maximise customer accessibility within their desired markets. FF: As the volume of physical cash continues to increase, how can banks be more efficient in its delivery? RL: I doubt cash will level off or decline within the next five to 10 years. Plus, in my opinion for cryptocurrencies to become stable enough to use in replacement of cash, they must be backed by vault currency or gold, silver, etc. Technology enhancements will continue to expand the capabilities of ATMs and self-service tech as well as the ways customers interact with them. In the US, the pursuit of safety, security and the customer experience has driven ATMs and other self-service technology into vestibules and spiked the enhancement and growth of 24-hour banking. Defining best practices for the efficient protection and servicing of these environments will be another layer for banks to manage. FF: How will the branch and its position in the banking model evolve? RL: A significant number of branches are closing, but equal numbers are opening as self-service technology filled tellerless branches with centralised and distributed video conferencing. Parabit’s role in this branch of the future will be to continue to innovate in contactless access control, integrated with a mobile app that provides NFC and Bluetooth access control/customer count and dwell time stats as well as customer rewards/advertising functions, integrated with multi-layer credentialing. Our MMR Cloud service will improve customer authentication and collect statistics on location behaviours that drive targeted mobile promotions and rewards/ couponing via a software development kit, integrated into a bank’s mobile app. Issue 7 |



Next stop: The future With a new CEO at the helm and an accelerated R&D programme, FIME is setting the pace for innovation in payments – notably in public transport FIME, the end-to-end testing services provider within payments, appointed Lionel Grosclaude as its new CEO in September 2017. Just a couple of months into the job, here he gives an insight into what attracted him to the company, his thoughts on FIME’s position in the market and his vision for its future. You have worked in IT and banking for more than 20 years, fulfilling roles across Europe and the US. What was it about FIME that appealed to you? FIME is at the forefront of its field. It has an impressive reach globally and it is known for its agility, innovation and creativity. It is primed and ready for the next phase of its evolution. I’m honoured and excited to be the person to lead the company into this next chapter of its history by driving an expansion strategy to bring us even closer to our customers with new offices and laboratories.

In what ways is FIME ready for growth? The company is renowned in the payments world because of its sophisticated functional testing solutions, global network of industry-accredited laboratories and comprehensive training and consultancy services. This wealth of payments expertise is transferable to new markets. Transport ticketing is one example; a sector that is committed to delivering seamless travel options by embracing new technologies. FIME already has credentials in this area through its existing relationships with the Smart Ticketing Alliance and Île-de-France Mobilités (formerly STIF) – the Paris regional public transport authority. These are relationships that we can build upon. FIME can also benefit from the convergence of payments into new use cases and the increasing requirement to secure transactions and authenticate individuals, such as the adoption of the EMV (Europay, Mastercard and Visa) standard in transport and the continuing

interest around smart cities to deliver ultimate convenience to the end user. It is the combination of FIME’s established credentials, global footprint and expansive knowledge that will enable us to enhance our offering to better support existing customers as well as attract and support new customers in new markets. What expertise do you bring to the company to help support its growth? The most important question! Firstly, I have experience in significantly growing a company of similar size to FIME. This was achieved by industrialising product and service offerings across legacy and new markets as well as focussing and simplifying operational policies. I hope to replicate this while retaining the personality, innovation and R&D at the heart of FIME’s operation. Additionally, I am educated as an engineer and have always worked in highly technical environments. This

Fast pace of change: FIME has an ambitious R&D programme in 2018


| Issue 7

background enables me to understand the technical challenges our customers face and balance them with business and operational requirements. What are your immediate priorities? FIME is already known as a thought leader in its field. Our experts participate in a number of industry associations, including EMVCo, GlobalPlatform and NFC Forum, to define the future of payments and other secure component use cases. It is vital that we continue to contribute and innovate, while accelerating our R&D programmes to bring new products and services to market. One example of this is to continue our drive towards Cloud-based testing models. This allows us to be more agile to software updates in response to industry needs. Plus, our customers get immediate and convenient 24/7 access to the tools they need, wherever they are in the world. We are also working to optimise our security evaluation offering. We are known for our functional services and we want to build a clear security product and

service portfolio that enables customers to access both elements of the testing landscape efficiently and effectively. You have only been in the role for a few weeks, but do you have a vision for the future of FIME? As I learn more about the company, speak to the team and meet customers, I realise its potential is endless. At this stage, however, I can see that FIME is a trusted brand in the payments sector and, at a fundamental level, this solid platform allows us to do a number of key things. Firstly, it allows us to meet the ongoing needs of the traditional payments community, while using this knowledge to build new tools and offerings to support disruptive fintech and regtech requirements. It also enables us to expand our relationships with existing partners in new markets and also establish new partnerships to maximise our potential in key vertical sectors. And it helps us to identify strategic acquisitions to enhance and complement FIME’s expertise and knowledge.

This will all be supported by ongoing expansions at FIME’s offices and laboratories worldwide, including new office openings across the Middle East and Asia, the first of which has just been announced for Dubai. So, how have your first few weeks gone? I have thoroughly enjoyed them! It’s exciting to join a company with so much promise. As I have spoken to the team, I have been amazed by the energy, creativity, ability and friendliness. On top of this, our customers’ commitment to innovation is staggering and I look forward to supporting them in achieving their goals. Importantly, everyone I have spoken to shares my vision for a bigger, better FIME, while emphasising that this needs to be achieved by retaining the company’s core values of customer service and agility. I will continue to connect with all of FIME’s stakeholders as we work to round off the year and set ourselves up for a strong and exciting 2018.

FIME can benefit from the convergence of payments into new use cases and the increasing requirement to secure transactions and authenticate individuals, such as in public transport

Issue 7 |



Go with the flow PSD2 will be a watershed moment for banks, says Ioana Guiman, Managing Partner for open source software solutions provider Allevo. The big question is, how will they control the deluge of information requests and channel it to their advantage? There’s more than a frisson of rabbits-in-the-headlights across the financial services industry. Many firms are frozen in the pre-regulation moment, knowing they need to comply with further tweaks to the revised Payment Services Directive (PSD2) and, frankly, wondering how the heck they are going to do it. ‘Snap out of it’ is the message from transaction flow software specialist Allevo. ‘We have the answer’. The Romania-based fintech targets its products at helping organisations from SMEs to financial institutions, achieve cost-effective compliance and, in doing so, gain competitive advantage. And it will soon be turning its attention to corporate treasuries, too. Its groundbreaking new FinTP Connect, an application programming interface



(API)-based system will, says managing partner Ioana Guiman, enable firms to respond to information requests and, in-so-doing, get to know and serve their customers better. Taking effect next January, PSD2 will build on the information provision rules surrounding electronic and non-cash payments contained in the first Payment Services Directive, with the addition of new digital payment services. Its core aims will be to open up the financial services market, make internet payments easier and safer, better protect consumers’ rights and improve services for them. By far the biggest of those changes is around competition, and the introduction of so-called third party providers (TPPs) of payment-related services that financial institutions will have to open their account interfaces to. Allevo’s open-source FinTP application already enables businesses – particularly

SMEs – to do this efficiently and safely, reducing the cost of operating systems that process transactions, automating flows and ensuring compliance with regulatory and industry standards by bringing them all together in one solution.

Integrated route plan FinTP provides technical integration between various business applications, connecting the back-office systems of banks to external market infrastructures. This includes an embedded routing mechanism that redirects messages based on rules and content. It does this by initially mapping any proprietary SWIFT FIN or XML messages to the native ISO 20022 message type, followed by applying the agreed business rules for sending or receiving. It also offers reconciliation and advanced capabilities for payment search and reports, all backed by reliable security, including Autumn 2017

Unstoppable:Open banking post-PSD2 will unleash a tidal wave of information requests

‘how should I manage all this?’. They’re having to redesign their organisational charts and starting to employ data protection officers and entire teams to be able to address all these changes.”

Regaining lost ground The clever institutions will be those that take the decision to make the inevitable time investment pay – as a strategic lever for competitive advantage. If TPPs are authorised by a customer to interrogate a bank, then why shouldn’t the bank use this intelligence to improve the know your customer (KYC) insight, and market services to individuals more effectively? The savviest of the banks could regain ground from the retail-based, technologically advanced whippersnapper fintechs that are poised to gain from them following PSD2. “FinTP Connect will accommodate accepting a request from a TPP and processing that information, including checking their authorisation, checking their credentials and that they have the right to get hold of that data, before responding with it,” explains Guiman.

There’s huge discussion and lots of the questions are around customer authentication, authorisation of access and requests management of groups, users, the profiles and functions. The further evolution of this system, FinTP Connect, has been developed in direct response to PSD2. It addresses the mechanics of how banks will handle the requests for access when the open banking floodgates are released. FinTP Connect goes to the heart of how banks do that – because verifying, tracking and analysing these requests, let alone making sure they’re not accidentally compromising customer data (which will be further protected by the upcoming General Data Protection Regulation), is a major task. “New data protection requirements have arisen out of very real problems people are facing. And in terms of these requirements impacting the budgets of banks, this is only the beginning,” says Guiman. “I am sure that every board of every bank or financial institution is wide awake at night thinking Autumn 2017

“We have designed this flow as a demo so far. We’re using it to show our banking customers how it can enhance the software they already use to compliantly process requests from external parties. Once they have this infrastructure in place, with an API management platform and the capability of checking and authorising requests coming from third-party providers, they can design new services to deliver to their customers in the same manner.” In this way, Allevo is cleverly building on existing capability. “The existing software infrastructures we provide to our customers already process all their transactions – from payments going out, to confirmations and other types of messages going back and forth from back office systems to the external networks that they use for communication. So it makes sense that this can also provide bits and pieces of this data between a bank,

the public and any authorised external party, based on certain rules and implemented in a PSD2-compliant flow.” Allevo is currently engaged in validating with customers to help perfect the platform’s capability. “There’s huge discussion and lots of the questions are around customer authentication, authorisation of access and requests – specifically, how you make sure you don’t disclose data you are not allowed to disclose, or that a provider is not authorised to obtain; managing versioning of APIs, logging and tracing these requests and communicating with the regulator – as well as obtaining and verifying the list of authorised third-party providers that can contact an organisation.” As they refine it for launch, Guiman is looking forward to Sibos where Allevo will be showing what FinTP Connect could do and talking about another open-source solution for corporate treasuries, FinTPc. “We’ve received financing from the Ministry of Communications in Romania, which uses European funds, to deliver a two-year project to create an application that automates flows and processing within corporate treasury departments, distributed under a free open-source license,” explains Guiman. “This means we’ll have the resources to produce the FinTPc application and all related documentation. The other objectives include 200,000 RON annual turnover growth in the first three years and growing the customer base to up to 23 over the following five years. We will produce the FinTPc portal for the community, a revamped Allevo website, an automated testing tool, a benchmarking tool and last, but not least, the FinTPc application suite itself.” Allevo hopes to build a modern architecture that connects corporations to the banks they’re working with, thus empowering them to use the same technology that banks use. It will be interesting to see how the banks respond. “Banks are no longer institutions that only handle deposits and loans,” says Guiman. “They have varied product portfolios and their business models are changing dramatically. It’s similar to when Google started taking a monopoly in the advertising industry. If banks want to stay relevant and want customers to seek them out, they need to redesign themselves.” |



And then there were none…

Ron Delnevo, Europe Executive Director for ATMIA, believes pressure to reduce interchange fees is a sinister twist in the ATM network story

A proposed 20 per cent cut in the LINK interchange fee is throwing the future of thousands of free-to-use ATMs into doubt and threatening to put the UK public’s access to cash at risk. It is unacceptable that there is an attempt in progress to rush these changes through by April 2018 without proper scrutiny. This is a matter of national importance, vital to the public interest; it cannot be left to LINK members – or its directors – alone to decide. It is far too important for that. With a public debate absolutely vital, it’s worth reflecting on the history of the UK LINK ATM network in order to identify the steps that will be needed to ensure it provides an enhanced service going forward. Until 1998, ATMs in the UK were solely run by banks and building societies. That year, of the total 25,000 ATMs in the UK, around 19,000 were located at bank branches. In essence, banks were telling their customers: “If you want cash, come to us. We are not going to bring it to you.” Those were heady days for banks. They were respected, held in awe and fear in equal measure. People and most businesses were small; banks were huge. But the company I worked for at the time, Euronet UK, changed the rules of the game in December 1998 when it installed the first Independent ATM in the UK. Banks, which monopolised LINK in 1998, did not really want independents running ATMs, although many couldn’t be bothered with running ATMs themselves. Thousands of their retail and other customers were clamouring for them on their sites but most were simply told ‘no’. Even if a bank did provide an ATM away


| Issue 7

from its branches, the lucky retailer or petrol forecourt was often charged hefty fees for every cash delivery. So that first UK independent ATM, located in a Spar store in Stonecross in Birmingham, broke the mould of banks dictating where ATMs could be located. At that time, independent ATM deployers (IADs) were not allowed to be members of LINK. But a public-spirited former building society, the Woolwich, decided to sponsor the independents into the LINK Network – which is how the first IAD ATM appeared in Birmingham, sponsored by the Woolwich. Two years later, IADs were allowed to join LINK in their own right as a consequence of the Government’s Cruickshank Report, which concluded that banks in the UK were suppressing fair competition. A signal that they were listening to the criticisms made of them at the time was their decision to admit IADs to LINK. I’ll save the detail about the structure of LINK and all the many difficulties faced by IADs over the years, even after they were allowed to join the network, for the book I am currently writing! Suffice to say at this stage that there has never been an easy time for IADs and I’ll give you just one example. Shortly after IADs were able

The inconvenient truth for anti-cash vested interests is that cash will not die out naturally. So they have apparently decided that they will have to try to murder it

to join LINK, Barclays announced that it was going to start charging customers directly for cash withdrawals from another organisation’s ATMs. It’s hard to say whether it was simply a way of earning extra money or even a way of making cash less popular but, whatever the intention, it stirred up a hornet’s nest for LINK. The media took a strong line against such charges for ATM transactions. In particular, the Daily Mail criticised the ATM industry for trying to make bank customers pay for access to their own cash. In the end, Barclays backed down and the bank members of LINK did not introduce charges at that time. However, Barclays’ actions focussed unwelcome media and political attention on IADs, who at that time mostly made a small charge for cash withdrawals at their ATMs. The net result was that ill-informed and possibly ill-intentioned politicians leapt in to try to undermine the concept of paying for ATM cash withdrawals and, unfortunately, LINK management caved in when faced by, for the most part, unwarranted criticism. Life was to be made even more difficult for the IADs, but they refused to go away because they had realised that they could run free-to-use ATMs more efficiently than the average bank. So, IADs started installing them the length and breadth of the country, which was, of course, immensely popular. Suddenly, cash was available from ATMs sensibly located at local shops in communities everywhere. Thus started the problems at LINK that we have seen come to a head in the last 12 months. It all comes back to the interchange fee. The banks had worked out a formula for free-to-use ATMs, whereby

a small cost-based fee was paid when one bank’s customer used another bank’s ATM. This interchange fee is calculated each year, based on the true costs associated with operating ATMs. It is an efficient cost-recovery mechanism, sanctioned by the Office of Fair Trading. When it was only banks operating free-to-use ATMs, it was simple. Most – around 70 per cent – of bank customers used their own banks’ ATMs. The remaining 30 per cent or so of ATM transactions more or less balanced out between the banks, so that net payments of interchange were low. In other words, LINK was cheap for banks.

The innocent victims

The plot thickens: Slashing interchange fees will render thousands of ATMs unviable

IADs’ free-to-use ATMs changed that for good. Now some banks were having to fund this improvement in customer service to their customers in the shape of LINK interchange payments to IADs. Between 2006 and 2016 there were 10 golden years of improvement in ATM services for the public with a net 20,000 extra free-to-use ATMs added to the LINK Network. More or less all of that net growth was achieved by the IADs. Some banks did install ATMs away from their branches in that period but others deinstalled ATMs in even larger numbers. So when the LINK website proclaims ‘10 years of improved access to cash’, what it should really state is ‘10 years of IADs improving access to cash’. Banks could themselves have installed the ATMs needed to meet the demand, of course. Instead, tens of millions of cards were issued giving customers ATM access without most banks bothering to provide the ATMs where their customers could use them. They were hoping, of course, that customers would use their cards to make purchases, because that way the bank earned a fee from the retailer. Stubbornly, however, most of the public continued to use cash. In the year to April 2017, despite 10 years of hype around contactless, 76 per cent of purchases in the UK’s 50,000 convenience stores were still made using cash. These largely low-ticket purchases should have been the first to switch to contactless, but most of them haven’t.

The Bank of England continues to announce that there is more cash circulating. In the recent 12-month Bank of England figures, there was a year-on-year increase of around 10 per cent. Meanwhile, the British Retail Consortium, representing 80 per cent of the UK’s biggest retailers, each year produces unbiased statistics that show cash remains the cheapest payment for its members to process. The inconvenient truth for anti-cash vested interests is that cash will not die out naturally. So they have apparently decided that they will have to try to murder it. Bank branches closing, taking with them their ATMs, add to that impression. Even more effective, however, would be making 20,000 IAD free-to-use ATMs uneconomic and therefore subject to deinstallation. And that is exactly what slashing LINK ATM interchange fees would achieve. So, in my view, the following actions are required: ■ The Payment Systems Regulator must act to ensure improvements in, not downgrade, the LINK ATM Network it oversees, with the nationwide introduction of ATMs with deposit and withdrawal functionality for both notes and coins one top priority ■ The Payment Systems Regulator must also intervene to ensure interchange continues to be calculated transparently on an average cost recovery basis. Arbitrary charges are unacceptable ■ The Government and the Bank of England must safeguard Payment Choice for the UK public and the sake of the economy. This is a vital component of financial inclusion The massive bank branch closure programme in the UK has left bank branch deserts. There are literally thousands of communities around the country without convenient access to a branch. But smart ATMs can provide the UK public and businesses with the local financial services touchpoints they need for a vibrant economic and social future. More ATMs are needed, not fewer.

Issue 7 |



Follow the

Money20/20 Las Vegas was the destination for the second Payments Race organised by Fintech Finance. It followed on from the first epic trip across Europe to Copenhagen… but the outcome saw a dramatic reversal of fortunes

Tired-but-elated: Our intrepid quintet celebate making it cross-continent, eventually

This latest #Money20/20Race saw our seasoned competitors heading from Toronto to ‘Sin City’, in what for some proved a personal growth experience, featuring ups, downs – and dramatic drop-outs. The original concept for the race came from our executive editor Ali Paterson, and was born out of his desire for consumers to be given a choice when it comes to how they pay for goods. In Race One, gold was crowned the surprise winner. This time, it was Bitcoin’s turn to shine – but does this result show that the erratic cryptocurrency is at last headed for mainstream acceptance, or did it have more to do with contestant Amélie Arras’s powers of persuasion? We’ll let you be the judge. Our five racers were challenged to make the high-speed journey from Toronto in Canada to Las Vegas in Nevada, in just seven days, in time for the opening of Money20/20 USA 2017. Each of them was allocated one payment method to a value of £2,000, to be used to the exclusion of all others for the duration of the race. In a sadistic twist, they received daily challenges from


| Issue 7

Amélie Arras

the Money20/20 and Fintech Finance teams. Those who successfully completed them were rewarded; those who flopped faced consequences. Again, transacting in nothing but their allocated payment method, they were faced with tasks such as buying an Ohio hat in the city of the same name and sending a gift to Singapore. Setting off on October 19, they had until 26 October to make it to the bright lights of the big city. It was a long road to the finish, but the eventual surprise victor was iGTB-sponsored Amélie with Bitcoin – surprising because so few places accepted cryptocurrency or, indeed, had even heard of it. Her master stroke was in reaching out to the mysterious community of Bitcoin fans, who were more than willing to help her out with random acts of kindness – from paying for her launderette bill to booking the helicopter that flew her over the Grand Canyon and propelled her into pole position. Reacting to her unexpected win, Andrew Morris from Money20/20 said: “Bitcoin was certainly a surprising and popular winner. Although Bitcoin

Position: Winner Payment method: Bitcoi n Sponsor: iGTB Profile: Amélie is an exp erienced international marketing strategist. As one of the founders at Fintech and Payments specialist agency Adastra Marketing, she is an adv ocate for the benefits of digital tra nsformation and collaboration in the financial and payment world. Top tweet: “Madam thi s is a dollar-based economy, no one accepts #bitcoin” #chicago $BTC #M2020Race #struggle @i_GTB I’ll prove you wrong man! acceptance is less widespread than other payment types, it’s a very efficient means of digital payment. It is also unique in that is has such a passionate group of users. The Bitcoin community rallied behind Amélie and helped her identify ways to use Bitcoin to complete her challenges and travel to each new destination. “There wasn’t the same kind of community support for contactless, chip and PIN, cash and gold.” The newest currency on the block was closely followed by the oldest. Ash, known

by his Twitter handle Maple Struggle, started out with a pot of gold. Despite the challenge of finding gold-to-cash outlets to turn his precious metal into usable greenbacks, and under-valuations from shady dealers hoping to make a ‘buck’ or two, ultimately, he discovered bullion still has cache. Encouragingly, Ash too was helped out by well-wishers who kept him on the road and well-nourished. Stuart had a relatively easy ride due to the simplicity of his cold, hard method of payment – cash and coins. But he also had the heaviest backpack and was even asked by one bystander if he was a stripper such was the booty he carried! From leading the race out of Canada in the first half of the week, Jessica was ultimately relegated to fourth place by chip and pin. Who would have thought McDonald’s would be this hungry financial explorer’s salvation – it was one of the few places in Chicago that would accept her

Ash Cooper

Position: Second Payment method: Gold Sponsor: Feedzai per/producer Rap Profile: who goes by UK the m fro . the name Maple Struggle e channel Tub You his on Every week sen by he raps about topics cho ‘funny, be to the viewer. His aim is ’. ing ain ert engaging and ent d, hungry, tire e, gag lug No Top tweet: h wit people like but none of this matters y2020 one this. #m2020race @m

Stuart Thomas

Position: Third Payment method: Cash and coins Sponsor: ACI Profile: Stuart is an intern ationally recognised technology and gadget blogger based in Cardiff , Wales. Hosting and presenting the YouTube channel Stu’s Reviews, he uses situational comedy to tes t out products and services. Top tweet: Just been ask ed if I am a stripper because of all the se $1 bills. I didn’t deny it. #m2020race @money2020

plastic. We understand she’s still on an indefinite detox after discovering only the major chains had heard of chip and pin and all she could buy there was a diet of carb-loaded crisps and other snacks. Her vlogs tell of a breathtaking journey that took in everywhere from the Hoover Dam to Red Rocks and the Grand Canyon. For Jordan, sadly, is was all too much. His contactless kit was the payment method that struggled the most, with negligible

Using contactless in the US is pretty much impossible adoption of near-field communication (NFC) across the US. Sporting a suite of the most cutting-edge payment tools, he set off hoping to fund his journey through a mix of Apple Pay, a Kerv ring and his contactless card. It wasn’t long before he discovered that Subway was one of only two merchants to accept one of the three – Apple Pay. Plagued by this and connectivity issues, he had to give up on his first challenge – to find ‘buckeye chocolate’ in Ohio – before bailing on the entire race after being unable to buy any food or drink for 24 hours, owing to an absence of Starbucks and Subways. Spending 20 hours ‘on a bus in the middle of nowhere’ proved the final straw. “One of the main problems I faced with contactless in the race was that pretty much no one knew what it was,” he says.

Jessica Moorhouse

Position: Fourth Payment method: Chip and pin Sponsor: AEVI DoMore Profile: Moorhouse is an award-winning personal finance blogger, speaker and host of the popular Mo’ Money Podcast. She regularly shares helpful money tips with major news outlets and magazines as a go-to millennial money expert. Offline, Jessica founded the Millennial Money Meetup in 2016 to promote financial literacy among Canadian millennials. Top tweet: Some days I live on chips and water, and some days I eat like a king! I’m going on a cleanse after this race, that’s for sure. #M2020Race

Even those that did, called it something else. “In Toronto it was pretty easy as a lot of places took contactless payments, they did however call them ‘tap’ payments,” says Jordan. “But when I described it to people in the US, both as contactless and tap, most people had never heard of either. “I came across a few places that said they took Apple Pay but when I tried to use it, it didn’t work. Similarly, I came across a couple of vending machines at the Greyhound coach stations that had contactless payment capabilities, which didn’t work with my cards or Apple Pay. “I discovered that using contactless in the US is pretty much impossible.” We asked Andrew for his reaction to the race’s outcome. “I’m not sure about gold,” he said. “There was maybe more barter and charm from that racer than true payments transactions! But the challenges with contactless were one of the more interesting findings. “The US is a complex market that has been hesitant to fully adopt contactless payments due to the sheer volume of card issuers compared to other countries and a legacy of pilot projects that just didn’t work. Maybe Apple Pay and others will be a catalyst to help break the log jam. In the meantime, it’s clearly tough to participate in a Payments Race like this with a contactless ring!” However, he believes the result could be very different if we were to repeat the in five years’ time. “By then there could be things like voice-enabled transactions with next- generation cryptocurrencies to pay for self-driving taxis!”

Jordan Dusty Drew

Position: Fifth Payment ntactless Co d: metho astra Fin : sor on Sp otographer, Profile: Film-maker & ph and London. lls We e dg bri based in Tun Toronto to Top tweet: Made it from using ast Cleveland and got breakf tactless con my st mo @KervLife ring for transactions! #m2020race @FinastraCareers Issue 7 |



Immediate gratification Given the spectacular failure of its sponsored payment method – contactless – we asked Finastra’s Head of Business Unit Open Payments, Eran Vitkon, what is likely to emerge as the dominant means of transacting worldwide... and it wasn’t Bitcoin! Finastra – created out of a union between Misys and D+H – is now the world’s third-largest fintech and a leading provider of financial technology solutions, so it’s ideally placed to give a global view on the future of payments. Its head of business unit for open payments, Eran Vitkon, is in no doubt that, in North America plastic will be overtaken. “The introduction of Immediate Payments in North America means you are now able to do something that is even better than credit cards, because money is in the account, irreversibly, after 10 seconds. So, while as a consumer, I probably wouldn’t mind either way, as a merchant, I would try to drive my customers to pay directly from their account, so I get the money immediately and don’t have to pay big fees. “I think what’s happening in Europe will spread to the US next,” continues Vitkon. “In Europe, with the Revised Payment Services Directive (PSD2), banks are opening up and there will be competition for credit cards as institutions fight for the two per cent margin they are currently making on payments. “So, to my mind, the fact that the banks are opening up and several countries, North America included, are supporting Immediate Payments means, I suspect, they’ll eventually catch up with the credit card, which is the current leader in wallet.” If that’s the case, why did contactless struggle so much on the American leg of the race? “Once something becomes the standard, everyone has to align to it, to remain competitive. It’s simply a matter of trend,” he says. And contactless hasn’t yet caught the imagination in North America as it has elsewhere. In Australia, for example, contactless is a hit, and 90-something per cent of merchants there support it. But in environments where no-one around them is using it, merchants will

Future vision: Contactless will be king

The pace of change in payments is forcing merchants to improve, to be smarter and faster and frictionless


| Issue 7

decide not to spend money on adopting new technology and wait it out. In America, it simply remains a case of supply and demand. That will change. The pace of change in payments is forcing merchants to improve, to be smarter and faster and frictionless. I think we’ll see at least the same pace of payments innovation over the next two years, as we did in the last two. Contactless and wallets and pay from account will be standard.” He’s less convinced about Bitcoin’s future – despite it’s decisive win. “I think Bitcoin is sexy today. Everyone’s heard the story about the pizza seller who got three Bitcoins for his pizza when Bitcoin was worth very close to nothing and now he’s a millionaire because he sold the pizza for three Bitcoins,” he adds. “There is a big buzz around it because it’s an interesting, thrilling currency. Some people fear that if they don’t seize the opportunity to invest in it today, they may be a sucker or feel bad when it’s worth double the money tomorrow. But we don’t

really know what will happen tomorrow.” Whatever the future currency stars will be, Finastra has big plans to continue innovating to help people pay with them in the future. “We are focussing on the immediate payment trend around the world, investing in this technology across the US and Europe this year, and then on to Asia- Pacific (APAC) region in 2019. “We are also promoting something called, which will provide banks with access to our best-of-breed APIs for everything from trading to payments, core banking systems and supply chain. “With one integration to the core banking system and the real payments system, we are actually allowing banks to embrace innovation and choose what suits them, in the same way that people decide whether they are ‘an Android or an iPhone person’. So, Finastra’s work should undoubtedly change the fortunes of our future payments racers. In the meantime, Vitkon had these encouraging words for Jordan: “Congratulations — at least you eventually made it to Vegas. Don’t lose hope. I suspect you will be able to easily get around the US with contactless in the near future.”

Europe’s biggest FinTech event is coming to Amsterdam Use the code 18FIFI to save €200 on your pass

4th – 6th June 2018 The Rai, Amsterdam, The Netherlands


Rewriting the rules

It was a question of ‘what’s the hottest acronym?’ at Money20/20 Las Vegas in October, with the clear frontrunners being APIs, AI and DLT. Galileo Processing, the ‘tech for fintech’ guys, eavesdropped on the conversations and helped us to translate Money 20/20 is the granddaddy of payments-meets-fintech events. And in Las Vegas in October, it didn’t disappoint.

More than 10,000 industry movers, shakers and hopefuls – mostly from North America but with strong representation from the UK and Europe, along with India and Asia – gathered in Nevada to promote their products and companies, share stories and seek funding. During four nearly sleepless days, Fintech Finance, with the support of Galileo, one of the largest payments innovators in the US, corralled several dozen attendees to pick their brains about the forces they see shaping fintech throughout the coming year. While the consensus choices – application programming interfaces (APIs), artificial intelligence (AI) and distributed ledger technologies (DLT) – were, perhaps, predictable, the thoughts and comments of those we spoke with were anything but. Here’s how those conversations went…

Open APIs Open APIs have a different connotation, depending on which side of the Pond you’re on. In the UK and Europe, the Revised Payment Services Directive (PSD2) will require banks to provide communication interfaces (typically ‘open APIs’) to third-party processors. With access to bank data, third-party providers (TPPs) can conceive new banking products to ramp up competition, ushering in an ‘open banking’ environment that will benefit consumers (more choice) and merchants (lower payments transaction costs). In North America, where open banking isn’t mandated, open APIs refer to the capability businesses offer other businesses or developers to exchange specific information or tools – not necessarily in pursuit of open


| Issue 7

banking, but frequently (at least in payments circles) to offer consumers a better front-end banking experience or provide critical back-office functions. Whichever definition you choose, open APIs are a double-thumbs-up trend. Ben Chisell, product director for the UK’s mobile-only Starling Bank, equated open APIs with transparency and competition, calling them a ‘mechanism to create an environment that ultimately helps the end customer’, as did Jamie Campbell, head of awareness at UK-based Bud, who added: “Open APIs increase industry collaboration.” He noted that Bud, a tech platform for linking banks and financial services, has utilised the APIs of robo-advisors, pension providers, banks and foreign exchange companies to link services in one place. Representing the North American point of view, Ron Ingram, chairman and CEO of Echo Payment Systems, said: “Open APIs make it easy for customers with very complex needs, or smaller customers that don’t have the technical ability or deep understanding of financial compliance and regulation, to design programs within the complexities of the financial system.” Darin Petty, president and chief operating officer of US-based digital payments company Cardplatforms, pointed out that, from the standpoint of connecting systems, APIs have been around for a while, but open APIs are the future – provided ‘ you do it right and connect securely’. Diwakar Choubey, CEO and co-founder of MoneyLion, a US-based mobile personal finance and consumer lending platform, said open APIs provide his customers with access to information such as free credit scores, Apple’s augmented reality kit and small dollar loans. He noted that consumers are the ‘big winners’ when open APIs are introduced, because they have access to

‘better and cooler’ financial products. “But,” he cautioned, “we have to be careful about the tokenisation and encryption of data.” Rounding off the US contingent and sounding like a proponent of open banking in the US, Colin Walsh, CEO and co-founder of Varo Money, which currently offers financial services through a partner bank, added: “Customers should have complete access to their data; they should be able to decide what they do with their data and how they use that data.” Data is integral to the discussion of open APIs. As one Money 20/20 attendee told us, they’re the ‘new oil’. But issues abound concerning access to data and the boundaries of using even that data which consumers have consented to make open. Walsh pointed out that Varo uses data to understand customers holistically. Aggregating data from third parties, he said, helps Varo provide a full picture of customers’ financial condition and make more accurate cash flow forecasts, such as whether they should save more, borrow temporarily or consolidate loans. He added that the big impediment for traditional banks is data trapped in silos – for example, in the mortgage or deposit divisions. “It’s really hard to wire it together [for the customer],” he said. Payments thinker Chris Skinner, known to many through his blog TheFinanser. com, agreed with Walsh’s concern about hard-to-access data. “Most financial institutions [are disadvantaged by] dirty data, meaning data locked into silo-based, product-based legacy systems, that aren’t cleansed, rationalised and consolidated,” he said. He predicted a battle between large banks that have data locked into those old systems and new companies doing transformational learning around data, such as Amazon, Facebook and Google.

DLT & cryptocurrencies No discussion at Money20/20 could escape passionate and opinionated mentions of distributed ledger technology (DLT) and cryptocurrencies, including their offspring Bitcoin and blockchain. Representatives from Syscoin and BitGive, businesses that illustrate the range of distributed ledger technology, were bullish about cryptocurrencies. Syscoin core developers Jagdeep Sidhu and Sebastian Schepis said their cryptocurrency, forked off the Bitcoin protocol, is ‘revolutionary’, offering near-zero-cost financial transactions and providing businesses with infrastructure to securely trade goods, assets, digital certificates and data. Recognising the social impact of Bitcoin, Connie Gallippi founded BitGive, a 501 (c)(3) US nonprofit company that leverages Bitcoin and blockchain technology to benefit charities worldwide. Commenting on distributed ledgers, she said: “People are starting to think about a lot of different use cases, not just finance and transactions but healthcare and identity, and keeping track of refugee identification.” Industry pundit and futurist Brett King said Moven, a mobile banking startup of which he is co-founder and CEO, is working on identity and know your customer (KYC) using distributed ledger technology (DLT). Blockchain and DLT, he claimed, will solve the issue of how to identify individuals if they don’t have an identity document, such as a driver’s licence in the age of

The importance of UX for fintechs Everyone agrees a great user experience (UX) is expected and necessary in fintech. But challenger banks, data aggregators and prepaid card providers at Money20/20 were quick to call out the incumbents for failing to provide it. “User experience and user interfaces are the new gold,” according to Diwakar Choubey, CEO and co-founder of New York-based MoneyLion, a mobile personal finance and consumer lending platform. It uses augmented reality to boost its UX, linking any bank or investment account and credit card so customers can view all their resources ‘in stacks of dollar bills, euros or pounds’.

autonomous vehicles, adding: “Something like blockchain is the most viable solution on the drawing board for an Internet of Things-enabled commerce system.” But King unexpectedly threw cold water on Bitcoin, citing its ‘design problem’, which he identified as the limitation of 21 million Bitcoins and their appreciation in

Perfect value system? Opinions on Bitcoin were divided

value. “We initially thought it was a currency that could be used for value exchange, but I’d call it a crypto asset now,” he said. He nevertheless does see the need for currency without borders – one not controlled by the central bank mechanism or geographic boundaries – for cross-border transactions and real-time commerce. Syscoin’s Sidhu disagreed with King about the Bitcoin cap, addressing the avoidance of The goal, Choubey said, is to make saving more palpable and fun, thus promoting better financial habits – and that happens through engagement. His fellow fintech executives agreed, but

Nishu Thukral, CEO of US-based Pangea Money Transfer, an international money transfer app, conceded UX is tricky. He said the challenge was in balancing UX

inflation, not the rise in speculative value. “The supply is hard-capped and you can’t inflate; it’s a known supply curve that doesn’t change over time and a stable store of value, creating a better form of economy,” he argued. Republic Bank’s David Jenkins, vice president of the bank’s payment solutions, reflected bankers’ caution about cryptocurrencies, focussing on consumers’ rights. “There are no consumer protections for [cryptocurrency] transactions like Bitcoin,” he explained. “Until there’s a viable mechanism for ensuring consumers are protected from harm, banks won’t be eager to participate.” His stance was echoed by Trent Sorbe, president of Central Payments, a division of the Central Bank of Kansas City, who pointed out the challenge of banks getting comfortable with the speed of innovation. “If you’re a banker, it’s also about keeping the regulatory agencies comfortable,” he explained. “Oftentimes, they don’t move at the same speed, so bankers find themselves in a middle ground, where they see the value proposition and great opportunities [for] consumers, but it will take a little time to bring along the regulators.” Sam Maule, managing partner for North America for consultancy 11:FS, agreed that blockchain was one of the biggest buzzwords at Money20/20, but pointed out: “There are about 2,000 folks on Twitter and in the industry who say they’re experts, but only about a half a per cent have any clue what they’re talking about and are actually getting anything done.” while addressing UX with regulatory requirements and suggested ‘that’s where the innovation is’. Jamie Campbell, head of awareness at UK financial services aggregator Bud, believes great UX involves ‘giving customers the ability to use all their financial products in one place’. He said the EU Revised Payment Services Directive (PSD2) will enable consumers to control their data and choose where they go for financial experiences. Banks will benefit, too, because they’ll be able to offer more plug-in digital services. But Andrew Siden, CEO of US-based Prepaid Ventures, a prepaid programme manager, put it all into context, explaining: “If good technology isn’t backed up with good service, you’re not going to win.” Issue 7 |


Disrupting banking with tech CEO and co-founder of Varo Money Colin Walsh joined Fintech Finance at Money20/20 to explain why the US needs to radically transform the banking experience for consumers Fintech Finance: Why Varo Money? Colin Walsh: Because banks have become so big, they’ve left many consumers behind. At Varo, we’re using technology to help people improve their financial situation – like using predictive analytics to help them achieve their saving goals and visualisation to help them stabilise and manage their cashflow. FF: Varo emphasises cash flow stabilisation over saving. Why? CW: Counterintuitively, stashing money away isn’t the first step for consumers improving their finances. Stablisation comes first. Varo helps consumers know where they stand and provides the tools to create a financially healthy lifestyle. FF: We understand Varo has applied for a US banking licence? CW: It’s the best way to control our destiny and help consumers solve their financial problems by fixing the fundamentals and guiding them to a better financial future. We want to be the first national bank in the US for people to bank on their smartphones. FF: Why mobile-only? CW: Nearly all adults aged 22 to 36 carry a smartphone and it's a perfect platform to deliver a personalised banking experience that minimises friction and maximises delight. It's with you 24/7 and mobile technology has evolved to provide contextually relevant alerts and notifications and allow customers to solve everyday financial problems in just a few taps.


| Issue 7

AI Another Money20/20 buzz phrase was artificial intelligence (AI), which Maule said consists of a ‘tonne of different technologies’ under the one umbrella and as a term was being used in ‘completely the wrong way’. Representing those who are more excited about AI, Moven’s King commented: “I’m very bullish on AI and, long term, I’m pretty positive about the effects. Short term, AI’s making some phenomenal progress in machine learning, but what it will do, essentially, is disrupt human-led processes. My advice to people in financial services is ‘figure out how you can compete with AI’’.” Does AI really threaten jobs? Maule claimed that AI augments, not replaces, individuals. “AI isn’t completely taking over jobs, but in many financial services applications it’s augmenting existing teams to operate like Iron Man with Jarvis, making you cooler and stronger.” King said he sees potential for the predictive capabilities of AI, combined with extensive data, to advise consumers. “Data is what enables you to predict behaviour to

solve a problem. So, the predictive elements will be important. The advice you’ll get from the bank of the future will be stuff like, ‘hey, Siri, can I afford to go out to dinner tonight?’” If that’s the future, the now for AI is combatting fraud. Echo Payment Systems’ CEO Ron Ingram noted: “AI is the next step [in fraud prevention], identifying, at a very personalised level, unusual trends, then customising the system.” Central Payments’ Sorbe concurred, adding: “Statistical and behavioural modelling enable us to extrapolate patterns that could identify fraud earlier, even at the point of card enrolment, before you see a transaction.” MoneyLion’s Choubey again added a caution: “We’re getting more advanced at using AI, but so are fraudsters. The industry must work together with policymakers and government to create new forms of encryption and new ways to monitor where these fraudsters are going.” It was a sentiment echoed by IDT’s Green: “We have to stop thinking of each other as adversaries and start working together to solve these very real issues,” he said. And that’s a trend we can all live with.

Is prepaid still trending? Despite being at least 15 years old, according to those we talked to, there’s still a lot of life in prepaid. Used in North America as an alternative to neo or challenger banking services, prepaid card companies build innovative customer interfaces and partner with banks, which serve as the ‘official’ issuers and support regulatory compliance, deposit insurance and membership in payments networks. Ron Ingram, CEO of US prepaid programme manager Echo Payment Systems, called prepaid ‘the most advanced platform for providing a number of financial solutions: basic banking for those who don’t have standard accounts and more advanced solutions for greater flexibility’.

Illustrating Ingram’s point, Andrew Siden, CEO of Prepaid Ventures, a US prepaid programme manager, noted that his company offered the ability to turn off lost and stolen cards using a mobile phone, years before the feature was advertised by big banks. Central Payments president Trent Sorbe confirmed the importance of prepaid: “[In addition to being crucial for a demographic that, traditionally, hasn’t been well served], we’re starting to see more applications of B2B, B2C and remittances – all the things that traditionally involved slow, paper checks and/or small dollar amounts.” Digital payments company Cardplatforms recently launched a new option, called Instant Wage, available on all its payroll cards, which addresses the between-paycheck liquidity crisis.

GALILEO & FRIENDS Deep thoughts: Should people in financial services ‘figure out how to compete with AI’?

Opportunistic: Positive thinking and customer focus pay

Once you get started, opportunity finds you That’s the golden piece of business advice given to Money20/20 Founder and serial entrepreneur in payments and retail/ecommerce Anil D. Aggarwal. Here, he shares his own wisdom

According to founder and CEO Jeff Foster, InstantWage enables ‘people to access their earned income between paychecks’, freeing them from title and payday loans. The service, he explained, can help Americans save the $140billion annually it costs them ‘for running out of money’ by avoiding late payment charges, utility reconnection and bounced cheque fees. Siden said data suggests as many as 60 million people in the US are underserved by traditional banking. Prepaid cards help them avoid the trap of the $30 to $35 ‘per pop’ overdraft fees, which he called, ‘no way to live’. “We provide an alternative – a Mastercard or Visa card – that offers most, if not all, the services a bank offers them,” Siden continued. “They’re not large account holders, but that doesn’t mean they deserve any less service.” Peter Read, senior vice president of Peoples Trust in Canada, agreed, saying: “It’s a noble cause to help the financially excluded, which prepaid does. It helps people move into society, especially from a non-creditworthy position.”

Fintech Finance: What originally drew you into payments? Anil D. Aggarwal: Way back in 1999, the idea that the Internet could enable the American Express, Discover, Mastercard and Visa payments networks to be used in new ways. That idea sparked the creation of my first payments venture, Clarity Payments Solutions. We were the first to create a virtual Visa account number and launch a prepaid product for the unbanked on the Visa network.

Shoptalk is another industry-building effort. It addresses the disruption in retail and ecommerce – where it is and where it’s going. The most important thing defining this Shoptalk narrative is how consumers discover, shop and buy differently in a digital age. In just our second year – with more than 5,500 attendees – we became the world’s largest conference for retail and ecommerce, and we’re tracking to grow 40 per cent from there in 2018.

FF: Your efforts always have an ‘industry-building’ element. Why? ADA: When you’re introducing disruptive products that will completely change an industry, everyone benefits from an ecosystem approach. I felt it would be helpful for everyone – including Clarity, which was creating new consumer and corporate products – to learn from each other. So, I created an event, trade association and publication to build high-level partnerships and encourage learning among industry stakeholders, including competitors. Money20/20 was created as an industry-building initiative for the card-based payments industry.

FF: What’s the best advice you’ve received? ADA: It was from my dad. He said: “Once you get started, opportunity finds you.” For me, it’s constantly proven true. If you put a concept out there and identify the people you want to be part of it, things happen. One of the best secrets of startups is, people will help you build them; they want to see you succeed if they see a relentless focus on building amazing products and improving the status quo.

FF: Your most current activities involve retail and ecommerce. Is that a pivot? ADA: Not a pivot but extending what we accomplished with Money20/20 to create a new, industry-wide narrative and retail/ecommerce community.

FF: What advice do you offer others? ADA: Patience. Things take time, but, ultimately, you get there – provided you’re truly focussed on and think about value for your customer. What’s in it for them? What’s the right thing for them? That’s my best advice – patience and focus. Forget about your competitors – they’re usually thinking about you, while you’re thinking about your customers.

Issue 7 |



Friend or foe?

The relationship between banks and non-banks is a complex one… are they rivals, partners or suppliers/ buyers? It depends on where you’re standing...

Money20/20 highlighted bank bashing and flag waving in equal measure, with fintech entrepreneurs in the ‘alternative bank’ space characterising traditional banks as slow-moving and too expensive for consumers. Most direct was Valentin Stalf, founder and CEO of N26, a mobile-only bank that originated in Germany. “Most [traditional] banks have been very slow in putting forward great digital products [and] most customers feel ripped off with high fees,” he said. Bankers we spoke to were more circumspect about their impressions of fintechs, largely because it’s hard to pigeonhole the role of fintechs in the US. They can be heads-on competitors, suppliers of digital services, business partners from which banks generate revenue or a combination. But greater caution doesn’t mean bankers don’t have opinions. Acknowledging the need for fintechs, David Jenkins, vice president of payments solutions at Republic Bank in Kentucky, said: “Third parties are so important to delivering a product that banks, particularly those in sponsorship roles, really depend on them.” But Trent Sorbe, president of Central Payments, a division of Central Bank of Kansas City, got to the crux of the matter, emphasising the role of banks: “There are great companies building great consumer experiences, but you have to be part of the rails of the payments system. We’ve built a foundation that enables fintechs to bolt on [to our rails], leaving the consumer experience to those companies. When you get down in the guts of financial products, there’s a real role for banks, based on their infrastructure and technological capabilities.” Then there are tech companies that straddle the line. Zev Mo Green of IDT Corporation, a multinational telecom and tech business, agreed about the importance of banks but suggested they

need a new mindset, focussing on excitement and simulating an internal startup culture to remain competitive. He encouraged banks to ‘run up to the compliance wall, cross it a couple of times and maybe push back before you release – move those walls a bit’. How much of the tension between banks and non-banks is related to regulation? A lot, it seems. It’s clear among bankers we spoke to that regulatory obligations were top of mind and coloured how they viewed opportunities. Asked about how financial services had changed during his 20 years in the payments industry, Sorbe identified regulation and consumer compliance. Jenkins pointed out that US bank regulators ‘are hyperactive’ in holding banks responsible for any violations that third parties they employ might make. In regard

There are great companies building great consumer experiences, but you have to be part of the rails of the payments system to Republic Bank’s attitude towards cryptocurrencies, for example, he cautioned: “Until there’s a way to reinforce consumer protections [for cryptocurrencies as financial instruments], you’re going to see banks avoiding engaging too deeply.” Syscoin creator and core developer Sebastian Schepis had a different take on regulation, saying: “The crypto industry has come together to regulate itself because we know a certain amount is important. But markets actually run pretty efficiently without a tonne of regulation.” That raised another interesting question: does the US’s (and, presumably, the UK’s and

Europe’s) strict regulatory structure foster or hinder financial services innovation? Simran Singh, director of business management and strategy for Hyperwallet, a US-based company with worldwide operations, suggested the former. “Because of strict regulation, people come up with other modes of fintech innovation to improve the user experience or speed up payments, for example,” he said. The irony being that although the US is ‘far behind when it comes to embracing fintech innovation, the innovation still ends up happening here’. Canadian banker-turned-prepaid programme manager, Ron Ingram, chairman and CEO of Echo Payment Systems, took the opposite position: “There’s an overabundance of regulation,” he claimed. “If the government would just insist on transparency and provide a bit more latitude, it would be tremendously helpful in terms of innovation.” Harinder Takhar, CEO of Paytm Labs, the Toronto-based R&D division of Paytm, India’s largest mobile payments and commerce platform, said that India had the edge over the US in having centralised regulation. “To offer a mobile wallet, for example, you need one licence, compared to the US, where you need roughly 50,” he said. And he claimed India is ‘way ahead’ of the US and the UK on open banking, saying: “There are several apps you can use to bank with whoever you want.” But, unlike the US, the UK and EU are actively moving towards open banking with this year’s Revised Payment Services Directive (PSD2), which will require banks to interface with third-party providers. Ben Chisell of UK-based, mobile-only Starling Bank commented: “These regulations force the larger, traditional banks to provide the best customer experience. We welcome the spirit and sentiment behind these changes, and we are ready for the competition.” Issue 7 |



Open sesame

Galileo Processing Founder and CEO Clay Wilkes talks open APIs, the challenge of cryptocurrencies and battling card fraud with AI

Clay Wilkes has built Galileo Processing into one of North America’s largest payments processors and programme managers, investing heavily in tech and engineering innovation, and focussing on perfecting payments operations so clients can spend their time creating products and building customer relationships. A prolific thinker on payments topics, Clay joined Fintech Finance at Money20/20 in Las Vegas to share his thoughts on topics that are front of mind for him right now. Fintech Finance: In the UK and Europe, the Revised Payment Services Directive (PSD2) will require banks to provide fintechs with open access to certain types of data to promote a more competitive and innovative financial services marketplace. The US doesn’t require open banking, but at Galileo – as a payments processor and programme manager – you voluntarily opened up three of your most important application programming interfaces (APIs). Can you explain why?


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Clay Wilkes: Much in the spirit of PSD2, we opened three of our key APIs because it’s the right thing to do to promote payments competition and innovation. Putting these APIs in the hands of virtually any developers – whether they’re working from their garages or in big banks – gives them powerful tools to create any payments programmes they can imagine. They can develop bankgrade programs with the time, cost and complexity of developing the functionality that sits behind the accounts. What we’ve done is enable industry-wide payments creativity without limitation and without risk. FF: Are you really that altruistic? CW: Look, we know that even after 17-plus years innovating in payments and with millions of dollars invested in tech and engineering, we don’t have a lock on great ideas. By giving virtually anyone access to the great tools in our open APIs and, of course, our open sandbox, we’re saying experiment, be bold, think outside the box. We want the next great idea in

payments to spring from our open APIs – regardless of whose idea it is. FF: And what about the commercial aspect? CW: Opening our APIs is important commercially, too. Prospect developers use our APIs to begin their work before any agreements between our companies are signed. Literally, they can kick our tyres in an environment that completely simulates live production and help their businesses make highly informed decisions. If we win their companies’ business, the developers are well ahead of the game, because their work is fully transferable. And current clients can iterate and test new products and features, focussing on creating great user experiences, because we’ve taken the complexity of payments connections, controls and processes off their plates.

Bridging the crypto gap FF: Since we’re on APIs, you recently introduced the Galileo Cryptocurrency API. What need does this new API fill?

CW: Let me talk first about cryptocurrency markets. Today, cryptocurrencies are speculative investments, not currencies. There’s a strong demand side but virtually no supply side, because cryptocurrency acceptance to pay for goods and services is limited. This has created an illiquid, asymmetrical market, fuelling speculation and large value swings. It also prevents cryptocurrencies from making progress as true currencies. That’s the big challenge: lots of demand, little supply. FF: So, pull this together for me. How does the Galileo Cryptocurrency API address this market imbalance? CW: Our API creates a gateway between the traditional payments rails and virtual currencies, so consumers or businesses can use cryptocurrencies to pay for whatever they buy from merchants that accept payments cards. It enables banks, fintechs and programme managers, for example, to handle cryptocurrency transactions from point of origination with the merchant, through the network, to the bank for authorisation and settlement. All the heavy lifting is accomplished through the API, using existing payments rails. If merchants and others can readily accept cryptocurrencies using the rails of traditional payments cards, but authorise and settle those payments in US dollars, for example, by converting cryptocurrency into dollars in real time, the payments will settle in dollars, but cryptocurrency will be sold in the process – levelling the supply. In time, merchants and other payments acceptors may even pay their suppliers in cryptocurrencies. This begins unlocking the supply side, with the added benefit of a multiplier effect throughout the supply chain. FF: From a user’s point of view, how does this work? CW: Assume you’re a consumer who wants to transact, whenever you wish, in a combination of US dollars, Bitcoin and Ethereum. You instruct your participating bank that you want your bi-weekly direct deposit of wages to be allocated as follows: 85 per cent US dollars, 10 per cent Bitcoin and 5 per cent Ethereum, which you plan to use for your upcoming holiday. When it’s time to pay your hotel bill, you use an app to verify your Ethereum balance and select the Ethereum purse for payment. Then, you pay with your card, and you’re done. Except

for using the app, the process was the same as using your credit or debit card today. Behind the scenes, Galileo uses the Galileo Cryptocurrency API – between Galileo and the programme manager – to initialise the account and manage your cryptocurrency balances, allocate your funds as you instructed and debit your Ethereum purse to pay the hotel bill based on current exchange rates. From the perspectives of the hotel, acquirer and payments network, the transaction was completed in US dollars.

Battling fraud with AI FF: Let’s talk about a topic that affects everyone in the payments ecosystem and that’s fraud. How does Galileo help clients fight fraud? CW: Fighting fraud is our passion. We’re the industry leader on tackling fraud today and committed to leading the industry for the long term. Here’s our proof: today, issuers experience fraud losses of five basis points on average. The average Galileo issuer client experiences fraud losses of around one basis

By giving virtually anyone access to the great tools in our open APIs and our open sandbox, we’re saying experiment, be bold, think outside the box point. That four-point spread – an 80 per cent reduction – translates to a $400 bottom line saving per $1million card payments processed. That’s significant if you’re handling billions of dollars of volume. We’ve just written an industry white paper on card-based fraud losses and what issuers can do to place themselves in the best position to fight fraud. I hope everyone in the industry checks it out at articles/view/title/Fraud_AI_White_Paper FF: And your secret is…? CW: Our Dynamic Fraud Engine (DFE), which is a rules-based platform that interjects custom rules in real time directly into the authorisation stream. These rules are created in response to fraud threats.

FF: Many fraud detection systems are rules-based, but they don’t achieve the result you’re getting. How are you different? CW: First, we built our DFE in-house to meet the exact needs of our clients, and we continue to invest in it to keep it at the pinnacle of rules-based systems. Second, because we handle a massive amount of payments transactions in-house, we have a huge base of data from which we create and update our rules. Third, we augment rules based on our own data with rules from rigorous outside sources, like Visa and Mastercard. Finally, and this is the most important point, for 17-plus years, fraud detection and mitigation have been our priority. We’ve become good at it. Putting everything together is our secret sauce. FF: But, you haven’t mentioned artificial intelligence (AI). CW: Thank you for pointing that out. The one basis point average fraud loss I’ve mentioned is based solely on DFE results without our new AI component, which we call Galileo Fraud AI. We introduced Galileo Fraud AI as an objectively better product just last summer. Today, average fraud losses of issuers using Galileo Fraud AI have improved; they’re even lower than the one basis point average achieved by DFE alone. But, the biggest advantage of Galileo Fraud AI is the significant reduction in false positives; that is, legitimate transactions flagged as fraudulent. This has huge implications for the quality of service our clients deliver to their customers. Another significant advantage is AI never sleeps. It recognises patterns early and effectively, so no rules need to be implemented. This means it can defend against the zeroth threat. And, the Galileo Fraud AI score can be incorporated into our DFE, enabling the two to work in unison to defend against threats. FF: Is there a limit on how low you can take fraud losses? CW: No system can prevent all fraudulent transactions, but we’ve developed an extraordinary solution by combining our Dynamic Fraud Engine with our Fraud AI capabilities to reduce payments fraud to levels that are unheard of in the industry. Zero fraud is impossible to achieve, but we’ll continue to work toward that goal by prioritising fraud and continuing to invest in our systems. Issue 7 |



All in favour, say AI! US bank Wells Fargo made a conscious decision last year to invest in artificial intelligence and apply it across the business. Bipin Sahni, EVP, Head of Innovation and R&D, weighs up the rewards The challenge for many organisations in the past year has been how to improve the customer experience through innovation without security breaches that erode customer trust. The answer may be to apply artificial intelligence (AI) to the problem – which is what US bank Wells Fargo started to do last year. In February, the bank launched a team to develop artificial intelligence-based technology that could help it interpret the data it held on customers in order to provide more personalised service through its bankers and online, at the same time leveraging the technology in ways that safeguarded those customers better. Ten months later, Steve Ellis, head of the bank’s Innovation Group, predicted that AI would eventually ‘touch nearly every piece of our business in some way’. “As a society, we’re creating more data than ever – it’s a gold mine, provided we continue to find efficient ways to sift through it,” he said. And Wells Fargo – appropriately for a bank founded during the American gold rush – has proved particularly adapt at that sifting, applying AI to an exceptional pipeline of products in 2017. A stock analyst bot, a new mobile-only


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account with AI-based budgeting app Greenhouse, a robo-advice platform for digi-savvy millennials – Intuitive Investor – and a chatbot within Messenger for social media account holders, have all tumbled out of the AI project. As Bipin Sahni, EVP, head of innovation and R&D for the bank’s innovation group, says: “You can apply AI to anything, so long as you have data.” And that’s one thing banks can boast. “The issue is trying to understand what’s in it, how do we use it and what do we need to use it for? If we can answer those questions, I think we’ll be very clear on what we want to capture in the future,” says Sahni. “But maybe then we will need different datasets, not what we’ve always been capturing. “A lot of enterprise and technology companies have been talking about data lake strategies, the idea being to get data together in one place where you can then leverage the holistic view of your customer and your datasets. Then you can apply different machine learning algorithms to draw out more value from it,” he adds. While Wells Fargo has bought into the concept of AI as one of the most powerful tools in banking, there’s still some

skepticsm out there about whether the benefits are worth the downsides – namely the displacement of human jobs and the possibility of creating vulnerabilities leading to breaches. Sahni is alert to the last, but it can be addressed, he says, by applying algorithms that respect differential privacy – a means of maximising the accuracy of the information an app extracts from a database while minimising the chances of it identifying the records and opening a wormhole through which hackers can invade or infect the data source. “We are talking here about how do we encrypt data while at rest and in motion. How do we anonymise the data enough and yet still get the value out if it?” says Sahni. “From a security point of view it’s the number one priority and artificial intelligence algorithms are beginning to adapt to that. “We are working with some interesting startups in this space, asking ‘how can we protect data at every stage? how can we anonymise it? how can we have a token defined for it, so that there are no real numbers, no credit card numbers, no profiles moving into the infrastructure?” A specific example of Wells Fargo’s AI in

action is Control Tower, where the technology is used to improve the customer experience but with built-in advanced security measures to better prevent data compromise. One of the biggest releases of last year, it provides a way for Wells Fargo consumers to control their payment relationships from within bank’s app. “It’s a new service where consumers h ave control of data and how they want to manage their instruments with Wells Fargo,” explains Sahni. “We’re hoping to use that service to understand our customers’ behaviours better – what they like and what they don’t like.”

Vision of the future Two years ago, Gartner identified machine learning as one of the top 10 strategic technology trends, while tech giants Google, Facebook and Microsoft invested more than $8.5billion in 2015 alone on AI research, acquisitions and talent. It was still one of the hottest topics trending at October’s Money20/20. Meanwhile, a report from McKinsey & Company suggested that a dozen European banks have already moved from traditional statistical analysis modelling to machine learning, with many citing it increased new product sales by 10 per cent and reduced churn and capital expenditure by 20 per cent. That should make any traditional bank sit up and listen. Wells Fargo is intent on using the technology to extend products to its customers and challenge statistics, which show that while US consumers spend an average of five hours on their phones each day only around two per cent of that is in the company of their bank. It wants to contextualise the customer experience – in other words, be the helpful friend, present wherever the customer is and accessible using whatever platform they feel comfortable with using. Its chatbot within Messenger aims to do just that. Targeted at the millions of customers already using the Facebook platform to communicate with friends and family, Wells Fargo’s account holders can now also choose to use Messenger to contact the bank’s virtual assistant for basic tasks, such as tracking recent transactions, balance inquiries and finding an ATM. Anyone who has ever waited on endless

hold will appreciate how valuable AI can be for those tasks. The most basic AI-powered chatbots are sophisticated document retrieval systems, able to scour vast stores of data in search of the right response and at the moment, but these systems are far from perfect. Investments in research and innovation by companies like Wells Fargo are constantly improving this technology and thus improving the customer experience. Wells Fargo has also been training its chatbot to recognise sensitive information provided by the customer and automatically encrypt it. One of the bank’s latest launches, the Intuitive Investor app, is also intended to reach out to digitally connected millennials. The robo platform, developed with SigFig, features a super slick onboarding experience, algorithms managing account rebalancing and tax-loss harvesting, and digital client communications ”Intuitiveness is very important and needs to be embedded into our mobile banking apps,” says Sahni. “We are thinking

How do you anonymise the data enough and yet still get the value out if it? From a security point of view it’s the number one priority about extending some capabilities as application programming interfaces (APIs) for our customers. Although consumers themselves may not be ready to accept APIs today, because not everybody is tech savvy, we are already seeing small businesses and corporates look at data and information from Wells Fargo through an API channel.” Indeed, Harvard Business Review predicted that within the next two years ‘people will manage 85 per cent of business relationships without human interaction’. That new relationship between bank and customer may extend to things as yet unimagined – but then thinking the unimaginable is what Sahni and his team do best. “The future trend could be very different,” he says. ” You could be talking to your smart

television, smart refrigerator, your self-driving car, or perhaps flying around in a drone rather than using a car. These are things that are going to happen, it’s just a matter of time. “The question is, how does banking play an important role in it? “If I’m dealing with something which is related to the Internet of Things, there could be a potential financial transaction there. So, there again, from our perspective, when we look at APIs as an important channel, these are the things which we are building for the future. “That’s where we could leverage these capabilities beyond the next five, 10, 20 years, because that’s where everything’s going to get nimble, everything’s going to be more contextual, everything is going to be simplified, so that I, as a consumer, am not wasting too much time when I’m buying something. It should be a seamless experience. Even when I’m authenticating myself, I shouldn't need to even say anything. “We’ve got to think about what the experience of the future looks like and build this infrastructure in such a fashion that it can be leveraged by our potential and existing customers alike.”

Not without challenges The future will undoubtedly hold surprises... and the AI project has already delivered at least one. In what could be described as a spectacular own goal, one of the first pieces of AI the bank came up with last year was a stock analyst bot, AIERA, that flexed her autonomous muscles by contradicting the bank’s own investment advice and recommended sell ratings on Google and Facebook. She was still on test, so there were no nasty shocks on Wall Street, but it goes to show how potentially powerful the work done by Sahni and the team is. The bank is keen to partner other fintechs to iron out such anomalies. It already works with several through its own accelerator programme and recently headed an investment round for startup’s Driverless AI platform – which has nothing to do with automobiles. Instead, it aims to make building machine learning less of a challenge with software that automates much of the complex, repetitive work involved in AI development. All those in favour... Issue 7 |



Defusing the GDPR time bomb

With just four months before new data protection rules kick in, John Clelland and Chris Greenslade, founding partners of Proteus-Cyber, explain how to stay cool, calm and compliant

It’s a watershed year for risk management specialists – and a worrying one for businesses that are not ready for the General Data Protection Regulation (GDPR). With less than four months to go before the regulation comes into force, time is running out for those yet to think seriously about their data obligations and liabilities. But if they seek expert advice now, and develop a step-by-step strategy to minimise risks, they can stay on the right road to compliance. That’s the message from Proteus-Cyber, a provider of integrated risk management software that has developed a product called GDPReady. Launched in February 2017, it was touted as the first GDPR software toolkit on the market to fully support the GDPR process and help data protection officers prepare their organisations for the new regulatory environment. John Clelland, CEO of Proteus-Cyber, says that GDPReady is suitable for companies of all sizes and covers every aspect of GDPR, such as subject access requests, legal


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compliance, privacy impact assessments and data modelling. “There’s a lot to prepare for,” says Clelland, “and the potential impact is huge for companies that are not ready. The fine for data breach is four percent of your turnover – and remember that’s per data breach. Although I think it will only apply to the most serious offences, there are bound to be headline fines. “Because banks and financial institutions have large and complex structures, with many applications and customers, it’s a significant change and a big challenge.” Does Clelland think the penalties are excessive? “Remember that the fines reflect how seriously the EU is taking data protection,” he says. “Consumer rights are being turned on their head and data now belongs to consumers and not to organisations. The fines are designed to make sure organisations don’t take their new responsibilities lightly, which is a good thing.”

Creating a strategy When it comes to data breaches, the financial industry has a poor track record.

“There were 143 million breaches last year alone,” say Clelland, “and there have been several high-profile and very embarrassing breaches industry-wide.’” A prime example was Uber, which concealed a hack that affected 57 million customers and drivers. Under the terms of GDPR, Uber would have faced a fine of €20million (£17.75million), representing four per cent of its global annual revenue. Fines will depend on how quickly a breach is reported and in Uber’s case it was more than a year before the company came clean. That would have been way too late to fess up under the GDPR – Article 33, the breach notification, allows you just 72 hours to report a breach. “You must give comprehensive details,” says Clelland. “This includes the nature of the breach, covering the categories and approximate number of data subjects and records, the possible consequences and the measures taken, or proposed to be taken, to address the breach. The more information you provide, the lower the fine is likely to be.” Of course, the best strategy is to avoid a

Danger UXB: Companies need a strategy to minimise risk of fines

our databases’. This is the wrong approach.” Although Clelland understands why companies would want to start with databases, he says it is extremely difficult to reconcile data in that way. Instead, Proteus-Cyber starts mapping data by engaging with the business and talking to the business owners and those responsible for data gathering and control. As an example, Clelland highlights car insurance. “You need to speak to the business owners, the car insurance experts, who have the best overview. They understand what sort of data must be held, such as where someone lives, how many times they’ve had an accident and how many speeding tickets they’ve acquired. They can define what personal sensitive information has to be delivered for a particular business function.” The rest is unnecessary information. “Often, businesses may find they have more data than they need,” notes Clelland. “They may be collecting 20 pieces of data, but actually, to deliver the service, only need 10. The important thing is not to start from the data – begin with the business and the people who run it.” But every case is different. The terms of reference and consent rules will vary from business to business. “If a company is supplying life insurance, it’s dealing with health data and that’s very different from car data,” says Clelland. “Part of GDPR is understanding the reason for holding and processing information, because you must establish whether it is necessary and legal. Whatever the business, it’s importan to talk to the key people first, to get under the skin of the company and identify what’s important and relevant. We take businesses through a series of carefully structured questions to achieve an accurate profile.” Once these steps are completed, reconciling the data can begin. Then they need to understand how to handle data. “Does the business encrypt the data? Is it stored on a mobile device? Is it secured at

A business may be collecting 20 pieces of data, but to deliver the service, only need 10… part of GDPR is understanding the reason for holding and processing information

fine in the first place. This is where Proteus-Cyber has a clear strategy for compliance. “If you approach GDPR in the wrong way,” says Clelland, “you will struggle with the notification for Article 33. You will constantly be on the back foot and you’re very likely to fall foul of the May 2018 deadline. “The right way is to have a multi-phased plan. Step one is to establish your data register, in keeping with Article 30, which focusses on records of processing activities. You need to be sure of the information and processes that you hold. We have a process mapping and collaborative approach that enables us to get Article 30 reports within one to two months, and sometimes even quicker than that. “However, many of our clients approach GDPR from a data perspective. They say ‘we have databases, we have IT staff, and GDPR is all about data and encryption, so let’s look at

rest? Is it encrypted at rest? Is it encrypted in transit? How do they back up the data? All these questions relate to Article 30,” says Clelland. “If you haven’t done this mapping, everything else will be compromised.”

The beginning of a journey Chris Greenslade, sales director at Proteus-Cyber, believes that GDPR will be very demanding for banks and particularly businesses in the UK. “Although GDPR affects all EU nationals, and is applied worldwide, the UK will be in the thick of it when it comes to dishing out fines following Brexit. The banking sector tends to have a great deal of historical and archived data, so it will be in the cross hairs when it comes to fines,” he says. But it’s not just banks that need to worry. “The reality is that very few organisations are prepared,” says Greenslade. “A recent study showed that only about six per cent of businesses think they will be ready on time. We’re being approached by many organisations that say: ‘We’re trying to do all the data mapping and we have Excel spreadsheets coming out of our ears. We can’t manage. How can you help us?’ “The answer, as John said, is to begin with the basics and interview the business first. You have to get behind the data, to understand what it is used for, and then proceed from there. If you build up an accurate picture of a company, of the data it holds and how it uses it, you’re in a much better position to deal with the regulators and show that you have acted diligently.” Confronted with potentially huge fines, all businesses need to minimise their liabilities as much as possible. “Say you have a £1billion turnover, four per cent of that would hit you with a £40million fine,” says Greenslade. But, while it's as yet unproven, the likelihood is that regulators will be lenient if you can demonstrate a clear strategy and systems for compliance. “This is where our Proteus GDPR tool can make all the difference,” says Greenslade. “May 25 2018 isn’t an end stop,” he adds. “It’s simply the date when fines start applying. The reality is, people must continue working on GDPR. And let’s not forget that it’s an opportunity as well as a challenge. Preparing for GDPR is a chance to take stock of your data, to have a close look at all your businesses processes and relationships, and to highlight ways to work more efficiently.” Issue 7 |



The new economy Brown Brothers Harriman has been facilitating trade for 200 years, but for Mike McGovern, head of the firm’s fintech arm, the most important commodity now is data It began life as an import and export company, trading linen, tobacco, cotton and flour – physical commodities that made the world go round two centuries ago. Today, the global financial institution into which Brown Brothers Harriman evolved is part of a less tangible, but no less valuable, economy. This time, it’s based on data. As head of the firm’s fintech arm, Mike McGovern knows full well that treating data as an asset is the new frontier in finance – and his pragmatic approach is the result of years of experience at the bank. The BBH managing director – formerly the firm's chief information officer and head of systems – says that after years of ‘hype and froth’, industry chiefs are now

Tradewinds: Physical commodities have given way to data


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beginning to ask more pertinent questions of information technology. “Some of the hot air has left the room on some of these topics,” says McGovern. “People are having more pragmatic discussions about use cases, whether it is distributed ledger technology (DLT) or machine learning or the next generation of the data experience we seek to deliver.” McGovern's realm as head of Investor Services Fintech spans middle office services, Infomediary (BBH's technology platform for global asset managers) and the bank's software as a service solutions (SaaS) for asset managers and financial institutions. And, given the huge dangers that cyber crime poses to some of these services, he is determined to put security first and protect BBH's centuries-old reputation. He says: “There is a dichotomy that the whole industry needs to come to terms with, and that is the trade-off between security and efficiency. “As the fintech business within a 200-year-old financial institution, I like to think we have the soul of a startup in a mature, successful financial organisation. We have to balance both needs – security and efficiency – and our clients’ privacy and data security will always come first in that calculus at BBH. “Cyber security is of huge concern to everyone in our industry and, as a regulated financial institution, we have to hit a very high standard in terms of data security. We must adhere to the EU’s General Data Protection Regulation (GDPR) and the new Markets In Financial Instruments Directive (MiFID II), and every other acronym that you can think of, with respect

to data privacy and data security. So, what we’re doing is investing in technologies that offer that security, in building out more granular security models that support data access entitlement in a way that’s fit for purpose and allows us to comply with the appropriate regulation in all the jurisdictions that we do business in. “But it’s a continuing effort. It’s not something that stops when one implements a particular model. We’ll continue to evolve. “The goal of all, or most, organisations, is to stay ahead of the next cyber challenge, and that is an ongoing battle, not a war that can be won.”

Promise and pitfalls of DLT BBH's history in shipping and commodity trading has seen it help to evolve distributed ledger technology solutions that automate processes and improve transparency, speed and security. But the group has found that, ultimately, commodity markets have been slow to modernise and still rely heavily on reams of paper documentation. While capital markets have run on digital technology for years, commodity players are lagging behind, due in no small part to the challenges of linking up local systems and processes across the globe. The bank’s senior vice president, Richard Fodder, said on the issue of technology: “Market commentators suggest that advances such as blockchain are creating a revolution that will disintermediate banks from their customers. “One area cited as ripe for overhaul is the securities processing industry. But how many times have we heard over the past 25 years that global custody is dead and yet it remains. Is this time different? Our view is that it is not. Blockchain and Cloud technology represent a natural evolution – not a revolution – that will continue to highlight the core competence of banks, namely risk management.” That said, BBH has developed the tools and is clear that blockchain and other distributed ledger systems present the commodity industry with the potential

to save billions of dollars in transaction costs, while slashing the risk of fraud. Given the industry's resistance so far, McGovern says the key challenge is to meet customers where they are, and deliver solutions only where the need is clear and proven. “We are looking at distributed ledger technology (DLT) and seeking to apply it for use cases that aren’t already solved using more traditional technologies,” he says. “I think that’s a very positive development for the whole industry. And there are a few very interesting use cases that we’ve started dialogues on. We’re working with a couple of clients on their needs, from a DLT perspective, and we’re increasingly looking at artificial intelligence, and in particular machine learning and more generally robotic process automation, to support the work that we do for our clients.” BBH's operations today cover three principle lines of business: investor services, including global custody, middle office and back office functions; investment management; and private banking services such as wealth management, personal trust and estate administration.

A facilitating role With 18 offices in the US, Europe and Asia, the bank has developed a broad range of IT solutions that it can adapt and offer to clients. Among those solutions is the Infomediary messaging and connectivity engine which is designed for asset managers, insurance companies, banks, fund distributors and industry players. The hosted communications platform provides a connection between clients, their external service providers and internal systems. It swallows up data in any electronic format and then processes it. Within it can sit modular applications such as InfoAction (automation for the corporate actions event lifecycle), InfoFX (foreign exchange system) and InfoRecon (which automates cash and securities data).

McGovern has a long track record in providing IT for front, middle and back office operations, and is keen to share that expertise with clients. He says: “The bank's focus on asset managers and financial institutions means that a lot of what we develop for ourselves, to achieve efficient, scalable and compliant cross-border operations, is directly relevant to clients. Clients can use these innovations as their own, whether or not they also use BBH for financial or business process outsourcing. “A lot of our focus has been around what I’d call the emerging data economy. What we’re trying to do within fintech at Brown

The goal of most organisations is to stay ahead of the next cyber challenge, and that is an ongoing battle, not a war that can be won

Brothers Harriman is really create value for our clients, based on our data. What I mean by that is adding value to their data flows. “A lot of our discussion has been around innovation as it relates to data development and our network of application programming interfaces (APIs), as well as looking at how we can apply those technology investments to the needs of our financial institution clients. “For our asset management clients and prospects, we focussed on the middle office of asset managers, and delivering modular technology solutions that support the needs of that middle office.” Hosting the Infomediary engine means that BBH is the hub for huge flows of data from financial institutions. McGovern adds: “We’ve been fortunate to be granted the opportunity to service our clients’ data needs through Infomediary. So, this relates to thousands of transmissions on a daily basis from the leading asset managers and financial institutions. “Our goal is to really act as a general contractor of those data flows and facilitate data transformation and data provisioning, and essentially allow our clients to take advantage of that and deliver on a spectrum of data needs across different digital channels that we support, such as our new digital client experience portal.” While the technology might have been a bit beyond them, that facilitation role – making global trade frictionless – is something the firm’s founding fathers, working in the first Philadelphia trading house in 1818, would surely recognise. The views expressed are as “Date” and are a general guide to the views of BBH. The opinions expressed are a reflection of BBH’s best judgement at the time and any obligation to update our views as a result of new information, future events or otherwise is disclaimed. Neither BBH nor its affiliates provide legal or tax advice. BBH is not affiliated with Fintech Finance.

Issue 7 |



The cyber ninjas Limiting the damage of a cyber security breach is as important as preventing unauthorised access in the first place – perhaps more so. But you need to be smart and fast, says Mike Hart, VP for Central and Eastern Europe, FireEye Cyberattacks are the flipside of our reliance on digital and mobile communication. Technology opens the door to cybercriminals as much as it creates new business models, and because cybercriminals follow the money, the banking infrastructure and the customers who depend on it will always be prime targets. Banks must inspire confidence, and if they can’t protect their customers, or respond quickly and decisively to incidents, they forfeit the trust that is the basis of their existence. FireEye understands that only too well. Describing itself as a ‘defence partner’ to financial institutions, it’s an intelligence-led security company that believes protection can only be achieved by operating with the same speed and determination as the attackers themselves. “Financial services are undergoing a massive advance due to mobile technology and the development of on-demand services, but it’s a change that’s also a huge opportunity for cybercriminals,” says Mike Hart, the company’s vice president for central and eastern Europe. It’s no longer a question of prevention, but damage limitation. "Traditionally, cyber defence used to be about ‘how do I protect the transactions?’ and ‘how do I prevent access?’ Now, a lot of organisations are coming to the conclusion that a breach is almost inevitable and so they start thinking about reducing the impact, both from a brand perspective, but also from a customers’ data perspective,” says Hart.

Staying one step ahead Recent research by LexisNexis Risk Solutions backs up the need for a more analytical approach, informed by security intelligence. In its survey of 200 senior financial services professionals, 44 per cent said that new criminal techniques are the biggest crime risk to their business,


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while 87 per cent admitted that they are not able to develop their technology quickly enough to keep up with them. The WannaCry ransomware attack and Uber’s massive data breach were among many that underlined that fact in 2017. As is the rapid growth of cyber insurance, which it is estimated will have spiralled from $2billion in 2015 to some $20billion by 2025. “Bankers are concentrating on using technology to provide better and more competitive services,” says Hart. “For example, they are under significant pressure to use the Cloud to provide mobile and on-demand services. Everyone wants mobile, full access, full visibility. Keeping up with infrastructure and customer demands is both a board

Experience shows that, on average, cybercriminals go undetected inside an organisation for between 60 and 90 days challenge and an IT challenge. Organisations in the financial services industry know that they walk around with a big target on their back and so they have done a lot and invested a lot over the last few years, to harden up the perimeter, to prevent access,” adds Hart. “But cybercriminals are becoming more innovative and cunning in their methods of attack. Rather than targeting software, they are using techniques such as spear phishing, a carefully directed email-spoofing attack that focusses on a specific organisation or individual. By posing as a trusted source they are very good at making their targets reveal passwords and other sensitive information. The most fallible part of the chain is always the human one.”

He believes that, given there will always be a vulnerability, the real focus should be on identifying and responding to breaches as quickly as possible. “Experience shows that, on average, cybercriminals go undetected inside an organisation for between 60 and 90 days. That’s a long time to expose data, and a long time for cybercriminals to drain money. On the other hand, if you’re alert to the danger within 24 or 48 hours, then the risk is significantly reduced and with it the potential damage to the bank and the individual customer.” Resourcing is a problem, acknowledges Hart, with banks and financial institutions finding it difficult to acquire the right skills and security professionals. Which is why automation is a vital line of defence. “Rather than look for more people who can provide analysis, you need to remove that burden,” says Hart. “Attacks are happening all the time and you can’t cover them all. What you must do is focus on the ones that will make the biggest difference, the ones that are the greatest threat. Instead of having hundreds of security analysts, you need an automated approach that ensures your staff can respond to the threats that really matter.”

Knowledge is power FireEye combines this level of automation with sophisticated threat intelligence that gives its customers an informed view of the overall threat environment. This helps organisations to understand current and evolving risks from, among other things, zero-day threats and advanced persistent threats (APTs), alongside information on industry trends and annual threat reports. Prevention is, of course, always better – and cheaper – than cure and FireEye is committed to avoiding breaches by taking all sensible precautions. “We make sure you don’t neglect the basic things, such as standard patch management,” says Hart. “Everything

should be up to date and you should be using technology that is appropriate to your controlled environment, yet affords access to all the information you need. At the same time, you must know who has access to your data and what it’s being used for.” The General Data Protection Regulation (GDPR), due to come into effect in May 2018, brings that sharply into focus. “Under the GDPR you have a very short window to go public and declare that you’ve been breached,” says Hart. “You need to provide all the relevant information quickly and reassure your customers and the market that you have the situation under control. “We’re the market leader in incident response. If something happens, we act immediately to find the cause and assess the impact. We find out what was removed from the organisation and we provide guidance and education on how to close the holes and prevent it happening again.” Hart thinks many organisations are too complacent about GDPR. While everyone is aware that

it’s coming, some are overly confident in their state of readiness or believe that there is still plenty of time to prepare and put the right controls in place. “I think there’ll be a big rush when the first case comes to light and the EU enforces regulation against an organisation,” he says. “I think there’ll be a panic, with organisations suddenly realising they need to act.” FireEye’s first response when notified of a breach is cool, calm and collected. The first step is to send in analysts from the incident response team. “It’s not an army of people,” says Hart, “just a handful of specialists – the ninja warriors of analysis. They’ll determine where the breach happened, the entry point, and then assess the impact. There’s no remediation at this point, just an understanding of what happened.”

Its ability to help from here on in is down to FireEye’s integrated, on-demand security platform. All the essential security activities exist under one roof and with one team, so that customers gain a complete picture of their exposure and the steps required to recover from an incident and limit any damage. “It’s less about creating a top-heavy security operations centre, or building an in-house team of highly trained staff,” says Hart. “What businesses need is an external defence partner that can come in when and as required; a partner that combines comprehensive threat intelligence with the latest security tools and countermeasures.”

Damage limitation: Highly trained analysts provide a fast first response

Issue 7 |




only way is up

Baader Bank grew out of a modest stockbroking firm to become an investment bank to Europe’s largest players in online asset management. Director Oliver Riedel explains how digitisation helped it get there Thousands of stock analysts could be packing up their desks this month following the arrival of MiFID II. The EU legislation, an update on the original Markets in Financial Instruments Directive, has unbundled and laid bare the cost of investment research to the investor. With an eye on value, it is predicted customers will inevitably only pay for what they need – and then only the very best. That is the view of Germany’s Baader Bank, which has its own strategy for survival. Its plan is to be ‘big in a niche’, says its executive team – a large fish in a small


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pond. The pond it’s currently swimming in is the DACH region – Germany, Austria and Switzerland – where Baader is making its name as a bank of choice for investment firms. Member of the management board Christian Bacherl recently said the only way to survive the investment industry shakedown is to be ‘extremely good’ at what you do. So, rather than stretching to become a global player, Baader is seeking to complement the output of the research industry’s giants by providing deeper coverage of its own specific markets.

A flexible infrastructure Baader certainly cemented its position with high rankings in 2017’s Extel Survey. It was in the top three for research in each of the three DACH countries, and came first for trading/execution for Germany and Switzerland. In the first six months of 2017, it increased the number of deposits held in the account-holding and depository business from 4,200 to 15.200, and swelled the total depository volume to €2.6 billion. It also increased the number of asset managers contractually connected to

Baader Bank to 49 – an increase of 158 per cent. Europe’s largest players in online asset management now use the banking services of Baader Bank. Whatever it’s doing, it’s doing it right. “We have a sectoral approach and want to add value where we can get a superior opinion of a stock from our local presence,” Bacherl has said. “We want to establish ourselves with the investor as a first or second opinion on the stocks we analyse. We are complementary to global providers. “By anchoring in the DACH region we achieve a deeper market coverage than is possible for a global house. But we cover everything – from large corporations to relatively small companies.” Another key strategy is to be flexible and invest in the latest digital technology. Oliver Riedel, Baader’s director in charge of multi-asset brokerage, asset management and banking services, argues that the firms that will succeed in the future are not necessarily the leading houses of today. He says: “The future players and the winners, going forward, will be the houses that have a very flexible infrastructure, that can adapt to client needs fast and have the motivation and the right talent, with the technology and established strengths. So, it will be the best of two worlds and I think those will be the winners.” Exactly how the changes being brought about by MiFID II will play out is still not clear and Riedel admits the pricing of research has been a major topic of conversation for the bank’s employees. But that, as a relative newcomer in the banking industry, Baader has a strong culture of innovation and little in the way of cumbersome legacy IT to weigh it down.

Building a scalable business Launched in 1983, Baader, based in Unterschleissheim near Munich, began life as a stock broker to deal in just three US shares. Through acquisition it became an institutional broker in 2000, a service bank by 2004, and obtained a full banking licence in 2008. The move into stock research came two years later and the bank has steadily expanded its research and tailor-made solutions for business clients. Baader typically develops systems to satisfy its own needs when it comes to meeting regulation. Then, because of its

B2B model, offers those systems and know-how to its customers. Riedel says: “You need good preparation for MiFID II, but then it can be plug and play because we are a B2B player. So, first of all we have to adopt MiFID II rules for ourselves, but obviously also for our partners. Digitisation helps a lot because if you implement it once, you can build a scalable business out of it. “Digitisation can have a very positive effect when you adopt the right trends and implement them because you can build a business with less resources and it is way more efficient.” Riedel explains that one of Baader’s core aims is to complement, not compete with, its clients, so offering complementary services is a major focus. A digital onboarding process for new customers that Baader developed for itself, but which is now also available for them to use, is just one example.

When you’re able to offer services such as online onboarding, efficient processes and an open infrastructure, growth can be enormous “We see ourselves as a leading provider of online asset management services,” he says. “When you’re able to offer services such as online onboarding, efficient processes and an open infrastructure, the growth can be enormous. You can also then keep up with existing players that are still doing their onboarding with paperwork. “Digitisation, generally, brings the potential to build scalable businesses, but the key thing is that you have an open IT infrastructure that is flexible enough to connect with many interfaces. Absolutely key is IT security, with more and more data coming through the pipes. “It’s also vital to keep up with the pace of the industry and to catch the right trends.” Two major ones – artificial intelligence and big data – are brought together in one product that Baader acquired through a

merger in 2016. The Clueda software can trawl and analyse news feeds and social media, such as Twitter, and is a powerful tool in fast-moving exchanges. Baader’s own traders on the Stuttgart stock exchange used it , for example, to react to a tweet by the then president-elect Donald Trump. Trump had screamed ‘Cancel order!’ in a tweet about escalating costs for a forthcoming Air Force One presidential jet. It put the share price of manufacturer Boeing under pressure – but only when share dealers had realised the significance of Trump’s abrupt Twitter release. The automated ‘algo’ traders, now said to be responsible for half of trading volumes, had no way of interpreting and directly reacting to the President’s statement. But, thanks to Clueda, Baader was on it. And it’s another piece of added value it can offer to clients. “Our strategy at Baader Bank is to provide services to our customers, in our own data centres, that keep us flexible and fast in implementing IT solutions for the fintech market,” says Riedel. “Technologies for those services need an enormous amount of investment and effort to operate them in accordance with compliance.” Already, the custodian bank for online asset managers Scalable Capital, Solidvest, DJE Kapital, Werthstein and Investify, in late 2017 Baader also brought Fundamental Capital on board. It offers the fintech company from Willich fully automated asset management, from order processing through access to numerous markets to account and custody account management. “Besides the ongoing growth of the established firms, we will see further growth as many new partners go live soon,” says Riedel. “Baader Bank will further help asset managers to improve profitability and trading expertise while acting as a service provider, taking over some pre-trade, post-trade compliance functions, portfolio management help and so on. "Currently, 140 funds have mandated us as their external trading desk. This business has only been established over the last couple of years and we believe that this trend will continue. “We are looking forward to a sustainable growth story, as the service provider for digital asset management in Germany, or, ideally, in Western Europe.”

Issue 7 |



The Midas touch

Fingerprint-enabled cards have unlocked a new era in plastic payments and IDEX is set to reap the rewards, as CEO Hemant Mardia explains

In the war of convenience between mobile wallets and plastic cards, it looked, for a time, as though the phone would win, with some forecasters enthusiastically predicting that the total value of phone payments could rival that of cards within the next two years. But then Mastercard’s next-generation biometric card shimmied into the spotlight in April 2017. The first to feature an IDEX off-chip fingerprint sensor, it integrates high-quality fingerprints in a durable format but without the high price tag that had hitherto been the biggest barrier to biometric card adoption. Suddenly, cards weren’t just smart, they were sexy. Consumers trialling the technology in real time gave the new biometric card from Mastercard a big thumbs up and, in its most recent report, ABI Research said it now believed such powered plastic payment technologies were ‘on the cusp of a boom’. IDEX, a company that already has a strong reputation for fingerprint sensing, patent coverage, and a history of manufacture, is set to produce 70 million to 100 million sensors in 2020 – equivalent to a third of a market that is set to experience 400 per cent compound growth over the next three years, according to ABI Research. In 2016, close to four billion smart cards were shipped,


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according to Eurosmart (excluding telecom smart cards) and a growing share of these cards are expected to include biometrics in the years to come. “It was our mission over the last few years to integrate fingerprint technology into everyday standard credit cards and payment cards. Using that as a vehicle to add biometrics into payment hasn’t been achieved in a scalable way and at low cost before,” says CEO of IDEX, Hemant Mardia. He believes it’s the breakthrough the card payments industry has been waiting for. In August last year, IDEX announced a new biometric matching algorithm specifically designed to ‘deliver a stepfunction improvement in performance for applications with acute power, processing and memory limitations’. And in November, the company introduced a new enrolment solution for biometric cards that allows users to enrol conveniently by themselves. “We’ve seen great adoption of biometrics in mobile payment, triggering a lot of technological change and need for innovation across the industry,” says Mardia. “The challenge lies in allowing a much more convenient and more secure, user-friendly way of making transactions so they’re friction-free.” Technically, that meant developing biometric materials that were compatible with our flexible friends and, crucially,

producing a payment card that holds both the digital template of the user’s fingerprint and the sensor that authenticates that fingerprint at a physical point of sale (its application in ecommerce is still a work in progress). No extra kit is required for the payment to process, so merchants and banks don’t even have to pay for the pleasure of joining this revolution; they get on board for free. And in territories where contactless is only just catching on, the cards leapfrog near-field communication (NFC) because they operate with any point of sale (POS) device. “It was really important to make sure our fingerprint sensor was the first to allow mass adoption by achieving a very thin and flexible form,” says Mardia of the technical challenge IDEX faced. “Obviously, the card has to work with existing readers, which have very low power generation capabilities, whether it’s contact or contactless. And in using existing ATMs and POS terminals, the thickness –

Our technology allows the total card cost to be extremely attractive. The value proposition is pretty clear for the users

Added security: Biometric cards protect the data source

specified by ISO standards – has to be met and our sensor is extremely thin. It solves the challenges of high performance and flexibility within a card. Until now, the only way this has been attempted is by putting a full circuit board into a card and that’s very expensive. Our solution doesn’t need that. We have a very low-cost, plastic, mass-manufactured solution – in this case, a polymer material that is already massproduced in Asia – and we integrate some sophisticated electronics using standard card manufacturing. So the breakthrough is that our technology allows the total card cost to be extremely attractive. The value proposition is pretty clear for the users.”

A secure solution IDEX’s software algorithms allow fingerprint verification and authentication designed specifically for biometric cards, which are nowhere near as powerful as a mobile phone. It means security is significantly harder to breach and, if a card was to be compromised, the damage is limited.

“Probably any biometric is vulnerable to attack with enough effort,” says Mardia. “But the key point is: can you scale it? We solve the security concerns around attacking databases by putting the fingerprint sensor and the whole electronic solution inside the card – it never leaves, so it stays within a secure environment. It is an electricallybased sensor, meaning it detects your fingerprint using electrical signals, so it’s not so easy to spoof, either. You’d need to take a good quality fingerprint from the correct finger and then, once a criminal had gone through all that effort, they’d find your fingerprint never leaves the card, so, in terms of effort for reward for the criminal, it’s very low and that’s the beauty of it.“ Two trials were carried out independently in South Africa in April last year using real credit and other payment cards enabled by a fingerprint sensor for real-time transactions. An additional bank trial was completed with UniCredit Bulbank in Bulgaria in August.

“The first two entities we trialled it with were Absa Bank – the leading bank in Africa – and a retail company called Pick n Pay. The results were overwhelmingly positive,” says Mardia, who has indicated he expects to see biometric payment cards rolled out this year. Meanwhile, he is now looking to develop a solution for card-not-present purchases. Mardia believes the extra security afforded by biometric sensors will give consumers and banks confidence to raise transaction limits above the current contactless threshold, enabling much higher value purchases, too. “Security will remain a huge focus in the future but as electronics and our sensors get more sophisticated there’s more we can do, so this will be a continuous evolution,” he says. “Multimodal intelligence – where you know the person’s identity because they’ve authenticated the card, you also know when they’ve done it, what sort of transaction they were making, and you couple that with location information or with some other biometric that you know – at that point, you can really raise the bar.” Issue 7 |


SECURITY, BIOMETRICS & COMPLIANCE Solving the puzzle: The AxiomSL platform gives companies an enterprise-wide, global view of data and compliance

Data: A strategic view

Can a single platform handle the growing complexity of regulation and compliance across all geographies and jurisdictions? Alexander Tsigutkin, CEO of AxiomSL, believes technology can meet the challenge Ten years after the worst financial crisis since the 1930s, there is no let-up in the pursuit of regulatory control and tighter governance. Indeed, with the introduction of a raft of new legislation across the globe in 2018, banks and financial institutions now face their greatest test yet. So, are they prepared for the changes and, crucially, is there a comprehensive and integrated way to keep on top of compliance?

Alexander Tsigutkin is acutely aware of that challenge. As founder and CEO of AxiomSL, a leading regulatory reporting and risk management company, he is well placed to comment on a decade of readjustment and reform that has been building towards the current watershed. According to AxiomSL’s 2017 survey on regulation and technology, the moment is


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not lost on senior executives in North America and Asia Pacific, either. When asked what their biggest concerns were about regulatory challenges over the next three years, 66 per cent of North American respondents cited their organisation’s ability to adapt to change, 55 per cent said improving data aggregation and reporting, and 38 per cent said allocating necessary resources and capital to ensure compliance. Respondents in Asia Pacific highlighted the same concerns, but gave greater emphasis to allocating resources and capital (66 per cent). One thing on which they were all agreed was the need to be able to adapt quickly to a regulatory environment that is unlikely to remain static for long. The key to that, says Tsigutkin, will be in their handling of date lineage. “Firms must ensure they have a technology platform that interfaces across

all business functions, optimising automation and controls, and delivers workflow transparency and data lineage,” he says. “You have a number of new local regulations, such as in Asia with the Monetary Authority of Singapore's overhauling of its 610 reporting regime (MAS 610), which is very demanding. In Australia, you have the Australian Prudential Regulation Authority (APRA) changes, and worldwide there is the need to prepare for the new International Financial Reporting Standard (IFRS 9).” That’s not to mention the raft of legislation being introduced in Europe that impacts not only those operating inside the EU but anyone transacting across its border. In Tsigutkin’s view, being prepared means creating the right technology infrastructure to deal with new trade, transaction and reporting requirements right across the

organisation – capable of responding both now and in the future. “We provide financial institutions with a single platform that allows them to ingest the data once and use it for many regulations and requirements, not just for outside reporting to regulators, but also to streamline their internal infrastructure,” says Tsigutkin. And that can deliver huge benefits, he says. But while there has been unprecedented investment in technology since 2008 under pressure of compliance, the opportunity to use the same technology to improve a company’s own data and risk management functions has largely been overlooked. “Many financial executives believe regulators will continue to increase requirements for data capabilities, but only a few firms have begun to use data strategically to streamline and optimise business process and, ultimately, support business growth,” says Tsigutkin. “These days regulatory bodies require risk management reporting as well as reporting from a financial standpoint. Regulations blend risk and finance disciplines, which is something banks didn’t have in the past.” It’s taken a while, though. “After the financial crisis, the United States set the ball rolling, but it took some time for other nations to take the new regulations on board and think them through in terms of their own local requirements and the need for greater harmony. Basel, FRS, the revised Markets in Financial Instruments Directive (MiFID 2), the European Market Infrastructure Regulation (EMIR), and the General Data Protection Regulation (GDPR) are all examples of a move in this direction,” says Tsigutkin. Some are only now being approved and implemented and, because of the delay, not all of them are still relevant. This is where AxiomSL can smooth the way for businesses and make sense of a complex and changing landscape. “We do this by analysing and quickly adapting new requirements into our technology and deploying the technology worldwide for financial businesses of all types – banks, broker dealers and asset managers,” says Tsigutkin. He believes that data lineage is the ‘cornerstone of data governance’, and that if you can understand what is happening from the ‘point of source, of data ingestion’, all the way through the information chain,

and where and how data is touched and modified, you can control it. “Our data lineage tool helps financial institutions be more transparent and more efficient, and understand what happens to data throughout the entire process,” says Tsigutkin. “It solves data governance issues and keeps companies afloat of regulations as well as helping with them with their internal management.” Regulations across jurisdictions have the same data management characteristics and can draw on the same infrastructure and methodology, he argues. “AxiomSL brings it all together. We use a lot of the same approaches and tools, the same data, because we ingest the data at a granular level and apply the new requirements for regulations. We have very strong versioning capabilities and help organisations to evolve. They have the benefit of one platform that streamlines a multitude of regulations across all locations and geographies.”

Many financial executives believe regulators will continue to increase requirements for data capabilities; only a few have begun to use data strategically to support business growth Tsigutkin calls this a ‘strategic view’ of data, and says that because regulations must eventually be harmonised, it is important to start with the right approach. That means looking at data through one platform, rather than in a segmented way. “Cloud storage helps us to achieve the necessary overview and control,” says Tsigutkin. “We take information in our clients’ systems and, without transforming the data into a particular regulation, keep it available by translating regulations into a set of rules. We then apply those rules to the data. “So, all the regulations that are coming into play don’t actually augment the data itself; they just apply the rules to the data, and generate the results. This is how we remain agile and can handle a multitude of

regulations. And, of course, our close relationship with the regulators keeps us abreast of all the new changes. Handling data ingestion is the easy part for us, because we are experts in data integration and can apply the rules without the data itself changing.” With the emphasis today on big data, how is AxiomSL handling structured and unstructured data? “While many institutions have adopted a big data approach, they still have plenty of structured data sitting in their systems,” says Tsigutkin. “We’ve developed technology that taps into big data and converges or integrates it seamlessly with structured data sources. Whether it’s used for risk management or regulatory reporting, the data can be accessed, managed and controlled in any way required.” Flexibility is thus a key part of the AxiomSL platform and business proposition. The company has a large group of subject matter experts who continually monitor the financial industry, noting changes that need to be addressed by technology with a global view in mind. “It’s very much a holistic approach,” says Tsigutkin. “When we build a technology solution for a particular requirement, such as trade and transaction reporting, liquidity calculations or liquidity reporting, we provide a total environment. The data is gathered and collected separately from the rules and analytics, and the presentation layer, in terms of disclosure, such as XBRL reporting, is also separate. The result is multiple layers.” This means that whenever a change occurs to one of the layers, it won’t affect everything else. It gives AxiomSL great flexibility for handling updates to regulations and avoids the need to completely revamp the solution. Tsigutkin describes it as an ‘industrial approach’, one that enables AxiomSL to stay on top of regulations and gives clients enough time to onboard the new requirements and go live with them very quickly. Much has changed over the past 10 years for financial institutions and in this new world much will continue to. “Regulators will continue to increase requirements for data capabilities,” says Tsigutkin. “Our aim is to ensure companies use data strategically, to improve both regulatory reporting and risk management, but also to support business growth.” Issue 7 |



Safe as houses Damian Richardson, Head of Payment Innovation and Strategic Initiatives at NatWest, discusses how the bank is using biometric technology to secure customer data The rapid growth of financial technology is enabling banks to interact with their customers through many different channels. With bricks-and-mortar business giving way to online and mobile services, accounts are now increasingly accessed via browsers and apps, transforming the customer experience and day-to-day transactions. However, while digital innovation and initiatives such as open banking are reducing friction and eroding traditional boundaries, there is an increased risk of fraud. So, in a world where business relationships and practices are fast changing, how do you authenticate user identities and keep accounts safe? Damian Richardson, head of payment innovation and strategic initiatives at NatWest, emphasises that whatever the future brings for financial services, one thing must remain constant – the basic tenet of banking: to protect the customer at all times. “Customer security and trust are everything,” says Richardson. “Our relationship with our customers must never be compromised by digital progress


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and new practices. Keeping customers and their money safe is always our top priority, and when we develop new ways of working and new services, we must also develop new and more secure measures to protect data.” Today that means multiple and mutually exclusive levels of security. “It’s not just about having a key to the front door,” says Richardson. “It’s about how to secure the whole house, how to keep the entire building safe from unauthorised access. Biometrics, in addition to other independent security measures, is one way we can increase our overall defences and makes it far more difficult for fraudsters break in.” The need for tighter security is a reflection of new consumer habits. “We’re seeing big changes in consumer behaviour,” says Richardson. “Customers are going mobile and they expect fast, on-demand service. We must ensure that we give them the experience that they want while at the same time building high levels of security into every new channel and service offering. If we’re opening the door to new banking

experiences, we must make sure we’re not also opening it to fraudsters.”

The key is you Two-step authentication, with a bank card and a bank PIN, has long been used to control access to sensitive systems and data. But this is no longer enough in the omnichannel and mobile world of banking. Customer accounts and confidential data are targeted every day by cybercriminals, who frequently outsmart traditional security. So, in addition to something you have (your card) and something you know (your password or PIN), a third line of defence is being introduced – namely, something you are. This is where biometrics comes into play – a physiological defence against break-in. Fingerprints, voice recognition, facial scans, and iris scans are unique to every individual and are just some of the ways additional authentication can be incorporated into devices and cards. “We already use touch and face ID on mobile phones,” says Richardson, “allowing customers to access our mobile app, and we are collaborating with

fintechs to ensure we explore the latest developments in biometric technology and other techniques.” In fact, it chose Israeli start-up BioCatch, a leader in behavioural biometrics to ramp up user protection using biometrics two years ago. Launched in 2011, the Israeli company analyses human-device interactions and NatWest began deploying its technology to a limited extent in 2015, trialling it in Coutts (part of the same banking group) as well as with some of its business customers. At the time it said it would roll it out to NatWest personal account holders in late 2017. The technology captures more than 500 points of behaviour, including hand-eye coordination and finger movements, and creates a unique user profile. The data is categorised into three different layers of security: cognitive traits (typically eye-hand coordination, applicative behaviour patterns, user preferences, device interaction patterns and responsiveness to invisible cognitive challenges), physiological factors (including left/right handedness, press-size, hand tremor, arm size and muscle usage), and contextual characteristics (device ID, network, geolocation, transaction and navigation behaviours). Collectively, these points are very difficult for a hacker to duplicate. BioCatch can recognise behaviour anomalies from the moment of login and throughout an entire session. “That means we can easily distinguish the behaviour of an authorised user from an imposter,” says Richardson. “BioCatch also recognises a wide variety of malicious attacks where victims are typically unaware that their banking session has been hacked. The technology is playing a crucial role in strengthening our security systems, and there have already been many examples of it alerting us to suspicious activity and protecting our customers from fraud.” The technology proved its worth early on by blocking fraudulent attempts to transfer funds, identifying remote access Trojans during an online session and identifying fraud attempts arising across online and mobile channels. Following earlier resistance, research shows that consumers are warming to biometric technology. A study in 2017 by

Visa, polling 1,000 consumers in the United States, revealed that 86 per cent were interested in using biometrics to verify identity or to make payments, and more than 65 per cent are already familiar with biometrics. An earlier survey, conducted in 2016 by Equifax for UK consumers, also showed high levels of awareness and approval, with 56 per cent of respondents happy to use biometric methods in place of their usernames and passwords. Ease of use is a key benefit of biometrics, which means that there is a double plus: better customer experience combined with better security. Passwords and PINs are cumbersome, often forgotten and sometimes easy to breach because of poor consumer behaviour. Currently, fingerprints are the most-used type of biometric recognition, but there is growing enthusiasm for other physiological controls, such as face recognition, iris scans and even venous scans (ultrasound imaging), particularly if they mean a quicker, more efficient customer journey. There are also other benefits. Biometric authentication can transform the banking experience beyond simply easing security

If we’re opening the door to new banking services we must also make sure we’re not opening the door to fraudsters... Biometrics can increase our defences protocols. For example, a customer could enter a branch where beacons or other sensors are installed to authenticate them biometrically. This could then activate other services to help the customer, automating and enriching their visit.

Extending the biosphere Like all banks, NatWest must prepare for this year’s big changes to the regulatory environment, which of course have implications for security. In particular, the new Revised Payment Service Directive (PSD2) specifies requirements for strong customer authentication (SCA). Under Article 98 there are references to

biometric recognition, which it defines as one of the possible factors in two-factor authentication, the minimum requirement for security. A positive for the biometrics movement, it also makes NatWest’s initiative with BioCatch even more timely. But it doesn't end there. Richardson says NatWest is working with a range of other fintechs and third parties that can help with the arrival of open banking and stiffer regulations, including the use of blockchain and artificial intelligence. “We’re focussed on a number of deadlines,” he says. “With the advent of open banking this year, we need to allow authorised third parties to access our accounts, subject to customer authorisation, to make payments and see relevant data. This will lead to new services in 2018 and beyond. I think we’ll see a lot of application programming interface (API) activity, with fintechs accessing our data as well as others’ data and creating new propositions.” The bank is plugged into all the latest research and innovation hotspots. “We have scouts in Silicon Valley and we’re active in Israel, a world leader in IT research and development,” says Richardson. “Open Experience, our Edinburgh technology centre, allows us to experiment with APIs, artificial intelligence and other developments. We also have a number of accelerators, including a partnership with Entrepreneurial Spark, and a Californian company called RocketSpace, which has been working with us in the UK.” Housed in NatWest’s Regents House in London, the RocketSpace centre is the first technology campus of its kind in the capital and the first to be set up outside of the States by the tech accelerator, which previously hot-housed both Uber and Spotify. The London location will eventually be home to around 1,500 high-tech, high-growth companies. NatWest is clearly committed to new technology and increasing its digital business. “But it all comes down to the customer in the end,” says Richardson. “We must always ask how new technologies can improve the customer experience and remove pain points. Whether it’s biometric authentication or open banking, the overall customer journey is the true measure of progress.” Issue 7 |



Banking on a better side of business Firms with a social conscience are businesses. They look like businesses and they operate like businesses. Employees get paid, owners take a wage. Firms with a social conscience devise and execute commercial strategies that build their business while also providing a social impact.

Why should organisations with a social conscience face bigger barriers to finance? asks Unity Trust Bank’s Daryl Wilkinson

At Unity Trust Bank, we call this our ‘double bottom line strategy’ – meaning that we are focussed on creating a positive economic output while also delivering shareholder returns. By investing in the world around us we all stand to benefit. I’m surprised my fintech colleagues haven’t discussed this more as many are doing exactly that through their work. I wonder if the technology headlines are drowning out the financial inclusion, community development, mental health and other socially beneficial stories that could otherwise be told. I spoke with Dr Rebecca Harding recently, who advises the Council of the Society for Business Economists and is a former chief economist at the British Bankers’ Association, as well as being a former advisor to the Treasury select committee. Dr Harding is very enthusiastic for the sector and has invested her time and expertise to explore the motivations, values and economic contribution of socially conscious enterprises. She told me: “We know that social and environmental challenges are here to stay and they need a new business model to deal with them. Socially conscious businesses have that model.” She and I will be working more closely together to shine a brighter light on these firms.

are sitting up and taking notice of this growing sector. With NatWest’s SE100 data report revealing a combined profit of £1billion, I think these models of business are already hitting the mainstream. An obvious connection for me is, of course, Unity Trust bank, which I joined in May 2017. We are a bank proud of our social conscience and offer an ethical alternative for other socially minded businesses. In the first half of last year alone, we provided a record £100million of loans to businesses and organisations that give back to society. The Big Issue, Divine chocolate, AgeUK, Cafédirect and Brewdog

Being social matters Firms with a social conscience are taking sustainability to a new level. They do not rely on donations, grants or funding over the longer term. They are scalable enterprises, providing genuine and secure support for their cause. Increasingly, people


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Traditional sources of funding can look sceptically or just plain confused at a business whose sole purpose is not profit are all fine examples of firms with a social conscience; building their organisations while making a positive impact on society. A true start-up success story is TOMS Shoes, created out of a vision for a new ‘Tom’orrow’, its ‘one for one’ mission to see a pair of shoes donated to a child in a developing country for each pair sold. This has resulted in more than 75 million pairs of new shoes being given to children in need. However, not all socially minded projects are created at start-up.

Traditionally, when we think of Tesco we think large ‘profit-making machine’ and while that is still true, it has also taken social missions beyond the CSR report. In recent years it has set up its Eat Happy project to invest in communities through educating families about the food they eat, promoting healthier eating for children.

Consumers care One of the biggest barriers to social entrepreneurship has been finance. While there have been many fantastic ideas out there, transitioning from a small-scale project into a large and sustainable business is difficult. Traditional sources of funding can look sceptically or just plain confused at a business whose sole purpose is not profit. That has changed in recent years, thanks to organisations such as Social Enterprise UK, Big Society Capital and Big Issue Invest, who are all helping to connect organisations with investors that understand and buy into the profit-wth-purpose mission. Further to this, they also connect organisations to much-needed expertise and mentoring, helping these firms to plan, operate and thrive. This expertise is helping to grow the sector into a very interesting proposition – both in terms of financing and employment. Another reason for the growth in socially conscious businesses is the consumer. We care about the ethics and contribution of the firms we engage with and want to put our money where our hearts are. A Nielson report showed that one in three

consumers is willing to pay more for goods and services that are socially responsible, and a CSR statement on a website no longer cuts the mustard with informationrich, digitally savvy consumers. In the past three years alone there has been a 30 per cent rise in consumers saying their purchasing habits are influenced by their social beliefs, according to The 2017 Edelman Earned Brand study.

A more social future? Further change is coming, due to the way in which communities are funded. The public wallet is increasingly challenged and a new

way to sustain the vital work in communities – giving support to those that need it most – is essential. Karen Bradley, until recently the Secretary of State for Digital, Culture, Media and Sport, commented in relation to the creation of the Inclusive Economy Unit in 2016 that: “There has never been a more important time for government, civil society and the

private sector to come together to deliver a country that works for everyone.” Creating new ways to make our economy work so we can fix the unnecessary problems facing our society, while also creating economic returns, is both a complex and exciting venture. But with organisations such as Social Enterprise UK, government support and investors ready to nurture the entrepreneurial spirits, there has never been a better time to turn social visions into successful missions. My busy schedule, with multiple demands on my time and high-pressured deadlines, hasn’t changed since moving into the sector, but what I do now and how I think about it challenges me to deliver even greater results. It’s a challenge we all relish at Unity Trust Bank and I personally believe that in doing so we are banking on a better side of business. Good apples: Businesses with a social conscience grow more than profits

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Digitising Greece Piraeus Bank is emerging from a Greek financial tragedy by taking customers towards a digital future, as Senior Executive Eftichia Kasselaki explains Greece is on a long and difficult road to recovery after teetering on the brink of financial collapse almost a decade ago. Thanks to a succession of EU bailouts and rescue packages, the worst may be over, but local banks still face a mountain of debt even though trading forecasts are now more optimistic. As the country’s leading financial institution in terms of assets, Piraeus Bank has been in the thick of the unfolding Greek financial tragedy. In common with the others, it has struggled with bad loans and been forced to restructure, and its position will remain challenging until the debt burden is eased. Nevertheless, Piraeus is a good example of a bank that is transforming the way it works. In her role as executive general manager, retail banking, branch network and deposits, Eftichia Kasselaki is leading the drive to digitise the bank and introduce technologies to improve efficiency and customer experience. “We are looking closely at artificial intelligence and robotics,” says Kasselaki. “Our most recent applications are for call centres, where our aim is to make automated responses as human as possible when it comes to language.


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We are investing a lot to get this right, to ensure interactions are natural and focussed on the needs of the customer.” KasseIaki is conscious that although the technology is sophisticated, it’s an experimental field and needs careful preparation. This was emphasised in a recent report by research and advisory firm Forrester, which said that most chatbots fail because of unclear purpose and poor planning. “For some things, there’s no substitute for a human,” says Kasselaki. “You need to find the right balance, which is what we do at Piraeus. Digital technology gives you the tools to make connections and increase support, enhancing the customer experience, but you still need the human element for the fine details and the most complex problems.”

Customer still king The digital customer experience is a new battleground for banks. Business is being won or lost on how they use technology to engage their customers while maintaining traditional banking values. Everyday needs, the basic administrative details of account management, depend on speed

and efficiency, and this is best served by digitisation. “Customers may be loyal to a particular bank for the total relationship,” says Kasselaki, “but today they are increasingly influenced by how quickly and accurately their bank can meet their day-to-day transactions. Banks must marry traditional face-to-face banking with digital banking so that it’s seamless and gives customers the best of both worlds. Wherever the customer goes, from the call centre to the website, a smart phone to a physical branch, the experience should be the same.” To that end, Piraeus regularly conducts a detailed survey called Voice of the Customer. “We monitor all the pain points and satisfaction points, and use this information to constantly improve our services – and not just transactional ones, but also advisory services,” says Kasselaki. It’s important to correctly gauge the customer’s appetite for change, she adds. “We need to know how far we can push innovation and what the priority investments should be for new technologies and customer experience.

We need to innovate in a way that is truly beneficial to customers, and, of course, profitable for the bank.” Both its biometric-enabled winbank mobile app and its fully automated ebranch project – a first for Greece – fall into that category. Three ebranches have opened in the Athens area since December 2016. “The ebranch network is designed to be homely and inviting,” says Kasselaki. “The aim is to have a reduced physical presence but to maximise the digital experience when face-to-face advisors are not necessary.” In these branches machines are set flush into walls around a living room-style area, with sofas, coffee machines and mobile device charging points, all made enticing by low-level lighting and a fresh scent. The look and feel were created in partnership with an Italian design company and have gone down well with customers; in just seven months, Piraeus’ ebranches were processing 84 per cent of the volume of transactions undertaken in nearby traditional branches where staff have been freed up to concentrate on higher value products. A feature of the fully automated ebranch is a video link to a remote cashier. Interestingly, in the first 11 months, 33 per cent of users were aged 60-plus.

Supporting a ‘less cash’ agenda The Piraeus e-experience should be seen in the context of the country’s move towards a cashless society – the domestic banking industry’s declared aim is to gradually

reduce cash usage, helped by governmentimposed restrictions on capital transfers and cash withdrawals from ATMs with mandatory card acceptance for businesses. Physical branches will always be needed for advisory work, as complicated customer services, such as investments and lending, require the reassurance and attention that only a real, live member of staff can give, says Kasselaki. Branches also act as training centres, accelerating digital transformation. The bank is particularly keen on using them to develop innovative technologies such as

We can’t afford to be complacent and let others move into our space; we don’t want to end up as the backend for fintechs who steal the direct customer relationship distant virtual cashiers and distant advisors, backed by appropriate guidance and support so that customers, including the elderly and people with disabilities, can make a smooth transition to digital services. As with many of its competitors, it’s finding a way to incentivise users to make the switch. Called ‘Yellow Rewards’, the programme is part of Piraeus’ winbank web and mobile banking service, and it enables customers to earn ‘Yellows’ for using digital channels.

“The Yellow programme rewards you simply for your daily transactions,” says Kasselaki. “If you use a Piraeus bank card for purchases, you earn ‘Yellows’ that can be redeemed from partners in the programme, as well as through the bank’s Yellowday service. Yellowday is our website for buying consumer goods.” The new regulatory landscape is an added stimulus for change, says Kasselaki. “We can’t afford to be complacent and let others move into our space; we don’t want to end up as the backend for fintechs who steal the direct customer relationship. On the other hand, openness creates opportunities for us as well, and we can work with third parties to extend and upgrade our services using new technologies. “We’ve also developed very important skills for customer intelligence and data usage, and we’re preparing to share this data with our customers to help with their financial planning. So, if customers agree to do this, in accordance with the terms of the General Data Protection Regulation (GDPR), we have an even richer database of information to improve customer service.” With Greece moving closer to becoming a ‘less cash’ society, ‘digital first’ and ‘mobile first’ have a stronger appeal than in many other economies. Digitisation is not the answer to Greece’s long-term debt and liquidity problems, but what it does provide, as Piraeus is demonstrating, is a more efficient business model and a better way of engaging with customers.

Ancient and modern: Greece is moving towards a 'less cash' society through progressive digitisation

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Now you see it, now you don’t If banks are to survive, will they have to perform the ultimate ‘white rabbit trick’? We asked the leaders of five very different fintechs what invisible banking ‘looks’ like The arctic hare, also known as the polar rabbit, is a lesson in evolution. The master of the original ‘white rabbit trick’, it transforms itself during the snowy season, at which point, to the naked eye, it as good as disappears. A natural loner, it’s learned to be sociable for the sake of survival, congregating in groups of dozens, sometime hundreds and even thousands in a mutually beneficial biosphere. And it’s agile, accelerating up to 40mph to stay one step ahead of predators, who are both numerous and merciless. Banks are much like the arctic hare. Challenged by a harsh environment, invisibility could be their survival cloak; threatened with disintermediation, a standalone bank’s lifespan may be brief – better to suppress your natural instincts, cooperate and thrive; and speed of digital change is of the essence, especially when a pack of fintechs like Starling, Monzo, Pockit, Revolut and GPS, all hungry for a limb of your business, are snapping at your heels. KPMG’s alternative vision of banking just 12 years from now paints a picture of a financial landscape as harsh for banks as that of the northern tundra for our hare. A good survival strategy, it believes, is to fade from view. This isn’t extinction; far from it. By 2030 it predicts banks could be present like never before – there at the intersection of every financial decision a consumer makes… we just won’t see them. To achieve this feat of invisible indispensability, banks must ‘undergo the necessary evolution and put customer needs first’, according to KPMG, which means developing products, processes or platforms that give customers what they really, really want – which is intuitive, fast and frictionless access to financial services, be it payments, insurance, investments, loans, foreign exchange, mortgages… the list goes on.


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For challenger banks, the philosophy of making the customer the driver of change, rather than the passive recipient of what’s thought best for them, is already hardwired into their DNA. “One fundamental key point of the success story behind new entrants and fintechs is that they have looked at problems they’ve encountered in everyday life,” says Suresh Vaghjiani, Managing Director of Global Processing Services (GPS) that works with, among numerous others, Revolut, Pockit, Osper, Monzo and Starling. “And whether it’s managing your personal finances or making payments overseas, they’ve created the product to solve them. “So, when I look at traditional banks’ innovation labs, I think they’re great at developing solutions, just as long as they constantly keep in mind that the aim is solving a real-life problem.

What I think will eventually happen is that traditional banks will give up on that end-user experience and say, ‘we’ll sit behind the scenes’ “What I think will eventually happen is that traditional banks will give up on that end-user experience and say, ‘we’ll sit behind the scenes, provide the ecosystem and aspects of the payments value chain, and allow some of these new entrants, that are actually more agile and better than us at providing a truly seamless user experience to interact directly with the customer'. “Banks may be concerned about losing that final touchpoint because if they don’t have that relationship with

the customer, they wonder how can they upsell other services. But I think that the market will naturally evolve.”

Cutting a slice By 2030, KPMG has hypothesised that banking will be made up of three distinct layers: the platform, the product and the process. Should banks be the jam in the middle – the juicy product providers; the utility processors on which this financial gateau rests; or the platform operators, the icing on the cake, using advanced data analytics, biometric authentication, artificial intelligence (AI), connected devices, application programming interfaces (APIs) and Cloud technology to build new touchpoints with the consumer? Powered by data-rich AI, these platforms could help to synch our daily lives, giving us not only greater insight and control of our finances, but also providing access to pretty much whatever we want or, even better, offering it to us before we know we want it. Could the future invisible bank – through APIs – facilitate the ordering and payment of groceries, direct from your fridge, for example? Find, pay for and guide your electric car to a parking space? Even anticipate the arrival of a baby by analysing your transaction data and social media posts and presenting you with better life cover or new home loan options?

The joy of… banking DBS, formerly the Development Bank of Singapore, a legacy institution if ever there was one, has figured out that people’s lives do not revolve around banking; they do, however, revolve around transactions and

after tearing up the rule book and most of its existing infrastructure in 2009, the bank set out to meet those customers where it mattered – in the dinner queue at school, for instance, where it enabled kids to pay for food with wearables. Its declared aim was to ‘make banking joyful’ by becoming invisible yet ever-present in its people’s daily lives. It certainly made shareholders happy; profits almost tripled between 2010 and 2016. Many incumbents have barely begun that intuitive digital journey, while plenty of neobanks are more than half way there. Pockit, for example, offers real-time notifications of spending (also useful for countering fraud) with daily budget updates and pin charge notification in the time it takes to swipe the card, giving in Pockit’s case often previously unbanked account holders complete visibility of their finances. And that’s just the start. “Our customers have needs across financial services that literally touch every single vertical,” says founder and CEO Virraj Jatania. “So, whether it’s insurance, savings, budgeting, access to credit cards, loans or overdrafts, we know that there is a huge opportunity to solve those problems for our customers, and we have an aggressive aim of launching new products every couple of months. When I see a customer who would never have gotten served by one of the mainstream banks or a payday lender and we’re able to solve a problem for them, that’s massively satisfying.” UK startup Monzo, meanwhile, which is on course to recruit its millionth customer this year and has just finished migrating its initial cohort of prepaid cardholders to current accounts, is building a ‘control centre for your money’. “We’re not going to come out with Monzo Mortgages, or Monzo Credit Cards, but we do want to give people visibility and control of all of their money, wherever it sits,” says CEO Tom Blomfield. “For Monzo, that means using the Revised Payment Services Directive (PSD2) to pull in the data from their HSBC savings account, or their Nutmeg ISA, or their student loan, or their pension, and aggregate it all in one place.”

Banking as a marketplace Anne Boden, founder and chief executive of the UK’s Starling Bank, was one of the first to talk about banks as a market

Social model: Revolut is so much more than a currency app


From FX to UX A FX platform with a FB effect was what Revolut set out to achieve, but as Co-founder Vlad Yatsenko explains, it has ambitions to be so much more FF: How did you come to be involved in Revolut? VY: I was at a traditional finance company in the City when Nick (co-founder and CEO Nikolay Storonsky) got in contact with me. The first offering from Revolut was a currency app, but the goal was always to create an all-you-can-eat financial product. Whenever you think about money, we want you to think Revolut. So from the start, everything that we added to the platform was designed to increase its usefulness. For instance, with a traditional foreign exchange (FX) platform, if I have 10 or 100 friends on there with me, it doesn’t actually make my experience any better. We wanted to bake in stuff from the start that would not only make it a cool FX platform, but it would also give it that Facebook effect. So, the more people on it, the more useful it becomes. It allows us to build other services based on that network. The more people on it that users can send money to and request money from, the more we can build other features based on that bill-splitting. FF: How important then is the FX product? VH: We used FX as an on-ramp because it’s cool. A customer thinks ‘I’m going to save loads of money with Revolut when I go travelling’. Then they realise ‘it’s really easy to send money cross-border, and it’s the cheapest, too!’ and ‘oh, I can split bills, that’s really cool’. Then gradually,

we’ll add more traditional things that you’d associate with your bank. FF: How did you go about building the Revolut platform; did you use third party suppliers? VH: We wanted to do all the core functionality in-house, but there were other things that, because we were a small team of four or five guys, we didn’t have time to do. One of those was the in-app chat. Initially we were using third-party services because we wanted to focus on the app and the FX and the P2P elements – all the sending and requesting money.But as we started to grow and more users joined the platform, it became obvious that things weren’t a good fit for what we needed. At that point, it became easier to persuade people to join the company – we’d begun to get more users and had started to get press coverage. So, that’s when we started to build out the chat feature ourselves. I think the general approach we would take is, if we want to shift something fast to market, we’ll see who’s out there that can do it and if they do it well, we’ll continue to use them. If not, then we’ll build it in-house. I think we have that classic Ford Motor or SpaceX mentality, which is if you control every single part of the process, from start to finish, and build all the tech in-house, it’s hard but it gives you much more control and I think, in the end, a better customer experience.

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place for apps linked to customer accounts – and why not? With the likes of Google, Apple, Facebook and Amazon (GAFA) muscling into banking’s space, why shouldn’t banks trespass into theirs? Live since last year, the Starling Bank Marketplace currently has five third-party partnerships from which customers can benefit: Yoyo Wallet allows them to collect rewards by paying retailers through their Starling account; Yolt allows them to see all their bank accounts, wherever they are held, in one place; Flux digitises receipts and gives access to them through the Starling Bank app; Moneybox rounds up debit card spending to the nearest £1 and piggybanks the change in a stocks and shares Isa; while Tail offers rewards to customers using a Starling account to buy locally. “The important thing is that everybody’s benefiting from better services, better apps and better pricing,” says Boden. “We believe that the consumer shouldn’t be forced to buy all their services and products from a single bank or a financial institution. We believe customers deserve the opportunity to buy the best product from the best provider. Doing that is very difficult, sometimes – if you decide to buy a mortgage from somebody new, not your own bank, for instance, you have to go through their know your customer (KYC) processes – show your passport, and your utility bill and then fill in lots of forms. Finally, after weeks of waiting and wondering, you might get an offer. “What we’re doing is respecting the fact that the customer owns the data within the bank and the customer can give permission for us to share that data with a third-party,” continues Boden. “For example, we’ll have some mortgage providers in our marketplace and when you want to get a new mortgage, or refinance your mortgage, you’ll have an easy way of pressing a button and selecting who you want to quote you for it. We will then do all the work for you, you won’t have to re-KYC yourself or present your passport to the new provider, we will pass that information over, if you give us your permission to. “What we’re doing is taking the heavy lifting out of shopping around. But we’re doing it in a far more sophisticated way than a simple comparison site because we are using customer data and people are allowing us to present the data to other firms in a very understandable way.”


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Like Pockit and many other new entrants, Boden takes an altruistic view of product development that means they are already way over the open banking horizon imagined by regulators in the UK and Europe this year. “We hope that we can be thought leaders and set the standards for what this [new banking] world should look like. We had open APIs, PSD2-compliant APIs, the day before we launched because we decided that those were prerequisites for providing a good service to customers,” says Boden. “The idea is that we have a whole host of developers out there who use our open APIs every day to innovate and create. There was a wonderful example at Money20/20 in Copenhagen where somebody gave a presentation about using our open APIs to build a voice recognition

It’s all about recapturing the trust and getting people to fall in love with a finance brand Vlad Yatsenko, Revolut

AI tool that sat on our platform. The more people that do that on our platform and other platforms to come, the better value and services for customers.” Pockit’s Jatania agrees that it’s fintechs that are flying the flag for open banking. “It’s going to present some really interesting use cases,” he says. “We’re building our API so other companies will be able to interact with our data on customers and we’re looking forward to seeing the ideas that come out of that, things we haven’t even thought of, but someone, maybe in a garage somewhere is.”

That said, DBS made its vision a reality by building an ecosystem of partnerships to improve customer journeys, such as buying a house, and recently launched more than 150 developer APIs. It’s a big, traditional institution living the open banking dream.

Trust and transparency It may sound like a tautology, but an important characteristic of invisible banking is transparency – with simple terms and conditions and good communication it engenders trust by giving banking a new dimension. It’s what GPS’s Vaghjiani describes as the ‘personal touch’. There’s almost a love-fest for neobanks among their fans. It comes from giving them unparalelled insight into their finances alongside value-added services to help them achieve their financial goals. It’s a welcome breath of fresh air for customers jaded by their previous experience with financial institutions, says Monzo’s Blomfield. In this new contract with consumers, there’s no room for fudge. He gives an example: “We had a couple of big outtages that were caused, unfortunately, by failures at a third-party supplier.” says Blomfield. “Why were we so transparent about it? Because I guess it’s what we would have wanted as customers. We were frustrated that when things went wrong with the big banks, they kind of hushed it up, so you were never really sure what was going on and why. Transparency is an amazing way to build trust, especially in the internet age, where there’s so much information flying around. Your customers are going to be talking about it anyway, so you might as well just say ‘look, this is what’s going on.’ Sunlight is the best disinfectant as they say.” Vlad Yatsenko, co-founder of Revolut, the currency app that’s transforming into an ‘all-you-can-eat financial marketplace’ agrees. “Trust and customer experience [or the lack of them] has opened up the industry an enabled fintechs like ourselves to have a chance. One of the advantages you have of coming into the industry as a new player is that you have a completely clean slate, so you can build relationships from the start. It’s all about recapturing the trust and getting people to fall in love with a finance brand.” Transparency? Trust? Love? In the summer, the Arctic hare turns from white back to common brown; the thing with the banking industry is, there’s no turning back.




New players don’t have the problem of pouring ‘new wine into old skins’. They can build technology around the customer rather than trying to force legacy systems into uncomfortable positions. Anne Boden, founder of Starling Bank and Tom Blomfield, CEO of Monzo gave us their experience ANNE BODEN: We always had the intention to build a bank that was all about doing the best thing for customers. Technology is a huge part of that. So, we built ours from scratch. There are guys here who actually sat down with a laptop and committed the first line of code. So, our applications were built here, using the best technologies available at the time. That is something very important to us. We need to build a platform that can deliver the service to customers at the required availability and resilience, at a cost that customers can afford and which allows us to make a little bit of profit. To do that, we need to access all the services, as natively as possible. We are members of faster payments, and we provide faster payments not just to ourselves, but also to other fintechs and government institutions. We are using what we have created for the benefit of the industry, as a whole. We’re hoping that, together with lots of partners, both in our marketplace and using Starling Payments Services, we will together kickstart an industry. We mostly have engineers here; we are just as much a tech company as a bank. If you look around, we’re all about measurement, making sure that we do things better every day. The majority of new banks coming to market tend to buy a package and a whole army of people arrives to install the package and parameterise and configure it. Then they make it live and all go away. There’s no more innovation for the next 10 years. By contrast, we’ve built Starling and intend to keep enhancing it and developing it with our engineers. The important thing is not what you go to market with on the first day, but that every single day following that first implementation, you can do

We implement into our platform several times a day, and we release into the app stores every couple of weeks Anne Boden, Starling Bank something slightly better and improve the experience and products. So, we implement into our platform several times a day, and we release into the app stores every couple of weeks. This means Starling is continually getting better, and as we release more products, and do that in new, different ways, we should be raising expectations of this industry. Tom Blomfield: We used some third-party partners to get started really, really quickly; to get our prepaid card launched and to see if consumers cared at all about what we were building. And it turned out they did, which was awesome. But over the last couple of years, we

brought a lot of that inhouse. So, we now have our banking licence and we’ve built a core banking stack, top to bottom. We even built a Mastercard processor and got that certified, too. My current bugbear is card manufacturing, personalisation and chip profiles. We might actually set up our own warehouse and start manufacturing our own plastic, which seems insane, but it just seems like keeping it close really streamlines everything and results in a much better customer experience. We are limited by Apple’s approval process, so we only release a new app every couple of weeks, but we’d like to do it every couple of days, which is very frustrating. We’d prefer to be getting stuff out faster, because, again it uncovers bugs while they’re still small. If you have six-month release cycles, you could have some catastrophic error that you’d have no feedback on until it goes live to a million people and that really is a big problem. Whereas, if you’re continually launching small things, you can catch them very early, and fix them, before anyone’s impacted too badly.

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INVISIBLE BANKING Innovative: But GPS itself remains invisible to banking users


Switched on to payments Suresh Vaghjiani is Managing Director of Global Processing Services (GPS), which has helped a number of neobanks and fintechs into the market place. Now it’s looking to help traditional players with ‘invisible’ services FF: So what does GPS do? SV: When someone asks us that we usually respond by saying we’re a payment issuer processor, but it doesn’t really provide much

explanation without showing you what our clients have been able to achieve on our GPS Apex platform. Clients such as Monzo, which is launching a ground-breaking product in the banking space, and Revolut, which took the multicurrency market by storm by giving people the ability to change money at interbank rates. Then there’s Starling Bank, which was the first to launch Apple Pay as well as in-app provisioning of all the other banks, even those on the high street; and a new product entering the market called GlintPay, which is a card linked to the value of gold that allows you to exchange in realtime. We have more than 120 clients,

Money in my Pockit

and I’ve just mentioned some of those you’ve probably heard of; the ones you haven’t will be tomorrow’s fintechs. FF: What’s the background story? SV: We started as traditional programme managers, providing cards and solutions to the largest shopping malls in the UK, using a third-party processor. But if didn’t give us the flexibility and innovation that we needed, so we built our own processing platform that was very rich in APIs. The way it’s been built, means we provide a single platform that processes globally. So, whether a client wants to go live in Australia, the Middle East or Europe, we’ve programmes in every territory. BANKING FOR THE UNBANKED

As with the most successful ideas in fintech, Virraj Jatania, CEO of Pockit, drew on personal observation to launch an alternative bank for those who didn’t have one FF: Can you tell us the history of Pockit? VJ: I grew up in a number of emerging markets – India, Russia, the Middle East – and had seen first-hand the challenges faced by consumers who were outside of the banking system, getting paid in cash. My family’s business was in consumer goods and so we had a lot of factories where people would be paid in cash. When you looked at who was trying to provide banking services to these people, there was basically no one. Typically, what you see is pretty offline, opaque, expensive offerings – things like payday lenders, cheque cashing shops, cash-money transfer services, pawnbrokers and doorstep lenders. No one had really thought about how to


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build a digital bank focussed on solving these customers’ problems. I was amazed that no one had taken on that challenge because the numbers are huge. You have two billion people, globally, that fall into this market, and about 100 million in Europe alone. FF: So what was your solution for the unbanked? VJ: We launched the company about three years ago to provide financial services to financially under-served, unbanked, low-income consumers. We work with a few partners to make that happen. We have Barclays as a banking partner and we use them to access the clearing schemes. We work

with Global Processing Services (GPS), which provides the ability for our customers to have their transactions processed – when they pay with our card or they’re transferring money, it all goes through the GPS switch. We also work with an issuing banking partner called Wirecard. So, these are the three core partners who enable our product to come to life and have allowed us to move much more quickly than if we had tried to build everything ourselves. Building everything yourself takes too long and requires a lot more investment. What we want to do was to go out there and solve problems for customers. Choosing the right partners is critical to that and, so far, we feel confident we’ve

FF: What are some of the more left of field payment projects you’ve handled? SV: Last Summer, Lucozade approached one of the programme managers we work with, called MIR, to run a promotion around Transport for London (TfL). All the stations, including the Oyster gates, were branded ‘Lucozade, feel your flow’ and the actual bottles carried the message ‘Lucozade gets you home.’ In collaboration with MIR we enabled a contactless bottle that could be used as the payment option on the Underground. It was given out to commuters to use for one return journey between zones one and nine. It was an effective marketing and PR stunt but more interesting for us was being able to demonstrate how payment technology could be integrated in objects you would not initially think of. Another great example would be the Kerv ring. FF: Where do you see neo-banks or challenger banks fitting into the financial services of the future? SV: Well, the one thing that we’re seeing with all of these fintechs is that they’re constantly evolving and enhancing their offerings. Fintechs want to launch their product to market fast because they know if they don’t someone else will! So, they

find our GPS Apex platform and solutions appealing for the easiness of integration and speed to market. Things that would take a traditional bank a year to do, we’re having to do within three months for them. One of the things that they do particularly well is the level of engagement and interaction with their end customer. They can put incumbents to shame. The frequent interactions they have managed to put in place directly with their customers as well as the behavioural understanding of their user base, is almost as if an emotional bond and personal relationship has been created. You tend not to sit there and say, ‘I love my bank.’ but these new entrants are creating a real movement where there’s an affinity, a feeling like customers are part of the product, part of the decision-making process. I think there’s great lessons for the others in that. Finally, they are very clever in the way they access and use data. It allows them to gain real insights into their customers' needs, and enables them to sell additional services that an end customer would actually see as valuable. Imagine, for example, your card provider tells you that you’re paying too much for something but then offers you an alternative that saves money! So, the real value in what they’re doing is using big data to help drive their product

Banking for the unbanked: Now Pockit is extending its services

done that. We launched in September 2014 and now have about 215,000 customers in the UK. FF: What’s your pipeline for product releases now? VJ: Where we started was very much with basic banking services – a current account and an account into which customers can have their salary paid. We provide 28,000 locations across the UK – basically any corner shop or convenience store – where people can deposit cash. Then they also have the ability to pay bills from their

account and a card to transact with. That’s where we started but we always knew it was not going to be the main product. Once you get people to use your account and have their salaries coming in, you can collect data, understand how they’re transacting and the challenges they’re facing. So, it gives you a view of the customer’s life and that was what was really important to us. Off the back of that we can move across all the different verticals and financial services and solve their problems in other areas. That’s what we’ve started to do

strategy. By providing value to the end customers, they are creating a type of dependency towards the usage of their products. It’s like Amazon suggesting to you what other buyers have bought. There’s a value to that, and this is what we’re starting to see when it comes to these new payment companies. They are being very clever with the data in a way that the incumbents have not been able to do, as yet. FF: What’s on the agenda for GPS over the next 12 months? SV: We have become one of the major issuer processors for payments in Europe, and are well known for helping companies push the boundaries of payment innovation, launching products to market in record time. The year 2018 promises to be one filled with further growth, expansion into new regions such as Australasia and US, while continuing to invest in our people, technology and platform. We are increasingly seeing the opportunity for us to provide our platform and solutions to traditional banks where they’re looking to keep up with the fast changes in consumers' needs, looking for new ways to engage their brand with their customers, and where they want to be able to innovate, prototype and test the product much quicker. now. Last year, we launched an international money transfer service, covering all euro countries as well as Poland, Romania and the Philippines with plans to roll out to probably another 10 countries. We have also just launched a lending product. Because we have salaries coming into our customers’ accounts, we felt this was a great indication of someone’s credit worthiness. So, while they may not have a credit profile with Experian or providers like that, we have a lot of data that shows us that these are reliable customers. We are providing the ability for them to borrow money through our platform and when their salary comes in, we make the repayment to the lender. Thinking about the future, we know that our customers have challenges across financial services, whether it’s insurance, savings, building their credit history or getting access to a credit card. So, we’re just going to take one at a time and solve them as we go along.

Issue 7 |



It’s SME first!

Cooperation is the name of the game for Christoph Rieche, CEO at iwoca, the ground-breaking lender to small businesses. They stand to benefit most from the woda forging a future in digital partnerships iwoca has come a long way since it launched in 2012. The innovative fintech lender has made a strong impression on the smalland medium-sized enterprise (SME) marketplace, winning recognition and awards for data-analysing technology that allows it to extend flexible short-term working capital loans in the UK and Europe.

Since featuring in Fintech Finance in 2016, the credit platform has been busy widening its base and strengthening its offer, as iwoca’s CEO and co-founder

sets to make instant lending decisions, then handling the underwriting, loan management and financing. Crucially, small businesses can access this finance without having to leave the Tide app, which is fully integrated with iwoca’s systems. In fact, the iwoca platform allows any similar third party to directly fund small businesses in the same way. “The lending API is all about third-party enablement,” says Rieche. “We help others to service their customers with credit, in the same way that we service our customers. We feel there’s a huge opportunity to help banks directly, as well as other banking fintech

was lengthy. Some calls lasted up to 30 minutes and I spent a lot of the time in queues, waiting for someone to pick up. You learn very little about the actual process, and not much about the eligibility criteria. So, at the end of these calls, you are no wiser than you were before you picked up the phone.” If you are not a bank customer, you may be referred to one of their branches, to discuss switching, or possibly starting, a bank account, he says. And if you then enquire about a small business loan, you may have to schedule an appointment that could be weeks away, which is clearly no

Small’s beautiful: But SMEs face lending barriers

Christoph Rieche explains: “Over the past year we’ve seen significant growth and enhanced our platform. We’ve focussed on building our lending application programming interface (API) and have forged a strong partnership with challenger bank Tide. We see partnership as the way to extend our service, with the API facilitating connections across the financial sector.” UK-based mobile-first SME banking service Tide launched in January 2017 and has itself come a long way fast, backed by impressive investment. Its partnership with iwoca means customers can be offered loans of up to £150,000 with iwoca’s risk engine analysing the bank’s customer data


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companies such as Tide. Our technology enables us to support anyone who caters for the type of small businesses that we do.” According to Rieche, the incumbents badly need such a service and partnering with them is clearly where he sees the biggest opportunity for growth. “A few weeks ago, we investigated what banks are doing to help small businesses. There has been a lot of talk that banks are investing in the right technology, and making themselves more digital, so I expected to see some positive changes,” he says. “In fact, I was shocked at how bad the service is. “I called a number of hotlines to enquire about applying for a loan and every call

good for a SME in urgent need of liquidity. “They appear to be trying everything to put you off,” says Rieche, “which leads to great frustration among small business owners. Some people may accept that this is just the way of things – but it doesn’t have to be. Companies like iwoca are now breaking through the barriers and embracing small businesses. Rather than wait weeks, you can have the funds within hours. That’s the value and difference that we provide.”’

Partnering with banks In late 2016, iwoca agreed a working arrangement with RBS/NatWest to provide SME loans, a significant collaboration for

the six-year-old startup and a sign that the mainstream lenders are prepared to take the disruptors into the core of their business. Under the banking group’s Capital Connections service, customers who have had loan applications declined are referred to the fintech. Last summer, iwoca announced another partnership with an established banking group, Italy’s Intesa Sanpaolo, following investment from its venture capital arm. The platform also provides a fully outsourced service to digital German bank Fidor, and has integrated with Xero, a Cloud-based accounting software company. Describing the iwoca API that facilitates all these services, Rieche says it has a number of end points that allow the third party to feed information into the iwoca platform. It then returns all the necessary data to help the third party provide credit to its customers. “In other words, we serve you to serve your customer,” says Rieche. iwoca manages the complete customer journey, leading to the selection of the

most suitable credit product. It involves considerable data exchange as information is fed back and forth, including repayment schedules, handling legal agreements, the onboarding process and payment collection. There are no restrictions on white labelling, but transactions can also be made in iwoca’s name, while some companies opt for co-branding to show clear ownership of the product – it also helps to establish iwoca as a lender in its own right, in a market place still dominated by the banks. “The banks account for 80 to 90 per cent of all lending volume to small businesses, and it’s incredibly difficult to switch from a bank to another provider,” says Rieche.

“We’re a small company, fighting to be heard. We need to get our message across to the SME community and show there is an alternative to banks.” While awareness may be low, there is a conspicuous need to focus on the requirements of small businesses and provide better lending technology. The self-service element of the platform is part of what makes iwoca different. “We want our customers to have a 100 per cent self-service model,’” says Rieche. “If customers know exactly what they want, our goal is to get them processed automatically and provide a funding decision almost instantly. At the same time, we are here to help any customer that needs assistance. Our philosophy is self-service backed by the best possible customer service.”

The self-service model Versatility and simplicity is a strong part of iwoca’s appeal and is presumably what attracted the 15,000 small firms it

providing service on behalf of a third party. “We use the same onboarding thresholds and mechanisms that we use for our own customers and because a lot of customer information will already be stored on our third-party partner platform, it can automatically be transferred to us, which avoids refilling forms and unnecessary duplication of effort,” says Rieche. The quality of the data – particularly transactional data – is crucial to the lending decision and, in the light of the upcoming General Data Protection Regulation (GDPR), continued, unfettered access to it is vital. “We built our system to be GDPR-compliant from the outset,” says Rieche. Even so, he is well aware of the challenge, not least because all the guidelines are not yet completely clear. Clarity is something that bothers him about Brexit, too. “The number one concern is that we won’t have the same access to talent. It would be very damaging if we were no longer able to

We see partnership as the way to extend our service, with the API facilitating connections across the financial sector has serviced so far. The aim is to reach one million of them by 2025 – typically, founder/ director SMEs with fewer than 10 staff and a turnover that’s measured in the thousands of euros, not millions. Read coffee shops, hairdressers, mechanics and the numerous other hardworking companies, many of whom will rely on credit card advances and personal loans rather than go through the hoops presented by banks. “We want everything to be as seamless as possible,” says Rieche, including – and perhaps especially – when iwoca’s

attract the same people from across Europe, which is where most of our staff come from. There is also the economic uncertainty of Brexit. No one knows for sure how business and finance will be affected in the long run.” While 2017 was a productive year for iwoca, there is still much to do. Rieche hints at further platform functionality and says there will be more partnership news. “Banks, brokers, fintechsfintechs, trade platforms and others have a great resource in iwoca. We must all work together to provide a better service for small businesses.” Issue 7 |



On a digital fast track With another 12 stores set to open this year, Metro Bank is clearly still committed to its physical estate… but app users are also now promised a smoother ride, as Chief Information Officer Martyn Atkinson reveals There is no disputing the spectacular growth story that is Metro Bank. Now approaching eight years old, it raced past the one million customer milestone last May, and from the second to third quarters of 2017 it grew its customer deposits by 10 per cent to £10.8billion. Calculated on an annual basis, those deposits were up 47 per cent in the year to September 30, while the loan book surged 66 per cent to £8.61billion. But though the media’s focus is so often on Metro Bank’s expanding branch – or as it refers to it, ‘store’ – network, a surging growth rate also means pressure to perform in the digital arena. It’s especially important since the bank’s branches have until this year been confined to south east England – and the phone app is a key tool for onboarding customers further north and west. Today, a new customer who walks into one of Metro’s 55 stores can be set up with a functioning current account in 15 minutes. The challenge is to repeat that trick through the app. “We’ll be able to reuse some of the technology that we’ve invested [in the store network] and apply it to our digital channel,” says Martyn Atkinson, the bank’s chief information officer. “That’s going to be great for us because it allows us to appeal to a larger market. If you want to come into a store we can open an account for you in 15 minutes. If you want to open an account online, because you don’t want to come in to a store, we’ll soon be able to do that as well. So, we’re starting to be able to play to a wider demographic.” Following an announcement by the bank’s chief executive Craig Donaldson last year that it would commit £55million to the digital push – alongside £35million for store development – Atkinson says that customers’ expectations are


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continually increasing. One major demand from its app users has been the ability to add new payees via a mobile – a digital gift it managed to deliver just days before Christmas. This new functionality allows customers to enter the payee’s account details and the bank sends them a code via text message to verify the request is genuine. Atkinson hopes the two-step verification is only a stopgap, with a more sexy solution in development. He says: “We’re in proof of concept with a behaviour metric platform that starts to understand that you are you when you’re using your mobile phone. It learns how you hold the phone, how you touch the phone, the pressure with which you apply your fingers and so on. “As that becomes more sophisticated we become more confident that we can remove verification processes, such as sending a text message or asking for information from a card, and it just

We completely recognise there’s a community of people who want to self-serve and that’s why we’re heavily invested in our digital capability personalises and takes that experience a little bit deeper.” Such a frictionless solution is certainly more in keeping with Metro’s status as the UK’s best-known challenger bank. And flexibility is possible because the business has adopted a ruthless approach to IT since its inception, with systems switched off when they have run their course. The bank is now on its third digital

banking platform, and it has been claimed that about nine tenths of the IT used in 2010 has gone. So, not only is the business free of the legacy systems that frustrate the established players, but its IT staff have also been given the freedom to dump what no longer works. Atkinson says that liberated outlook has been noted by teams from Swissbased Temenos Group and Microsoft, which have worked with Metro to develop its core systems. “With Temenos and Microsoft it’s a two-way street. We offer an ability to get new products and services to market. And because we’re not dragged down by legacy debt, because we’ve got a relatively agile framework those guys can come with new ideas, and they are not drowned by bureaucracy and governance and red tape. We can get things done really quickly. Atkinson says the bank’s culture is to think many years ahead. “We challenge those software guys to make sure that, when we apply thinking on a proof of concept, we don’t just then productionise it. We take a proof of concept, we think about how we’re going to scale it, we think about how we can offer it across all of our channels. We give them a good challenge to make sure that what we are building for now is effectively what we are going to have in three, five, 10 years’ time. “This is a win/win situation because it allows them to bring to market new products and services and it allows us to have a bleeding edge opportunity that differentiates us from our competitors.” “We are an incredibly well-capitalised bank,” Atkinson adds. “We have shareholders who believe in the model

Driving digital: Metro Bank announced a £55million investment in online services

and they believe in our executive team. We are very privileged to have a level of funding that allows us to invest in all the supporting frameworks, all the technology.”

Wherever, whenever, however Providing a full range of customer channels has been a keystone of the Metro Bank offer and it makes no assumptions that, for example, younger customers will be averse to walking into a branch or calling one of its advisers. But the digital drive aims to free those staff from dealing with transactional duties by giving up such mundane jobs to technology. The same rule has been applied to the bank’s drive-through stores, of which it now has three. “What we’re effectively doing with the drive-throughs is playing to our service and convenience brand,” says Atkinson. “You might be a business customer with valuable machinery in the back of your van that you don’t want to park up, or you’re a mother with two children in the back and the drive-through offers seamless convenience. “So, where it’s the right location, we try to build that into our proposition and the feedback has been fantastic. “They’re relatively transactional: cash in,

cheques in, cash out. What we don’t do is allow people to open accounts there because when we open accounts we want to get to know them. We want to understand what their financial drivers are and, if they are business customers, we want to know about their business.” And as for those famous stores, which so far have been the only way to onboard a customer, Atkinson reveals 12 more will be added in 2018. He says: “We get a lot of social media feedback through our Twitter handle that says ‘when are you coming up north?’ and ‘when are you going to come down the M4?’ “What we’re trying to do at Metro is demonstrate that we completely recognise there’s a community of people who want to self-serve, and that’s why we’re heavily invested in our digital capability. But we think customer sentiment, and some of the major surveys that have been carried out by EY and Accenture and the like, still demonstrate that even the millennials, even those who are perceived to be completely branch-averse and just want to sit

all day on the phone, actually value the ability to go and speak to a human about their financial services needs. “While there’s a need in the marketplace, Metro Bank will continue to grow and offer physical distribution in the regions,” says Atkinson. “Location is key, but the one thing that I would say that differentiates us is the absolute obsession with customer service. You can have a physical distribution model but if you don’t care about your customers, if you don’t listen to them, you won’t be a success. That’s something here that is absolutely intrinsic to the DNA of everyone, right from our chief executive to the most junior staff. “Everyone obsesses about doing the right thing for the customer. ”I think that’s the bit that differentiates Metro Bank.”

Issue 7 |



Heaven sent Is ‘celestial’ banking the answer to our payments prayers? We asked Darryl Proctor, Product Director for Payments & Universal Banking at Temenos What do they want? Instant payments. When do they want them? NOW, NOW, NOW! That’s been the recurring chant across the worldwide banking industry for the past decade. Up until now, though, the banks’ capability hasn’t matched their desire to please, and slow-moving legacy systems have held them back significantly. Game-changing, Cloud-based technology is about to make that a thing of the past, according to Darryl Proctor whose company Temenos, the first to build a core banking system in the Cloud, has just added a groundbreaking Payments Hub with Microsoft Azure. Cloud-based processing is an irresistible force, says Proctor, and the improvements in speed and efficiency it offers in payments will be a clear differentiator between banks that have adopted it and those that have not. “We launched a survey recently that showed that 80 per cent of corporate clients are willing to move to a second bank that offers better services. That’s a staggering figure,” says Proctor. “If a bank were to lose 80 per cent of its corporate business because it wasn’t providing adequate services, it would have a huge impact on its bottom line. Banks are well aware of this and are therefore looking for the fastest and cheapest way to process payments. The Cloud offers them the ability to adapt very quickly. There are no infrastructure costs – they don’t have to buy machines or have machines installed, as our software runs natively in the Cloud with Azure. This means we can operate with their existing systems, giving the banks a speed to market they didn’t have before. That equates to better customer service, which will enable them to retain customers and remain competitive.”


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In order to progress their Cloud-based solutions, however, Microsoft and Temenos had to overcome the clear challenges surrounding Cloud-based financial services in a highly risk-averse regulated environment. “When a bank is operating its software sitting somewhere in a Cloud, the regulator wants to know ‘where is that Cloud and who has access to that data?’. But together we have overcome those barriers. As a result, we’re seeing banks move progressively more and more of their business to Cloud-based services.”

The Cloud as core In a report published in June last year, consulting firm Celent said Cloud-based core banking platforms will have gained enough market traction to feature regularly on banks’ bidding programmes for major projects, known as requests for proposals or RFPs, over the next couple of years. And in the UK at least, the Financial Services Authority has made it clear it has no fundamental objection to such critical systems being operated in the Cloud. Here, Metro Bank moved its core infrastructure to a privately hosted Cloud in 2016 while startups OakNorth and Monzo both adopted off-premise platforms from the get-go. And that makes perfect sense, says Proctor. “Why should a bank have to worry about developing software all the time?” he says. “After all, a bank’s business is banking. An IT company’s business is IT. IT is not a bank’s core function, but it is what they were doing. Moving to applications that are digital end-to-end, like ours, and putting them into the Cloud, lets the bank focus on its core business.” When it comes to payments within the

Up, up and away: Is it time to move to Cloud-based systems?

banking process, a real-time, Cloud-based system is an even more obvious solution. “Just about every transaction a bank undertakes results in a payment,” says Proctor. “A retail client goes into a shop and buys a sandwich; it results in a payment. A corporate client is making a trade finance transaction for goods that are being moved across the world; it’s a payment. Payments become an entire ecosystem and infrastructure, which is why payment volumes are growing so much. People use mobile to make payments, or near-field communication (NFC), or contactless, or Bitcoin. Moving to instant payments is the natural evolution of that.” What’s previously slowed things down has been the sheer scale of payments data going through the system. “For years, there have been three things in the market,” says Proctor. “There are low-value payments in high volume, where

within our application for many years. Some people refer to that as AI,” says Proctor. “It’s a piece of software that intelligently makes decisions relating to payments. “For example, core to the payments business is operating a high straight-through processing (STP) rate – 99.97 per cent at the very least. But processing the returns and exceptions effectively is also important. I’ve heard figures being quoted of a cost of between $100 and $200 to process a payment that fails STP. That’s a lot of money for a bank, when you consider it will be dealing with millions of payments in any given day. “AI has the ability to make decisions based on historical information and create rules to help banks achieve the margins and STP rates that they need. “We’re now also seeing banks really utilise big data, rather than simply talking about it. In the new ISO 20022 world, much more data is available for each payment, enabling banks to tailor their services for their individual clients.”

A ‘market of one’ banks are processing millions and millions of payments every day. Then, you have your high-value payments, which is what the industry commonly refers to as RTGSs or ‘real-time gross payments’, which are really important payments that must get to their destination within the designated time frame. Then there are international payments. Within the domestic market, things are a lot easier to operate, because you’re using one clearing scheme. “In the international market, we’re only reaching the point now where we can manage the volume. What’s changed is that new infrastructures are now available, including Azure Cloud-based services and

on-premises solutions which, together with the adoption of ISO 20022 standards, make the volume of data much more manageable.” At the heart of these instant payment processes is artificial intelligence (AI). “AI is something that we’ve been using for a long time. We’ve had rule-based processing

Moving to applications that are digital end-to-end, like ours, and putting them into the Cloud, lets the bank focus on its core business

The dawn of open banking, including the introduction of the EU’s Revised Payment Services Directive (PSD2) later this year, will further help to achieve that. “Open banking and the ability to share data in order to create markets of one for their clients is, I think, where the banks are heading,” adds Proctor. “If you look at Netflix and Amazon, they make recommendations based on a customer’s previous spending or viewing history. They’re looking at the data that exists across their organisations and from other organisations in order to offer truly client-centric products and services. “That’s where the banking industry is really moving in the long term,” says Proctor, “to a point where everybody will have access to the right amount of data in order to offer the best possible service to their clients.”

Issue 7 |



Getting it right first time

Customer input errors are frustrating, costly and can mean they abandon your onboarding process. Head of Marketing Chris Boaz at address verification service PCA Predict says there are lessons to be learned from the Black Friday behemoths If you were one of the millions rushing to get their Christmas shopping done with an online click, you’ll know we consumers aren’t famous for our patience. The era of sending a cheque in the post and waiting 28 days for delivery is all but forgotten – we want our goods yesterday. According to the UK’s Office for National Statistics, the Black Friday month of November saw the volume of UK internet sales in 2017 rise 10.2 per cent year on year. That means we’re visiting web retailers more and more


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often – but practice clearly doesn’t always make perfect. As many as one in 20 of those customers could be making errors. Step forward PCA Predict. If you have ever started inputting your address to find that a retailer’s site finishes it when you are half way through typing, then adds your email and mobile phone number as if by magic, you have probably already encountered PCA’s services. The firm claims to be used by 40 per cent of the UK’s top retailers, making it the country’s market leader in address verification.

And the reason for its popularity is twofold: it speeds up the buying process for the customer and it minimises the risk of input errors for the retailer. According to one US shipping firm, 4.7 per cent of customer-completed e-commerce forms contain an error. If you’re sending a million packages a year that’s a lot of lost and returned post hitting your bottom line. “User experience is at the heart of the technology we’ve built over the past 17 years,” says Chris Boaz, PCA Predict’s head of marketing. ”When you feed

high-quality global data sources into that, you get not only accurate, verified data, but the users are able to use the technology in whatever application they want. That helps remove friction through the onboarding process.”

Learning from retail Worcester-based PCA was created in 2001 by entrepreneurs Guy Mucklow and Jamie Turner and was first known as Postcode Anywhere. Its birth soon after the bursting of the dotcom bubble meant the early years were tough, but once it signed the Passport Agency as a client there was no stopping it. The company now has offices in New York and Berlin, and its 11,000 customers include Nescafé, Tesco and ASOS, who rely on it to verify customer data and reduce fraud. Such stellar growth inevitably attracted the interest of bigger industry players, and PCA was bought by identity data specialist GB Group for £66million in May 2017. With its backing, PCA is now aiming to push further into the financial sector. Boaz says: “Just like in retail, within finance we see more and more people banking while on the move, whether that’s via apps or mobile devices. That is especially true of the millennial age group – more than half of them are using digital banking services. “I think the finance sector can learn from retail when they look at the omni-channel approach. Nowadays we’re all very used to channel swapping, whether that’s using your mobile device, then your desktop at home, phone or instant messaging, for example.”

Confidence in data PCA delivers its product to customers using a software as a service (SaaS) platform via the Cloud. Its address data is collated from official providers in the countries it covers, such as Royal Mail for the UK, UPS in the US and Canada Post. To provide an example, Royal Mail’s Postcode Address File (PAF) is a database containing 29 million residential and business addresses. It is continually refreshed to keep pace with new homes being built and firms launching or closing, with between 3,000 and 5,000 updates per day. Address verification is PCA’s main dataset, but it also provides verification for

email, phone and payment services. Address data cleansing is another PCA product, whereby customers can repair out-of-date address lists to minimise the risk of losing touch with customers. One buyer of the cleansing service, the charity Yorkshire Wildlife Trust, said it regained £10,000 by reconnecting with former supporters and members. For financial businesses that adopt the address verification software, they can be more confident a customer has inputted the correct details and are who they claim to be. It also serves to make life easier for potential customers who are keen to get signed up and begin using a product as soon as possible. “Having that super slick, smooth user experience across all formats is going to be really important for financial firms,” says Boaz. “We see that abandonment rates within the financial industry are a lot higher than they are among other industries. “This is especially true when compared to retail, so making sure that the customer is able to flow through the onboarding process as smoothly and as fast as possible, is critical.” He adds: “If they manage to get through that process with inaccurate data, then obviously that causes issues. A financial firm may have let people through the system that they shouldn’t have done. Or, following up with their customers afterwards is going to be harder, whether that’s sending out information in the post, sending emails, or doing further checks.” The global financial services giants that are established PCA customers include JP Morgan and HSBC, plus software firm Xero and payments group Braintree. And it recently added credit report provider TotallyMoney, which was modernising its online channels. TotallyMoney sells credit report services to individuals so they can make informed decisions when applying for products including credit cards, personal loans and mortgages. The tie-up with PCA came during a drive to speed up and simplify its sales process; adopting PCA’s address verification system was all about

minimising friction. It was pleased with the result – once in place it calculated PCA’s service resulted in a 2.4 per cent rise in customer application completions, which was worth tens of thousands of pounds each month. Credibility was another factor. Because TotallyMoney refers customers to lenders it needs to avoid fraudulent activity, and the accuracy of PCA’s address data was a selling point.

Speeding up the process “When you’re finance onboarding, you typically have to ask for more information than you would in a retail checkout, for example,” says Boaz. “So, processes such as verifying address data can be quite time-consuming, especially when you have to look at historical address data. Having the technology to make that process a lot smoother and remove any friction, which is then backed up by the verified global address data, is really important.” A lack of friction was also hailed by another new customer, Zylpha. The firm, which supports the legal profession with services such as electronic court information bundling, has integrated PCA’s address verification into its own workflows. It means lawyers who need addresses for conveyancing purposes, or anti-money laundering (AML) processes, can verify an address without breaking off and using a standalone web page or app. Boaz says for UK firm Zylpha, which is based in Southampton, minimising the risk of failed postal deliveries was another consideration when choosing the service. “When they select their address, they know, and the finance companies know, that it is provided by a verified source,” he says. “Human error will always be a risk when inputting data, so if you don’t have an address verification tool there is always that risk of inaccurate data in your system.”

User experience is at the heart of the technology that we have built over the past 17 years

Issue 7 |



Keeping the wheels turning 2018 is the year of open banking and for SMEs that could mean a faster, smoother lending journey, says Invoice Cycle UK MD, David Cockle

The new year brings a new dawn for data and new opportunities for those ready to ride the velodrome of open banking. The potentially transformational impact of the Revised Payment Services Directive (PSD2), introduced across Europe this month, and the simultaneous roll-out of the UK’s Open Banking Standard, governing the sharing of information from current accounts, has been widely flagged as triggering faster, better targeted, cheaper products for retail customers. But what of financial services for small businesses? Will banking based on application programming interfaces (APIs), facilitating the porous exchange of customer information between providers, serve up better products for them, too? Invoice Cycle thinks so. It is primed to plug into business customers’ banking data to turbocharge its lending services. The London-based group has already developed a niche, providing small businesses with short-term loans to bridge funding gaps caused by invoice payment delays. With an algorithm that draws on 260 data points, it is big on automation and provides decisions on lending requests fast. But 2018 will be a turning point, says the group’s UK managing director, David Cockle. “PSD2 is going to be huge for us,” he says. “As part of our process, I can see a customer ticking a box saying we can contact their bank to gather all of the anti-money laundering information from them we need from them, in addition to verifying the business and whether they’re creditworthy.” Another big win, says Cockle, is being able to scour a customer’s bank data to identify the financial pressure points on a business.


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“If we can see the last 12 or 18 months of account operation, we can see where some of the challenges are,” he says. “If a business has seasonality issues, we can go to them and say ‘we understand that in March you have a real cash flow issue. So, we’re going to try to match our facility to your needs so this problem doesn’t keep you up at night’.”

A crowded space Invoice Cycle offers loans of £5,000 to £250,000 with repayment terms of up to 12 months. It is part of a growing industry of alternative finance providers that have sprung up since the credit crunch when the big banks effectively pulled down the shutters on SMEs seeking funding.

The banks are carrying all the regulation and all the uncertainty at the moment; they don’t know where to move to The annual UK Alternative Finance Industry Report by the Cambridge Centre for Alternative Finance calculated that £452million was provided to firms through invoice financing in 2016, a 39 per cent rise on 2015 when £325million was delivered. In 2016, peer-to-peer business lending also overtook the peer-to-peer consumer market, with a 39.8 per cent jump to £1.24billion. According to the British Banking Association, that was equivalent to 15 per cent of the total new lending to small businesses by British banks.

Web giants such as Amazon and PayPal have entered the arena, too, both lending money to merchants based on sales performance. Invoice Cycle’s USP is that it recognises the danger cash flow problems can pose to small firms caused by customers pushing payment terms to the limit – and beyond. Cockle explains that, while a bank may take eight weeks to reach a decision on a loan application from an SME, his firm has decision times closer to eight minutes. Its algorithm already uses APIs to draw data from services such as credit rating agencies, and the aim is continued automation of this process. “That eight weeks can sometimes be make or break for a business,” he says. “What we have is a very streamlined process that enables us to service customers quickly. “As well as drawing data from credit underwriting agencies, we use Companies House and HMRC. With the algorithm there are around 260 different data points, and probably 12 or 13 different feeds into that. It’s those partnerships and APIs that allow us to get hold of data very quickly. “At the moment we still have to go through the process of asking customers for copies of passports, copies of proof of address and so on. Further down the line I can see that we might not even have to ask our customers to provide proof of address or ID, because the banks have it already.”

Banks v fintechs Among the 260 checks Invoice Cycle runs on every application, there are searches on a company’s directors, its accounts, addresses and other publicly held data.

“We verify a customer and then essentially what this algorithm will do is produce almost an immediate credit decision and a facility amount,” explains Cockle. He believes a lack of automation is a big reason why banks remain uncompetitive for SME funding. He formerly worked as head of business development for a bank’s invoice financing arm where the process had been heavily reliant on paper documentation. “You would have to take reams of paperwork from a customer, do a frontline assessment and offer some sort of recommendation,” he says. “You would next go to a credit underwriting committee where they would probably print off another 100 pages and have different manual sheets to use as they went through their assessments. “With Invoice Cycle, there’s really no comparison. All the data that we ask for from customers is uploaded to our platform and the technology accounts for 90 per cent of the decision-making process.”

Savvy customers He believes banks are nervous about the arrival of PSD2 – and he understands why. “They are concerned from a security perspective and a regulatory perspective,” he says. “They wonder if their customers will really understand what they are doing when they tick that box to say a third party can have all of that data.

“I’d like to think they do and most of our customers are very tech savvy and run great businesses. “The golden nugget for us is them allowing us into all of that bank data. We just want the banks to get on board with PSD2.” Cockle believes the alternative lending market may be due for a shakedown. He calculates that there are around 150 providers now operating, and only time will tell if there is enough demand in the market to sustain all of them. He sees two scenarios precipitating a cull – an economic crisis or an intense period of mergers and acquisitions. “To my mind, there are probably too many providers out there at the moment and I think over the next few years we might find ourselves in a situation where the market corrects itself,” he says. “Whether that is through acquisitions or economic shocks, which I hope it isn’t, or businesses falling over because they’re not well run, we’ll see. But I think it’s definitely going to be an interesting space for the next few years.

“At Invoice Cycle, we’re adamant that we’re going to lend money to good businesses and good directors. There are other providers out there that don’t have the same attitude and will lend money because they need to grow their book. That, to me, is a concern. “If some of these practices are found to be inappropriate and there is an economic shock, all of a sudden some alternative lenders could start to fall over. “Obviously, there’s going to be a ripple effect for the rest of us, and during a period of regulation the bar might jump up. Who knows where we’ll be then?” He has some sympathy for his erstwhile colleagues. “The banks are carrying all the regulation and all the uncertainty at the moment; they don’t know where to move to,” he says. “We are ready to take advantage of that and provide solutions so that we end up with happy customers.”

Moving up a gear: PSD2 will be a turning point for Invoice Cycle

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Cloud forecast As a former banker and now a Director at Microsoft, Peter Hazou is uniquely placed to predict the impact of Cloud technology on financial institutions – and understand their reluctance to adopt it When it comes to resisting the inevitable, the story of ‘the banks vs the Cloud’ has been an epic battle of wills. While remote servers, hosting everything from favourite tunes to family photos, have long been a fixture of our daily lives, the risk-averse world of financial institutions has been somewhat slow on the uptake. Until now. Worries about data security, cyber attack and, in some cases, resistance from local regulators, have made the world’s banks, perhaps understandably, wary of the technology. But according to Peter Hazou, the London-based director of business development for financial services at Microsoft, that’s changing – and for good commercial reasons. “The financial services value chain is no longer just about the banks,” he says. For a long time, the mainstream institutions were hamstrung by legacy systems and wary of third party providers in general. A recent survey of financial services workers by the Cloud Security Alliance, found that security was the unanimous reason for non-adoption among those not using Cloud services. In


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71 per cent of cases, regulatory concerns were cited as the reason. But with improved security and proven use cases from challenger banks, such as Metro Bank and Starling, the argument has now been largely made and won for switching. One of the most obvious ways the Cloud can impact banks and their customers is in accelerating the payments process, and that’s what Microsoft is doing for the first time through its partnership with core banking platform innovator Temenos, enabling banks to transform their payments offerings at a much lower initial investment and provide customers with a much better service.

The hub of the matter In October 2017, Microsoft and Temenos launched a collaborative project called the Temenos Payments Hub, which is claimed to be the first combined Cloud-based core banking platform and payment hub, using Microsoft Azure. It’s a leading example of innovation in a post-SEPA (Single European Payments Area) world where companies’ and consumers’ demands for increasingly instantaneous funds transfers are creating a new kind of crossover between banks and IT.

The Payments Hub can operate as a standalone payment processing engine or a fully embedded component of the Temenos core banking platform, and is available in the Cloud or on-premises for all those with the aforementioned reservations. Either way, it represents a single solution for processing low-value and high-value instant payments, driven by real-time processing that could radically change the way banks operate. “The crisis of 10 years ago made it really clear that the banks needed to go through a transformation of their business and operating models and their cost structure,” says Hazou. “At the same time, new competitors were coming along, including a lot of born-in-the-Cloud fintech companies that were very agile in developing the value chain for banking. The banks had a lot to digest in terms of compliance issues, while big new technology was emerging all at once. “Although, compared to fintechs, the banks have been caught in a bit of a difficult place, held back by legacy and compliance issues, now they are very clear about their options for growth.” Adopting Cloud technology is one of

Reaching for a solution: Banks must evolve to survive

those options and payments is an obvious application. “There’s lots happening in the payments space, and this is where the fintechs have excelled – spanning channels, mobile and person-to-person (P2P) payments,” says Hazou. “The banks have these great old businesses, which is actually not terribly customer friendly or customer-centric, but fintechs are now developing really nimble solutions, in the midst of bank infrastructures and regulation, to help them operate in real time.” So, what exactly will it take to achieve instantaneous payments? “One of the challenges of payments, at least core bank payments, is historical and relates to them being designed a certain way, for an earlier, batch-driven epoch, with overnight processing,” says Hazou. “But the notion that people can send a video with lots of data and the recipient get it instantly, or an email within a nanosecond, but they can’t do

the same with a payment has to change for the sake of the modern economy.” That was also the thinking behind the introduction of the EU’s Target Instant Payment Scheme, known as TIPS, which is due to roll out in November, while the US launched real-time payments (RTP) late last year. In both cases, it will mean banks moving away from the batch payment systems that most countries have operated up to now. The Payment Hub offers the modern architecture and technology to enable this shift.

Cloud technology is providing banks with the means to transform their business models “It will enable banks around the world that need to upgrade their systems to be able to process real-time payments,” Hazou explains. “That has a lot of implications for the entire architecture and design by which the payment gets done. Fraud detection, identity and checking the account balance, as well as

scans for money laundering, all have to be done in real-time payments, in seconds.” The Microsoft/Temenos partnership is focussed on making all of that happen seamlessly. A positive by-product is that this system will help banks get to know their customers better, too, says Hazou. “Banks are basically flow institutions. The entire economy flows through banks and from this there’s an enormous amount of insight that’s available for understanding clients and predicting what’s going to happen in payments and in the wider economy. “The role of banks is so central in terms of understanding criminality, including money laundering, and a whole spectrum of other issues. That’s why a number of initiatives are now coming from policymakers rather than the regulators, particularly around competition and improving the payments process. This has spurred on the banks to become more than simple processors and provide more value.” But they can’t do it on their own, says Hazou. “Modern technology is opening up the banking system for a lot of players to better serve clients with really great ideas and great innovations. The banks couldn’t, and shouldn’t, be the only source of all of that innovation.”

Issue 7 |



Have phone, will travel Germany’s N26 mobile-only bank is going on an awfully big adventure. Co-founder and Chief Executive Valentin Stalf can’t wait…

For a bank designed with globetrotting millennials in mind, Berlin-born N26 has travelled far since 2015. With more than 500,000 customers signed up so far across 17 countries in the eurozone, including Ireland, this year it will embark on an intrepid journey into new territory with both UK and US launches planned. A fully licensed German bank, it has proved a big hit with those seeking a fresh, app-based approach to personal finance. Co-founder and chief executive Valentin Stalf puts that success down to three factors, which he believes traditional banks are failing miserably to deliver. “We have based our product on making the customer experience in mobile banking as easy as when you use Spotify or Google Maps,” he says. “This easy user experience has been the key to our success. What we are seeing is that most customers around the world have a need for a better banking product. Everything we do is based on transparent fees, in fact a lot of transparency in general.


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“The key needs of the digital generation are great usability, transparency and fairness around pricing. For us, these three things are easily scalable in Europe, and also for the UK and the US.”

The power of discrete apps Fee-free ATM withdrawals worldwide and market-leading rates on making payments while abroad and to other countries have helped N26 create a positive buzz among professionals on the move. The foreign currency system, which enables transfers into 19 currencies, is underpinned by peer-to-peer money transfer group TransferWise. But the N26 customer need not concern themselves with that – TransferWise's system, and those of many other third parties the bank partners with – run seamlessly on N26's app-based platform. System tie-ups via APIs are the lifeblood of the bank and it is a model that has allowed the firm to expand its services at a lightning pace. It also means the customer gets the benefit of a third party's services without having to sign up with them.

Stalf says: “We started out with the core account experience and then integrated partners for the different dimensions. “So, we are now offering savings products, investment products, a credit product, even an insurance wallet in Germany. “Most of these products are being provided with partners in the background. So, if you want to save with N26, what we do is link you to different banks through APIs. “You always have the option to save with the bank that pays the highest interest and you can choose from around 10 to 15 banks in Europe with just one click. The rest is done in the background through the API.” Despite his bank being at the cutting edge of app technology, he’s equivocal about the IT itself. APIs, in themselves, are nothing to get excited about, he says; it is what they deliver that matters. He’s rather dismissive, too, of mobile wallets. “I think almost all of them failed,” he maintains. “I don't think the wallet itself is of interest, or indeed where you put your card. It is more about the experience. For us, it doesn’t matter if you use your card over

On the move: N26 proved a rapid hit with globetrotting millennials

and cover for your mobile phone. But both accounts major on usability – features include fingerprint scans to log in, real-time cash transfers to friends and other contacts, push notifications on all account activity, categorisation of spending and a computerbased platform. N26 also has innovative uses for data. “We cluster the data from a customer's transactions so that they get a better overview of where they have been spending,” says Stalf. “For example, if I bought something in a Nike store in San Francisco it would be clustered in 'shopping' and also 'sports'. We also use data to profile our customers, which is used to provide better fraud management. “So, we kind of have a profile of you, how you’re spending, and if there are irregular transactions we block them.”

The future of finance is to be a helpful partner for customers based on the data that you have

“What we do, based on the profile of our customers, is try to be helpful and guide them to make the right financial decisions. “If a customer is always short of money, maybe we shouldn't show that person big investment opportunities. Maybe we should help them run their finances more efficiently. “I think that is what the future of finance is. To be a helpful partner for customers, based on the data that you have on them.” Stalf is excited by the opportunity brought by the EU's second Payment Services Directive (PSD2) and it's no wonder; his bank is already proactive in the field of third-party data sharing. He points out that the added transparency the directive brings to the banking market will be of benefit to consumers and it will be good for N26, too, because it will drive new customers to its app. “Customers will be able to switch bank accounts faster and find out what’s best for them,” he says. “For us, PSD2 is especially important, because I think we have one of the best products on the market, offering the best value. If you have one of the best products with the best value, it’s always Young and mobile: Next stop for N26 is the UK and US

near-field communication (NFC), or if you use your phone. I think payments will increasingly migrate onto phones but, beyond that, not much is changing. “What is of interest is the interface that is working behind them – such as what control do you have with your card? Can you block it with one click? Can you unblock it? These are features that we are already offering at N26.” When the bank launched, it offered an app-based bank account with a Mastercard. Services have extended through partnerships and N26 currently offers its customers a basic bank account and the fee-charging 'Black' account that has added features such as unlimited ATM withdrawals, travel insurance, warranties for purchases

Keeping a close eye on transactions opens up cross-selling opportunities for N26. But although the bank offers investment services, for example, Stalf says it makes no sense to put these under the noses of all its customers. He says: “Finance is a very complex field, and I think if you always show everything to everyone, from investment opportunities to credit opportunities, it makes no sense. “I think a lot of the traditional banks have been failing because they have offered products to customers who weren’t interested in those products. Because of that many people feel disappointed by traditional banks because it appears they are always trying to sell them stuff.

good if it is made easier for people to switch bank accounts. It's going to be a big driver. For the new players, the challengers, we will be getting more customers, more quickly.” The UK launch, planned for the first half of 2018, will prove a test of Stalf's theory. So far, a UK website has been established, which introduces N26 and allows potential customers to sign up for future launch news. Once established, the bank will be fighting alongside the other app-based operators such as Revolut, Monzo, Starling and Atom. After that, N26 aims to cross the Atlantic and challenge in a market far bigger than anything it has encountered before. That 500,000 milestone could soon seem like a distant memory. Issue 7 |



not legacy! Cloud-based software-as-a-service provider Mambu is building new banking models one brick at a time. CEO Eugene Danilkis is the architect of its growth… The ‘future-proofed’ platform represents the holy grail for financial businesses anxious to avoid the Dodo’s fate that is legacy tech. And it’s this awareness that Mambu, a Cloud-native software as a service (SaaS) platform, has at its core. First launched in 2011, Mambu gives institutions the ability to design, launch and fully support any lending or deposit product – based on an architectural philosophy that CEO Eugene Danilkis likens to… Lego. The Danish brick’s trick, of course, is to be infinitely adaptive. And that’s his point. “To be future-proofed, you have to basically acknowledge from the beginning that you’re going to be in a constant state of change. You’re always rearranging,” says Danilkis. “Adding more and more [inflexible] layers is how you get to legacy. We make sure we have constant change built into our product; think of it as a Lego model – you can buy additional sets and reconfigure them endlessly.” This isn’t about big boys’ toys, though. Derelict digital services stand as cautionary tales to an inflexible banking architectures and Lego is a useful analogy, emphasising the swap-in-swap-out framework that allows Mambu to react to changing markets, new customer expectations and better technologies without tumbling like a doomed Jenga tower into an obsolete abyss. With Mambu as the engine, a ‘composable architecture’ that protects digital banking projects from becoming outdated: just like Lego, it also allows for constant reconfigurations and tinkering, with a healthy culture of ideas sharing to benefit Mambu’s wide client base. “Right now we have more than


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6,000 configurations of different types of lending and deposit products live on the market,” says Danilkis. “From a technology perspective, it’s constant evolution. We always have interesting ideas coming from clients – functionality and features – which we’re always taking on board developing and making available to all our clients through regular releases.” And how exactly does Mambu achieve this apparently utopian network of interchangeable ideas and robust solutions? Through application programming interfaces (APIs). “We’re very much an API-first company, so everything is possible for clients to access, to change, to manipulate via simple APIs, which enables us to play in the API economy, helping clients bring new services to the market, says Danilkis. “Having a platform like Mambu, which has open APIs from the beginning, makes it very easy to comply with new regulation like the Revised Payment Services Directive (PSD2), where it’s effectively about exposing your data and being able to interact with it. You already have it in your DNA to comply.” With customers in 45 countries and some 180 live deployments, Mambu’s geographically agnostic tool box is attractive to incumbents and neobusinesses alike that recognise the unrivalled scalability benefits offered by such Cloud-based service providers. “The Cloud gives our clients a lot of operational flexibility, which for a rapidly growing company is really key. With a Cloud-native partner

like Mambu, the technology, scalability and security shouldn’t be an issue,” says Danilkis, whose previous career was in developing software for the International Space Station. One sky-rocketing beneficiary of Mambu’s platform, the Berlin-based digibank N26 (see also page 90), has experienced a meteoric rise since its inception in 2015 as Europe’s first mobileonly bank. A year later, it was onboarding its 500,000th customer and announcing its expansion across Europe and the US. “It’s really critical for these companies to maintain their pace of

Building market share: Mambu’s platform attracts neobanks and incumbens alike

growth, to keep being agile and innovative,” says Danilkis. And the orbit that N26 now enjoys over the market – tailoring new products and tapping further international customers – can be attributed to what Danilkis calls Mambu’s ‘building from the Cloud-up’ approach. “They can control their own destiny,” he says, “in terms of the sorts of products they want to offer; the fees they want to charge;

different types of lending they might introduce; or geographical expansion they are planning. They can scale horizontally as well as vertically, without worrying that their initial solutions will hold them back.” The same can be said for Wenance, Argentina’s largest digital consumer lender, which chose in December 2017 to partner with Mambu for an ambitious expansion operation throughout Latin America. Alejandro Muszak, Wenance CEO, quoted Mambu’s ‘unrivalled speed to market’ as a crucial factor in the decision. “There really aren’t any cases where clients can’t go live to market in under 12 months,” confirms Danilkis. With these young entrants getting creative with Mambu’s expansive architecture of bricks, Clouds and APIs, it’s unsurprising that incumbents’ heads are turning from across the financial playground. As Danilkis notes: “Established banks are realising there’s going to be an overall shift in the market and, of course, they’re concerned about fintechs taking some of that market from them.

You have to basically acknowledge from the beginning that you’re going to be in a constant state of change “Importantly, they realise that other banks have tracked the rise of these fintechs, so they could also copy the same sort of model and use that to give themselves a more profitable or a more attractive offering in the market,” he adds.

Incumbents launch fintechs You might expect incumbent institutions to leave to leave smaller players to compete. But this entails complex, risky, and inevitably years-long transformative projects that might yet end in ball-andchain legacy tech. Instead, they are launching off-shoot companies to get their hands on Mambu’s offering, much like speedboats from a cruise ship, sent out to test the

technology waters bobbing with a flotilla of fintechs. This is not just about market share. ABN Amro, which in 2017 smashed a bottle of bubbly against the hull of its home-grown fintech startup New10 (see also page 94), ) another speedboat propelled by Mambu, will certainly be watching out for API solutions and strategies that it can, over time, bring back to its core. While New10 provides fully-automated SME loans in the Netherlands – a geographically and operationally small market – Danilkis notes that incumbents such as ABN Amro benefit from launching these niche products by way of testing the technology. “It’s certainly an addressable market segment, but it’s also an internal proof point to then give them ideas for expansion strategies in the future,” says Danilkis. “They’re then taking that back into the rest of the business and applying it to other business units, in other geographies, and slowly transforming the organisation that way. I think that’s been a shift in the strategic thinking of these institutions.” So Mambu has positioned itself as an extremely desirable service for both fast-growing neo-businesses and the institutions whose lumbering framework dictates they take a few pleasure trips aboard SS Experimental to must test the water before wading in to new technologies. All the while avoiding a Titanic disappointment, of course. As Danilkis says, what fintechs have revealed is very clearly going to be an important trend over the next few years; namely, that Cloud-based, API-led services such as Mambu are best-placed to react to the constant churn that now characterises the financial market. It’s no surprise, then, that it continues to grow. “We’ve opened offices this year in Miami and Singapore. We’re expanding our European team in all areas – everything from sales to solution architects, delivery, products and support,” says Danilkis. Mirroring the success of its clients, Mambu’s own future-proofed network looks set to keep on building… one brick at a time.

Issue 7 |



The power of 10

When Dutch giant ABN Amro launched New10, its Cloud-based funding spin-off for SMEs in 2017, it turned traditional business banking on its head, as co-founders Joost Brouwer and Mark Schröder explain

If 10 is a perfect score, ABN Amro has set the bar high for its latest venture. Launched to service Dutch SMEs with business loans – and especially the new wave of digital-savvy entrepreneurs – New10 was conceived, constructed and launched following a group-wide strategy review at the bank in 2016. “The bank decided to work with fintechs, but also to become more like a fintech,” says Joost Brouwer, co-founder and director of product management at New10. “So, they set up the idea of launching companies that are part of the ABN Amro group but which have separate IT systems, a whole separate culture and a separate brand, to create new propositions for customers. And one of the ideas was to create something for small and medium enterprises in the Netherlands – to cater for entrepreneurs looking to get a loan.” It was a brave move – especially considering how badly traditional banks have been struggling in digital offerings for SME segment– but turnaround for the launch was rapid. Coding began in November 2016 and the full-service app went live just 10 months later. That was made possible by outsourcing the IT to Cloud providers, with partnerships struck with lending platform developer Mambu, Amazon Cloud and Salesforce.

New10 bosses were attracted by the speed and scalability of the Cloud-based solutions – and the fact it was far cheaper than taking a traditional in-house IT route. The lender now offers business loans from €20,000 to €1million and gives an initial lending decision in 15 minutes. Brouwer acknowledges that banks have struggled to find ways of servicing small business lending needs in a digital age, so New10 spoke to scores of entrepreneurs to discover what they wanted. He says: “It's a segment that is quite difficult for banks to target so we built a new proposition. “Since we were working from outside the main bank we could start completely from scratch. And any player starting from scratch these days will choose a Cloud-based solution.

If you're a restaurant owner looking for a loan, first you want to know if you can get it and for how much – not be asked whether your passport is valid

“Amazon offers great services, where you can use platforms such as Mambu – just plug and play, and within a couple of weeks you’ve set up everything to create a new credit product. “If you look at how we are set up, fully Cloud-based, we can easily scale everything. “New10 has the best of both worlds. On the one hand we have the agility of a start-up, meaning all the new technologies. And on the other we have ABN Amro's data expertise. We can use the main bank to help test prototypes, get feedback and use their expertise with issues such as fraud and credit risk. “The result was we could immediately offer very attractive pricing to our customers.” ABN Amro already had experience of this 'speedboat' model, whereby a new venture is launched to run separately from the main business, with the creation of its payments app Tikkie. Like that business, New10 harnesses the latest digital trends to provide a low-friction onboarding process with continual innovation. The customer focus is evident from the outset – during onboarding customers get a provisional lending decision from

Aiming high: New10 strives for the best in business lending with a Cloud-based platform


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New10 before embarking on the identification verification process. Co-founder and commercial director Mark Schröder says that was intentional as the lender aims to demonstrate it trusts the applicant. “If you're a restaurant owner looking for a loan, first you want to know if you can get it and for how much – not be asked whether your passport is valid,” he says. “So we don't do all the fraud and KYC checks first. We answer the 'can I have a loan?' question in 15 minutes. Within 15 minutes you know if you can borrow, what the conditions are and also what the interest rate is.” From there on in, New10 runs background checks on an applicant and their business using digital channels where possible. An applicant's data is compared against databases held by organisations such as chambers of commerce, personal ID is verified using a process that calls for a selfie, and even the signature can be provided online. Within 48 hours of a successful application,the money is in the customer's account.

In the net in 15 mins Brouwer says the focus on immediate decisions has been driven by smartphones, and banks have needed a culture change to bring themselves in line with customers' new expectations. “People expect instant access to everything,” he says. “Nobody emails their friends anymore, everybody expects instant reactions, such as with WhatsApp. And because they are used to having connections with

other people in such a seamless, instant way, they expect the same from their banking services. “So, if a customer contacts a bank and requests a loan, they don't want to wait weeks for a response. “For banks, this is quite a challenge because existing IT, or processes, don't work that way. Because you have this whole system – whether it’s your IT system, or processes, or the way of working within the organisation – it’s difficult to change overnight. It's difficult to say, ‘OK, instead of weeks, I’m now able to respond within minutes'.” Schröder adds: “We immediately provide an answer to a loan request. It can be a no, but people are happy with a no if you can give it in 15 minutes. If you say no after three weeks people are annoyed because that's time wasted.” Though New10 is only months old, Schröder and Brouwer say feedback has been positive with customers liking the speed and personal touch. “Customers can chat to us and we can easily hook them up to the same staff member each time,” says Schröder. “It’s quite easy for us to set that up because we know who the customer is and who they spoke to last time. “Feedback has told us that a personal touch is still very important as well as the speed of the digital processes.” Looking ahead, New10's founders say they will continue to focus on reducing friction and the arrival of the EU’s Revised Payment Services Directive (PSD2) will open more digital doors.

Brouwer says: “For us, it could mean customers do not have to upload their transaction data any more, they can give us access to that data held elsewhere. It will enable us to do the full process on a mobile channel. That’s such a big change, because we see that entrepreneurs like the mobile phone to be their main device. So, if you enable an entrepreneur to go through the entire process on his mobile, they will love it.” Brouwer also looks forward to being able to provide insight to customers about how they can improve the financial side of their own businesses. “We believe we have a role to play in redefining risk as something that is not just assessing our own risk, but assessing the health of a company and really being the partner of an entrepreneur,” he says. “We should provide quick responses to any liquidity needs, but also insights so they can steer a business towards growth. Application programming interfaces (APIs) allow multiple partners to work together, to create propositions that are even better for the customer. “What we’re exploring is whether we can help in creative ways to finance working capital, whether we can combine the strength of multiple companies to offer better loans, more insight and a seamless journey together.” Distinct from but still a part of the bank, Schröder says the New10 name will be useful in helping ABN Amro maintain its competitive edge. He says: “It’s about striving for the 10. We know that achieving the 10 is tough, because a 10 today will be an eight tomorrow, and a six the week after. So we need to continuously balance servicing our current customers, building features to surprise them and make their journey better, while continuously investing in capabilities to be competitive in the long-term. And if we can do those three elements at the same time, then we can continuously set '10' as an ambition level to work towards.”

Issue 7 |



Buckeye fizz

Valentina Isakina of regional development agency JobsOhio explains why ‘The Buckeye State’ is bubbling up to be North America’s newest fintech hub

Toasting success: Ohio ranks sixth among US states in terms of GDP for financial services

It’s known for a long list of world firsts: the Wright Brothers’ aeroplane; the invention of the cash register, ambulance services and the traffic light; being home to the first major US city to elect a black mayor, Carl Stokes, in 1967, and to the first man that walked on the moon, Neil Armstrong, in 1969; and having a college that allowed women to advance their education in 1833, ahead of any other state. So, maybe it’s no surprise that when it comes to the financial technology reshaping our world, Ohio is fizzing with bright ideas. Propelling it into the vanguard of the fintech revolution is JobsOhio, the privatelyfunded, non-profit economic development corporation, and newly launched sector champion Fintech71, whose purpose is to attract the most innovative startups from around the world and connect them with top financial services companies. Named


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after the Interstate71 highway that links Ohio’s capital city Columbus (where Fintech71 is based) with fellow conurbations Cleveland and Cincinnati, the unique non-profit accelerator is already chewing up the metaphorical tarmac. Supported by industry heavyweights including Accenture, Visa, KeyBank, Huntington Bank, JPMorgan Chase, Mastercard and Microsoft Azure – all with a significant presence or headquartered in Ohio – Fintech71 sets out to ‘expand the innovation pipeline for current private sector stakeholders, including Ohio’s strong financial services base and Fortune 500 and Fortune 1000 companies headquartered in the state’. Among them is a company that began in 1937 to provide quality insurance to customers with unique needs. Now known as Progressive, one of the largest and most innovative financial services companies in the world, it’s one of the key anchors for the Cleveland economy.

In fact, Ohio, boasting a diversified economy the size of Switzerland, already ranks fifth largest in the United States for the number of Fortune 500 and Fortune 1000 companies headquartered in the state, and sixth among US states in terms of GDP for financial services, which overall contributed more than $50billion to the North American economy in 2016. Ohio figures its name will be featuring among the likes of Silicon Valley and New York soon, not only because of the existing competitive advantages – talent, low operating cost environment, ease of doing business and physical accessibility – but also because of innovation and cutting-edge thinking. Fintech71 is one of those innovations. Tempting any fintech startup looking to do business in Ohio with an attractive package, the accelerator offers $100,000 of investment in return for up to six per cent of equity; a 10-week programme on piloting innovations with Ohio companies;

Ohio leads way According to the Kauffman Foundation, a number of key Ohio cities rank in the top 10 for scaling startups and entrepreneurial growth, with a bevy of venture capital funds working to attract business. Just one – Create Columbus – already has $140million committed to making it the benchmark for smart city innovation in the United States, which will include autonomous vehicles and public wi-fi. Unsurprisingly, it’s all helping to attract widespread interest. Fintech71’s first cohort of participants in its accelerator programme, which came on board last September, included companies from the UK, India, Ireland, Israel, Portugal, Silicon Valley and Atlanta. Valentina Isakina, managing director of financial services and select HQ operations at JobsOhio, who also serves as chair of the Fintech71 board, is confident that other well-established companies will follow. “Financial services is going through quite a change at the moment,” she says. “The traditional approaches to doing business, by investing in high-cost locations, are not necessarily going to play out as well because organisations are looking at different kinds of strategy now. They are looking for innovation, for techsavvy talent and for ways to address the burn rate of the kinds of startups that large financial institutions want to work with to innovate. So, what we are seeing is that a number of financial institutions are starting to look for alternative ways to address those needs. Ohio is one of those places where all of those elements come together.” She cites US entrepreneur and co-founder of AOL Steve Case’s Rise of the Rest – a nationwide effort to work closely with entrepreneurs, which is based on the belief that high-growth companies can start and scale anywhere, not just in a few coastal cities of the US. “This is not new to us. That’s the same model that Ohio is already living every day,” says Isakina. “We have talent, more than

The low cost of living, talent availability, and the ability to partner with likeminded businesses with great proximity adds up to a fantastic model

and help with issues around regulations, compliance, finding great talent, design and fundraising. Its startups also receive daily, one-to-one mentoring support and access to all of the participating companies and their expertise, not to mention six months of free office space in Columbus. And when that free ride ends, it’s worth knowing that, while the costs of doing business are stratospheric in better known hub locations, Ohio rents are a quarter of those in New York City and Silicon Valley, and cost of equally amazing talent is half of those locations. Another thing worth noting is that JobsOhio, one of the most innovative economic development enterprises in the United States, stand ready to support qualifying fintechs to scale up in Ohio, by providing research and development grants and other economic development incentives.

200 colleges and universities and a very healthy financial services sector, the sixth largest in the country. In fact it’s actually second, in terms of top financial services headquarters, outside of New York City. “Then there’s the low cost of living, the famous Midwestern hospitality, and the ability to partner with likeminded businesses with great proximity – all here in Ohio. It all adds up to a fantastic model that is starting to work very well.” There are particular benefits that come from being situated within the eastern timezone, too, she adds. “It’s to do with connectivity and ability to do business. If we’re dealing with people in Europe, we have a great number of hours that overlap in the working day, which is very convenient. We’re also in the same time zone as New York, which many don’t realise. So people don’t really lose out by doing business in Ohio. In fact, they gain because they can still do all the same things as they do in NYC, but at a fraction of the cost. For example, this is what JP Morgan Chase has done. They have more than 20,000 employees in Ohio, including a large fintech team. And when needed, NYC is only 90 minutes away, with hourly flights available. That’s the model to do business and innovate successfully with the eye on your bottom line.” Known as The Buckeye State – after the horse chestnut or ‘buckeye’ trees that covered its hills and plains – Ohio is singled out for attention in Steve Case’s book, The Third Wave: An Entrepreneur’s Vision Of The Future, in which he argues that America is ‘entering an era where entrepreneurs will seek to transform major sectors of the US economy by targeting cities where sector expertise and excellence exists, such as Columbus’. In a recent blog, he argued that, 120 years since the Ritty brothers invented the first cash register in Dayton, Ohio, the state is helping to usher in another wave of financial innovation.

America’s ‘biggest small town’ A new startup economy has emerged in what Case coins America’s ‘biggest small town’ of Columbus, supported by a state-backed ecosystem that encourages blue-sky thinking and populated by ‘one of the most educated workforces in the US’ – the product of more than 50 higher learning institutes whose graduates are choosing to stay and join the Columbus startup community. Issue 7 |


LOCATIONS: OHIO Fintech explosion: Cincinnati is one of three major commercial centres

“In 2016, the Ohio State University totalled nearly $850million in R&D expenditures and continued to bolster its Technology Entrepreneurship and Commercialization Institute to support innovators on the path to commercialization,” Case writes. “Additionally, Battelle [the global research organisation in Columbus] has led the way for corporate innovation, helping to develop everything from the M&Ms’ candy coating to the copy machine and lifesaving vaccines.” Case also points out that ‘unlike many other startup ecosystems where founders feel the need to go out west for capital’, Columbus benefits from local investors who are eager to support talented regional founders with funds. These companies include Rev1 Ventures, NCT Ventures and the Ohio TechAngel Funds, plus Drive Capital. Isakina – who served as an advisor working with heads of state on a number of economic development initiatives around the world at the Office of Tony Blair, and prior to that spent over a decade at McKinsey and Bain, focussing on financial services and private equity – has previously described finance as ‘the glue that holds everything together’ and financial services as a ‘mission-driven engine with a social purpose’. Which is why the proximity of other leading companies in sectors such as automotive, advanced manufacturing and healthcare in Ohio is important to fintechs’ scale up opportunities in the state. “Ohio is a very large, robust state,” says Isakina. “It’s actually equivalent in size to Switzerland’s economy and very well


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diversified. We also have a very unique situation, encompassing three large, economically strong cities. Unlike Atlanta in Georgia, or Charlotte in North Carolina – where there are few things happening outside of that one large presence – we have the urban centres of Columbus, Cincinnati and Cleveland, along with a number of other vibrant communities, like Akron, Dayton and Toledo. That diversity of skill set and culture, and the lifestyle choices that represents, is very attractive for companies and people. Each city has its own character, its own personality For example, Cleveland is on the shores of one ofthe Great Lakes, Lake Erie; Cincinnati is on a beautiful river with a historic downtown; then there’s Columbus, a great college town and a golf haven, being home to Jack Nicklaus. So, everybody can find something unique and attractive, both in terms of lifestyle and opportunities to do business.” All three cities featured in the Fintech Finance Payments Race from Toronto to Money20/20 Las Vegas in 2017. Money20/20 was attended by 75 delegates working with Fintech71 – an impressive show of strength from the Buckeyes who went with the intention of putting Ohio on the fintech world map. Among them were some of the 10

inaugural companies in the Fintech71 accelerator programme: Billon, a UK blockchain-based payments platform; Hexanika, an end-to-end regtech and big data automation solution for banks, operating out of India and New York; James, from Portugal, a machine-learning credit risk solution for banks; LateShift from Atlanta, with an income optimisation and upward mobility tool for independent workforces; Israel’s PayKey, a white-label money transfer service over any social platform; and SKOOKii, from Phoenix, US, an all-in-one payment platform, solving major pain points for K-12 schools in the States. The remainder of the cohort included an AI/virtual insurance agent, a know your customer (KYC) authentication and onboarding solution, a title insurance optimisation tool using blockchain, and commercial insurance technology for agents. It’s said that Ohio is a barometer for the way the general vote is headed in the United States politics. In future, we might all come to regard the Buckeye state as a bellweather for fintech, too. ■ Fintech71 will open the new cohort applications in early March. More information can be found at

Each city has its own character, its own personality. Everybody can find something unique and attractive, both in terms of lifestyle and opportunities to do business



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Next stop, Toronto Salman Khan, Senior Advisor at Toronto Global, makes the case for Canada’s fintech-friendly region being your new business destination A strong technology sector, resilient financial system, quality talent pool and low business costs have put Canada’s Toronto region on the global fintech map. Not only is it the headquarters for the major Canadian banks, but it also boasts being home to three of the top 60 global pension funds and seven of the largest global hedge fund administrators. In fact, after New York City, Toronto is the largest financial centre in North America, hosting around 12,000 financial firms and employing more than 360,000 people. It is also North America’s third largest technology hub. Since 2015, the number of fintechs in Canada has skyrocketed from 40 to more than 250 and we’re still counting. These fintechs operate in multiple sectors, including cryptocurrencies, financing, robo-advising, crowdfunding and blockchain. The financial sector in Canada is expected to allocate $15billion in technology spending in 2018. So, no wonder that between 2012 and 2016, the venture capital community invested more than $1billion in fintechs here. Some of the biggest making waves in Toronto include Wealthsimple, League, Nest Wealth and Sensibill.

Wealth of talent From a talent perspective, the Toronto region is a compelling location for fintechs. Ontario, which is the province that Toronto resides in, is home to more than 30,000 of the country’s approximately 60,000 fintech employees and offers one of the most highly educated workforces in the world. Ontario turns out 40,000 STEM (science, technology, engineering and mathematics) graduates a year – with plans in the pipeline to increase this number by 25 per cent in the next five years. Companies in the Toronto region draw graduates from the entire province in addition to those from the five universities and six colleges in the region.

But average salary expectations for engineering, management and software development experts are 17 to 33 per cent lower here than compared to major cities in the United States. So, many European companies have already got the message: the Toronto region’s a great place to grow your fintech. UK-based Ebury recently opened an office in Toronto and plans to service the large SME community in Canada with its financial solutions. Sweden-based Bambora has opened a Toronto office to be more accessible to its customers. Meanwhile, Misys merged

Ontario Fintech Accelerator will be launched soon to promote innovation in the fintech space with Toronto-based D+H to create Finastra, the third largest financial services technology company in the world and its CEO Nadeem Syed plans to expand the existing capability in Canada by taking advantage of the depth of talent available in the Toronto region.

A supportive environment From a regulatory perspective, things are looking positive. The Ontario Securities Commission (OSC) has created a Fintech Advisory Committee to advise staff on developments in the fintech sector. It created Launchpad – essentially a sandbox for fintechs to test their products under the supervision of the provincial regulator. Moreover, the OSC has signed co-operation agreements with the UK’s Financial Conduct Authority and the Australian Securities and Investments Commission – an indication of a willingness to operate at a global level. Ontario is striving to create an innovative ecosystem for fintechs to thrive. The Ontario Fintech Accelerator office will be launched soon to promote innovation in the fintech

space – and one of its responsibilities will be to help start-ups get established. So, with continuing uncertainty surrounding Brexit, protectionist policies in the US, and the positive note struck by the trade agreement between Canada and the EU (CETA), fintechs in the EU and UK would do well to consider expanding to the Toronto region. Not only does the region offer the opportunity to establish a business in Canada, but it also doubles as a springboard to enter the US and Mexico markets. Businesses can take advantage of the Eastern Time Zone to service North American clients and easily access cities throughout the Americas from Toronto’s two international airports – Toronto Island Airport connects to destinations in the United States daily and you can be in New York, Boston, Washington or Chicago in two hours. Meanwhile, Toronto Pearson International Airport connects travellers to 67 per cent of the world’s economies through daily, non-stop flights. You could say the fintech sector in Toronto is cleared and ready for take off! Salman Khan is a senior advisor on the Investment Attraction team at Toronto Global, a government-funded, not-for-profit agency that works with international companies interested in expanding to the Toronto region. Services include providing market information, assisting with navigating the business ecosystem and facilitating introductions. With a technology background backed by a recently completed MBA, Salman has a keen interest in emerging technology companies in fintech, blockchain and artificial intelligence. Readers can reach Salman at skhan@ toronto to request assistance in expanding their business to the Toronto region. Salman tweets at @SalmanK84s Issue 7 |



Crossing the divide BankservAfrica’s CEO Chris Hamilton and Executive Head of Digital Infrastructure Martin Grunewald ask what role payments could play in improving financial inclusion It’s easy for the US and Europe to get carried away with thinking they’re alone in experiencing a deeply uncertain, transformative time in history when many societal components – especially economic ones – are being re-worked, revisited or rebuffed. But South Africa is also expecting another challenging year in 2018. The uncertainty here lies with its ongoing shallow economic growth and confidence, high unemployment rates and political unpredictability, which will shape the next 12 months. And yet South Africa is also witnessing a significant and potentially definitive surge in fintech and the largest automated clearing house in the country, BankservAfrica, is a pivotal organisation behind the current redesign of its national payment system. It’s well-positioned to sponsor this next-gen, faster payments upgrade because it also operates as clearance bank for the Southern African Development Community (SADC). This is a 16-state, inter-governmental organisation that seeks to promote political cooperation and security in the region. Labelled a ‘cautiously optimistic’ time for South African banks, this year will be one to focus on innovation, investment in technology and real-time deliverables to counterbalance the depressing forecast of risk and uncertainty. And there are plenty of other things to be optimistic about in South Africa. Looking to its investors, the influx of Chinese money has steadily continued, as has that from plenty of other regions (the EU especially). In August last year, (overall) real-time clearing even recorded the highest growth, with an impressive 32.6 per cent increase on one year ago.


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Meanwhile, the long-anticipated Bank Zero, a 45 per cent black-owned mutual bank founded by veteran bankers from First National Bank, Michael Jordaan and Yatin Narsai, is set to launch in the fourth quarter. Looking beyond South Africa to the wider continent of Africa, its similarly unhurried economic growth has prompted an increase in nonperforming loans and sapped some countries’ financial sectors. That’s before you throw the unfortunate foreign exchange policies into the mix. So if it’s not a time to boost lending, when is? Against this backdrop, Fintech Finance spoke to two people behind the wheel of the next-generation payment system in South Africa, CEO of BankservAfrica, Chris

The big challenge in South Africa is that it’s got two economies, not one Hamilton, and its executive head of digital infrastructure, Martin Grunewald. BankservAfrica is Africa’s largest automated clearing house and builds and operates South Africa’s core interbank payments infrastructure. Payments and transactions are at the heart of this organisation and it fully backs the need for modernisation in the payments landscape. It has played an integral role in processing billions of payments in South Africa since 1972. All four of South Africa’s high-volume banks – as well as a consortium of the lower volume banks – are shareholders and customers of BankservAfrica. FINTECH FINANCE: Describe the primary challenge facing banks in South Africa.

CHRIS HAMILTON: The big challenge in South Africa is that it’s got two economies, not one. It has a developed economy – a well-banked community, with the world’s best payment infrastructure – and it also has an under-developed economy of people who are not financially included, with limited access to the financial services the rest of us take for granted. So, the really big challenge is how to bring these two economies together. MARTIN GRUNEWALD: We are busy going through a process of redesigning our own national payment system, but we’re not unique. Everyone in the world is saying ‘what do we do around faster payments, what’s the next evolution of payments?’ And we’re finding our colleagues across the African continent asking themselves the same question. FF: South Africa is part-way through the design of a new payment system – tell us how the country might benefit? CH: It turns out the payments system has a role to play in bringing together the two very different economies I’ve just described. If we can rebuild the developed economy payments infrastructure in a way that brings in and includes the under-developed community we have an opportunity to really start making a difference. The big programme is to work with the banking community, retailers, telcos and regulators to come up with a design for that next-generation payment system and then develop and provide it, so that it creates that platform for inclusion. So, like a lot of developed economies, South Africa needs to redevelop its core payments infrastructure in the next five years or so and you’ll see this happening all around the world. It’s often called the real-time payments revolution. The

‘real-time’ part isn’t the important bit. It’s going to be fast, sure, but it’s also going to be data-rich, it’s going to be very flexible, and it’s going to enable a whole lot of new financial services. MG: Almost six months ago, we had a national payments design workshop in Abidjan. Many of the countries and central bankers were there and everyone’s grappling with the next generation. It’s not just about putting in a piece of tech. It’s around the holistic design and how we see the future. We need to design payment systems for the economy of the future and not for today’s economy. Things change so fast and we need to make sure we’re designing for that. So, I’d say the summary of the challenges we face is ‘let’s look at a new way of designing our payments systems and catering for the future’. But we also need to understand what our economies will actually need in the future and not silo our payment systems. I think that’s what most people are starting to think about, and you can see that with faster payments projects all over the world. FF: How has regulation and compliance impacted you in a positive way? CH: It’s native to what we do as a network: to make sure that we’re not only in full compliance with the relevant rules and regulations but that the community also is. So, a well-regulated banking community is going to make our lives easier, as an operating network; we’re always going to be very supportive of a sensible framework. I think it’s really positive that the world’s financial regulators are waking up to the need to balance innovation with safety and soundness, if you like. And so you’ll see a lot of the regulators talking about building regulatory sandboxes where

they can test out new ideas before letting them loose on the public. I think that regulatory development is a very positive one and should be encouraged. FF: Would you say there’s much technological leapfrogging in South Africa? MG: Yes and no. There’s always the example used of M-Pesa in Kenya and some really good examples in Tanzania, as well as the use of mobile. So, what has happened in those instances? There’s been a really good uptake of mobile, but I think we’re way ahead of ourselves to say there’s some leapfrogging. I think that, in some instances, in the traditional payment systems there’s some really old technology getting deployed in Africa. So, typically, people will sell card switches and electronic funds transfer (EFT) switches (which is the old way of doing things) because all of these stay isolated. So, putting in an automatic clearing house that deals with cheques and EFT is maybe not the right thing in the future. But the opportunity for leapfrogging exists because there’s such a lot of mobile usage and so much of the informal sector is vibrant and willing to accept new ways of doing things. At the moment, I think our whole lives are on mobile. You know, 10 years ago, we wouldn’t have had our lives on mobile, and I think if we ignore that and say it won’t impact payment systems for the future,

we’re being naïve. I think there’s going to be much more impact than we’ve ever imagined, with more and more uptake of mobile. And for a lot of the continent, smartphones are coming in more and more. So, I think there’s great opportunity for us to leapfrog in Africa. Whether we’re leapfrogging already or not, I think that’s open for debate. FF: How much of your focus is on cyber security? CH: It’s part of the inherent furniture of what we do. We run networks, so we’re native to the need to make sure the network is secure all the time. The fact that, these days, you have so many more openings in your network – each node is running each bank, if you like, which is an opportunity for someone else to get in, not only to their systems but to yours. It means you’ve just got to stay on that, constantly, and be aware of the evolutions. Luckily, of course, we tend to be a network that can harden its own perimeter and then we just have to worry about making sure the banks have got their perimeters sorted out. So, it’s a big challenge but it’s essentially a constant battle, to make sure we keep up with the trends. Ultimately, cyber security is vital.

Deep division: Redesigning the payments system could help address social issues

Issue 7 |



From textiles to tech style 200 years ago, Leeds was a hub for investment and innovation in the textile industry. Now, it’s back in fashion with entrepreneurs powering a second industrial revolution, as Leeds Digital Festival’s Head of Marketing Charlotte Scott explains

A key driver of Britain’s industrial revolution in the 19th Century, Leeds’ Victorian woollen mills, overlooking the central canal, were once hubs of technical innovation. Back to the future and these formerly derelict units have received a new lease of life, becoming homes to some of the region’s 110 small- and medium-sized businesses, many digital-based businesses and an increasing number of them fintechs. Towering above them are the glittering high-rises of one of the most important financial centres outside of London, including the headquarters of well-established players such as Clydesdale and Yorkshire Banks, First Direct, Sky Betting & Gaming and Capita, alongside offices of the big four consultancy firms, KPMG, Deloitte, PwC and EY. Leeds is about much more than architectural repurposing, though. With a £64.6billion economy predicted to grow by 25 per cent by 2027, the largest knowledge-intensive

sector outside London and £688million gross value added in the digital and tech sectors, it’s no wonder it has caught the eye of investors worldwide. In 2017, the city region secured more than 100 foreign direct investment projects, as well as enticing homegrown companies, such as Burberry and Covance, to relocate from London. Comparatively low rents (the central Leeds City Region is up to 50 per cent cheaper per square foot than London and yet it’s just over two hours away from the capital by train), make it an attractive proposition for companies such as investUP. The peer-to-peer lending aggregation platform founded by serial digital entrepreneur Daniel Rajkumar, moved from London to offices in the Leeds Digital Hub to escape wage and rent inflation and hasn’t looked back. “The ecosystem in Leeds for fintech is phenomenal,” says Rajkumar.

“You’ve a large traditional financial sector, so you’ve access to compliance skills, you’ve access to people who are investment advisers, and it’s got a great technology scene with a lot of media companies and big-name brands that can help with web-oriented innovation.” In fact, Leeds City Region is home to 30 national and international banks, with three of the five largest building societies headquartered here. It’s widely regarded as the UK’s second most important centre for banking outside of London and tipped to become England’s second fintech hub. The Government has already committed to growing the local fintech industry as a key part of the Northern Powerhouse agenda, building on the innovative groundwork of companies such as Panintelligence, Contis, WorldPay and Equiniti Credit Services (formerly Nostrum Group). But perhaps the strongest vote

Old and new: Leeds' traditional industries have given way to a digital economy


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of confidence in the city’s future as a hub of financial digital innovation and economic prosperity is the relocation of HMRC offices and some 6,000 civil servants to Leeds in 2020. While this move serves the strategic political purpose of boosting the economy of the Northern Powerhouse, the relocation will also aid HMRC’s ‘transformation into a modern digitally advanced tax authority’, according to its chief executive, Jon Thompson. What really attracts businesses across the globe to Leeds, though, is the pool of 38,900 skilled graduates delivered into the workforce every year by the city’s nine colleges and universities. The lack of much-needed tech and digital skills – and the dreaded brain drain after Brexit – is a concern cited by many elsewhere. But Leeds presents an alternative future. Accelerating towards a knowledge economy faster than any other UK city, Leeds’ universities, local government, big business and small players alike collaborate to ensure that its 1.7 million-strong workforce has every opportunity to expand its future skillset. From global initiatives promoting tech and digital skills in education, such as Global Digital Week, to free business workshops hosted by Google Digital Garage, Leeds is committed to providing accessible training for graduates.

These projects are supported by Leeds City Council, which recently provided grants of £3.7million to tech projects alongside the development of its Leeds Digital Skills Action Plan that works with universities and industry to get people ‘job-ready for the digital sector’. It’s clearly paying off. Big-hitter Sky Betting & Gaming has been a key sponsor of digital initiatives across the city, including this year’s Leeds Digital Festival, since moving here in 2010 and is consistently impressed by the calibre of Leeds graduates. It remains one of the city’s’ largest employers.

An unstoppable font of ideas As important as the city’s digital training initiatives, is its world-class research. The Leeds Institute of Data Analytics (LIDA), a partner of The Alan Turing Institute for data science, is an example of the quality research and interdisciplinary approach at the heart of the innovation scene. LIDA, also host to the Consumer Data Research Centre, uses data analysis to improve efficiency across healthcare, transport, policing and sustainable consumption. Within Uber-hailing distance, the social and computer sciences, forensics and cryptography departments at the University of Bradford are working alongside West Yorkshire Police at the new Cyber Security Interdisciplinary Centre. And beyond the adrenaline-pumping lure of cyber crime busting, Leeds maintains a leading

position in UK medtech, too. Drawing on disciplines across the city – from designers of user interface to data analysts an SEO specialists – NHS Digital is ready to propel the National Health Service into the future from its Leeds-based launchpad. As any entrepreneur knows, success thrives on fresh ideas and Leeds’ young talent generates them in droves, enabling industry to keep its finger on the pulse of emerging trends and markets. The University of Leeds Business School, Centre for Enterprise, university-funded SPARK enterprise programme, and the myriad of societies within the university itself, enable the next generation of business leaders to pursue boundary-pushing projects. Perhaps influenced by the radical optimism of its students and the ambitions of a young workforce, it’s clear from the city’s numerous networking events that the projects that elicit the most smiles are those with a heart. Whether making a conscious effort to support women in tech (She Does Digital, Northern Power Women), helping schools manage and moderate social media (onShowcase), or 3D-printing with recycled plastics (Filamentive), a keen desire to use innovation for positive social change motivates digital startups here. Not only does all this cross-fertilisation of ideas give way to a more holistic digital business model, but it also provides the foundation of the city’s digital success.

LEEDS DIGITAL FESTIVAL APRIL 1627, 2018 What better way to showcase Leeds’ collaborative innovation scene than during a city-wide festival? Backed by this year’s headline sponsors, Leeds-based Sky Betting & Gaming, NHS Digital and the University of Leeds, the Festival attracts delegates from across the world to meet the most innovative UK start-ups and award-winning businesses. Now in its third year, with more than 100 events across 50 venues, the festival explores cutting-edge technology, spotlights the most recent research from Leeds’ universities, and hosts provocative debates around the tech of tomorrow – there’s even a ‘Code in the Dark’ session for hardcore programmers! For more information, log on to

Issue 7 |



All-you-can-eat AI in 112 minutes Will Dove matches his appetite for pastries with a thirst for machine learning – and in Steven Finlay finds a satisfying read

Last night, my phone buzzed to inform me that I had matched with a potential suitor on a popular dating site. I almost fell off my chair in shock. After a year’s worth of membership fees, this was my first match (in fact, I’d forgotten that I was even subscribed to the service). Initial feelings of elation were soon replaced with bitter resentment. Who was responsible for selecting this match? And why had they been so inept at connecting me with any other bipedal mammal up until this point? Just as I was rehearsing the stern conversation I would have with my personal matchmaker, I recalled Steven Finlay’s teachings. No human being was to blame for this – my romantic fate had been left in the hands of machine learning. A whole host of complex algorithms had worked their magic to deliver this one, single match according to a mind-blowing number of criteria that no website employee could ever hope to analyse. Unfortunately, by the time I had logged into the site again to draft a message to my match, she had already blocked me. The robots have spoken: I’m destined to become just another crazy cat person. When writing Artificial Intelligence And Machine Learning For Business: A No-Nonsense Guide To Data Driven Technologies, Steven Finlay set himself the challenge of producing a comprehensive introduction to the world of machine learning that can be digested in no more than 112 oddly specific minutes. Admittedly, it took me approximately 140 minutes to finish the book, but I was eating

An AI guide to life: If you’re hungry for answers, read it

Having outlined what machine learning and AI are, he takes the reader on a whistle-stop tour of predictive models


| Issue 7

mince pies at the time and had to pause frequently to brush off the crumbs. There’s no doubt that Finlay has succeeded in his mission, though. Artificial Intelligence will provide you with some of the most engaging and informative 112 minutes of 2018 (if you can resist the pastries). Having outlined what machine learning and AI actually are, he takes the reader on a whistle-stop tour of the various types of predictive model, evaluating the advantages of each, not just in terms of data science, but also in a practical business sense. A deep neural network may well be a data scientist’s dream, but would Mr and Mrs Smith be able to benefit from one in their cornershop, let alone explain how it works to prospective investors? Finlay refrains from needlessly championing the cutting-edge aspects of machine learning, and his book is a far more valuable offering to business owners as a result.

Sure, if you’re already an accomplished data scientist with PhDs coming out of your ears, then this book probably isn’t for you. However, if you’re one of the other 99 per cent of the population who couldn’t identify a decision tree if one of its branches slapped you in the face, then there’s no better way to take your first steps into the world of machine learning than with Steven Finlay. There’s one glaring error to be found in (or, more precisely, on) Finlay’s new book, though. The penultimate chapter focusses on the ethics of machine learning; for example, which data it is appropriate to use, and how it is appropriate to use it. Considering the contribution that each and every one of us makes to the big data warehouses of companies such as Facebook and Google, this chapter stood out for me as proof of how machine learning has already transcended the world of business. Artificial Intelligence And Machine Learning For Business? I disagree. This is artificial intelligence and machine learning for life. Artificial Intelligence And Machine Learning For Business: A No-Nonsense Guide to Data Driven Technologies By Steven Finlay. Published by Relativistic. Price: £9.99. Great for: Machine learning novices or frustrated singletons, looking to dip their toe into AI or optimise their online dating profiles. Best read: On a flight from Frankfurt to Budapest Ferenc Liszt International Airport (exactly 112 minutes). Good read rating: ★★★★★

Growing with the business of banking


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