Fintech Finance Magazine Summer 2018

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Money20/20 Europe Preview The Payments Race is on... see you in Amsterdam!



Fast work!

How the Asia


Race was won

‘There is nothing more disruptive than a female voice in fintech’




of Fintech

It's time




Superheroes return

a bow

Regtech D-day for



Nom-omnichannel! All-you-can-eat digital banking with Backbase

PLUS INSIGHTS FROM Wirecard ● FileFacets ● Glory ● Tinkoff Bank ● Pendo Systems Meniga ● Wells Fargo ● Galileo Processing ● Isracard ● SmartStream ● Saxo Bank ● Axa

Regtech: The GDPR wave hits Europe’s shores

Paytech: Real-time, invisible and borderless

Insurtech: Digital risks and rewards

Lendtech: Reimagining the money flow

Anders la Cour

on why SME lending will complete Saxo’s virtuous Banking Circle

PLUS INSIGHTS FROM Link11 ● DBS ● Finastra ● InsureApp ● Glory ● Exagens ● OCBC ING ● Zwipe ● SmartStream ● Earthport ● ACI Worldwide ● Apply Financial ● 4Stop ● EBF

2600+ attendees


CEO speakers


fintechs on stage










Money talks The Biocryptology stage might be swamped by Antonio Banderas fans, but he’s not the only star of this year’s Money20/20 Europe

11 Buying time The fourth #M2020Race, aka #paymentsrace, is on…

16 Saxo Payments’ virtuous circle Saxo Payments Banking Circle facilitates ambitious SMEs’ cross-border trade. Now, co-founder Anders la Cour is setting his mind to financing their growth, too

20 Pastures new Rabobank is ploughing its own fintech furrow with the launch of Rabo Frontier Ventures, targeting innovation in finance and agrifood

22 Bright sparks Small can be beautiful, but when it comes to fingerprint authentication, the bigger the better, argues the CEO of NEXT Biometrics

24 An Open question Barclays’ Catherine McGrath considers the far-reaching implications of data sharing

26 The next best ING Benoît Legrand discusses ING bank’s far-sighted digital strategy

28 Let’s get real Real-time payments may appear instant to the customer, but in reality they’re stuck in a time warp. ACI Worldwide is helping to bring them up to speed

31 Sock it to ‘em




We’ve booked our tickets, the van is packed and I'm looking forward to three non-stop days of back-to-back interviews… it must be events season! In this edition of Fintech Finance, we look at the tech that is due to tumble out of Money20/20 Europe in Amsterdam. Among some great features, we talk to Anders la Cour, co-founder of Saxo Payments Banking Circle, on his unique new approach to SME lending. We look at the mighty Curve card (book your financial ride-hailer now, it's going to be popular!). And we unpick Finastra's plans for a beautifully-stitched-together new service, FusionFabric.Cloud. Did I mention the fourth Money20/20 Payments Race? Well, I will now! We’re about to fire the starting pistol in Istanbul and you can watch them fly (or fail) on Twitter - hashtag paymentsrace. Meanwhile, were you ready? May 25, the deadline for the introduction of the

General Data Protection Regulation for business, has been and gone. Our regtech feature looks at how to use technology in a sensible way to ensure compliance for today – and, perhaps more importantly, tomorrow. Don’t be caught out. Speaking of data, we also look at how insurers are being challenged by insuretech, including InsureApp and Covera with their unique approaches to the customer experience. Ali Paterson |

Did you recognise last issue’s ‘spine tingler’: ‘There is nothing more disruptive than a female voice in fintech’ Elizabeth Lumley, Director, Global Ecosystem Development at Startupbootcamp FinTech and Startupbootcamp InsurTech



Consumers are ‘voting with their feet’ and picking their payment preferences at the checkout. Intrapay has a colourful solution for merchants

34 Ahead of the Curve Everyone talks about the ‘Uberisation of banking’, but Curve is the financial ride-hailing service

38 Fusion fintech Global banking software giant Finastra officially unveils a new approach to seamless services

40 Mixing and matching The tie-up between former rivals Barclays and PayPal is a sign that unusual couplings will become increasingly common


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Partnering for growth

September 26, 2018 - National Bank of Belgium

A new conference committed to bringing together European financial services and financial technology players to discuss digital transformation, technology and innovation within the industry, making Europe an even stronger region through collaboration This one-day event is not just another fintech conference—it is an opportunity to come together within working sessions across various focus domains to create real outcomes and change, with a focus on confluence between financial services, fintech and regulator perspectives. Digital Finance Europe goes beyond business and technology—the event is open to c-level executives, digital business managers, technology and regulatory experts, entrepreneurs, talent management specialists, economists, governance specialists and those interested in further collaboration and tangible innovation within the financial services and technological worlds. Attendees 450+

Speakers 40+



50 46

44 60 42 Banking with a smile When established global security specialist Giesecke+Devrient says biometrics can restore trust, it’s as well to listen

44 Right first time Businesses run a real risk of being ‘fat-fingered to oblivion’ in the race to speed up payments, warns Mark Bradbury of Apply Financial. But he has a solution

46 Crossing the divide It’s tough building a cross-border payments system to rival the correspondent banking model but that’s just what Earthport has done

48 Connecting the data dots Payvision gives a unique insight into the inevitable transformation of payment services providers into data-driven enterprises

50 The digit-al human Tech company Zwipe is helping fingerprint-enabled cards go mainstream – but it’s just the start

52 Entering a new era The challenges for banks in achieving digital transformation – and FIME’s anwer to solving them

REGTECH 54 When worlds collide The old financial supernovas and the bright new stars of fintech are – or should be – on the same trajectory, says the EBF’s Sébastien de Brouwer

56 Tooling up Global consultancy Capco describes itself as the ‘Swiss army knife for the financial industry’ – and it’s as well to have every tool at your disposal

59 Designs on fintechs The region known for its flatpack furniture is opening the box marked ‘fintech’ – and Capco Nordics is inside

60 Full disclosure Business departments and IT have only been getting half the story when it comes to user experience problems. With Glassbox those issues have nowhere to hide

62 Curing the risk headache How 4Stop set out to soothe risk managers’ brows with an end-to-end solution that promises to solve the regulatory pain points

64 The digital bouncers Marc Wilczek, Managing Director of Cloud-based cyber security company Link11, describes how it has the banks’ backs covered

CUSTOMER RELATIONSHIP MANAGEMENT 66 A Sterling effort! The last thing you want when absorbing legacy systems during an acquisition is to upset the very customers you’ve invested a fortune in acquiring. Sterling National Bank, explains how Backbase helped it to keep them

68 The rules of engagement Artificial intelligence is helping banks connect with customers by improving their understanding of how best – and when – to approach them. The CEO of Exagens discusses human behaviour and the science of building beautiful relationships

70 You’ll never bank alone Canada’s Desjardins Group, the largest cooperative bank in North America, explains why we could all do with a digital friend

72 Cashless societies: fact and fiction Reports of the death of cash have been much exaggerated, says Ron Delnevo, European Executive Director at the ATMIA. And in this whistle-stop world tour, he sets out to prove it

Issue 9 |


Trusted Technology Securing the Future


EMV - Biometrics - Wearables - IoT

The future calls for increased security, exibility and convenience. MULTOS is a trusted technology, widely used for mainstream and innovative smart cards from around the world. Quality, Security and Flexibility are core MULTOS values that have led to the delivery of 1 billion MULTOS devices to date. With over 20 years of experience in advanced EMV chip & PIN, contactless payments, digital identity and electronic passports, the MULTOS technology is trusted by many global bank issuers and government identity schemes worldwide.

An Industry Backed Design The MULTOS Consortium is a group of highly respected global businesses within the IT security markets. Their expertise and delivery capability ensure that they can service all aspects of the supply chain, from small innovative proof of concept designs, through to large volume projects.

Intelligent HomesÂŽ


74 There’s something about Emma OCBC Bank knows what it takes to build digital relationships. Here it discusses chatbot chemistry, customer experience and how to unlock data


76 Tackling branch transformation head-on RBR’s Branch Transformation 2018 conference helps to address one of the biggest challenges for banks worldwide


78 EX marks the spot We’re familiar with AI improving customer experience (CX), but applying it to employee experience (EX) could substantially boost wealth managers’ productivity, according to Comarch

80 Can’t stop the feeling



82 The Age of Fintech



96 Going under the covers

104 Fixing the financial plumbing

Ali Paterson talks trust, relationships and experience with Michael Bielamowicz of Glory

Three new Vision-ary fintech superheroes assemble for the latest instalment

Richard Carter of Equiniti Credit Services believes the pipework through which loans flow could do with a refit. And he’s got the toolkit

Scott Loong is on a mission to transform the delivery of insurance with wideawake startup Covera

PAYTECH hcope 90 Embracing the digital payments evolution

98 The all-seeing ‘I’

Shoppers are more sophisticated in their choice of channels and payment methods, but they still respond to incentives and rewards, says Blackhawk Network

Knowing us better than we know ourselves is the way forward for InsureApp

94 Tech Tonic For Neal Cross, ‘the entrepreneur who happens to work at a bank’, the challenge is to get DBS thinking and operating ‘more like a tech company’

UK digital savings bank and commercial lender OakNorth has grown into a unicorn faster than its founders could have hoped. Now it’s seeding new opportunities

DATA 100 Digital sweet spots In Singapore’s smart city state, data provides attractive opportunities to collaborate

92 Nice work Gig workers crave flexibility, but can your payroll and finance team deliver? asks Brian Thornsberry from Prepaid Technologies

106 From little Acorns

PARIS FINTECH FORUM 109 The Davos of fintech What to expect from the next Paris gathering of industry leaders


102 Costs and controls

114 Thinking the unthinkable

We sit down to talk transaction costs, robots and blockchain with SmartStream

Will Dove browses Chris Skinner’s future digital financial bazaar where social constructs are up for grabs


PHOTOGRAPHER Jordan “Dusty” Drew SALES James Butcher Chloe Butler Rebecca Routledge Shaun Routledge

FEATURE WRITERS David Firth Sean Martin Will Dove Tory Hywel-Davies Alex King Tracy Fletcher Sue Scott

VIDEO TEAM Douglas Mackenzie Lea Jakobiak Daniel Curnme James Butcher Shaun Routledge Lewis Averillo-Singh

ISSUE #9 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.yorkshirecreative


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 9 |



Mon€y t£lk$ The Biocryptology stage might be swamped by Antonio Banderas fans, but he’s not the only star of this year’s Money20/20 Europe, as Pat Patel, Content Director, tells us FINTECH FINANCE: What are some of the highlights that you’re looking forward to at this third European Money20/20 conference? PAT PATEL: I’m excited to see how the themes of connected commerce and voice commerce will be represented at this year’s conference. Naturally, the latter will be anchored around Amazon Echo and it’ll be interesting to see where Amazon is hoping to take that product and grow its use cases. Various companies will be talking on the subject of conversational commerce, with Mastercard in particular focussing its conference presentation around this topic. Obviously, over the past decade, we’ve experienced a shift towards online commerce, but we’re now beginning to witness a minor shift back towards a more personal commerce experience – a resurgence in the art of conversation. FF: There’s been a lot of talk recently about collaboration within the financial services industry. Do you expect this trend of fintech partnerships to continue? PP: I believe that we’re going to hear a number of announcements about new partnerships being formed at this year’s event and also celebrate some existing partnerships that have stood the test of time. If you think back five or 10 years, it was unheard of that a bank would partner with a fintech such as PayPal. Nowadays, however, it’s happening all the time. Earlier this year, we learned that PayPal would be collaborating with both Barclays and HSBC, which proves the success of the coopetition model. I’ve no doubt that these types of collaboration will continue to increase in number. FF: As always, you’ve a remarkable range of speakers lined up for this year’s conference. Who do you think will be the ones to watch out for on stage?


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PP: Obviously, it’ll be extremely interesting to hear Apple’s Steve Wozniak share his view of the world and pick up on some insights and anecdotes from his past. Antonio Banderas is somewhat of an unusual choice for the main stage, but as an ambassador for Biocryptology it’ll be fascinating to hear his thoughts around the art of identity. The actor’s been working closely alongside the firm over the past few years and now it’s looking to launch a new product into the marketplace that should break new ground in terms of allowing consumers to access information without usernames or passwords. On stage with him will be David Birch, acting as the moderator, and Ted Oorbals, CEO of Biocryptology, so it’ll certainly make for a compelling session. In addition to a Hollywood superstar and one of the forefathers of modern computing, we’ll also be hearing from Leda Glyptis, a successful author on the subjects

We’re beginning to witness a minor shift back towards a more personal commerce experience – a resurgence in the art of conversation

For real: Antonio Banderas is a Biocryptology ambassador

of digital disruption and transformation. She produces these amazing articles on a weekly basis. One of hers that we particularly loved was entitled Money Is Not A Dirty Word and explained why banks shouldn’t consider commercial models to be a taboo subject. She’ll be doing a 20-minute presentation on this theme, effectively bringing the article to life on the Money20/20 stage. Finally, fresh from our previous conference in Asia, we’ll have ‘ethical hacker’ Ralph Echemendia leading a thought-provoking session on some recent hacking scandals, illustrating what they could mean for companies that collect and store data. With him on stage will be singer/songwriter Saul Williams, as well as criminology academic and cybercrime specialist Dr Mary Aiken, ensuring that the on-stage mix remains as eclectic as ever. FF: Your ‘Room 101’ feature went down exceptionally well at Money20/20 Asia. Will it be making a return in Europe? PP: Absolutely. Just like the TV show, we’ll have a panel of experts up on the main stage, listing their pet hates within the financial industry. David Birch will be on that panel, which should prove to be very amusing since he appears to have quite a number of bugbears at the moment. As in Asia, we hope Room 101 will prove to be a highly entertaining session at Money20/20 Europe, with plenty of edge and insight thrown in for good measure. Also returning in Europe will be the Arena Stage with its 360-degree screen setup. There’ll be screens on the floor, around the edges and overhead, making the experience of the Arena something you’ll definitely not want to miss. The Arena promises to be bigger and better than ever in Europe and I’m confident it’ll come into its own even more than it did last year. One of the highlights of day two at the

conference will be the innovation labs takeover. A few of these labs will be spending some time talking about the things that they’re currently working on, and I’ve no doubt that’ll prove to be extremely insightful. FF: As well a host of family favourites, do you have any new features arriving in Europe this year that you’re particularly excited about? PP: We’re introducing a new stage called the Spiegel Tent at this year’s conference. From the outside, the Spiegel Tent appears to be just a stage within a tent, however what goes on inside is sure to be much more revolutionary. We’ve been working closely with BBVA Open Talent to design this stage and they’ll be hosting a number of sessions within it where they’ll be opening the floor to debate on topical issues. Think intimate fireside chats, albeit without the presence of biting insects and an acoustic guitar, where one can really get to know the speakers themselves as opposed to the company they’re representing. Another new addition to Europe this year that’s worth mentioning is our new stage focussing on cutting-edge content, specifically in the field of artificial intelligence (AI). We’ve been working closely with Feedzai on a project called AI Deep Dive and it will be presenting this project in detail on the new AI stage. To help it do this, it has enlisted the help of Jose Manuel Barroso, Chairman of Goldman Sachs, as well as a number of other industry experts in order to really cut to the core of what’s going on in the AI space. Steve Wozniak will be taking the occasional break from the main stage to give his opinions on the future of AI on this new stage and we hope to come away with a good grasp on what to expect in the months and years to come.

In terms of overall differences that you can expect to witness at this year’s conference, we’re really focussing a lot of our content around the subject of customer journeys. Our goal is to take delegates on a whistle-stop tour of a variety of different topics, including blockchain, digital transformation and platforms. To do this we’ve had to programme our agenda more carefully and cleverly than ever. FF: We all met in the beautiful city of Copenhagen for last year’s Money20/20 Europe. What prompted the decision to move this year’s event to Amsterdam?

Not only is the general fintech community of Amsterdam particularly friendly, but the venue we’ve chosen also fits our needs perfectly. The RAI Exhibition and Convention Centre is a very large space indeed and the owners are currently in the process of building their own hotel on the site, which will open in the next year or so. We feel that we can grow into this venue, since it gives us so many options in terms of how we want to develop the Money20/20 experience. Unlike the Bella Center in Copenhagen, the RAI isn’t a dedicated conference facility, but is instead a customisable facility that’s used for a multitude of different events. This set-up grants us the blank canvas that

Chat lines of credit: The art of conversation is making a comeback

PP: Copenhagen was obviously a fabulous destination and one that served us extremely well last year. However, we feel that we’ve now outgrown the Danish city to some extent and have been looking for other destinations across Europe where we can host things. Amsterdam has always been a very strong contender, thanks to the city’s thoroughly welcoming financial community. We have strong connections with Holland Fintech, as well as many other Dutch banks, including ING and Rabobank.

we need in order to design each area of the venue to our liking, and consequently realise our vision of what Money20/20 should be. With this year’s theme of Circus, we’re confident that Money20/20 Europe 2018 will be unlike any other conference you’ve been to before. It’ll be a completely distinct experience, featuring a blend of performance and insight, although we’ll be keeping things strictly PG – no doubt a rare occurrence in Amsterdam! Issue 9 |



BUYING TIME From Istanbul to Amsterdam Our five racers are poised to pay their way across Europe with nothing but a single transaction method each. Equipped with just one means to make purchases for travel, food and accommodation, they’ll barter and blag the distance from Istanbul to Money20/20 Europe in Amsterdam where the financial world will be waiting to see who among them – cash, wearables, mobile, plastic or cryptocurrency – gets the furthest, fastest.

Augustus Loi

Payment method: Mobile phone Hashtag: #TeamMobile Status: Reigning champion Sponsor: Quadient (

Augustus stormed across Asia in our last race to lift the Payments Tiara in some style. But he’s not complacent. “The advantage that I thought I would have in Asia turned out to be entirely not what I expected,” he says. “The ability to plan and make payments in advance was what put me ahead and I don’t think that’s got anything to do with the geography. As long as I have an internet connection, that’s an advantage almost anywhere. But I’m not going to reveal my strategy, if that’s what you’re asking!” He has a cunning plan to overcome some countries’ clear preference for cash. Not mentioning any names, but you’d

Oh, and we’ve built in some teasers along the way because it’s not a first-past-the-post. That would be far too simple! Our whacky racers have to pick up points by: a) winning (well, obviously), b) visiting as many countries as possible (across two continents this time) and c) collecting video endorsements (check it out and join in at #money2020race #paymentsrace). The social media battle has already begun without the first transaction taking place! Number four is shaping up to be one hell of a ride, so let’s meet our racers…

struggle to buy sauerkraut without euros in your pocket. “When I first signed up for the race, I went back and studied how the previous winner, Amélie, had engaged with her payments community to get things done. Wherever there were gaps, she was able make those relationships work for her.” He concedes that the spreadsheetapproach might not cover his back as well as it did in Asia, where he was more familiar with the payments and cultural territory. “There are some countries where I have

As long as I have an internet connection, that’s an advantage almost anywhere. But I’m not going to reveal my strategy

Amélie Arras

#TeamCrypto Returnee

Augustus Loi

#TeamMobile Reigning champion

Stuart Thomas

#TeamCash Veteran

Nina Mohanty

#TeamCard Newbie

no idea Valentina what the Kristensen #TeamWildstyle situation’s Newbie going to be when I land. When I visited Frankfurt for the first time, I assumed I would be able to grab an Uber, for example. But at 2am, to my horror, it turned out Uber was not available in Germany. “I think I’ll have to play it by ear because I have a sense that Europe is a geographical mass of different objectives, policies, governments and infrastructure, and it’s going to vary wildly.” ■ Augustus is a senior manager at the Singapore Government-linked venture capital fund SGInnovate, which focusses on launching, proving and scaling ‘deep tech’ products.

Issue 9 |



Nina Mohanty

payment cards might prove more of a challenge during some stages of the Instanbul-to-Amsterdam journey. As a former staffer with Mastercard, she knows that she risks hitting the plastic buffers at the borders of the Austria-Germany region. “They’re definitely more cash-friendly there,” says Nina, who used to live in Vienna, “so that’s going to be a challenge as the card racer. But once I’m in Benelux, it should be smooth sailing because they’ve some of the best adoption rates for cards in the world. “I find it fascinating that, in London and across Europe, so many fintech companies still want to issue a card when at the same time we see so much coming from

Hashtag: #TeamCard Status: Newbie racer Sponsors: Apply Financial ( Curve (

“There’s a misconception that Americans are notoriously bad with geography!” says Nina, an expat living in England where she works for the financial network This Is Bud. While she’s confident she can find her way around Europe, locating vendors who’ll accept her wallet stuffed with

Asia where it’s just easier to do everything with a smartphone. I think in 20 years’ time it might be difficult to get around with plastic – card readers will have given way to QR payments and bank-to-bank transfers. “For now, though, I‘d better not jinx it by saying I have the easiest task, but I definitely have an advantage over some of the other racers.” ■ Nina is responsible for business development at This Is Bud, described by others as ‘one of the most compelling fintech apps around’ that connnects users with more than 50 services from leading financial brands.

I think in 20 years’time it might be difficult to get around with plastic – card readers might have given way to QR payments and bank-to-bank transfers Valentina Kristensen


Hashtag: #TeamWildstyle Status: Newbie racer Sponsors: Earthport (

Clearly the most stylish racer on the starting block in Istanbul, Valentina will be allowed to use a wearable every time she makes a transaction. #TeamWildstyle has really caught the imagination of the #money2020 fintech Twitterati with the most glamorous of them posting their support for a wardrobe of iWear. Valentina, director of ACORN machine, the award-winning platform launched by challenger bank OakNorth, is squaring up to her odyssey across Eurasia – which may well give her an opportunity to explore territories that ACORN OakNorth is eyeing for expansion. That’s if she’s not too weighed down by fancy Kerv rings and Apple Watches loaded with ApplePay. “In Scandinavia, you barely use cash at all – contactless cards and mobile payments are very common,” says Valentina. “I imagine in certain markets I’m travelling through, even cheques wouldn’t be frowned on – although I don’t think I’ve

ever received one here in the UK. Being in London, I’m spoiled when it comes to the payment methods I can employ – I’ve been to lots of other cities, even in the UK, where if you whip out Apple Pay, they’re like ‘what are you doing?’ According to Barclaycard’s most recent Contactless Spending Index, use of its bPay payments chip, which is embedded in items such as watches and jewellery, increased by 365 per cent in 2017 compared with 2016. And, according to a recent survey, almost two-thirds of banking professionals have predicted that wearable payment technology will be the next key innovation.

Being in London, I’m spoiled when it comes to the payment methods I can employ – I’ve been to lots of other cities, even in the UK, where if you whip out Apple Pay, they’re like ‘what are you doing?’

“I’m not so worried about the big expenditures on the trip, but smaller payments might prove problematic “To be honest, I’m kind of disappointed that Money20/20 isn’t happening in Copenhagen this year because I’d have finished the race in my home town, which would be an added incentive to win! Just kidding… it’s going to be an amazing trip.” ■ A popular fintech events speaker, Valentina heads up communications at ACORN OakNorth, a London-based fintech firm focussed on unlocking the potential in bespoke lending to SMEs globally using its data and technology platform, ACORN machine. In the UK, the firm operates as OakNorth – a challenger bank and one of the fastest-growing unicorns in the sector. Valentina is a passionate advocate for improving the female talent pipeline in fintech, as well as closing the gender pay gap in financial services. She sits on the Steering Committee for FinTECHTalents.

Issue 9 |


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Amélie Arras

Hashtag: #TeamCrypto Status: Veteran racer and former winner Sponsors: Coinfloor (

About the only thing that’s predictable about Bitcoin in this race is that you can’t predict its performance – such is the volatility of the cryptocurrency market and the vastly unequal degrees of acceptance across countries. Bitcoin wallet pulled a rabbit out of a hat in the States, winning the second payments race for Amélie, but in Asia she struggled to finish under threat of imprisonment in one territory. At least

this time, she’s confident she can finish. “I felt Asia was quite hostile towards cryptocurrencies, especially Vietnam,” says Amélie. “It taught me a lesson, though. In Europe I need to do my research! I already know that Malta is quite open to crypto transactions, as is France, not that they’re on their way there. I’d be surprised if Amsterdam wasn’t on board with it. But who know’s what will happen? With cryptocurrency it’s so unpredictable.” Not content with sticking to one community of crypto fans, she says she ‘might even ramp up the excitement’ by using Ethereum one day, Bitcoin Cash the next and Bitcoin itself on the third. “That would be quite funny, don’t you

think?” she says. “That way, I can really test the acceptance levels. If I have to fall back on the communities then, no matter what the price is – high or low – they will still accept my cryptocurrency because they are true believers. “I understand I get extra points, the more countries I visit… I was thinking about going to Syria.” Um, we’d rather you didn’t, Amélie. ■ Amélie Arras is an international market strategist and founder of the specialist fintech and payments agency, Adastra Marketing. She advocates digital transformation and collaboration in the financial and payments world.

I might even ramp up the excitement by using Ethereum one day, Bitcoin Cash the next and Bitcoin itself on the third Stuart Thomas

Payment method: Cash Sponsor: Glory Global Solutions Hashtag: #TeamCash Status: Veteran racer Sponsors: Glory Global Solutions (

“I think governments have a very unrealistic opinion on the use of cash. They might find it convenient to stop its circulation, but individual citizens are ones who should judge and I think they testify to its usefulness,” says our veteran payments racer, Stu. The man who thrice before has started the race confident that cash is king, isn’t bowed by his failure so far to win. In fact, he says cash has allowed him more fun

on the journey than that afforded to his rivals by any other payment method. “Not only was I the racer who spent the least (although I’m not sure I can repeat that in Europe), but I’ve had the most diverse experience of all of them,” he says. “As a tech blogger, cash started out being a real challenge for me. I had to learn news skills, not least how to interact with people in order to utilise what is, essentially, a payment method that’s been around for thousands and thousands of years. Things like Apple Pay and using mobile payments come naturally to me, so cash was the polar opposite of what I was

used to, but it’s been a real education. “I’m trying to think of something really bizarre to do on this race. I’m looking forward to experiencing something a bit weird and fun! Perhaps dogsledding or scuba diving – something that I can easily pay with cash that other people probably aren’t going to be able to with card, mobile or Bitcoin. So, watch this space…” ■ Stuart is a technology blogger and YouTube presenter with an international following. He uses situational comedy to test out products and services. You can catch him on his channel, Stu’s Reviews.

I’m trying to think of something really bizarre to do on this race. I’m looking forward to experiencing something a bit weird and fun!

Issue 9 |



Many hands… The utility approach of Saxo Payments Banking Circle makes light work of global trade


VIRTUOUS CIRCLE Saxo Payments Banking Circle facilitates ambitious SMEs’ cross-border trade. Now, co-founder Anders la Cour is setting his mind to financing their growth, too The future of banking and international business looks very different through the eyes of Saxo Payments Banking Circle. Saxo Payments Banking Circle was established in 2013 and is a prime example of a growing industry trend: the rise of the financial utility. The utilities proposition has compelling advantages in today’s business environment, as global trade continues to expand but is hedged in by a payments framework that is costly and creates friction. Anders la Cour, Banking Circle’s co-founder and co-CEO, says technology and regulatory developments have favoured the growth of financial utilities. “If you look at it from a structural perspective, the


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adoption of the original Payment Services Directive in 2009 enabled non-banks to offer financial services, which was a big stimulus for fintechs. There’s been a huge impact over the last few years, and we’ve seen many fintechs moving into the parts of the value chain where they service the consumer or the corporate, but where they don’t do anything that would typically be back-office functions outside their domestic core.” That is a highly profitable space, says la Cour, with the value chain likely to be decoupled further over the next few years. In the process, banks will try to move up the chain in order to stay close to their customers. “They don’t want to

become a commodity or utility in the lower part of the chain,” he says. And that's precisely where Saxo Payments Banking Circle is positioning itself to be. Until now, the infrastructure that supports financial services has made it difficult to innovate, which is why financial utilities have emerged to deliver standardised, non-core solutions to banks and other financial institutions and their customers. For banks, Banking Circle offers an add-on, or outsourced solution, to the existing infrastructure. For fintechs, it offers an alternative for managing multiple banking relationships in different regions. “If you end up as a utility with a legacy cost infrastructure, you’re not very well positioned,” says la Cour. “You lose the contact with your end clients, which is where the most profitable part of the value chain is. So, what we’ve done is build a utility that can operate on a global scale, and which any incumbent in the financial industry can use for products and services that are non-core.” These products and services function in much the same way as the pipes, plumbing and wiring supplied by utility companies such as gas and electricity. “It’s our philosophy never to compete with our clients,” says la Cour. “We allow them to focus on what’s valuable and profitable to them, while we provide the infrastructure to support their growth. It’s a mutually beneficial relationship.”

A fresh approach to trade The infrastructure that Saxo Payments Banking Circle provides is changing the concept of cross-border payments. While international trade is expanding, it remains slow and expensive, particularly for smaller players. This is because the existing correspondent banking model is ponderous and inflexible, involving numerous steps and parties. Individual currency accounts need to be set up in every country where a business wants to operate, which has implications for cost, time and compliance. In short, the traditional approach is a drain on operating liquidity and, therefore, a significant challenge for smaller businesses who don’t have the resources or clout of their corporate counterparts. In addition to high transaction fees and foreign exchange fees,

cash flow can be affected due to the time it takes for payments to be settled. As speed is crucial for merchants, many choose not to expand internationally and so avoid the risks that come with cross-border trade. “Our vision is to make sure everyone can operate internationally,” says la Cour. “At the moment, we are seeing a paradox where digital technology is shrinking the world and enabling you to reach anybody in any country, but there is no consistency in banking functions, file formats and clearing systems: they all vary from country to country. The consumer and corporate sides are becoming digitised and global, but the rest is lagging behind. That’s what we are fixing with Banking Circle.” The community-based solution allows cost and time to be removed from international business-to-business transactions, providing a seamless channel

We allow clients to focus on what’s valuable and profitable to them, while we provide the infrastructure to support their growth. Our vision is to make sure everyone can operate internationally for members to make and receive cross-border transfers in seconds rather than days, both in multiple currencies and at low cost. Moreover, transactions take place in a secure and compliant Cloud environment, based on the Oracle FLEXCUBE platform. This provides flexibility and scalability, and accommodates new regulatory requirements. A key feature of the platform is Banking Circle’s Virtual IBAN. This enables businesses to enhance their service proposition by providing them with access to international business bank accounts. By joining the Banking Circle, businesses can issue multi-currency international bank account numbers (IBAN) for customers in their own name and multiple jurisdictions.

Banking Circle clients include card acquirers, payment services providers, foreign exchange payment providers, banks and other financial institutions with international client bases. All these organisations can make instant international payments at competitive rates using currency accounts in the Banking Circle. And because its parent, Saxo Bank, has enormous liquidity, user confidence is assured. Members of the Banking Circle benefit from a global banking platform that enables merchants to make B2B payments and instantly settle with suppliers and partners, regardless of location. The platform also enhances members’ value propositions and helps them attract more merchants. Funds are fully under control, thanks to segregated IBAN accounts, and growth is supported because the platform can handle rising volumes and values. The Banking Circle community has grown rapidly in a short time. “We’ve been live for two years and the business has grown from almost zero to an annualised flow of $75billion as of April 2018,” says la Cour. Banking Circle members include Tuxedo Financial Solutions, First Data, Credorax, Valitor, SafeCharge and Paysafe. A recent addition is freemarketFX, the disruptive foreign exchange and payment platform for SMEs. James Allum, the company’s CIO, summarises Banking Circle’s value proposition for fintechs and the benefits of collaboration: “For freemarketFX, a big part of providing a better customer experience is the ability to offer cross-border payments without the high cost and slow transfer times traditionally associated with international payments. “Our partnership with Saxo Payments Banking Circle allows us to extend our industry-leading 0.2 per cent rate to those trading on online marketplaces.” Although Banking Circle works at the smaller end of the scale, la Cour is happy to collaborate with any business that is licenced, with one exception. “We’re a utility for all financial businesses, but you can’t get direct access if you’re a large corporate, because then we start competing with our clients. You can work with us if you’re a large bank, a small bank or a financial tech business or a pure tech business with a financial licence.”

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A flexible solution: Saxo Payments Banking Circle is about to facilitate lending

Banking Circle’s success is reflected in the many awards it has won over its first few years of existence, with four so far in 2018 alone. They include Best B2B Payments Company in the fintech Breakthrough Awards and an innovator award from Global Finance magazine for Banking Circle’s Virtual IBAN solution.

The lending conundrum In addition to payments, Banking Circle is about to bring its philosophy to bear in the lending landscape – another pain point for smaller businesses – and will present a new lending proposition at Money20/20 Europe. “It’s very difficult for start-ups to make any impact without a cash injection,” says la Cour. “And the sad truth is that since the 2008 crash, banks are less willing to lend, especially to smaller or younger firms.”


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This means SMEs are having to fight for finance and negotiate many hurdles to secure the cash they need to compete and grow their businesses. It’s a battle that defeats many of them. Recent research from SME Finance Monitor, suggested that only one in three SMEs is willing to borrow to grow the firm. That might be about to change – because the new Open Banking environment will encourage enablers such as Saxo Payments Banking Circle to step in and help. Whether businesses require a short-term loan to cover the purchase of new equipment or longer-term funding to help expand into new markets, traditional banks are no longer the only, or indeed the best, option for business finance. Banking Circle studied 500 SMEs in the online space, to identify the difficulties they face in obtaining funding.

The vast majority of companies had accessed business finance in the past five years, more than half of them to purchase equipment, 35 per cent to buy inventory and 28 per cent to help them expand into new markets. While all these things are basic requirements for any business, SMEs are stymied without the cash to make them happen. Life is tough enough for start-ups – 90 per cent don’t make it beyond the first three years of trading. And, according to the Banking Circle study, if they can’t get the necessary finance, 25 per cent would have to let employees go, 30 per cent would have to reduce prices to increase sales and, most worrying of all, 13 per cent would fail. It believes it can help them avoid those fates with access to affordable, flexible

MONEY20/20 EUROPE would be required if the solution was built in-house,” he says. It’s another dimension of business banking that can be addressed by the financial utilities model. “We can step in and fully stock the armoury. We can provide fintechs and banks with the capability to offer their customers a transparent, flexible, low-cost and easy-to-manage loan solution.”

Maximising the value chain

finance, delivered when it is needed – precisely what is not available through traditional banks, as it can take many months before an SME gets its hands on working capital and the money will come with high set-up costs and high interest rates. It doesn’t take a genius to work out that traditional bank-based lending does not favour entrepreneurs.

A forward-thinking solution While fintechs are beginning to make inroads by keeping the cost of payments low, Saxo Payments Banking Circle believes there’s room for another offer. The study revealed that low interest rates would encourage 58 per cent of businesses to select a non-bank for a loan, while 44 per cent said low arrangement fees or flexible loans would persuade them to look outside

The sad truth is that since the 2008 crash, banks are less willing to lend, especially to smaller or younger firms banks. A quarter said that they would consider a specialist lender who could offer simple online account management. Traditional banks have not fared well when it comes to understanding the needs of SMEs, says la Cour. “We need forward-thinking lenders that can move quickly without legacy systems holding them back. In today’s market, banks and fintech are increasingly open to working collaboratively, bringing in third parties to deliver non-core solutions without the significant investment that

La Cour believes that only the financial institutions that embrace the collaborative ecosystem will prosper in the digital age, because they will be the ones that can offer customers the most versatile and cost-effective range of solutions, reinforced by the highest levels of customer service. He expects to see many fintechs as well as smaller banks act almost as financial services supermarkets. They will be the platform delivering the service, but someone else will be manufacturing and providing the product. “In this respect,” says la Cour, “if you do lending, you can be quite versatile. If you look at mortgaging real estate, the banks will try to retain that, as it’s a core service in a domestic market. But if you look at cash advances to merchants or maybe even revolving credit facilities for SMEs, that’s different. It’s a hard space to develop the necessary credit information. You need to use a lot of information that will not typically go into a credit algorithm. This is where we would use third-party application programming interfaces (APIs) – ones that are niche specialists. “Larger banks would definitely develop their own solutions, because they can be in both parts of the value chain, but for those lower down the scale, it makes sense to get a product in. We have the scale, so we can deliver it at quite low cost. So why would you want to develop an in-house solution? Far better to focus on improving your customer experience and engagement.” By 2020, the banking landscape is likely to be far more diverse and fragmented, with a range of financial utilities playing a central role in payments, lending and other non-core services. Banking Circle is leading the way. As la Cour puts it: “The mission that we are on is to enable any business in the financial industry to go global.” Issue 9 |



Pastures new Rabobank is ploughing its own fintech furrow and playing to its core strengths with the launch of Rabo Frontier Ventures. Harrie Vollard discusses innovation in finance and agrifood

Rabobank was founded by Dutch farmers and horticulturists in the late nineteenth century. Those whisker-muzzled entrepreneurs wouldn’t recognise much of the bank today, but it’s stayed true to its roots – and is now fertilising them through the appliance of fintech science. Earlier this year it launched Rabo Frontier Ventures (RFV), a €60million investment fund focussed specifically on fintech and agrifood startups and scaleups that harness data to improve business performance. It’s the bank’s way of putting a metaphorical stake in the ground. “Customers want services rather than products,” says Harry Vollard, who heads up the fund. “And these services must be directly related to their needs. So, the challenge is to transform ourselves from


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a product-oriented company into a service-oriented company. Beyond that, we must differentiate the service and I think this is the case in the crossover between financial services and food and agriculture.” With a €92.3billion agrifood loan portfolio and supporting 85 per cent of Dutch farmers – some of the most advanced and productive in the world – Rabobank is the global leader in food and agriculture financing. It is also a cooperative, which, says Vollard, gives it another key strength and competitive advantage, the cooperative ethic complementing the Netherlands’ startup and incubator culture. Cooperation is also a strategy for countering the threat from tech giants such as Alibaba, Tencents, Amazon and Facebook, which appear intent on a landgrab from traditional regulated institutions. Rabo Frontier Ventures’ aim is to help

internal and external fintech, and food and agri ventures, to grow their businesses through investment and non-financial support, such as access to Rabobank’s customers, knowledge and global network. The main focus areas are ‘financial cruise control’, platform banking, emerging technologies and Data4Food. The last is fertile territory for the bank. The Netherlands is a frontrunner in the global food and agri sector – Wageningen University & Research, one of the world’s leading agrifood research institutions, is based there – but promising startups are often insufficiently visible to investors. Worldwide, agritech startups raised $10.1billion in 2017, a 29 per cent year-on-year increase. But it’s still not enough if we are to meet a 60 per cent increase in demand for food by 2050. Vollard says that agriculture is often

Fertile ground: Rabobank is using tech to support the finance food chain

underserved financially. He gives the example of unbanked farmers in countries such as Kenya, where startups can make a big difference. Fintech and better use of data can help to create a credit model that will make these farmers bankable, enabling them to secure loans and other financial benefits. Looking at the wider startup environment, Vollard says that the goal is to embed innovation and achieve scale. He describes RFV’s role as seeking the right innovation opportunities to create a more secure future for the bank and the businesses and communities it serves. And because startups are too small to handle full-scale deployments for millions of customers, the bank can give step-by-step assistance to achieve critical mass after the seed stage. “We try to run a proof of concept first,” he

says, “because it’s good to validate assumptions before rolling out to customers. And it’s good for startups to work with a large company like us, because they can test something on a relatively large scale. Then, when it’s time to move beyond the seed stage, we can create the scale for success.” RFV has been quick to invest in a number of startups, notably and Peaks. is a pan-European platform that uses blockchain technology to make domestic and cross-border commerce easier for European companies. Originally called Digital Trade Chain, the platform manages, tracks and secures trade transactions. It connects parties involved in trade deals, helps SMEs initiate new trading relationships and provides easy access to trade finance. A similar concept to Moneybox, Peaks is a mobile-only investment app, targeted at Millennials and first-time investors, and is completely chat-based. The app already has more than 100,000 users, who are helped to save small amounts regularly by rounding up bank account transactions to the nearest euro and then investing the ‘change’ to create a nest egg. The bank is also a partner in Startupbootcamp and has already helped one of its rising stars – the UK-based mobile biometric ID authentication company iProov

Open banking opens up our infrastructure for fruitful collaborations that help customers – go some way towards its ambition of becoming a £1billion company by 2022. It signed up to deploy iProov’s patented face biometric system in the bank’s new smartphone service, which authenticates a user against their ID document, without the need for them to visit a branch. The arrival of open banking gives Rabobank and others licence to go further and take advantage of third-party offerings that provide a smorgasbord of choice. “These could be context-based,” says Vollard. “For instance, we could focus on international payments. Although we handle our own, we could also integrate Transferwise, for example, because that

might be a better route for an organisation, depending on how it does its international payments. Open banking provides this versatility; it opens up our infrastructure for fruitful collaborations that help customers.” Open banking works both ways, of course, and Rabobank has been offering its own application programming interfaces to third parties for some time, among them telcos and insurance companies. A good example of how the bank is differentiating its services and identifying the financial needs of a particular group or sector is an in-house-produced app called Tellow, which is designed to help freelancers manage their finances. “With Tellow, we looked closely at the needs of freelancers and developed a tailored solution, instead of delivering a standard product, such as a cheque account, which wouldn’t differentiate us from other banks,” says Vollard. The bookkeeping tool makes administration simple and transparent, allowing freelancers to automate their accounting and ensure their VAT returns are ready on time. Tellow links users’ administration directly to their payment accounts, too, so they have real-time control of their finances in one place. The app also provides accounting tips. When it comes to digital innovation, Vollard says the bank has passed beyond the first wave, which he defines as being ‘mobile-first, plugged into social media, Cloud-based, and data-rich’. “All these things are now a given,” he says. “We’re now exploring blockchain, artificial intelligence, and the Internet of Things, but we’re still searching for the right propositions.” That said, a blockchain milestone was achieved earlier this year when a cargo of soybeans became the first fully-fledged agricultural trade conducted through the distributed ledger technology platform Corda, developed by the R3 consortium of which Rabobank is a part. Such collaboration, innovation and scale are the agents for change, says Vollard, and Rabobank’s strategy now is to bring them together. “What fintechs show,” he says, “are pieces of a puzzle that we can combine to future-proof the bank and develop a strong and sustainable business model.” Rabo Frontier Ventures will play its part by sprouting fintechs that in turn help it to grow into a new variety of bank. Issue 9 |



Bright sparks Small can be beautiful, but when it comes to fingerprint authentication, the bigger the better, argues Ritu Favre, CEO of NEXT Biometrics Ritu Favre joined NEXT Biometrics as CEO in February 2017 and has been moving the company ahead ever since, pursuing opportunities for fingerprint sensors in four key market segments: smart cards, government ID, access control and notebooks. To-date, the 90-person, publicly traded Oslo-based company has sold more than four million sensors, primarily for use in notebook computers. However, as she readily tells anyone who asks, a top priority for NEXT is to be ready for what Favre predicts will be the enormous opportunity created by the use of biometric authentication in smart cards for financial inclusion and retail payments. Here, we learn more about the company’s plans. FINTECH FINANCE: Tell us about NEXT Biometrics and your focus on smart cards. What does NEXT bring to the fiintech party? RITU FAVRE: NEXT provides secure, easy-to-use fingerprint sensor technology for authentication in the smart card, government ID, access control and notebook markets. We have a unique technology designed to meet the rigorous demands of what we call the quality-critical segment of the market. Our core technology is called the NEXT Active Thermal principle. It allows us to manufacture cost-efficient, large area, flexible and rigid sensors that are ideal for use across a wide range of environmental conditions. Fingerprint technology is increasingly becoming an alternative for authentication in banking and payments. PIN codes and passwords just aren’t well-suited for ensuring secure transactions. They’re too easily lost, forgotten, stolen or hacked. Current systems for authentication rely on what you know. With a biometric approach like


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fingerprint technology, the access control factor is about you – it’s unique to you as an individual. NEXT manufactures fingerprint sensors that have several advantages for smart cards used in fintech. We’re able to build a flexible, large-area sensor at lower cost than others available today in applications like cellphones and tablets. This provides end users with the higher security they require for financial transactions, along with the convenience they enjoy with their consumer electronics devices. FF: Tech companies always seem to be focussed on building devices that are smaller, faster and more powerful. Isn’t it counter-intuitive that large sensor size is an advantage for fingerprint technology? Why is this large sensor size a differentiator for NEXT? RF: It does seem counter-intuitive, I agree. However, there are independent studies showing sensor size is the dominant factor determining the overall security level of a given fingerprint authentication system. The advantage for NEXT is that our Active Thermal principle for capturing fingerprint data allows us to use manufacturing materials and processes that are already deployed in the smartphone display industry. By taking advantage of fully-depreciated manufacturing facilities, we can build large sensors that have a higher level of security at lower cost. In fact, our cost advantage increases as sensor size increases. With a large sensor, more data points can be collected. This makes fingerprint verification more accurate, resulting in a higher security level. If readings are more accurate, it means enrolment can be

simpler and less time is wasted in authentication because there are fewer false results. The combination of large sensor size and our unique technology means NEXT sensors can deliver simple, one-touch fingerprint enrolment. This is the holy grail for the industry. You’ll be able to register your fingerprint on your own and still have the highest quality image capture – quickly, easily and securely. In addition, our large-area sensors accurately capture fingerprint data in real-life situations across a broad variety of environmental conditions for virtually everyone. Size most definitely matters when it comes to fingerprint sensors. FF: You’ve now been with NEXT for a little more than a year. What have been some of the biggest challenges for you since taking on the role? RF: Fortunately, I have a background in engineering and have spent my career in the semiconductor and biometrics industries with a heavy focus on product development. I didn’t have to take a crash-course in fingerprint sensor engineering. In my career, I’ve also had a great deal of experience growing businesses, so it’s been clear what we’ve needed to do to take the company to the next level. First, we had to identify how we would grow revenues – that’s the importance of focussing on the four markets I described earlier. Now that we’ve put the strategy in place, we’re obsessing about execution – taking the actions that will help us deliver on our strategy. Right now, we’re all about positioning the company for the anticipated ramp up in demand that we’ll see with smart cards and in our other market segments.

We need to do all we can to accelerate smart card adoption. That will be a key win for all of us

In terms of challenges, I’d say the biggest thing has been gauging the timing of the ramp-up for smart card adoption by the financial services industry. Needless to say, I’d hope to see it happen soon and, like others in the industry, I’ve been frustrated by the slow pace of adoption. FF: Let’s follow up on that. What has slowed adoption for smart cards in payments and banking? RF: Some of the slow progress has to do with a lack of clear standards, changes that would be required for things like the payments infrastructure, enrolment issues and ease-of-use challenges. Hopefully, if I’m asked this question a year from now, the industry will have made much more progress. However, I’m impatient and we need to do all we can to accelerate smart card adoption. That will be a key win for all of us. FF: How important is contactless technology in terms of the growth of the smart card industry? What is NEXT’s plan to compete in contactless? RF: I think most in the industry would agree that contactless smart card solutions are the wave of the future. That’s where the growth will be, particularly for retail payment cards. It’s an enormous opportunity for us. We recently announced NEXT was providing samples of its contact-based smart card to several customers worldwide and that we’re working with nearly two dozen other customers on smart card solutions. On top of that, we also recently achieved a significant milestone in the development of our contactless technology. In nerdy engineering terms, NEXT smart card modules were able to perform biometric functions using only the incident electromagnetic signal of the reader to power the card’s electronics. This is an exciting first step as we pursue leadership for our contactless solution in the smart card segment.

– particularly in the banking and payments industry. NEXT will be a key player in this area because of our unique technology, which allows us to manufacture highly accurate and secure, large-area sensors that are physically flexible. And we can do all of this at a lower cost. While we’ve supplied the industry with more than four million sensors and have an established, proven track record, we have a laser -like focus on being even better able to deliver product in high volume in the future. We’re taking steps now, ahead of the smart card ramp, to ensure that happens. Finally, I would say it’s important to me that NEXT continues to deliver on its promises. During my time as CEO, I’m happy to say we’ve consistently met the goals we’ve outlined for ourselves and it’s my responsibility to make sure we continue to do that.

Pressing the point: The larger the sensor area, the better the security

FF: What else should our readers know about NEXT? RF: There are several key takeaways here. One is that the use of biometrics and fingerprint technology are going to expand significantly in the coming years

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An Open question Barclays’ Catherine McGrath, MD for Transactional Products and Payments, considers the implications of data sharing A strong consumer focus has seen Barclays spearheading a raft of innovations over the years, from its Digital Eagles initiative, aimed at improving customers’ digital skills so they can better access banking services, to its bPay wearable payments device. It was also one of the first of the major banks to offer physical card printing in branch. But the advent of Open Banking supercharges its ambition to empower customers and put them in control. In her role as Barclays’ MD for transactional products and payments, Catherine McGrath is at the epicentre of that. “Open Banking is about putting customers in charge of their data and letting them do great things with a broad range of parties,” she says. “However, I think it will take time for consumers to get comfortable with this new concept in banking. You need to give them a great reason to share data, one that gives them greater value, and so gain their trust.” That trust was potentially undermined for all businesses by the recent Facebook/Cambridge Analytica data-handling debacle, which was a wake-up call to regulators and consumers alike. With the heightened interest, McGrath believes the area of data sharing is about to become a lot more complex. “That’s especially so with providers that look like financial services but aren’t. They need to make money in another way – by selling people’s data to somebody else, and it’ll be interesting to see the degrees of transparency that are presented to customers. How do they feel about someone selling their data to a third party, that might sell it on to another third party? There’s a really big discussion to be had around designing to the customer’s agenda.” Indeed there is, but in Barclays’ case the conversation has been running for some time. Its customer-driven Open Banking use cases include aggregation, which


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allows multi-banked customers to see and do everything in one place, with prompts to help make smarter financial decisions. “If I’m multi-banked, being able to see everything in one place is great,” says McGrath. “Then what I’d expect, as a customer, is some great nudges about how I can get better value from my banking, or just how I make smarter decisions – somebody being that useful voice on the shoulder. I’d love to see this expanding dramatically. More of us have multiple pension pots than we do multiple bank accounts. Imagine if you could have all of those in one place and understand a) what you’re going to get when you’re older, and b) how much it’s costing you today.” It’s exactly the scenario envisaged under the UK's Open Banking regime, but maybe the framework to encourage it doesn't go far enough, says McGrath. “Under Open Banking in the UK, the nine major banks are set up to send out data in

I wonder whether the controls we are getting around financial services data will start to move into other areas of our lives exactly the same way, which is great for others to ingest because they only need to plug in once. Whether everybody else comes to the party in the same way and chooses to put out the same standard of APIs, is yet to be seen. But it would be wonderful from a consumer perspective, because then everything is completely interchangeable and, no matter which financial services or third party I go to, I can get the same benefits. So, for us, I see Open Banking as quite a significant opportunity, providing we continue designing things around the customer agenda.” That means being transparent and fair.

“Under Open Banking, customers’ permission for companies to use their data lasts for 90 days and then it needs to be reconfirmed. In the Barclays app, they can see what data is stored about them, who they’ve given permission to use it, for how long, and whose permissions they have switched off. “We think that this transparency and control is a really key part of building trust.” Just how far does McGrath think data sharing under the revised Payment Services Directive (PSD2) and Open Banking agendas could go? Could third-party companies, such as Uber, pull cardless payments directly from customers’ accounts, for example? “That would need some regulatory attention but they could, in theory, make the process even more frictionless,” says McGrath. “Firstly, though, retailers will need to ask themselves if they want to become payment initiators.” The Open Banking principle of permissioned use of data could, says McGrath, serve as a broader model. “I wonder whether the controls around financial services data will start to move into other areas of our lives? Someone could develop a system that said ‘Catherine, you can have all the permissions you’ve ever given to various apps, in one place; turn it on and off and control it’.” Whether she said ‘yes’ would rather depend… “Barclays started by asking its customers what they thought about and what they wanted from Open Banking. Two things became really clear, really quickly. One was that they wanted to feel safe and secure. Secondly, if they did, then they would be happy to engage with it,” says McGrath. “We have a great reputation already, we treat customers fairly and they are therefore happy to let us do smart things with their data. If we continue to ask ourselves ‘is the use of data understood by the customer and on their agenda?’ then I think we’ll continue to do really well.”


The next best ING

Benoît Legrand, Chief Innovation Officer at ING, discusses the bank’s far-sighted digital strategy and its success in breaking new ground across retail and wholesale

ING has a habit of being ahead of its time. Well before anyone uttered the word ‘disruption’, the Dutch bank was challenging accepted models and introducing new channels. Its digital banking service, ING Direct, launched 20 years ago and it was one of the first to anticipate the open banking revolution with its home-grown aggregation app Yolt on the UK’s new Open Banking platform and payment app Payconiq in mainland Europe. Transformation and reinvention are now so embedded in the bank’s culture, says ING’s chief information officer Benoît Legrand, that it’s changed its DNA. “Our culture means we see opportunities rather than threats,” he says. “It’s a mindset that helps us launch new products and services that are in tune with the times and customer needs. “Banks are facing some big challenges,” he adds. “One is to transform the linear business model into a platform-oriented model. All businesses now talk about ecosystems and how to tie everything together with technology. If we don’t take this seriously, and do it quickly, we could be overtaken by a host of technology challengers.” With a history of self-disruption, ING doesn’t plan on being one of the ones left behind. In fact, its ambition now is to transform itself into the ‘go-to platform for the new economy’ with custom-built solutions to the everyday needs of


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customers in both retail and, importantly, wholesale, where there has been less innovation overall. Legrand believes that will change as more banks build platforms and refine their capability. “Eventually, what you will see is a blurring between wholesale and retail,” he says. “Because while at one end of the platform you might have retail customers, our wholesale customers are also offering their products there. There are a lot of opportunities to investigate in wholesale banking.”

Forward, march! This growing level of integration as well as financial cooperation is a key part of ING’s Think Forward strategy. Launched in 2014, chief executive Ralph Hamers began accelerating its implementation in 2016, now supported by improved data collection and partnerships with around 150 fintechs. Ultimately, Think Forward is about custom-built services for customers, says Legrand. That means recognising that they are now in charge – thanks to greater autonomy over their data conferred by regulatory changes – and expect higher levels of speed, availability, functionality and flexibility. Banks must therefore use technology to help customers make all sorts of decisions about their financial life – when they want and how they want. There is no shortage of valuable customer data to draw on in order to achieve that, says Legrand. But the key is

how banks use the data so that customers’ interests come first, thus creating a virtuous circle that reinforces relationships, instils trust and generates repeat business. “It’s fine to use data to help sell a product. But we also need to flip the perspective and use data to empower customers and help them manage their own finances,” says Legrand. “This will create a different relationship and a different type of value, based on data. The viewpoint and experience of the customer is what matters in the long run.’” To that end, he welcomes the General Data Protection Regulation (GDPR). “We think it’s an interesting opportunity to place the customer even more firmly in the centre of everything we do and build tailored services where customers have more control over their money and their financial future,” he says. At the same time, though, he questions why the GDPR applies to all organisation holding information on EU citizens, but the Revised Payment Services Directive (PSD2) only forces the banks to share it at customers’ request. “Why don’t we do this with other industries? Why not Google? Why not Facebook? We should be able to integrate everything, with the customer’s permission.”

Platforming for all ING isn’t the only bank to question why it is playing against the GAFAs (Google, Apple, Facebook and Amazon) on a tilted playing

Building the future: ING intends to be the ‘go-to platform for the new economy’

field, but that hasn’t stopped it seizing opportunities under Open Banking. Yolt is an obvious example. Founded by ING, it grew up in its Accelerator programme and was launched in the UK in 2016. The app allows users to manage their money in one place, regardless of the bank or the financial service. It is integrated with RBS, Lloyds and Starling Bank and recently connected with Monzo, the UK’s largest challenger bank, while energy bill comparison and international money transfer have also been added to the platform. Take-up has been impressive and Yolt now has 250,000 users. “We’ve gained a lot of traction with an open application programming interface (API),” says Legrand. “Because we were the first one on the Open Banking platform in the UK, we’re in a very good position and are now thinking about taking it into other countries. There’s a lot we can do, a lot of places we can go.” UK consumers have certainly taken to financial apps in a big way. According to Yolt’s research, 89 per cent of Millennials use financial apps as well as nearly 50 per cent of those over 55. It works closely with the user community, developing features in response to user feedback and suggestions, so while the same research suggested consumer’s understanding of the Open Banking framework that allowed it to happen was very limited, they are nevertheless enjoying the new flexibility and democracy it brings. In addition to Yolt, ING has stormed the

all-in-one app market with Payconiq. Launched in Belgium in 2015, the app allows users to make direct payments online, in-store and peer-to-peer. Payconiq is compliant with the revised Payment Services Directive (PSD2) and has grown rapidly, expanding from Belgium into Luxembourg, Germany and the Netherlands. In 2018, it further strengthened its reach through a partnership with the Dutch payment solutions provider Buckaroo. ING’s wholesale banking divisions have also been busy innovating, redefining the bank’s customer relationships and

Change is rooted in our DNA… we see opportunities rather than threats digitising business services. Katana, (named after a samurai sword famed for its sharpness, if you were wondering), uses artificial intelligence to improve pricing decisions in bond trading. “Katana provides views on quotes,” says Legrand. “It’s an enhanced capability that we sometimes call the bionic bank. You still have traders, but they are helped by enriched data so that they can make more informed decisions. Katana learns from the history of hundreds of thousands of trades and then makes predictions or suggestions for the trader to act on.” Then there is new business tool Cobase,

which Legrand describes as a ‘Yolt for treasurers’. It’s a multi-bank platform that provides a single point of access for all bank accounts and financial products and services, eliminating the inefficiency of having different bank portals and distributed systems for businesses to remember and navigate, instead bringing everything under one roof. Cobase, Yolt and Payconiq typify the kind of innovation that ING Ventures, a €300million investment fund set up by the bank in late 2017, would like to encourage by entrepreneurs. While other banks initially dismissed fintechs, Legrand says they have now entered a new phase where the advantages of working together are clear. Fintechs can create a minimum viable product, but it’s complicated and costly for them to acquire customers. Banks, on the other hand… “Well, we alone have 37 million customers,” says Legrand. “We’re operating in 40 countries, have 51,000 employees, and huge knowledge and experience. So, this is a big benefit that we can bring to the partnership table. “Today, we have 150 different partnerships with fintechs of all sizes. We also have an investment side, a substantial venture capital fund and are spending a lot of money working jointly on innovation projects. “This is as much cultural as it is commercial and financial.” ■ Benoît Legrand will be giving ING’s view on technology trends at Money20/20 Europe 2018. Issue 9 |



Real-time is an illusion: But open APIs can solve the puzzle


Real-time payments may appear instant to the customer, but in reality they’re stuck in a time warp. Mark Ranta, Head of Digital Banking Solutions, and Lu Zurawski, Solutions Practice Lead in Consumer Payments EMEA at ACI Worldwide, are helping bring them up to speed When you get in from work after another long day of driving technological innovation, developing revolutionary banking solutions and arguing with your colleagues over whose turn it is to get the Starbucks in, there’s nothing better than enjoying a little instant relaxation. You make yourself an instant mug of hot chocolate using the boiling water tap you had installed at great expense last year, sit down on the sofa and instantly purchase and begin watching that box office film you wanted to see on a popular streaming service and the doorbell rings,


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alerting you to the delivery takeaway you ordered on your way home that almost beat you to the door. You’re living the real-time dream, right? Wrong. Those ‘real-time’ payments you just made to Deliveroo and Films4U is anything but instantaneous, despite your phone buzzing to tell you that the money has left your Monzo account. “From a consumer’s perspective, it may appear that we already have instant payments,” says Mark Ranta, head of digital banking solutions at ACI Worldwide. “However, the ability to transact at any time of the day doesn’t necessarily mean that your money is

moving in real-time. Merchants don’t receive any cash from you instantly, Instead, your payment has to first move through various different settlements and agreements, preventing them from collecting your money for a few hours, days, or maybe even weeks.” In a world where you can begin watching a film, connect to a friend on the other side of the planet and download Rick Astley’s entire back catalogue in the blink of an eye, it seems ludicrous that payments are still so sluggish in reaching their destinations. It might be OK for us as consumers. Being able to initiate a transaction and immediately see a result

is one thing, but it doesn’t really help the merchant who’s trying to balance the books at the end of the day. So, why are payments still so lethargic and what’s being done to lend them the lightning pace that we expect in the rest of our digital lives? “We’ve built up the current ecosystem over the course of hundreds of years, ever since the introduction of cash and coin,” says Ranta. “Sure, we may have entered the digital payments era, but we’re still operating within heritage infrastructure developed in the 1960s. If we wish to make the leap from generation one technology to a system capable of instant payments, then we need to totally redefine the architectural layer that underpins that ecosystem,” he says. “Only then will we be able to remove all of the stops that were necessary in an older, card-based world, and achieve the real-time dream.” OK, so redesigning the central infrastructure of the payments ecosystem is clearly what’s needed in order to turn our current illusion of instant payments into a reality. The question remains, however, how does your average financial institution begin this frankly mammoth process without completely derailing its ongoing operations. Thankfully, Lu Zurawski, solutions practice lead in consumer payments EMEA at ACI Worldwide, is confident that one little acronym could hold the key to minimising disruption on the journey to real time. “Application programming interfaces or APIs have been around for a long time and are basically just a means of allowing different programming components to talk to each other,” says Zurawski. “Open APIs are the next step along this digital pathway, although they’re more than just an evolution of existing API technology. In reality, what open APIs amount to is a new state of mind,” he says. “They allow an organisation to make their services freely available to third parties, be they a payment service provider, retailer or any other business. This notion of open, easily discoverable services is a world away from the banking tenets of old.” Ranta adds: “Once you accept this new organisational mentality, you can begin to make open APIs work for you as a means of decoupling your old monolithic applications. The easiest way to think about them is as individual building blocks, much like Lego. You take your aged heritage architecture,

and then pick out discrete services from within it, turning each of them into a brick. Then, you piece together these bricks in new and interesting ways to achieve the capability you desire, be it real-time payments or something else," he says. “Open APIs give banks the chance to slowly migrate their services, avoiding any potential disruption that a rip-and-replace approach may cause.”

Compliance v strategy In spite of the obvious benefits of embracing open APIs with open arms, many banks have waited for regulatory change to force their hand. In the case of Europe, the revised Payment Services Directive (PSD2) is the latest regulation to have given financial institutions a push towards open innovation, although Zurawski believes that banks are placing themselves at a distinct disadvantage by cutting things so fine. “One of the biggest problems I’m seeing today is this belief that open banking is some sort of a compliance project,” he says. “The goal of many financial institutions is to simply meet the minimum requirements in order to comply with new regulation – to tick all the boxes, as it were. This mentality is problematic, as it severely restricts their thinking. At no point are they considering how open banking can, and will, create new value propositions and flows of revenue.” In the US, the attitude is slightly different. “Sixty-four per cent of the US market believes that there is value to be added for their customers by implementing real-time payments, and open APIs are the best way of doing this,” says Ranta. “You can see the advantages of a pragmatic approach towards open banking in firms like BBVA and Crédit Agricole. These were the early adopters that set their sights on developing API-driven ecosystems years before regulation shifted the landscape. Now, they’re reaping the benefits of their proactivity since they can pick and choose which fintechs they work with. As a result, they’re seeing very high customer loyalty and satisfaction scores because they can provide all the services that their customer base is demanding of them. They aren’t limiting innovation to within,” he says, “but are reaching out to a whole host of partners

to gain information and enhanced value from outside their own walls. Over time, we’re going to witness a big divide open up between the compliance followers and the strategic thinkers.” When it comes to payments, one particular phrase that often goes hand in hand with real time is frictionless. Just as we’re beginning to expect our transactions to occur instantaneously, we’re also expecting them to be so inconspicuous that we don’t even notice them until we check our bank balances. It’s another capability that open APIs can help financial service providers to achieve, although Ranta and Zurawski believe that it should be treated with a certain level of caution. “The watch phrase here is appropriate friction,” says Zurawski. “I don’t think we should be using the term frictionless, as a degree of friction is necessary to ensure customer safety and peace of mind.” “At the end of the day, friction is important in payments as they involve something highly personal – your money,” says Ranta. “It’s nice to know that your hard-earned cash isn’t going to just fly out of the window. On the other hand, using an API to incorporate just one additional security step is still going to make a transaction seem extraordinarily fluid from a consumer’s perspective.” He points out that biometric facial recognition or a thumb print adds mere microseconds to the process, whereas historic verification methods would have added up to 10 minutes. “It’s important to remember that, at its core, open banking is about allowing payments to be integrated seamlessly within commerce,” says Zurawski. “Until now, in order to make a payment, you’ve had to finish your shopping and manually move to the payment page. That’s forced shopping and payment to remain as two separate experiences. Open APIs make it possible to merge these into one, allowing customers to focus purely on the shopping experience. This is one of the most fundamental changes that will be brought about by open APIs and open banking and if turning payments (even those with two-factor identification) into something that magically happens in the blink of an eye isn’t frictionless, I’m not sure what is.”

Open APIs are more than an evolution… they are a new state of mind

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Sock it to ’em!

Consumers are ‘voting with their feet’ and picking their payment preferences at the checkout. Intrapay Founder and CEO Koen Vanpraet has a colourful solution for merchants who want to optimise those choices

We’ve had duck-billed platypuses, meercats and a nodding British bulldog, but not until Intrapay had socks been synonymous with financial services. The startup, with its dual headquarters in Manila and Malta, sends a snazzy pair to every new customer. Although this might sound totally random, there is method in their madness, because reinventing the norm goes right to the core of Intrapay’s business ethos. “It’s about standing out from the crowd and helping our merchants and partners do the same; about wanting to be different without being exclusive, and not being content to play the same game as everyone else,” says founder and CEO Koen Vanpraet. Intrapay only launched three months ago, but is very clear about its target business segments, both geographical (Europe and Asia) and merchant type (online, video and gaming sites, travel, entertainment and financial services). And its vision is as brave as it is quirky – re-defining the entire payments industry, no less. In an interview at launch, Vanpraet said: “The era of ‘one-size-fits-no-one’ payments is coming to an end and the future of payments is going to be defined by customers. Thanks to

internationalisation, proliferating device use and newer payment methods, consumers are already becoming more influential and ‘voting with their feet’ by picking their payments preference at the checkout.” In line with this, the company’s basic premise isn’t a solution going in search of problems. Its flexible platform is designed to meet merchant-specific challenges and so it invites them to tell it what it services they need. Intrapay’s predictions for what those requests might look like in 2018 go beyond PayPal’s imaginative link-up with Skype to allow peer-to-peer payments via instant messaging. They extend to voice payments integrated into Alexa and Siri, and the omnipresent Internet of Things taking on a role in how people pay for goods. It also believes real-time money transfer across Europe will factor in a major way, and the significant growth of Chinese payment services, such as WeChat Pay, within the European Union and United States, driven by greater international mobility among the Chinese. Intrapay currently operates in card processing, alternative payments, credit

Feet first: Vanpraet and the tea

m at IntraPay

risk and compliance, chargeback prevention, and currency optimisation. There is also a white label solution, Intrapay Direct, which enables direct bank transfer payments by online consumers, and which can be integrated into a merchant’s website, confirming transactions in real time, just like PayPal or WorldPay. The company is also part of the Sappaya ecosystem, which has spun out a number of innovative fintechs, including cashless experience experts tappit, which has become one of Intrapay’s first clients. Vanpraet, who has worked for payments providers big and small, is keen to see the industry make more progress. “I have this awkward feeling that any company that has a technology platform that’s more than 10 years old, has legacy by definition,” he says.

It’s about standing out from the crowd and helping our merchants and partners do the same; about wanting to be different without being exclusive and not being content to play the same game as everyone else

Issue 9 |


MONEY20/20 EUROPE “Yet there is great pressure from consumers, who are getting used to being always ‘on’. We all have instant Facebook, instant messaging, Instagram, instant news and the ability to instantly comment or share views on social media. “This reflects in the behaviour of consumers, who want access to straightforward, easy systems and ways to pay, whether on the back of cash converted into wallet or some other means – such as WeChat or Go-Jek – or cards or bank transfers. “In the end, it doesn’t really matter, as long as you can build a single point of interface that gives access to different payment options, either online or in a point-of-sale environment, when buying anything, anywhere. “People want a very seamless experience in how they use payments and that reflects more and more on how merchants, payment providers and financial institutions translate their older, legacy, back-office systems into a customer interface that is flexible.” Vanpraet admires Asia for being way ahead of the game and is envious of it being where the big opportunities lie. “Europe’s running a little behind,” he says. “Look at countries like China, with WeChat, and Indonesia, with its population of 360 million, 20 per cent of them banked – any merchant or payment provider would want to tap into that huge market potential. But they might as well forget about cards. It’s all about converting cash into online capability with which people can order anything from a taxi to food.” Intrapay is on the brink of announcing an exciting new Indonesian collaboration, according to Vanpraet, who is clearly not daunted at the prospect of taking on the fintech leviathans Alipay and WeChat Pay, that have dominated the Asian space for some time. In fact, some of Intrapay’s new ideas could result in them having to pull their metaphorical socks up. “We’ve gathered a team of very experienced people who think this is the right time to bring something different into the market by looking at regional payment trends and how we can translate technology into better value for merchants first, then apply it to a B to B to C model,” says Vanpraet. “We’re conscious that, for merchants, it’s all about capturing more consumers, and


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getting their buy-in through loyalty programmes, so everything we do is focussed on helping them to do that.”

A creative pipeline Each Intrapay solution is specifically tailored around real merchant feedback. “We don’t build to sell. We sit with them and ask merchants ‘what is missing from your industry?’ and ‘what would you change if you had the capability?’. Because our technology is completely new, we can build them solutions from the ground up,” says Vanpraet. So, what exactly do these solutions look like? “It starts with an effective payment gateway,” says Vanpraet. “We have built something of our own, which is a constant work in progress, and we do it with very scalable technology that allows a high degree of customisation. “We can work with application programming interfaces (APIs) for very fast integration and easily cut into additional channels, or what we call connectors. Instant and alternative payments are growing massively and these are the two initial key markets we focus on, as well as card-based solutions, including Visa, Mastercard and JCB,” he continues. “I’m a big believer in real-time bank transfer products, so we’ve developed an in-house solution, which is a whole banking-related software layer that we can offer as a white-labelled platform service, like a Trustly or an Ideal. This allows merchants to offer an instant payment solution across a number of countries. And then, we have a pre-paid card business which, when attached to wallets, is attractive in countries where cards have some penetration and opens a pathway to new applications.” And the creative thinking doesn’t stop there. “We also provide services like customised data analysis for merchants and are looking at attaching banking capabilities at the back end of processing.” But the true genius may prove to be in the clever potential aggregation of sources and systems into a single, simplified onboarding process. “Most merchants or clients have to work

with different sources and then they work with the payment provider, or somebody else. If we can somehow attach one, pooled account – including client or merchant accounts where funding comes in from the acquirers or from the issuing banks – then we can link those pooled accounts to a corporate account where the merchant banks within the same community. This offers options like same-day settlements. “In a nutshell, we’re looking at the payments themselves and value-adding services such as advisory, where we can help merchants choose the most relevant payment options for them, optimise approval rates and monitor anomalies. Attach banking capabilities to this, and it all becomes pretty exciting.” Intrapay has a cunning plan for achieving all this at scale, too. “At some point we could tell a merchant ‘you know what, your business case is interesting, we’ll let you process the payments at very low margin or at cost, providing that you bank within our same environment’, because there are other services we can then offer on the back of a banking platform that could almost substitute their payment processing. “And because the merchant will still process a payment, from a data capture point of view, that opens up other opportunities to capitalise on data analysis and reporting.” This approach to innovation will help Intrapay steal a march, believes Vanpraet. “Imagine, for instance, an iGaming merchant, most of whom are very well served by the existing larger players in the market. But if you dig deep enough into the algorithms they use to dynamically route a transaction across multiple channels, you can start to look at building predictable costs into that model. How far can you go to help a merchant decide, when a payment comes in, what is the ideal routing channel to not just optimise the approval rate, but actually predict the cost of that routing, to help them improve their bottom line? “We have the technology and a kickass team who are asking ‘what are we not providing for clients today that we could be building for them tomorrow?’.

We could tell a merchant ‘we’ll let you process at cost, providing you bank with someone in our environment’

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Be on stage Enjoy a free pod Be listed in 2019 Altéir Fintech Book


Ahead of the Curve

Everyone talks about the ‘Uberisation of banking’, but Shachar Bialick’s gameplan is for his business to become a financial ridehailing service. You can call up a card any time you like with Curve and it’s the coolest customer journey you’ll ever make No edition of Fintech Finance would be complete without a little game of word association. So, let’s see how good you are… What’s the first company that comes to mind when you hear the word ‘streaming’? Very good, now how about ‘ride hailing’? Excellent, you’re a natural! Finally, what about ‘shopping’? You’ve played this before, haven’t you? If you’re below the age of 60 and possess a smartphone, it’s more than likely that you answered Spotify, Uber, and Amazon to these questions. Let’s move on to round two now, where things get a little bit trickier. What’s the first company that comes to mind when you hear the word ‘banking’? I’ll give you a little more time on this one. Still struggling for an answer? You’re not alone. As we approach the third decade of the 21st Century, the banking industry is proving to be somewhat unique in the fact that no ‘category king’ has emerged to claim the industry’s crown. However, there’s one company that is intent on providing a definitive answer to the question above. It’s called Curve, and it hopes to become the king of banking. “In all other industries in the market, as soon as the Internet arrived, we witnessed a pattern of disintermediation, divergence, and convergence,” says Shachar Bialick, Founder and CEO of Curve. “One of the first places where this happened was the travel industry. It was out with the travel agents of old and in with the opportunity to book directly with a hotel or an airline. Following this divergence, we saw the rise of aggregators like, Expedia and, who initiated convergence by buying up smaller companies and reducing the number of players at the very top.


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“The very same thing happened in consumption with Amazon, in transportation with Uber, and even in music,with Spotify,” he says. “Every one of them offers you the opportunity to access your favourite content and discover new services within a single platform. That’s what we also foresee as the end game for the banking industry. What we’re building is the tool to make this end game a reality – what we like to call an ‘operating system (OS) for money’, that will allow you to access your favourite banking content and discover new financial products and services all in one place.”

Challenging the ‘stack’ So, what exactly is an OS for money? Well, Curve currently takes the form of a smartphone app that you can connect all your existing bank cards to, as well as an almighty super card that allows you to pay using any of the accounts that you have connected to that app. Every purchase you make using your Curve card is categorised and added to a spending timeline, enabling you to remain in control of your outgoings across multiple accounts, without needing

to change your bank or where your money sits. It’s obviously a neat and technically impressive solution that will instantly appeal to anyone looking to eliminate once and for all the problem of purse paunch caused by excessive plastic and it frees up your financial headspace, which has become dangerously crowded over the past few years. “As a user, I am sitting in the middle, using this host of great financial products, but I don’t really know what’s going on with my money,” says Bialick. What he refers to as the ‘beautiful fragmentation’ of the industry into more and more providers of more and more products has, in fact, just created one giant brain fog. According to Bialick, the

ultimate success of an open banking platform relies not so much on the strength of the solution, but rather in its ability to provide a user journey of unparalleled smoothness – a river of silk flowing through a valley of velvet. “If you take Amazon,, or Spotify, the marginal cost of user acquisition is close to zero and so is the marginal cost of product distribution,” he says. “This leaves the company free to do one thing only, which is to design the ultimate user experience. “I’m not just talking about user interface,” says Bialick. “I’m talking about crafting an entire journey, from start to finish, around the idea of the one-click button. Worldwide delivery should be totally optimised, allowing for a fast and seamless connection of the user to their money. Once you successfully establish this, you have what you need to continually attract new users and then it becomes a virtuous circle. More users lead to more products, which in turn lead to more users, and so on. That’s what we mean by a Curve.”

Building this virtuous onboarding curve required strategic focus, DNA and clear purpose, but what’s stopping other companies from creating a ‘curve’ of their own? Well, nothing as it happens, and Bialick is fully prepared to share his new kingdom with a handful of other benevolent rulers. “There are potentially going to be only a handful of category kings that emerge within the banking market – category king being defined as having less than 50 per cent market share, but more than 70 per cent of profits. “Why do we predict this? Because we believe that the financial industry shares a lot of similarities with the entertainment industry in terms of frequency of use. The average UK consumer watches three to four hours of TV per day. Imagine

The financial industry shares a lot of similarities with the entertainment industry… potentially there are going to be a handful of category kings

how much content that constitutes over the course of a year. It’s impossible for one company to provide all of that content by themselves, which is why the entertainment space is shared between a few majors, including Netflix, Disney and Warner. The sheer range of financial products and services available will produce a similar scenario within the financial industry.” Currently, the only legitimate competition faced by Curve is brewing in Asia in the form of WeChat Pay and Alipay. Both Chinese firms have demonstrated considerable foresight in developing similar operating systems for money, despite various infrastructural limitations within their own market. “ The reason you’re not using your Android Pay or Google Pay or Apple Pay every day is because you can’t – there are some caps and it doesn’t work here, sometimes it doesn’t work there, so you just get out your card and pay with it. It’s the same with Alipay and WeChat Pay trying to penetrate Europe. Until they bridge the infrastructure gap, which will probably happen in four or five years, consumers are unable to form a new behaviour and leave their cards behind. We hope that, in these five years, Curve is not only able to grow to become a meaningful company and defensible, but we’ve actually formed this new category.” In the meantime, what can Curve do to fend off this competition and remain king of the hill within Europe? Judging by the number of innovative new features arriving on its platform, it appears to have decided that offense is the best form of defence. “We’re currently focussed on implementing MVPs into Curve in order to gain as much valuable feedback as possible from our existing users,” says Bialick. “This tactic allowed us to identify a problem of our creation and consequently design our Go Back In Time feature as a means of combatting it. The problem in question was the need to open the app and select a card to use before making a transaction.

Plastic paunch: Curve allows you to shrink your wallet but maximise your spend

Issue 9 |


MONEY20/20 EUROPE We observed that a lot of users were forgetting to do this and, as a result, were making transactions using the wrong cards. Having identified this problem, we decided that the best method of solving it was simply to remove the time constraint associated with choosing a card,” he says. “With the Go Back In Time infrastructure built in to the back end of our system, you can tap into your past transactions and retroactively give them to alternative providers. Not only this, but we’re also using AI technology to develop personalised smart rules for your cards,” adds Bialick. “For example, if you were travelling to Money20/20, your Curve app would assume that you’d like to use your business card to pay for your flight and will choose this card for you by default. “As you keep Curving, the app keeps learning, meaning one day you’ll never need to go back in time at all.”

Travelling to Money20/20, Curve would assume you wanted to use your business card

Onboarding: Challenger banks aren’t Curve’s rivals… but they could be customers

There’s no restriction on the number of cards you onboard – in fact, the more challenger banks issuing cards the better, as far as Bialick is concerned. They are not competitors, but they could be customers. “The operating system in effect tells you, ‘keep using Monzo, keep your money there’. But what we now have is a view of your entire spend so the app can be more personalised to you and it can connect you to a further list of products. “The challenger banks’ biggest problem is that their risk and cost of acquisition is higher, because they don’t have data. As the operating system, though, we have the know your customer (KYC) information, we


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have everything needed to onboard you to a new product or service. Because you are already on the platform, we can personalise an offering for you through the platform. We can decrease the cost of user risk because of the data share ( I know what products the customer has, how they pay the bills, where they spend their money) and the cost of acquisition also significantly decreases – from the cost of KYC to the cost of distributing the product to the user.” As well as its financial flux capacitor for ordinary card users, Curve also now connects to Xero to serve businesses’ accounting needs and can deliver email receipts, much like Uber.

In the pipeline for the near future are new peer-to-peer capabilities as well as a carshare function. The question is, can this smorgasbord of first-rate features help Curve to ascend the throne of the financial industry? You bet they can. “We went out of beta just a few months ago and since then have witnessed an increase in signups of 100 per cent per month, without any marketing whatsoever,” says Bialick. “We’ve now more than 150,000 users, with more than 1,000 new ones joining every day. Our retention metric is equally impressive – it’s more than 70 per cent after six months. A platform can be likened to a bucket, with the userbase being the water. If you have a leaky bucket (i.e. a poor retention rate), you’ll eventually be left with a userbase of zero.” Curve, however, has a very, very strong bucket. And it hopes to be able to exchange it for a crown in the next decade.

Smarter Engagement.

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Fusion fintech Money20/20 Europe will mark a major milestone for global banking software giant Finastra, says Chief Marketing Officer Martin Häring, when it officially unveils a new approach to seamless services in the Cloud It’s the third largest fintech company in the world – a global leader in financial services software with around 9,000 clients and an annual revenue north of $2billion. Forty-eight of the world’s top 50 banks use Finastra. For more than 35 years, it’s been building banks’ infrastructures. It knows legacy like few others – which is precisely why it’s taken a strategic decision to move to a bank-as-a-service platform model with As far as financial services go, that’s a nuclear event. “It’s the most important strategic launch for Finastra in the last five years, because we think this is the future – for us as a company, but also for the banking world,” says Martin Häring, Finastra’s chief marketing officer. “Collaboration is the new innovation. And therefore, we are changing the way financial services software is created, deployed and consumed. “We know how to run a bank, we know how to do treasury, we know how to help people to have corporate portals; our software covers 90 per cent of what a bank currently needs. We have that extreme broad spectrum of banking products and a certain depth of market knowledge.” Finastra pioneered the coding on which much of the global banking system was built and it’s a testament to its skills that those systems are still reliably chugging along. The architecture ain’t broke, but it still needs fixing because now those banks are wondering how they can innovate faster, cut down on costs and create better customer experience and new revenue streams. “And we tell them ‘migrate to the latest release of our software, which is


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application programming interface (API)-enabled, and you can immediately participate in this global marketplace, in’,” says Häring. “Companies can make use of all the fintech applications that are sitting on that infrastructure and, suddenly, they can innovate by bringing things to market in weeks, instead of years or months. “We have core banking systems which are more than 25 years old. Do you want to throw away that code? No. But if you enable this, through APIs, you can attach.”

A new spectrum of choice Unlike any other platform on the market today, opens access to APIs, not just in specific business lines, but across Finastra's core systems, covering an exceptionally broad financial services spectrum. Two weeks before Money20/20 Europe, the company announced four early adopters, including US-based fintechs, Tradle,, Active Allocator and GreenPoint Financial – all signed up to design and create apps on Finastra’s platform. believes that using will support its ‘goal over the next two years to deliver the capability to build

Collaboration is the new innovation. And therefore, we are changing the way financial services software is created, deployed and consumed

cross-channel conversational solutions in minutes to close to 30 per cent of Finastra’s clients, so they become our customers as well’. BankBI was also among those first financial atomic nuclei to participate on the platform. A UK-based business intelligence and analytics software organisation, BankBI believes that working with it will allow the fintech to deliver value to their customers even more quickly and efficiently. “The pre-built integration and orchestration of processes through the platform simplifies due diligence for customers when vetting vendors for security, trust and adherence to standards for data interchange,” Paul Sutherland, chief operating officer of BankBI said recently. “The API layer is a key technology enabler. We expect that being able to interact with the core systems via the pre-defined API layer will greatly accelerate the development process for us, making deliverables such as artificial and augmented Intelligence with user interfaces like Alexa and others much more achievable.” It’s a game-changing ecosystem because it opens core infrastructure back-end systems to the rest of the world, allowing any Finastra customer to be automatically enabled with open APIs. It provides the means to connect fintechs, independent software vendors, academics and individual developers to the platform and drive innovation at a much faster (unprecedented) pace. And, as with any close encounter at an atomic level, that should result in super-hot explosions – of ideas in this case. It could change the physics of

To boldly go: Finastra could alter financial physics

financial services. Deploying the bank-as-a-platform model through has meant taking a never-before-seen holistic approach to innovation, by opening up the platform to developers and fintechs, too. On the one hand, it enables banks to keep their legacy structures intact while giving access to dynamic, bolt-on front ends; it invites developers into the community to contribute applications and learn and share with others; and, lastly, it serves as a marketplace for fintechs who want to take their solutions to Finastra’s illustrious list of bank clients. “What it means for our banking clients is they don’t have to change their core banking application. If they are able to attach simple APIs to them, then let other people develop new extensions on top,” says Häring, “Fintechs are entrepreneurs. They want to sell to a global marketplace. With our platform, they programme and deploy

the app in the Cloud then place it in a directory called the Fusion Store, which is much like the Apple App Store. “So, a fintech in the UK can sell to a bank in Turkey. I think this is what fintechs are looking for – a broader reach, a global reach, and the possibility to monetise their applications. “Not one of our competitors has such an approach to bank-as-a-platform on a global scale.” So how does it all fit together? Its development component, Fusion Creator, is a rapid innovation environment with low-code capabilities and integrated API management tools. Banks or fintechs log in to Fusion Creator to see all the APIs that are exposed through the platform. “Currently, there are all the APIs that we’re connecting to our back-end core system there,” explains Häring. “For example, for our retail offerings, we have built revised Payment Services Directive (PSD2) API connectivity. So, when you enter the retail space as a fintech, you see all the APIs exposed from Finastra that you need

to connect to a bank. Within this visual environment, you code based on plugging visual elements together instead of hacking Java or PHP code.” Fusion Operate, meanwhile, is a fully-automated app deployment in the Cloud, so that the app operates in a highly secure infrastructure, ready for when a bank or fintech has its application ready and wants to go live, globally. “Finastra is not a Cloud infrastructure provider, so it’s formed a very close relationship with Microsoft,” explains Häring. “We’re building this in the Azure environment because we truly believe Microsoft is the leader when it comes to ticking all the boxes for various countries’ regulatory requirements.” Häring is particularly excited about the possibility of opening up the platform to academia – the idea that a university can play around with financial applications and technology participants when the financial world has previously been locked down, allowing little – if any – new, cross-sector thinking. “Maybe the next fintechs are coming from universities?” asks Häring. “We already have UCL, in London, active on this platform. They have programmed applications in weeks, on top of our retail banking applications. So, all this has huge potential to create incremental revenue for banks.”

Issue 9 |



Mixing and matching Barclays’ tie-up with former rival PayPal is a sign that unusual couplings will become an increasingly common feature among FIs There’s an old piece of advice that says ‘keep your friends close and your rivals even closer’. Institutions across the financial services sector are taking that very much to heart. Old enmities are being replaced by groundbreaking alliances, as incumbent banks, tech firms and newcomers recognise the need to co-operate to thrive in the new financial services landscape being shaped by the revised Payment Services Directive (PSD2) and the Open Banking environment. According to PwC, 82 per cent of banks, insurers and asset managers intend to increase their partnerships with fintechs over the next three to five years. Not surprisingly, consumer banking and payments are the areas of most interest because that’s where banks themselves admit they could lose up to 24 per cent of their business if they fail to adapt to new consumer-focussed freedoms. With a watchful eye on the ‘triple A’ retailers, Amazon, Apple and Alibaba, growing their financial services, the trend for ‘frenemies’ to agree a truce and co-operate is one that Barclays followed earlier this year when it teamed up with payments provider PayPal. The agreement will enable consumers in the UK and the United States, and small businesses in Britain, to view and manage their PayPal and bank accounts more easily through Barclays’ digital channels, and for consumers to use Barclays’ products in their PayPal digital wallet to pay online, by mobile or in the bank’s Pingit app. They can seamlessly add Barclays credit and debit cards to their PayPal wallet, update them automatically in PayPal, and the card image will appear in the PayPal


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wallet so they can easily select their preferred way to pay. In the US, the bank’s customers will also be able to redeem Barclays rewards via PayPal. PayPal’s UK small business customers will now be able to choose to see a snapshot of their PayPal balance, recent transactions and sales on the Barclays SmartBusiness Dashboard and move seamlessly from the Dashboard to their PayPal account for further insights. Barclays is the first bank in the UK to collaborate with PayPal in this way. At the time of the launch, Ashok Vaswani, Barclays’ UK CEO, said: “Our customers and clients live in an increasingly connected world and this is why we are working with PayPal to make services more joined up and convenient for them. By joining forces, we can make it easier for people to manage their money and payments. “Each of these new features, whether removing the hassle of updating an expired card, connecting with Pingit, or being able to see all your finances in one place, are about designing the very best customer experience.” In many ways, Vaswani’s comments

It is becoming increasingly common to hear the names of incumbents mentioned in the same sentence as powerhouse innovators such as Amazon

underplay the full implications of such a development, which goes beyond Open Banking. Collaborations, such as that between his bank and PayPal, are revolutionising the approach banks take and, as a result, dynamically altering customer experience of the sector. As for PayPal, this is not its only such partnership with a mainstream bank that was at one time seen as a rival. It has also worked with Bank of America, Citi, JPMorgan Chase and HSBC, all of whom acknowledge the logic in teaming up with a payments giant that handles $132billion of the $.1.8trillion transactions made annually to better serve their own customers’ needs. PayPal has also, though, sent $3billion to 115,000 small businesses in loans of up to $125,000 since 2013 under its PayPal Working Capital scheme for which businesses pay a small setup fee but are not charged interest. It can do this because it can see what sales a company is making through its PayPal account. In the spirit of disclosure between friends, perhaps Barclays could also see some advantage in this. It is becoming increasingly common to hear the names of an incumbent bank mentioned in the same sentence as those of powerhouse innovators such as Amazon (JPMorgan Chase) and Apple (Goldman Sachs). That has obviously not been lost on PayPal – which in the pre-digital era was once dubbed one of the 10 worst business ideas. It doesn’t look so dumb now – the company is clearly pursuing a clever first-strike strategy when it comes to alliances between major technology firms and big banks.

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Banking with a smile Global security specialist Giesecke+Devrient has been ahead of the banking curve for more than 150 years, so when it says biometrics can restore trust, it’s as well to listen. Dr Carsten Wengel (right) and Gabrielle Bugat go over the body of evidence Digitisation, industry wisdom dictates, leads to efficiency, convenience and reduced costs. But in the wake of the Cambridge Analytica scandal, the future of data security has made for some cynical headlines in a world only tentatively investing its trust in fintech companies and mobile banks. As Facebook’s shares tumbled and thousands of users deleted their profiles, the US Senate asked an uncomfortable Mark Zuckerberg: why should the public trust you with their data? It’s a question that goes to the heart of what Giesecke+Devrient, the German specialists in security technologies, are working on in 32 countries worldwide. Founded in 1852, G+D has been at the cutting edge of secure technology revolutions, whether producing the world’s first machine-readable bank note or being instrumental in developing the eurocheque system in 1969 which evolved into modern debit cards. Reflecting the organisation’s central goal of ‘creating confidence’ in governments and institutions that hold your data, Dr Carsten Wengel, head of the Europe, Middle East and Asia region at G+D Mobile Security, argues that the successful digitisation of banking services boils down to credibility and retaining customer trust. Because when personal data seems insecure, it instantly becomes a business-critical issue. “Data breaches must not happen in an industry that has a core value of trust,” he says simply. “If your data is compromised, then the credibility of the service drops immediately. It’s a big disaster: it will explode on social media and the bank will go out of business.” While Facebook survived the fall-out of this year’s bombshell revelations, it’s easy to see how a comparable hit to a bank’s data security reputation could lead


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to the controlled demolition of even the most towering of banks. That’s why financial institutions are looking to G+D’s 166 years of security experience for guidance, according to Wengel’s colleague and head of G+D Mobile Security's Financial Services business division, Gabrielle Bugat. “Banks turn to us because we’re an international player – we can bring new ideas to the table. We’re no longer only a security player, we are a provider of business solutions,” she says. That’s something of a recent development for a company that provisioned more than 2.3 billion EMV cards and issued over 1 billion contactless and dual interface cards over the past six years – and that manages 2.9 billion SIMs across the globe.

We believe that security can be built into digital transactions in a way that has never been achieved before… the more data we have, the closer we get to 100 per cent of them being approved Encompassing four operational areas – in mobile security, currency technology, governmental identity solutions and IT security – G+D is being drawn into the conversation surrounding business data security at a time when banks are in a race towards optimal risk-free mobile banking. As Bugat puts it ‘everything has to be reinvented and revisited, and the banks need to do that quickly. If they don’t, others

will – which means a loss of competitive advantage in a fast-evolving financial environment. With fraud following the banks’ transition into ecommerce, G+D has been at the forefront of developing new forms of identification that are far safer – and more convenient – than their traditional precursors. And its declared frontrunner in secure and seamless access to mobile financial services, is biometric ID. Once science fiction, now science fact, biometrics uses the analysis of unique personal characteristics, such as the way you walk and talk, to confirm your identity. They call it ‘banking with a smile’. “Twenty years ago, American Express came up with the slogan, ‘just pay with your name’,” says Wengel. “Now that slogan should be ‘just pay with a smile’ because likeness detection will authenticate a transaction and make it much more secure than anything you could do with a PIN card.”

A multi-layered identity This is a company that has vast experience in the production of passports, identity solutions and e-gate border control systems all around the globe. “At G+D, we embrace the Fast Identity Online (FIDO) standard,” says Wengel. “We believe that security can be built into digital transactions in a new way that has never been achieved before.” By that he’s referring to multi-layered technology that analyses your retina, fingerprints, hand shape, voice, smile – and even your gait because, as Wengel explains: “The way you walk is so unique that it cannot be replicated in any way.” As with all data sets, the more features under analysis, the more certain the results, and since a fingerprint can be stolen, no single body part is sufficient for security specialists like G+D. “It’s a question of how to combine this information, check it against fraudster

patterns and come to the right decision to quickly authorise a transaction,” says Bugat. “The more data we have, the closer we can get to 100 per cent of transactions being approved.”

Capturing the ‘castles’ As banks become less castles and more part of the digital ecosystem, as Temenos' Ben Thomas recently put it, the greater their need for a multi-layered but frictionless process of identification, be that authorising the use of a payment card or making a transaction by app or social media. Eventually, your secure biometric bank ID will probably ensure that your fridge and the company that fills it over the Internet of Things knows it was you who binged on the beers and is authorised to restock them. It leaves hanging the tantalising question ‘will banks become the ultimate guardians of our ID and how might work as a business model?’. Meanwhile, Wengel and Bugat cite N26 as an example of how biometrics are already delivering dramatic results in this new digital ecosystem: where the setting up of a banquette account that traditionally meant visiting a branch and a post office over a number of days, can be achieved on your sofa on a Sunday afternoon in a matter of minutes. “You basically make an appointment with a person from the call centre, they call you on your mobile device and they complete the onboarding using the identity card that you hold in front of you. “You literally feel and touch the brand very early as a new customer.” He argues that the seamless simplicity this new, highly personalised method of onboarding customers enables the bank to create an emotional link between them and the brand that has a value beyond trust. That is true especially for older users who are sceptical of mobile banking.

Creating confidence in the financial services market is, according to Wengel and Bugat, all about improving the customer journey; breaking it down into each transaction or service and facilitating smooth, convenient and secure access. “Only a few companies have the history and competency to support these business solutions,” says Wengel, “but many small companies contact us to discuss and test their technologies.” As Bugat puts it ‘we’re all forced to think services now’ and, as many of these services migrate or are initiated in the mobile banking sphere, expect G+D to develop more device-agnostic security tech that makes use of biometrics. In May, G+D Mobile Security entered into a partnership with IDnow GmbH under which the two will

combine expertise and resources in developing artificial intelligence-driven biometric and security technologies. The first product to market will likely be a fully automatic remote ID solution for international markets. Meanwhile, G+D Mobile Security will be present at Money20/20 Europe with examples of the breakthroughs it’s overseeing in the fintech space. “Expect a lot of demos – after all, in the digital world, you want to touch and feel what’s going on!” says Wengel. And he’s wearing a very broad smile as he says it.

Face says it all: Biometric ID is a gamechanger



Right first time Businesses run a real risk of being ‘fat-fingered to oblivion’ in the race to speed up payments, warns Mark Bradbury, Founder of Apply Financial. But he has a solution It’s your first day in your new job at FAKE (Financial Auditing Kompany for Example) Ltd and nerves are running high. You may have impressed your new co-workers with your tea-making skills, but you’ve yet to turn your hand to any duties beyond refreshment provision – and the window for first impressions is rapidly closing. However, your manager then asks you to enact a payment to another firm. ‘Perfect,’ you think, ‘now’s my time to shine!’ Unfortunately, a thin blanket of sweat has coated your computer keyboard throughout the course of the day, turning your keys into slippery squares of doom. As you struggle to enter the recipient’s bank code, you type an incorrect digit. Eager to prove the claim on your CV about being a fast learner, you immediately submit the payment without noticing your error. Two days later, your manager slides a letter onto your desk. It’s from your company’s bank, informing you of a payment error and a chargeback bill for £50. Sure, a bill for £50 wouldn’t cause even the most hard-nosed of employers to print out a P45. However, all those £50s add up when you’re a company that carries out more than 10,000 payments per year. “Nine per cent of all payments feature some sort of human error and six per cent contain incorrect data,” says Mark Bradbury, Founder of Apply Financial. “With these statistics in mind, you can imagine the sort of financial impact that payment errors can have on companies that perform thousands of transactions every year. Cutting out human and data error when making payments is therefore a priority for many firms,and that’s exactly what we help them to do at Apply Financial.” With its online tool Validate, Apply Financial’s goal is to become the world’s best payment validation solution provider. And, judging by its proven effectiveness, it’s safe to say that the


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eight-year-old company is well on its way to lifting that title. “In simple terms, Validate prevents companies from fat-fingering themselves to oblivion,” says Bradbury. “It takes the form of a single application programming interface (API) that can be plugged into a company’s payment system – at the front end (particularly in the case of banks) linking to mobile and online banking channels. From here, a series of algorithms and functions (delivered as web service calls) identify and analyse any payment information that is inputted in order to determine whether it’s correct or not, as well as how to fix it if the latter. “Validate’s algorithms work by automatically cross-referencing account numbers and bank codes to ensure that they’re coherent,” says Bradbury. “It knows which codes have the right to live together and, if they don’t, then the

Payments are becoming irrevocable. Real time is eliminating any form of safety net payment is flagged and halted. This means no more payments bouncing back, and no more fees of £50-a-pop to amend a simple, avoidable error.” It may sound like penalty enough for bungling a single transaction, but oftentimes companies pay a far higher price for such a mistake. “First of all, if a payment fails there’s a cost involved in fixing the issue,” says Bradbury. “Somebody has to sit down, run through the details of the transaction and manually locate the error within it. Seventy-eight per cent of businesses estimate that their finance teams spend more than 10 minutes rectifying each failed direct debit and 43 per cent of finance teams spend, on average, more

than four hours each month fixing problem transactions. Not only are transaction troubles wasting the precious time of employees, but they’re also having a negative impact on business relationships. “If you claim to have sent a payment to a supplier and it doesn’t arrive, they’re going to get upset. Almost three-quarters (71 per cent) of businesses admit that past failed Direct Debit transactions have damaged customer and employee relations and 36 per cent said they result in a higher business cost to secure revenue – £50 doesn’t seem quite so expensive any more, does it?” If these symptoms of payment failure weren’t enough to make the average businessperson’s blood run cold, there’s another fly in the ointment that’s putting even more pressure on companies to debug their debits. “Real-time payments are coming, not just domestically but also overseas,” points out Bradbury. “If you set aside the potential of technologies like blockchain and distributed ledgers, there’s still a global movement towards faster, same-day payments. The days when payments took at least 48 hours to process and you had ample time to correct any errors will soon become a distant memory. Not only this, but payments are also becoming irrevocable. Real time is eliminating any form of safety net for payments as we speak,” he says. Thankfully, Bradbury and the team at Apply Financial had their sights firmly set on the future when creating Validate, and the tool has been designed from the ground up to operate effectively in a real-time world. According to a recent ACI Worldwide/ Ovum survey, the number of banks that now expect real-time payments to drive revenue growth has increased by 60 per cent in one year, while the number currently investing in real-time payments solutions has doubled, with 28 per cent planning to at some time in the future. That’s no doubt driven by growing

evidence that SMEs will leave banks that don’t offer the facility. And it’s not just banks that are waking up to real time. The International Air Transport Association, in partnership with Deutsche Bank, recently announced it is powering its own real-time electronic payment system for tickets, enabled by the revised Payment Services Directive (PSD2), which is likely to prompt more non-banking organisations to address the issue themselves. AirAsia is already on the case. “If you’re working in real time, you need to make sure that your payments are perfect before you send them,” says Bradbury. “Validate allows you to verify payment and beneficiary details instantaneously, removing any chance of an irrevocable real-time payment making its way out of your account.” As Apply Financial’s client base continues to see healthy growth, Bradbury believes that the success of the company can be attributed in part to Validate’s real-time readiness. “On average, our client base has grown by nearly 30 per cent per year since we began,” he says. “We now serve more than 700 different types of company, with many of these being corporates as opposed to financial institutions and payment firms. We’ve found ourselves in a very sweet spot indeed since a lot of companies across the board are starting to move towards real-time payments and Validate can help them to deliver the faultless service that is required.” It also helps to navigate the treacherous waters of making overseas payments. “You’d be forgiven for thinking that, by 2018, athe task of making a cross-country payment would be a simple affair. Unfortunately, this is far from true,” says Bradbury. “Every country and every central bank has its own legislative requirements. For some countries, such as the UK, these legislations are relatively easy to handle, but others feature numerous little quirks that have to be considered in order to make a successful payment – adding a few digits to an account

number here, typing in a purpose of payment code there… and so on. “Validate saves our clients the headache of trying to decipher every country’s payment regulations by doing it for them. We’ve taken the rules from the official sources of nearly 220 countries and melded them together into a set of algorithms. When a client of ours makes an overseas payment, Validate will draw on these algorithms to ensure that the payment is compliant with the legislation of the receiving country, won’t be received on a date that could cause complications (such as a holiday) and won’t breach the cut-off period of the receiving bank in question. When it comes to mistakes in cross-border transactions, the majority of the time it’s data errors that are to blame and we’ve designed Validate to eradicate these errors before they cause an international crisis.”

And if prospective clients still demand solid proof that investing in the Validate tool is worth it, Bradbury and the team have built a very simple return on investment calculator to work it out. “The back end of our system constitutes a real-time reporting suite that tells clients exactly what’s going on – how many payments they’ve validated, how many passed straight away, how many contained incorrect information and how many we’ve helped them to fix. From here, it calculates how much they’ve saved by using our tool and stopping payments that were destined to fail. There’s also a more externalised version of this calculator that we like to show to people,” says Bradbury. “This can quickly determine a client’s payment failure rate, and then inform them how much they could save by using Validate.” Thumbs up all round, then.

All positive: The Validate tool stops erroneous payments in their tracks

Issue 9 |



Crossing the divide It’s tough building a cross-border payments system to rival the correspondent banking model and be good enough for even those banks to use it. But that’s just what Earthport has done with a ‘hub and spoke’ approach. Chief Commercial Officer Mike Steinharter took us for a spin Anyone who has sent money abroad via their bank will have wondered why it takes days to arrive. The world's established system of cross-border payments is horribly out of date and is expensive and inefficient, too. According to payments firm Earthport, the correspondent banking model, where money goes from point A to point B via multiple banks that have relationships with each other, is only 84 per cent efficient and, for the most part, completely opaque; the customer has no idea where their cash is in the chain until it arrives, which in 16 per cent of instances, it struggles to do.

A hub and spoke approach The UK-based company is working to replace this 40-year-old system of linear transactions with a hub and spoke model. Instead of a lengthy chain through which


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a payment passes, bank A sends the payment to Earthport which moves it to bank B. Sounds simple and obvious, doesn’t it? But, as the firm's chief commercial officer Mike Steinharter explains, the infrastructure is fiendishly complex. “Looking at it from a mile high, our hub and spoke model looks obvious, leading you to ask why it wasn't done 20 years ago,” he says. “But it’s difficult to put together and we had to become a regulated financial institution so we could handle clients’ money – we're regulated by the Financial Conduct Authority. “The correspondent banking network is a series of bilateral relationships,” explains Steinharter. “As a customer, you are frustrated before you get started because the process will

take four to five days and your dollar will be 93 cents by the time it arrives. While the profits some banks make from tolls taken along the correspondent banking highway are significant, it doesn't serve their customers well. “But if your bank is using Earthport, you make your payment, it goes into the hub, then we send it to its destination and there are no deductions taken along the way.”

Links in the blockchain Activity in the arena of cross-border payments has been frenetic of late with banks, blockchain companies and even social media firms building solutions. Santander UK is developing a payments system using Ripple's blockchain technology, and in the Far East, four banks, including Mitsubishi Corporation, are running a pilot scheme to move

A complex world: Earthport currently allows direct payments between more than countries

The task of building the infrastructure has been huge and costly. But the company is bullish about the opportunities presented by blockchain and transactions from existing customers are showing double-digit growth. The company was recently granted a money transmitter licence covering New York state which will help drive turnover further. “The truth is, when we outsource the handling of international payments we’re taking onboard an extraordinary amount of operational complexity,” says Steinharter. “A bank, for example, has to keep literally thousands of nostro/vostro bank accounts active around the world in order to handle all the international payment requests that it might get and that complexity is a big deal. “If you look at the true cost of an international payment, and I’m thinking about a study I read from McKinsey & Company, it’s in the neighbourhood of $35 to $45. “People oversimplify by saying it costs $1 or €1 or £1 in a particular corridor because that’s what the receiving bank charges. But the total cost of ownership is extraordinary and so building an operation that can take that onboard took some doing. “Our chairman Hank Uberoi was invited to the Committee on Payments and Market Infrastructures a couple of years ago and was the only non-central banker at the conference. Afterwards he asked why he had been invited and they told him they saw the value in what he was building. “They said 'let’s face it, trying to get two central banks together to agree on standards is hard, let alone 20. If you guys are going to provide that asynchronously, then you’re doing a service to the system’.”

Let’s face it, trying to get two central banks together to agree on standards is hard, let alone 20

money internationally on RippleNet. Meanwhile, Facebook is rumoured to be investigating the area of cryptocurrencies as a method of allowing international payments. Other Earthport clients include Bank of America, Japan Post Bank, Payoneer, WorldRemit and TransferWise. Steinharter says: “We serve the money transfer organisations such as TransferWise, Western Union, MoneyGram, PayPal, Xoom and Payoneer. “We even process payments from gaming companies that are excited about the uptick in traffic from the Champions League and World Cup! Earthport now allows direct payments between more than 80 countries using its network, with a one-day turnaround.

Deceptive simplicity To underline the complexity, Steinharter tells of a major IT company that spent a day at its offices with a view to entering the cross-border payments market. It became apparent that, brilliant though the technologists were, they had little idea how

a solution could be built that would stand the test of the regulators and be t ruly ‘bank grade’ quality. He says: “You really need to understand the regulatory environment. You need to know how you’re going to handle know-your-customer (KYC) processes and compliance and transaction monitoring. You really need to understand what your funding and clearing and settlement model will be. “It’s not just applying blockchain to a process and expecting it to work better.”

The ‘preferred utility’ Given the level of investment committed by Earthport, Steinharter says the company’s aim is to become the preferred utility for cross-border payments. “Customers won’t come direct to us because they want to send money to their mother-in-law in India or something like that, that will always be TransferWise or similar service. But we want to be the utility, the platform, that all of those firms can be confident they can run on and trust – because we will handle those payments with 99.6 per cent accuracy, as we do today. That's opposed to 84 per cent in the correspondent banking network. “So the world we strive for will allow for innovative services and technologies to ride on that platform. That may be delivery to new channels, mobile wallets, card systems; it may be the incorporation of new technologies, whether it’s blockchain or the thing you think of next.

Drive for efficiency “Perhaps it is the pressure on the banking industry in particular that’s forcing it, but there seems to be extraordinary uptake in the need for better customer service and greater efficiency. “I try to stress that we’re not just providing a payment for pennies less than your correspondent bank would, what we’re providing is a service and taking on the complexity,” says Steinharter. “Frankly, we’re not serving the banks, we’re serving their customers. The banks have the opportunity to be our partners and some of them, like Bank of America, have proven to be really good partners. But if a bank doesn’t want to partner with us, that’s OK because we can still make this a more efficient world of cross-border payments.” Issue 9 |



Connecting the data dots Nathan Trousdell, Director of Data Science & Strategy at Payvision, gives a unique insight into the inevitable transformation of payment services providers and retailers in their journey to become data-driven enterprises The dynamics of payments and commerce have been changing rapidly, and that change is likely to speed up. For many it’s hard to understand what’s happening and, more importantly, why! There is a transformation process going on in our industry that organisations such as retailers, payments providers and banks are either choosing to go through or will be forced to go through soon enough. What transformation am I talking about? Well, let’s look at the omnichannel consumer. Thanks to this technology-empowered shopper, we have stepped into a new era where flawless service and convenient experience are expected. Companies that achieve this gain their loyalty. Think of Amazon, Uber, Airbnb,, Netflix and Spotify. One of their key advantages is how they use information to understand and connect with their consumers. To do this, detailed data on consumers is required to build complex models of behaviour patterns, which are then leveraged in the small moments where companies have touch points with them. In this omnichannel era, many merchants have an ever-increasing amount of data streaming back to them from various sources – in-store, online, mobile and social. This massive volume of information is one of the modern merchant’s most valuable assets to optimise their business. As The Economist famously proclaimed in 2017 ‘data is the new oil’. And yet, properly leveraging this data requires determination, expertise and investment. Many companies are unable to make the most of this opportunity due to a lack of understanding of, and investment in, the optimal technologies and skills required. To truly become a data-driven company, you don’t just need expensive technologies and PhD employees. There’s one major challenge that many companies


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don’t take seriously; you must centralise and understand all the data you have, so that you’re able to allow your employees to work from the same playbook and unlock the value in the data. In a McKinsey report from late last year on why many industries have failed to capitalise on data science technology, the barrier that is mentioned most often is siloed data. From basic operations being simple and standardised to advanced data-science models breaking barriers, having the discipline to simplify and streamline data management practices enables you to have the freedom to connect the dots with less energy and innovate for your customers. There is a great book written by the ex-head of data science at Warby Parker, Carl Anderson, where he states that this was the most impactful work that his team did there. It’s the least glamorous part of becoming a data-driven company, though. So, why is it worth it? Here are two simple reasons. First, between 60 and 90 per cent of the time spent on projects involving data is in the preparation. Second, companies that are more data-driven have a five-to-six per cent greater output and productivity than their less data-driven counterparts. Often, the things that feel like chores, when done, allow you to be far more effective at the fun things, too. It’s not easy, though, and I’m sure that, just like me, many merchants or merchant services providers, have faced the challenge of keeping their data lake from becoming more of a data swamp. For us at Payvision, simplifying the data management landscape has let us put data science and artificial intelligence/ machine learning at the core of our business strategy. Leveraging these emergent technologies and methods, we managed to equip ourselves to provide best-in-class fraud products, reporting and strategic insights to our merchants. With customers demanding a better omnichannel experience at every stage,

it’s hard to achieve excellence alone. Hence, companies can solve challenges better by working together instead of trying to replace one another. We need to complement each other to create more efficient products and serve the omnichannel customer. At Payvision we’ve partnered with specialised companies that helped us focus on merchants and their customer needs, such as Cloudera for our underlying big data stack. Then there is Sift Science to provide the most effective machine learning fraud fighting. ING recently invested in us and now holds a 75 per cent stake. This creates a unique combination of payments and banking products, which we are deploying through our vast worldwide networks. Through this transformation, we have transitioned to became trusted advisors for our partners and merchants, and are now able to give our merchants great insights into how to eliminate risk, enhance customer experience and maximise their revenue. Examples of how Payvision utilises data science to this effect include: ■ We can detect real-time payment fraud while keeping false positives to a minimum ■ We have useful insights into the payments journey of the end consumer ■ And we have increased the chance of every legitimate transaction being approved, leading to better authorisation rates and higher merchant revenues (on average we see a revenue increase of two per cent and sometimes more than five per cent)

What does the future hold? Consumers are going to continue to demand a better experience for their money. The barriers in commerce and payments will continue to fall as

Leveraging data requires expertise and investment, inaccessible to many due to a lack of understanding of the technologies and skills required

A connected future: It’s important that the industry works together

IoT-connected devices, virtual and augmented reality become part of the omnichannel story – look out for Magic Leap’s release this year. On the back of the General Data Protection Regulation (GDPR) in Europe and the techlash from it, the Wild West of data will not last. With privacy becoming more personal, consumers will demand more control of their data and regulation will tighten outside of Europe. While scale, speed and cost issues mean that cryptocurrencies have a long way to go before they’ll change the payments landscape, the underlying technology – blockchain – will make an impact on the consumer, merchant and risk landscape soon. So far, it’s been a solution looking for a problem and it’s not really found the right one to prove its value yet. However, once it does, it will have a huge impact on the world. And when it does change payments, I believe the breakthrough will come from an incumbent, or group of them, not an outsider. We will be right there with them, servicing our clients. Blockchain will be used to allow consumers to choose what data they share with merchants in exchange for rewards and discounts. Victor, which is built on NEO blockchain technology is doing some great things. One interesting use for blockchain is as the basis for digital identity, because it will allow users to be authenticated in a more trustworthy manner. Direct access to a shared ledger for identity – with trusted institutions as the main anchors – will save companies time in the know-your-customer process. Facebook will be involved in all the above in a major way, like it or not. Finally, fraud is going to continue to increase until merchants and banks make the most of technologies such as hand, voice and facial recognition to validate risky transactions, ideally in real time. However, since that comes at a cost, it may take some time until it becomes common practice. Because of the speed of all of this change, it’s really important that we work together to provide the best experience for end consumers while making sure we protect them not only from risk but also data overreach. It’s what they want and it’s what they deserve. Issue 9 |



The digit-al human André Løvestam and Kim Kristian Humborstad believe fingerprint-enabled cards should go mainstream – but that’s just the start for tech company Zwipe We’ve all been there, standing at the department store or coffee shop till, clutching our card and inquiring hopefully ‘contactless?’ And then, if the bill goes over the issuers’ cap, struggling to remember the PIN. That could be a thing of the past if a new generation of cutting-edge, contactless cards with built-in fingerprint biometrics are accepted as providing enough security for limitless transactions. “We’re going from contactless to the next frontier, limitless contactless, enabled by much better security capability,” says André Løvestam, CEO of Zwipe, the Norwegian biometric tech company that teamed up with Gemalto earlier this year to pilot the first battery-less, dual-interface, fingerprint-activated VISA payment card with the Bank of Cyprus. In April Gemalto began supplying its biometric dual-interface Europay, Mastercard and Visa (EMV) bank card, also incorporating Zwipe tech, to areeba, a financial technology company that provides payment solutions for banks, governments and merchants in the Middle East. Standard POS terminals in Lebanon will be the first to process fingerprint-authorised VISA payments in the region. “It’s paramount that these cards work in the existing EMV world. So, all our innovation is sitting on the card itself: biometric scanner, biometric templates, everything, so that when it communicates with the terminal it’s talking a language that the terminal already understands,” says Løvestam. “Our technology fits with existing infrastructure and installations and works to global standards in terms of operating systems and everything that is back-end.” Zwipe’s biometric authentication engine draws on the radio frequency from a payment terminal for its energy source and it is capable of performing full ID verification without the biometric data ever leaving the card (minimising the risk of


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fraudsters hacking a central data storage). “What’s been missing in payments is security, creating the need for transaction limits,” says Løvestam. “We offer positive identification of the card owner through fingerprint ID, while keeping the transaction contactless and not compromising on convenience. “The challenge with many cards is that users have to think whether their transaction falls above or below the limit. When security is added to convenience, that’s when contactless will really take off.” There are plenty of others trying to hasten that moment, based on the theory that while people often forget their PIN number, they never forget their fingers. Mastercard plans to roll out its first fingerprint-authenticated cards for use with

POS terminals in Europe this year and by 2018 it will insist on biometric authentication for online card purchases, too. This April it launched a battery-powered sleeve that will allow anyone to sign up to its biometric authentication scheme remotely, dispensing with the need to go to a bank branch to enrol. Meanwhile, America has seen the launch this year of an ultra-small fingerprint scanner for cards in ATMs and card readers, powered by an internal rechargeable battery. But for Zwipe, cards are just the beginning. In addition to payments, the company also provides fingerprint authentication solutions for access control and in any environment where ID needs to be verified. Where all those applications logically converge is around the Internet of Things, facilitated by mobile technology.

You are the payment: But biometric contactless cards are just the start

A multi-billion-dollar market By 2020, Acuity Market Intelligence predicts biometrics will come as standard on all of the three billion smartphones sold each year, and 800 billion transactions requiring biometric authentication will be processed on mobile devices annually. If this proves true, the value of the biometric market will increase from $1.6billion today to $34.6billion. Zwipe plans to be at the heart of it and sees solving the conundrum of security versus convenience of contactless payments as a first step. It’s already engaged in a number of partnerships in its quest to make biometrically-enabled payment technology more widely available. Combining the benefits of contactless payments and personal ID into one solution that is usable across multiple devices is a green light for further growth, says Kim Kristian Humborstad, Zwipe’s founder and CGO. “We’re seeing banks wanting to innovate on that existing contactless platform where we already have infrastructure in place to support this. By adding biometrics to the card, you can increase

the scope of contactless and improve the user experience.” Zwipe technology works on the principle that it keeps the card turned off until the user wants it on, overcoming concerns among some consumers that cards in their pockets or bags are vulnerable to skimming in public places, such as on the Tube. A biometric sensor basically works like an advanced on-off button connected to cardholder themselves. It’s the first step towards the person becoming the payment and it doesn’t just pave the way for the phasingout of transaction limits, it opens up a whole new era for the digital human. For the moment, though, there are more prosaic concerns, including the revised Payment Services Directive (PSD2) and the additional payments authentication that it requires for online and over-the-phone payments that will have to be verified in at

The proliferation of contactless, frictionless transactions is not part of the future, it’s happening right now

least two of three ways: by something that only the customer knows (e.g. a PIN or password); something that only a customer possesses (e.g. a card); and something unique to a customer (e.g. a fingerprint). “We see these new regulations lifting authentication up to bank board rooms,” says Humborstad. “It’s being discussed now at a high level and we’re coming into these discussions as an advisor, looking at how we can work together to solve these new regulation issues and meet the future together.”

First cards… then cars Zwipe is working closely with a selection of industry partners to bring its solution to as many people as possible. Løvestam adds: “Everyone needs to work together and we need the banks and large, global card issuers to be involved. There are companies like car manufacturers investing heavily in this kind of technology and we’re working with many of these sorts of stakeholders. “We’re an enabler, but we need to work with a broad network to make it happen and I’m very glad there is such strong interest in taking this to market from all quarters. “Whoever can develop the best and most consumer-focussed solution will be the winner,” Løvestam continues. “It’s in our DNA to enable different devices to have secure fingerprint solutions. Currently, the payment card market is the most readily accessible for us and our greatest focus. But, over time, we’ll expand across all kinds of verticals, including access control, where we’re already active, and the Internet of Things.” Humborstad adds: “We don’t see ourselves as a card company. We are an authentication company that happens to work with card manufacturers. Our unique core is patented technology allowing fingerprint scanning to take place and identify a person without the use of batteries – and that can be implemented in a range of technology platforms and products. “The proliferation of contactless, frictionless transactions is not part of the future, it’s happening now,” says Løvestam. “It’s what’s going to shift consumer behaviour, brand preferences and, indeed, consumer loyalty. “ Issue 9 |



Entering a new era Reza Rahmani Fard, Head of Products and Services, and Stéphanie Pietri, Head of Communication at FIME, explore the challenges for banks in achieving digital transformation – and how to solve them

When Aimazing, a smart startup, incubated in Singapore, officially launches this year, it will have FIME to thank for getting it through the payments door. The novel, secure soundwave technology on which the fintech’s three 20-something founders hope to build their fortune was untried and untested until the globally


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respected consultancy provided vital technical endorsement. It gave Aimazing the credibility to approach banks, telcos and payments providers with a white-label solution that could rival the only other commercially available mobile wallet to communicate using highfrequency soundwaves, Google’s Tez. As with Tez, Aimazing will provide the

same tap-and-pay user experience as near field communication (NFC)-enabled devices but will be compatible with ‘all the smartphones in the world’, irrespective of the OS. Now in advanced talks with major financial services players in South East Asia, FIME will be supporting the company every step of the way as it evolves and integrates with client technology.

A lot to understand: Open banking presents a number of challenges

a danger of them being squeezed out of the picture by the technology-driven neo-banks and big-tech companies. It pushes them towards platformitisation. To be sure they remain competitive, banks must apply advanced technologies to provide services in more cost-effective a nd innovative ways.” In Europe, that spirit of innovation both inside and outside of banks is being amplified by the introduction of the revised Payment Services Directive (PSD2), which brings its own set of challenges for established players – challenges that FIME is unpackaging for its clients. “PSD2 requires banks to allow third parties access to consumer account data through open application programming interfaces (APIs), enabling them to build new financial services on top of banks’ data and infrastructure,” says Rahmani Fard. “Banks can still store masses of valuable data that they can repackage, monetise and expose to third-party payment service providers through APIs. However, API development and integration into banks' existing systems is a real challenge for banks’ IT teams.” That's where FIME, which partners with payment schemes and standards bodies, can assist banks in testing new protocols and ensuring functionality, compliance and security. “We’re already working with fintechs and banks to define a new testing strategy and

To be sure they remain competitive, banks must apply advanced technologies to provide services in more cost-effective, innovative ways

It’s a neat illustration of how a leader in consulting and testing payment solutions can bring its expertise to bear – and how it can help to identify opportunities, in some cases broker, and give confidence to the relationship between fintechs and financial institutions. That’s an increasingly valuable skillset in the open banking era. “The point of interaction (POI) is increasingly virtual or even non-existent to consumers experiencing a seamless shop-and-pay process, such as with the Amazon Go store and, to a less extreme extent with AliPay,” says FIME’s head of products and services, Reza Rahmani Fard. “For the incumbents, that means there is

roadmap to provide clear API functionality,” says Rahmani Fard. “Solutions need to be open and compliant but also well-managed to protect the data that banks still need to safeguard – because while everyone is excited about the benefits that will flow from PSD2, there have been concerns raised about privacy and risk.” Banks’ monitoring systems must also be brought up to speed to detect and thwart fraud, as the flight towards open banking encourages a reduced transaction processing window that’s sometimes as tight as two seconds for settling and clearing, he says.

“Banks will benefit from real-time payments technology to address the increasing demand for transactions to be conducted faster, to carry richer information for matching and reconciliation purposes and present data in standard formats so that they can interoperate across systems in different countries and regions,” says Rahmani Fard. To this end, national payments service providers and regulators are adopting two strategies: implementing a real-time retail payment system (RT-RPS) and adopting the ISO 20022 payments message standards. In fact, corporates are requiring banks to deal with ISO 20022, especially for the multinational companies, and it allows further innovation to be easily applied. FIME highlights the need for stronger security at the initiation of payments with the implementation of water-tight authentication and secure communication. It also supports the creation of a common standard for the exchange of bank data between actors. “With PSD2 already in action, banks need to ensure their systems are, and remain, compliant,” says Rahmani Fard. But beyond PSD2 and in an increasingly global transaction world where peer-to-peer and even B2B payments can by-pass banks, they need to ensure they understand the business environment while meeting a number of local, regional and global regulations. “FIME has a long history of working with industry organisations and standards bodies – in fact, we actively contribute to the advancement and simplification of certification processes,” says FIME's head of communication, Stéphanie Pietri. “With 10 offices around the world, serving more than 3,000 clients in 13 languages, we bring a combination of global expertise and local knowledge to bear through a single point of contact to enable customers to bring seamless card and card-not-present services to market effectively and confidently using secure chip or Cloud-based solutions. “There’s a lot for banks to understand, a number of challenges to overcome and, in some instances, a tight timeframe to work towards,” observes Rahmani Fard. “An expert partner for both consultancy and technical support can help banks remain competitive in the age of open banking,” concludes Pietri. Issue 9 |



When worlds collide The old financial supernovas and the bright new stars of fintech are – or should be – on the same trajectory, says the EBF’s Sébastien de Brouwer. And the fall-out when they converge will change the future of finance Big or small, young or old, financial organisations will have nowhere to hide from the blinding spotlight of regulation being introduced in 2018. And the resulting urgency around finding solutions will give rise to a new type of collaboration. That’s the view of Sébastien de Brouwer, an executive director of the European Banking Federation (EBF), the ‘trade association’ of big banks which represents their interests to government. The EBF has been hugely influential in shaping the unprecedented raft of regulation that’s come out of Europe recently – including pushing for the European Commission (EC) to implement the screen scraping ban which comes into force this September under the revised Payment Services Directive (PSD2). De Brouwer and his EBF colleagues are also busy formulating their response to the EC’s new Fintech Action Plan, revealed in March, which has far-reaching implications for the whole industry, with landmark statements like: “An EU-wide fintech market will not reach its full potential without the development of open standards that increase

competition, enhance interoperability and simplify the exchange of and access to data between market players.” During its initial consultation with industry on formulating the Action Plan, the Commission said most respondents stressed that the priority was to develop international standards, promote their adoption and ensure interoperability between systems. The preferred approach was for that to be led by industry and market participants, developing global standards as opposed to local or regional ones. There was particular demand for greater standardisation in blockchain/distributed ledger technologies, application programming interfaces (APIs) and identity management. The document is now out for industry discussion and the EBF will be a key voice in the feedback, given the Action Plan’s potentially huge significance for not just neo-banks and pseudo banks, but long-established players both inside and outside the 27 post-Brexit member states. Its development will also be keenly watched by one particular neighbour. Although the UK will not be part of the

European Union after 2019, the high degree of synergy between it and other fintech capitals means that what results from the Action Plan will still have far-reaching implications for Britain. De Brouwer believes there is a delicate balance to be achieved between fostering innovation and ensuring everyone plays by the same rules. Cooperation will be key to that. “As the EBF, we represent all banks in Europe and we are, of course, very much interested in the development of new technology, the fintechs’ world,” says de Brouwer. ”A new ecosystem is being created and banks are at the centre of it, in our opinion. In fact, banks are fintechs as well. They have embraced digital innovation. And, as one of the CEOs said recently, fintech startups are banks’ best friends because they will help them seize new opportunities, modernise and innovate further." The Action Plan looks at the possible regulatory approaches to cryptocurrencies, Cloud services, blockchain technology and cybersecurity,

Catalyst for change: Fintech and banks are on the same trajectory


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and is part of the European Commission’s aim of building the Capital Markets Union and a Digital Single Market. Its three main policy objectives are to create the right market conditions for innovators to grow; to increase uptake of new technologies in financial services and to enhance the security and resilience of the financial sector. Initiatives such as the cuttingedge, cross-border payments systems being spearheaded by SWIFT gpi, are examples of some of those already being led by the industry that will contribute to the Action Plan’s standardisation goals. “We are keen to follow regulatory development within this space and we are very much looking forward to exchanging ideas with the sector because we believe that it is important to modernise the European regulatory framework, in order to enable banks to deploy digital strategy,” says de Brouwer. He believes that, in many ways, the sector has outgrown the old rules of regulatory engagement. “There are still a lot of regulations, at European level that are actually not fit for the purpose of digital,” he says. “They should be modernised and adapted, incorporating the views of all players – banks and non-banks. “In addition to that, we believe a certain type of level playing field is necessary. If an organisation engages in certain activities, it has the same risk as others and needs to abide by the same rules. Most likely, it will also need the same supervision to ensure that investors and consumers are protected the same way, whichever entity, bank or non-bank, is offering services to them,” he adds. The EBF’s vision is for all EU countries, as well as the range of financial services

firms operating within them, to sing from the same hymn sheet. “That’s very important, and we note that there is currently huge competition among countries, in terms of fintechs, startups and more generally, and we fear that this will create fragmentation," says de Brouwer. “There is a very good example of that, in regulatory sandboxes. Some countries have regulatory sandboxes, allowing new firms to pilot their new services and products within the market. In other countries, this is not allowed, which leads to different conditions and creates fragmentation in the market. That is something we believe should be avoided.”

Collaboration key to control The UK’s Financial Conduct Authority (FCA) pioneered the idea of regulatory sandboxes by engaging all manner of companies in defining that country’s future framework. The FCA’s sandbox is about to enter its third cohort stage, featuring companies including Barclays, Barkat Ventures, First Direct and Nationwide. By contrast, in some areas of the EU, financial monitoring authorities are barred from such activity. That's a pity says de Brouwer. “If we really want to create a digital single market, which is able to compete with other markets across the world, we need to have a harmonised pan-European

There are still a lot of regulations at European level that are actually not fit for the purpose of digital

approach, or a converging market at least,” he says. The EBF believes individual states' Open Banking authorities could encourage that harmonisation through supervised sandboxing and other activities designed to test legislation. Where does de Brouwer see regulations coming over the horizon, including the General Data Protection Regulation (GDPR), the revised Payment Services Directive (PSD2) and the Markets in Financial Instruments Directive (MiFID II), taking the industry in the short term? “There are a lot of new regulations, which will be quite burdensome to implement. Most of them will be gamechangers for the banking sector and will take time to be implemented,. Uncertainty still surrounds many aspects of these new regulations,” he says. “Of course, they should apply to the activities – whatever the entities are that are offering them. This means the GDPR is key because it’s not only for banks, but also for the entire market. We see how data is currently shared and exchanged around the world, sometimes without the customer knowing it. This may change, thanks to the GDPR.” When it comes to finding solutions to such issues, de Brouwer is most excited about the opportunities presented by a new era of integration. “What is fantastic is that we’ll see innovators, startups and entrepreneurs linking with banks, that can offer a lot of other advantages, in terms of scale-up, finance and expertise, as well as an understanding of regulatory requirements. So, here you have two worlds which meet, to the benefit of the customer. That is quite exciting.”

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Tooling up Global consultancy Capco describes itself as the ‘Swiss army knife for the financial industry’ – and it’s as well to have every tool at your disposal to prise the lid off open banking, says UK Partner and Head of Digital, Dan Jones Given its high-profile work in the banking and payments industry, its 28 offices stretching across Europe, North America, South America and Asia, and its 20 years in management consultancy, Capco needs little introduction. Its one of the few financial services-focussed consultancies helping banks with the ongoing digital transformation, balancing compliance with growth and increasing their speed to market; or moving them from waterfall organisations to more agile institutions to elevate their competitiveness. Recently, the company helped a top US retail bank to migrate more than 10 million customers to a new online banking platform – in real time; it’s helped numerous banks to simplify, upgrade and renew their architectural landscape; and it’s just helped one of the UK’s top four banks to prototype and scale an account aggregation service. As one of the UK partners, Dan Jones heads up Capco’s digital proposition, having joined the consultancy in 2013 as a specialist in digital and change management. There’s been plenty of learning, evolution and revelations for everyone since, thanks to a raft of new financial regulations. And for Capco, which has set itself up as ‘the Swiss Army knife for the financial industry’, it’s a matter of staying ahead of the game and ‘keeping up with the challenges that the fintechs are throwing out there’.


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Jones says that many of the incoming regulations, such as the revised Payment Services Directive (PSD2), will transform the industry and springboard banks into much-needed action – or so he hopes. “I think we’ll see a shift by the banks from a focus on just simply ‘being compliant in time’ to a view of ‘what can we now do to leverage this and turn it into a strategic advantage and get off the back foot?’,” says Jones. “A lot of clients have been massively focussed on simply meeting the deadlines and being compliant. So, there’s a slight shift in mindset to ‘now we’ve done that, what do we do with it?’ How do they compete and avoid new entrants taking some of those market shares and traditional revenue lines that banks have enjoyed for so long?”

Decision time for banks The EU’s PSD2 – and, in the UK, the parallel Open Banking (OB) initiative – offers opportunity, but that’s counterbalanced by threat, says Jones, and this will prompt banks to make some tough decisions. “It will drive more competition for the distribution of products, so banks need to decide where they want to play. They need to decide on their strategy for Open Banking, but the key is applying that strategy throughout the group. These are large, corporate organisations with many departments, often with multiple OB projects and initiatives running at once. They all need to be tied up – in line with the group’s overall strategy.

“My second piece of advice to banks is to decide if they still want to own the customer relationship and, if so, which parts of it. They need to look at their core strengths. If banks are going to give up some of their customer relationship, then they need to embrace that fully and collaborate with fintechs or startups that are putting out new products and distribution options for their customers. “Thirdly, banks need to decide if this is a cost play or a revenue play – or both." Take mortgages, for example. “If you look at the distribution models for complex products, such as mortgages, quite often banks have networks of brokers and advisors that come with a high cost,” says Jones. “Typically, customers need to send their documents to the mortgage broker, they come back and ask them several different questions. There’s a team of people in the back office, processing that.” Open Banking presents an opportunity to work with a fintech player that may have its own platform for mortgage brokers, reducing the outlay for banks. And if banks then offer additional products on the back of that service they continue to drive revenue while protecting their customer base, he explains. “But often we see our clients looking at startups like Bud or Starling and Monzo [who use third-party Cloud technology] and taking a very defensive stance,” says Jones. He also thinks that customers’

understanding of – and relationship with – data is in the process of changing after the Facebook debacle and will begin to form a big part of the agenda. “The Facebook news will eventually catch up with banking somehow. Typically, a customer’s understanding of how banks use their data is probably quite low, but I think that will come to be more at the forefront of customers’ minds and banks will need to be ready for that. “Obviously, under the General Data Protection Regulation (GDPR), banks need to explain what data they hold and how they use it, and how that data has been used. The average consumer doesn’t really understand what Open Banking or PSD2 are, so the changes they see are simply changes their bank is making, be it good or bad. “The challenge is to ensure the customer experience is still a good one but keep customers involved and up-to-date with what’s changing and how some of that data is being used.” All the same, says Jones, while PSD2/Open Banking may herald opportunities, it ‘may not make the customer experience as seamless as possible’. “Banks need to be cautious of some of the more detailed guidelines in PSD2. If you look at transactions of more than €10, for example, they need to go through a secure customer authentication process that, arguably, degrades the customer journey, albeit while maintaining security. It doesn’t enable you to have that seamless interaction as you go through the process. So, while opening up data via open application programming interfaces (APIs) is a shared ethos of Open Banking and PSD2, banks need to look at the detail of the regulation and understand what impact that has on customers. It’s not completely frictionless,” says Jones. “If you look at what the European Banking Authority (EBA) is saying, for certain transactions you need to provide information that proves you know something, you are something and you have something. So, it could be a physical token or a code, for example. What it’s saying is that the current 3D secure mechanism could be a way of complying, but if you think about the impact on the customer, that arguably is a step away from a frictionless, seamless journey. The key point is that the issuers, the banks, need to work collaboratively with the EBA, the card

schemes and also the merchants, to bring improved customer journeys that are also compliant with the regulation.” That said, while tech-biased, digital-adoptive customers want the Amazon or Uber experience in their banking journey, that’s true only up to a point. “If you look at younger generations, the expectation is to do everything via mobile and banks have to keep up with that. You can check out of Amazon in 20 seconds. With simple transactions, people expect banking to be that quick and easy. However, the more complex the financial product, the less people want that. They want more of a human touch – to be talked to and educated. “If you’re applying for a mortgage, for example, you almost don’t want it to be frictionless. You want to be reassured. Customers want to know the ins and outs of that product, they are more likely to read the terms and conditions for longer-term commitments and they are also more likely to look at their choices.”

If banks are going to give up some of their customer relationship, they need to embrace it fully and collaborate with fintechs Even in the typical retail space, customers are in a lot less of a rush than is sometimes assumed. Recent research by Nielsen showed that 72 per cent of customers use their mobile to check for prices, but when it comes to making the transaction, mobile usage falls significantly as they move to a different device or go instore. “If you then apply that to financial services, the percentage of mobile use is quite high, in terms of shopping around for different products – a mortgage, or APR percentage – but again, for those more complex products, people might go in to a branch or get a mortgage advisor to take them through it. So, I think you’ve got to put the customer at the heart of it, understand what they’re looking for, understand their needs and wants, and then design a journey around that while obviously staying compliant.”

Jones feels that established banks are missing an opportunity if they don’t exploit the prevailing trust their brands still command in customers. “There’s quite often a perception of security built in to those brands, and that’s a strategic advantage in this new world of Open Banking competition, where you’ve more fintechs competing for a higher share of the market and more of the distribution of those financial products. So, there’s definitely an opportunity for banks to leverage the brand they’ve built up over many years,” says Jones.

Learning from fintechs Collaboration with fintechs holds enormous scope for experimentation, he says, especially when it comes to enhancing the customer experience. Jones is a huge fan of test and learn, and Capco itself partners with a fintech that has advanced encryption sandboxing capabilities. He believes established investment, asset and wealth management firms as well as the banks, who are looking defensively at the likes of Monzo and Starling, could steal a march on the challengers by developing a more frictionless, mobile experience for savings and investments. “It’s an area that has been largely untouched,” says Jones. “There’s an opportunity for banks to bring in new customers they wouldn’t normally attract early on in the customer lifecycle. Typically, customers start saving for the future in their late thirties, so that’s an opportunity for a bank to introduce an innovative offering, such as the Moneybox app sitting under its existing brand, which is trusted and has security built in to the perception.” Moneybox – which rounds up transactions on a bank card to the nearest pound and automatically diverts that 'spare change’ into tracker funds based on the account holder’s risk appetite (‘cautious’, ‘balanced’ or ‘adventurous’) – is a good example of a fintech that has stepped into a novel space. So, once we’ve all got used to this Open Banking paradigm or Paradise, does Jones believe there will be a PSD3? “It’s possible. PSD2 is obviously a large body of regulation and I think we will need some time to understand whether or not it’s achieved its goals and impacted the customer journey detrimentally or advantageously. If further tweaks are needed, there’s every chance of a PSD3.” Issue 9 |


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Designs onfintech The region known for its flatpack furniture is opening the box marked ‘fintech’. Anette Tånneryd, Managing Partner of newly established Capco Nordics, can’t wait to see what’s inside There’s a competition taking place in Scandinavia – and it isn’t a cross-country skiing event nor a competitive hygge match. The Nordic countries are locked in a financial services war, with fintechs constituting the largest growing branch of startups in each nation. According to Deloitte, this civilised Scandinavian struggle has placed the region third behind the UK and Germany in terms of activity within the sector, with local firms such as Klarna and iZettle driving the Nordic fintech trend. In fact, the latter reported a turnover growth rate of more than 30 per cent between 2010 and 2015, making it the fastest growing fintech company in the whole of the Europe, Middle East and Africa (EMEA) region. The country is intent on maintaining this level of momentum – €400million was invested into Swedish fintech between 2014 and 2017, helping to further establish a healthy fintech ecosystem within the land of flat-pack furniture. Sweden’s status at the beating heart of Scandi fintech makes it the perfect place to set up shop in order to expand your services across the whole region. That’s exactly what Capco has done, basing a new division of its business, called Capco Nordics, in the country’s capital. “Welcome to the heart of fintech in Stockholm,” says an enthusiastic Anette Tånneryd, managing partner of Capco Nordics. “Capco has been at the centre of helping financial institutions to navigate this new digital landscape. We are the world’s largest consultancy firm dedicated to financial services and it’s time for us to drive change and collaboration within the blossoming Nordic ecosystem, too.” The Scandinavian market has demonstrated particular foresight through

coopetition strategies between fintechs and incumbents, the majority of these within the payments vertical. Considering this, it’s perhaps unsurprising that card payments in the Nordics are between two-and-a-half and four times higher than the European average. In Sweden, only around 20 per cent of payments are made in cash, while Denmark has set a 2030 target for becoming a cashless society. Despite leading the way on the path to cashless-ness, there’s one key area where the Nordics are lagging behind. “When it comes to open banking, the region is probably a year and a half behind the UK,” says Tånneryd. “But we’re quickly catching up and we expect to see many more open banking businesses shortly.”

We help our clients solve old world problems and pave the way for new-world solutions If ever there was a time to prioritise open banking initiatives, it’s now as the revised Payment Services Directive’s (PSD2) implementation at the beginning of the year adds another string to the bow of the Nordic fintech ecosystem. “PSD2 is the start of a regulatory journey that will drive a higher level of innovation and client centricity across the financial services industry,” says Tånneryd. “The financial institution that recognises this and rethinks its strategy accordingly, i.e. by collaborating with promising fintechs, will find itself in great shape, come the next wave of open banking regulation.

“The opening of the banking value chain, what you’re doing is allowing the entrance into the industry of new players and more innovative products and services. PSD2 and open banking will challenge the historical vertical integration of production and distribution of services within banks and will cause a more horizontal split between producers and distributors to arise. This means that, as a client, I’ll be able to access traditional banking products such as accounts, cards, and mortgages via specialised providers, as opposed to through a traditional bank.” Obviously, such a bypassing of traditional financial institutions presents a lucrative opportunity for fintechs across Europe, not least within the Nordic countries where the fintech ecosystem is already in the midst of a golden age. So, how does Capco Nordics plan on further accelerating the flow of Scandinavian fintech? “We help our clients solve old world problems and pave the way for new-world solutions,” says Tånneryd. “We ask our clients the tough ‘why?’ and ‘what if?’ questions in order to generate innovative strategic responses and to challenge the status quo. The recommendations we make are immediately actionable and we help in executing them.” Capco Nordics is confident that the coopetition strategy that has functioned so well throughout Scandinavia will continue to drive future fintech innovation. “When small, innovative fintechs and large, established players cooperate, your agility and efficiency in creating new products increases dramatically,” says Tånneryd. “You can begin to tailor products for under-served segments and the number of potential revenue opportunities skyrockets.” Issue 9 |



Full disclosure Business departments and IT have only been getting half the story when it comes to user experience problems. With Glassbox those issues have nowhere to hide, as CEO Yaron Morgenstern explains

Super-fast broadband is the least we expect nowadays – but the instant gratification it brings has almost made a virtue of impatience. The average website or app user expects services to work 100 per cent of the time without fault. And if they don’t, deleting them takes milliseconds. With its ability to store the complete customer journey and replay it just as fast, Glassbox has become many businesses’ best defence against that itchy-fingered doom. It allows firms to solve problems quickly, rather than spend time trying to recreate or hunt for them, says Glassbox CEO Yaron Morgenstern. “In the digital world today, and especially when you look at the younger generation, you don’t have the luxury of time to solve the problem,” he says. “Their attitude is if they have a problem and it’s not being solved, then they’re being duped.


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“A young Millennial will not try again and again, he or she will just uninstall your app.” Established in 2010 in Israel under the name of Clarisite, the company rebranded in 2016 to Glassbox, which is a play on an aircraft’s black box data recorder – but with better transparency. The company is now headquartered in London, with offices in Tel Aviv and New York. It has built its reputation on helping clients slash the time taken to identify and solve customers’ IT issues. Glassbox’s strength is that its platform records every element of a customer’s online interaction with a company. This means that when a customer raises a problem, a call centre representative can replay that interaction and see the issue. Furthermore, through machine learning analytics the software can also discern what typical customer behaviour looks like and will alert staff when it spots a deviation

from the norm that could signify a problem or inefficiency has occurred. But Morgenstern says there’s more – the platform can go so far as to transform a company’s culture because it allows staff from all departments to see the same data simultaneously. “In many cases, banks will merge IT staff, developers and the business guys when it brings digital under one umbrella,” he says. “But problems arise because those different staff still use different systems. “The IT guys are looking at solutions that give them deep information on servers and network and capacity. Meanwhile, the business guys are looking at processes and user experience. “We believe that technology should allow the unification of these elements and this is what Glassbox does. You can open the replay and see exactly what the customer experienced, and you can look at all the

Single vision: Glassbox allows the IT and business teams to have the same view

exist between IT staff and others because a system’s problems are clear to see.” Glassbox says a customer’s digital session – either on a website or through an app – can be replayed after three seconds. A customer services representative can call up the data using a straightforward free text search. And being able to actually see what happened during that customer’s interaction means there is no need to share screens or remotely take control of their personal device in an attempt to recreate what happened.

Solutions, not problems Israel’s Bank Leumi is among Glassbox’s clients. It adopted the platform after suffering high volumes of customers raising IT problems with its call centres. Before that happened, the bank may have known about an issue but often could not accurately reconstruct the online journey the customer took in order to fix it. Now it solves 95 per cent of interaction and transaction non-reproducible errors, which has saved time, cost and frustration for its marketing and IT departments – not to mention the customers on the receiving end. Other Glassbox customers include Bank Hapoalim and Santander, Admiral and Zurich in the insurance sector, and Expedia and Air Canada in the travel industry. Morgenstern is keen to point out that though Glassbox records every element of a customer’s journey, it does not extend beyond a company’s website or app – it does not record what a customer does elsewhere for example. But by allowing a company to look at aggregated data, its staff can then proactively contact a customer who might have experienced a problem. He says: “We allow organisations to move from an aggregated view on a collated analysis of what their customers are going through, while also being able to look at an individual and understand if they’re struggling with something that maybe they can be assisted with. “If you had a problem, you did something and it didn’t go through, staff can

With our system there is no need for the IT folks to try to reproduce a problem. You only see that going on in organisations that don’t use us!

information that was running between the server and the client, then start to drill down and see how it differed between the various networks and internet service providers (ISPs). “With our system there is no need for the IT folks to try to reproduce a problem. You only see that going on in organisations that don’t use us!” Morgenstern says that by providing such a comprehensive breakdown of the customer journey, all sections of staff receive ‘one digital truth’ from Glassbox. “Obviously, each one grabs their own data and the information they need, but there is one element that they all look at to solve the problem. It means financial services organisations can perfect their customer service experience. It also means businesses can break down the silos that

compensate for that. So, the ability to capture a customer’s activities on a website or app means a business can be more confident and know it is protecting itself and its customers. “Beyond that, the data that we capture for our clients is well secured, as we’re working according to the highest security and privacy standards. Data is encrypted and cannot be grabbed or manipulated by anyone. “Secondly, we allow organisations to mask the data, so some of it will not even get into the organisation and other elements will be restricted to selected staff. “Finally, we allow our clients to understand whether a user of their website or app is a real customer or a bot. A bot could be penetrating into their organisation or it could be just quoting their data, we’re seeing this happening a lot with insurance companies. So, we’re helping clients to identify those patterns of a bot’s behaviour and be able to better block them.” Looking to the future, Morgenstern says Glassbox will continue its focus on large organisations. It has built a reputation for being able to address their needs around compliance and regulations and it understands their departmental structures. “We aim to continue to grow and we're working with many financial services organisations with a view to them becoming our customers as we move forward this year,” he says. “We’re working with one of the top banks in the UK, which is about to launch robo-advice services. “They chose us to be the ones that will give evidence around that because this is a solution they have presented to the financial regulator, which is quite exciting. They've got their approval and acceptance with a combination of tighter regulation and new, advanced technologies. Robo-advice working under tighter regulation is potentially the perfect storm but we’re enabling them to move ahead, despite those two conflicting factors. “In terms of our own development, we’re focussing on two elements – expanding our mobile app solution and our automatic insight tool. One of our differentiators in the market is the fact that we have a solid solution both for mobile apps and websites on the same platform – a key requirement with mobile apps high on the agenda. “We want to enable our clients to focus on delivering a solution rather than simply identifying a problem.” Issue 9 |



Curing the risk headache Ingo Ernst and Alvaro Kurth set out to soothe risk managers’ brows with 4Stop, an end-to-end solution that promises to solve the regulatory pain points You’re running, but not you don't know where to. Danger lurks in the digital shadows. Something big and ugly – possibly a compulsory audit by the Information Commissioner’s Office – is up ahead... Keeping up with ever-changing compliance demands often feels like one of these recurring bad dreams. Not only are there a growing array of regulatory acronyms coming at risk officers thick and fast, but he or she needs to ensure the company’s response to requirements translates in all regions where they perform business, whether one country or on a global scale. And all the while a determined and increasingly sophisticated band of online criminals are making it their business to find ever-more-ingenious ways to circumvent the solutions that the business has put in place. It’s an ongoing regulatory nightmare that know your customer (KYC), compliance and risk management platform 4Stop aims to end. The company offers a complete, end-to-end compliance solution by aggregating more than 400 global premium KYC data sources and combining them with its proprietary, anti-fraud technology with real-time intelligence to provide a centralised global view of risk. Every transaction is subjected to a multitude of various different data parameters to ensure its legitimacy, as well as offering real-time anti-money laundering (AML) monitoring, customised alerts and quick filters. All of this enables 4Stop’s clients to streamline the process of submitting information to the relevant regulatory bodies in the regions in which


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they operate. It also gives them access to continually-evolving KYC data sources so that they can keep pace with requirements on a ‘plug and play’ basis through a single application programming interface (API), allowing them to future-proof their regulatory and anti-fraud requirements with zero touch on their IT department and resources. According to 4Stop co-founder and CEO Ingo Ernst, the solution enables companies to ensure they are Fourth Anti-Money Laundering Directive (4MLD) and revised Payment Services Directive (PSD2) compliant at every customer touchpoint, including sign-up, logins, account updates and transactions. It’s a platform very much for its time. According to leading research and advisory company Gartner, the

There’s always a catch-up race between industry, innovation and regulation governance risk and compliance market is projected to grow at a 13.4 per cent compound annual growth rate, to reach $7.3billion by 2020. Meanwhile, Ernst and Young’s Global Fraud Survey showed that 43 per cent of businesses thought the changing regulatory environment was their biggest threat – with the conundrum that if they focussed all their efforts on meeting the growing compliance requirements, they would no longer have a business to worry about. That’s precisely the problem 4Stop set out to solve.

It was founded by four visionaries from far-flung corners of the globe – Montreal, Germany and Latin America. All from banking backgrounds, they discovered they shared similar experience in risk and fraud management solutions, which often fell short of the challenges facing both financial institutions and businesses operating in the high-risk, high-volume financial transaction areas of gambling and foreign exchange. They decided to found the company to provide the solution they couldn’t find. “We all had to work with a lot of different providers; the idea behind 4Stop was to bring all the solutions together in one platform with a single API. Now, legislation, including PSD2 and the General Data Protection Regulation (GDPR) in Europe, are playing into that, however, but we’ve been working together in the risk management and fraud industry for quite a while. “Anti-fraud, KYC and compliance has changed from mere threshold and deposit behaviour management to being driven by more sophisticated data insight – and the sheer amount of that data has grown tenfold in the last couple of years,” says Ernst. “So, at 4Stop, we can have up to 2,000 data parameters for a single transaction. If you multiply that by millions of transactions per day or sometimes even per hour, it’s tough for global companies trying to achieve instant payments under PSD2, for instance, to stay on top.” It’s an irony that, in an era of tightening controls, open banking has potentially increased companies’ exposure to risk. And yet it’s essential that they do stay on top if they are not to make thousands of customer accounts vulnerable to fraud.

Alvaro Kurth, CRO, adds: “When organisations transact globally in real time, the potential for fraud is a lot higher because organisations don’t have the ability to thoroughly review that volume and speed of transactions. “Recently, of course, we’ve seen data breaches on an enterprise-wide scale. It’s no longer a case of them hacking one credit card. Criminals now will even use bank wires because they know it gives them access to the full set of customer data. To help our clients contend with this, we’re integrating machine learning and artificial intelligence (AI) into our technology.” The increasing threat explains why 4Stop has made a number of significant new signings recently, including Ripple, the enterprise blockchain solution for global payments, in April this year, and the MiFinity e-wallet provider. Ernst adds: “We work with clients in their vertical and regulatory framework for today, as well as looking at where they want to go tomorrow so that we can advise what they will need to comply with. We ask things like ‘do they need to do an electronic verification as part of their strong authentication?’ and ‘what kind of risk management and customer verification does their risk-based approach entail?’ “We can use the platform to look at different countries and verticals with the client and advise them that, under regulatory framework A, for example, they should verify their client in this manner, whereas under regulatory framework B there’s less emphasis on compliance, or more verification is needed. “That would normally entail working with an additional solution provider whose development queue might be backed up for the next six months, so they have to wait to expand into that new territory. 4Stop gives them confidence that they are within the regulatory framework and auditable as such.” 4Stop does this partly by forging vital links with complementary providers. “We’re a young company; we’re not claiming

we’re perfect, but we have integrated more than 400 data sources already and we’re averaging two to three new data sources with every release we make,” says Kurth. “We constantly have our ears and eyes open in the industry, finding fantastic providers that work with us, which enables us to offer very strong value to our clients.” In this way, 4Stop hopes to help firms focus on the true meaning of regulation – protecting and better serving customers. “There’s always that catch-up race between industry, innovation and regulation,” says Ernst. “The last of those might be seen as a headache by firms that ask ‘why do we now have to do all of this?’ and there’s no denying there’s an impact on business that is not positive. There’s lots of regulation to catch up on in an environment that’s moving incredibly fast. But in the long run, it’s the customer who is the focus – he or she ultimately needs to know where his or her data is going and what’s being done to it; that it’s secure and, ultimately, that they’re still in control of it. “We aim to help those companies that don’t want to change their whole business model so that it’s focussed on compliance,” says Ernst. “We allow them to continue to focus on their core strengths and expanding, while ensuring full compliance with the auditors and regulatory frameworks they are operating under, wherever they are.” So, how exactly does 4Stop

achieve that in, for example, the context of PSD2 in Europe? “PSD2 covers a lot of different areas but we focus on strong authentication, client verification and KYC,” says Ernst. That includes vetting third-party suppliers to ensure that, when onboarding their data, companies don’t bring a Trojan horse into their system. “Firms need to consistently stay on top of their clients’ behaviour within their platform, not only at sign-up but also once they start interacting and transacting” says Ernst. “This is where we bring together document-based ID checks with a live video call, address and device ID checks and much more, all based on the requirements our client needs to comply with. That’s all backed by our transaction monitoring, to be able to track client behaviour in real time and make sure anything suspicious or out-of-the-ordinary is flagged instantly. “It’s having that hybrid of all of the data and verification needed for KYC and compliance combined with multi-faceted, real-time transaction monitoring in a single, plug-in platform and API that makes us different.”

They feel your pain: 4Stop understands the headache of compliance

Issue 9 |



Thedigitalbouncers Marc Wilczek, Managing Director of Cloud-based cyber security company Link11, describes how his company has the banks’ backs covered Everyone in business these days knows someone who’s been the victim of a cyberattack. From banks to charities and even the National Health Service, distributed denial of service (DDoS) attacks – where legitimate websites are overwhelmed by fake traffic – are a growing problem that costs potentially millions of pounds to put right and could even pose a threat to national security. Apart from the impact on the economy from loss of business (and the biggest DDoS damage is done by making supply chains or internal networks unavailable), the big concern is politically motivated cyber raids, heightened by the increased vulnerabilities inherent in the Internet of Things (IoT). Just how serious a problem governments consider DDoS to be was illustrated recently by a well-publicised raid on the administrators of the site by the European law enforcement agency Europol. It led a co-ordinated effort by cyber police in six countries to shut down one of the biggest ‘attack-for-hire’ platforms, which allowed users to pay as little as €15 a month to take down selected legitimate websites and Internet users. The police claim the site had 136,000 registered users and had been responsible for four million attacks, the kind in which victims are put out of business or forced to spend money to rectify the damage. According to a Q4 2017 report by German cybercrime specialist Link11, there were 13,452 cyber attacks on organisations, 146 per day, between October and December last year alone, representing a 116 per cent increase on the same period in 2016. The total length of the attacks was also up, from 1242 to 1675 hours, with

denial of service being the main tactic. In an age of increasingly fragmented IT and the need to engage across multiple providers, the risk is becoming ever more magnified. Link11 believes the only way of preventing and deflecting attacks is Cloud-based – and it claims to have the perfect solution. Its artificial intelligence-driven Link11 DDoS mitigation software runs in the background in the Cloud – a bit like a bouncer on the digital door, identifying suspicious individuals and barring them from entry. There might not be any bone crunching involved but there’s a whole lot of data crunching. Its service even includes the option to bar an entire region or an individual IP address if either is the originator of sustained attacks or known to harbour dodgy data troublemakers. Given the heady responsibilities they carry for safeguarding customers’ financial interests, the threat to banks posed by this clandestine IT landscape, are significant. Link11 MD and COO Marc Wilczek says: “Unfortunately, there’s no simple answer to the question ‘how can financial services firms better protect themselves?’. They need to take a number of precautions to safeguard their clients and data. “They are well-placed to take a 360-degree view of their IT estate, starting with encrypting data at rest, in motion or in process. But over and beyond just encrypting data, a bank also has to make sure the parameters are safe, including firewall technology and DDoS mitigation, because that’s one of the very pressing trends that needs action, since clients want to transact around the clock." And this isn’t, necessarily, straightforward. “IT landscapes are getting far more complicated and fragmented with IT

It’s always been painful when outages have occurred, but there is now a very severe revenue impact


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systems that reside partly in public clouds, partly in a private cloud, and partly onpremises,” says Wilczek. “It’s important to take a view on the entire IT stack, from infrastructure, network and physical security to databases, middleware and applications and then build governance programmes around them.” DDoS attacks are, in his opinion, one of the biggest threats, and the stakes are rising all the time. “Because of digitisation, organisations have increased dependency on IT. It’s always been painful when outages have occurred, but there is now a very severe revenue impact. Reputation is at risk because, if services are down, things go viral at lightning speed,” he adds. “The Internet of Things (IoT), also means billions of devices are being connected to the Intranet and bad guys can abuse these devices as so-called ‘demons’ to produce an unprecedented amount of malicious internet protocol (IP) traffic that could present very severe risks for an organisation, rendering their entire IT unavailable.”

Dark forces at work What are these tech-savvy criminals’ key motivations, then? “It varies,” says Wilczek. “There are different types of stakeholders in this business. There are some hacking groups that take an action for political reasons, there are state actors increasingly involved and, unfortunately, due to the emergence of the darknet, DDoS attacks are even being offered as a service in return for Bitcoin payments. “The more the digital world and its revenues grow, the more does the underground world and economy. If you look at reports by the FBI and others, cybercrime in general is growing through the roof and DDoS attacks are just one part of that.” It makes banks particularly vulnerable,” he says. “The world is heading towards an online ecosystem that I would call the zero outage

world. It’s all about digital experience and online, real-time banking, so systems have to be available or it creates a severe business impact. “The increasing dependency on the availability of IT means that, for most organisations, 99.9 per cent availability is no longer good enough. Customers expect a seamless interaction, in real time, or they’ll simply walk away.” The impacts can be substantial when a breach does occur. “If services are down, there is an immediate revenue implication because certain digital business models no longer work if they are not available. What’s harder to judge is the reputational risk, because if services are not available for days, customers and clients will ultimately walk away and that can have very long-term impacts,” says Wilczek. “There are different studies available and some say we’re talking, on average, about $200,000 per incident, whereas others say it’s millions. What’s certain is that it’s substantial.” There are things organisations can do to help rule out that risk. “The most obvious is a DDoS mitigation solution,” Wilczek continues. “Advanced organisations these days operate in so-called multi-cloud scenarios, comprising different wide area network (WAN) connections, different telco or carrier providers, and a whole bunch of different Cloud providers comprising both private and public clouds. “We’re talking about IT that is constantly evolving and that is getting more fragmented and complex. Because of that, we recommend putting one coherent shield in place that safeguards the entire IT landscape against these cyberthreats. And, ideally, that shield should be a Cloud-based solution, so no matter what systems reside in the Cloud or on premises, the entire IT landscape is protected.

extremely slow because it means manual work has to be done and there is always that delay between the first attack and when all systems have been updated. “AI obviously doesn’t involve human interaction, it means all incoming IP traffic is being scanned instantly, 24-7, for possible abnormalities. An AI shield leverages machine-learning mechanisms, constantly evolves and responds to cyberattacks or cyberthreats in no time. We’re talking nanoseconds, as opposed to hours or even days. “It’s a fundamental gamechanger, because when translating the technicality into customer benefits, all that basically boils down to is the ability to detect malicious traffic faster than ever before. It’s the ability to respond to cyberattacks in real time.” Given the rising complexity and vast growth of data, Cloud-based systems and security offer the essential scalability that organisations need, says Wilczek. “An organisation’s IT landscape could include on-premises systems, private clouds or public clouds, or a combination of all of those. But the Cloud-based solution gives an organisation a single point of truth. It allows it to orchestrate and enforce policies across it business, irrespective of its set-up or level of fragmentation. “Our Cloud-based service is deployed across nine different data centres to deliver a service that

works around the globe and around the clock. It enables our customers to take advantage of an AI-based Cloud platform that filters all incoming IP traffic through one of our scrubbing centres, the nearest to the point of origin, to make sure only clean traffic is passed through. All of the bad stuff is filtered in the Cloud, without our customers having to worry about it. They don’t need to put people, processes or tools in place. Our customers can concentrate on growing their digital business, while we take care of safeguarding it.”

Shielded from the worst “DDoS attacks are getting more complicated and the bad guys out there are pretty creative. Artificial intelligence (AI) makes a fundamental difference to preventing attacks. In the old days, most other players used patterns to detect malicious traffic, but patterns are

Not welcome: The Link11 system bars entry to the bad guys

Issue 9 |



A Sterling effort! The last thing you want when absorbing legacy systems during an acquisition is to upset the very customers you’ve invested a fortune in acquiring. Jesse Honigberg, Chief Digital Officer, and Bruce Schilder, Project Manager, at Sterling National Bank, explain how Backbase helped “I don’t know what banking will look like in 2020, much less 2030,” says Jesse Honigberg, chief digital officer at Sterling National Bank. “But what I do know is my job at the bank is to set ourselves up to respond to client needs over that time horizon. If I’m with Sterling in 2030, I want to make sure that I can look back and say ‘we made foundational decisions in 2017 that allowed us to respond nimbly’. I think Backbase was one of those decisions.” The bank adopted the Backbase omnichannel banking platform, which allows data and functionality from traditional core systems, like Sterling’s, to be combined with new, innovative players in fintech. Hosted on site or in the Cloud, it’s modular, based on user experience ‘building blocks’ – in Sterling’s case, it’s used it for front-end user experience – and, importantly, it can be integrated without the organisation and its customers missing a beat. The platform allowed Sterling to deliver on its pledge that ‘our problems are not your problems’, ensuring clients are never affected by system changes. And, one year on, it’s more than paid for itself. One of the Forbes 100 best banks in America, Sterling has climbed five places in the rankings since last year, to number 31. Already one of the strongest US regional banks, it now has more than $30billion in assets and a growing footprint in its home patch of New York City metropolitan area after completing a merger with Astoria Bank in 2017. Honigberg, who has been with the bank for 15 years, has witnessed several such acquisitions and the trauma that can come with them. “You acquire them for the good and, candidly, you inherit the bad,” he says.


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“You try to figure out how to make the most out of all those legacy investments but keep the client experience that drove clients to that platform in the first place. And then you ask is it worth modernising?’ and ‘can you get rid of it?’ “One of the reasons why we made the decision to go with Backbase was this acquisition strategy and to answer the question ‘how do we insulate our clients from all the changes that happen when you acquire other banks?’.” Sterling is implementing Backbase with a variety of partners and different elements of an ecosystem that the bank built during its transformation towards becoming a digital business and an agile organisation. The beauty of the Backbase product is it allows for infinite flexibility and a huge degree of future-proofing. “Backbase is part of our front-end user experience but we’re integrating an enterprise service bus (ESB) that’s not Backbase to give us maximum flexibility in the future,” says Honigberg. “The challenge was how to build a single services layer, so if we need to get back to cores, we’re able to have one, two, three or any number of them running on the back end? We’ve had a great partnership with Microsoft and we really believed it was important to put the Backbase platform on a public Cloud for scale. So, we told Microsoft ‘this is going to be a hard journey, but let’s ‘dockerise’ Azure and let’s put Backbase on it. But then let’s use Azure active directory federation services (ADFS) and Azure business-to-consumer identity management rather than the Backbase ID management components’.” As the man with his finger on the bank’s digital pulse, it’s a question of keeping all his options open.

“It’s about building an abstracted architecture, where you’re able to say that any one component is swappable. No one tells us ‘this is our roadmap’. We own that. Ultimately, the accountability is ours. And it’s us who need to be able to go back to our clients, in the event that there’s some major issue, and say ‘we can move out of this in a fairly reasonable timeline’. The key is to make sure that this entire stack is flexible and that it has best-of-breed components, as opposed to best-of-suite components. Backbase, we think, is best-of-breed for the user experience (UX) layer with its ability to deliver an engaging platform for our clients, with real features and functionalities that matter.” The bank has other strong technology relationships – with Microsoft, Fiserv and FIS. The aim is to make them all engage while allowing them individually to focus on what each does best. The

Good fit: Backbase plugged easily into Sterling’s platform

bank believes that way it will deliver the ultimate customer experience. “One core is heavily customised for commercial, one for retail. We have chosen Fiserv as our core provider, which is the legacy Sterling core, whereas Astoria Bank, our recent acquisition, is on FIS, so we stuck with Fiserv. The way that Backbase integrates with both is through single sign-on. Not to the core, but to the legacy online banking platforms. Theoretically, we could plug Backbase into both cores, although it doesn’t make financial sense,” says Bruce Schilder, who works with Honigberg as a project manager.

“I think it’s a long-term vision to say ‘we’re going to get deep data and insights into our clients and be able to make them actionable’. But, from a more practical standpoint, in the next 24 months, I’d really love to say we’re making these investments so that a client can come to Sterling and have a single place to get everything done that they need to, to get there quickly and simply, and for us to respond nimbly to their request.” Honigberg says the longer-term vision is to use data and personalisation as an integral part of how Sterling improves its ongoing service. “We think the elements of Backbase, and of the rest of the stack, allow us to do rich data collection. And to provide

actionable experiences is incredibly important, but if I were being more practical, clients want reliability and consistency, and they want honesty in our brand, in our interactions. That’s what we’re trying to focus on – how do we build that honesty and that consistency?” says Honigberg. Schilder, who has a focus on client experience, agrees, saying that there is a direct correlation between the bank’s technology and the net promoter – or customer satisfaction – score. “If you remove high-touch processes that are very emotional to a client, your net promoter score will actually go down because technology is expected to be at 100 per cent, all day, every day,” he says. “In a human interaction, there’s the human factor; they understand their mistakes. There’s no trying your best with technology –either it’s on or it’s off, it’s good or it’s bad. “In a human interaction – whether it’s a sales or a service – you can really show that you care, face-to-face, and that’s what drives your net promoter score up. So, when you drive towards digital, you need to do that very thoughtfully and not take away these in-person interactions, at the same time as adding new technology. So, it’s really a fine balance.” Honigberg says the next two years will be focussed on improving the bank’s learning around how to treat the customer and creating a simple and seamless experience. “We want to make sure that the experience is engaging and meaningful, and customisable. I wouldn’t want the customers to have to go to six different places to get one thing done,” he says. For Schilder, Backbase provides exactly the right toolkit to deliver on its digital goals but he also sees its client service as a selling point. He says: “They are the lever to help you compete with the larger banks without spending $100million a year or spending five years building some digital strategy that, once you launch, is irrelevant.”

One of the reasons we made the decision to go with Backbase was to answer the question ‘how do we insulate our clients from all the changes that happen when you acquire other banks?’

Issue 9 |



Not now!: Timing is just one piece of the equation if you want positive engagement

The rules of engagement AI is helping banks connect with customers by improving their understanding of how best – and when – to approach them. Michael Stojda, President and CEO of Exagens, discusses human behaviour and the science of building fruitful digital relationships Money for nothing. That was the unlikely proposition offered by the Montreal-based fintech company Exagens when it ran a psychological experiment at several trade shows. There was no trick, no catch: all you had to do was take a cash gift from a table outside Exagens’ booth. A sign invited you to step up and pocket $5 from a stack of bills, with no expectation of anything in return. Despite such a seemingly irresistible offer, there were hardly any takers. Why should this be? The answer lies at the heart of Exagens’ business. Part technology specialist, part behavioural and psychology expert, Exagens is a new type of software development organisation that is mining the potential of artificial intelligence (AI) and machine learning. In doing so it’s marrying digital banking with the more bespoke and personal approach that’s


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familiar to traditional banking. Exagens CEO and president Michael Stojda explains the significance of the unwanted windfall: “In many ways the response mirrored the experience a bank might go through when it tries to sell its products. When I look at the rates of engagement and conversion, they’re remarkably similar.” What Exagens had highlighted was our natural caution, if not suspicion, when confronted with something that looks too good to be true or is unclear. Wary of what we don’t fully understand, we’re very likely to look a gift horse in the mouth and walk away. When people saw the sign for free cash, they couldn’t process what they were seeing. And because they couldn’t process it, they wouldn’t accept it. The lesson for Stojda was that because people need to feel comfortable with communication and

relate to the message and the messenger, they will resist banking information that is out of register. “People will look at marketing information and consider it,” says Stojda, “but always through their own lens, their own set of cognitive biases and traits. When we asked people why they hadn’t taken the free money, they replied that it couldn’t be that easy, it couldn’t be genuine. They thought it was a marketing ruse and they’d have to talk to someone, or do something, to keep the cash. In other words, best avoid it.” Stojda says that this logic holds true in the banking context and he gives the example of a credit card banner advert that includes a special offer, implying that the bank is giving away money. “We’ve all received this type of offer,” he says. “You’re invited to sign up for a card and get so many thousand bonus points.

Or, if you open a new bank account, you may be promised a couple of hundred dollars if you keep the account for a certain period. “Even though conversion rates have improved as a result of better targeting and better segmenting, we’re seeing that most campaigns are still failing 85 per cent of the time or more.” Stojda believes that proper customer engagement is the route to improved conversion. If someone physically comes into a bank, the advisors can have a detailed discussion, explore the customer’s needs more fully, overcome any reservations, and structure the conversation so that it’s in the best interests of both parties. But that can be challenging to do in the digital world. The trade show experiment corroborated what Exagens had learned from other research. “It’s not just about having the right product for someone,” says Stojda. “There’s been a lot of industry focus on analytics, but it’s not easy to figure out customer behaviour and what leads to successful conversions. The crux is timing and context. It’s about all sorts of contextual and cognitive values.” By digging deeper, banks can discover the friction points, why people are not receptive to certain messages, and what the triggers are for fruitful engagement. This is where Exagens’ white-label AI comes in comes in, helping to bridge the gaps and build stronger and more meaningful relationships between banks and their customers. The Exagens’ agent is a virtual personal financial assistant that creates the right context for a conversation. It has four million users across Canada and can be deployed as part of an online web or mobile platform. The digital agent guides customers through what Stojda calls ‘specific, curated experiences’, with the goal of providing general assistance, tips, and specific advice where appropriate. Above all, the aim is to get customers to adopt particular products and services.

Engaged assistance Exagens’ technology delivers many of the same services that you would expect from a traditional in-branch advisor, except that everything is digital and available 24-hours-a-day, seven-days-a-week. Stojda points out that the human touch

will always be valuable, but the advantage is that you have an on-demand service with the insights and benefits of human interaction. He’s keen to point out that Exagens’ digital assistant is far more sophisticated and versatile than chatbots, which are limited to binary conversations and don’t have real intelligence or an intuitive approach. “We have great programmers,” says Stojda, “as well as specialists with backgrounds in artificial intelligence, machine learning, behavioural economists and psychologists. We focus on human nature, unravelling what makes people choose one course of action over another. We’re replicating human behaviour and the knowledge and insights that develop from real, intelligent conversations.” The results of this customer focus can be seen in one of Exagens’ flagship projects, for the largest financial cooperative in North America, Desjardins. Here, the Exagens white-labelled digital assistant guides people through opening a high-interest savings account, and it was responsible for bringing in 50,000 new accounts with nearly $500-million in deposits.

There’s been a lot of industry focus on analytics, but it’s not easy to figure out customer behaviour and what leads to successful conversions What makes the digital assistant stand out is that it proactively engages with customers, based on their requirements and circumstances. Whereas traditional marketing campaigns run on specific cycles, Exagens’ technology provides awareness and advice linked to individual needs and moments of intent when a suitable product might be timely. “It’s a form of personalised engagement that’s not bound by rigid campaigns with a defined start and end period,” says Stojda. “We guide people to take specific actions at times that are of mutual benefit for the customer and for the bank.”

As the relationship develops, acceptance rates increase. While Stojda says that initial acceptance is typically around seven per cent, it can grow steeply once trust is established and a rapport is built with the customer, just as it might through regular face-to-face contact. After five engagements with the digital assistant, Stojda says acceptance rates can rise to more than 50 per cent. As the digital counterpart of an in-branch advisor, the assistant wins the loyalty of customers through frequent and helpful contact. It learns about customers individually, creating a personal profile, and each engagement then becomes more relevant and instructive. And it’s not just a tool for the retail environment; the assistant can be, and has been, deployed for commercial customers, too. According to Stojda, small businesses tend to be underserviced digitally by banks, leaving many owners frustrated. Exagens therefore has a growing role in the SME marketplace, where Stojda says it can deploy rapidly and easily. In particular, he says that Exagens technology is useful to companies that don’t have a dedicated chief financial officer (CFO). Such companies are more focussed on running the day-to-day business, rather than the finances, so would welcome a digital financial assistant. And, as Stodja says, a bank that provides this kind of service – almost an outsourced CFO – has a good chance of establishing a long-term relationship as that company grows. Exagens has been concentrating on building business with a handful of banks and refining the product. ‘Stealthy’ is the word Stojda uses to characterise progress so far. However, if it’s been a deliberately low-profile rise for this innovative technology, the results are already very public. What’s more, the demand for digital advisors, as opposed to chatbots, is sure to expand. Now that high-street branches with flesh-and-blood staff are fast disappearing, customers expect to be guided in other ways. FAQs only touch the surface and call centres are expensive and can’t address all customers effectively. In the absence of direct human contact, dedicated digital advisors, powered by AI and machine learning, are a compelling substitute. Issue 9 |



You’llneverbankalone alone Nathalie Larue, Executive Vice-President of Strategy, Marketing and Personal Services at Canada’s Desjardins Group, explains why we could all do with a digital friend It’s 2008 and you’re getting ready for your annual financial advice meeting with the bank. You arrive at the branch in good time. In your hand is a folder containing the previous year’s bank statements. You take a seat in a small booth and await the arrival of your personal financial advisor. Obligatory small talk out of the way, you slide your folder across to them, certain that your impeccable filing system will earn you a gold star off the bat. The advisor opens the folder, takes a cursory glance at the statement on top, then pulls a sheet from a large stack next to them. ‘Our best savings account ever, just for you!’ it r eads. With that, the advisor gets up to refill their coffee. Fast forward to 2018, and you’re logging on to your bank online to make a

quick transaction for a utility bill. As you receive confirmation of the transaction, a message appears at the bottom of your screen. ‘Hey, you’re regularly paying a few different bills. Did you know there’s a pre-payment transaction type that we offer in our mobile app? I can help you to set one up, if you like?’ You sit back, take a sip of your coffee, and relax as your digital banking assistant does the rest. “We’ve built into our channels a digital personal assistant that will identify the right financial products for you,” says Nathalie Larue, Executive Vice-President of Strategy, Marketing and Personal Services at Desjardins Group. “This technology automatically analyses your patterns, behaviours and information to give you advice that, in the past, would have necessitated

a lengthy meeting with a dedicated advisor. We’re seeing fewer and fewer of these types of appointments taking place, and therefore needed to find a way to establish a digital relationship with our clients that can still offer the same level of personalised financial advice. Our digital personal assistant is the perfect solution in a world where people do their banking 24-7,” she says.

Designed to attract Based in Quebec, Desjardins is one of the biggest cooperative financial institutions in North America, having served the Canadian population for more than 100 years. As a cooperative, the bank is technically owned by its members, and can in

Digital friends: They have your best interests at heart


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turn sell its wide range of products and services to them. However, marketing these products to its clients is proving to be trickier than ever. According to Exagens (the company that provides the software for Desjardins’ digital personal assistant) the average conversion rate for offers made through a digital channel is just four per cent, despite banks consistently investing millions in new customer relationship management (CRM) technologies. But Desjardins is confident that with Exagens’ sophisticated artificial intelligence (AI) it will be able to buck this trend of lousy conversion rates. Exagens’ white-label digital personal assistant can deliver the behavioural banking solutions that have so far been missing from digital channels. “The key is to not engage in the sort of speculative cross-selling that only benefits the company,” says Larue. “That’s where digital channels have failed previously. Our digital personal assistant won’t make suggestions every five minutes or even every day. It’ll only deliver advice when it recognises an opportunity that corresponds with the client’s behaviour and information. “It can be lonely in the digital world,” she says, “but when you’re in the Desjardins digital world, you’ll always be in contact with somebody that is proactively trying to give you the best advice for your situation.” The digital personal assistant isn’t Desjardins’ first foray into artificial intelligence (AI). In 2013, the

cooperative’s insurance division launched Ajusto, a piece of AI software designed to improve its customers’ driving habits. After using Ajusto for just a few months, a driver received a score that, if positive, lowered the cost of his/her policy. In a survey in October 2017, 75 per cent of respondents claimed that Ajusto had helped them to improve their driving and 76 per cent said they feel that the software is beneficial to general road safety. Since its launch, Ajusto users have saved an average of 10 per cent on their car insurance premiums, making the service advantageous, both in terms of wallet and welfare. Desjardins’ AI effort to combat the problem of digital loneliness is already proving to be equally fruitful, although this time it’s the marketing department that are reaping the rewards. “We recently launched a new high rate savings account and saw this as a perfect opportunity to test the effectiveness of our digital personal assistant,” says Larue. “Let’s say you had a lot of money in your existing savings account but it wasn’t delivering much in the way of interest. This would prompt our assistant to say,‘hey, with that much money in your account you’d benefit a great deal from our high interest savings account’. More than 37,000 customers opened one of our new high savings accounts once it was proposed by our assistant, and since then more than $300million has been transferred into these accounts. “In my long experience in strategy and marketing, I have never witnessed such an impressive conversion rate within a digital channel,” she says. “I ca n assure you that, without the use of AI, we would never have hit these figures so rapidly. This goes to show just how vital these new technologies will prove to be when launching new products and also demonstrates their potential to make a significant impact on customer behaviour.” Considering the immediate success of its digital personal assistant, it should come as no surprise that Desjardins is prioritising the development of AI technology in its investment strategy. In fact, at the end of last year, the company established a

financial technology investment fund in unison with La Caisse de dépôt et placement du Québec as a means of supercharging the growth and development of new fintech firms, such as Exagens, across Quebec and Canada as a whole. “Both Desjardins and La Caisse de dépôt have invested equal amounts to make a joint total of $50million and other investors are free to join to help the fund reach its limit of $75million,” says Larue. “Alongside the obvious financial benefits, the fund is designed to bring people together from across the Canadian economy in order to devise innovative technological solutions to specific problems.”

Opening the door to fintech In addition to providing a healthy investment fund, Desjardins is also literally opening its doors to fresh-faced fintechs. As part of an initiative called Desjardins Lab, the cooperative has invited select firms to become ‘startups in residence’, providing them with office space and access to mentoring and other services. It’s not an investment deal and there are no restrictions on who the fintech can do business with; the goal is simply to equip startups with Desjardins’ knowledge as an established institution and in turn for it to receive unprecedented access to new ideas and developments. “Our overarching goal is to strengthen the digital relationship that we have with our clients,” says Larue. “Right now, we’re making sure that we choose to work with businesses that can help us to deliver solutions that put the customer at the heart of the proposition. These solutions make people feel special and recognised, and that’s the best way to support and maintain long-term relationships with them. The digital transformation provided by companies like Exagens is exactly what we need to achieve our goal and we look forward to working with many more fintechs in the future.” Just as Desjardins has invited in fintechs, it’s hoping more consumers will welcome a little digital assistant onto their laptop. And, if they do, they’ll never bank alone again.

The key is to not engage in the sort of speculative cross-selling that only benefits the company

Issue 9 |



Cashless societies: Fact and fiction Reports of the death of cash have been much exaggerated, says Ron Delnevo, European Executive Director at the ATMIA. In this whistle-stop world tour, he sets out to prove it

As a fairly seasoned international traveller, as well as a keen observer of all things payments, I have significant first-hand experience of the cashless society propaganda machine spinning its fiction ever-faster, world-wide in an effort to make it reality. Some of the propaganda is aimed at convincing us, the continuing users of cash, that the end of our old-fashioned world is nigh. The implication is that we need to leap aboard the Good Ship Cashless, or we will be left stranded in a dark place, where all hope is gone and the sun will never shine again. Another element of the propaganda is around trying to persuade us that only criminals use cash, implying that those who prefer fiat currency are soon likely to be behind bars – and not the type that offer fancy cocktails. The final thrust of this propaganda extols the virtue of us having a common sense approach to cost. Cash costs too much, we are constantly informed. Silly, old, empty-headed us, wanting to continue to use cash, when costs must be reduced for the sake of all. In this article, I will rip apart these cashless


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propagandists and expose their nonsense for what it is: big budget fiction. TAKE SWEDEN Almost every article I read or presentation I listen to about Swedish payments blasts out the message that it is difficult to use cash in Sweden because so many shops and restaurants now refuse to accept the world’s longest-established payment method. FICTION On a recent visit to Stockholm, I used cash for every purchase I made and never saw a sign proclaiming that cash would not be accepted. Underlining this is a recent report from Niklas Arvidsson, a respected Nordic researcher, which revealed that 97 per cent of Swedish businesses still accept cash for payment. TAKE CHINA The world’s media is crammed full of reports that Alipay and WeChat Pay are now so powerful in China that cash is often refused, even in street markets. FICTION On a recent visit to China, I used cash everywhere without the slightest difficulty. It was never refused, including by beggars, who seemed not to have the handheld terminals I had read about in

magazines. Mobile payment methods are popular in China – but they are a long way off being as popular as cash. TAKE INDIA The government, led by Prime Minister Modi, told us that much of the currency held as a store of value in India was in the hands of criminals and tax evaders. When the country’s highest value bank notes were recalled by the country’s Central Bank, the world was led to expect that a high percentage would not be redeemed, because the felons and tax dodgers would not dare to return their ill-gotten gains to the bank. FICTION According to reports, around 99 per cent of all old bank notes have been returned to the Indian Central Bank. Those holding cash in India were overwhelmingly people like us, sharing our uncertainty about the future, keeping a reserve of cash in case of an unforeseen crisis. In Europe, we would call it saving for a rainy day. Mr Modi certainly created a rainy day with his ill-conceived demonetisation. In fact, he visited a monsoon of misery on the honest, decent people of India whose only ‘crime’ it seems is to trust cash more than they trust their Prime Minister.

Not dead yet: But plenty are willing to dance on the grave of cash

Ironically, the unintended consequence of demonetisation has been to make most Indians even less trustful of their leaders. The Indian Central Bank is now having to print vast quantities of new bank notes to meet increased demand from those who use it as an emergency store of value. They are trying to ensure that they will never again be caught out by the games politicians play. TAKE THE UK The anti-cash vested interests are continually telling us that cash is too expensive to process. This nonsense was one of the justifications given by then London Mayor Boris Johnson and Transport for London, for ceasing to accept cash on buses as payment for fares. By the way, the other reason given was security, i.e. it was too dangerous for bus drivers to accept cash. Once again, complete rubbish. Cash continues to be accepted on buses for fares in Los Angeles – a city where gun crime is a significant problem. Are they saying is London is more dangerous than Los Angeles? Anyway, back to the high cost of cash. FICTION Every year or so, the British

Retail Consortium, the trade association representing 80 per cent of the UK’s major retailers, produces the results of its survey of the total cost to its members of processing cash payments – and every year, cash is acknowledged as the cheapest payment method for retailers to process. TAKE KENYA Kenya has M-Pesa, a mobile phone-based money transfer, financing and microfinancing service, introduced in 2007. M-Pesa is now used by more than 17 million adults – more than two-thirds of the adult population – and, reportedly, accounts for more than 25 per cent of the country’s gross national product. So, cash is clearly under threat from mobile innovation? FICTION Many M-Pesa users simply use the system to withdraw cash from the network of agents – mostly small retailers – the company has recruited around the country. Used in this way, M-Pesa is really a form of cashback and works very conveniently in thousands of communities in Kenya. Problems can arise, of course, if the shops do not have enough cash to service demand, but there are not many reports of this being a serious issue. As for M-Pesa creating an economic

Mr Modi visited a monsoon of misery on the honest, decent people of India whose only ‘crime’ is to trust cash more than they trust their Prime Minister ‘miracle’ in Kenya, as is sometimes claimed, unemployment figures do not support this analysis. In 2008, one year after M-Pesa was launched, Kenya’s unemployment rate stood at 11.24 per cent. It then increased and did not become lower than the 2008 level until 2016. As miracles go, it’s not startling. However, there is absolutely no doubt that M-Pesa has been an excellent new product. Its role in allowing easier access to cash is a perfect illustration of how radical technological innovation can mesh with established technology

to improve services to the public. Millions of Kenyans would happily testify as to how their lives have changed for the better since M-Pesa was introduced. TAKE THE WORLD Marketing by the huge international card schemes focusses on the death of cash. Card schemes spend hundreds of millions of dollars each year on advertising with basically the same storyline: the king is dead – long live cards! FICTION Cash is used for around 85 per cent of payments made on the planet. There are, of course, wide variations, but those nations claimed (erroneously) by some to be nearly cashless, such as Sweden, usually have tiny populations. There is no country with a population of more than 15 million that is anywhere close to being cashless. Given that plastic payment cards were first introduced in 1950 – long before the first ATM – the combined marketing efforts of card schemes could be characterised as having been abject failures. In fact, to spend 58 years and billions of dollars promoting cards to have a 15 per cent or lower market share might be described as quite a dismal performance. Anyway, that concludes for now my world tour, aimed at refuting the fictions of the anti-cash brigade. There are many more examples that I could have given but I am sure you have already grasped my direction of travel. However, there is a proviso I must make clear. While cash is not dead, there is no doubt that the card scheme marketing budgets, which are now largely promoting the ‘magic’ of contactless cards, are beginning to make more of an impact. Many of us are being won over by hype, such as, for example, that security is not an issue – they tell us that fraud costs will be met by card schemes and don’t worry, you won’t spend more than you can afford, and so on and so on… Cash as a payment method hasn’t needed any marketing support for 2,700 years – but it does now. Those who support cash must no longer be the silent majority. We must shout out our support from the rooftops – and make sure that we are not ignored. With the support of all of us, cash will be around for another 2,700 years. Let us make sure it is. Issue 9 |



There’s something about Emma OCBC Bank knows what it takes to build digital relationships. SVP Pranav Seth discusses chatbot chemistry, customer experience and how to unlock data Success in today’s digital world requires a new set of skills and a clear strategy to gather data and then analyse and apply it in the most effective ways. If that much now seems obvious, and all businesses are aware of the need to get creative with data and analytics, not all banks are progressing at the same rate. While some are moving swiftly and confidently, others are still in the slow lane. Not OCBC Bank – or Oversea-Chinese Banking Corporation Limited, to give it its full name. Operating in more than 18 countries and territories, the bank is the second largest financial services group in Southeast Asia by assets and has a well-deserved reputation as a slick digital operator. On top of that, it’s one of the world’s most highly-rated banks and is consistently ranked among the safest. The bank is active in a wide range of sectors, including consumer, corporate, investment, insurance and asset management. Pranav Seth, the bank’s SVP, head of e-business, business transformation and the fintech and innovation group, emphasises the need to remain digitally ‘relevant’ across all sectors and deliver the digital ‘oomph’ and sophistication that customers now expect. That means being very selective about how technology and data are used to improve the customer experience. Seth believes that banks are better at this than many would have us believe and that OCBC is transforming successfully because of the right technology support and focus. “The popular press and the Silicon Valley visionaries like to say that banks are dead or dying,” says Seth. “They say that startups will conquer the world, but remember that banks have an advantage: we might not be able to produce ideas at the same speed and execute them quickly, but we have


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scale and we know how to extract commercial and customer value.” That puts OCBC very much in the ‘let’s work with startups’ camp, says Seth. “For us, it’s always been a case of working with whoever has the best ideas, the best approach, and then bringing those ideas to life in our markets.” Seth says that OCBC Bank has probably the largest number of successful partnerships in Southeast Asia. As an example, he cites a recent anti-money laundering (AML) project with Israeli fintech firm, ThetaRay. The project focusses on artificial intelligence (AI) and machine learning to handle transaction data and combat financial crime. Early results show that the technology can reduce by 35 per cent the number of alerts that do not require further review, relieving pressure on the AML team

We gave Emma a certain je ne sais quoi. People were flirting with her, so we ensured she could flirt back engaged in manually inspecting flagged transactions. The technology is also effective at categorising such transactions by their risk levels, thus improving accuracy in identifying suspicious transactions. OCBC Bank is no newcomer to digital transformation, as Seth confirms. “We began this journey around 15 years ago. Most of our marketing is analytics-based and draws on customer information that we collect from our insurance arm, our stockbroking activities and right across all the banking products. So, it covers all the credit cards and all the transactions. We’re

pretty advanced in the way we segment and connect with our customers.” Seth underlines the need to capitalise on machine learning. “We need more machine learning tools and better machine learning approaches, so we can get into credit conversations, be more predictive about credit and, of course, concentrate on anti-money laundering and know your customer. Everything we do should be directed at improving the customer experience and the crux is to find true value in today’s data deluge.” Seth adds that, in addition to refining existing services, you can create new ones for customers when you unlock the value of data. A good example is OCBC Bank’s ‘money insights’ initiative, launched in 2011. Seth is reluctant to call it personal finance management (PFM), which he says means taking a PFM tool and delivering it to the customer. Instead, the goal here is to take the customer’s data and create what he calls ‘ah ha! insights’ into their personal financial data. Seth confesses that his personal ‘ah ha!’ moment came when he made the sobering discovery that he was spending rather a lot on beer. One customer service that characterises OCBC bank is its development of chatbots. Seth claims that It is probably the first bank to create a commercially successful chatbot and that the trick to ensure the technology resonates with customers is to be very specific about meeting customer needs and expectations. “For chatbots to be effective,” says Seth, “they must have a very precise and controlled focus. If you try to cover too much ground, the artificial intelligence becomes vague and less useful. We narrow down the use case and make sure we hit the target.”

The perfect demonstration of this is Emma, the home loans chatbot with a persuasive personality and a winning way with customers. Emma was created because customers were not reading the FAQs on the home loans page, which resulted in poor lead generation. Emma has handled many thousands of enquiries since its launch in January 2018 and, according to Seth, at the last count she has helped to secure about $100million in loans. “We gave Emma a certain je ne sais quoi,” says Seth, “because a fun element helps to engage people. We actually found that people were flirting with her, so we ensured she could flirt back – in an entirely proper way, naturally. “The main thing with chatbots is to make sure they continue to learn and adapt. From the moment we introduced Emma, the technology has been evolving and improving.

We are exploring possibilities elsewhere, and we are learning from all the data, from all the conversations and this information is being fed back into the system.” Seth sees a big future for bots, so long as they are used correctly. “I think of them as internal knowledge bases, internal agents, which understand all the rules better than anyone else. Whether it’s voice-enabled or text-based, it can be done very effectively for a wide range of niche areas, such as retirement planning or planning your children’s education.” Again, it’s all about narrowing down the focus. I don’t think customers are ready for fully-fledged financial portfolio planning, but if you’re talking about things like

The thinking woman's chatbot: Emma was deployed in home loans

buying a house, that’s definitely bot territory,” says Seth. OCBC Bank is good at inspiring confidence and trust – and not just in the hands of Emma. Safety and risk management are priorities for the bank, and Seth says the aim is always to ‘stay ahead of the bad guys’. This is where fintech partnerships are helping the bank to experiment with new technology. In addition to the anti-money laundering project with its Israeli partner, OCBC Bank is exploring many artificial intelligence initiatives to increase security. Here, again, the bank applies the same rigorous focus. “The key is not to waste a lot of time theorising,” says Seth. “We select partners that, we believe, have the right stuff, the right team, the right background, and we experiment in a very purposeful way. We have a dedicated sandbox and we can get busy and productive very quickly. If any fintech startups have a great idea, they’ll find we’re easy people to deal with.” This commitment to the future is shown in another way. It’s not just customers and fintech partners that receive special attention: OCBC Bank is totally committed to its staff and the digital expertise and knowledge that they will need to further their careers. The bank recently announced an enterprising programme to develop digital skills in all 29,000 of its employees. It’s investing $20million in a Future Smart Programme, with staff receiving training under seven ‘pillars’: digital business models and ecosystems; technology and data; customer-centricity; new risks; marketing and communications; the way we work; leadership in the future world. All businesses now talk about improving customer journeys, how to use the latest technology and the best data to stay relevant. OCBC Bank is doing this in a very conscious way, for all its audiences. As Seth says: “We want to make sure that our brand and personality, come out strongly. We don’t want to be an invisible bank, a bland bank.” Thanks to initiatives such as Emma, it’s anything but.

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Tackling branch transformation head on RBR’s Branch Transformation 2018 conference helps address one of the biggest challenges for banks worldwide, as Conference Operations Manager Emily Beeby explains The closure of bank branches is, arguably, the most sensitive issue that retail banks face today. Despite declining footfall, there is an outcry from customers, the media and government whenever a bank announces one. Branches still play a critical role in banks’ channel strategies – the challenge is how to efficiently operate a network that delivers the maximum possible value for customers. This is where strategic research and consultancy firm, RBR’s, annual Branch Transformation conference fits in. Fintech Finance met the latest recruit to RBR’s conferences team, Emily Beeby, to discuss her new role and ask how banks are addressing the branch transformation opportunity. FINTECH FINANCE: Tell us a little about yourself and your new role, Emily. EMILY BEEBY: I worked as a research analyst at RBR for four years. My background is in languages – I speak fluent French and Russian – and my research work allowed me to use these, while building industry knowledge of the banking automation, cards and payments sectors. I have become more involved in RBR’s conferences over time; I have organised several conference speaker agendas and I recently joined the conferences team full-time as a conference operations manager. I make sure that everything runs smoothly for our sponsors and exhibitors, as well as liaising with our venues and suppliers, writing marketing copy and managing our conference apps. I am

currently managing the agenda for our Branch Transformation 2018 conference, for which we already have a high-quality speaker line-up confirmed. FF: Your Branch Transformation 2018 conference is coming up in November. Why is it such an important topic? EB: Banks in many countries are facing the same issues: transaction volumes within branches are declining as customers embrace digital channels, and cash and cheque volumes are falling as a proportion of the payments mix. At the same time, branch overheads, such as site rental and human resources costs, are increasing, putting a squeeze on the current branch banking model. Branch transformation is a response to this challenge, which addresses how to deliver more through the branch network but at a lower cost. FF: Why can’t banks just close their branches? EB: This is the paradox. Although transaction volumes may be falling, customers still want to see their bank on the high street. For some customers, this is because physical representation is key to trust in the brand. Many consumers are not yet willing

to put their faith – and their money – in the hands of a digital-only bank. For others, it is because there are key ‘life moment’ conversations that can only take place in the face-to-face environment that the branch provides. This might include a first-time buyer’s mortgage application, or a startup loan for a new business. Closing branches also risks alienating the customer segments who still wish to do their banking via a teller. Branch closures are not just viewed negatively by many customers but can also directly lead to customer attrition. FF: Isn’t it simply about adding customer-facing technologies? EB: Not at all. Branch transformation doesn’t always have to involve purely physical changes; although many branch transformation projects involve the incorporation of the latest technology, such as geolocation beacons, artificial intelligence or biometric identification, others adopt a much more subtle approach. Enhanced analysis of customer data can allow for targeted sales and marketing, for example. Empowered and properly utilised staff can be a transformative force, too, and often the most successful branch transformation programmes are built from staff culture upwards. In many cases, it is a question of improving the customer experience. FF: Are you able to share some of the highlights from the agenda for Branch Transformation 2018? EB: We are extremely excited about this year’s line-up already. We have confirmed

Who walks to their bank? But customers still want branches


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speakers from leading institutions from across Europe and North America, including Lloyds Banking Group, UniCredit, HSBC, ING, Citigroup, Bank Millennium, RBS Group, Scotiabank, Eurobank and Umpqua Bank. Among the topics for discussion will be the interplay between human engagement and digital technologies within the branch, how best to leverage behavioural analytics, resource optimisation through technology and omnichannel banking. FF: What types of organisation attend Branch Transformation? EB: There were 574 delegates from 50 countries at last year’s conference, so it is very much a global event. Retail banks make up the biggest audience share, which also contains a mix of hardware, software and services

suppliers, design firms, professional services companies and numerous others. FF: How can people get involved? EB: Branch Transformation 2018 takes place on November 27 and 28 in London. We do have a few slots left on the speaker agenda reserved for branch transformation case studies – if anyone has recently completed a project, or is currently working on one, I would be delighted to hear from them ( For enquiries about our range of sponsorship and exhibition opportunities, interested parties should contact my colleague Amanda Hardy (amanda.hardy@rbrlondon. com) as soon as possible as we do not have many spaces left! Finally, if Fintech Finance readers would like to attend the conference, I would invite them to visit our website at FF: What other events do you have coming up and what will visitors get from them? EB: There are a few things that set RBR’s conferences apart.

Firstly, RBR’s research insights feed into our conference speaker programmes – our subject matter expertise helps us identify topics that will bring the most value to our audience. Additionally, our conferences are extremely well attended by banks, many of whom participate in RBR’s research. Other forthcoming conferences are ATM & Cyber Security 2018 on October 9 and 10, also in London, while our next overseas conference will be Self-Service Banking Asia 2019, which we are hosting in Bangkok on April 3 and 4. After that we return to London for Self-Service Banking Europe 2019 on May 21 and 22, 2019. It’s a busy calendar!

Empowered and properly utilised staff can be a transformative force... often the most successful branch transformation programmes are built from staff culture upwards

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We’re familiar with AI improving customer experience (CX), but applying it to employee experience (EX) could substantially boost wealth managers’ productivity, says Tomasz Czech, Business Solutions Manager at Comarch Growing revenue isn’t about hiring more relationship managers. The point is to improve sales and customer service productivity while keeping costs in check. Easier said than done? AI can be of help.

According to a recent PwC Global Artificial Intelligence Study, the biggest labour productivity gains are achieved by business employing dedicated AI technologies. What is more, the study says wealth management services are in the top three sectors where there is the largest impact potential from AI. AI has many faces and definitely does not have to mean replacing humans with machines. It’s either human in the loop or no human in the loop. Take augmented intelligence supporting human decisionmaking, or assisted intelligence helping people perform their tasks faster and better. At the other end of the spectrum, you have autonomous intelligence doing things uninterrupted, on its own. In private banking, a client advisor continues to be irreplaceable in terms of building strong relationships – at least for the time being; AI simply facilitates the advisor’s work by taking some of it off his/her shoulders.

One of the most important features of AI is its ability to learn from historical examples or discover hidden patterns, allowing it to spot and understand relationships and similarities between data. Further down the road, it may learn to detect anomalies or predict specific preferences and events. AI algorithms are able to learn with or without supervision. Using the most common technique – supervised learning – the algorithm is given a training set containing input and output data. After it has been shown a number of historical cases, this is enough to provide it with data inflow, indicate the purpose and let it do the rest. The data sets used are those obtained during many years of business operations and come from interactions with customers and employees. Those sets allow us to create applications that make recommendations to their users, e.g. on what actions to take and when, to obtain optimum results in terms of sales or customer service.

Letting AI take the strain One such application is Comarch Wealth Management (CWM), which helps

The work of a wealth manager comes with many routine, repetitive tasks. So why not automate them?


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Friend not foe: Human tasks are enriched, not replaced, by AI

wealth managers operate with greater efficiency through the use of AI algorithms. This is an illustration of augmented and assisted intelligence. The application is able to organise, on a daily basis, the wealth manager’s entire to-do list, recommending the next best course of action. This might entail offering a new investment product and, should that be the case, the AI recommendation engine is instantly able to pick and choose clients most likely to be interested in making an investment, increasing the probability of closing the sale. What is more, by analysing the history of contacts, the application will prompt the manager as to when and how a client can most conveniently be contacted. The work of a wealth manager comes with many routine, repetitive tasks, so why not automate them? A good example of such a task might be a periodic preparation of personalised reports for clients, which takes a lot of time and effort. Using natural language processing (NLP) technology, it is possible to automate the entire process. With the supervised learning technique, an algorithm is able to generate a case description in the natural language, based on the portfolio’s historical performance, or even a text summary based on financial and text data provided. In this way, raw data, usually interpreted and described by the advisor, is automatically turned into a piece of text that is understandable to the investor. As a result, a lot of time and energy can be saved on all sides. Productivity is tightly linked to employee experience (EX). And improving employees’ professional lives through an intelligent work environment (augmented, assisted intelligence) is a definite boost to that experience. According to Gartner, about 90 per cent of businesses today compete on customer experience. I strongly believe that the next competitive frontier will be EX. That’s where AI can truly be of help.

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Can’t stop the feeling Ali Paterson talks trust, relationships and experience with Michael Bielamowicz, Chief Marketing Officer for Glory. No, it’s not marriage guidance – it’s fintech! There’s something very satisfying about listening in to someone else’s conversation. When it’s between two people as passionate about fintech as our editor-in-chief Ali Paterson and Glory’s chief marketing officer Michael Bielamowicz – who is behind some inspired marketing – being a fly on the wall is fascinating. So, sit back and enjoy as the two share candid thoughts about building trust, customer relationships and customer experience in financial services. ALI PATERSON: Everyone loves to talk about blockchain and technology, and artificial intelligence (AI), data and chatbots, and how much it can save, but where does the human element fit in? Do people really want all that? Where is the engagement? I find it interesting that Bitcoin has been around for nine years and has 28.5 million people using it. Whereas it took Twitter just one year to get to 50 million. Doesn’t that tell us something? You need the technology, you need to make the economic argument, but then you also need people buy-in. Michael Bielamowicz: I just came back from The Financial Brand Forum in Las Vegas and, listening to presentations, I heard bank after bank consistently communicating the idea that, as hard as we push technology, we can’t create the experience with technology alone. The experience happens when you introduce the humans. It happens when the interactions start. It’s fascinating how many banks are trying to figure out how to use the digital channel, to create a bit of demand in a place where you can create a human interaction, which then becomes ‘how can we drive that into a really positive experience?’. The older idea of good service being enough isn’t working; it’s not ‘good service’ now, it’s ‘good experience’. It’s the next level of delivery. All the base entry requirement stuff about the immediacy that Millennials – and younger – expect from their


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technology, that’s service. But now it’s about ‘why is it special?’, ‘why is it personal to me?’ and ‘how do you make me feel?’. Everybody’s fast and cheap and convenient, but that’s not differentiating. AP: I saw a fantastic demo of a voice AI that phoned a call centre to verify a change of address, so the customer could avoid having to deal with humans! We must be rapidly approaching the time when AI will be able to deliver that level of trust and experience? MB: It’s really all to do with the difference between a transaction and a relationship. We want transactional stuff to be easy and cheap, and to feel good about the more complicated, relationship stuff. These aren’t incompatible ideas. I shouldn’t have to have a ‘great experience’ if I just want to check my bank account balance but, at some point, I want to know if I’m using my money well, planning for retirement well and being smart? That’s a much more sophisticated and highly personalised decision. I might have a goal of starting a family, or buying a fast car. So, how do I talk to a bot to know what I should do if I have a particular life plan? That’s where we’ve got to come back to ‘who do I trust?’. Nobody goes to a restaurant anymore unless somebody says, ‘oh, yes it’s fabulous’. I read about Amazon’s problem with paid raters – so now you can’t even trust the ratings! Pretty soon, you’re back to ‘I only trust things that I know are true because I know about them personally’. You talked about Bitcoin earlier. And what’s the problem with Bitcoin? Not enough people trust it. They aren’t sure about it or confident in it, so they don’t trade in it. This is the challenge. At some point, you want to look someone in the eye and figure out if you can trust them. If you’re the seller or the bank, you should use the tech to keep your costs down, so you can

redirect the expense to drive revenue and profit. We’re using technology up to the point where we need AI that doesn’t exist today, so at that point you have to substitute it with real intelligence – where, for instance, a person can draw inferences and make connections, so they can really help somebody with financial advice. That’s where we still need the humans. They’re a very powerful addition to the mix. When you can drive that great experience, you see the engagement and sales go up, you see the products per household go up. A lot of that comes from person-to-person stuff. Here’s an interesting data point I heard recently from one of our partners. They had a customer who wanted them to create a marketing campaign around customers choosing their banker – by that I mean choosing any person who works in a branch. So each member of staff created a profile for themselves. So, ‘I’m Mary, I’ve been with the bank seven years, I do this, I love my customers, these are my skills, these are my certifications’ and so on. And the very last thing on the profile of each employee, was ‘these are my hobbies’.

Without fail, whenever customers came in to request a banker, they would select the person who had the same hobbies as them. Now, how are you going to do that with AI? AP: Well, it would be great if everyone could have a one-on-one personal banker, who had the same hobbies, but it’s just not practical, is it? There’s the element of scale for a start. So, how do

you strike that balance between automation and the human element? How do you really build trust in a banking relationship? MB: You’re right, you can’t have a personal banker in your pocket all day. They don’t fit, and it would never be cost-effective! But we need the system to recognise the moments in a relationship when you need the real person and bring them in, in a really smart way. There’s no reason I should have to see a banker to open a bank account. But at some point, the system should say to the bankers ‘hey, this customer probably could use some financial advice; they’re not managing their accounts very well’. Or, the consumer might say ‘I’m not sure I’m doing this well’. In that one per cent of the time, or maybe five per cent of the time, what I’m saying is ‘let’s connect the humans’. AP: So, what if you had a green pastures environment in banking? No legacy or preconceived notions. Taking advantage of all the technologies that we’re aware of, what would be your approach to building a banking system that still included a human element? And how then do you convert that human experience to ones and zeros? MB: If you’re letting me green-sheet, then I’m going to want to automate as much as I can, to guide the customer to

I can recreate your digital experience – can you recreate my physical experience?

a certain point with as little personal interface as possible. But here’s the problem. It means someone has an app that he uses with open banking. When he goes looking for a Type X loan, he finds all the pure digital banks are offering a product in that category and Bank C has the best rate. What are banks A, B and D going to do to win? Just offer a better rate? The thing is, as consumers, we don’t realise the value of the other elements in a banking relationship until we have a problem. It’s only then we realise ‘wow, this was probably a bad decision, because I now can’t get help’. Those are the moments when a bank might decide ‘OK, let’s put in a great helpline’. And it might work. But at some point – and we’ve all experienced this – a customer will be in the interactive voice response (IVR) system, where it’s ‘press one to do this, press three to do this. Press or say…’. And, at some point, you’re 14 steps into that decision tree and you just start hitting the zero button in the hope somebody answers. Right? The point is, everyone will catch up on the digital side. I can recreate your digital experience – can you really recreate my physical experience? I mean, why does anybody go to a concert? It’s all on Spotify. Probably even the live versions. Why do we ever leave our bedroom? It’s all online. Because we want that experience, we want the interaction, we want the community, and so, the companies that are the best at offering that to us are the most successful companies in the marketplace. The Apple store is the prime example. Apple, which absolutely does not need stores, has the highest sales per square foot of any retailer in the world. Why (and this comes back to your ones and zeros)? Because people love going to the Apple store. You feel cool going to the Apple store, you have a great experience there. You can get help at the Apple store. And why does Apple have those stores? Because it knows people want that experience, they want that feeling of belonging to the club. They want the community thing. They want to be part of that Apple world. So, it’s all about customer experience in every channel. And the winners are those that put the best experience forward. And you can’t not be in any one of them. You have to be in all the channels. Issue 9 |




FINTECH Three more Vision-ary superheroes assemble for the latest instalment in our series looking at the forces for good shaping a new financial epoch

Ross Gallagher

Sarah Kocianski

Principal Research Analyst, 11:FS A first among equals in the Marvel universe, sassy Avenger the Black Widow is an intelligent agent… an appropriate alter ego for Sarah Kocianski, 11:FS’s principal research analyst and a regular host of its Insider podcast series. Making her debut among the Fintech Superheroes in this edition, her mission is to follow the trail of the mythical financial beasts, the British unicorns.


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Principal Consultant, 11:FS

Like Rajesh Agrawal,11:FS’s Thunderbolt Ross – or the ‘Rulk’ as we like to call him – believes financial exclusion is the nemesis of a successful economy and a caring society. Our cosmic-strength superhero urges the fintech industry to flex its muscles in ‘breaking down walls’ between the banked and the unbanked. In doing so, he believes they could build profitable – and right-thinking – businesses.


Rajesh Agrawal

Entrepreneur and Deputy Mayor of London for Business Wonderman seemed an appropriate alter ego to bestow on self-made millionaire Rajesh Agrawal, founder of RationalFX and Xendpay. Having built one of the country's fastest-growing financial businesses from a ‘car loan’ and a laptop, he’s now promoting the UK’s fintech capital of the world.

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Agenda Themes Include:

+ Digital Transformation + INSURTECH EVOLUTION + IT Infrastructure + RegTech and Security Futures






+ PAYTECH & CASHLESS SOCIETY + Fast Growth Founders





For speaking and sponsorship opportunities, contact: | +44 (0)207 368 9750

Financial inclusion is the ‘touchstone’ for our muscle-bound hero Ross ‘the Thunderbolt’ Gallagher. With a history in financial services consulting and research, he’s the regular host of the Fintech Insider podcast – although we’re told that at work he also regularly transforms into the Tupperware Fiend. We asked Ross how fintech could be a force for good in the world (while carefully avoiding mention of microwaves)



FINTECH FINANCE: Two billion people across the world don’t use formal financial services. Why is financial inclusion important for them? ROSS GALLAGHER: Financial exclusion is a key stumbling block in life. And it’s not just a matter of poverty. Expats, for example, need an account to get settled into a country, but without a proof of address they’re unable to open a bank account. And, without a bank account, they’re unable to pay rent to get an address. It’s a catch-22. People from multiple financial levels are excluded from fully engaging with the economy and living a better life. Two billion people is a massive number. It’s comprised of adults who, for many reasons, have no bank account. Maybe they have a poor credit rating, a thin credit file, they are not financially illiterate, they’re blacklisted… the list goes on. However, that still means there are two billion people using cash who can also be viewed as an untapped market for financial services. But fintech can address these problems. The previously excluded now have alternatives to payday loans and credit builder cards.

influence, they can create an ideal customer and an entirely new revenue stream. While the underlying principle is relatively simple, there are two key tasks for the provider. First, they need to verify their customer’s identity, a process that deals in confidence levels and can never be binary. Secondly, they need to check credit scores so that they can build a personal risk profile. Banks exist as walled gardens where consumers are either in or out. Those who are in have access to all the credit, financial and banking services that come with a bank account. But those who are out are completely cut off. There’s no ongoing support, alternatives or advice. I believe fintechs are primed to fill the gap. Unfortunately, Equifax and Experian used to dominate the credit ratings market. This meant they could easily be secretive about their scoring methods. Fintechs can still use credit reference agencies to verify identification but

FF: From a provider’s perspective, what are the reasons for tapping into this underserved segment? RG: Providers can use nudge theory and implement educational models into apps and services to encourage healthy spending habits. Using that

Financial exclusion is a key stumbling block in life. And it’s not just a matter of poverty

rethink the use of credit scoring to provide services. That’s one of the potentials from open banking. By using a sophisticated application programming interface (API) to track spending habits, fintechs can develop a superior credit picture that’s much more revealing of a person’s true financial behaviour. Even using these services, there are people who will be included and those who will be excluded. Real innovation will be the company that comes up with the idea that removes the wall altogether. FF: You must have your own ideas about how that can be achieved. RG: In my opinion, removing the wall between banks and the unbanked is the most vital task for financial inclusion. Fintechs could achieve that through progressive onboarding, with restrictions placed on basic products so that higher risk services aren’t immediately available and push notifications to educate customers on better financial management. Over time, this should build positive financial behaviour. Gamification of financial services, where customers unlock banking features, will also create attainable goals and make financial inclusion attractive to them. All of this will help customers get the most from their money and create value for the fintech. FF: Cynics may argue that some financial inclusion schemes part money from those who need it most. RG: It’s a valid point but it’s hugely beneficial to the individual compared to the length of time it takes to thicken a credit file or work past a bad credit history. Gaming the system so that credit reference agencies accept housing payments as credit, for example, comes at no cost to the customer. Paying a minimal fee for a shortcut to better credit is better than the not-so-great credit builder cards and predatory payday loan companies. Financial inclusion doesn’t always mean it’s the cheapest option but it’s about creating competition for the financial market and building a better

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Fintech entrepreneur Rajesh Agrawal stepped off a plane at Heathrow in 2001 with £200 in his pocket and no idea where life was going to take him. Fifteen years later, after building a small fortune from automating foreign exchange, he was handpicked by the Mayor of London, Sadiq Khan, to be his business tzar. Here, Agrawal (aka Wonderman) tells the original 11:FS superhero David Brear why his adoptive city will remain the undisputed fintech capital of the world. DAVID BREAR: You’ve been quoted as saying that you always knew you’d do well in life. You just didn’t know what, when, or where. So how did it happen? RAJESH AGRAWAL: I was born and brought up in a small town in central India, called Indore. After university, I moved to Mumbai to take a £50-a-month job in a foreign exchange. But I wanted to see the world and in 2001, when I was 24, I had the opportunity to move to London. I remember the day I landed at Heathrow Airport with £200 in my pocket. I didn’t know a soul, but I did not feel like a stranger – that’s what’s so great about the city. It makes you feel at home, regardless of where you are from. I worked in FX for another three years before setting up my own business in international payments, using nothing but a laptop! That business became one of the fastest-growing companies in the country. Fast forward to 2018 and here I am, trying to help other entrepreneurs succeed. DB: That was the mini version of events! You sped over the part about setting up your first international payments business, RationalFX. There’s a good story about how it was funded? RA: Well, like most entrepreneurs, I was so very excited about the idea I’d had – to take FX online –that I quit my job. Then I realised I had no money in my account and my visa was going to run out in six months. So, I prepared a little presentation and went to a bank to ask for a £10,000 loan to start the business. They declined. Two days later, I went back to the same bank and I said ‘you’re right, I shouldn’t start my own business. I’ll continue in my job. But I’m thinking of buying a car’. And they lent me £20,000. I never bought the car – I didn’t



even have a driving licence at the time. (Just for the record, I paid it all back with interest). But I don’t recommend it as a method for funding a business. DB: You went on to launch Xendpay, the world’s first free money transfer service in 2011, and five years later you were installed in City Hall as the new Deputy Mayor of London for Business. That’s a pretty impressive job title you’ve got there. What exactly does it involve? RA: My job is to make sure that the Mayor hears the voice of London businesses. One day I could be talking to the CEO of a big investment bank, the next I’m at New Covent Garden Market, talking to fruit a nd flower wholesalers. I also chair London and Partners, which is London’s inward investment agency – it runs the Mayor’s International Business Programme, which helps fast-growing London businesses to internationalise. I also look after a number of initiatives to support the tech industry, including a fund that invests in startups. DB: What is it about London that makes it so great for fintechs? RA: Fintech is the crown jewel of London’s tech industry. It’s built on the city’s natural strength, which is finance. We’ve more banks and insurance companies than any other city – we’ve more American banks here than they have in New York! And when you look

at foreign exchange, of the $3trillion traded every day worldwide, half of it passes through London. In 2017, nearly £3billion of venture capital went into UK businesses, almost half into fintech companies, of which 90 per cent are in London. Thirty-one of the Fintech 50 companies are London-based. And yet London still has the potential to achieve more, thanks in part to an amazing talent pool of people who have come from all over the world. More than half of the people working in tech are overseas born and I know of many entrepreneurs from Europe who came to London and started their business. Equally, many London-based fintech firms have expanded into Europe. That’s why it’s so important that we remain open after Brexit. While that poses challenges, I’ve no doubt London will continue to be the fintech capital of the world. DB: Are we doing enough to teach people to become entrepreneurs? RA: I don’t know if entrepreneurship can be taught exactly, but it can be ‘caught‘, like a bug! That’s especially so if you create an environment that is entrepreneurial – people will want to go on that journey then. You need to provide support to startups, by way of funding, opportunities to network and mentoring – which we are providing for young entrepreneurs. We are also funding training at Ada College – the National College for Digital Skills – which will focus on young people from underprivileged backgrounds and women. It’s important to remember that fintech isn’t just a commercial opportunity, I think it can contribute significantly to society, too, by way of financial inclusion and financial literacy. They're big issues. One of our Tech Invest events, which brings together startups and angel investors, will be ‘fintech for good’ and we’re about to launch a civic innovation challenge which has that as a category theme. And it can truly make a difference. In payments, for example, $550billion every year gets transferred from developed countries to developing countries, which is three times more than the global foreign aid budget. If we are able to reduce the cost of those transfer and billions more dollars will reach some of the poorest parts of the world. It’s an example of where fintech can truly help the society. Issue 9 |



Sarah Kocianski is a principal analyst at 11:FS and regularly hosts Fintech Insider and Insurtech Insider as well as guest-hosting on Blockchain Insider. Here, the Fintech Superheroes’ Black Widow, considers the emergence of a new superbreed of British fintech FINTECH FINANCE: London-based digital bank Revolut confirmed recently that its valuation had increased five-fold since the middle of last year to reach $1.7billion. It’s now officially a unicorn. Late last year, business lending bank OakNorth became the first of Britain’s digital challengers to achieve unicorn status. Why are these mythical creatures so important to the UK fintech industry? SARAH KOCIANSKI: Revolut’s accomplishment makes it Europe’s fifth fintech unicorn. Unicorns are private companies valued at more than $1billion. When it comes to fintech, the more of them that are created in a country or jurisdiction, the more successful that location’s fintech industry is perceived to be. Revolut’s news will be viewed as a home win by those who have seen the number of recent unicorn births in the US rocket (the country boasts 16). The idea is that the creation of fintech unicorns and, in turn, the perceived success of an industry, will lead to increased funding for the region’s fintechs more broadly. In Europe that would be welcomed by most as it has consistently lagged significantly behind both Asia and North America when it comes to attracting fintech funding. However, questions remain as to whether Revolut’s success will have this impact or if it is a lone example and whether other companies should be reaching for such heights. FF: So, why do you think European fintech funding is so low? SK: The reasons behind European fintech funding’s relatively small volume are myriad, but broadly it


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SarahKocianski breaks down to the European venture capital industry being newer, funds being smaller and more barriers to firms reaching audiences of hundreds of millions (e.g. language and multiple financial services infrastructures). Revolut’s success does not surmount these hurdles, but it can be used as evidence that global interest is growing in European fintechs. That trend is likely to increase as the European Commission amends regulations to make it easier for firms to make cross-border investments in the EU, and Asian and US investors ramp up their searches for less competitive rounds. With these factors in mind, we should take Revolut’s recent valuation as a sign of good things to come for European fintech funding, even if few others will reach such scale any time soon. FF: From a fintech’s point of view, what does becoming a unicorn mean

The idea is that the creation of fintech unicorns will lead to increased funding for the region’s fintechs more broadly

for the development of its business? SK: When it comes to whether individual companies should be seeking, and accepting, valuations of more than $1billion, the situation is more complex. Unicorn status is certainly good PR for a company and signifies investors’ belief in it but, in some cases, it can be a double-edged sword. Investors’ expectations of incredible returns can put significant pressure on a young firm and, if a company doesn’t show stellar performance and chooses to raise again, it could end up with a lower valuation. So-called ‘down rounds’ are most definitely not good for PR. Additionally, when a fintech comes to exit the market, either through an initial public offering (IPO) or a sale, a huge valuation presents hurdles. It can be harder to find a buyer willing to stump up the funds, while IPO’ing at such a value is incredibly difficult if the firm cannot back it up with revenues to match and, in many cases, profitability – both hard tasks for young companies. All in all, though, Revolut’s success is great news for the company, and a positive sign for European fintech, but should not be taken as a sign that Europe will see a plethora of unicorn births and skyrocketing funding volumes any time soon.


Embracing the digital payments evolution Shoppers are more sophisticated in their choice of channels and payment methods, but they still respond to incentives and rewards, says David Jones, General Manager for the Digital & Incentive Divisions at branded value pioneers, Blackhawk Network As consumer expectations shift and technological innovations continue to rapidly change how customers shop, the retail industry is continuously examining how to stay ahead of the curve when it comes to connecting with shoppers. A survey by Accenture found that 54 per cent of surveyed consumers switched brands in the past year and 78 per cent said they retract loyalty faster than they did just a few years ago. In an effort to attract and retain loyal customers and engage shoppers in ways that make sense for their instant-gratification, non-stop lifestyles, retailers are looking to use fintech


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innovations in their incentives programmes. In doing so, they are able to meet the demands of digitally-enabled customers while also finding new opportunities to encourage more meaningful customer experiences. Here is a look at a few up-and-coming trends in incentives and how retailers are leveraging fintech solutions to complement today’s consumer purchasing habits.


Reward-based promotions reign supreme Recent research from Hawk Incentives revealed that consumers prefer rewards to discounts across 11 merchandise categories, including personal care, home improvements, telecom and pet

health. Companies that leverage rewards report better brand perception and customer loyalty – 67 per cent better, according to Aberdeen. Sixty-two percent of consumers self-identify as deal seekers and bargain hunters. Price and promotion are king and savvy retailers capitalise on this with reward-based strategies. prefer prepaid Prepaid 2 Consumers cards have maintained their mass promotional appeal, offering a seemingly endless range of branded options – physical, digital and mobile. According to a study by Hawk Incentives, consumers of all ages prefer the convenience and flexibility of receiving a physical prepaid card as a

Triggering a response: Digital rewards work

A recent report by Salesforce found that most consumers – especially younger consumers – are willing to share personal data in exchange for personalised offers, discounts or shopping experiences. Unfortunately, as an industry, expectations for personalised experiences have continued to outpace the efforts being made by retailers to create those experiences. A 2018 report on personalisation by Accenture found that nearly half of all consumers have left a business’s website and made a purchase on another retailer’s site or in-store because the website was poorly curated. The report also noted that this percentage is on the rise, a sign that digital experiences for consumers are likely headed in the wrong direction. Retailers wanting to improve the digital and overall shopping experience are looking to fintech for the data that can be gathered during the purchase process – or through promotions like rebates and loyalty programme rewards that are paid out on prepaid or gift cards and can track redemption behaviour and purchases – to compile a wealth of insights. A customer’s previous purchases and shopping behaviour can inform additional offers and promotions, improving their overall experience and allowing the retailer to collect data that can be helpful for potential cross-selling opportunities.

As consumers migrate towards multichannel purhasing patterns, they are looking for digital rewards and promotions reward over discounts and other promotions. Nevertheless, there has been steady growth in digital and consumers’ attitudes towards digital options continue to shift from awareness to activation – proving there is still a place for both physical and digital prepaid rewards. These rewards are highly brandable and can drive trackable customer behaviour. technology to 3 Leveraging personalise shopping experiences With the data-mining capabilities available in the retail industry today, shoppers expect to receive personalised experiences.

digital 4 Advancing rewards and

loyalty programmes. There are several existing and upcoming types of digital and wallet-enabled incentive options leveraging fintech – egifts, wallet-enabled prepaid cards, digital loyalty programmes, etc. With a projected 62 per cent annual increase in mobile payment transaction volume through to 2021, according to Statista’s Digital Market Outline, a rising demand for digital and wallet-enabled rewards and programmes comes as no surprise. As constantly connected consumers continue to embrace mobile and digital payment options and migrate towards multichannel purchasing patterns, they are also looking for digital rewards and promotions and have become increasingly confident about using them.

Advancing mobile wallets from payments tools to engagement platforms is one way retail can explore and leverage mobile wallet potential while also providing a complete brand experience. For instance, many consumers are looking to move away from piecemeal payment experiences. Retailers are starting to help by providing more opportunities to integrate gift cards, loyalty and rewards programmes online or into digital wallets. Once consumers are connected digitally, both retailers and consumers benefit. Consumers can receive and redeem personalised special offers when checking out online or in-store, extending the customer lifetime and helping to create and retain loyal customers. Many shoppers rely on mobile devices as an integral part of their lives and retailers are now able to give them the option to store, manage and make payments with them. customer experience 5 Aatcohesive checkout, across all channels Research from Blackhawk Network found that 76 per cent of respondents said an easy payment process will make them more loyal to a brand. These same respondents reported more frequently engaging with their favourite brands through marketing vehicles, such as egifts and promotions. Whether consumers are shopping in-store, shopping online then picking up in-store, or ordering for delivery, retailers are increasingly relying on innovations in payment technologies to create a consistent, intuitive and trusted checkout process, which has proven to be an optimal way to create a positive customer experience. The National Retail Federation forecasts retail sales will increase by between 3.8 and 4.4 per cent in 2018. As retailers look to ensure that consumers spend some of that money in their stores or on their websites, fintech will continue to play a r ole in helping retailers to get ahead of consumers’ evolving expectations. ■ David Jones is general manager of the digital and incentives divisions for Blackhawk Network, a global financial technology company. The Incentives division delivers incentive programmes that build relationships with easy-to-use platforms, global rewards and comprehensive service and support. Issue 9 |



Nice work

Gig workers crave flexibility, but can your payroll and finance team deliver? asks Brian Thornsberry, Senior Vice President for Marketing at Prepaid Technologies No matter what industry you’re in, chances are that you or your company has hired a ‘gig worker’ in recent years. Also known as contractors or freelancers, the number of workers in the gig economy is rising dramatically and transforming payroll and other payment practices.

McKinsey & Company reports that up to 30 per cent of people in the US and Europe are now considered gig workers, as the labour trend touches industries well beyond those companies commonly associated with gig working such as Uber, Fiverr and Upwork. At this growth rate, Intuit forecasts as many as 40 per cent of American workers will be working on a gig basis rather than being paid a salary by 2020. As people find success in this flexible labour format, more executives are looking to hire experienced contractors instead of full-time employees. And they’re more open to gigging


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themselves: nearly two-thirds of full-time executives would switch to become a contractor, given the opportunity. Whether employers are driving this change or responding to worker demand, this seismic shift in the way people work and get paid is having a profound impact on business. Here are three reasons why organisations must anticipate and be responsive to the gig economy:


Maintain a competitive advantage Businesses have to be more nimble and responsive to the needs of various types of workers. You can adjust and stand out in a competitive market by providing gig workers with flexible payroll options. In fact, according to a US survey, 91 per cent of Millennials say they want a full-time job – and for businesses that want full-time employees, a gig could be a great first step towards full-time employment. Most gig workers also don’t want to participate in the tedious and expensive

processes of picking up and cashing paper cheques in those countries where cheques are still prevalent, and companies shouldn’t spend time or money mailing them. This may seem like a small consideration, but in the States printing and mailing paper cheques can cost thousands of dollars per month and data shows that almost half of Gen Z (47 per cent) and nearly a third of Millennials (31 per cent) living there would turn down a job if they were unable to choose their method of pay. Why? The reality for many contractors is significant fluctuation and inconsistent timing of monthly pay – especially for those working multiple gigs. Timely and reliable payments can have a significant impact in helping workers manage cash flow. Waiting for cheques or dealing with delays if an error is made can also have a major impact on gig workers. More stability means a more committed, productive and loyal workforce that is focussed on its work. Progressive organisations, such as

Flexwage, are taking these and other issues off the table by providing payroll cards, on-demand payment, advances on accrued pay and direct non-recurring payments for tips, gigs, rewards and more.

extend the company’s credit to the contractor and can be quickly deactivated or de-funded when a contract ends.

problems beyond payroll 2 Avoid and keep expenses simple

to process: you must automate Even without gig workers, tech-enabled payments and automated processes are a must and the nature of gig work makes this even more important. Short-term and project staff mean more transition, often a higher volume of people to pay and more out-of-cycle payments. Contractors may negotiate various payment terms and invoice as projects complete, rather than on a consistent monthly cadence. As the lines between traditional payroll management and vendor management blur, finance and payment systems must be modernised and integrated to keep costs down and make processes as stable and efficient as possible. Businesses can do this by:

In most cases, it doesn’t make sense for businesses to give gig workers a company credit card or petty cash for business expenses. But gig workers are often a team of one who are unwilling or unable to carry the cost of their client’s expenses and wait weeks or months to get reimbursed. Many also work remotely, making delivery of petty cash impractical or impossible. In addition, the traditional reimbursement process can be a major source of fraud, and factors that lead to fraud can be exacerbated with non-employees who may be remote and hard to track. All of these issues can be addressed by replacing cash and reimbursement cheques with prepaid expense and purchasing cards that offer real-time visibility into spending on a card-by-card basis, and allow full control of spending. Cards issued to contractors do not

gig workers mean 3 More more payroll activities

As the lines between traditional payroll management and vendor management blur, finance and payment systems must be modernised and integrated

■ Using technology and automation to decrease manual tracking, as well as reporting and payments

■ Improving real-time tracking and visibility of payroll and expense systems ■ Reducing paper cheques, postage costs and reporting paperwork

Transforming payment processes It’s estimated that 13 to 15 per cent of the US workforce has gone full-time freelance to replace a traditional job, and nearly 20 per cent of full-time independents pull together multiple gigs to earn more than $100,000 per year. Clearly, the gig economy has become a mainstream part of corporate labour markets and will continue to influence how businesses compete for and compensate top talent. Doing so requires big changes to payroll and expense systems and it’s time for employers to adapt to stay ahead of the trend and remain competitive. Tech-enabled financial processes can keep payroll, payments and expense programmes more stable and costs under control, while also reducing risk and liability. At the same time, businesses should start to look at their best contractors and other gig workers as potential long-term partners – and even future full-time equivalents, when it makes good business sense. Flexible and responsive payment solutions are a key element of a competitive and successful strategy to incorporate gig talent into your business plan.

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For Neal Cross, ‘the entrepreneur who happens to work at a bank’, the challenge is to get DBS thinking and operating ‘more like a tech company’ as non-banking friends and new rivals muscle into its space Peer-to-peer domestic payments with the swipe of a finger are becoming common across the globe – and the transfer time is almost instantaneous.

But speeds for cross-border payments are still stuck in the slow lane. It can take several days for money to move, which is a big issue for businesses working internationally and workers sending money home from jobs abroad, particularly in South East Asia. There are seven million migrant workers across the region and remittances have grown 102 per cent over the past 10 years. In 2016 the amount of money sent home amounted to a staggering US$63.9billion. Improving this international payments traffic is one of the ‘next big things’, says Neal Cross, chief innovation officer at Singapore’s DBS, which is collaborating with financial telecommunications provider SWIFT in an attempt to stay ahead of pure blockchain-based rivals in that area. “In Singapore, we have peer-to-peer payments with PayLah! and we also have a great payment infrastructure around FAST,” says Cross. “Then you look at India and there is a similar system, UPI. “But moving money across borders is still very difficult to do peer-to-peer, based on a phone number. That’s going to change in a very short period of time. There are a lot of fintechs that are focussing on that. It seems to be a good place for blockchain technology and finance, so what I would say is watch this space as we expand the corridors that we operate in.” Launched in 2017, SWIFT Global Payments Innovation (gpi) already accounts for $100billion of global cross-border payments. The second phase, timed for October 2018, will integrate it further with domestic rapid payment schemes – in Singapore (FAST), China (CIPS), Thailand (PromptPay) and Australia (New Payments Platform). Beyond that, the aim is to grow the tech so all bank customers in the Asia-Pacific


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region can pay each other immediately, regardless of where they are. With figures released in February showing that nearly 50 per cent of payments being sent via SWIFTgpi messages every day are credited to end beneficiaries within 30 minutes, the initiative is a direct swipe at blockchain newcomers such as Ripple, which can undercut on price but doesn’t have the volume. Despite the The Monetary Authority of Singapore describing cross-border payments as the 'killer application' for distributed ledger technology, by laying down rails of gpi infrastructure, SWIFT hopes to dominate cross-border, meaning domestic banks are inclined to join its network. DBS, which has 280 branches across 18 markets, also worked with SWIFT to launch real-time, cross-border payment tracking as a direct result of corporate customers telling it more transparency was needed.

I’ve been waiting to see other corporates move into the world of finance – in fairness, I think it was just a matter of time The bank has made digital strides in other areas of treasury, too. Last October, it launched Prism, an online cash management simulation tool that allows corporate treasurers to find the best place for their company cash. Working like a comparison website, it scours banks for solutions while considering national tax costs to save treasurers hours of their time. “They may have a business that is spread across Asia, money is coming in and out, they’ve got many different currencies to handle, regulations, bills to pay and so on. What we’re trying to do with Prism is really focus on the journey,” says Cross. “Payments

is part of that journey but, actually, our customers are doing something that’s bigger and more important to them than payments. It is those problems that we’re trying to solve.”

Customers and ‘rivals’ A known innovator, Cross describes himself as an ‘entrepreneur who happens to work at a bank’. Always with an eye on the bigger picture, he was not surprised to see airline AirAsia enter the financial market with its own digital payments platform, BigPay, this year. A way to make money from the data the company holds on 63 million passengers built up over 16 years, BigPay is a taste of things to come. The airline also plans to introduce cashless cabins, so all in-flight purchases can be made through the BigPay mobile wallet using an airliner’s wi-fi and, beyond that, to develop cross-border payments and online lending. The company foresees that BigPay could one day be more valuable than the airline business itself, graphically illustrating that it's as much who as what is new in fintech that’s causing disruption in financial services. Cross appears sanguine about the emergence of what’s been described as the next big challenger bank in South East Asia. “I’ve been waiting to see other corporates move into the world of finance – in fairness, I think it was just a matter of time,” he says. “It’s quite plain AirAsia have a lot of runway and they can spot the exits!” Nevertheless, it poses some big questions for the incumbents – not least how do they handle the potential tension between themselves and a customer who’s suddenly doing their job? “We’re seeing three forces at work here. One is the startups, we currently call them fintechs. Two is the tech and ecommerce giants, which I think will certainly have a huge impact. And, thirdly, we’re seeing our own customers moving into the finance world. Some of our corporate customers

are, like AirAsia, getting into the business to try to make money, or at least make their own products more sticky. Other corporates are getting into finance to solve specific problems, such as supply chain finance issues. The world is moving pretty quickly in this space, but, thankfully, at DBS we are cognisant of these things and we’ve been working on our responses for some time,” says Cross. One of the ways DBS has worked to remain agile in the face of such competition is changing the bank’s internal structures. Another is more subtle – it’s to do with addressing the banking culture. “I continue to drive down the ego,” says Cross. “It’s not so much people walking around with a big ‘I am’ attitude, but it’s more getting bankers to realise that they don’t have to solve all the problems by themselves. They can partner with startups, fintechs, other divisions, students, with ecosystem players – we can solve this together. We’re becoming a more collaborative, platform-approach business. “Secondly, I work to increase the ambition. So, we’ve got a new strategy around helping the bank think about what the world’s going to be like in 2030, and once we have the shape of that world, then how does the bank need to change to fit into it? And then how does their division fit inside that bank? “What that does is not only help staff think a lot more long-term, but also look at and understand some of the really big technology changes that are affecting the world and will, ultimately, affect our business and our customers.” Cross says building operations around platforms is now the DBS way. Giving payments as an example, he points out that the payments function is owned by many divisions because it touches credit and debit cards, peer-to-peer, consumer banking, small business payments, institutional payments and cash management... the list goes on. “What we’ve done is say ‘wait a minute. Let’s make this into a platform of ubiquity, across the organisation, and we’re going to have one business owner and one tech owner. We’re doing that for every capability in the bank. For wealth, for SME, for digital channels, for lending, we’re going to have one tech and one business. That’s really important. It’s more how a tech company operates. “The tech person will

have KPIs based around revenue and the business person will have KPIs based around uptime. “By doing that we achieve a kind of dual ownership. We call it ‘two in a box’.” Ultimately, the aim is to provide great services to customers but to remain ‘invisible’, particularly in retail, since customers typically would rather be doing anything than managing their finances. “When you think about how people operate, they’re either working, playing, or learning. They’re doing something in their life, in their journey, and most journeys require some kind of financial instrument, at some time. At that point they have to stop what they’re doing, the thing they enjoy, and then go

over there, to a bank, and apply for something, then engage in a banking process, then come back to the journey they were engaged in. So, what we’re trying to do is let them utilise a banking service right inside that journey. And, ideally, it can be fulfilled with just one click or a voice command. That has to be highly contextual. We really have to understand that customer, what they’re trying to achieve, and have the very best product or service delivered to wherever they are.”

Mindblowing: Powerful digital forces are at work – both inside and outside DBS


Going under covers

Scott Loong is on a mission to transform the delivery of insurance with wideawake startup Covera – and that means snuggling up to the industry’s sleeping giants

Five minutes with Scott Loong and it’s clear you’re in the presence of a bright cookie who has come up with a really neat concept. But what makes him even smarter, is he knows how to court the industry’s giants in order to bring it to fruition. He summarises his idea as ‘totally recasting the purchasing experience of insurance into one that’s like a personal shopper’. For too long, in his view, the insurance industry has fed off customer apathy and is tainted by public wariness resulting from the difficult process of applying for expensive cover that doesn’t always deliver what consumers expect. By contrast, Loong says his company, Covera, which he founded in 2016, will put the customer back in control by simplifying the application process, alerting them annually to better deals for their circumstances and shopping around to save them money without them having to ask. A role reversal he believes is long overdue. “When we’re seeing insurance retention rates of 80-90 per cent, it can’t be attributed to any sort of customer satisfaction,” says Loong. “People are not renewing their insurance because they love their broker or their products or their insurance carrier. They’re doing it because the current way of shopping for insurance creates apathy.” Montreal-born Loong, a corporate lawyer who also has a background in private equity and mergers and acquisitions, had a lightbulb moment two years ago when he realised there was a golden opportunity for insurtech startups like Covera. “At the time, fintech had just started happening and I was able to list every insurtech startup in the world on a single


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spreadsheet, look at what they were doing, who had received funding, who had already failed and what was hype. And that is where the initial idea for Covera came from,” he says. “We received our seed funding in the Fall of last year and since then we’ve been growing as a team, building our product and aiming to create the best robo-brokerage in the world. It’s been a pretty wild ride.” He is almost evangelical about his cause. “We’ve tried to totally recast the insurance purchasing experience into a service, like a personal shopper, that is always available for someone at the right moment and always gives them the option,” he adds. “They can stay, they can migrate or they can stick with what they’ve got.” His thinking is in tune with the times. According to Accenture Financial Services’ 2017 Voice of the Customer global distribution and marketing consumer study, 74 per cent of people surveyed would welcome computer-generated advice on what kind of insurance to purchase, 68 per cent of them preferring to use online channels to find their answers and 64 per cent saying they were looking for a more personalised service.

A customer for life? In a competitive industry where attracting customers is tough even for the big players, Covera’s aiming to net them once and make them stick around by looking after their interests and taking the pain for them. “The moments when people shop for insurance are rare. They happen when people move, when they acquire a new car, or if their premium jumps

significantly on a year-to-year basis,” observes Loong. “Traditionally, the only way to capture these clients has been to flood the market with omnichannel marketing, all in the hope that when they reach that inflection point, your brand will be top of their mind. “We didn’t want to go head-to-head with the incumbents in this area because we can’t afford to out-market them. We aim to find alternative moments to provide insurance products to those customers, rooted in that central pain point, which is the reason so many people don’t bother to shop around when their insurance products expire. “People are spending six to seven years automatically renewing their policies and Covera’s way of breaking them out of that cycle is that they sign up once and every year, when their policies come to term, we bring their information back to the market and identify whether or not there are opportunities for them to save money or get better cover. “If so, we do all the administrative work to move them over, but if they’re already with the best possible provider we let them know and tell them to stay where they are.” To power this, Covera needs to make the highly complex easy, automating as many processes as possible. “In the insurance industry, there is an enormous amount of data entry friction in the onboarding process,” says Loong. “To accurately quote, we need between 60 and 170 different data points about someone. We will always collect enough information to quote for someone accurately but, from there, we’ve built a proprietary database which monitors and collects what deals are available to them. “The only way to build those insights is to collect exactly the right kind of

data about customers and the kinds of policies and products they’re choosing and create a centralised nexus for all of that information.” The vision is to eventually provide peer validation to customers as they work through the insurance buying process. But such automation does not mean further dumming down of the sector – far from it. “The most unfortunate development in insurtech, over the last decade, has been the reduction of the product via price comparison websites,” says Loong. “The traditional approach to selling insurance online has been ‘let me ask as few questions as possible to show your price as quickly as possible, regardless of whether or not I can actually offer that price at the end of the day’, as there are typically clarifications and modifications that are going to happen afterwards. As a consumer you leave that process feeling underwhelmed and not really knowing if the policy you just bought is actually going to provide you with the cover you’ll need if the worst happens. “What’s very palpable and real about the insurance industry is when things go wrong, such as people standing outside a burning home where all their worldly possessions are being destroyed by smoke and fire.

“Those are the moments where the product becomes extremely real and as much as startups like us like to disrupt, it’s important we remember that, at the end of the day, we are dealing in a product that really, really matters to people. This is something we take very seriously.” Rather than taking on the giants, Loong believes there is sufficient potential for Covera to build a business from the crumbs they drop from their table. “The large incumbents have a tradition of growing through acquisition and you end up with super companies that have bolted together legacy technology platforms, legacy databases, legacy cultures. Their size gives them tremendously defendable competitive advantage, but it also creates opportunities for startups like Covera to find areas where those legacy systems, processes or attitudes leave portions of the market underserved,” he says. “Fintech and insurtech necessarily become bedfellows with large incumbents from a technology and pure business perspective. Fundamentally, Covera distributes insurance products on behalf of our carrier partners and we have a symbiotic relationship with them. So, we don’t see ourselves as exploiting difficulties in their legacy systems in order to gain an advantage. It’s about what we can do to enable them to deliver value to customers that right now they’re not able to, starting with things that are in our DNA as a fintech, like having access to real-time documents, being able to see accurate prices

People are not renewing their insurance because they love their broker or their products or their insurance carrier. They’re doing it because the current way of shopping for insurance creates apathy

and moving away from paper mailings and ink-based signatures.” Crunching extensive and complex data more instantaneously is vital. “There is a compelling use case for third-party data, in terms of how a company underwrites a customer and rethinks their riskworthiness based on information that existing models don’t typically take into consideration,” says Loong. “We’re a personalised insurance brokerage which means that, to reach a critical mass, we need to be extremely efficient. Our targets are less to do with reaching particular sales levels and more about trying to be innovative about how we can service 10 times more customers per broker than anyone that we are competing against.” That means making sure customers understand both the importance of providing clean data and the process. “We also need to communicate with customers in the ways they want and chatbots provide some really compelling opportunities for that,” says Loong. “Consistent quoting application programming interfaces (APIs) save the considerable energy and resources that this process takes for brokerages, both traditional and insurtech. We have really great relationships with our insurance carriers and we’re already building those API connections, which is going to be a tremendous boost in efficiency. It’s a very different proposition to build a true robo-brokerage in insurance because it is much more nuanced than other sectors. There will be some hard artificial intelligence (AI) requirements to get there, but already we’ve made excellent progress.”

Bedfellows: Covera doesn’t compete with incumbents, it snuggles up to them

Issue 9 |



The all-seeing ‘I’ Jochem Davids and Harm Vollmuller explain why knowing us better than we know ourselves is the way forward for InsureApp Imagine a world where it’s not what you tell your insurer that counts, but what they see you doing. How you drive your car, the food you fill your fridge with and your social media conversations – all pointing to lifestyle choices that make you more or less of an insurance risk. According to fintech InsureApp, it’s coming. Marketing itself as ‘the world’s first lifestyle-based insurance platform – extremely smart and hyper-personalised’ – the company’s website claims it is ‘applying artificial intelligence (AI) technologies to interpreting data gathered from smartphone sensors and Internet of Things devices and services, to contextualise human behaviour’. A far cry from the traditional process of applying for insurance, its software automatically interacts with the user – telling them what they need, when and how much it will cost, based on where they are and what they happen to be doing at any given point in time. The app serves a commercial purpose for carriers, who can use the information it generates for cross- and up-selling, and coaching people to change their behaviour, hopefully making them less likely to make a claim. It does all of this through personalised, multichannel notifications on mobile, web, email and Internet of Things (IoT) devices, based on real-time events and user patterns. Thanks to the imminent introduction of the revised Payment Services Directive (PSD2), it will also be able to integrate with financial institutions to analyse their spending habits, too, giving it a full 360-degree picture of someone’s life. InsureApp is a software-as-a-service platform whose basic premise is that consumers are either obliged to buy insurance (such as for their car) or do so from fear (if I don’t insure my home contents and get burgled, I’ll have a


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problem). Its aim is to give all this a more positive spin by being ‘in your pocket’ for all those moments when life presents a risk, from holidays to health. The very detailed data points it collects, mean it can enable brokers to offer bespoke insurance based on a personalised risk register, but the quid pro quo from a customer’s perspective is that they have to be prepared to let it into their lives. Co-owner and CEO Jochem Davids explains why, to him, it is the only way forward for insurance. “Engagement around an insurance product is mostly a mandatory moment when someone needs it to take their car on the road or buy their house,” he says. “It’s also a painful one because it’s very administrative, complex and expensive.

Software automatically interacts with the user – telling them what they need, when and how much it will cost at any given point in time The other moment of engagement is when they actually file a claim. Currently, these are not really happy moments, or the way the Google, Amazon, Facebook and Apple generation of consumers want to engage with a product. “Based on someone’s automaticallygenerated profile, we try to engage with them in a natural moment, when they need an insurance product, like when they go abroad for travel.” In other words, InsureApp wants to transform insurance into helping people to live their lives better. While the scope of the data it collects to decide, among

other things, how well you drive, how healthy your lifestyle is and how good your work-life balance, may not suit everyone, Davids believes InsureApp can demonstrate a persuasive benefit for consumers in exchange for their information. And you’ve got to admit the technology’s clever. “We are a mobile platform, and use the three basic sensors of a mobile phone: the GPS, the accelerometer and the gyroscope. With the data they produce on a continual basis, in the background, we use different algorithms to create a contextual layer around it. “Through patterns in the data, we learn whether someone’s location is their home or work, and from that extract their work/life balance, commute and driving style. If they drive to the airport every day and spend eight or nine hours there, it’s probably their work, so it doesn’t make sense to offer them travel insurance. Whereas, if they go to a hotel and stay several weeks, they’re probably on a leisure trip with their family,” says Davids. It can even distinguish between someone travelling on a train or in a car – and if they’re driving it or being driven. “We look at the GPS location, which could be a train track or a highway, and then speed and type of movement. A train will go at a particular speed, it will accelerate in a particular way, brake in a particular way, stop at certain places, and that’s all context for us,” explains Davids. “We can distinguish whether someone is the driver or the passenger in a car by looking at driving style, because everybody has a very unique pattern in the way they accelerate, brake and steer, and again, the context of where they’re going. “When it comes to lifestyle habits, we can see if someone goes to a particular place like McDonald’s to eat regularly. We can’t tell if they eat a hamburger or a salad while they’re there, but it tells us

something about their lifestyle, and that’s what we take in to account. “Using devices like mobile phones, which people always have with them, we want to just be in the background, there for them when they need it. And we can automatically adapt insurance products to a particular situation. For example, asking a family traveller if they are planning to go diving or skiing, or participate in some other dangerous activity,” adds Davids.

Connected & embedded In this way, InsureApp is moving towards the kind of ‘connected insurance’ model – insurers seamlessly integrated into

Harm Vollmuller, co-founder of InsureApp and owner of Utrecht-based Managing General Agent Risk Insurance. InsureApp currently offers providers a choice of options. “We have three propositions,” adds Davids. “One is aimed at the car industry, including leasing and rental. We combine driving style, from a telematics perspective, with the context of a trip, to learn its purpose – for example, a commute to work or taking kids to school. And we take all that into account in the actuarial model and product pricing. “Our second proposition is travel insurance embedded in an existing app of a telco, retail or financial institution. The third is aimed at

Close watch: InsureApp collects background data from mobile devices

consumers’ lives – heralded by KPMG in its February 2018 report, Insurtech Hits Its Stride. Predicting that this will be the year that the industry scales up, it says: “This concept relies on devices – from consumer-focussed health trackers and IoT-enabled appliances to telematics – to make the insurer a trusted partner in the customer’s everyday choices.” And the obvious next step? Embedded insurance. “So, the moment you buy your car or computer, the insurance is embedded in the purchase. We think this is the next big thing in insurance,” says

health and wellbeing, including physical activity in context. If someone works 90 hours per week but moves and engages in sport a lot, it can still be an unhealthy overall balance.” In the wake of the suspicion generated by the recent Facebook/Cambridge Analytica scandal, and with the ink still wet on the new General Data Protection Regulation (GDPR), how will InsureApp pull all this off? “For financial institutions in particular, data and privacy is important. I’m actually very happy that this new legislation will

provide proper guidelines around informing the customer which data is being used, with which goal,” says Davids. “Every time we use and process someone’s data, we inform them what we will do with it.” Transparency will be key to the proposition and Davids is honest enough to admit that even clever algorithms get it wrong sometimes. “I have a personal example of this. The day care I take my daughter is on the opposite side of the road to a snack bar. At one point, the algorithms were telling me that I was brand loyal to that snack bar. “If I had health insurance and was providing them with this type of data, they would get pretty concerned. So, we’ve been in situations where the algorithms need to be corrected, because of a 100-metre difference. It’s almost impossible to change the actual algorithm, but consumers can engage with the data and highlight an error.” It wouldn’t have made that mistake if the app had records of Davids’ spending patterns, of course. And that’s where PSD2-fuelled access to banking data will be useful. “We are currently experimenting to see how we can complete the user profile using data from banking transactions,” says Davids. “To come back to the example of someone visiting a McDonald’s, we will be able to cross-reference to see whether they were just visiting or bought a full menu, a small cup of coffee or a doughnut.” This also enables InsureApp to package and make additional product offers to customers, based on what it sees. From the carriers’ perspective, InsureApp’s capabilities can be easily integrated into existing IT using application programming interfaces (APIs). Founded just two years ago, InsureApp has certainly made an impression, winning a raft of awards already. Its ambitions for the year ahead include landing some of the major world players currently testing the solution, opening a second office in America and securing growth funding. “We just have to keep pushing forward,” says Davids, “because there’s a lot to do in this industry.”

Issue 9 |



Digital sweet spots In Singapore’s smart city state, data provides attractive opportunities to collaborate, says Janet Young, UOB’s Head of Group Channels and Digitalisation Singapore has long been an international crossroads – a hub for maritime trade that today still provides a link between East and West, specifically bridging China and the Association of Southeast Asian Nations (ASEAN) and America and Europe. The city state’s openness to trade and collaboration opportunities has been key to its success and that mindset is embedded deep into the strategies of Singapore's United Overseas Bank (UOB). This is crucial now more than ever, according to Janet Young, UOB's head of group channels and digitalisation. “In every disruptive moment you can always find a common sweet spot over which to collaborate,” she says. Most significantly for UOB, Singapore’s smart city agenda – potentially one of the most disruptive in the world – has created the opportunity to provide its customers with a better experience when signing up for financial solutions with the bank. From the bank’s perspective, it’s a useful way of accelerating onboarding and from the regulator’s perspective, it vastly improves know your customer (KYC) procedures. In November last year, the Government’s portal MyInfo, a central database that holds personal data, including passport numbers, contact numbers, addresses, education, job and income details on more than three million of the nation’s citizens (or virtually all the adult resident population), was opened up to third parties for the first time. Four banks, including UOB, were invited to take part in a pilot scheme that enables customers to authorise the bank’s access to relevant personal information stored on the system to autofill bank enrolment forms. In addition to enhancing the customer experience, it is a useful way


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of accelerating the onboarding process and, from the regulators’ perspective, vastly improves know your customer. It resulted in an 80 per cent reduction in the time taken to onboard customers. Other non-banking businesses will go live with the MyInfo portal this year. “Using MyInfo, we can onboard customers virtually and more seamlessly,” says Young. “Assume you want to apply for a UOB One account, which has a credit card, a savings account and enables you to pay and transact. If you come to the UOB website and you are Singaporean, or a resident in Singapore, UOB will almost immediately pull the information from MyInfo and give you an instantaneous approval on your application. You will be able to get your card on the same day.” Since regulators increasingly impose tough know-your-customer (KYC) and anti-money laundering regulations, it makes sense that governments play their part to ensure personal data used by the financial sector is of the highest integrity. “The power of being able to get that integration means we do not have to do a face-to-face interview for KYC,” Young explains. “Processes can be seamless, convenient and, most importantly, secure for the end user.”

Collaboration with government It’s not the first time that UOB has worked with state departments in Singapore. It is also one of three banks to provide a Child Development Account that includes a matched-savings element from the Government. But in UOB’s case it took that as a starting point to go much further. The Child Development Account includes a Baby Bonus payment card that can be used to pay for a wide range of permitted children’s expenses under the statutory scheme, including education and

healthcare. It also, of course, gives the bank greater insight into parental spending and it’s a good stepping stone to other bank services. Families who take advantage of UOB’s One Account, One Card and Junior Savers Account also have access to privileged offers and discounts from selected partners that provide child enrichment and education products. In addition, the bank introduced other solutions to help parents plan for their child's future needs. Through the UOB KidSmart Programme, parents can discover their child’s natural talents through the internationally recognised MIDAS (Multiple Intelligences Developmental Scales) aptitude assessment tool and identify the suitable savings and investment solutions to support them. With an understanding of their child’s talents, the bank hopes they will be able to identify the suitable savings and investment solutions that will enable them to support their children. It’s an example of how financial service providers can go beyond providing products to addressing the lifestyle needs of their customers. Young says: "UOB worked with technology firms to help schools collect fees from parents directly. By doing so, we were able to address schools’ pain points in fee collection and finance management. This helped to reduce the time spent by administrative staff on reconciling parents’ payments via cash and cheques, and having to follow up on late payments. It is estimated that this will save schools an approximate 25 hours a month on administrative work. “It’s just one example of how banks like ourselves can collaborate with other organisations in the business ecosystem – anything from social media platforms to large retailers or shopping malls – to

provide our customers with a better experience and to drive business performance. Such collaborations have the potential to expand into many different realms and that provides banks with the ability to add value to each of the partners in that ecosystem.” The ecosystem in which the UOB Mighty app functions is specifically around payments, shopping and hospitality. Mighty turns a phone into a mobile wallet with QR code scanning, payments to mobile phone numbers via messaging apps and foreign exchange features. But on top of it is a social media dimension – the app allows users to search for and book restaurants, then encourages them to review and rate them. More than 3,000 restaurants are currently listed. Young explains: “It is an all-in-one lifestyle app that enables you to not just bank, but to dine, travel, pay, conduct foreign exchange and earn rewards. You can also check out what your friends are saying about the latest restaurant, hear about their favourite dish and look through their daily interactions. It's the kind of innovation that we could spin off, looking at how our partners are evolving around their own growing engagement with their clients.”

The icing on the cake Data isn’t just valuable in retail banking. In trade finance, historically important for a bank that developed by serving entrepreneurs, it’s also central to the development of Singapore's new National Trade Platform (NTP). Built to replace existing trade declaration and logistics portals, NTP is an open innovation system. During the planning stages, developers held scores of meetings with existing users who provided around 300 ideas for what the new platform should include. Young says ‘the collaborative effort, which involved virtually every part of the value chain’ is a pioneering one. She believes the model will set the benchmark for the rest of the world,

The infrastructure and systems that UOB has invested in are ready. Should each country’s regulators roll out a service similar to Singapore’s MyInfo, we will be able to onboard customers online seamlessly

strengthening Singapore’s position even further as a trade hub. “Last year, it was announced that we will connect to the same national trade platform that is being built by Hong Kong,” she says. “That connectivity will enable a lot of flow for our large corporates in the trading, manufacturing and commodity sectors, and I believe it will grow beyond Singapore and Hong Kong. Can you imagine all the other major trade hubs and financial centres being able to build that level of connectivity for the exchange of goods and services? “Because of Singapore's location, at the centre of a tremendous, dynamic growth region, UOB can take advantage of many such possibilities, given our ability to provide financing for trade deals. Along with other banks in Singapore, we work to ensure that, when trade comes in, we are able to provide support in terms of financing and payments.”

Ready and waiting UOB operates in 18 countries outside Singapore where levels of data integration vary – but the bank will be ready for them to provide customers with digital solutions when it is possible to do so. “To give the example of Vietnam, if we want to acquire our customers online we still need to complete the last mile by getting a wet signature with a face-to-face verification. We manage that today by sending a motor scooter agent to a customer's doorstep,” says Young. “The infrastructure and the systems that UOB has invested in are ready. Should each country’s regulators roll out a service similar to Singapore's MyInfo architecture, we will be able to onboard customers online seamlessly. That exchange of data and ability to recognise and immediately respond to it, is a capability that we feel is core to how we can enable business in the digital world.”

Issue 9 |



Costs andcontrols

The revised Markets in Financial Instruments Directive, otherwise known as MiFID II, was front of mind for the senior SmartStream team when we sat down to talk transaction costs, robots and blockchain

FINTECH FINANCE: It’s been a few months since the EU rolled out what’s been called its most ambitious regulatory regime ever to affect the investment industry. I’m guessing you guys welcome the attempt to make trading more transparent, but it’s a complex piece of legislation (1.4 million paragraphs no less!). What impact have you seen it having so far on your clients? PETER MOSS (CEO, SmartStream Reference Data Utility): Last year, our conversations with clients were almost entirely related to MiFID 11. It was obviously brought in as a reaction to the financial crisis – a sort of European equivalent to the Dodd-Frank legislation in the States – but the implementation mechanism has been completely different. The fundamental goal is the same: to make it a fairer market, one that anybody can participate in, and I think transparency will be substantially better as a result. The


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complication, I think, is the explicit way the regulatory authorities in Europe have wanted the industry to do things. The legislation has been around for six months with the mechanisms now starting to bed down reasonably well. There are still data inaccuracies, but a growing focus on resolving these from national regulators. The European Securities and Markets Authority (ESMA) continues to roll out aspects of the regulation with mandatory reporting of legal entity identifiers (LEIs) on July 2 and the mandatory systematic internaliser (SI) regime on September 1. From our perspective, the main focus of effort has been around the SmartStream Reference Data Utility because MiFID II requires a significant amount of reference data for each security that trades. The concept of a reference data utility and MiFID clearly go hand in hand, so, we’ve built a set of data and application programming interfaces (APIs) that make it very easy for

banks to get hold of the reference data they need for pre-trade price transparency, post-trade reporting and transaction reporting. Those are the three areas that have also dominated most of the trading automation across the industry. FF: You mentioned, Peter, the three areas seeing the highest interest in trading automation. Where is SmartStream looking to introduce robotic processes? Vincent Kilcoyne (SmartStream head of product management): This is very much where SmartStream has been focussed for decades – in helping banks to automate their processes across diverse problem spaces, such as fees and reconciliations, and now, increasingly, on the data management side. We’ve been working with a broad spectrum of financial services providers on higher levels of automation and advanced

analytics, so that banks can understand where the pockets of cost and bottlenecks are. We can then help them to improve their exception management, for instance, or throughput, driving down their daily cost of operations while also ensuring that all of the people who require that information are kept aware of it in a timely manner, so that any remediation does not impact on the reputation of the bank. PM: In the trading markets, quite a substantial amount of automation has already been introduced. If you look at equities in particular, we’re seeing huge volumes flow through the electronic venues. That’s as a result of the focus on automation over the last 10 or 15 years. But what’s now very apparent is that, in order to get the automation to work effectively, we need good, clean, quality reference data. And that’s where the SmartStream Reference Data Utility comes in, because it’s one thing to create data that is good enough for humans to process, but it’s another entirely getting reference data of the quality, completeness, accuracy and timeliness for a completely automated process. The data set that the Reference Data Utility is creating will be very much in demand as automation increases. FF: And how is that automation helping banks to contain and drive down costs? VK: Up until around 2007, banks, hedge funds, etc, were all engaged in a lot of high-margin activity, which masked, to a large extent, the underlying operational costs. That behaviour became increasingly unacceptable, so the banks have retrenched from some of those activities and are refocussing on their bread-and-butter business – foreign exchange, money market, fixed income. The only way in which they can really drive margin and take the volatility out of the financial results is by automating. The volume of customers is not that much greater, but the margins associated with supporting those customers have changed and the banks have to understand and manage that cost of service. Darryl Twiggs (head of strategy at SmartStream): Return on earnings hasn’t grown in the way that banks would like. So, this puts a

greater focus on operating costs: how they increase revenues, develop new businesses and provide more charged services. Many of our clients are going through a significant process of re-engineering projects, centralising previously decentralised operations, rationalising the number of solutions they’re using and moving people from labour-intensive tasks to using their skills and knowledge to attract more business. Our solutions and services enable customers to achieve those objectives. And because they are all under the Transaction Lifestyle Management brand, formed on a single, technical stack to be shared and used by multiple systems and solutions, the cost of ownership is reduced. You only need one technical team to support multiple solutions. That’s our unique position as a software vendor. With a single technology we are helping clients to solve the big data problem. We provide a managed service, hosting the software on behalf of our clients and providing the operational staff so that clients can enjoy the benefits of economies of scale and shared enterprise solutions.

The concept of a reference data utility and MiFID clearly go hand in hand FF: That would suggest that banks need greater visibility, both of their data and liquidity? Rocky Martinez (chief technical officer for SmartStream): Correct. We saw what happens when they don’t keep an eye on their cash management in 2008. What keeps bankers awake is not knowing whether they have enough cash to meet their overnight requirements. They can’t know it because they are running disparate systems – a treasury system, a trading system, a custodian system – and they all have different types of cash. SmartStream can give them a holistic view of all of it. We take all of their projected and actual payments in real time and make sure they’re correct. If they’re not, we can create

an exception, and say ‘hey, you’ve got a problem. There’s a payment in, but it wasn’t created properly’ and auto-balance those accounts again. So, the system is constantly telling you, in near real time, what cash is coming in and what is going out. There’s a story some sales people tell of a $30billion deposit made at a bank that no one saw and it ended up paying a $10million interest fee on it because it wasn’t swept into an interest-bearing account. The SmartStream system is designed to make sure that doesn’t happen. FF: So, what are your priorities as a company this year? PM: There are three things we are focussed on in 2018: MiFID, selling our existing listed derivative product and building out our equity proposition. We believe there’s a lot of opportunity to sell MiFID products over the next six to nine months to different types of organisation. Among those, we see some people wanting to fix things that didn’t quite work; others are looking to optimise what they built and make it more cost-effective and sustainable – we think we can help there, too. We also see some organisations wanting to put in place a control framework so that they can validate that they’ve reported the right things to the regulators – MiFID requires that cross-checking capability. RM: We’ll also continue to work with a major provider to look at cross-border trades on blockchain, instead of using SWIFT, which can take hours to see a transaction. With blockchain, it can happen in three or four seconds. As soon as a cross-border payment hits the chain and we are notified, we can apply it to our cash management system. It’s going to make cross-border payments that much faster and cheaper because you’re not paying seven per cent to deposit, say, $400 that’s going through the traditional batch processing – what I call the sausage factory. Instead, you’ll be paying a couple of percentage points to a blockchain partner and the payment hits the account within three to four seconds. The fact that our partners had banks already signed up indicates there’s an appetite among banks to avoid large infrastructure fees.

Issue 9 |



Fixing the financial


Richard Carter, MD of Equiniti Credit Services, believes the pipework underpinning loans provision could do with a refit. And he’s got the toolkit Richard Carter, MD for one of the top European providers of software for loan activities and a proud member of a growing cluster of lendtech firms in northern England, is pondering the company’s role in financial services. “We’re plumbers, not tilers,” he says. “We provide the underlying technology and the capability that allows a bank or other lender to go and build their brand.” It’s an apt metaphor. Founder of the Leeds-based Nostrum Group, which was acquired by Equiniti in 2017, he’s in the business of making sure credit can flow where it’s needed at the right time – for everything from a mortgage to a mobile phone. And, depending on where you are in your life journey, he understands that the way you wish to access that gush of cash will vary. “Nobody ever wakes up in the morning and says ‘you know what? I’m going to borrow some money today’,” says Carter. “They think ‘I really must get a new car’ or ‘we need a holiday’ or ‘we’ve got to get some furniture for the new house’. And then the finance follows that purchase.” But what if it didn’t? What if you, as a lender, were using an intelligent loans platform that used data to anticipate when a customer might appreciate you turning on the tap and before they reached the point of purchase? Not only could that generate sales, but it could also solve one of the biggest issues in the industry, that of vanishing brand loyalty. Gone are the days when a customer would return time and again to the bank manager for finance, impressing him with polished shoes and six months of good financial behaviour.


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“There’s a distinct lack of loyalty for loans from the same provider,” confirms Carter. “That’s a particular problem for the banks, which should be concerned about being seen as utilities after the revised Payment Services Directive (PSD2), where other providers are just using their rails and taking the bank out of the relationship with the customer. The principle of joined-up banking – where holding the customer’s current account and savings account provides the opportunity for cross-selling a loan – should absolutely be driving more share of wallet for banks.” But in fact, it’s often the retailers selling the goods who are presenting the credit that finances them, too.

There’s a distinct lack of loyalty for loans from the same provider. That’s a particular problem for the banks “Consumers will generally take out one loan agreement – when they buy white goods for the house, for example – and they’ll pay some of that off. Then they buy some more furniture. But they don’t go back to the same provider, they take the one that’s offered at the point of sale. They’re so involved in buying the goods, they’re not really bothered about how they get the finance, just so long as they do. That points to a potential disruption in the marketplace – an opportunity for a lender to provide that seamless service. “I think loyalty, when it comes to loan providers, is an area of the market that could change dramatically over the coming years.”

And the platform that he built and which Equiniti Credit Services offers, shows how. “Ultimately, it comes down to using data more effectively to pick up on obvious lifestyle changes when consumers might need finance,” says Carter. ‘If you look at young people coming out of uni, they’re going to get their own place and a job somewhere. They need to buy things they haven't needed before for a home that they’re probably renting at this point. So, they’re going to want an unsecured loan. But as they move on, they need other forms of finance. At some point, they’ll probably get into a long-term relationship, buy a house and possibly have a family. The vehicle that they’re using, for instance, is going to have to change – they’ll need a larger car. And when the family’s flown the nest, they’ll trade down to a smaller one.” The more data customers are willing to share, the more personal offers can become to help ease those financial pain points. Carter uses a moment in his own domestic life to illustrate. “We’d just bought a new house, so any lender that I’d notified could have seen that I was trading up from one postcode area to another. I had 10 or 15 years of good credit behind me, but nobody wrote to say ‘you might want £15,000 for new curtains, furnishings or a new kitchen.’ If they had done, at the point my wife and I realised we really couldn’t make do with the old kitchen and needed a new one, I wouldn’t have argued about the rate. I’d have said ‘brilliant, where do I sign up?’ because I needed that kitchen! “If you take it a step further, with low-powered bluetooth devices there’s no reason why a retail finance company couldn’t detect when I walk into an Apple store and say ‘if you want to go buy that

new Mac, Richard, here’s £1,000’. There’s a load of compliance and regulation that sits behind that, of course, but it completely changes the dynamic around how finance is delivered to consumers – to prompt the purchase of an asset, rather than following the purchase of that asset.” Importantly for the banks, which in their enthusiasm to capture more customers have tended to build different loan products in different stacks from the ground up, the Equiniti Credit Services platform also allows for a more efficient use of resources on which that credit is constructed. “With the one platform, you have all of the regulatory aspects sitting underneath, – all the reporting, the capital adequacy, etc. You just need to do it once,” says Carter. “We’re able to bring together a behind-the-scenes proposition and deliver it to the banks or the lenders so they can go launch their own differentiated propositions, maybe targeting very specific market sectors.” Extensive aggregated and individual data also helps to inform more nuanced lending decisions – not the ‘computer says yes/ computer says no’ binary analysis that credit referencing agencies provide. “The problem with credit referencing is that it’s based on historic data,” says Carter. “Historic performance is not a guarantee of future performance. Just because I paid all of my loans in the past, why would I pay all of my loans in the future? There’s a wealth of data out there now that will allow lenders to make a better, more informed credit decision, even helped by looking at how people interact on the website. If they move the slider all the way over to the right – ‘I want the most amount of money, for the longest period of time’ – it indicates they’re kind of desperate. If they move it around a little bit and diligently read through the Ts&Cs, they’re likely to be more considered.

Lenders can use a lot of that behavioural data from the site to start to build more of a profile of the person. “There’s a big debate about the extent to which social media data is allowed in credit decisions. I think it’s an inevitability, ultimately. We all leave this tremendous exhaust of data out there – Facebook, Twitter, LinkedIn – that lenders can use simply to validate information. I think social media data will come to the fore and again that allows the lender to get a much better data set.” Being part of a larger financial services group in Equiniti allows the platform much more ambition. “We’ve a tremendous pipeline of work with existing clients, some of it really innovative,” says Carter. “There are a bunch of clients who are launching new propositions that leverage the power of our platform, as well as clients coming onboard who are creating products that have tremendous potential to disrupt the way in which finance and banking are managed. I’m looking forward to seeing how we integrate more of the data capability we have built with the broader Equiniti Group to offer something hugely differentiated from any other lendtech.” Making funds flow: The Equiniti platform replumbs the lending system

Issue 9 |



From little acorns... OakNorth has grown into a unicorn faster than Co-founder Rishi Khosla could have hoped. Now it’s seeding new opportunities Given the current uncertainty in some quarters regarding UK business investment, a partnership with a sturdy, reliable neobank would seem a priority for ambitious SMEs casting around the expansive fintech forest for somewhere to draw down funding. Step forward OakNorth, the digital UK savings bank and commercial lender, standing tall with what co-founder Rishi Khosla calls a ‘dramatically different solution’ to the problem of bespoke SME lending that high street banks struggle to deliver with their legacy tech. Flourishing in the fertile mid-cap lending market, offering loans of between £500,000 and £30million to businesses and property developers, OakNorth’s rise above the fintech canopy since its launch in 2015 has been impressive. It was the first challenger bank to partner with the British Business Bank’s Help To Grow programme; the first to become fully-hosted in the Cloud in what the Financial Times called a ‘landmark move’; and, significantly, it was the first UK digital bank to turn a profit, which happened in 2017. Professional experience combined with algorithmic assistance give digital challengers like OakNorth the edge over incumbent banks, according to Khosla. “By combining very strong data science and data analytics with a traditional credit approach, we’ve created a man-and-machine platform, which has helped scale OakNorth very significantly over two-and-a-half-years,” he says. Self-identifying as the bank ‘built by entrepreneurs, for entrepreneurs’ – Khosla


| Issue 9

himself was a recipient of the Ernst & Young Entrepreneur of the Year Award in 2011 – OakNorth is fast conquering the ‘middle area’ of the lending ecosystem, nestled as it is between the multi-million-pound loans offered by the UK’s Big Five banks and those made available by other neo-lenders servicing the modest needs of startup enterprises.

Flourishing among mid-caps OakNorth lends on average £4million to those mid-caps, but that doesn’t preclude it from making flagship deals, especially in its specialist property portfolio, such as a £20million loan to Whittlebury Park Estate for a leisure development in 2016 and, more recently, a £20.5million debt finance arrangement for Caridon Property to build hundreds of flats in Bristol.

If you look under the hood, very little of what we do is like a traditional bank At the root of its success is the aptly-named ACORN machine platform, a technological collaboration between data scientists and credit analysts that’s delivering SME loans in weeks rather than months, using millions of data points to analyse credit decisions at speeds unmatched by commercial rivals. “Legacy slows down the incumbent,” says Khosla, whose bank achieved unicorn status in 2017 after £160million of investment from Toscafund, Clermont

Group and Coltrane Asset Management and £90million from Singapore’s GIC ramped up OakNorth’s valuation to $1.3billion. As well as offering flexible, tailor-made loans to SMEs through rigorous and efficient credit analysis, the ACORN platform itself has now seeded a new commercial revenue stream. Offering the platform to other banks and non-bank lenders was the quickest way to scale the business internationally, says Khosla, whose experience of regulatory roadblocks warned him that there was limited scope for quickly establishing OakNorth outside of the UK in any other way. “We’re already talking to clients in eight different countries – the eighth largest, fourth largest, and third largest bank in different markets, as well as implementing in three countries. We’re talking about plugging the ACORN platform into banks’ existing SME businesses, which will provide us with significantly more scalability, much quicker, than we’d be able to do alone.” He hopes the strategy will take the bank’s £1billion loan book to £2billion within the year. Redefining banking services around efficient machine-learning models will set legacy banks ‘a challenge in keeping up and reinventing themselves for the future’, says Khosla. And he warns they could be barking up the wrong tree if they invest billions in terrestrial IT projects; OakNorth, like other innovative

Golden harvest: OakNorth has grown rapidly

neo-banks, was an early fan of life in the infinitely flexible Cloud. “The Cloud gives us much better security around the platform and enables us to update our infrastructure easily, which leads to much more flexibility,” says Khosla. Indeed, it was OakNorth which, after attaining its full banking license, worked with Amazon Web Services to convince the UK’s Financial Conduct Authority (FCA) that Cloud-hosted banking is more secure than a co-host environment. “That led to the white paper that the FCA published on the issue,” Khosla says. “As soon as that was done, we took the decision to flip our infrastructure into the Cloud and, because our data is logically organised there, our ability to extract, search, determine and manipulate that data is stronger,” he says. All those are characteristics which make compliance with the new General Data

Protection Regulation (GDPR) that much easier, too.

Man-and-machine partnership Data provides quantitative reassurance, but it’s not why the company was named City A.M.’s 2017 Bank of the Year. Rather, it was the team’s business experience, which is augmented by machine-learning, that allows it to enter funding partnerships through informed, face-toface discussions, giving qualitative guidance on the bank’s decisions. Khosla is proud of this duality, which the bank claims has directly stimulated the UK economy by helping to create 4,000 jobs, producing £4billion in economic output. And with more than 20,000 retail deposit customers to date enjoying OakNorth’s generous 1.9 per cent rates – higher than most high street contenders – its deposit services are equally attractive to investors and borrowers.

So, where next for the bank that became the fastest-ever unicorn just two years after launching? Khosla keeps some cards close to his chest: “We’re experimenting in the mobile area, evolving different ideas – there are multiple different products that we’re playing around with to lead through into a mobile app,” he says. For him, it’s a case of taking advantage of the spaces left vacant by slow-off-themark legacy banks, especially in the area of artificial intelligence where OakNorth leverages its strengths. “If you look under the hood, very little of what we do is like a traditional bank,” he says. “So, I think the banking sector is looking at a quite significant shift in approaches, leaving players like us to scale in our spaces.” And it’s in those clearings, no doubt, that it will continue to make grateful tree-huggers of finance-hungry SMEs, looking for that golden acorn. Issue 9 |


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The Davos of Fintech

The Davos of digital finance & fintech is coming back next January. Let’s have a closer look at this event through this interview with the event founder, Laurent Nizri.

Laurent, we heard that the last edition in January was a success, could you give us a few highlights? Indeed, the forum welcomed 2600 attendees from 72 countries among whom 60% were C-level and directors, 240 speakers mainly CEOs of bank, insurer, regulator and of course numerous fintechs from all over the world. In addition to that, an unprecedented panel on the future of finance with 4 European Ministers of Finance was held on stage, around 100 sponsors & partners and 120 exhibitors took part in this event, and 8 international fintech awards were given away… Those figures underline the edition’s success. But that’s only a part of it. What makes us even happier with this 3rd edition are our attendees’ direct feedbacks, whether they are speakers or participants. Most of them attended the two full days, they learned many things, and finally they made business in one way or another (new partnership, new customer or supplier, investment deals, media etc.). Time is money for all of us, and when you decide to spend 2 days of your life at an event you must have a return on investment. The forum must be a good mix of knowledge, high-level networking and real business. The feedback we received on those 3 elements are astonishing. Could you give us 3 specific strengths that made Paris Fintech Forum so special? First, we are a content driven event that welcomes only finance and fintech leaders on stage. We try to select the key actors of the industry, such as CEO of a top tier one bank (as BNP Paribas, Crédit Agricole or Société Générale), or unicorn Fintech like

iZettle or a young promising one like Loot, and the top leaders of regulation authorities like the French central bank governor or the European Banking authority CEO. All being on the same stage to debate and enlighten us on the future of the industry. You won’t find expert keynotes or vendors sales pitch, just high-level discussion between “Doers”. This year we had 25 interviews, 65 panels and 100+ fintech pitches, more than what you can attend by yourself! Secondly, we are truly global: the 150 fintechs CEOs on stage came this year from 40+ countries, France representing only 15% of the total, and the verticals presented by those entrepreneurs were a reflection of the fintech reality: lending, payment, insurtech, blockchain, PFM, wealth management, …at all development stages ranging from early to unicorn. Some sectors are clearly more mature,

We are a content driven event where you'll find only finance and fintech leaders on stage. We try to select the key actors of the industry. already at a consolidation stage like payment and lending, and some are only at their very beginning in terms of industrial results. But all deserve to be equally discussed and put upfront. Last but not least, with the help and support of all our partners, we try to make each minute of the event a “5 stars experience” for all our attendees: top quality of content on 6 stages, astonishing 200 years old venue in the center of Paris (former stock market exchange), champagne lunches for everybody, dedicated 1to1 networking app, VIP side events, Gala dinner in an historical Paris landmark etc.

I remember looking at your advertisement and thinking that it was absolutely impossible to get so many CEOs on stage. Did they all attend? We only had two last minute cancellations for personal matters on a total of over 240 speakers; so I think we can say they all came. Just to give you a few examples of who was on stage: group CEOs of BNP Paribas, Société Générale, BPCE, SWIFT, Wirecard, Orange, BankMobile, Kabbage, Transferwise, Zopa, N26, Revolut, iZettle, Cross River, Starling Bank, Yandex Money, UAE Exchange, World Remit, Lemonade, Trov, Saxo Bank, Euronext, Data Robot, Moven… And is there a specific weakness you would like to adjust for the upcoming 4th edition? Definitely. As mentioned previously, we are very diverse in terms of geography and verticals. Unfortunately, we are not as diverse in gender. We did have 10% of women on stage last January, which is a lot if you consider our condition of being a CEO stage only. It’s good to highlight that in our industry we do not have more than 5% women at this high position, but it is clearly not enough, and we have to be much better in promoting women’s success in Finance & Fintech.


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Issue 9 |




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PARIS FINTECH FORUM What are the measures taken to correct that situation? Even if we cannot correct by ourselves the industry’s gender inequality, we’ll do our best this year to get on stage as many successful fintech and finance women leaders as possible. We took a few actions for that, let’s mention 2 of them. First, we put in place a “virtual advisory panel” with key actors of the industry willing to help us in finding and attracting more women leaders on our stage, as of course we need a new vision angle to help us correct what we were not able to previously do by ourselves. Secondly, we took an external help to do a specific screening and listing of women fintech CEOs & founders and we’ll proactively contact them to try to heavily correct the very low gender ratio that we had last year on direct fintech application. Of course, just like anyone else, they can already apply on our website to be selected to be on stage. Speaking about the 4th edition which will be held next January 29 & 30, will you change the venue to cope with your growth, as you were at full capacity during the last edition? Of course, we thought about it. We had 40% increase in participants between 2017 and 2018, and we had to close registration because tickets were sold out. We took the decision to keep the same venue as we think that to make the best of such an event we need to keep it at a reasonable size where interaction and networking is still easily doable. No doubt, that this will direct us towards a more selective ticketing process and earlier registration closing date. Nevertheless, keeping that astonishing venue and limiting the growth of attendees were clear feedbacks of our attendees, that we will be loyal to. What will be the key themes of the 2019 edition? It is of course a bit too early to answer this question, to be very honest. However, I can already tell you that in addition to the usual verticals themes we always treat (neo banks rising, finance as a platform …) we’ll have new focuses on several key themes such as Data in Fintech (GDPR is here), AI real use cases, Cyber risks in finance, cloud base finance, a dedicated focus on asset management & market industry, and the

new European regulation playing field for regtech. And that’s just a sneak peek on what will be a 100+ session agenda. How do you select the fintech you propose to be on stage? My team and I are travelling 2 or 3 times per month to every key event taking place in Europe, Asia, US, and Middle East, and to be honest geographically speaking we do not have clear limits besides time and opportunities.

We had 40% increase in participants between 2017 and 2018, and we had to close registration because tickets were sold out We try to meet as many potential interesting players as possible. In parallel, we have a public online application (www. where any Fintech can apply to be on stage. Last year we had more than 800 fintech applications from 52 countries. We expect even more for this new edition. As we are building the program week after week, my

only advice will be to register as soon as possible on our website platform. Last but not least, since day 1 in 2016 during the first edition, you spoke about this “coopetition concept” between incumbents and fintechs, kind of a mix of cooperation and competition. How do you bring this concept to reality at the Paris Fintech Forum? We do it at many levels, promoting as much on stage as off stage the different ways to work together in the industry (partnerships, investments, customer/suppliers, white labels, buy outs, …), and of course not forgetting the reality of competition between the different actors in our panels on stage. As an example, for this upcoming edition we’ll organize dedicated sessions in specific lounges to foster meetings between fintechs (established ones as new players) and top tier one incumbents (banks, insurance and telcos) who want to meet disruptors to work with them. Those sessions will be open to registration to any fintech CEO or founder, being a speaker or an attendee and will be led by top level management on the incumbent side. We’ll follow in 2019 the real business outcomes of those sessions, and based on our past experience we are sure it will be terrific.

Last Paris Fintech Forum at a glance*


CEO speakers


fintechs on stage














fintech & tech

banking & finance


institution, media & VCs


C-level & top management


CEO & founder


C-level & director


Mngt. team

* 2018 figures

Issue 9 |


240+ CEOs were on stage at Paris Fintech Forum 2018 Bruno Le Maire Minister of Economy & Finance of France We are one of the first countries with Luxembourg that has allowed the banks to develop the blockchain, and I strongly believe that the blockchain is really the future of fintechs and one of the most promising technology that we have now on the table.

François Villeroy de Galhau Banque de France, Governor I don’t oppose incumbents and fintechs, on the contrary I feel responsible for good balance between the various actors and for a convergence between 2 absolute necessities, on one side financial stability and on the other side financial innovation. The future of finance relies on this convergence.

Jean-Laurent Bonnafé BNP Paribas, CEO Fintechs help us in our transformation. We help them in their development. It's a mutually beneficial partnership in which we cooperate and grow together.

Gottfried Leibbrandt Swift, CEO I am completely convinced that the incumbents are only going to survive if they bring innovation to their core business (…) and use the technology to really innovate themselves at their core, instead of keeping at a peripheral thing that you just sort of dabble in.

Stéphane Richard Orange, CEO We are the first operator to launch a full true mobile bank. Our approach has been to start with the user interface and to create a fully digital experience. Our target in 10 years is to become a leading player in mobile bank as a daily service, family designed, and simply to use.

David E Rutter R3, CEO I ve been as negative as you can on ICOs but the reality is that they are here to stay, and when these two extremes [venture world Vs ICOs] are going to converge, ICOs will become better regulated, venture guys will have to evolve, and overtime the real threat could be to the banks.


| Issue 9


Quotes from interviews and panel held in Paris Fintech Forum 2018 edition Kristo Käärmann Transferwise, CEO & co-founder Most of the banks are very local businesses. We build something which has to work the same way anywhere in the world. Many banks now think about doing as N26 and integrate our services in their apps.

Nikolay Storonsky Revolut, CEO & co-founder In the next 2 years we’ll see local champions becoming global champions (…) and product will become much smarter and much more sophisticated in ways never seen before.

Anne Boden Starling Bank, CEO & co-founder PSD2 is breaking up the value chain. Unless the banking industry wakes up you'll have a situation it won’t be the new fintechs sitting on top of banks, it will be the likes of amazon and big techs providing the customer interfaces, that will be connected onto old banks who provide the rails.

Jay Sidhu BankMobile, CEO & co-founder In the USA, in 5 years I believe that the traffic in bank branches will be only 10% of what it is today. So if the bank branches don’t shrink by 90% you will create operating inefficiencies.

Daniel Schreiber Lemonade, CEO & co-founder Insurance at its core is statistics and data. We are at a tipping point, in the next 18 months we'll see a tip over where the young insurtechs have more data, deeper data and more predictive data and there are structural reasons that inhibits traditional insurance from implementing the same thing .

Shivani Siroya Tala, CEO & co-founder When I think of what comes next for us, there is obviously geographic expansion, but I also think about how can we use the understanding of our customers and the data that we have to further that relationship with products in saving, insurance, financial education, longer term investment products.

Issue 9 |



Thinking the unthinkable

Will Dove browses Chris Skinner’s future digital financial bazaar (or should that be bizarre?) where the whole of humanity’s social constructs are up for grabs Imagine walking into the centre of a bustling street bazaar on a Saturday afternoon, the air electric with the clamour of traders touting their wares. Your view is totally obscured by market stalls of every colour, the products on each one more shiny and alluring than the last. To your left you hear cries of ‘flexible access to finance for your small business’ coming from the Kabbage stall, while to your right the Moneybox merchant is demonstrating how easy it is for a passer-by to invest the spare change from the falafel they’ve just bought. This is how the retail bank of the future will operate, according to Chris Skinner, writing in his new book, Digital Human: The Fourth Revolution Of Humanity Includes Everyone – who’d have us all munching now on fried street food while setting up our next direct debit. Skinner takes things from the top with Digital Human, establishing how the human race is currently in its fourth stage of evolution, The Network Age, which will culminate in the open banking system described above. Just like Uber, Facebook and Airbnb, Skinner argues that Web 3.0 (or the ‘Internet of Value’, as he labelled it in his previous book Valueweb, released in 2016) will force banks to relinquish their current vertical control structures in order to

become marketplaces of plug-and-play processes – digital fintech bazaars, if you will. In fact, the 11:FS financial strategist claims that banks like BBVA and Santander, which have already kickstarted fintech collaboration programmes, will be the ones that survive to the end of the current age. It’s food for thought for the CIOs (Chief Incumbent Orifices, as Skinner affectionately refers to them) hellbent on upholding the closed-door ‘cathedral’ structures of their banks. However, the scope of Digital Human goes far beyond just the notion of banking-as-a-platform. In the spirit of Isaac Asimov, Skinner speculates on what would be some suitable rules for banking robots, explains how the Semantic Bank of the future will take the form of a living, breathing companion for our cyborg minds, and predicts that the concept of money may well be replaced by universal philanthropic endeavour once we become an interplanetary species. That’s right, we would no longer be driven to work by a need to accumulate wealth, but would instead toil solely for the betterment of humanity. Hard to imagine, isn’t it and, if you did, what does that mean for the way consumers, business, banking, government and society transact? Skinner’s book is a roadmap for how that future trade in value (not necessarily cash)

The Semantic Bank of the future will take the form of a living, breathing companion for our cyborg minds


| Issue 9

might take place and, while some of these ideas might sound implausible now, thanks to Skinner’s methodical approach and conversational style, at no point did I feel the slight tickle of my head beginning to explode, despite the enormity of the theories being proposed. It’s clear that this is a man who has spent more time reading, debating, and lecturing on the subject of humanity’s future than perhaps the rest of the financial services industry combined. So, who am I to judge whether we’ll all end up in an outer space colony or forego human relationships in order to tie the knot with our washing machines?

Digital Human: The Fourth Revolution Of Humanity Includes Everyone

Published by Wiley. Available in hardback and Kindle editions. Great for: Chauffeurs keen to explore alternative career options once the robots have taken their jobs (and partners) Best read: At the SpaceX launch site, regularly refreshing an internet browser in order to bag a cheap last-minute booking to Mars Good read rating: ★★★★★

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