Fintech Finance Magazine Autumn 2016

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Issue 2

Autumn 2016

Fintech in Focus

Exploring data

Digital connections with BBVA

Getting to know you

Understanding customer needs at Lloyds, Glassbox and Metro Bank

The Digital Avengers

Jason Bates, David Brear, Simon Taylor & Chris Skinner go into battle


SIBOS & Money 20/20 PLUS INSIGHTS FROM Tinkoff Bank ● Capify ● Barclays ● Willis ● Saxo Payments ● IWOCA Capgemini ● PPRO ● Nationwide ● Wirex ● MBNA ● Growth Street ● Fiserv ● Monese

Theory to fact Applying blockchain and other emerging technologies to strengthen banking Join our blockchain panel discussion! We'll discuss the tangible value this new technology offers banks and how it can be applied, the panel will be made up of eminent industry experts: • • • • •

Patrick Stutvoet - Head of Transactions, ABN AMRO Stephen Mollenkamp - Head of Channels, Ripple Patrick Laurent - Partner, Deloitte Jordan Brandt - CEO, Inpher Darryl Proctor - Director - Transaction Banking, Temenos

27th September 2016 08:00 to 09:00 (over breakfast) The Intercontinental Hotel, Geneva Following the event, all attendees will receive a summary of the session as well as our new Corporate Treasurers Survey which includes insight into your corporate customers views on innovative technologies and blockchain. For more information please contact us at






Fintech Avengers

Brave words from the digital superheros at 11:FS

SPECIAL REPORT: SIBOS 2016 13 New horizons

What Sibos holds for visitors this year

14 Banks’ balancing act

Al Carpetto of iGTB gives his personal view on challenges and trends

16 A prologue to the future

Are we building Distopia or Utopia? asks author Gerd Leonhard

18 Too much of a hurry?

How to stop real-time payments from being a fast way to lose money

21 Things are looking up

Scott Hess from Fiserv on connecting with the Internet of Things

22 Joined-up thinking

Why SEB’s Paula da Silva believes linking to blockchain is way forward

24 An Exchange of views

The London Stock Exchange Group's UnaVista is extending its reach

26 Smart moves ‘Outlier' activities have to go, says

SmartStreams’ Haytham Kaddoura

28 Turning the ship around

UniCredit’s Raphael Barisaac on why trade finance is so slow to change

30 Cleaning up your act

Good data hygiene can foil criminals’ dirty tricks, says Pitney Bowes

32 Breaking the mould

Trendsetting Allevo is at it again

34 A King-sized future

Moven founder Brett King stares into his crystal ball

38 The tech tzars

Russia’s National Settlement Depository is embracing fintech

40 To B or not to B...

EPAM’s Balazs Fejes, shares his thoughts in the wake of Brexit

42 Fintech... Brextech?

Alexander Tsigutkin of AxiomSL helps firms cope with a new world order

44 The alchemy of change

Mindset is the key to beat challenge, says Mark Buitenhek of ING Bank

46 Peak practice

Innotribe's innovation in the Alps

Autumn 2016



Welcome to the second issue of Fintech Finance Magazine, a companion to our popular Fintech Finance channel, in which we give a platform to some of the sharpest players shaping the industry today. Sibos 2016 in Geneva is upon us, and to celebrate, we have a bumper section looking at what to expect from the conference and beyond. We touch base with guest speaker, futurist author Gerd Leonhard, who challenges us to think about the ethical impact of financial technology; Fiserv talks cyber security; and we hear how NSD and SEB are finding practical ways to apply the blockchain. Then we head straight across the Pond to look at what to expect from Money 20/20 in Vegas, including latest hardware from Muira and

AEVI , and talk to Google about how Android Pay’s shaking up payments. Elsewhere, Persado explains how it’s putting ‘human-assisted’ intelligence to work. MBNA, Barclays, and others explore alternative ways to keep customers happy and BBVA’s top analysts give their view, post-Atom. We really welcomed your feedback to the last edition, so keep it coming and let us know what YOU think!

Ali Paterson |

Did you recognise last issue’s ‘spine tingler’: "I don't think of work as work and play as play; it's all living" – Sir Richard Branson 48 In or out?

60 Big brother benefits


62 POS-itive genius

Insourcing is the new outsourcing for IMTF’s Christoph Erb

51 Follow the money

Getting ready for Las Vegas

52 The end of the queue?

North America's next in line for Miura’s mobile point of sale devices

54 Frontier thinking

Bill Ready on why PayPal continues to push those boundaries

56 Love and war

Who’s squaring up to big banks now? asks Saxo Payments’ Anders La Cours

58 Password pawns

Trusona warns businesses are big losers in password memory games

WTSS Holding has got businesses’ interests covered Albert the cashless payment device takes a bow in the US for AEVI

64 Google's pizza the action Android Pay aims for a big bite of the UK’s digital wallets

CUSTOMER RELATIONSHIP MANAGEMENT 66 Move fast, build smart Daryl Wilkinson of DWC on TechSprint surprises

68 Up close and personal

How Lloyds Banking Group set out to truly Connect with its customers |



84 30 74 22 70 GO for it!

Teleperformance’s Richard Nicholls says Pokémon is food for thought

72 Why Barclays is new bf

Digital communication has put the bank on a new social footing

74 Natural selection

What does BBVA’s evolutionary lead say about an emerging ecosystem?

78 The digital truth

Yaron Morgenstern is transparently honest about Glassbox

80 Metro at a junction

‘Bricks and mortar’ Metro Bank is ready to cross the line

82 Upwardly mobile

Why Nationwide Building Society’s new phone app is a hit

84 Too much information...

Persado’s logical answer to the difficulty of big data

86 Net gains


Apply Financial's new reporting tool is already paying big dividends

90 Stronger together

It’s time to redefine the relationship with banks, says Capify's Tony Pegg

92 The way to pay

PPRO Group is going global

94 Addicted to banking

Tinkoff Bank plans a Russian one-stop shop for online financial services

96 The heat is on

Payments are under pressure, but Paysafe is keeping its cool

98 Shopping the world

Julian Wallis of Ingenico on a tailored strategy for the ecommerce market

100 PayExpo heads east

MENA is a region thirsty for payment solutions, says Zehra Chudry

102 Let's get real

Banks must reset the clock on payment times, says Capgemini

104 Arms around the world

The 'Best Challenger Bank in Europe' Monese solves an ethical dilemma

106 Cards without frontiers

Expanding Contis Group isn't fazed by a Brexit bombshell

109 Bit better

How Wirex plans to take cryptocurrencies mainstream

COMPLIANCE 110 Ill-gotten gains

ComplyAdvantage on how regtechs are reimagining financial crime risk

112 Risk and reward

Compliance isn’t a stick; see it more as a reward, says Willis Towers Watson

114 You are the weakest link

Featurespace takes its AI ARIC across the Atlantic to keep businesses safe

Footie-mad MBNA is scoring points all round with customers



Autumn 2016



90 116 The last laugh

Former LulzSec hacker Mustafa Al-Bassam is backing blockchain

SMEs 118 Vive la fintech!

French crowdfunding platform is magnifique

120 Power to the people

Business lender iwoca looks to make new friends among the banks

122 Street smart

Growth Street has its eyes set on a financial super-highway for SMEs


Taviq is setting out to help advisors 'disrupt themselves'

126 Rich pickings

Chuck Thomas from Gartner's three top tips for a more profitable future

BRANCH/ATMs 128 Check this out

RBR on retail checkout processes

130 Hole in the wall evolution

Why ATM and card providers look to Cennox Group to keep them safe

132 Dispensing solutions

Could ATMs provide a crucial public service? asks Ron Delnevo


Women in fintech have a new voice in the emerging payments industry

138 New look at accessibility How software developers can improve access for all

141 A chain for the better

Could the blockchain free millions of migrants from misery?

142 Back to the future

Chris Skinner's new book Valueweb asks, 'have we been here before?'

Autumn 2016

120 FINTECHFINANCE ISSUE #2 AUTUMN 2016 EXECUTIVE EDITOR Ali Paterson EDITOR Sue Scott ART DIRECTOR Chris Swales PAYMENTS DIRECTOR Doug MacKenzie SECURITY DIRECTOR Nikheel Solanki COMMERICAL DIRECTOR Jason Williams FEATURE WRITERS Dylan Jones, Will Dove, Sherree Moore PRODUCTION EDITOR Tracy Fletcher PHOTOGRAPHER Jordan ‘Dusty’ Drew 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 Yorkshire Creative Media | IMAGES BY PRINTED BY Webmart Limited | 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. |



The Fintech Avengers Four digital superheroes from 11:FS are taking on financial services as we know them and creating a new world in which bankers have no fear, change is good and billions of transactions take place in the Cloud. Only then will their mission be ‘more than one per cent complete’. Alasdair Paterson asked the Avengers to assemble for a Q&A

Chris Skinner

Jason Bates

Jason co-founded two challenger banks in the UK (Starling and Mondo). As CCO of 11:FS, he built the proposition, the product team, and defended the regulatory application. Prior to that he was CEO of a digital transformation company where he consulted for Google, taught at Facebook, and separated billion pound companies.

Autumn 2016

Chris is the Advisor to Special Projects at 11:FS as well as being the lead partner in the Banking On Blockchain fund with Life.SREDA. Chris is a regular commentator on BBC News, Sky News and Bloomberg about banking issues and is the best-selling author of both The Digital Bank and his most recent book, released in 2016, Value Web.

David Brear

David is the CEO and co-founder of 11:FS. Voted one of the most influential people in banking, insurance and fintech, David has delivered large digital transformations for Lloyds Banking Group and Aviva. He most recently ran the Global Digital Banking practice for Gartner.

Simon Taylor

Simon is one of the co-founders at 11:FS. Simon established Barclays as one of the leaders in blockchain thinking and doing. He also helped a variety of startups flourish, through the bank’s Tech Stars accelerator scheme. |



Ali Paterson, Fintech Finance: The message that hits you right between the eyes when you open the 11:FS website is ‘Digital Banking Is Only One Per Cent Finished’. You cannot be serious… or are you? JB: I was doing some work with Facebook a few years back and one of the motivational messages that it passed around the office was, ‘This journey is one per cent done’. At the time, Facebook had 1 billion users or so. But it struck me then that if you think something’s 98 per cent done you don’t look at the full bandwith. Whereas, if you think you’re really only one per cent done… Banking’s in that position. The passbook became the statement which became the online statement which became the mobile app statement. We’re in an era where we’ve got digitised banking rather than digital banking. None of the virtues around digital, and especially around mobile, real-time, intelligent, contextual, connected financial services, have really made it into the fundamental DNA of financial products. So we’re still stuck with the same old commodity products that our parents and grandparents had, yet we have these supercomputers that are connected to a network that will allow us to do amazing things. So, yes, from our perspective, digital banking really is only one per cent done. AP: You’ve described yourselves as being The Fintech Avengers. So where did this story begin? JB: We wanted to know what it would look like if we brought the ‘superheroes’ of banking and fintech together and that’s been pretty much the recruitment pitch ever since: ‘What have you done and what have you changed?’ We don’t like consultants very much. In fact, the more we can stay away from them the better really. I feel that bad consultancy practice has led to the state of the industry today, not just from a quality perspective but from a moral viewpoint, too. We’ve pulled together the people who have really been there and done that;

people in the organisation who have either had significant impact on transforming a bank or, in the case of Simon and Chris, been out and built a new one, which is pretty awesome. Our theory is, get a huge number of very interesting people together and stand back and see what happens. So far, it’s been fireworks.

Our thesis isn’t that every bank is going to disappear, our thesis is that banks are going to radically transform. Blockchain technology is going to be a key driver of that and there’ll be winners and losers, but actually, you know, by being involved and by making the right strategic bets, you can have an option on that future.

AP: Can you tell us a little more about the blockchain investment fund that 11:FS set up earlier this year to raise $50million? You were quoted as saying it would ‘sort the good ideas from the magic beans’. ST: There are a whole lot of people very interested in blockchain, but not very sure what to do about it. There’s been the odd pilot, the odd PLC, but there are so many potentially great companies, it’s hard to know which one to invest in. So, we thought, what if you could have an option where you hedge? There are maybe five or 10 major winners in this blockchain space and what if there was a fund that had access to all of them? It’s something like Anthemis did for fintech many years ago. That was the core idea and we partnered with a group called Life.SREDA, based in Singapore, who have done incredibly well in the fintechs space, to achieve it. They come with a really strong track record of investing in the likes of Simple and Moven, Sum Up and Fidor. They were looking for somebody who had been there on the front line, implementing blockchain inside a bank, and knew the problems that needed solving. There are some amazing companies out there that have really strong businesses, great tech teams who are going to transform large parts of financial services, and those are the companies we really want to invest in. The target has been to raise €100 million by the middle of next year and we’ve been really blown away by the level of interest from large strategic organisations. But also by the traditional investment community – family offices, asset managers and so on. They really want access to this emerging tech in a way that’s not just spread betting.

AP: So, how will traditional banks transform and, more importantly, how do we spot them? CS: A couple of years ago, the CEO of JP Morgan Jamie Dimon came out with a statement, ‘Silicon Valley is coming to eat our lunch’. Now that fintechs are being absorbed by the banks, they no longer fear Silicon Valley. They’ve got accelerators, hackathons going on… but what’s intriguing is that although banks have woken up to the challenge, I don’t think they’ve actually dealt with it by becoming internet enabled and digitised. There are even some banks that are proud of systems that were written in COBOL in the 1970s and are still in their back office. And when I say proud, they recognise that, those systems are not really as functional as they should or could be, but they don’t need replacing because they’re operating and they are cemented in place. The analogy I use for them is it’s like building Crossrail here in London: a massive multibillion pound project that is technically very challenging, because you’ve got to go through all the spaghetti of the rest of the Underground to get this new line built. That’s exactly how banks deal with their systems. The challenge is getting them to say, ‘we need to not just embrace fintech, but align ourselves with the technologies that are being used’. It’s basically a leadership challenge. Most leaders of banks are

Our thesis isn’t that every bank is going to disappear; our thesis is that banks are going to radically transform – Simon Taylor 8


Autumn 2016


risk managers, or accountants, or financial investment banking people by background. And that’s the problem. If you have people leading an institution that’s technologybased, who have no experience of technology, how can they lead effectively? I hold BBVA up as a leading light. They’re using technology systems to integrate the capability of storing and transferring value, directly – person to person, peer to peer, globally. That’s more a platform infrastructure marketplace programme than the software company that its CEO said he wanted it to be, but BBVA has been very effective in marketing itself as a fintech bank. To a large extent, of course, most banks are fintech companies, they’re just very mature ones. Their challenge is in re-architecting and renewing their capabilities to be marketplace and platform-based, rather than being stuck on old COBOL mainframes. AP: Will banks hang on to their old branch networks, or do they need chucking out along with the COBOL mainframe? DB: The branch network for many large banking organisations has been a bit of a safety net. They’ve used it as a way of bridging gaps between digital processes and people and paper. We don’t necessarily believe the branch needs to disappear, but cheques will not exist in 10 years’ time, maybe five, and physical cash will cease to be the main way of engaging with money in the not-too-distant future. Most banks are considering how to emulate retail in their branches, without really looking at what it is that retailers do within their stores that actually makes

them successful. You know, most banks are busy trying to copy the Apple Store – all wood floors and coffee – rather than changing the services they’re offering through them. JB: We’re heading for a world without branches – after all, financial services is almost a perfect digital product. But we’re in this massive transition period. Banking isn’t one of those things, like clothes, where you have to go and try something on, or coffee where you go to a shop to consume it. But equally the whole world isn’t becoming digital overnight. It’s an extremely drawn out process, when you’ve got someone in one house living on Netflix and Spotify, eating their dinner via Deliveroo and ordering their consumables via Amazon, and then the guy next door who goes shopping at Asda, watches BBC One and just lives in a non-digital world. You’ve got large banks with 20million-plus customers who are having to deal with both of them. AP: Many if not most start-ups, like iwoca the SME finance guys and a whole host of cross-border cash transfer firms, seem to set out to fix a very specific problem. What other opportunities are there for fintechs to pick off services? CS: Well, the main area where banks fall down is onboarding customers, because they have to go through this complex structure of know your client (KYC) and identity verification. That problem’s been around for decades and no one’s really solved it yet for a bank. That’s where I see interesting things happening around digital identity using distributed ledgers. Start-up companies are already beginning to say, ‘we can solve some of the KYC issues, by directly having identities registered in a sovereign state scheme, which is run through technology rather than through a bank’. That will allow a bank to work with individuals and companies in a network of trust that doesn’t exist today, which is the reason why you have to do all this onboarding KYC malarkey. I’ve just been blogging about trade

finance and some companies in the start-up mode within trade finance and the supply chain are basically creating an identity for companies in emerging markets that American and European banks have never dealt with before. They have a verified status on a blockchain, which allows them to fund and provide trade finance to those companies because they can trust them, whereas they couldn’t before, because they had no idea who they were. Equally, we talk a lot about Stripe, Klarna and others – PayPal being the oldest – which are good examples of companies taking friction out of the payment process, allowing people to pay for things across borders without the challenge of working out how the hell you get it done. AP: What piece of gamechanging technology would you like to see adopted by the industry? ST: I’ve got three! The first is native digital financial services. Reading a copy of the Daily Mail on your iPad is digital news. Buying an album on iTunes is digital music. Digital brings a whole new set of capabilities that fundamentally change the product itself. We haven’t even got into that yet. The second thing is the application programming interface (API) ecosystem. The opening of banking and financial services APIs is going to radically change the landscape. It brings all kinds of new businesses, new intermediaries and intelligence to the end consumer. But with it also is a whole lot of risk and danger and some big problems that we’ve got to move around. For me, though, it's amazing. Thirdly, is obviously the blockchain. A little further out, it really does have the potential to change the underlying fabric of financial services. JB: Very few banks go the route of actually building their own operating technology from the ground up, whereas what the blockchain will do is move people in that direction where they’re thinking, ‘how do I change the core of these services, and then how can I offer customers something truly different?’.

There are some banks that are very proud of systems that were written in COBOL in the 1970s that are in their back office – Chris Skinner Autumn 2016 |



For a large bank to be able to do that, it needs a big reason to migrate its technology, and I think blockchain is that reason. I also think Pokémon Go! Was a watershed moment for how people interact with technology, so is Amazon’s Alexa, whereas Siri and everything before it was always a bit of a gimmick. I think more of those will come, and what you’ll start to see is intelligent digital services so banking just turns up in the course of every day and reacts around you and tries to be useful to you. The app itself may disappear, but the logic may appear wherever it’s needed, inside of whatever activity it is you’re engaged in. AP: So, if Loki got his way and managed to wipe out financial services – along with everything else on the planet – overnight and you had the chance to reshape the industry from scratch, where would you start? DB: With a regulatory framework that not only pushes competition but supports innovation and change. It’s kind of critical that those things are in good shape to start with. One of the other things we’d also look to do is remove a lot of the fear from banks – the fear of new technology, fear of change, fear of punishment for trying things and from a regulatory perspective in terms of doing things. The combination of those two things would allow for interesting changes to occur. JB Primarily,I’d like to see a world in which change isn’t scary – and it is terribly scary to a bank right now. Everything feels like it’s going to cost £100 million and might fail; but actually there are better

ways to of doing things and there are people who know how to do them. You can call them, you can find them… I’m thinking of an A Team reference here, but really it’s the 11:FS Team! The things I’d also look for are automating regulation and reporting. Manual process are a huge cost centre for an individual bank and it’s a huge systemic risk for the banking industry. In 2008, all of the information that said, ‘we’re heading for a crisis,’ was there, we just didn’t understand what it meant. What you need is technology flashing a big red warning, ‘hey, this looks dangerous guys, you should really look into this more’. But what you need for that to happen is for bank systems to be automate to deliver the information. ST I guess I should point out that it would be a momentous catastrophe if the current financial services industry just disappeared overnight. It’s really easy to do bank bashing, but in the end, when you look at what they actually provide for individual businesses, for infrastructure projects, the creation of capital, the financial services industry, it’s frankly amazing. That said, the question is, how do you keep it going? The regulator’s being smart in opening relatively slowly and conservatively to competition; it could have gone faster but they’re bringing in regulatory sandboxes to test new propositions and really starting to grapple with innovation successfully. I am fortunate to have had the opportunity to sit with a blank sheet of paper and to say, ‘well, what do we build, where do we start?’ And the answer is, inevitably, ‘with the customer’. When you talk to them about the intricacies of their financial life, then all of a sudden you find that, the dance, the glide of getting from payday to payday, of trying to

Most banks are more busy trying to copy the Apple Store – all wood floors and coffee – than they are changing the services they’re offering through their branches – David Brear 10


We’re in an era where we’ve got digitised banking rather than digital banking – Jason Bates deal with the annual car insurance bill that overlaps with the quarterly electricity bill and the monthly travel card, there are real challenges that people either deal with themselves or ignore and fly by the seat of their pants. And that’s just consumers. Multiply that by small businesses, bigger businesses, capital markets… there are all kinds of work inefficiencies and of disconnected processes and errors that are out there that technology can solve, but only from a point of view of: who is your customer and what is their problem? That’s where I’d start. CS: Most of the data will eventually be Cloud based, most of the delivery of that data will be through APIs into digital platforms that give a great user experience, which are, today, mobile-based, but very soon are smart things-based. So, knowing the Internet of Things is coming, where you’ve got billions of transactions of a few cents each in value, I think that’s going to be a massive change to the current system and it’s why you really have to have a platformbased structure. It needs some form of digital identity that’s probably managed by the individuals on a permissions basis for those who are interacting with them, rather than being issued by governments and institutions. So, in that context, again, we'd need shared ledger structures, distributed ledgers, the things that we’re all excited about in financial services, using what came out of Bitcoin and blockchain, in a database structure that can enable us to have all these things transacting in billions of cents and billions of transactions every second. That’s how we’re going to reinvent things, it’s going to be getting rid of buildings and humans, and making the whole thing far more automated on software and servers. Autumn 2016

Reimagining the Financial Services Experience Core Banking Customer & Channel Management Risk & Compliance Payments Insights & Optimisation




29 Nov.


Palais des Festivals Cannes France


Register now on



We asked Sven Bossu, the man responsible for staging the world’s premier financial services event, what 8,000 visitors gathering in Geneva can expect from Sibos ■ What aspect of financial services is the show hoping to focus on this year? The Sibos 2016 theme is Transforming the Landscape, concentrating on how areas such as changing customer expectations, regulation, technology and innovation are having an impact and thus changing the financial services world. The conference will focus on many topics, including payments innovation, distributed ledger technology and blockchain, cybercrime, financial compliance and digitisation, to name just a few. There are a number of changes to Sibos this year. One of the more significant is the structure of the different forums. There were 12 last year and the feedback from some delegates was that this was too complex. Therefore, this year we have simplified the programme into four streams: banking, securities, compliance and culture, which will enhance the experience. We have also made improvements to the Sibos app, which now not only allows delegates to consult the conference programme, but also to define their own customisable programme based on their interests and availability. ■ How has the conference grown? The first Sibos in 1978 attracted 300 participants to Belgium and each year the conference has grown bigger and more impressive. Singapore last year was our biggest ever Sibos in Asia-Pacific, with more than 8,200 delegates at the Marina Bay Sands Expo and Convention Centre, showing that we are clearly doing things right and providing a conference that is engaging, useful and entertaining. This year we again expect upwards of 8,000 delegates and 200 exhibitors to

Exciting times: Sibos 2016 will address some of the big questions facing fintech, says Sven Bossu

congregate at the foot of the Alps in Geneva. We’ll serve 1,500 lunches a day and wifi will allow for 7,000 concurrent users. ■ What trends have emerged over the last year that have surprised you? Disruption and innovation within the industry have been fascinating to monitor over the course of the past 12 months. 2015 certainly felt like a thawing-of-the-ice moment, allowing for the speed of change to really ramp up. Blockchain was a hot topic at Sibos last year and since then the industry has made greats steps in working towards identifying areas that need to be addressed to mature the technology. Digitisation of financial services is another example of speed of change, with initiatives such as the revised Payment Services Directive (PSD2) having significant impact and various challenger banks receiving banking licences. Robo-advice and artificial intelligence are two other areas that have developed with

Disruption and innovation within the industry have been fascinating to monitor over the past 12 months Autumn 2016

haste throughout 2016 and will be a source of discussion at Sibos this year. ■ What should visitors look out for as a talking point/highlight? As always, we have excellent plenary sessions with great speakers lined up, such as Thomas J. Jordan, chairman of the Swiss National Bank, and Ginni Rometty, chairman, president and CEO of IBM, and the closing speech by Bertrand Piccard will be truly fascinating. Mr Piccard is a psychiatrist and the first person to complete a non-stop balloon flight around the globe. He recently flew a solar-powered airplane around the world, too! Innotribe, which promotes networking and discussion in the industry, moved centre stage last year. This year it is going to be a breathtaking amphitheatre of creativity and innovation, with speakers and thought leaders focussing on disruption, organisation, the man/machine and platforms. Sibos 2016 will be the first time the host country has its own lounge. The Swiss Lounge will showcase the country’s fintech community, with 32 Swiss companies presenting their products. |



Banks’ balancing act

Al Carpetto, EVP Americas Business Head for iGTB, the world’s first complete global transaction banking platform, gives his personal view on challenges and trends in the financial services market, and what they mean moving forward I am sure I am not alone in saying that the biggest challenge at present for the financial services industry is regulatory pressure. Despite innovations and improvements within the sector, many are struggling to comply, with a number of banks still showing significant gaps in their solutions.

The problem is, regulatory requirements have become much more granular, and the consequences of noncompliance have become more severe. Even more worryingly, there are some that believe they’ve solved all their problems – a sign that there is still a long way to go. Alongside this, there are too many banks that are still using multiple legacy platforms, which, in the majority of cases, just don’t work. If they inherit systems that are standalone and don’t communicate with each other, they end up having to make them interact and interlink. In the long term, this can be extremely complicated, as well as being very inefficient for the business. Incidentally, there are a number of non-bank competitors, outside of the regulatory circle, that are using this as an opportunity to offer payment or financial solutions to corporations and individuals. This has presented a unique challenge whereby banks now have to compete against the world’s leading companies. It is important to remember, however, that in commerce somebody is always either your partner, competitor or customer – all banks can do is assess the situation day-to-day and come up with a potential solution.

Running to keep up In terms of current trends in the market, there is huge discussion right now around the pros and cons of omnichannel solutions and what they mean for a bank’s bottom line. Traditionally, banks have operated commercial and retail aspects of the business separately. Having developed my skills in the commercial sector, I have



seen firsthand the gaps this creates. Now, more and more banks are trying to link both together by using technology that can be employed across the bank on both the commercial and retail sides. At iGTB, we have invested heavily in digital financial technology to provide comprehensive solutions across all channels for all products, so that banks can operate effectively and efficiently without the need for manual processes. Ultimately, finding a solution to the omnichannel way of working is a must for banks moving forward. After all, expectations are getting increasingly higher, so companies must find a suitable way of working that eradicates any glitches in the system. While innovation in the banking sector has been comparatively slow compared to non-banking competitors entering the

There are too many banks that are still using multiple legacy platforms, which in the majority of cases, just don’t work market, this is no surprise if you consider the recent challenges that banks have needed to overcome. Regulatory changes have resulted in many banks' budgets being spent on necessary updates rather than customer-friendly digital solutions. With other products being introduced into the global market, such as faster payments and real-time payment systems, unless you’re a large bank with a significantly bigger budget, it can be difficult to figure out which area to prioritise – considering everything is important right now. Regulatory requirements aside, I have noticed that banks are also allocating a lot of their budget to improving the client

experience. Although this is a great way to demonstrate to customers that their service is keeping up with the times, it is crucial that they consider other areas of importance.

A legacy of challenges If banks have lots of legacy patchwork systems in place and they’re looking to upgrade, there are several factors to give thought to. For instance, are they going to replace it all, or choose a new system that can run alongside existing programmes? The other question to ask themselves, if primary funds aren’t an issue, should they start now or should they wait? For tier two banks and below, there will be a little bit of a waiting game, but as ‘fast followers’ I believe the correct solution will be discovered and filtered down eventually. As for processes within trade finance, there is still a long way to go before best practice is implemented within the majority of banks. As it stands, trade finance is dominated by paper and, although many are trying to automate their systems where possible, gaining consensus and implementing the changes is proving to be a bit of a challenge. That said, the trade business will continue to evolve and there’s a lot going on in the market, so I wouldn’t be surprised if we see huge developments in the coming months. To assist with this, we have developed a platform that automates and fully integrates workflow and imaging systems. We also offer products like document scan, as well as repository services to assist banks with bottom line savings, especially on the business' operational side. Innovations in blockchain technology – a distributed database that maintains a continuously growing list of records, secured from tampering and revision – is also set to make waves in the coming months. With huge potential to save a number of banks a lot of money, not to mention helping to streamline Autumn 2016

processes and take that step into the digital era, we have already initiated a number of payments with blockchain technology and have successfully executed some transactions on the payment side. There is a plethora of other trends starting to emerge, too, many of which will no doubt come to the fore at this year’s Sibos conference exhibition and networking event in Geneva. We will be highlighting the importance of contextual banking, as well as products that focus on risk management, digital payment solutions, liquidity, supply chain finance and digital transaction banking – a package that we are currently offering to medium-sized banks. No one wants to make a payment – rather, it’s only done in the context of a specific need, whether to keep staff (by paying wages), to receive vital goods (by paying suppliers) or to avoid fines (by paying

the tax man). This crucial context surrounding a transaction – the reason for it, its background and its consequences – constitutes customers’ real business requirements that banks must satisfy. Elsewhere, we can expect to see a growing focus on mobile phone apps for both the retail and corporate sectors. As the millennial workforce moves into management positions, there is going to be a real demand for more sophisticated digital solutions and applications that can be used to streamline business practices.

Plus, if non-bank players continue to develop products, it will be interesting to see how they exist outside of the regulatory framework – indeed, surely it is only a matter of time before they are subjected to the same kind of scrutiny? Ultimately, our aim as a technology vendor and software provider, is to advise and create solutions that help to solve these problems.

Hobson’s choice: Banks need to weigh up investment in regulatory compliance against the need to innovate to compete

Autumn 2016 |



A prologue to the future One of the keynote speakers at this year’s Sibos, American futurist and author Gerd Leonhard, argues for an urgent rethink of the relationship between man and machine. Here he explains why the big decisions rest with us Human beings often extrapolate the future from the present or even the past. The assumption is that whatever worked well for us up to now should in some slightly improved shape or form also serve us nicely in the future. Yet the new reality is that because of the increased impact of exponential and combinatorial technological changes, the future is actually very unlikely to be an extension of the present. Rather, it is certain to be utterly different – because the framework and the underlying logic have changed. As a futurist I try to intuit, imagine and immerse myself in the near future (five to eight years) and then work my way back from there, rather than towards it. My new book, Technology vs. Humanity, is both a report from that future and a kind of manifesto, a passionate call to stop and think before we all get swept up in the magic vortex of technology and eventually become less rather than more human. Right now is a good time to remember that the future does not just happen to us – it is created by us and we will be held responsible for the decisions we make at this very moment. I am generally very optimistic about the future. However, we definitely need to define and practice a more holistic approach to technology in order to safeguard the very essence of what being human means. We are at the inflection point of an exponential curve in many fields of science and technology, a point where the doubling from each measurement period to the next is becoming vastly more significant. This pace of development is now evident everywhere, including in fields such as deep learning, genetics and material sciences. The time required for each exponential performance step is also declining in many fields and this is driving the potential for fundamental change across every activity on the planet. Witness the recent changes in the car industry – during the past seven years we’ve gone from electric cars with a range of less than 50 miles to more than 300 miles



on a single charge. Witness the even more dramatic cost decline in human genome sequencing, with the price falling from around $10 million in 2008 to approximately $800 today. Imagine what might happen when exponentially more powerful supercomputers move into the Cloud and become available to every medical facility or lab: the cost of sequencing an individual’s genome should quickly drop below $50. Such exponential developments suggest that continuing to imagine our future in a linear way will probably lead to catastrophically flawed assumptions about the scale, speed and potential impacts of change. That may be part of the reason why so many people cannot seem to grasp the growing concerns about technology trumping humanity. Issues such as the

Intelligent Clouds are morphing from knowing me to representing me to being me increasing loss of privacy, technological unemployment or human de-skilling are still not in our face enough. It is also important to realise that the biggest shifts will happen because of combinatorial innovation. For example, we are increasingly seeing companies combining big data and the internet of things (IoT) concepts along with artificial intelligence (AI), mobility, and the Cloud to create extremely disruptive new offerings.

Welcome to HellVen! It is quickly becoming clear that the future of man-machine relations very much depends on the economic system that creates them. We are facing what I like to call HellVen (i.e. a blend of hell/heaven)

challenges. We are moving at warp speed towards a world that on the one hand may resemble Nirvana, where we may no longer have to work for a living, most problems are solved by technology, and we enjoy a kind of universal abundance – sometimes referred to as the ‘Star Trek economy‘. Or, on the other hand, the future could usher in a dystopian society that is orchestrated and overseen by supercomputers, networked bots and super-intelligent software agents – or rather, by those who own them. Is this a paranoid view? Let’s consider what some of us are already witnessing in our daily lives: low-cost, ubiquitous digital technologies have made it possible for us to outsource our thinking, our decisions, and our memories to ever-cheaper mobile devices and the intelligent Clouds behind them. These ‘external brains’ are morphing quickly from knowing me to representing me to being me. In fact, they are starting to become a digital copy of us. Navigating a strange city? Impossible without Google Maps. Can’t decide where to eat tonight? TripAdvisor will tell me. No time to answer all my emails? Gmail’s new intelligent assistant will do it for me. As I started writing Technology vs. Humanity three important words rose to the top: Exponential Technological progress is still following Moore’s Law. The performance vs cost curve continues to rise exponentially, not in the linear way humans expect. This represents a huge cognitive challenge for us: technology grows exponentially, while we remain linear. Combinatorial Game-changing advances, such as machine intelligence and human genome editing, are beginning to intersect and amplify each other. They are no longer applied just in specific individual domains – instead, they are causing ripples across a multitude of sectors. These are developments that would up-end the entire logic of medical care and health, social security, work, and capitalism itself. Recursive AI, cognitive computing, deep learning and other technologies may Autumn 2016

eventually lead to recursive (i.e. selfamplifying) improvements. For example, we are already seeing the first examples of robots that can re-programme or upgrade themselves, or control the power grid that keeps them alive, potentially leading to what has been called an intelligence explosion. If we can engineer AIs with an IQ of 500, what would keep us from building other ones with an IQ of 50,000 – and what would happen if we did?

The paradigm shift Even without such challenges, we are already grappling with some rapidly escalating issues, such as the constant tracking of our digital lives, surveillance-by-default, the de-skilling of our kids, diminishing privacy, the loss of anonymity, digital identity theft, data security, and much more. That is why I am convinced the groundwork for the future of humanity is being laid here, today. We can no longer adopt a wait-and-see attitude if we want to remain in control of our destiny. We should take great care to not just leave these decisions to ‘free markets’, to venture capitalists, corporate technologists, or the world’s most powerful military organizations. The future of humanity should not be about some generic, industrial age paradigm of profit and growth at all costs, or some outmoded technological imperative. Neither Silicon Valley nor the world’s most powerful nations should end up becoming ‘mission control for humanity‘ just because it generates new revenue streams. Thankfully, I believe we are still at the 90/10 point right now: 90 per cent of the amazing possibilities presented by technology could play out well for humanity, and 10 per cent might already be negative. At the same time, that 10 per cent may quickly balloon to 50 per cent or more if we do not agree on exactly how we want these technologies to serve humanity. The first major force in the realm of exponential technologies is AI, simply defined as creating machines (software or robots) that are intelligent and capable of self-learning. The capability of AI is widely projected to grow twice as fast as all other technologies. The companion game changer to AI is human genome engineering. These two and their neighbours (what I call the Megashifts), will have huge impact on what humans will be Autumn 2016

in less than 20 years. Very soon, machines will be able to do things that once were the sole domain of human workers, such as understanding language, complex image recognition, or using our body in highly flexible and adaptive ways. By then, we will no doubt be utterly dependent on machines in every aspect of our lives. We will also likely see a rapid merging of man and machine via new types of interfaces, such as augmented reality, implants and brain-computer interfaces. If and when things such as nanobots in our bloodstream or communications implants in our brains become possible, who will decide what is human? For the foreseeable future, machine intelligence will not include emotional intelligence or ethical concerns. Yet eventually, machines will be able to read, analyse and possibly understand our value systems, social contracts, ethics and beliefs – but they will never be able to EXIST in, or BE a part of the world as we are.

some very tough battles between opposing world views and paradigms, with gigantic economic interests facing off against each other. Europe is somewhat stuck in the middle, more concerned with what many would see as lofty issues, such as human rights, ethics and collective wellbeing. There are already global tribes of opinion busy promoting a voluntary departure from humanism altogether. These techno-progressives are urging us to ‘transcend humanity’. To me, it is clear that technological determinism is not the solution and that the prevailing Silicon Valley ideology that argues ‘why don’t we just invent our way out of this, have loads of fun and make lots of money while improving the lives of billions of people with these amazing new technologies?’ could prove to be just as dangerous as Luddism. I believe we can find a balanced way forward that will allow us to embrace technology but not become technology; to use it as a tool and not as a purpose.

Didn’t see that coming! For me, this line from Ernest Hemingway’s The Sun Also Rises describes the nature of exponential change perfectly: 'How did you go bankrupt?' 'Two ways. Gradually, then suddenly.' When thinking about creating our future it is essential to understand these twin memes of exponentiality and ‘gradually then suddenly’. Increasingly, we will see the humble beginnings of a huge opportunity or threat. And then, all of a sudden, it is either gone and forgotten or it is here, now, and much bigger than imagined – think of solar energy, digital currencies and the blockchain. I tend to think that markets will not self-regulate and deal with these issues. Rather, traditional open markets will only escalate the challenges of humanity vs technology because these very same technologies are likely to generate opportunities worth trillions of dollars. In the end, we are talking about the survival of the human species and it just won’t do to have venture capitalists, stock markets, and the military running the show. In the near future, we are certain to see

Future 'human': AI and genome engineering are the two big game changers |



Vulnerability: Cybercriminals are taking advantage of shorter transfer windows

Too much of a hurry? Speeding up payments to achieve real-time transactions has become something of a holy grail. But Andrew Davies, VP, Global Marketing Strategy for Financial Crime Risk Management at Fiserv, cautions companies to slow down and think

Two-day transactions are becoming a thing of the past. No longer are we willing to deposit our money into a black hole and twiddle our thumbs for 48 hours before it pops out again at its destination. Real-time transactions are the new norm. And who’d argue with that? Not Andrew Davies of financial technology solutions firm Fiserv. He agrees real-time transactions increase convenience for both retail and commercial customers – but, he points out, they also come with a risk. “This level of convenience requires much easier access to the initiation of payments,” says Davies, VP of global marketing strategy for financial crime risk management. “In turn, this leads to a greater inherent risk, as the faster you make a transaction, the less



time there is to identify an issue and repudiate a payment where necessary. Once they’ve gone out into the market infrastructure, it’s extremely difficult to get the funds back.” He is concerned that emerging companies in financial services are yet to introduce the comprehensive anti-money laundering (AML) protocols needed to clamp down on criminals who take advantage of such faster payment methods. “More and more fintech companies are offering alternative financial services mechanisms, including new payment services,” he says. “These payment services often utilise mobile devices and with these devices there’s always the risk that someone could be monitoring payment initiation through malicious software. Tie

this in with the lack of knowledge of some fintechs regarding international and domestic payment security, as well as the ever increasing sophistication of fraudsters and financial criminals, and it’s a perfect storm for financial crime.” As Fiserv’s resident financial crime management guru, he’s seen his fair share of companies whose AML operations fall short of what is necessary. “There are organisations that still use arbitrary rules that are totally ineffective. For example, they’ll have a system in place that identifies any transaction above a certain amount that is wired into an account and then wired out within a certain time frame. This arbitrary application technique generates far too many false positives and it’s consequently very difficult Autumn 2016

to locate legitimate suspicious activity in all the noise. If your rules and scenarios aren’t sophisticated enough, you’ll always be trying to find a needle in a haystack.”

A new approach to AML Fiserv approaches its AML operations from a different angle, disposing of the one-off, arbitrary screening tactic that has proved itself to be far too inefficient in a world of real-time transactions. Davies is confident that its universal, series-based formula is what is needed to revolutionise the effectiveness of AML processes. “We introduce a series of checks and balances at different times to ensure that what’s occurring during the entire life cycle of the payment is consistent with the historic behaviour of the consumer. It’s a predictive Autumn 2016

model, based on previous circumstances where financial crime has actually occurred,” he says.“Using the outcomes of the intelligence from previous circumstances, we can produce legitimate scores for the likelihood of money being laundered in each case. It’s a much more focussed, accurate method of detection and a strong starting point for a refined model in the future. “There may be a situation where a transaction is initiated, the credentials used are captured and then, further down the line, the payment is modified before it is sent out for settlement. This is the reason why it’s imperative to have a layered AML system; you have to be capable of detecting financial crime throughout the entire chain of events surrounding a payment leaving an organisation. It’s too easy for criminals to evade the single perimeter detection services offered by many software providers.” While the prevention of money laundering remains his primary objective, he sees additional value in Fiserv’s software when it comes to data leverage in a broader sense. “If you’re just collecting and viewing the data through an AML lens, you’re not really realising the value of that data. Firstly, by understanding what products people are using, and how they’re using them, there’s the opportunity to introduce a new product to somebody based on their historic behaviour. Secondly, our AML data can be used to uncover different types of crime. In fact, we’ve seen our clients uncover elder abuse, human trafficking, tax evasion, and various fraud crimes using a hybrid model formed from a blend of their own intelligence and ours. So, despite being in the area of financial crime, it’s necessary to take a broad view of our AML data to ensure that you’re not overlooking any related criminal activities.” As important as technology is in fighting those battles, one of the biggest problems financial institutions face is a psychological one; if consumer perception of how a company handles financial crime is undermined it's likely to affect retention. “In the past, it was said that people were more likely to change their spouse than their bank account. This is no longer the case, as millennials are far more mobile

when it comes to their financial institution of choice,” says Davies. “So, if a customer doesn’t have confidence in your products or your interaction, the likelihood is that they will cut all ties and establish a new financial relationship elsewhere. “Education of the customer is critical in tackling this problem, as the security measures implemented by a financial institution are dependent on the awareness of the consumer if they are to work. The customer must recognise how to maintain the security of their credentials as well as the key indications of spear fishing and suspicious activity in general. Also, should they decide to adopt mobile transaction services, they must understand the threats that are inherent in this type of access. It’s a juggling act as you strive to maintain the consumer’s faith in the system while also supporting their need for mobility and speed,” says Davies.

Making real-time safe At this year’s Sibos, Fiserv will be focussing on its work in payment infrastructures, discussing the speed of payments and the associated benefits for consumer, retail and commercial markets. Davies will be taking the opportunity to talk about the new analytics embedded into Fiserv’s solutions. “Any time we deploy a new predictive model, we provide the market with what we call a ‘lift model’. We’ll be showcasing these at Sibos and demonstrating the success that these models have had in the prevention of financial crime,” he says. “We’ll be specifically discussing analytics and how they can prevent financial crime in the context of electronic funds transfer and cheques. The former is obviously of greater importance nowadays; there are currently 20 or so market infrastructures that have deployed real-time domestic payments systems and this trend is set to continue. “We’re going to see more speed across the board in the offering of financial services and easier access to real-time settlements. For me, Sibos is a chance to discuss these developments and formulate new ideas on how best to combat financial crime among these new technologies.”

It’s too easy for criminals to evade the single perimeter detection services offered by many software providers |



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Things just ain’t what they used to be... Scott Hess, Vice President of User Experience, Consulting and Innovation at Fiserv, gives advice on how financial services should connect with the Internet of Things Today, people are more connected than ever before. From homes and appliances, to cars and accessories, the Internet of Things (IoT) has the potential to bring banking to every corner of people’s lives. Comprised of physical devices that can collect and exchange data, the IoT includes everything from smart domestic appliances to connected cars and the number of these devices is growing exponentially. At its best, the IoT offers an opportunity to deliver relevant, timely information that helps people keep pace with the speed of life today. On the other hand, there is the risk that people could be overwhelmed by so much content that it simply becomes noise. The challenge for financial institutions is to determine how consumers might want to consume financial services. When it’s time for your financial institution to extend existing financial services capabilities to the Internet of Things, consider what types of capabilities are practical and how consumers will want to access them. For some devices there may be no application for financial services, at least in the near term, while others lend themselves quite well to the delivery of financial information or transactions. The physical attributes of an object are often a good indicator of the type of information a consumer might want to access or the tasks they might like to complete using it. People are unlikely to want to set up a budget from a screen in their refrigerator door, but they may very well want to check their balance or pay a bill from there. In some cases, people may simply want the option to connect with their financial institution to complete tasks, such as checking their balance on request, one of several concepts Fiserv has created to Autumn 2016

People are unlikely to want to set up a budget from a screen in their fridge door, but they may well want to pay a bill from there showcase the way banking could be conducted via an Amazon Echo voice control system. Other circumstances may lend themselves to proactive alerts sent to a wearable device, such as an Apple Watch. No matter what the piece of equipment or its potential use, the information must be relevant. In an age of information overload, irrelevant information will at best be ignored and at worst lead consumers to disengage. For example, consumers should have the ability to personalise the information they receive via alerts, choosing what they are notified about and when. When it’s time for your financial institution to consider extending your existing services capabilities to the Internet of Things, use the

same lens you would when evaluating the capabilities your financial institution has for delivering to a smartphone versus a desktop: what type of functionality is practical for this machine and how will consumers want to access it? Fiserv is continually evaluating the impact developments such as the Internet of Things have on the industry. This includes testing technology, such as the Amazon Echo, and gauging consumer demand through research and focus groups. We do it because we understand that this type of purposeful innovation has the potential to change how people live and work – and how financial institutions deliver services to consumers. |


SIBOS All of a piece: SEB is focussed on bank-to-bank partnerships

Joined-up thinking

The only way to drag corporate transactions into the 21st Century is through closer collaboration with other banks, believes Paula da Silva, Head of Transaction Services at SEB. And blockchain is the best way to facilitate it If corporate banking processes are beginning to feel somewhat antiquated compared to advances in the retail sector, there’s one particular space that looks decidedly prehistoric – payment transaction times.

“It seems that the corporate banking world is constantly hesitating when it comes to adopting digital transaction processes,” says Paula da Silva of Nordic giant SEB, whose clients number 3,000 large corporates and 400,000 SMEs. Compared to the fully digitised services SEB’s four million retail customers have come to expect in their everyday lives, corporate banking processes haven’t fundamentally changed in nigh on 200 years. And there’s good reason for that.



“In simple terms, it comes down to the number of parties involved in each transaction,” says da Silva, who heads up SEB’s transaction services. “In a private payment transaction there are two parties on the sending side and two parties on the receiving side. In trade finance, however, every set of documents must be passed by five or six counterparties in addition to the sender and receiver: the transporter, the logistics company, the verifying entity and then, finally, the two banks. So there are many more parties involved in trade finance and, crucially, the shipping documents still act like old-fashioned cheques; only if you hold the document are you entitled to the goods.” Which is why, in her opinion, there is

only one solution to speeding up the process: blockchain. The bank is on a mission to shrink the technology chasm it sees between retail and corporate banking divisions by actively participating in the blockchain consortium R3, an example of joined-up thinking in the global financial services industry that has just welcomed its first exchange, Brazil’s BM&FBOVESPA, to the table. “If you look at the securities business, or the asset management business, the blockchain could instigate a great change towards making the industry much more efficient,” says da Silva. “The same goes for the trade finance business and that’s why banks are dedicating so many of their resources to explore it. At SEB specifically, we’re investigating potential Autumn 2016

The industry needs to discuss new methods of integration built from the ground up, not superimposed over old legacy systems

payment methods using the blockchain, as well as ways of distributing and validating document using the technology. “What we aim to achieve is to have a distributed system of global intra-company payments. A customer would be able to make a transfer between their own accounts, in real time and between any two locations internationally. Immediate credit anywhere that bypasses the need for regular correspondent banking is all made possible by the blockchain.” The R3 initiative – an international financial innovation body that tests and benchmarks blockchain technologies – has seen a rapid increase in membership since its creation in September 2015. Currently comprising more than 50 financial institutions, its goal is to drive forward R&D projects while developing a reference architecture to underpin a global financial grade ledger. Da Silva firmly believes in its collaborative approach. “We feel that trade finance is one of the most interesting areas currently. Today, physical paper documents still have to be exchanged between banks and a person has to review them. By inputting these Autumn 2016

documents into a distributed ledger context, such as the blockchain, and validating them at the inception of the document, rather than afterwards, we could drastically reduce the manpower involved and error rates resulting from the reliance on the human eye. “That would be a groundbreaking way of performing trade finance in the future,” she adds. But that’s not the only area where SEB is driving collaboration. “We’re focussing on bank-to-bank partnerships and managing the whole network and infrastructure to negate the need for corporate involvement throughout,” says Da Silva. “An example of this would be if you were an American company looking to distribute a product in Europe, or vice versa. You would require a single account in one region and then we would foster an intimate bank-to-bank relationship in order to facilitate the necessary trade, sales, or purchases in the desired area,” she says. Da Silva believes fintechs will have a major role to play in this new era of collaborative banking.

“To my mind, there’s no doubt that crossovers between fintechs and banks will be one of the key talking points at Sibos this year,” she says. ” The industry needs to discuss new methods of integration built from the ground up, not superimposed over old legacy systems. From there, I believe we will start to see many more agile means of developing and delivering value to customers. “Fintech’s role will evolve to incorporate behavioural science more intently. The banking industry’s understanding of its customers is still somewhat black and white. It’s not enough just to acknowledge the customer’s demands – we need to react to the way they actually function and we need the monitoring systems in place to verify that our understandings are correct. “This applies to both the private and corporate spaces,” says Da Silva. “Regardless of whether we’re dealing with an individual or a multinational firm, the key to providing the best possible advice is appreciating the customer’s behaviour.” |



An Exchange of views Part of the London Stock Exchange Group, UnaVista is extending its reach through a programme that brings on board technology friends and competitors, as its global head of strategic partnerships Wendy Collins explains Stock exchanges are temples of one-upmanship, so it’s something of a surprise to find ‘co-opetition’ on anyone’s lips in the London Stock Exchange Group. At UnaVista, however, part of LSEG’s information services business, the concept is positively thriving. Through the technology provider’s partnership programme, the principle of cooperative competition has become key to delivering a whole host of data handling, software support and other advice to clients coping with a regulatory onslaught. Under the Exchange’s 300-year-old grand brand, natural born rivals are creating great synergy. Take, for example, UnaVista’s link up with DTCC, an American post-trade financial services company providing clearing and settlement services to the markets. “Although UnaVista and DTCC each have offerings for EMIR post-trade reporting, when it came to MIFIR and MiFID 2, DTCC made a strategic decision to work with UnaVista to offer its clients access to our regulatory expertise,” says Wendy Collins, global head of strategic partnerships. “So here you have two leaders in their own markets coming together to say, ‘how can



we deliver the best solution?’. It’s a good example of ‘co-opetition’.” Having worked for some of the world’s biggest technology companies before joining UnaVista earlier this year, Collins was well placed to find the best alliances to take the programme forward. Originally set up in 2012 to help UnaVista’s transaction reporting clients face the new European Market Infrastructure Regulation (EMIR), the network has expanded in line with the growing demand for help with compliance. “The number and complexity of regulations coming along make it forever front of mind for clients and top of their budget priorities,” says Collins. “It falls on UnaVista to ensure that the money clients are allocating to address regulations, which are seen as not adding competitive advantage for companies, do in fact derive some benefit. Working with partners, we can broaden the solutions we offer to clients for example by leveraging existing client data to feed into UnaVista regulatory reporting.” says Collins. “We’re focussed now not only on addressing these regulations and helping our clients to meet the deadlines, but also on looking at how can we take a more strategic

approach to assisting them by, for example, bringing them onto one reporting platform.”

Regulatory hub UnaVista is the LSEG’s global hosted platform that undertakes all matching, validation and reconciliation needs for clients by offering a spectrum of solutions through the interface, thereby helping the client to reduce operational and regulatory risk across the board. Much of UnaVista’s work recently has been around building a regulatory hub, supported by its unique position as part of the Exchange. “Basically, we’re saying to clients instead of sending us data for different regulations, send us one lot of data and we’ll help you decide where that data needs to go to conform to the different regulations,” says Collins. “Building on that we're doing a lot of work around management information. We can use all the data a client sends to us to show them their key trends and issues. We have customisable dashboards that can highlight the most important points quickly helping them drive their business more efficiently. Clients are interested in how we can help them manage and control

Autumn 2016

their businesses from both an operational and a compliance point of view.” Collins is on the lookout for companies to add to her partnership portfolio as she reshapes it to deliver a more integrated offer. She is already exploring the idea of working with software vendors to ‘make sure we are integrating in the most effective way and utilising data that other vendors generate, so we take some of the burden off clients’. “Obviously, obligation, responsibility, and liability still rests with clients, but it’s really about us working with the external bodies to say, ‘how can we help?’,” says Collins. And her work isn’t confined to the UK. “We really want to go after the European market much more aggressively and partners will be absolutely vital in that because what we want is local knowledge and expertise,” says Collins. “North America is another important market for us, where we can leverage not just the LSEG, but the FTSE Russell brand, which is also part of the Exchange's information services. " “While Europe and North America are the two immediate targets for me in terms of growing the partner ecosystem, if the right partner opportunity comes along we can look across the whole globe." “The way we’ve structured the partnership enables some of them to work with us both

A strong brand: UnaVista is part of the London Stock Exchange Group

tactically and strategically. For strategic partners it’s really about ‘how do we go to market, what do we both want from this relationship and how can we achieve that and both benefit? ’We’ll be completely open about what they do and what we do." “We have professional services businesses who are SMEs on the UnaVista platform and we can deliver a whole client implementation onboarding for them. But if we agree to work with a partner and go to market in particular geographies, or niche areas, then we’re happy to say to them, ‘you have the professional services’.

UnaVisvta technology coupled with a partner's capabilities, makes a very compelling proposition

Autumn 2016

Obviously, we train them, but basically we are very flexible in how we work with partners to deliver the solution that works best in three ways – for UnaVista, for the partner and the client.” She’s cautious in her choice of partners, ever mindful of protecting the London Stock Exchange brand. “We want to make sure that the partners we work with have stability and longevity in the market, but it is also important that we are leveraging the latest developments and technology," says Collins. “One of the small, niche partners that we’ve recently signed up have very strong, functional technical skills. When we come together with partners like that, utilising UnaVista's technology, coupled with a partner's capabilities, makes for a very powerful and compelling proposition.” |



Smart thinking

A constellation of pressures on financial institutions is forcing them to offload ‘outlier’ activities to third party providers. It’s a trend that’s only set to continue, says SmartStream CEO Haytham Kaddoura

Not many companies are in the privileged position of being recommended by name to potential clients by a regulator. But then, few companies have been in the business of fixing the financial service industry’s problems for as long as SmartStream has. Founded in 2000 with an initial focus on reconciliations, it’s grown to become a leading global provider of enterprise-wide, real-time transaction lifecycle management (TLM) solutions; dismantling barriers to straight-through processing and offering cost-effective alternatives to traditional middle and back office functions – with in-house, outsourced, and, more recently, mutualised solutions. Seventy of the world’s top 100 banks, along with some of the best-known asset managers, custodians and broker-dealers, look to SmartStream to provide support for non-core, but often expensive activities. It allows CEOs to get on with the day job and focus on strategic investment that adds value to the bottom line. “We are at the forefront of working with some of the big financial organisations in helping them really understand their areas of risk exposure, what we can do about it and, in certain areas, especially



on the trade processing side, how they can make their operations more efficient,” explains CEO Haytham Kaddoura. If any further endorsement of SmartStream’s reputation was needed, it came with the three heavyweights Goldman Sachs, JPMorgan Chase and Morgan Stanley lining up alongside the company last year to create the SmartStream Reference Data Utility (RDU), a world first in shared service models for data management within the industry. “The RDU is the logical culmination of all the intelligence we bring; we were really the only ones who could do this,” says Kaddoura. “We’ve got three of the world’s largest banks who are authorities in their own right and the fact they chose us says a lot.”

Mutual advantages An area that rarely represents any competitive advantage for a business, data referencing is also extremely costly for any one organisation to maintain, requiring large teams engaged in complex acquisition and cleansing tasks. Accessing it on a mutualised basis through the RDU, says Kaddoura, not only gives clients the added value of SmartStream’s knowledge and expertise, but also ticks the boxes for

improved quality, timeliness and consistency using data that is already normalised and validated. Job done. The principle of shared utility, using a platform that is rich in pooled knowledge and expertise, extends to other areas of SmartStream’s operations and is likely to play an even greater role in its future. Three years ago, the company created a Central Onboarding Utility (COU) to handle onboarding reconciliations for clients. Now evolved into its Center of Excellence, it hosts and manages SmartSteam’s TLM software, not only onboarding reconciliations but also providing production support services and performing Level 1 reconciliations. Standardizing and automating operational processing across geographies and institutions allows it to claim to reduce client costs by a minimum 20 per cent. With regulators snapping at their heels, the ability to onboard new reconciliations more efficiently and minimise the risks associated with manual processes, with improved reporting and transparency, is as much a matter of compliance as of cost. And it’s where SmartStream has a market edge. “We have instances where the regulators Autumn 2016

Outsourcing: “The stars are aligned,” says Haytham Kaddoura

have recommended our solution by name to clients because we bridge the space between the regulator and the client, by listening to both parties,” says Kaddoura. “We’re not trying to push our solution or make the pieces fit by force. We have our feet on the ground and we know what’s happening in all the major financial centres. The US typically is at the forefront of regulations, but when the regulators are moving in Singapore, for instance, we know. “Regulators are pretty much coordinating and picking up best practice from each other and we’re close to the centre of action. We’re in touch with them and we’re in touch with our client base, so we know how things are evolving and we try to be a step ahead.”

The way forward The company’s agile approach to problem solving has served it well. It was one of the few financial services firms that grew

revenues through the recession – and by a considerable 20 per cent. With 21 offices on every continent bar Antarctica, SmartStream is now focussed on helping others maintain theirs as pressure mounts from regulators, shareholders and investors. Kaddoura believes the RDU platform provides a model way forward. “Instead of every bank or financial institution building their infrastructure and their capability, internally, we can provide it as a shared opportunity,” he says. “The model is picking up pace in different components of financial organisations – in areas that were not foreseeable three years ago.” This reshaping of banking activities, with less energy spent on the ‘outlier’ tasks, plays well for third-party vendors like SmartStream which, in all the years it’s been in operation, hasn’t let up on investing in R&D. A fifth of revenue is ploughed back into new solutions, even in the lean times.

“I think in the future, banks will try to be focussed on the most strategic components. If an activity doesn’t add value for their stakeholders, they’ll try to source somebody who can extract that value. This is also what you are seeing with the new banks,” says Kaddoura. “If you look at the top 100 banks in the US, you’ll see a lot of new names – including some small entities from the mid-West – and they are all banks that have succeeded in leveraging, in pushing infrastructures and non-core activities out to third parties and gaining the benefits. “I think the stars are aligned for that. It’s the same message the financial institutions are getting from their shareholders, it’s the message they’re getting from the regulators: ‘focus on what you guys know best, no need to step into tertiary activities that are not necessarily your core competency’.”

In future, banks will be focussed on the most strategic components. If an activity doesn’t add value for stakeholders, they’ll source somebody who can extract that value… pushing non-core activities to third parties Autumn 2016 |



Turning the ship around Raphael Barisaac, Global Head of Trade Products within UniCredit Group’s Global Product Portfolio, discusses how far digitisation of trade finance has come… the answer is that, while technological solutions have advanced considerably, their use is constrained by a fragmented regulatory landscape A shipment of chemicals from Shannon in Ireland to an automotive parts manufacturer in Genoa, Italy, made history in August. There was nothing particularly remarkable about the cargo itself, but what was notable was the method by which the payment was executed – using the UK’s first Bank Payment Obligation (BPO) live transaction. A proven digital settlement tool for international trade, and a clever combination of easy handling and secure payment, the first BPO was used by UniCredit in 2014. The solution consists of the irrevocable undertaking by the buyer’s bank to the seller’s bank, to effect the relevant payment as the invoice falls due. It relies on the electronic matching of trade data between participating banks using a digital platform. The Irish consignment was the latest in several landmark moments for UniCredit, which has led the way in trade finance digitisation and in this instance processed the payment for the Italian purchaser. Fintech Finance asked its Global Head of Trade Products, Raphael Barisaac, for his predictions on the wider adoption of trade BPOs, and the future of financial services at large. Fintech Finance: What, in your view, are the biggest challenges currently facing the financial services industry? Raphael Barisaac: We are living in a very dynamic and changing world. For instance, the, often unexpected, geopolitical changes that affect macroeconomics in general, and the way we do business – including

the growing move towards cross-border, inter-country commercial transactions. Such developments impact the entire spectrum of trade, from commodities to the pricing of shipment containers, insurance, credit insurance, and the way transactions themselves are actioned. In the finance industry itself, there is dramatic development going on, not least in the way that new players in the market are offering various services that no-one would even have dreamed of 10 years ago, and shifting power away from the traditional banks. FF: How does UniCredit plan to tackle digitisation? RB: We are investing extensively in digital solutions across our whole spectrum of transactions. The BPO is one such example, where we are recognised as a forerunner, with our own digital platform for offering them in various countries. We’ve had amazing feedback about our BPO service and this has led to us acquiring new businesses in areas where we haven’t had a presence previously. On blockchain, too, we are very active, and have been involved in the R3 consortium from day one. We have also produced two proof of concepts, specifically related to the use of blockchain for trade transactions, linked to DLP software for trade flow. One focusses on an e-letter of credit presentation, the other on a bank confirmation of the invoice receivable. These concepts have proved successful.

FF: Trade finance is still quite paper-based. Why has it taken so long to adopt digital technology, compared to other areas of the industry? RB: I think it’s down to the complex nature of cross-country commercial transactions. From the simplest to the most complex, they typically involve a huge number of people, including regulators in the different countries. This means they are very complex to digitise end-to end. First and foremost, you need to have the right governance to ensure the actions you take in one country are appropriate to the others. So often the issue isn’t the technology, it’s the governance you need to apply to the transaction end-to-end. To a large extent, we can only develop at the pace allowed by the environment we are operating in, no matter how fantastic our technological solutions might be. FF: Blockchain is sometimes referred to as a solution looking for a problem. However, trade finance seems to be a perfect example of using it well. RB: I think people who hold that view are confusing two things – the capability of the technology and the transformation businesses must undergo in order to be able to use it successfully. There is no question that our distributed ledger is working, in proof of concept. So we have a prime example of what this technology is capable of, albeit on a very small scale, and thus far independent of the compliance considerations that will feature in an actual

All in good time: Cross-border trade transactions are slow and difficult to change



Autumn 2016

transaction. In order to implement processes using this technology, every organisation involved in the supply chain, from the exporter to the shipper, the insurer, customs and, of course, the bank, would need to open up their core functions to this technology. This means each of them changing the way they do things. This is significant because we’re talking about core processes, not the small things around the edges. However, the fact remains that the products and technology exist to allow, for example, the use of electronic documents. So maybe the industry needs to ask itself, ‘why are we talking about this and not just making it happen on an industrial scale?’. FF: From a non-blockchain, compliance point of view, what are the implications of digitisation for an organisation like UniCredit? Does it make it easier or harder? RB: We’re seeing a year-on-year increase in new compliance-related demands from regulators and this trend is likely to continue, with organisations having to juggle their priorities and investment accordingly. From a digital point of view, this is not all bad, as intelligent organisations like ours can apply digital solutions to necessary process changes and improvements, saving time and money.

ourselves on our relationships with partners, so we’ll be looking to deepen existing ties and build new ones, as well as learning from our industry peers and colleagues and exploring opportunities for new collaborations. Aside from this, we'll be sharing our blockchain ideas and gauging the adoption appetite among our industry peers. FF: Lastly, how do you predict the financial industry will evolve over the next few years? RB: I think we’ll see some real settling-out within the industry. Bank profitability will be one of the things that dictates its future, because banks are likely to run with the products that offer the highest return with the lowest risk. Increasing risk and compliance demands are inevitable and this will also have a significant bearing on the money financial institutions have to invest and where. There are also going to be dramatic changes in the kinds of financial offerings

We can only develop at the pace allowed by the environment we are operating in, no matter how fantastic our technological solutions might be banks are able to provide, due to increasing competition from fintechs, which are more nimble and rapidly taking market share. We ourselves plan to partner with other organisations to explore how we can participate in this. It is also likely that regulation won’t match the pace of change and this will create vulnerability in some organisations, by preventing them from doing what they need to do to compete, quickly enough.

FF: So what can we expect to see from UniCredit at Sibos? RB: Well, first of all, as a European bank, we've got to stay true to our Italian roots and offer excellent coffee! We pride

Autumn 2016 |



Cleaning up your act

How do you know customers are who they say they are? Graph database technology could expose fraudsters and sweeten relationships with genuine clients, says Tim Barber, VP EMEA Software Solutions at Pitney Bowes “When you talk to people in the banking industry, there are only two things that they are consistently keen to spend money on: ensuring that they adhere to changes in compliance regulations, and achieving greater communication levels with their customers. These two things are clearly linked through know your customer (KYC) and anti-money laundering processes, since the need to know who your customer is serves the purpose for both,” says Tim Barber.

As VP EMEA software solutions at global technology company Pitney Bowes, he’s acutely aware of the threat cybercriminals pose; the challenge is how to stay one step ahead of them as the online arms race hots up. “Money laundering is an industrial-scale operation; those who are engaged in it are very sophisticated people. This is the reason it’s so difficult to detect and why it’s such a learning process for the regulators and the banks,” says Barber. “There is a continual evolution of the regulations because the regulators are learning as they go along and then changing the regulations to take things up a notch each time. “Where the first regulation might read, ‘you need to have a transactions monitoring system in place to identify suspicious transactions‘, the next would say ‘that monitoring system now needs to be effective’. You need to be able to demonstrate that you are making an impact on the detection of financial crimes.” He is confident that there is a solution to the problem, but it requires fighting fire with fire. “Technology is starting to make a difference when it comes to anti-money laundering. It has to, since the sheer volume of data that banks have to analyse means that they require seriously powerful hardware just to sift through it



at a reasonable rate,”says Barber. “Transaction monitoring, per se, is a relatively simple thing to do, but to make it meaningful you’ve got to feed the system with data that you know is clean, enriched, de-duplicated and complete. Herein lies the first challenge. “The second challenge is to then automate as much of the process as possible, while ensuring that your automation is indeed filtering out the correct data. “When you’ve successfully overcome these two hurdles, you can rest easy in the knowledge that your investigators are examining the information that is important and real, without it getting lost in the noise.”

Spectrum technology Pitney Bowes is aware the stakes are high. “It’s not just crime,” says Barber. “Money launderers are people who are funding terrorist acts, so it’s of monumental importance that the industry takes this problem seriously. We’re in this business because we genuinely want to make a difference.” The company has done that by taking a Spectrum Technology Platform approach to tackling financial crime. “It uses graph database technology,” explains Barber. “Think of when you go onto Google. It doesn’t matter what you type, 999 times out of 1,000 what you’re looking for is in the top three things that Google returns. Then, on the side bar, it shows you related links that it has figured you might also be interested in. This is graph database technology in action. “Pitney Bowes uses the same sort of technology to tackle financial crimes. When we encounter a data quality challenge, we do so with the intention of helping banks to identify non-obvious connections between data. In essence, we do all of the heavy lifting regarding the data quality: de-duplication, transliteration, enrichment

and completion. However, what we then do is enable banks to use that data to find connections between people, institutions, transactions and locations, for example – things that a traditional database simply wouldn’t be able to cope with. It’s the graph structure that allows them to do this, so the technology is extremely important. That’s what underpins the whole system.” But how can banks use it to improve their interaction with customers? Barber believes it could have a dramatic impact on KYC. “You can use Spectrum to understand the contextual location of the customer as well as where they are in real-time. Then you can make a decision on the best way of communicating with them. “For example, you would know whether a person is mobile and when they were abroad. From there, you could choose to contact them via text messages or via the mobile app that you know they’ve already downloaded. The technology thus gives you the ability to create the most effective message and deliver it to the right person at the perfect moment and via the best possible channel.”

New partnership This September's Sibos event in Geneva will see Pitney Bowes appearing alongside Capgemini for the first time, having recently signed a global partnership deal with the multinational management consulting corporation around Spectrum. “It’s a match made in heaven. We’ve presented them with some very clever and innovative technology and they’ve kicked the tyres and concluded that we know what we’re doing,” says Barber. “Taking into account their extensive track record in helping banks combat financial crime issues, the prospect of our technology combined with their consulting expertise is really exciting.” Autumn 2016

Technology is starting to make a difference when it comes to anti-money laundering. It has to

Imposter: Do you really know your customer?

Autumn 2016 |



Breaking the mould One of the first fintechs to share its financial transactions processing application on the open source network, trendsetting Allevo is poised to expand its operation, as CEO Sorina Bera explains When the Romanian fintech Allevo takes to the stand at Sibos in 2016, it will be worth western European banks sitting up to listen. Its open theatre session The Trendsetter Bank will go to the heart of what – in the CEO’s own words – “cool banking services” look like from the perspective of one of the EU’s fastest growing fintech hubs. It will inevitably mean a rapid evolution of the banks’ DNA – one that releases them, she says, from the chore of concentrating on what’s happening in their “internal kitchen”



to concentrate instead on serving a consistently exciting menu of services to their customers. “It’s definitely the direction banks are headed in; the sole question is when we’ll be able to say ‘it happened’,” says Sorina Bera.

Co-operation is key Founded in 1998, Allevo is one of a cluster of fintechs that have helped make Romania one of the fastest growing economies in Europe and an increasingly attractive outsourcing

destination for IT, contact centres, research programmes and business processing (BPO) services. According to data analysis company, Romania’s total transaction value in the fintech market is set to increase by nearly 20 per cent over the next four years. A 100 per cent-owned Romanian company designing its own software solutions, Allevo’s central proposition is the FinTP, one of the first open source applications for processing financial transactions, which was published in 2014. A versatile solution, it aims to lower users’ Autumn 2016

Evolution: PSD2 will bring fundamental change

FINkers United, a community for financial thinkers – everyone from IT developers to financial experts – gathered around the FinTP project. “One very important aspect of FinTP is that its open source distribution model allows for banks that use it to contribute updates and improvements to benefit all users,” says Bera. “This enables an unprecedented level of transparency and collaboration between banks and it is possible because middleware is not a competitive differentiator for them. “It is in the best interests of all involved that this collaboration happens, so that everyone can focus on primary bank business – delivering attractive services to clients. We believe open source is the suitable distribution model for banking software fuelling everyday operations.”

Scalability 'no problem' Initially targeted at smaller regional financial institutions and primarily focussed on core banking with limited capital market trading, FinTP has been extended to corporations, microfinance institutions and public administrations in Romania. “As far as scalability is concerned, when we first connected the Romanian State Treasury to the Romanian Electronic Payment System, we realised we had a much larger volume of transactions a day (for example, days when they collected VAT) than our banking

Imagine for a second there were no limitations caused by the lack of interoperability. Banks would be a lot further up the evolutionary scale in our opinion total cost of ownership (TCO) and provide end-to-end interoperability across the financial supply chain, with faster and better compliance. It accomplishes this by providing a process that allows flow automation and seamless integration between various internal systems and external market infrastructures or networks, such as SWIFT. It also provides operators with relevant information in a one, easy-to-view window. FinTP and all ancillary documentation is distributed freely and openly through Autumn 2016

customers had. FinTP had no issues accommodating large volumes a day. As the application evolved, so did resilience, scalability and flexibility,” adds Bera. Having stress-tested the model in its domestic market, Allevo is diversifying its portfolio. Not only is it making FinTP work for new types of financial institutions by giving them automation, integration validation, processing and reporting, but also reaching beyond the Romanian border to Bulgaria, Moldavia and the Netherlands. “We would like to find a similar spot in

the European and African financial markets, as well,” says Bera. It makes the future introduction of PSD2, the revised EU directive on payment services for a single euro payments area, a prospect that can’t come soon enough for Allevo. “It’s definitely a positive,” says Bera. “The fact that people are focussing on systems able to communicate through application programming interfaces (APIs) is a blessing for us as a software provider. Interoperability has always been an issue in banking; in fact, it is so old we are not even listing it as problem Number 1 any more. "Although imagine for a second there were no limitations caused by the lack of interoperability. Banks would be a lot further up the evolutionary scale in our opinion. We welcome PSD2 because it introduces an element of 'obligation'. It is the role of regulators to impose certain changes, so everyone aligns in due time.” It’s something “trendsetter” banks will have no problem accommodating as they take on the mantle of role models. “The trendsetter bank is not a follower or a copycat; it is a reference for the entire fintech ecosystem,” according to Bera. “It pleases and surprises its customers and it is trusted because it complies with regulations. In the backend, it has completely automated its internal workflows and it is agile and flexible enough to quickly integrate new technologies. It prefers open source technologies, eliminating the proprietary factor from the equation in order to deliver state-of-the-art services to its customers. “I think we will see more integration between banks and innovative services created by fintech start-ups, be they direct acquisitions, such as the recent acquisition of the German challenger bank Fidor (by the second largest French banking group BPCE) as well as accelerators, investment funds or other vehicles that banks have already put in place to drive innovation within their institution. We will start seeing these delivering something. “Then we will probably see a separation of forces – start-ups can play a role on the user front while banks can take on a well-trusted and secure role at the back. A consequence is that banks may well become aggregators of cool banking services. Banks are not famous for agility and speed of change, but we may well see some surprises in the coming years.” |



A King-sized future Founder of fintech start-up Moven, best-selling financial author and host of the hit podcast Breaking Banks – the world’s most popular finance show – Brett King is the go-to commentator on emerging trends in fintech. As the industry gathers at Sibos, we asked him to polish his crystal ball and look at the of future financial services Fintech Finance: What is the most important change we are currently seeing in the industry? Brett King: Right now, we’re beginning to experience an industry-wide unbundling of bank utility. Fintechs are leading this revolution, because they’re challenging the old, outdated model of ‘we are a bank, we must do everything’. Take a look at China, for example: firms such as WeBank, Ant Financial, and Alipay have rejected the archaic banking system in favour of a more focussed approach. In the US and the UK, peer-to-peer lending services and challenger banks are also striving to undermine the traditional formula for banks. What these firms are doing is picking one specific segment, utility or service and going after it, hard. What we’re seeing then is nothing short of a paradigm shift in the industry. Banks thought they could pass unscathed through this period of disruption, thanks to their network access options and the ‘trust element’. However, they were clearly mistaken, as we’ve seen a distinct decline in universal models and a rise in unbundled services. The question now, of course, is will we see re-bundling? Will we see fintechs starting to work together? Will we even see partnerships forming between fintechs and banks? The answer is yes, to all the above. What we won’t see, however, is the status quo. FF: If every financial services institution disappeared overnight, what would you

make sure was in place in order to rebuild the industry from scratch? BK: Funnily enough, this is exactly the question that I’m attempting to answer with the book I’ve just begun to write, Bank 4.0. It’s necessary to go back to first principles. What this means is that instead of generating a blueprint based on the recently deceased financial system, you say ‘let’s not assume anything from the old system, let’s redesign from scratch based on the technology and knowledge we possess today’ . We call this process ‘design thinking’, and it’s this approach that has directly spawned companies such as Alibaba in China. Once you’d adopted this first principle mentality, the next step would be to identify what you need from a bank nowadays. You need the ability to move money instantly and seamlessly from one device to another. You need to be able to safely store your money. You need to have access to credit, and so on. Once these needs have been determined, work can begin on a banking ecosystem that functions as a utility, much like electricity; access is available whenever and wherever you want it. Banking would be embedded experientially into the world around you, be that through augmented reality technology within the glasses you’re wearing, or phone and voice commerce tools such as Amazon Echo and Alexa. Now, in order to build this banking ecosystem, we would also require different thinking in terms of regulation. It’s imperative that real-time ecosystems are sufficiently safe and robust, and a

technology like the blockchain, or perhaps something that will emerge from our current experimentation with the blockchain, could provide the secure foundations necessary to support such an ecosystem. Hence, it’s safe to say that a first principles approach to banking would produce a significantly different system to the one we have today, especially from a regulatory and technological standpoint. Part of the reason that our current system is under so much pressure is that the old rules and regulations are no longer relevant to the majority of the population. The simple requirement for banks to open a physical branch, or for a customer to sign a piece of paper to gain access to banking services, is frankly archaic. People are becoming wise to the fact that they can access these services on their phones, and are asking ‘why would I visit a branch to sign a piece of paper?’. The first principles approach does away with incumbent legacy systems and places modern technology at the core of banking infrastructures. FF: Would a real-time banking ecosystem bring any additional benefits, alongside speed and efficiency? BK: Well, when you start to embed investment advice and behavioural and market data into a real-time system, you’re actually initiating data synthesis on an immense scale. In turn, this amalgamation can be used to synthesise recommendations in real time. Thus, a new form of financial advice can be created, which is generated


When you embed investment advice and behavioural and market data into a real-time system, you’re initiating data synthesis on an immense scale… a new form of financial advice can be created, tailored to you, the individual 34


Autumn 2016

using algorithms and artificial intelligence that is tailored to you, the individual. This advice would incorporate all factors including your past behaviour and what is currently happening in the world around you, and would, statistically, form the best recommendation for how you should invest your money. These so-called ‘smart systems’ would constantly reinforce positive financial behaviour, and would negate the need for supplementary budgeting tools and financial coaches. Another practical benefit of a real-time ecosystem would be the omnipresent element of banking. For example, if you were heading away on holiday, you wouldn’t need to apply for a credit card four months in advance of your trip to


I see the emergence of digital wallets, embedded within possessions, as a possible catalyst that could spark the end of physical currencies ensure you had a card when travelling. As previously mentioned, your accounts would be accessible anywhere, any time. FF: Are any of our current payment tools capable of being used with this ecosystem? BK: To answer this question, I think it’s necessary to extrapolate the idea of a first principle approach to banking and apply a

legitimate timescale to it. For example, if we were to look ahead to the year 2050 and ask ‘what’s banking going to be like then?’, I think most would come to the conclusion that we will have eliminated cash, and possibly all physical currency, from the ecosystem. I see the emergence of digital wallets, embedded within possessions, as a possible catalyst that could spark the end of physical currencies.

Experiential banking: Services wll be available any time, any place, anywhere and through every device

Autumn 2016 |


SIBOS There are some particularly interesting developments occurring within the machine to machine field right now, and I mentioned the example of Amazon’s Echo and Alexa earlier. In fact, Amazon’s adverts for their voice commerce technology succinctly demonstrate the revolutionary potential of machine to machine transactions. In one such advert, the actor Alec Baldwin wakes up hungover after an eventful night and notices a hole in one of his cashmere socks. He simply says to the Echo unit ‘Alexa, reorder me a pair of Brescianis’ and a transaction is made instantaneously on his behalf. Baldwin’s expensive taste in socks aside, the point is that we’re not far from a world where you can simply speak to your phone, home or car and be able to conduct commerce. This automation of processes is going to have a seriously disruptive effect on transaction services in the future, since it all comes down to what payment method you decide to integrate into the voice architecture. The physical pieces of plastic, the cashback, the rewards, and the rest of the ecosystem we have built around cards, is going to disappear as a result of this change in conducting commerce. FF: What implications do autonomous technologies have for the financial services industry? BK: In my opinion, the automotive trade is one example of an industry on the brink of revolution as a result of autonomous technologies and new disruptive services. Driverless cars and complete ‘Uberfication’ could mutually eradicate the need for an individual to buy a car in the future. In fact, Elon Musk believes that we’ll only own a car in the future for sentimental reasons, much like owning a horse today. While his view may be somewhat extreme, there’s no doubt that



the car trade is going to experience a huge transformation over the coming decades, and this change will certainly force us into some virgin territory in a financial sense. Let’s consider the simple issue of insuring an autonomous, or semi-autonomous vehicle. When you’re riding in a semiautonomous vehicle as it drives itself along the motorway, are you the insured party? No, because the manufacturer who wrote the car’s software is ultimately responsible, in a legal sense, for any accident that the vehicle may be involved in. So, when you take your hands off the wheel, whoever built that car and designed the algorithm is going to require an insurance policy in

something of a rabbit hole, with new questions and complications cropping up at every turn. However, what’s certain is that we will no longer be able to think about insurance in traditional terms. The current process of underwriting a car insurance policy, whereby an applicant’s salary, driving record and demographics are key criteria, will be perceived as ludicrous by our descendants, owing to the phenomenal amount of data that they will be able to bring to bear to the problem. FF: What can we expect from the Breaking Banks podcast over the next year or so? BK: We’re currently producing a five-part


The issue of insurance in an age of autonomous vehicles is something of a rabbit hole, with new questions and complications cropping up at every turn order to govern the operation of the vehicle, be that Tesla, General Motors, or whoever. However, as soon as you touch the steering wheel and take control, you’re now going to require insurance as the driver. What’s going to be needed in the future to resolve issues of liability are highly refined telematics systems. These systems would need to indicate whether the driver or the software was in control when any accidents occur. It’s absolutely vital that the insurance company has access to this data. What insurance companies also need to know is if you are indeed a safe driver when you do take control of the vehicle. Judging by your past behavioural data, should the insurer be recommending that you don’t drive, as you’re statistically more dangerous than the algorithm? The issue of insurance in an age of autonomous vehicles is Technology in the drivng seat: Automation poses significant challenges

series on the blockchain with the help of Chris Skinner. Chris is currently adventure partner with Life. SREDA, a fintech VC fund based in Singapore, and is looking after their blockchain investments for them, so it’s great having him bring his knowledge to the podcast as co-host. We’re also working on some spin-off podcasts at the moment. We just launched the Fintech Five, which features one of our regular hosts, Sam Moore, carrying out five minute interviews with various notable fintech personalities around the world. With regards to the Breaking Banks podcast itself, the show is really going from strength to strength. We expect to hit two million listeners this year, across 72 countries, which makes ours easily the largest global fintech podcast in the world. We’re always trying to think what else we can do and where next to take things, and I think this will lead to a greater variety of content and more specialised episodes. In fact, you’ll hear very shortly about a couple of major tie-ups that we’ve arranged with some significant media platforms in the finance space, one in the US and one in Asia. These platforms are going to be syndicating and supporting our content, and we’re really excited about the benefits that they’ll bring in terms of the distribution and growth of the podcast. Summer 2016

Meeting the needs of the corporate treasurer

26th September 2016 12:45 - 13:15 CET Open Theatre 1, SIBOS, Geneva

Find out:

75% of corporates in which 2 regions are interested in blockchain to reduce trading risks

The No.1 challenge and requirement for your corporate customers How European corporates think Brexit will effect their bottomline For more information please contact us at:

Join Temenos and Ovum at Sibos to review the results of the survey to 200 top corporates and discuss its implications to the banking industry.





Silicon Valley meets the tech tzars

Eddie Astanin, Chairman of the Executive Board at Russia’s National Settlement Depository, is embracing collaboration to further fintech A quiet revolution is taking place in Russia… in financial technology. And it’s being aided and abetted by one of the country’s leading institutions.

Headquartered in Moscow, National Settlement Depository (NSD) acts as the central security depository within the Russian market. The largest in terms of market value of equity and debts held, this non-bank institution also conducts the majority of commercial exchange and over-the-counter (OTC) transactions within the country’s borders. However, it also provides many additional financial services to key market players – and it is here that its chairman sees the biggest potential for growth, most notably through blockchain. “Alongside our depository services we are engaged in developing new settlement methods, core protection tools, and corporate information processing appliances,” explains chairman of the NSD’s executive board, Eddie Astanin. “IT is hence at the core of our business, and we’re certainly not alone in the Russian market in embracing fintech eagerly.”

Nurturing fintechs Astanin has long held a front-row seat from which to observe the development of Russian financial services. In his opinion, this is a good time to be a fintech. “There’s an air of expectation in the environment. The regulators are supportive of new players as they take their first few



steps,” he says. “For example, Bank of Russia, the main regulator of the Russian financial market, has been hosting its special annual forum FINNOPOLIS, which is designed to accumulate all of the market participants’ knowledge and experience in one place. It features numerous debates and discussions on the current situation – the challenges, threats and implications of the newest technologies in the banking system.

Fintech is allowing us to form direct, robust connections to customers outside of the Russian market “Many large financial institutions are also setting up special labs to directly study technological developments and to find new uses for them. They are looking to uncover some new technical solutions and to improve its business in the process. “These are the reasons why so many fresh initiatives are popping up every month. Vendors, start-up providers, financial institutions and commercial banks are all organising consortia as a means of combining their R&D to deliver more effective results.

“Russian companies and regulators have realised potential benefits of these organisations and have made it their goal to increase collaboration between the country’s institutions in order to maximise the efficiency of Russian fintech research.”

Collaborative models NSD itself intends to play an instrumental role in this new, collaborative Russian market and Astanin is proud of the steps that it’s already taken in contributing to the development of fintech research. “We’re currently providing in co-operation with Strate (South Africa’s Central Securities Depository) a new workshop aimed at developing distributive ledger technology in CSD business. We expect around 30 representatives from CSD and other companies to attend this workshop. We hope, by the end of it, to be able to establish a new consortium to continue our efforts.” Also on the board of directors of the financial messaging service SWIFT, Astanin visited Silicon Valley in 2016, which inspired him with its fresh ideas and new concepts. “They’re thinking about solutions for new generations (day after tomorrow) – fresh processes that are going to be implemented on a day-to-day basis. I believe that NSD should be thinking in line with new trends and that’s why we’re spending our time, money, and resources in finding our own solutions for the future market,” he says. “We already have proof to support some Autumn 2016

Russian expansion: NSD is hoping to do more business beyond its borders

of our concepts, most notably our ideas relating to blockchain technology. We’re not focussing solely upon blockchain – we have simultaneous projects in the Clouds and open application programme interfacing (API) – but we know that this technology undoubtedly works in core protections and that’s why we’re placing such an emphasis upon it.” Like many in the industry, Astanin shares the feeling that trade finance processes need a technological overhaul and he is intent on ensuring that NSD supplies a fintech solution to the problem within the Russian market.

Business opportunities As Russia’s central security depository, NSD is under constant pressure to broaden its provision of services. “As a trade depository, we receive the greatest service demand from the participants and counterparties of the OTC market,” says Astanin. ”It’s our job to present official, reliable reports on OTC transactions, and we’re certain that blockchain technology can revolutionise this process in terms of the precision of the profiling. It’s yet another area in which the blockchain is delivering a prospective solution and allowing us to potentially add value to our service.” NSD will be present at Sibos this year and Astanin is expecting to have a particularly busy conference in Geneva. “We’re participating in four panels. The first will be the regulators’ panel, which will feature the first deputy governor of Bank of Russia. The second panel will present news and information on the infrastructures developing across the BRICS countries, and the third will focus upon standards, namely ISO 20022 and 15022. We’ll certainly be engaging in plenty of discussion on the Russian financial market and we look forward to detailing our achievements and plans for the coming year. “That said, the real purpose of the conference for us is to share and formulate new ways in which we can utilise fintech for the benefit of our customers. IT is present in every part of NSD’s activity and our goal is to make the transition from being a supporter of business to a provider of business. “Fintech is allowing us to form direct, robust connections to customers outside of the Russian market and it’s through these relationships that we open the door to new transnational business opportunities.” Autumn 2016 |



To B or not to B...

Blockchain was on everyone's lips at last year’s Sibos. But that’s not the B word likely to be dominating debate at the event in Geneva this month. Balazs Fejes, Co-Head of Global Business & Head of Financial Services at software product developer and consultancy EPAM, shares his thoughts in the wake of Brexit “2015 was the year when everybody talked about blockchain. Everybody talked about how much it will be impacting the industry and how, if you don’t have a blockchain solution, you are dead in the water,” says Balazs Fejes.

So, he’s curious what this year’s hot topic will be around the stands at Sibos, given the departure from key positions in the banking industry of some of blockchain’s biggest advocates, including Simon Taylor at Barclays and Oliver Bussmann at UBS. As the head of global business at software developer EPAM, Fejes remains alert to any opportunity blockchain offers, of course. “I believe if it starts happening, there are going to be major projects launched in this area and we are preparing for those opportunities.” But right now there’s something else on the horizon that could be much more disruptive than a single distributive database. “The new Payment Services Directive, or PSD2, to me, is going to be a revolution," says Fejes. "I believe that it can fundamentally change the whole industry, more so than blockchain. PSD2 will introduce new players to the game, who can really take advantage of the fact that now you can develop API-based banking.” By new players, he’s not talking fintechs, but the emergence of piggyback partnerships between the likes of Fidor Bank and Telefónica Germany, which launched O2 Banking using Fidor’s banking licence this summer. It was the first mobile-only bank account from a mobile provider, complete with an O2 Mastercard. “What I’m really interested to see is if there is another type of company which is trying to couple its services. I’m looking for telcos – we’re talking with quite a few of those,” says Fejes.



There’s a problem taking part in this debate, though, especially if you’re a fintech sitting on the ‘wrong’ side of the English Channel. And that’s the other B word that’s likely to be on everybody’s lips in Geneva. “Number one will be Brexit,” says Fejes. ”What does Brexit do for the fintech? What does Brexit do to the whole industry? That’s going to be a big talking point, which is unfortunate because that’s not really moving the industry on." Instead, it's just caused confusion and delay – particularly around regulation. "Clearly, PSD2 is coming; we see a lot of people starting to implement parts of it. There's a good example with a UK challenger bank. They were preparing, ready to go, and then, due to Brexit, they were like, ‘Wait, what are we doing now?’ “This is what we are seeing from the UK financial services industry… ‘Do we need to implement these regulations? If yes, in what form? And how much should we invest into it if the bank is no longer inside the EU?‘” Fejes doesn’t see PSD2 as an instrument for democratising banking services; rather the increased competition that comes in

its wake could simply dilute the value chain further, he says. He’s also not convinced that banks have entirely appreciated it. “Do you understand that people have a chance right now to disseminate your value chain? Or will you stand behind somebody who is going to provide you with an aggregation capability or the API? So you’re being compliant, but your brand and other access to the customer actually disappears, which is happening somewhat in Germany right now with what a major retail bank is proposing to all the small retail banks,” says Fejes.

Pay as you go As one of the Forbes 25 Fastest Growing Public Tech Companies, which recently posted second quarter revenues of $283.8million, up 30 per cent year-on-year, EPAM’s 18,000 people, working across 25 countries, see digital design changing the lives of people everyday, from their shopping, to travel, financial services and healthcare. But no one technology has had quite as much of a universal impact as mobile phones – and in Asia, mobile pay.

Question mark: Brexit has left financial institutions in limbo

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“The most advanced mobile payment solutions and mobile platforms I’m seeing today are coming more from the Asian market – WeChat and Alipay are really representing the forefront of such innovation, with wide acceptance and widespread usage,” says Fejes. “Clearly, it’s not an Apple platform, but it’s way beyond what Apple Pay can provide. So, if today you are in Hong Kong, you can pay anywhere with your WeChat payment capability, which is based on QR codes or near field communications." And it's not just payments, but wealth management and other sophisticated financial services. "The WeChats and the Alipays are sneaking into the more advanced market," says Fejes. “Compared to this, Apple Pay and mobile solutions are quite restricted. They’re very much tied to card-based payments and Apple Pay is very much an aggregator, not a single player.” It’s yet another example of the disrupters desiccating the traditional banks’ value chain and robbing them of customer loyalty. “It’s interesting, people are becoming more loyal, not to their bank, but to Apple itself,” says Fejes. “Apple Pay drives loyalty towards Apple. I believe that once PSD2 is out there in the world, you will see that Apple Pay or other mobile payment providers will provide another payment instrument, which is a direct connection to your bank, which I think is going to be amazingly powerful. "I just don’t think other payment solutions are popular enough to make a difference. In Switzerland you have Paymit; in the UK you have different banks launching different payment solutions; in the US you have virtual credit card setups. PayPal is introducing certain things; Samsung Pay is out there also. "However, the real traction is only coming from a couple of the players and these are either Apple, or the Asian competitors," says Fejes. “We talk a lot about new payment solutions and seamless payment that’s fully integrated. I think what’s more visible, actually, is payment networks and acquiring systems or switching systems, preparing for this new type of payment to appear. We see the greatest opportunities where you have legacy systems behind credit card acceptance or Autumn 2016

clearing networks. They are going in and replacing those; trying to adopt and deploy new solutions, versus trying to adopt the old mainframe or batch-based solutions. I think there’s a clear correlation between how modern the payment infrastructure is and how fast can they adopt this new type of near real-time solution.” But there’s a flip side to convenience – data security. “One aspect is: how can you secure your mobile payment device itself? The second is: where are you storing this information, how is this information stored and how well is it encrypted? " I think there are a lot of question marks around that. When you lose your phone, for instance, is there a way anyone finding it can reuse or get access to the payment instrument? “The traditional fraud detection solutions that are out there are not really connected; they are not really taking all the data in and they’re not understanding the data. So, my favourite example is that you use your credit card to buy a ticket and you fly to Spain. You are in Spain and the credit card company is blocking your usage. Why? Because they don’t know that you are in Spain, although you used the

digitisation, says Fejes – an issue that will be addressed in an upcoming EPAM white paper, which looks at, among other things, its work with wealth managers. UK online wealth management platform Nutmeg’s struggle to turn a profit hasn’t surprised him, not least because the onboarding process was 'much more than they had envisaged'. “When you talk about the Nutmegs of the world, we’re not seeing that much uptake in Europe. This kind of change in the market is more dominant in the US, where millennials really distrust the (wealth management) industry," he says. But the emergence of automated, online competitors has nonetheless made the traditional wealth management providers focus on customer retention – and that comes down to providing what Fejes calls the 'basic stuff'. “How can I add very basic functionality, such as portfolio analytics, health checks and suggestion engines, enriching it with content and providing a way to have more meaningful discussions with customers? Maybe I’m not able to provide somebody more return because the market is not there, or somebody is very conservative, but I want to provide additional value. Can I provide concierge services with it? Can I provide

I believe once PSD2 is out there, you will see Apple Pay or other mobile payment providers, provide another payment instrument, which is going to be amazingly powerful credit card to buy the ticket. So you need to apply cumulative capabilities and really use the big data that you’re collecting to make fraud detection a real-time thing. With a mobile device, that’s a little bit more sophisticated. We’re not correlating data using GPS coordinates –for example, ‘I paid with a mobile device in one location, I just cannot be in the other location five minutes later.' So I think that there are some holes here.”

Digital isn’t everything Fintechs have to recognise that improving the customer experience isn’t all about

additional content? Can I provide some sort of networking or new type of investment possibilities… charity, donations or social investing? These are the things we’re starting to see being asked and the main driver is to retain customers and assets under management. It’s all about making the client advisor more effective and driving more engagement. People still want to deal with somebody human at the end of the day. They don’t want a completely automated experience. That’s going to be part of the white paper we’re releasing in September: how far can robo go without being counterproductive?” |



Risktech, fintech, regtech... Brextech? Alexander Tsigutkin, CEO of AxiomSL, the enterprise-wide data and risk management solutions provider helping firms cope with some of the biggest change management challenges, gives his take on the new tech Coping with changes to regulations, risk and compliance, as well as to operations and technology, are among the biggest challenges financial firms and corporates face. With the scope of regulatory focus continuing to expand while budgets are cut, finding the right balance between sustained growth and meeting the needs of high frequency compliance change is an ongoing challenge. Risk and finance executives agree that the need to embrace unconventional technology is inevitable to manage the quantities of data needed to perform extensive analysis and deliver internal and external reporting, according to the Basel Committee on Banking Supervision (BCBS) 239. As a result, we have seen fintech and, more recently, regtech evolve.

Integrated risk and finance With tighter regulations, reputational and compliance risk have become perhaps the most significant ongoing concerns among financial institutions. As an example, let’s look at the capital markets – a sector that’s characterised by opacity, enormous deal size with nanosecond speed (both pre-trade and trade environment) as well as complexity and systemic risk. Incumbent financial firms integrating a data-driven change management platform would gain valuable market advantage. This would allow them to leverage their existing technology in a data-rich, analytical manner with increased use of predictive analytics and scenario analysis, to efficiently automate regulatory

demands. It is critical that financial firms also address infrastructure-related challenges they face in relation to data risk aggregation, data lineage and data governance. As the volume and complexity of new rules grow every year, so too does the interconnectedness of regulations. Historically, regulations tended to take a static approach. However, today there is significant overlap between regulations and cross-business functions. International Financial Reporting Standards (IFRS) 9 is a good example, which revolves around the requirement to accommodate the perspective of both risk and finance. These two divisions have previously operated in isolation from one another and have their own language, culture and data granularity frameworks for addressing and analysing the uncertainties of the future. Trying to combine the goals of accountants and risk managers leads to the key question: can structured and unstructured big data be managed in a controlled production environment while simultaneously being available for dynamic, flexible and evolving decision support? The answer is yes. The right technology tools can provide both the controlled environment required by accounting and the flexibility demanded by risk. For instance, AxiomSL’s data-driven collaborative platform, known for its robustness, adaptability and transparency, imposes no constraints on where the data is located and enables financial firms to avoid duplication and double storage; as a result, data can be simultaneously used in a

rigid production structure on the one hand as well as in a flexible, dynamic decision support environment on the other.

Data and process As the quantum of structured and unstructured data grows and the requirement for transparency and traceability by regulators continues, the volume and granularity of data demanded by regulated entities will also grow. Data is the lifeblood of an organisation. It must flow seamlessly through its products and lines of business, not only to support growth strategies but also to meet ever-expanding regulatory compliance mandates. All too often, financial firms attempt to address increasing data volumes by creating more business unit silos. This data fragmentation results in major struggles when aggregating, enriching, analysing and validating vast amounts of information in order to accurately report overall risk exposure and financial positions. In addressing the slew of contemporary regulatory mandates – such as Basel III reporting rules, BCBS 239 Principles, the Markets in Financial Instruments Directive (MiFID) II, comprehensive capital analysis and review (CCAR), liquidity (LCR & NSFR) and stress testing requirements, IFRS 9, Fundamental Review of the Trading Book (FRTB), Common Reporting Standard (CRS) and Foreign Account Tax Compliance (FATCA), and many more – financial firms need a robust platform for change to provide data and process lineage data enrichment and automated workflow

It is not about developing whizzy apps as individual solutions… it’s time to consider unconventional methods to deal with the constant state of change 42


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capabilities that deliver the analytics, reconciliation and validation required. These business functionalities, in addition to providing efficiency gains and saved resources, will enable firms to draw business intelligence from their regulatory compliance data gathering and reporting activities, plugging that intelligence back into their trading, risk management and operations. Top management sees an opportunity, but in order to realise it, they must address data governance frameworks and data lineage in a controlled environment, and this is no small task. Given financial firms’ challenges, it demands partners like AxiomSL, which offers both a strategic blueprint to quickly adapt to change and the flexible platform to bridge disparate systems that house key datasets. In short, it demands a change manager.

Best option post-Brexit In the wake of the vote by the UK in favour of Brexit, which compounded the many new regulatory compliance requirements, financial firms need to be swift and decisive while protecting existing business and re-establishing their European headquarters. That entails managing a multitude of time critical projects involving data management, finance, risk management and new regulatory regimes.

A data and process-driven platform, such as AxiomSL, enables financial institutions to make a timely and seamless transition, with the ability to attest the accuracy of data and the analytics when navigating through new regulations and the unknown impacts of Brexit. AxiomSL’s change management platform steps in and acts as an integration and application development layer, which is implemented with minimal internal disruption and without a ‘black box’ mentality. This integrated platform delivers traceability, transparency and greater clarity about the organisation’s financial position and risk exposure to meet the requirements of both regulators and company management. The focus of this work is on process streamlining and change management. The industry’s technology focus has always evolved – from the early risktech to

the fintech startup boom and now regtech. However, technology-led transformation strategy and its relationship to change, is making senior managers realise that it is not about developing new whizzy apps as individual solutions, but about transforming businesses for future success. To this end, it is time to consider new, unconventional methods to deal with the constant state of change.

New approach: Keeping pace with regulatory change will require an unprecedented integrated approach

Autumn 2016 |



The alchemy of change Mindset is key to transforming even the largest companies into scalable, well-oiled machines capable of coping with industry challenges, says Mark Buitenhek, Global Head of Transaction Services at ING Bank Many banks are experiencing a rapid change in their customers’ expectations. Frictionless service, ease, simplicity, and real-time functionality are just a few aspects of these developing needs. There is also a requirement to help customers cope with growing regulatory complexity. Examples include European regulations such as the Payment Services Directive (PSD2) and BASEL III capital constraints. These are having an impact on our clients from all angles. At the same time, in this increasingly digital world, there are issues like cybercrime and fraud to contend with, and all of these things combine to exacerbate the internal challenges that even the most modern banks still face. There is a great deal of rationalisation that needs to take place. On one hand, new channels demand due consideration. Application programming interfaces (APIs) require far greater implementation than what is currently in place. At the same time, however, having to deal with antiquated production lines, combined with the need for better APIs, is an enormous challenge globally.

Fresh perspectives And then there are the new entrants and ‘attackers’ that are constantly targeting institutions and trying to take capital away in bits and pieces. When it comes to the latter, though, ING has discovered some interesting new ways of tackling such problems. These include the unlikely approach of cooperating with them, rather than seeing them as a threat. We consider ourselves to be pushing forward a new frontier against considerable odds. This is especially true when it comes to transaction services and cash management. That’s where all the excitement is now taking place and we believe it’s going to become a major driver for innovation.



Embedded innovation The world is changing and we need to move with it as fast as possible. We embrace this, with fresh techniques and financial technologies (fintechs) around us to create a new kind of ecosystem. This effort started years ago with the creation of internal ‘hackathons’. These are innovation boot camps that see us taking professionals out of their daily jobs and treating them like a fintech. They receive money and the internal phase sees them going through sequential stage gate meetings. Externally, we work closely with perhaps 40 to 50 fintechs. If we have

Antiquated production lines, combined with the need for better application programming interfaces (APIs), is an enormous challenge globally a question or a need, we can post it and our fintechs respond. We use them for web design and problem solving. At the same time, we’re investing in fintech, in areas like loans and equity. Underpinning this third aspect of our new technology-based market strategy is a mindset and internal culture that embraces the need to move from where we were towards a new way of thinking and operating. This reflects less the traditional mindset of bankers and more that of a modern company. This is a more fluid mode of operation than traditional banking. For example, one of our largest business units in the

Netherlands has fully adopted a product management process in its IT operations – a more agile approach that is now used in all of its internal processes. Departments have been replaced by what we call ‘scrum teams’, or ‘squads’. These handle proportionate microcosms of the entire banking process. This compartmentalisation allows individuals to quickly and comprehensively achieve mastery within their areas and means the whole organisation is made up of well-oiled units that fit together like the components of a fine Swiss watch. Working in this way, we’ve turned around very large companies – transforming them into agile and responsive startup-style cultures. In environments like that, innovation thrives. Within these businesses, all the normal trappings of offices have gone, all the desks and rooms have disappeared. People can play football, soccer tables are everywhere. Already, we’re seeing such great results from these firms that newcomers to our service are willing to pay an entry fee, as are the many leaders who want to understand this unique new system. People are lining up to see what’s going on.

Backing Blockchain Blockchain combines multiple complex processes into a single step. It drastically simplifies the way firms operate. This technology has the potential to streamline processes from end to end and secures transactions almost flawlessly at the same time, creating enormous savings in time and capital. Scalability is another highly valuable byproduct of this approach. We see firms bringing new concepts to market on a daily basis, and one of the many advantages of Blockchain is that demos of products and processes can be created and analysed within a matter of days, allowing them to move forward rapidly. There are many of examples of Autumn 2016

international payments where Blockchain technology has been implemented successfully. Based on this positive evidence of its capabilities, we can build complex operations, such as customer due diligence and advanced know your customer processes, where the complexity of the work could otherwise easily become a burden.

The R3 connection R3 is a New York-based firm, founded in 2014, that leads a syndicate of financial companies in Blockchain research, development and use within the financial system. We’re one of 45 financial institutions that have teamed up with it. Right now, we’re leading the industry in the area of correspondent banking and promoting the debate about Blockchain’s role within that. We want to promote Blockchain as one of the most serious and

meaningful solutions available. While it is not the answer to everything, it is still the most promising utility of its kind and has the greatest potential. Still, correspondent banking needs a reboot, and SWIFT, the global provider of secure financial messaging services, is working on it. One great area of concern relates to our understanding of what areas or components of the industry need to speed up, simplify or become more transparent than they are now. Questions abound, such as ‘is Blockchain the right answer?’, ‘if so, how do we prove it quickly so that we can implement it rapidly with zero undue risk?’, ‘will we be able to move fast enough to get to where we need to be?’ and ‘how will the transition be managed?’.

This is what we are hearing, not only in international payments but also in securities and trade. Recently, in conversation with a number of large corporations, we learned that they are extremely interested in these questions. They want to partner with us and lend their resources to researching and developing Blockchain. They see that it’s in everyone’s interests to transition from old legacy systems, where many thousands of banks are connected into an interdependent network. It’s an issue that demands input from industry leaders and teams from every part of the global banking trade. But we have every confidence that it will work out very well. The transition will be costly in every sense, but there is almost unanimous agreement from thought leaders of every stripe that the rewards will be more than sufficient to justify this.

Forging a new future For today’s financial firms, transformation is survival

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Peak practice

Fintechs have got better at pooling talent so that they can meet the mountain of obstacles facing financial services, says Innotribe’s Head of Innovation Kevin Johnson as he heads for a bumper Swiss Sibos Fintech’s days of disruption are ending and a new era of collaboration has begun – and it’s driven in large part by funding, says Kevin Johnson.

Innotribe’s head of innovation programmes has witnessed a distinct shift in focus that is being embraced by both fintechs and the established financial giants. In this new era of cooperation, fintechs are increasingly drawn together to pool strengths and resources to solve problems. “I first saw it suggested in a paper about 18 months ago that we’re entering a phase of Fintech 2.0,” says Johnson. “If you look back to when fintech started, which was around 2008/9, it was primarily funded by the venture capitalists who were out there to make money on the back of valuations and looking for exits from companies. Whereas now if you speak to the venture capitalists, half of them are embedded in captive funds, working with the banks, and their goal isn’t just to make money. Their goal is actually to look at solving problems. “A lot of the fintechs are wanting to work with incumbents in the industry and the industry is receptive to it,” he adds. Part of SWIFT, the co-operatively owned provider of secure financial messaging services, Innotribe was created to identify emerging trends in financial services innovation and promote discussions about how those trends will impact the industry. Brussels-based Johnson witnessed the spirit of collaboration firsthand earlier this year,



when Innotribe helped banking group ING Belgium develop its ING Fintech Village. The bank gave each startup taking part a mentor from its own staff and the firms worked on projects to solve problems faced by ING. “All the people there could solve problems the bank was having and ING managed to tie this in with its management structure,” explains Johnson.“Each startup they worked with had a mentor inside a business unit inside the bank, so there was clearly a value in taking part.” He’s excited to see fintech hubs, including the London-based Innovate Finance hub, working in closer partnership – a move that was accelerated by last year’s Sibos discussion ‘Why Do Banks Need Fintech Hubs?’. Led by Innovate, it spawned the Innovate Finance Global Summit, which helped hubs evolve the ‘friendship agreements’ they'd previously held into more formal working relationships. “From an economics point of view, and a government point of view, fintech hubs are hugely important, which is why a lot of governments are trying to themselves be a fintech hub,” says Johnson. “What we realised very quickly was that these hubs

should be working together. It’s not a case of them competing against each other for talent. It’s going to give them a forum where they can connect with each other, where we can bring our contacts inside the financial community to make them aware of what’s going on, because these hubs are going to be economic drivers for growth for those regions.”

Accelerator hubs As a platform for innovators, bank representatives, investors and leading financial institutions, the global network’s reach is huge and the sharing of knowledge ties in with Innotribe’s aim of focussing on opportunities for transformation rather than threats to current market practices. “If you’re a London-based fintech start-up and you want to branch out to America or Australia through that global federation of hubs, we will have contacts there,” says Johnson. “We will be able to put you in touch with people who can help you with expansion. If you want to partner with financial institutions, we can bring those to the table as well.” This desire to tie up hubs across the world has

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seen Innotribe focus on Africa and Latin America for its most recent annual Startup Challenge competitions that showcase the best talent. Three winners from both continents this year netted $10,000 and have been invited to take part in this year’s Sibos conference in Geneva. “We were getting ever increasing numbers applying to take part in the competition but last year we decided to go to Africa as part of the Swiss/African regional conference and we found that our customers in Africa were very much underserved by connections to the fintech ecosystem," explains Johnson. “The Startup Challenge was designed as a bridge, so that our customers could understand what was happening in fintech, and if you look at the UK, the US and Asia, there are a lot of other initiatives that can serve our customers well. A number of those are in fact being run and supported by our customers. “So we wanted to go into what we called emerging innovation ecosystems and expose what was happening there.” This year’s Startup Challenge winners include Quotanda, a marketplace for student

loans managed by education providers to connect borrowers with lenders. And from Cameroon, WeCashUp took a prize for its cross-border secure payments platform that lets users pay via mobile phones. “We have the three winners from our African showcase coming to Sibos, not to talk about what they’re doing but to talk about the realities of fintech innovation and collaboration on the ground in Africa," says Johnson. “And we’re going to do the same with those from Latin America. “For the rest of the week you’ll find them on their own separate stand, where we’re putting them on the floor as full Sibos exhibitors for the rest of the conference to discover and interact with.”

Swiss innovation Innotribe has also been working to bring Swiss fintech start-ups together at Sibos, to showcase their talents on home soil. It has organised a Swiss lounge for the country’s fintech ecosystem – the first such lounge for fintechs from the event’s host nation. About 25 Swiss firms are taking part, along with hubs such as Alp ICT. “There’ll be a lot of one-on-one and

mentoring meetings happening, as well the main stage,” says Johnson. The country has a particular take on fintech, he adds. “Historically, Switzerland was considered the home of private wealth management. However, in recent years it's been promoting itself as a very innovative economy. If you look at the Swiss fintech scene it’s in two to three pieces. You have Zurich, you have Geneva, and you have Basel. In Geneva, for example, they’re concentrating on working with the banking sector while Zurich is still focussed around private wealth, leveraging their historical assets and trying to turn that into positives in this fintech ecosystem.” Johnson says the Swiss fintechs play to their strengths by tapping into traditional areas of expertise. And he notes that the startups are typically outward looking, so he believes they will be open to exporting their ideas. “They’re very competitive and I think that will serve them well. So I think it’s a healthy, vibrant ecosystem. It is growing and growing.”

From an economics point of view, and a government point of view, fintech hubs are hugely important

On the up: Swiss fintechs are leveraging the country’s historic links to finance

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In or out?

Since the rethink over call centres, banks have kept pretty quiet about outsourcing key functions. But third-party processing is a growing opportunity for suppliers and one that director at IMTF Christoph Erb will be looking out for at Sibos 2016 The banking industry divides into two camps for Christoph Erb; those focussed almost exclusively on reducing cost in a futile attempt to maintain the status quo; and those who recognise that 200 years of banking as we know it is coming to an end and it’s time to move on.

As IMTF’s director digitrans (read digital transformation), he mainly concerns himself with the latter. Here, he predicts mobile payments, outsourcing back office functions and automating the customer onboarding process will be hot topics around the board table over the next 12 months. But, meanwhile, he’s helping them deal with the somewhat more urgent business of regulatory compliance while simultaneously trying to shape their digital future. “Now they have to do innovation inside of the regulations,” says Erb. “And there a lot of financial institutions are struggling.” Not least because the time allowed for implementing financial services directives is getting shorter, which is where the leading Swiss provider of process automation services has stolen a march on its competitors with software that features built-in compliance features. “It depends on the size of the regulation, of course, but starting from scratch we can implement in two to three weeks,” says Erb. This speed-of-light response is achieved by clients outsourcing the entire process to IMTF's team, which lives and breathes regulation and has already implemented the same compliance procedures in dozens of banks. “If each of the banks is doing compliance for itself, it has to read the regulations and



think about how it can solve [the problem]. It takes time. We’re doing it on a regular basis for several banks. We’re focussed on it,” says Erb. “When you look into financial institutions, the regulation processes are almost the same – relationship manager, maybe team head, or team head and then the compliance officer, or the regulations manager, compliance officer, head of compliance, risk officer, maybe tax operations and then top management. But the rules behind them are changing. This is differentiated in our tools between workflow and processes. Therefore we’re really fast.

A lot of banks solve the compliance requirements in the back office, but we can start at the front “Time to market is not the new functionality, it’s time to regulation.” IMTF’s latest processes even combine onboarding and client management across multiple channels with compliance embedded in the system. “We cover the whole process, from prospecting, on-boarding and modification to closing, including self-service clients, iPad option for the relationship manager, a solution for the call centre and so on," says Erb. "Maybe our customers want to start with the self-service client, but afterwards have

the same process for the relationship manager. If somebody is coming to a branch and asking for a new product or wants to be onboarded, it’s the same rules, the same technology, but the questionnaire is different. “A lot of banks solve the compliance requirements in the back office, but we can start at the front. "Think about it: you want to onboard a customer who stands on a sanction list on a self-service. If you are doing the sanction screening at the end, you have to call the customer and tell them ‘We are not able to onboard you‘. You need the whole process, it takes time and it’s not good for the customer. If we are doing the sanction screening in real-time then you can give a message, ‘Please contact the branch’, if you want to be polite, or if you’re not so polite, ‘Unfortunately we are not able to onboard you,’ without giving a reason, but then it’s done. It’s faster, less costly,” says Erb. At Sibos, he’ll be on the lookout for innovation in mobile payments, one of the three key developments he predicts will be gathering pace over the next 12

Autumn 2016

months, with mainstream financial services providers looking over their shoulders at disruptive competitors, such as Apple Pay. “Should they compete with them? Or should they partner with them? Here, I think will be one of the biggest challenges, especially in Europe,” he says. IMTF’s other tipped area for growth is outsourcing – not the customer-facing functions that earned banks such bad press when call centres were migrated from the UK, but back-end processes. “It’s a big area, because in the past, the financial industry did everything on its own, starting with the software. This year, the trend is for the banks’ software to be developed by providers like Temenos and Avaloq. Now a lot of banks are starting to outsource business processes, too, like asset data management, scaling of payments and compliance services.”

It’s the beginning of a quiet revolution in the retail bank value chain. “It’s not public, but they outsource one service or one functionality. In Germany, all the retailers outsource the infrastructure. In Switzerland, most of the banks have outsourced the infrastructure and asset data management. Now they outsource payment and printing. Go to Indonesia and they are thinking about outsourcing infrastructure, but they are not so keen to outsource business functionalities. In Australia it’s also a big trend to outsource the infrastructure and some of the small- and mediumsized banks are also thinking about the due competence and payments. Because payment is not a

differentiator, they will build up a payment centre for all the mid- and medium-sized banks and have this outsourced. “ The driver towards this is clearly cost. “The cost pressure and the complexity will only get bigger,” says Erb. And it’s forcing banks of all sizes to think about what they’re good at and what they’re not; what's in and what's better out.

New direction: Cost and complexity will increasingly force banks to outsource back-office functions

Autumn 2016 |


Automation enables transformation Our solutions help to optimise the cash processes across your entire branch. Free up time, free up space and free up your staff to focus on your customers.

To ďŹ nd out how we can enable your branch transformation strategies, visit or contact your Glory sales representative

MONEY 20/20

FOLLOW THE MONEY Fintech Finance asked Sanjib Kalita, Chief Marketing Officer for Money20/20, what to expect from the world’s largest payments and financial innovations event, due to be held in Las Vegas in October n What are your plans for Vegas ? Each year, Money20/20 highlights the most interesting companies and leaders driving innovation and change in fintech. This year’s event will draw more than 10,000 people from more than 3,000 companies to Las Vegas. It will be the best event to meet companies and close deals. We’ve had so many people tell us about how productive their time at Money20/20 has been in the past and we expect that to continue. Money20/20 attendees tend to have an open mind when on site and are more likely to interact with others in chance encounters. Last year, the average attendee spent five hours in the exhibition hall. While attendees did meet many people and companies they expected, they ended up meeting many more that they didn’t! There will be new announcements. There will be surprises. So be prepared to think and act on your feet.

Hit the town: Expect the unexpected at Money 20/20

n Give us an idea of the scale of the conference and how it’s grown. When Money20/20 started in 2012, we drew 2,000 attendees. Over the next two years this grew to 4,000 and 7,500 attendees respectively. Last year, the event drew 10,000 people from more than 70 countries. The exhibition hall during the first year featured fewer than 100 companies. Last year, the event had 500-plus exhibitors and sponsors. Throughout this, it’s maintained the same level of seniority among attendees.

Money20/20 had previously been employed in the payments and financial services industries for decades, without much interest from people outside of the industry during that time. Now, many of the backend systems, technologies and processes have come to the forefront and become critical parts of strategies for all sorts of companies. This means that things like blockchain, mobile payments, and alternative lending are now topics you find yourself talking to your friends about at cocktail parties. We’re also seeing an expansion in disruption within the financial industry. As an example, topics like insurance and robo-advisors are on the agenda this year, whereas they wouldn’t have been a couple of years ago. Additionally, we’re seeing fintech disruptions reach new geographies. We’re seeing this across economy types, from centralised to free market, and from developed to developing.

n What trends have emerged over the past year and has anything surprised you? With every successive year, it’s surprising to see the increased interest in the topics we cover. Many of the people working on

n What highlights and talking points should visitors be alert to? There should be several companies making some pretty significant announcements at the event this year. There will be some names you know and some that you don’t.

Now that we’re in our fifth year, companies plan and time their major announcements around Money20/20 to maximise conversations and engagement with the industry. You’ll just have to come and see! n Finally, the second Money 20/20 Europe is due to be held in Copenhagen in 2017. What can you tell us about it? Money20/20 Europe had an amazing inaugural event that drew more than 4,000 attendees. The vibe was energetic and fun. Anecdotally, we heard that many people and companies had significant conversations on site. The media coverage was quite positive as well. We anticipate more attendees. We also anticipate that the types of companies that come along will expand. This will raise the level of the entire event. As an example, it took five conversations over three months to secure a keynote speaker for the first event; this year, it only took one conversation. Additionally, now that we have a sense of the flow of events and people, we can spend more thought on how we can optimise the attendee experience even further. We’re well on our way to building v2.0.

Blockchain, mobile payments and alternative lending are now topics you find yourself talking about at parties Autumn 2016 |


MONEY 20/20

The end of the queue? Mobile point of sale devices are transforming the shopping experience and driving down business costs in many retail markets. But we’re not at the end of the line yet, says Simon Stokes, Chief Commercial Officer for Miura Dollar per square foot, Apple’s retail outlets are by far and away the most profitable on the planet. Across the technology company’s global estate, the chain’s signature glass walls, Scandi wooden benches, tech talk and play areas and – in some cities – even plazas for weekend concerts, charm customers out of an astonishing $5,546 for every one of those highly polished square feet. And helping to effortlessly relieve them of all that cash are mobile point of sale machines (mPOS). A retailing groundbreaker when they were introduced into Apple stores in 2006, the handheld mPOS devices continue to be one of the most liked features of the Apple shopping experience. And,



says Simon Stokes, Chief Commercial Officer for Miura, a company that pioneered mPOS devices in Europe and is now dedicated to creating a new ecosystem for payments, it’s not hard to see why. “Apple stores drove a change in consumer expectations around the shopping experience,” he says. “We did some research recently in which we had a little segment that revealed shoppers love Apple stores’ mPOS. Ninety per cent of the consumers that were polled said it’s faster than using a till, and 92 per cent said that they liked staff being able to take a payment from them there and then. “This is the evolution and revolution that’s going on at the coal face in the payments industry.” Not everyone’s ‘got it’ yet, of

course – or, if they have, many might be reluctant to invest in a whole new suite of handsets while they still have a perfectly functional set of equipment. Which is why Miura is taking a different approach, as will be evident at Sibos, the third such event for the company since it entered the US market just 18 months ago. “Shoppers don’t believe the traditional, fixed point of sale is an efficient, effective, or even personable way to conduct commerce,” according to Stokes. It also leads to low morale among store staff. But a flexible payment system designed to work alongside legacy technology while simultaneously taking advantage of the latest improvements in the transaction process, makes life easier for both. The defining feature of Miura’s products is ‘flexibility’. The company doesn’t see itself

Autumn 2016

as a rival to any provider in the marketplace, but rather as a fellow traveller on the industry’s quest to see the end of queuing to pay as we know it. “There is so much innovation going on across every layer of the payments industry,” says Stokes. “We’ve got to embrace the best innovators, the best designers and make our products compatible with theirs in order to provide the very best solutions for our clients.” That means Miura, which already has one million payment entry devices in use in Europe, does not involve itself with software development. “Instead there’s a real desire to reach out and touch the other players in the ecosystem, be that the payment service provider, the acquirer, or the software developer,” says Stokes. “We interact with all of them rather than just channelling a hardware product to a point of distribution that then goes on to an end user client. “I think the value that Miura brings, especially to the North America market, is the heritage we have in the mobile payments industry, especially if you think about the journey we’ve been on with the Europay, MasterCard and Visa (EMV) standard for credit and debit card payments in the UK and Europe. As the North American market begins to accelerate its adoption of EMV, I think

Miura definitely has a key part to play. “We don’t compete, that’s a very important factor. We don’t have our own software. We provide the hardware, an application processing interface (API) that sits behind it and a software developer kit. That means we can embrace working with the key constituents to enable a mobile transaction to happen successfully and securely. That’s a big differentiator and a big advantage for us.” It’s also key to the way Miura drives cost out of payment transactions for the vendor, starting with a low cost of ownership. Again, says Stokes, it comes back to flexibility, something its latest device, the POSzle – a modular, POS hardware bundle – has in spades. “At the heart of that product is a smart hub that gives flexibility and choice to the merchant, not only in how they build their POS environment, but also by virtue of the fact that this product will work with third party peripherals. In particular, larger merchants who have already invested heavily and have legacy terminal environments, are

The POSzle smart hub gives merchants flexibility and choice over the POS envronment

thinking, what next? That what next has to have flexibility, it has to be able to drive cost down, and it has to have the capability to work with other elements that they don’t necessarily want to let go of right now. “That was really the thinking behind POSzle. We’re trying to change the way the market thinks about terminal replacement,” adds Stokes. “I think it’s absolutely acceptable to be able to say, ‘you can go and choose somebody else’s scanner or cash drawer or payment entry device if you wish to do so, or if you’re already invested in that, that’s fine’. It’s not so much disruptive, as market changing,” he says. The contactless and Wi-Fi enabled M010, the latest iteration in Miura’s M-series of devices, including the stylish and popular M007, will also be on display at Sibos. Each of its mPOS devices works across the same API and benefits from low-cost remote key downloading and a support package that enables merchants to recover devices that go down in store. “Many merchants, who are embarking on this mPOS journey, are really looking for an organisation that can share subject matter expertise, technical support and anecdotal experience from similar sectors or markets across the regions we serve,” says Stokes. “I’m tremendously excited about North America and the phenomenal opportunity it holds. Not only because of the move to EMV, but also because of merchants’ desire to engage with a manufacturer that will really drive a change of thinking around how we do point of sale.”

Not such a long wait: Mobile point of sale devices are gaining ground fast

Autumn 2016 |


MONEY 20/20

Frontier thinking

PayPal was way ahead of its time with the first mobile payment in 1999. Now handling nearly a third of the world’s 4.9 billion mobile transactions, it continues to push the boundaries, says SVP Global Head of Product & Engineering, Bill Ready The move to mobile has been one of the greatest changes in human behaviour in recorded history. There are now more mobile connections than people on the planet. It has fundamentally changed the way we consume content, connect to the things we love, communicate and get access to everything from food to transportation and accommodation – with a simple tap.

Today, mobile is no longer a nice-to-have, it’s a must-have, and the industry as a whole is moving toward a mobile-first strategy. PayPal has led this from the technology’s earliest days, starting 10 years ago when we launched our first payment product for mobile phones



in April, 2006. Our own mobile strategy predates even that. Confinity, the company that became PayPal, was the original pioneer in the push to mobile. In 1999, PayPal’s first business was a mobile one, on personal digital assistants or PDAs, allowing people to ‘beam’ money between two such devices. But PayPal was ahead of its time and the world wasn’t yet ready for mobile, so the company pivoted to email payments and helped ignite the online commerce revolution, allowing everyday people to transact with each other on the Internet.

Mobile pioneers On April 6, 2006, seven years after PayPal’s first foray into mobile payments, we launched a new way for people to send

each other money, buy the things and donate to charities directly from their mobile phones, via text message. To put this in perspective, this was well before the iPhone launched in 2007, and before the Apple App Store and Google Play appeared in 2008 and 2012 respectively. It was also before next-generation mobile apps like Uber, Airbnb and HotelTonight had transformed the transportation and accommodation industries, and well before the mass adoption of smartphones. Throughout the last 10 years, we have continued to innovate and invest in mobile, acquiring mobile-first companies like Braintree, which launched its first mobile application processing interface (API) in February 2012 and built a payment platform Autumn 2016

Breaking ground: PayPal has explored new payment worlds, while driving global financial inclusion

exclusively focused on mobile and digital payments. This enables us to think more holistically about how people can best manage and move their money and how businesses can better connect with their customers anywhere, any time, around the world. Today, mobile commerce in the US alone exceeds $100billion and continues to grow at a rapid pace. As the industry began to adopt mobile, PayPal’s mobile volume grew dramatically. In 2010, mobile was only one per cent of PayPal’s payment volume. In 2015, nearly a third of the 4.9 billion transactions PayPal processed were on mobile. This volume had increased to $66billion by last year.

Untapped potential Despite major advancements in mobile across the industry, it still represents only a tiny fraction of all commerce – even though consumers are demanding more seamless experiences. That’s why we’ve been innovating with tools like One Touch, the first cross platform one touch mobile

PayPal Commerce now enables consumers to connect with potential purchases in an email or on a social media site, like Pinterest or Facebook upon which mobile innovators like Uber, Airbnb, HotelTonight, Dropbox, Munchery and Jet have built their offerings. Along with the Braintree acquisition, Venmo, one of the world’s fastest growing mobile apps that processed more than $1billion in payments in January alone, joined the PayPal family. Since then, we have acquired companies like Paydiant, which is focused on building in-app mobile solutions for businesses like Subway; Xoom - which enables seamless remittances for people around the world, most often from their mobile devices – and Modest, which powers contextual commerce so that people can connect with and buy items at the point of discovery.

Serious value As part of the PayPal platform, the mobile innovation these companies bring propels our flywheel for growth. PayPal is the only truly global, end-to-end, payments platform that operates on both the consumer and merchant sides of the ecosystem, Autumn 2016

buying product that enables consumers to connect with the things they want without having to remember passwords or type in credit card information. This helps drive convenience for consumers and sales for businesses, wherever they are happening. Digital commerce first came about online, and only recently spread to mobile. We’re now pushing the industry forward with new inventions like PayPal Commerce, enabling consumers to connect with potential purchases anywhere, whether in an email or on a social media site like Pinterest or Facebook. The potential of mobile globally, especially in countries where people don’t have access to banks, ATMs or even traditional computers, is profound. This technology is breaking down barriers and has the power to help drive financial inclusion globally. Our commitment to working with many of our mobile and payment partners to bring advancement to global markets, and our new partnerships with telecom providers, like Vodafone, Telcel and Claro, will put fast and simple payment solutions in the hands of hundreds of millions of people around the world, helping to democratise financial services globally. Mobile will lead to more change in commerce over the next decade than we’ve seen in the last hundred years and PayPal will continue to lead this revolution.

Mobile Money at PayPal 10 Years Strong and Growing


Cumulative Total Mobile Payment Volume



$10B $1B $100M 2006








2014 |




MONEY 20/20

Love and war

Currently, both Tech and FinTech business are trying to unbundle the big banks but the banks aren’t sitting back and letting these start-ups attack their previously well-defended markets. These banking giants are taking proactive steps to protect their dominance in payments, wealth management, and billing by entering the FinTech space, says Anders la Cour, CEO of Saxo Payments. In 1985, when Microsoft launched Windows it took nearly 26 years to hit a billion users. In 2008 when Android launched, it took less than six years to reach a billion users. But it was the even faster adoption of social media channels and the large amounts of data bytes they transferred with minimal staff, that inspired Saxo Payments to take a revolutionary new approach to financial services. “WhatsApp could run 400 million text messages with less than 30 people when they were acquired by Facebook. We basically built our organisation the same way,” says CEO Anders la Cour. Established three years ago, he expects to scale his business fast.



Digital warzone “The speed with which Android, WhatsApp and Facebook went from zero users to one billion users is a pattern that we would also expect to see in financial services. It may not be quite as quick as it is with technology applications because of the compliance requirements we face, but still, this is a trend that we’ll see emerging over the next five to 10 years,” says la Cour. “Newcomers to the financial industry can be part of a huge and very powerful shift in the landscape.” This sets the scene for a battle of Goliaths, he says. “We’ll see a pattern in the creation of a digital global market where players like Alibaba and Amazon basically compete head to head with the banks and FinTechs

to own and control the relationship with customers,” says la Cour. “There will be a huge digital battle between the tech giants, the FinTech industry and the traditional banks. As a consequence, the tier two and tier three banks especially will have to become more focused on customer relationships and outsource functions such as cross border payments to businesses like Saxo Payments.”

Finance without borders Saxo Payments has grown exponentially within its relatively short time in existence. Part of the Saxo Bank Group, it deals in foreign exchange and cross border payments, which have historically been made notoriously complex by different state clearing requirements. Autumn 2016

Squaring up: Fintech led skirmishes on banks' borders before negotiating an alliance; the new threat now is ‘bigtech’

Unfettered by legacy systems, Saxo Payments is working with the major banks to reshape this service to make it faster and more practical. It offers next day payments across any border in the world – and in some cases, same day, giving the company a real edge within the industry and changing the lives and work of countless people. Only by collaborating and sharing information in this way, utilising all the benefits of our modern, networked society, can truly exciting things happen, says la Cour. Currently, both Tech and FinTech business are trying to unbundle the big banks. But the banks aren’t sitting back and letting the start-ups attack their previously well-defended markets. The major banking giants are taking proactive steps to protect their dominance in payments, wealth management, and billing by entering the FinTech space. Saxo Payments is one of their strategic allies, acting as a ‘middleman’ for transferring funds between multinational banks and merchants. Autumn 2016

“If a merchant in, say, China or the US is selling goods and services via our platform, they might use a service like Alipay to collect and distribute payments. Alipay would then use our infrastructure to settle to the merchant’s bank account in the country where they are based,” explains la Cour. Enabling these platforms to take payments from customers and distribute them to bank accounts all over the world so quickly, means Saxo Payments’ services are guaranteed to see an increase in popularity in the months and years ahead, he claims. He’s conscious that his pioneering efforts are likely to tempt ’bigtech‘ companies, like Apple and Samsung, to weigh in with the potential

to offer cross border payments via platforms such as Apple Pay. “I think we’ll see a more fragmented industry in the next five to 10 years with a broad range of products and services offered by non-banks,” says la Cour. “I think there will also be a huge leap forward in emerging markets, where mobile applications will be the most interesting space. Meanwhile, in the West, where the credit card market is mature, you will also see a transition towards mobile. Who’s going to win? It’s very difficult to say, but you will have the three main players – banks, the FinTechs and the tech giants – on a digital battlefield. Ultimately, the winner will be the consumer.”

The best way to fight an enemy is to keep them close to you and, in my opinion, this is part of the strategy we are now seeing from the big banks |


MONEY 20/20

Password pawns Founder and CEO of Trusona, Ori Eisen, and master of disguise Frank ‘Catch Me If You Can’ Abagnale, have set out to rid the world of passwords. When they succeed, the big winner will be business Around 63 per cent of confirmed data breaches in 2015 involved hackers leveraging weak, default or stolen passwords. Yet they are still the most widely used method of authentication. According to a new #NoPasswords survey by cyber security specialist Trusona, 83 per cent of consumers still trust the all-too-easily compromised ‘secret’ combinations to keep their data safe. Unfortunately, it’s a mindset that’s all too often related to bad password habits, says Trusona. Eighty-five per cent of those who trust passwords only use between one and five of them at any given time. More worrying, only 66 per cent are likely to change a password immediately after being notified of a security breach. That means a third are not taking even the most basic precautions to protect their most vulnerable details. And it’s costing business a fortune. “The most dangerous phrase in the English language is ‘we’ve always done it



that way’,” says Trusona founder and CEO Ori Eisen. The entrepreneur and cyber security expert, previously behind multi-million dollar 41st Parameter, sold the company before joining forces with whitehacker Frank ‘Catch Me If You Can’ Abagnale to find the Holy Grail of online security. He was determined to come up with a foolproof way of guaranteeing that the person you’re remotely transacting with really is who they say they are. Abagnale likens the pair's relationship to that of two chess players – or maybe more accurately Kasparov and Deep Blue. “Ori says our whole career together has been playing a chess game,” says Abagnale. “He comes up with a technology and says, ‘here’s what I developed!’. Then I go and try to beat it or screw it up somehow. Then we go back and try to fix it until we get to the point where it’s foolproof.” Together, they devised the only insured Cloud identity software suite, designed to guarantee the true persona behind the

most sensitive online dealings. Free-to-use for consumers, its business services include an Executive package and the close protection of Trusona programmes Elite. Designed for VIPs and critical assets, it is the only solution backed by an A+ rated insurance carrier. “Whether you’re operating a nuclear power plant or you’re a CIA agent sending information, the Trusona technology can guarantee the person you are talking to is that individual. And what’s nice is it’s not complicated to understand or use,” says Abagnale. But he adds one important caveat: “There is no technology in the world, nor will there ever be, that beats social engineering.” The man widely regarded as the father of social engineering – who, by sheer force of personality and adopting a variety of elaborate disguises conned banks, airlines, hospitals and even lawyers into believing he was who he wasn’t – says that, 50 years on, cybercriminals are still using basically

Autumn 2016

the same techniques… and they’re still getting away with it. “Whenever we test the technology and someone says, ‘wow, you can’t beat it!’ I have to say, ‘well, there are two exceptions’. First, there is no technology in the world, nor will there ever be, that beats social engineering. So if I call you and pretend I’m Bank of America and tell you to go through all the steps for Trusona and you follow my instructions, then I’m going to get you. And the second is, if I had a gun to your head, and I told you to do this, then you’re going to do it. “We try to account for some of those things with TruToken (part of the Elite protection package) – if you swipe it, it will tell Trusona that you’re under duress, but social engineering will never go away.” TruToken reads the unique, physical magnetic signature found in each card’s magnetic strip. By measuring the swipes, two of which will never be the same, it guarantees safety from session replay attacks by criminals. The results of Trusona's #NoPasswords survey held few surprises for Abagnale. He’s long believed that the weakest link in the cyber security chain will always be the human one. “In a company, every breach that occurs is because someone did something they weren’t supposed to do. Those things don’t

need to occur. It’s human error. You’d have to eliminate the human being to prevent it, because that’s the weakest link,” he says. The Trusona survey went on to reveal that more than half of consumers take no active action to keep their passwords safe, and one in six even shares them on a regular basis. Half have purposefully disabled two-factor authentication. And despite all this being of the consumer’s making, it’s businesses that pay the price because almost a third of consumers will give up using a service if they have trouble accessing their account, while 40 per cent already have because they simply forgot the magic digits. The good news is that 67 per cent of consumers welcomed the idea of a password-less login that increased security, which is what Trusona offers through its Cloud identity suite. Instead of typing a password, a user scans a

Almost a third of consumers will give up using a service if they have trouble accessing their account

QR code and a push notification is sent to their registered smartphone, where they can then verify their identity. Trusona’s Executive package, targeted towards companies with employees that access sensitive company and/or customer data, is designed for businesses to authenticate employees using verification through the Trusona app. Use of the TruToken hardware, meanwhile, is reserved for Trusona Elite clients – corporate entities and users accessing highly sensitivity data and/or performing high-value actions, such as money transfers, critical infrastructure networks and social media accounts for public figures. It relies on TruToken patented technology that hasn’t been breached by fraudsters in the 119 million-plus transactions it’s processed to date. This has been achieved not by reading the data on a card, but the physical particles that make up its magnetic strip. It goes a long way towards achieving 100 per cent online security, but Abagnale and Eisen haven’t given up looking for that Holy Grail yet. And they never will. “You can’t develop a technology and say, ‘here’s my foolproof technology, you can’t beat it, goodbye’,” says Abagnale. “You have to constantly go back and stay on top of it all the time. You have to always be aware of how people are going to try to beat it.”

High stakes game: It's companies that pay the price of consumer apathy

Autumn 2016 |


MONEY 20/20

Big brother benefits Closer monitoring of financial behaviour could be a ‘win win’ for customers and banks alike, says Martin Schorel, founder & CEO of WTSS Holding, which provides real-time insight along the entire financial transaction chain Alternative payment networks are currently the subject of a lot of hype. Bitcoin and blockchain have the potential to transform the financial sphere, but they lack the use cases for anyone to be able to make that call just yet. And while the outcome of these technical advances is debated, what is certain is that the new revised Payment Services Directive (PSD2) and the mandated opening of European banks' open application processing interfaces (APIs) to third parties will have a direct impact – and soon. And yet, in many cases, it’s being treated like the elephant in the room – no one wants to talk about it. PSD2 is set to be put into motion in January 2018, less than two years from now. So, while banks may prefer to keep their heads in the sand, they will be imminently forced to face it. For them, PSD2 will require substantial investment; it will reduce their existing revenue channels and bring a surge of competitors. That said, there are also benefits to be had. For example, it may allow more access to customers and improve branding and integration. This in itself is not money maker, though, and banks like to make money. While the changes may not be great for banks, they are undoubtedly good for the customers they set out to protect. PSD2, through the use of open APIs, will pave the way for new payment services and more streamlined identification processes. It will ban transaction surcharges for card payments and provide customers with an added level of security when it comes to keeping their card transactions safe.

Information = power This is the background against which WTSS, one of the leaders in monitoring solutions for banks, is looking for ways to consolidate ‘fimotech’ (financial monitoring technology) into one information channel. Currently, banks use many monitoring



systems to keep their customers and their internal processes safe. They may use one that looks at bills paid online, another for card transactions and yet another for banking transfers. All of these solutions currently work well in isolation, but there are major benefits in pooling them, including better protection against money laundering and phishing attacks. Having one single, consistent view of the entire financial chain would not only benefit the whole community but also assist individual banks in meeting their obligations under new and future compliance regulations. While that potentially saves banks a significant amount of money, the question

With the 2018 deadline for PSD2 looming, there is like to be a mad scramble by the banks to get all their ducks in a row is, could it be used to earn them additional revenue. That’s the question we're now addressing at WTSS. We are currently trialling a WTSS monitor badge alongside a bank's brand name, which lets customers know that their bank’s systems are being observed by an external monitoring solutions industry leader. A form of quality assurance, if you like, we believe this lends legitimacy and security to the process from a customer perspective, enhancing the bank’s reputation and therefore potentially increasing its customer base and, ultimately, its bottom line. With the January 2018 deadline for PSD2 looming, it’s likely that the end of 2017 will see a mad scramble by the banks to get all their ducks in a row.

At WTSS we are confident in our ability to help deliver the integration required to meet their obligations, especially as no additional infrastructure is required inside the bank to allow us to monitor apps, websites and other interfaces. We are also currently negotiating to become an official payment initiator, or third party payment provider, making us eligible to use a PSD2 interface so we can reach out to all banks where customers conduct business. So while I’m not 100 per cent convinced that the banks are working fast enough on procedures, ready to implement the changes that PSD2 and open APIs will bring, I’m certain WTSS will be ready for the conversion.

Ready and waiting PSD2 will be a game changer for certain. Its mandatory requirements will encourage banks to start doing the things that customers want; they will become more customer aware and they will be forced to recognise the things that need to change. I also believe that blockchains will remain in the industry spotlight, with some of them be successfully adopted while others fall by the wayside. When Article 50 governing the UK’s withdrawal from the European Union is finally triggered – which could be as far away as 2019 – I believe we will see more demand for the monitoring services WTSS is set up to provide, especially in the areas associated with PSD2. There is no doubt that the future of the financial services sector holds some interesting changes. Will they all be as beneficial to customers as current thinking believes them to be? We’ll see. What I am confident about is where WTSS is headed. Against a background of technological and regulatory change, we will continue to partner with top European banks, to make banking easier and safer for their customers. Autumn 2016

Close monitoring: It could be made to be a money maker for banks

Autumn 2016 |


MONEY 20/20 Inspiration: The Albert payment device was named after Einstein

POS-itive genius AEVI’s US launch of Albert the cashless payment device, linked to an open marketplace for merchant apps, will be a eureka moment, says Chief Product Officer Mike Camerling When AEVI, a provider of global payment transactions and a marketplace for B2B apps and services, christened its first mobile point of sale (POS) tablet ‘Albert’ after the one of the most disruptive physicists of the 20th century, it fully intended it to shake up our reality as thoroughly as Einstein had. Well, if not life, the universe and everything as we know it, then at least the POS experience. Having begun reshaping the merchant world in Australia, where Albert was born along with the first Marketplace for B2B apps last year, and entering Europe this, AEVI is now intent on turning tables at the Las Vegas Money20/20 event in October. “We are there to make sure that everybody knows we’re in the US and that we’re open for business with talented app developers and smart ideas to make sure that we can start fulfilling the promise of the AEVI’s Global Marketplace,” says chief



product officer Mike Camerling. Some of the developers AEVI relies upon to populate its open app store – otherwise known on its website as ‘heroes’ – will be there, too, demonstrating the kind of cool, value-added benefits you get from being part of the company’s open ecosystem. “The whole concept of the Marketplace, and what we as AEVI stand for, is that it is open,” says Camerling. “That means we want to provide our customers, the merchant acquirers and the merchant banks – and therefore, ultimately, also the merchant – with choice. So we are filling the Marketplace with content. And not just apps that are a single form, or an app that is a utility, but proper, high-quality, business-to-business apps, made by well-valued and renowned app developers. “The second thing we’re doing is extending the range of hardware and, contrary to some of our competition, we do not limit the use of the Marketplace to our own hardware. One of our targets is to have

other payment devices and non-payment devices on the Marketplace platform as soon as possible so that a merchant acquirer can fulfil a whole range of use cases and create their own propositions to their merchants.” Inspiration for all this came from a desire to make the merchant payments sector as dynamic as any area of fintech. Until Albert and the white-labelled Marketplace for B2B apps came along, merchant technology was so last century that opportunities for parties to differentiate themselves beyond price were few and far between, says Camerling. “One of the things that needed to happen first was to develop a new range of terminals – although terminal is the old word for it, it’s more of a business tool. In order to provide services and apps beyond payments that assist merchants in their business processes, we needed a device that could do that and a whole ecosystem that could provide these services to it.” So that’s what AEVI built. Autumn 2016

Say hello to Albert Albert is an Android-based tablet with an integrated, encrypted PIN pad, card reader and receipt printer – an all-in-one POS that also runs productivity apps. The first solution of its kind, it takes secure cashless payments from any card or mobile device and is EMV-ready and PCI-certified. When not being used as an electronic point of sale, it can carry out backoffice tasks, such as stock checking, range extension and order checking. Developers, meanwhile, are invited to build apps for acquirers, banks and their merchants to be made available on the AEVI Global Marketplace for downloading onto Albert or any other device. Built with the Commonwealth Bank of Australia and design company IDEO, Albert took the customer’s digital experience as a starting point. “We started by asking ‘how can we provide the same in-store experience as we have at home?’. We’re all at home, downloading apps from Google and Apple onto our tablets or phones, but when we go to a store, we go back to the Middle Ages. There’s a great big box that is a POS and actually none of that experience transfers. “For the bank, we wanted to know if we could help its merchants achieve that and offer them additional services that would help the bank embed its relationship.’” Albert and the Global Marketplace have gone a long way to achieving that. “The reactions have been fantastic. The best thing is seeing what it does to people when they finally realise that we’re at a stage in development in the market as a whole that makes this a reality. They start thinking about the possibilities of such a marketplace. What could I fill it with? How could I use that to strengthen my identity? What we see is that it gives people challenges but ideas at the same time, which is, of course, very motivating for us to push this further and further.” Accounting apps and opportunities for cross-selling, upselling and creating a ‘whole new form of loyalty’ are just some of those ideas. “In hospitality, for example, a menu app on a tablet will work seamlessly with the POS app when it comes to payment,” says Camerling. But that’s just the start. One hotel chain is exploring the possibility of an Albert on every floor for guests to self-check out and top up payments. “That same app communicates with a room-ready app, Autumn 2016

which then feeds into the systems of the hotel, so they know exactly when a room is available, saving them enormous amounts of money in terms of reservations and readiness and improving service to their customers,” adds Camerling. It’s a dynamic example of what happens when the Internet of Things and payments technology finally collide.

A new toolset Camerling isn’t ruling out the potential for Albert-led technology to help your fridge handle your grocery orders. “But at the moment we are still focussing very much on what can be done in store by the merchant acquirers, to help the merchants in that experience with their consumers, to optimise their business,” he says. It’s a major step towards democratization of the payments industry. “In the current environment, the merchant acquirers and merchant banks

We’re all at home, downloading apps from Google and Apple onto our tablets or phones, but when we go to a store, we go back to the Middle Ages can pretty much only compete on price and maybe a little choice in hardware and that’s it,” says Camerling. “That’s the same for both the large and the small merchant acquirers, where, of course, the smaller ones will be under a lot of pressure. Now we can provide them with a whole set of new tools to differentiate. They can, with a selection of apps, create a unique portfolio for their customers and therefore create a much bigger advantage than they had before. “We do not believe that just having one single device in the Marketplace is the way forward. What we need to do is create the experience. And it’s not only the experience of the merchant acquirer and the merchant using the apps, but especially the

experience of the developer community. With us they have a whole new distribution network to countries that they’ve never had access to before. “The Global Marketplace is where all our partners providing content will list their apps and services. Once a customer has selected the apps they would like to have, they are transferred to a local Marketplace, which has its own identity for those customers, branded under their umbrella, where these apps will then be available to their merchants. “Now, our customers can also decide to create their own content and put it in their local Marketplace and that goes back up the chain through the Global Marketplace to help developers to extend their network. It’s an open marketplace, rather than purely an app store.” Providing opportunities to developers is central to the ecosystem’s sustainability. “Our multiple device promise extends not only to our customers, but also to the developer network,” says Camerling. “So you develop your app once and we make sure that it will run on all the devices that are connected to the Marketplace. “We have different developers in different markets. Our strategy for the management of the app portfolio is very much based on regions, but together with developers finding new markets they could extend their services to. So we will help and coach a developer that has a Spanish app, for example, go to Australia and we can help and advise them to deliver and implement it there.” He believes merchant services are now at a tipping point. “Our customers, the merchant acquirers and merchant banks, have accepted that something needs to change; that the new proposition to their customer base is in value-added services and value-added apps," says Camerling. “Consumers have a choice not only in payments-capable hardware, like our phones, but also wallets or any other apps they choose to use. “The merchants are under pressure to start accepting these and the merchant acquirers will have to be even faster in adopting these technologies and changing their operations to support it. We are challenging everyone to step up and do more; to embrace the idea of an open, collaborative ecosystem.” |


MONEY 20/20

Google’s pizza the action

Android Pay landed in the UK this summer, taking a big bite out of the market for digital wallets and allowing everyone except Nokia users to cut up the plastic. Google gets brownie points for syncing with loyalty schemes but, crucially, can it order a takeaway? Will Dove finds out Technology firms are on a mission to conquer the credit card, hoping to end its half century reign as the king of consumer commerce.

Apple launched its preliminary attack in 2014 with the worldwide release of Apple Pay – a mobile payment and digital wallet service that allows holders of Apple devices to commit transactions with one simple touch of their phone. Now comes the turn of software giant Google, having recently unveiled its Android Pay service in a bid to vanquish rectangular plastic wallet bloaters once and for all. So how will Google’s new service go about eliminating the need for credit cards? Well, similar to Apple Pay, the basic premise of Android Pay is that your phone will replace all the cards in your life. The Android Pay technology will be implemented with all new phones that run on the Android mobile OS, granting Android users the opportunity to take advantage of the service. Great news for Android devotees, then, who’ve been feeling rather left out since the iPhone community was blessed with Apple Pay two years ago. Not so great news for Nokia users, however, who are having to wait a little longer before they can get their hands on the Microsoft Wallet app in Windows Mobile OS 10. With Android Pay, the team at Google has made it a priority to ensure that the service remains as simple for the consumer to operate as possible. After all, one sure-fire way to prompt the early commercial death of a new technology is to make it fiddly and convoluted for the end user. Users are initially required to manually add a credit card to the Android Pay app in their phone. This process is refreshingly simple and can be completed in multiple ways. If the account holder already has a credit card linked to a Google account, it can be added to Android Pay after



confirming a few details on the app. If the user has yet to pair a card with Google in any format, they simply take a snap of their card using their phone camera. Multiple credit and debit cards can be synced with the app and the phone will prompt the customer to select one of them to use at a contactless payment terminal. Google has addressed obvious issues of security through its Android Device Manager tool. If a phone is stolen, the device manager allows the account holder to remotely lock it from anywhere in the world. There’s also the option to secure it with a new password, or initiate DEFCON 5 immediately and wipe all the personal data from the device. Android Pay also has point-of-sale security measures incorporated into its core

private within the phone. If anything, Android Pay is a much more secure way of conducting a transaction than sliding a card across a counter for anyone to see.

Loyalty counts When it comes to the physical benefits of using Android Pay over traditional chip and pin transactions, there are advantages in terms of both security and wallet weight. However, Google has further strengthened its attack on the girth of the purse by allowing the connection of loyalty programmes to the Android Pay app. This negates the need to carry additional loyalty

Coca Cola rolled out 85,000 ‘tap & ready’ vending machines in preparation for Android Pay architecture. Firstly, to enable a payment to be made, the phone user has to unlock the device by entering a nine-dot pattern code (the signature password format for Android phones). Although it slows the process down by a few milliseconds, most users accept certain compromises have to be made in order to visibly protect customer security. Secondly, Android Pay doesn’t transfer a card number to the contactless terminal when a customer makes a payment. Instead, a virtual account number is generated that merely represents the account information, allowing the app to keep the actual card details

Secure: Android Pay doesn't transfer the card number to the terminal

cards, since membership details for various merchants can also be stored in the phone. It was a smart move. Loyalty programmes are extremely popular worldwide, especially in the United States, where in 2015 there were 3.3 billion active loyalty scheme memberships, or roughly 29 per household. Loyalty schemes across the commercial world are now being redesigned to ensure that they work seamlessly with phone Autumn 2016

Food on the go: It even remotely orders pizza

their My Coke Reward points without the use of a card. So, once they hit the magic total of 30 points, the next time they tap their phone at a Coca Cola vending machine a transaction of loyalty tokens is initiated instead of a credit card payment, and a complementary beverage tumbles out as the points total resets to zero.

One portal fits all

payment technologies including Android Pay. Some are even being developed in conjunction with Android Pay, such as Coca Cola’s My Coke Rewards. The soft drink corporation rolled out a network of 85,000 ‘tap and ready’ vending machines in the US, in preparation for the launch of Android Pay. These machines are specially equipped to accept tap payments from Android phones and also allow customers to contribute to Autumn 2016

Google has designed the Android Pay app to be an all-encompassing portal with a versatile application processing interface (API) that allows the service to be added to exterior apps and software. For example, banks are free to incorporate Android Pay into their own apps, which will please those customers who prefer to conduct their transactions solely through the channels provided by their bank. Instead of relying on the integrated Android Pay app, the consumer can simply open their banking app and continue with the tap transaction. Food and shopping services can also

integrate Android Pay into their apps, with many retailers having already invested in the necessary development of their pre-existing software. One of Android Pay’s partner apps is GrubHub, which speeds the process of ordering a takeaway by locating the customer using their phone. Having identified the closest pizza restaurant to the customer and recommended its triple pepperoni deep pan, the app offers the user the chance to ‘buy with Android Pay’ at the checkout. Despite the phone holder not actually being in the restaurant, the transaction process is identical to a tap payment in that a virtual account number representative of the customer’s card is sent to the merchant and a pizza is on its way in seconds, without even having to give the card’s security code. Wallet bulge and security benefits aside, if contactless phone payment technologies can shorten the time it takes for a pizza to arrive at your door, then it’s safe to assume that the credit card’s days are truly numbered. |



Move fast, build smart When the UK’s Financial Conduct Authority pulled some of the country’s biggest institutions and smallest fintechs into the same room for its first TechSprint, no one quite knew what the outcome would be. For Daryl Wilkinson, founder of DWC, the result was inspiring Earlier this year, and after many weeks of planning, we supported the Financial Conduct Authority in delivering a highly collaborative two-day hackathon focussed on improving access to financial services. You can look it up on Twitter, using the hashtag #FCAsprint. To our knowledge, this was the first event of its kind by any regulator worldwide and it saw big-name brands –including KPMG, Visa Europe, Funding Circle, Lloyds Banking Group, the Post Office, iProov, HCL Financial Services, Fidor and the Financial Services Consumer Panel – come together with a shared purpose, Chris Woolard, director of strategy and competition at the FCA, had this to say: “The TechSprint was a new way of working for the FCA. Over the course of two days, participants came together to generate solutions and foster innovation at pace. “The enthusiasm, energy and creativity shown during the event demonstrates that there is huge potential for collaboration between the fintech community and those more established within the industry.” This event was lively; the energy in each room and across Twitter was inspiring. The friendly competition between break-out teams, within the context of everyone being in it together, was a truly unique experience. Post-event, I remain inspired by how individuals broke down their usual barriers to work together. Could it be that the interaction between companies who may otherwise consider themselves competitors was the genuine innovation? Competition makes us faster. Collaboration makes us better. Collaboration between different organisation types can yield real benefits



if managed well. Small fintechs are considered to be agile and more open to taking risks, however they can be held back by the financial complications of such an approach. Small and large working together leverages the best of both, by ensuring the small fintechs have the financial backing of larger, established organisations as they break new ground. There are great examples of large organisations utilising small, agile start-ups to test and grow an idea before sweeping in with the scale and customer base to make it commercially viable. BBVA Compass announced their strategic partnership with Atom in 2015 to utilise their digital banking services to serve a growing demand in the UK. Atom has the right product in the right place and BBVA the experience and stature to drive growth in line with changing customer demands. Early in 2016, JP Morgan also announced its new service Chase, which through its partnership with alternative lender OnDeck, broke into the online lending market. It is not just finance organisations enjoying the fruits of collaboration to improve customer experience. For instance, I hear of fashion designers working alongside publishers to directly link consumers from the clothes they see in glossy magazines to a retailer with the item in stock. This mutual effort gives the consumer a fantastic experience they will not forget.

developed their innovation far enough to get noticed. Innovation labs and accelerators have tried to start these relationships earlier by offering mentoring and support for businesses. Take, for example, Lab 126 that enabled Amazon to bring products, such as the Kindle and in the US the Amazon Dash Button, to market. Taking this further could potentially see traditional competitors working side by side on developments that will benefit industry, too. All parties come to the table with open books and share responsibility and results from their research. Together, these teams develop a solution that is better than would be produced by working in isolation. I can think of a few opportunities in financial services where this makes sense.

Stop, collaborate and listen By collaborating, organisations and industries stand a better chance of finding innovative solutions to the issues they face. This isn’t as easy as putting two groups of people into a room and letting them get on with it. It requires a shift in attitude among employees who are usually more comfortable keeping developments closely guarded until they are ready for the launch.

When the time is right Designing collaboration into strategic ventures from day one is where I see innovation actually transcending. Currently, we have cash-rich established firms with the route to market taking quick wins from start-ups that have

Fast movers: TechSprint proved collaboration makes for quicker progress

Autumn 2016

The decision to be open needs to filter throughout, from board to project team members. Individuals who share make learning faster and better for the teams around them. Individuals on teams created with innovation in mind need to understand their common goal and what they and those around them bring to the table.

Teams need to respect each other’s contributions and be open to their ideas being developed, dropped, changed, reworked and critiqued. Facilitators employed within teams can help make the interactions happen; they understand who is doing what and who can help them, and then bring the two parts together.

Stimulating environments Moving from a large, corporate machine to managing my own business this year has exposed just how different these environments are. To be effective, however, leaders must find a way to merge different types of organisation to create an environment conducive to stimulating the minds of the team. The physical space can be an enormous influence. Innovation rarely happens around a conference table in a boardroom. Space needs to inspire and be flexible enough to encourage and facilitate interaction. Budgets need to be considered, along with the governance and process to draw down funds quickly. It is possible to alienate individuals from smaller organisations by expecting them to have the same processes as large companies. Finally, having the right tools to enable effective sharing of documents and the safe and seamless testing of ideas is essential. Â There is no bigger barrier to collaboration than systems fighting each other. If sharing becomes laborious it stops and the sense of teamwork breaks down. Simple systems that can be accessed by all are essential. These may require an adjustment to traditional procedures for some companies, but finding a secure process that everyone feels comfortable with will make or break collaboration.

Leadership is key

There are great examples of large organisations utilising the benefits of small, agile start-ups Autumn 2016

All of this assumes the right leadership to begin with and, as I reflect back on our #FCASprint, it strikes me that our real success was the innovation in how things got done. A handful of people wanted to try something new and when they communicated this, others volunteered time and resources to make it happen. It all begins with visionary leadership, pulling your head up to see past today and towards a future more compelling for your customers and your employees. |



Up close and personal This year, Lloyds Banking Group renamed its contact centre business Connect in response to the myriad ways customers now choose to engage with the bank. The rebranding was more than cosmetic, as Connect MD Martin Dodd reveals There was a time when any major financial decision in your life required a face-to-face meeting with your local bank manager. Today, most customers would struggle to tell you what he or she looked like… but Lloyds Banking Group is getting up close and personal again. Far from using technology to distance itself from customers, the bank is harnessing every channel at its disposal to get to know them better and putting living, breathing advisors in front of them, any time, any place, anywhere, via video link. “It really works,” says Martin Dodd, MD of Connect, the bank’s contact centre business, which began trialling video with new mortgage applicants earlier this year. “The big thing customers wanted was to be able to make an application from the comfort of their own home. This makes them feel more confident and more at ease, and it’s much easier to arrange joint interviews, because they tend to be at the evenings or weekends,” says Dodd. “The other advantage is the paperwork. They might not have everything in front of them, but it’s probably in the drawer upstairs, so it’s easy for one party to go off to get it. “One of the things we implemented once we’d gone live was an add-on called document upload. Let’s say we want to see payslips or bank accounts. Customers take a picture of them on their phone, we give them a link and they upload them straight on to our system. With video we can share information and have a much more interactive conversation that works really well for the customer and for us. Customer satisfaction scores have rocketed.” It’s been so successful that existing mortgage customers will soon be given the option to connect via video, too. Then it will be a question of where next, says Dodd. “I think video will be huge. I think there will be a real desire from customers to see the person they are speaking to. We’ll test



and learn in different areas and see where customers want us to use it.” And that’s the point. This isn’t a service imposed by the bank; it’s led by customers and reflects their changing lifestyle. It’s part of a new approach it's taking with the aim of seamlessly integrating two pillars of customer service – personal and digital – at the ‘clientface’, while building quite separate departments of expertise behind the scenes. “Building your services around what customers want is where you get breakthroughs in terms of service experience,” says Dodd. “The way we organise ourselves is by having a digital team that looks after all the interactions customers have on their laptop, home computer and mobile device and then the Connect team, which deals with all the others, including social media and web chat. If they call us, they’ll talk to a member of the Connect team; if they’re having a video

I think video will be huge. I think there will be a real desire from customers to see the person they are speaking to conversation, they’re talking to one of our people, too. We’re the support function for online banking.” It all comes down to keeping the conversation going, whatever media the customer chooses to use to communicate with the bank, and getting a 360-degree view of what the customer is experiencing. “The idea is we know what’s happening; we can see the issues a customer has had so it’s much easier for us to help them. I’d love to see a world where (as a customer)

I’m on Twitter, I give some feedback, the bank has a conversation with me and it could be we end up having a video conversation, a voice conversation or a webchat. We’re not at that stage yet, but as we move forward people will be able to seamlessly move between each of these channels and we can keep the interaction going, potentially talking to the same advisor all the way through, which I think would be hugely different to what customers experience today.” In his view, contact centres are at a crossroads. “If you go back four or five years, a traditional call centre in financial services would be handling balance inquiries, such as ‘what are my last three or four transactions?’, and fairly simple tasks. With the explosion in desktop and, probably even more, mobile banking, when customers call us now it’s for different reasons. It tends to be more complex than what we used to see.” That has meant redefining the role of the contact centre advisor. No longer a faceless voice answering transactional queries, Connect staff are being upskilled to provide a whole different level of support. “We think we will be able to answer about 90 per cent of all customers’ queries there and then – there’s nothing more frustrating than a customer being passed around – but it involves huge amounts of training, skilling and coaching of our people to achieve that,” adds Dodd. “When I’ve got a question, a complaint, or I’m not sure about something, I want reassurance and confidence. Whether it involves video or voice, it’s all about how we can put the customer at ease.” It’s not just about human interaction, of course. Technology is important, too. “We did some customer research on the role of the call centre, going forward, and the name that really worked for customers was Connect because their view was, ‘I go on my desktop. I go on my mobile phone.

Autumn 2016

The human touch: Customers want a personal connection

Actually, I might go into a branch. What I expect you to do in the call centres is connect it all together’. “That’s not easy,” he admits. “It requires a big investment in different kinds of technologies and that opens up all sorts of different avenues.” Video was one of them; fingerprint and voice biometric ID was another, both of which Lloyds Banking Group is poised to introduce. But virtual reality isn’t a dimension it’s keen to enter. “We’ve thought about it, but effectively it’s a computer. But what does the customer want? The big demand is for human interaction.” Dodd is happy to be held to account if and when customer services fall short of the mark. It’s all part and parcel of being a digitally savvy bank. “If somebody says they’re not happy with what we’ve done, be it on Twitter or any social media site, the response is very clear and very quick,” says Dodd. “Complaint statistics are in the public domain, we can be benchmarked, league tabled. The challenge for financial services is how do we keep improving that customer experience so they tell us we are getting it right? “The way modern technology keeps changing it wouldn’t surprise me if something new comes up in 12 or 18 months time that we haven’t even spoken about; our challenge is how we adapt to it. “We’ll keep learning, we’ll still keep testing and we’ll build it if our customers want it.”

Autumn 2016 |



GO for it!

Financial service providers must adopt whatever tools are necessary to make their customers’ lives easier, says Richard Nicholls, Business Development Director for outsourcing providers Teleperformance… and that could mean some surprises If the augmented reality phenomenon that is Pokémon GO proves anything, it’s that no one can forecast where the next hit technology will come from.

“I mean, who predicted that?” says Richard Nicholls, business development director at the outsourced customer experience specialist Teleperformance. “Nintendo’s share price is currently 60 per cent higher than it was before the launch, and they don’t even own the technology.” Having been around since 1978 – just five years after the first mobile phone was invented – Teleperformance has certainly seen the impact of new tech, and most recently fintech, on its business. Back in the early days of the company, the only communication channel financial services could offer customers – apart from a physical branch – was a call (now contact) centre, an idea that had begun to gain traction in the UK earlier in the decade, most notably with Barclaycard.



Today, Teleperformance’s 190,000 staff, interacting with 38 per cent of the world’s population annually in 75 different languages across 311 sites, manages both outsourced and insourced customer experience services across multiple channels. And while that’s been facilitated by technology, it’s driven by a fundamental power shift between provider and consumer, says Nicholls. “The customer can now make a decision with a thumbprint,” he says. “Customers are empowered to use the companies they want to use, when they want to use them, and how they want to use them. “Customer experience is all about making it as easy as possible to deal with your business. The surprise is that it’s taken so long for the industry to understand the customer just wants an easy life. If dealing with you is cumbersome, laborious and involves having to repeat themselves, customers will switch. It sounds really simple, it sounds easy, but it’s a real

challenge, and it affects how our customers look at their entire estate and the channels they operate on. Do they offer their customers a single view? Can they be omnichannel? Everyone talks about it but I’ve yet to see anybody properly deliver it. “Businesses really stress about the AHT, CSAT and the MPS scores, the opening hours, and the kind of channels that they operate,. However, if you just adopt an overarching principle that you want to be really easy to deal with, that answers lots of other questions that sit underneath it.” To help businesses across all sectors address those questions, Teleperformance opened a unique customer experience (CX) lab in Lisbon, where it brought together a team of expert researchers and analysts to look at the trends driving customer behaviour and desires, benchmarking company performance against them. “The team in the lab looks at which channels customers are using and which they’re turning away from, and then says, Autumn 2016

‘this is what the customer wants, this is what organisations are providing, here’s the opportunity’. It’s a kind of gap analysis,” says Nicholls. At an industry level, the Teleperformance CX lab contributes to the wider debate on customer experience, with white papers, hosted webinars, seminars and round tables. “We push it out to the market to make people aware of where we feel there are challenges and where there are behaviours that they’re not serving,” says Nicholls. At a client level, the lab deploys an elite CX squad into organisations to look at their end-to-end processes, a specific channel or behaviour. “They will go deep diving into those topics through experiential learning,” explains Nicholls.“So they’ll listen to call recordings and look at the data behind our own customer relationship management system and the clients’ to get to the bottom of customer behaviours. What are they doing? Where are the gaps? What needs to be improved? They’ll produce a report with

The customer can now make a decision with a thumbprint. They are empowered to use the companies they want to use, when and how they want on an insourcing basis. This is where Teleperformance would go into the bank’s building, put in our people and management to deliver best practice around training, recruitment and operational delivery, but we do it from inside the bank. So the bank gets the benefit of working with a best in class provider while not having to pipe their systems outside their business. There’s no need for VPNs or other links, so from a data and security point of view, they really like it, but they still get all the benefits of our help. The customer gets the best of both worlds. “There are still opportunities to offshore elements of an outsourced solution, but it has to be right for the customer, and there’s

Phenomenon: Hit augmented reality game Pokémon GO! might be a lesson for financial services

actionable insight that these clients can then use to make changes to their organisations,” says Nicholls. He’s witnessed a cyclical change in clients’ attitudes to outsourced services. “Outsourcing doesn’t always mean offshoring,” he points out.“Offshoring is just one element of an outsource solution. What predominantly happens in the financial services market is that a lot of outsourcing relationships actually start Autumn 2016

been a huge shift in the market,” says Nicholls. “A lot of organisations made use of cheaper labour markets in India. A lot of US services were outsourced to the Philippines. But quite a lot of that work has now morphed. Some of it’s come back to the UK, because the customer pushed back. Some of it has moved to a different offshore location, such as South Africa where the vernacular is a lot closer aligned to the UK. “Other relationships have changed too.

The call centre voice service may have come away from a far-flung, offshore location, but the people there are now doing something different. They might be doing back office work, transactional work, fraud order management screening, for example, where the bank is still able to benefit from the cost arbitrage. Yet the customer, for all intents and purposes, doesn’t actually interact with them, and therefore they don’t know they’re being serviced offshore.” Wherever and however they choose to service customers, the starting point for businesses remains the same, says Nicholls. “Organisations need to understand how they a) deliver, and b) service. It’s kind of bleeding edge rather than leading edge, but in terms of technology, we are starting to see some organisations in other sectors offer virtual reality and augmented reality experiences to customers. It might seem kind of fantastical, but it might be timely to challenge even financial services organisations, which are steeped in history, on how they are going to deliver those.” And if it sounds unlikely that customers will want to experience banking services via a third dimension, just remember how the simple promise of candles and stardust led to Pokémons – an outdated collectors’ game from the 1990s – becoming the most downloaded mobile app in 2016, and gaining more than 500 million players worldwide in a matter of months. “Running into a highway to collect an imaginary character that’s augmented onto your mobile device sounds crazy, but if you want to create mutual understanding, then virtual reality is the way to do it,” says Nicholls.“I think if you look at the big challenges for financial services, such as the erosion of trust, loyalty and advocacy, then you can see there is a need to drive empathy. If you then layer on top of that the fact that branches will continue to disappear from the high street,then there needs to be another way to service clients. So will we end up with a virtual branch? Will you have a virtual branch that you access through your mobile phone, where you speak to a virtual teller?” |



Why Barclays is new bf Digital communication has changed the relationship between customers and banks forever… but Barclays is a real social climber, as Simon Separghan, MD of Global Contact Centres and Digital Channels explains You’re a woman on her own after a night out, stuck at a cashpoint that has just swallowed your debit card. It’s 2am and you’ve no money to get home. What do you do? If you’re a Barclays customer, you reach for your phone and tweet your bank. When its social media monitoring team saw the message ‘Barclays, help, what am I going to do now? It’s 2 in the morning’ pop up on the bank’s Twitter feed, they lost no time getting in contact. “Our team, who are multiskilled, not only in social media but also in video banking



and traditional telephony, picked up the message within a matter of minutes and arranged for a taxi to make sure the customer got home safely,” says Simon Separghan, MD of Barclays’ Global Contact Centres and Digital Channels. “While they were doing that, they ordered her a replacement debit card, so she could carry on with her everyday life. For me that’s a good example of how technology can come together to make sure we’re providing great outcomes for the customer.” It’s a story of which he’s particularly proud and it neatly demonstrates just how

profoundly the customer relationship with banks has changed – and how Barclays has responded. “Our purpose has always been to make the customer’s life as easy as possible,” says Separghan. “With that in mind, we’re taking all of our established capabilities and resources and fusing them together. That means that our branch network, contact centres and digital applications are coming together to form a truly effective omnichannel service that satisfies the needs of all our customers on their terms. “Despite the expanding adoption of

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digital services by our customers, the challenge for us is to ensure that no one particular channel is primary. For the omnichannel system to work, it’s imperative that we treat each access point equally, applying the same standards of quality across all of them,” he adds.

Omnichannel future An omnichannel system is a fairly obvious way for banks to ensure that their communications are tailored to the needs of the entire customer base. However, the question remains, how do banks actually bring together all of their channels to offer a seamless experience without compromising on efficiency? Separghan believes that the solution to this problem lies partially in the specialised technical training of staff. “Over the last couple of years, we have invested quite heavily in all of our channel capabilities, including our contact centres, branch network, social media presence and webchat services. One of the areas that we have focussed on is the multiskilling of our personal bankers operating in each channel. Through training, our staff have obtained a degree of flexibility so that a customer can start a conversation in one channel, and then be able to finish the conversation in another having corresponded with the same agent all the while,” he says. “We know that customers appreciate having all of their queries dealt with by one person, and it’s our goal to provide them with the answer that they’re looking for, first time around. “In addition to the customer benefits, the upskilling of all our teams has advantages from a colleague perspective. As our frontline personal bankers are beginning to deal with more complex activities, their roles are becoming much more rewarding.” The technical training of staff is one thing, but for an omnichannel system to function it’s essential that a bank incorporates its database into an interconnected operating system. Personal bankers must have real-time access to any customer’s details, if the bank wishes to realise the communication advantages – as in the case of the stranded account holder at the cashpoint. “We recently rolled out an operating system that handles all of our customer

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management across our branch and contact centre network. As a result, we now have one customer platform, so whether you’re a personal banker in a contact centre, or an operative in a branch, you’ll access the same customer system and view the same customer information.” As well as catering for a broad spectrum of communication needs, an omnichannel system also brings additional security advantages over a traditional, segmented structure, as Barclays has demonstrated. “Our voice security software feeds into the omnichannel system, since customers are no longer required to memorise a whole host of different passwords in order to access their banking needs,” says Separghan. “Customers are searching for a seamless experience and our customer platform ensures that the data is always on hand to accept their access requests as swiftly as possible.

Despite the expanding adoption of digital services by our customers, the challenge for us is to ensure that no one particular channel is primary "We’ve invested a huge amount into our voice software, but the rewards in terms of security and convenience are evident.” Separghan believes this proves the positive potential of taking an omnichannel approach to customer experience. “There are around 3.2 million log-ins to the app every day. To log in, all you need do is touch a couple of buttons and speak when prompted. You can then do everything, from moving money, paying bills, and changing your address to taking out a new product with us. “Also, we now save a transcript of every conversation that you have with us in the app on our integrated platform, so

customers can revisit the discussions they’ve had with their personal bankers at their leisure.”

Man versus machine Despite the increasing adoption of these self-service tools, there is still room for a good, old-fashioned chat at Barclays. A large number of customers still rely on calling the bank by phone to discuss their finances. So, it's not inclined to reduce its sizeable contact centre operations, employing 3,500 people and handling 50 million interactions a year. Instead, the bank has developed several innovative communication technologies, based on real advisors, that are already forming the foundations for the bank’s omnichannel system of the future. “We launched our live video chat service at the end of 2014, and we’ve been expanding the technology across our customer base ever since,” says Separghan. “What we love about video banking is that it allows real, human connectivity at the touch of a button and is thus both suited to customers who appreciate interacting with a person and customers who enjoy using cutting-edge technology in their everyday lives. “Video banking has already revolutionised the banking experience for thousands of people. A perfect example of this would be our most frequent user of video banking, who is an 83-year-old lady. “She finds it difficult to get out of her home on a regular basis and so she had previously entrusted her financial wellbeing to a member of her family. As a result of video banking, she has regained her independence because she can deal with all of her financial affairs herself once again. “In a sense, whenever she logs onto a video chat she is walking into a virtual branch. But that’s not to say that we are moving away from physical branches,” says Separghan. “At its core, the omnichannel system works because all of our channels, physical or digital, complement each another. By providing a range of complementary channels we can ensure that the customer receives the best possible service, whichever way they choose to interact with the bank.” |



Natural selection Among the traditional big banks, BBVA has taken an evolutionary lead. What does it tell us about the emerging new ecosystem? Almost a year after Spanish mega bank BBVA entered the UK market by taking a 30 per cent stake in digital lender Atom, we brought together three of its key analysts – one working in digital, one in data and one in research – to give their perspective on the changing face of financial services. Our experts were Gonzalo Rodríguez, BBVA head of digital banking, Elena Alfaro, CEO of BBVA Data & Analytics, and Raúl Lucas, Spain Country Manager of Open APIS. Fintech Finance: What is the biggest threat to the way traditional banks like BBVA do business and what are the biggest opportunities? Elena Alfaro: The biggest problem is coping with all the disruption coming from the fintechs! But data is a very big advantage that the financial sector has and the new companies don’t yet. So here we have an opportunity. The future of traditional banks is in how they can get value from data. As long as we are able to create services and improve the existing ones, we will be able to keep up with the pace. I think we have a lot to learn, though, from how the fintechs are dealing with customer experience in general. For instance, in lending; the way we manage a loan hasn’t changed in decades. It isn’t always a matter of the interest rate but how you create an experience that facilitates how customers ask for loans, how they receive their money and how you help them manage it.



Gonzalo Rodríguez: The key driver of the disruption is mobile. We see mobile adoption among our customers growing very rapidly and this, obviously, poses a challenge. How can we transform an experience and put as much convenience as possible on the mobile so our customers can do everything from their app? This is a total game changer compared with the past. Raúl Lucas: The fintechs are here to stay and we cannot ignore them. The best way to face this new player is to collaborate in different ways. One is by investing in them, the other could be buying them as a whole or trying to collaborate with APIs, like we are doing at BBVA. We have to try to participate in this new world with them because without them, banks will be discontinued. FF: Your CEO Francisco Gonzeález said he wants BBVA to be more of a software company than a bank. At the same time, Europe’s new open banking standards under the Payment Services Directive (PSD2) could be a golden opportunity for banks to compete to provide superior, open application programme interfaces (APIs). How will BBVA respond? Raúl Lucas: PSD2 mainly is telling banks to open our doors to new players, third party providers, to share out data with them. So this changes the ecosystem, but it can also be an opportunity to start building new business models, together with these third party providers, or even for us to become third party providers ourselves and start acquiring the data from other financial institutions and building whole new products on top of that.

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I don’t think fintechs are going to make banks extinct and banks are not going to be able to eradicate fintechs

Financial ecosystem: Can established banks and fintechs co-exist?

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CUSTOMER RELATIONSHIP MANAGEMENT We started in the open API area before knowing about PSD2, so our approach is to try to establish new business models independent of it. We are not just being compliant with the directive, we are starting to offer side services that could make money. APIs are the way that we are trying to open doors to provide financial services, or to let third parties, or other companies outside the bank provide financial services on top of our infrastructure; on top of processes within their own websites or their own mobile applications, or any process that they want to build. It’s a way to create a lot of innovative processes in addition to any kind of financial service that you can think of. Gonzalo Rodríguez: We have more than 500 people working on 10 different programmes, trying to change the customer experience completely. So, from making sure that customers can use their mobile as a remote control for their relationship with the bank, all the way down to providing a new, different set of advisory services and tools and solutions that will take that customer experience to a different level. Elena Alfaro: BBVA has created a spin-off, which is a centre for excellence in analytics. It’s called BBVA Data & Analytics and here we have mainly data scientists, PhDs in machine learning, etc. It’s a centralised unit and what we try to do is spread this knowledge among all the other areas of the bank that are working on data; all the data mining, business intelligence, risk analytics areas. We are trying to help them reskill in the new big data technologies. We also give training so people can start programming their own algorithms. FF: PSD2 has a lot to say about data sharing. How do you plan to make the most of the data you hold on customers and manage it effectively? Elena Alfaro: Sometimes it’s not a matter of volume, but of the quality of the data that you have. The data that we, as a financial company, produce is really valuable, because it’s not people saying, ‘I like this’, as they are doing on social media. It’s that they like things and they buy them. We know if they buy again, if they are loyal to a brand; their habits; their interests. It’ tells us the person went from his house to somewhere and bought something physically. That is very valuable for many purposes. Any big company has worked with



segments until now because that was the easy way to manage different types of customers. Now that we have more technical capabilities and more data, we can go to segments of one. But what I like more is to use attributes. Say that I have eight segments that are based on how these customers consume financial products, I can look for attributes that have a purpose that can be used maybe only once. So, for instance, if we want to launch a credit card with something related to online travel shopping, I can try to find attributes related to that in my customers’ data and use that only for that product. I don’t need to have a complete segment and then adapt the product to that segment. Instead of having several segments, I have thousands of attributes that I can use, depending on what is my purpose. This is something that can be derived from the transactional data. It’s more related to lifestyle. We are doing several things on a macro level to know our customer. First of all, it’s trying to merge all the data sources that we have within the bank, that are very dispersed, internally and externally, because when you start doing online marketing, for instance, you have some of your data in an external media agency. We’re trying to bring everything together so we have a single view of the customer. That is for customer understanding and this ‘attribute generation’. Then we are trying to create services to personalise financial services to people. For instance, we are trying to predict what is going to happen in one single account, one month before it happens, so we can give advice to that specific customer, regarding how he is doing this month and the following one. At the end of the day, I think it’s a matter of the experience you receive. That experience has to be personalised and it’s impossible to personalise an experience if we are not trying to understand what is happening to you, not only in the financial world, but also in your life. So this is what we are trying to check in the data. Raúl Lucas: There are a lot of data within the bank that we are trying to

In our hands: Fintechs have raised the bar, but banks can collaborate in a new future

Autumn 2016

All-seeing: Glassbox gives firms total visibility of the customer experience

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Route map: The bricks and mortar bank is preparing for a digital transformation

Metro at a junction Metro Bank blazed a trail on the high street for ‘open all hours’ banking. Now the philosophy’s going online. Director of Change and Digital Martin Atkinson explains 2016 is the year of digital transformation at Metro Bank. The first new bank to hit the UK high street in a century, opening branches while others were closing theirs, is about to surprise again – this time by leapfrogging many of its rivals with a multichannel revamp that includes fingerprint ID. It’s reaching out a virtual hand to customers whose mobile phones have become their ‘remote control to life’, says Martin Atkinson, director of change and digital, responsible – among many other



things – for making sure that the fiercely bricks and mortar bank keeps up with the frantic rise of the fintechs. “Long gone are the days when the banks would define which products they would offer and through which channels, because customers have changed the dial,” he says. “They’re setting the agenda and as an industry we’re starting to gravitate towards a 24/7 operating model whereby consumers effectively dictate the services they want to see, through which channels and at what time of day.”

Metro goes mobile Metro Bank, which already opens what it prefers to call its ‘stores’ in the evenings, at weekends and even over bank holidays, took the decision to look again at how it communicated with customers remotely after sitting down with several hundred of its account holders. Its first response to their feedback was to relaunch Metro Bank’s personal banking website this summer, in an effort to make it clear ‘what the bank did and what customers could expect’. A new Autumn 2016

platform for commercial accounts is due to follow shortly. But the signature product launch will be Metro Bank’s mobile app, a market-leading feature of which will be biometric login. There will also be a new, smoother onboarding experience for those who choose not to use the branch network. “It was evident that people wanted the simplicity that fingerprint authentication gives. So we’ll be delivering touch ID not just to iOS and Apple, but also to the Android mobile app,” says Atkinson, who arranged to have devices with a pre-installed prototype app distributed to members of its customer experience panels and then filmed them using them. “One of our customers had given us some great feedback. They said ‘Amazon and Apple don’t give you a video guide or a tutorial – it just works’. So, that’s the benchmark. If our customers are able to pick things up and they work really intelligently and seamlessly, then we’ve been successful; if not, then we go back to the drawing board.” The bank also responded to complaints that its registration process was unnecessarily clunky. “At the moment, it can take up to seven screens and you need multiple data items. We’ve changed that, so that when you log in to mobile banking, you'll get credentials to go onto desktop banking, too. We’re calling them your digital credentials – not just your mobile or your desktop credentials.” The new app will also allow customers to add payees to their accounts via their mobile. “Again, consumer feedback is that we live in a very socially connected world where the mobile phone is effectively your remote control to life. To force a customer to have to go onto desktop banking to create a beneficiary, get a one-time message and go back to your mobile is wrong in our view. So customers will be able to create a new beneficiary on their mobile in real time.”

Transparent data There are, of course, also advantages to the bank in taking a more digitally integrated approach, not least in the data the new mobile app will allow it to collect for both internal and regulatory purposes. “Data is becoming an increasingly important source of differentiation and at Metro Bank we’re quite privileged that our world-class technology systems afford us to have a single customer view,” says Atkinson. Autumn 2016

“That means that at any one point, I can understand exactly what our customers are doing and all of their interactions – for example, if a customer has a complaint in flight; when they last visited the internet bank; if they are halfway through a mortgage process. We use a huge raft of secure data for things like authentication and we make sure that when we are engaging with people, we use our data framework to understand exactly who it is that we’re working with.” Metro Bank differentiated itself at the outset from other high street providers by taking photographs of customers during the onboarding process. “Onboarding’s key, both from a customer experience and a regulatory perspective,” says Atkinson, who believes there is an inevitable and as yet unresolved tension between the two that the industry is struggling to resolve. But Metro is trying. “We have a standardised set of checks to make sure that we’ve got the right data and we’re not onboarding anyone who’s either politically exposed, has sanctions or works

We live in a very socially connected world where the mobile phone is effectively your remote control to life with terrorists. With business accounts there’s a greater richness of data we need to capture. But I think we’re relatively unique in that you can leave the application process with a working debit card or credit card, whether you’re a business or a retail customer. On average it takes 15 to 20 minutes for a retail customer and a couple of hours for a business. “We actually have people leaving our stores, going straight across the road to Sainsbury’s and buying something because they don’t believe their card’s going to work so quickly. “From a business perspective, if we look across the industry, for a small business to come in and get a fully functioning account within two hours is, I think, a fantastic proposition and a real commitment to our customers,” adds Atkinson.

The onboarding process – and, for the moment, the majority of Metro Bank’s customers choose to sign up in person – gives it the data to begin building a detailed profile of that customer. “We have an analytics tool that really allows us to understand people’s engagements through our digital channels, so whether they’re on the internet banking platform, on the public website, or the mobile app, we can understand where they have come from, where they go to, and their movements within the process,” says Atkinson. “That affords us a huge insight into the transactional behaviours of our customers. It allows us to understand the services that we think they may or may not want, and if we’re seeing drop-offs, tells us which screens, services, and products are creating the most challenges for them.” Any usability issues thrown up by the data are then run past Metro's customer experience panel, comprising retail and business account holders, for validation and, if necessary, action by the bank. “Within my digital team, we have a set of people who obsess about the features that our customers want,” adds Atkinson. “The great thing about the new mobile app is it’s going to be delivered on a digital banking platform that affords real flexibility and real agility. So we’re going to be doing constant delivery updates on a two-week or monthly cycle.” It’s the natural evolution for a bank that from the outset has aspired to create a customer experience that matches that of the retailers. “Amazon reportedly makes 1,000 changes a minute to its production estate. We’re not going to be doing that, but we’re really keen that we keep a constant rhythm and deliver some new features that continue to amaze, surprise and delight our customers,” says Atkinson. Apple Pay would seem an obvious extension of the bank’s digital services. “One of the things that’s evident through dialogue with our customers is that they absolutely want what we would call an omnichannel experience, or frictionless movement between channels,” says Atkinson. “With the advent of new challenger banks, neobanks and fintechs creating experiences that are setting a new benchmark, we’ll start to see people really pushing the boundaries of where financial services meets day-to-day life experiences.” |



Upwardly mobile Nationwide Building Society’s widely praised new mobile banking app is just the first stage in a journey that follows a digital roadmap drawn up with the help of enthusiastic customers. Divisional Director, Group Retail Strategy, Barnaby Davis, explains why it took that route For a building society that was late joining the mobile arms race, Nationwide is catching up fast. Having released its first app in 2012, it became the first to embrace Apple Watch with the help of developers at IBM just three years later, and this summer the building society delighted customers with an update that answered their every wish – including touch ID. But there’s more to come. Phase 2 of its mobile app strategy, beginning later this year, will see the building society begin to tick off even more items from its customers’ virtual shopping list, putting them in the driving seat for all of its future digital development. This proactive strategy avoids the constant need for the building society to look over its shoulder at rivals, says Barnaby Davis, divisional director, group retail strategy. “There’s a big focus by organisations on the score they've got for their banking app. It creates a constant stream of app updating, based on the questions, ‘why do we have this?’ or ‘why don’t we have that?’. “I think customers are more focussed on the things that a mobile banking app needs to do well and easily. There are things that they think should be in the app, of course, but they are less important and shouldn’t get in the way of things that customers are doing 30 times a month, such as checking their balances.” So, for its latest roll-out, Nationwide went back to basics, recruiting 2,000 piloteers for a beta app. It embarked on a period of rigorous customer testing, ironing out bugs and discarding and adopting features. Development that had previously been carried out by external agencies was brought in-house at a new location in Bristol, where an internal service design team and user experience studio responded to feedback, drawing up a new concept for the front end and wireframes. As part of the research, it employed multiple GoPro



cameras to watch customers using the prototype app. “You might have 10 customers a day who are testing something one by one and the first customer can really dislike something. So you change it for the second person and by the end of the day you’ve so refined and enhanced it that the final person says, ‘I’ve got no feedback, I really like what you’ve done here!’,” says Davis. The new app allows customers to manage their money across a range of devices, from tablets to mobile phones and desk tops. Current account and credit card customers can now trawl back through 15 months of transactions, compared to one month on the previous version, while a new search function allows them to find a transaction by name, amount or location. It also gives customers the freedom to

There’s a big focus by organisations on the score for their banking app. It creates a constant stream of app updating update settings, personal details and arranging text alerts. By allowing those in the trial to communicate its progress over social media, Nationwide built up a head of steam around new features that account holders couldn’t wait to get their hands on. Once out in the market, the building society continued to trawl the app stores, Twitter and Facebook for ongoing feedback. “Our biggest issue is probably the thousands of combinations of Android handset types; it makes testing

an ever larger overhead and something that we need to think about quite strategically,” says Davis. Social media has been key in helping the bank respond to issues after the app went live this July. One of the first to emerge was poor resolution on LG phones. Once resolved, those users were quick to give praise, too, but the one feature that really had them hitting the ’like’ button was touch ID for iPhone. “It was the most mentioned missing feature in our appstore feedback previously and following launch it’s probably been the most commented on element, after the look and feel of the app. We’re really pleased with the response,” says Davis. He believes the whole exercise demonstrates why it's important to listen to what customers want, rather than focus on what the bank thinks they want. Just how much in control of its digital evolution customers are will be evident in Nationwide’s next release, which features extra facilities for them to set parameters on how and when the building society communicates with them. It’s a feature closely linked to data collection. Nationwide has invested heavily in information management architecture to gain a greater level of structured, semi-structured and unstructured data analysis. It allows greater insight into customers’ channel usage, which in turn plugs into the society’s anti-fraud strategies. “It allows us, for example, to see if a customer’s debit card is being used overseas and bring it to the customer’s attention to ask if that’s them. If it’s not, then we can stop the card, ” explains Davis. “Customers like the idea that data can be used to protect them and feel safer when somebody is looking out for them.” In September, a report from business intelligence firm App Annie suggested banks should be deeply concerned about the increasingly mainstream use of apps launched by rival fintechs. Nationwide isn’t about to let that happen. Autumn 2016

Cunning device: Customer feedback during trials helped drive demand for Nationwide’s app

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Too much information

How do you interrogate big data to improve the customer experience? Persado’s Cognitive Content Platform has a logical answer, as Chief Revenue Officer Lawrence Whittle explains

Digital marketeers are full of psycho-social soundbites designed to persuade companies that they’ve cracked the old paradox of online persuasion: the more you advertise, the more you add to the noise and therefore the less you’ll be heard. So it’s refreshing to hear a software company talking about the appliance of science and maths – two solid disciplines you can surely rely on to get measurable results – in an attempt to bring some order to the chaos. Persado’s Cognitive Content Platform (a smart-thinking artificial intelligence) is reassuringly described as ‘human assisted’. In other words, it relieves companies of the burden of figuring out the psychology behind what customers really, really want – especially when they probably don’t even know it for themselves. As Lawrence Whittle, chief revenue officer, puts it, Persado’s unique approach, using a combination of maths and data, ‘enables humans to really point their efforts at the right areas. It’s taking the randomness out of how people think’. “It’s not about machines taking over; it’s about machines providing humans with some assistance in taking decisions,” he adds. “What it’s effectively doing is figuring out, in real-time, how consumers want to be spoken to and really uncovering what inspires someone to act. We’re using data and mathematics to generate content that inspires someone to react.” So, it could, for example, inform how a company constructs an email subject line in a direct marketing campaign, or a post on its Facebook feed. “What we’re doing is providing insights into what is likely to work,” says Whittle.



”Inside our platform there are literally billions of combinations of data imports that we’ve been gathering over a number of years. We use it to provide insight for companies on how they should present digital adverts and communications to customers. It’s also about making sure they understand what that data means.”

Machine-generated content With more than 15 years experience in senior software industry positions, Whittle is responsible for Persado’s market strategy and execution, as well as developing its network of partners. Persado itself is a British company, which relocated to New York and expanded its reach to the Asia-Pacific region. The company now has ambitions to extend its presence to other parts of the world. “We have made significant investments in global financial services, and the development of the content platform is representative of that,” says Whittle. So what are Persado’s plans for the Cognitive Content Platform? “Having shifted our focus to financial services in the last few years, we have been very selective about the areas we choose to prioritise,” adds Whittle. “The credit card sector has been a particular focal point, not to mention significant developments around current accounts, loans, mortgages and so on. The reason for this is that all of these areas are trying to refine their customer service, and that's absolutely what we are about as a company.” In part, these developments have been as a result of huge advances in how big data can be used to improve service and customer interaction.

Big data, big impact: There’s no ‘randomness’ in cognitive content

“Data impacts almost every possible area of financial services,” says Whittle. “The problem is, everyone is flooded with raw information that they don’t know what to use, which can be very challenging. For us, leveraging data to its maximum potential is essential because ultimately it is the data itself that allows us to take the randomness and uncertainty out of how people understand content. “Deciphering information is one thing, but making sure that it can be consumed by a company so that they understand what it data means is different thing altogether.” Autumn 2016

Tools such as the Cognitive Content Platform allow financial services to develop relevant, useful and effective material that could significantly improve the customer experience. As Whittle explains: “Marketeers have an incredibly difficult task at the moment in terms of content. Any marketeer in a

financial services company, whether it’s in London, Paris or New York, has the same issue, which is that there’s this pressure to develop content. It also needs to be good content. We provide sets of tools to help them become more effective, whether it’s developing a new landing page on a website, a Facebook ad,or an email, to

inspire customers to buy more and to trade more.” Persado has a bold vision. “Our view is that can we can provide this platform to every marketeer, so that every time they want to communicate to a customer, they hit the ‘Persado button’? The Persado button basically gives them a vital insight as to how they should communicate. The question I always ask is 'would you ever send a letter out now without hitting the spell checker?'. In the same way, why would you send a digital impression, or a piece of marketing collateral to anyone, without hitting a checker to make sure that you’re explaining and conveying your message in the most optimal way? It's our vision to make that equally instinctive,” he says. “Over the course of the next few years, I think the role of financial services will become increasingly more focussed on people’s daily lives and customers’ relationship with digital technologies, ” he adds. “As such, not only is there is a huge opportunity to develop software, but also the possibility that some of the more traditional banks will struggle to remain innovative and active. More forward thinking banks, however, will have a huge advantage. “I also wouldn’t be surprised if we see newcomers entering the market to join the likes of Apple Pay. “Financial services has a bright future, especially in emerging markets, but banks must learn to adapt to new technologies and ways of working. If they don’t, they’re going to fail – it’s as simple as that,” says Whittle. “My other prediction is that branding will become less important as a result of the amount of transactions that are going to be conducted over a mobile device. If you consider Apple Pay, for instance, behind it is probably a credit card from American Express, Barclays, or RBS. In some respects, the source is irrelevant to a customer. There is also the chance, of course, that such platforms could develop into becoming banks. That would create an extremely dynamic and competitive environment in the future.”

Data impacts almost every area of financial services. The problem is, everyone is flooded with raw information that they don’t know what to do with Autumn 2016 |



Net gains MBNA is best known to TV viewers for its football-in-the-office ads. Turns out the Chester FC sponsor and credit card issuer is scoring points all round with customers. Emma Sutton, Head of Customer Experience and Gary Watts, Head of Innovation, keep score... When a merchant card processing issue meant one of MBNA’s football mad customers missed the ballot for tickets to a crucial game, he didn’t expect much to come of it. But the response by the customer experience team to his comments over social media was in a league of its own. With a little string pulling, the company that issues branded cards for fans of seven top-flight clubs, including the Gunners, Chelsea and Spurs, secured seats at the match. It was an example of how knowing your customer sometimes means ‘delivering the unexpected’, says head of customer experience Emma Sutton. “We have a culture of wanting to do the right thing by the customer. We could just have explained to him what went wrong – the merchant had reprocessed the transaction – but the associate the customer spoke to over social media took it upon himself to find out a little bit more about the issue and get him to the game. The customer was very thankful.” Social media has been one of the key forums for MBNA to talk to customers since the credit card issuer launched – more than that, the conversations it’s had there have helped define the business. It was the head of steam building up around mobile pay on Facebook and Twitter that persuaded MBNA to be one of the first card issuers through the gate with the technology – a decision that not only pleased its existing customers, but attracted new ones. “We were listening on social media and everybody was excited about the technology,” says head of innovation Gary Watts, recalling the build-up to MBNA adopting Apple Pay last year. “I think it’s something that people have been waiting for a long time and certainly the early adopters have taken to it quickly. We’ve had some really good feedback.” MBNA lined up alongside some of the



biggest names in banking to offer the Apple payment platform and was in the vanguard again with Android Pay this summer. MBNA was already a pioneer of contactless payment technology – 100 per cent of its cards have been enabled since 2013 – but it was the launch of the mobile wallet that really captured the public’s imagination. “A number of people communicated via social media to let us know that they were going to be taking out MBNA cards because we were providing the technology," says Watts. “I think in the long term we’re going to see a major migration of transactions to mobile, especially as the limit goes up.” The mobile pay story is an example of MBNA’s customer experience team, in which it invested heavily from the start,

Customers are having amazing experiences in other industries; it’s becoming really important that financial services comes up to speed being constantly alert to opportunities for the company ‘to understand when we need to intervene and how we can enhance the end-to-end experience’, says Sutton. Whether you’re a frazzled mum in Morrisons in Milton Keynes or a city slicker using the Thames Clipper, not wanting to have to fumble for your plastic, Sutton believes that knowing who customers are and the transactional pain points they experience in everyday life is key to developing future services. Good know your customer (KYC)

practices open up opportunities for personalisation that will fundamentally change the relationship between provider and user, adds Sutton. “One of the first things we did was to look at the key customer interactions, but through their eyes. I think as an industry we’re very good at looking at things through a process lens, with a view to making sure it’s efficient, but when you truly look at it through the customer’s eyes it’s about making things seamless and effortless for them. It’s mapping out what we would see as a very simple process, such as going into a supermarket. You have a trolley full of shopping, three children all screaming because they’re hungry. You just want to hand over your piece of plastic or use your mobile wallet. So we want to make sure our authorisation strategies are appropriate and relevant to that customer. “Customers are having amazing experiences in other industries and it’s important that financial services comes up to speed. Technology, like artificial intelligence and open application processing interfaces (APIs), are becoming even more critical. In future it’s going to be more and more about personalisation.” Which is why both MBNA and its chosen networks – Visa, MasterCard and American Express – use as many opportunities as they can to draw closer to their card users. “Because MBNA are card issuers for well-known brands across the UK, we can leverage those relationships and work in partnership to drive customer loyalty,” says Watts. “Very often it’s about what’s relevant to me, the customer – whether, for example, I’m loyal to a football club or an airline. We can look at how those customers are interacting with all of us and share some of that information so we get the best, most relevant offers to them. “We can use data on how and where they’re using their products. That could be Autumn 2016

by the volume of transactions or the number of touch points they have with us through a particular journey.” That all feeds into innovation in products and processes that make those journeys smoother. “One of the biggest challenges we’ve seen is immediacy,” adds Watts. “Customers want frictionless and seamless transactioning of their choice of payment. We’re about giving customers that choice and putting the power in their hands, but making sure we anticipate where they are

going and meeting them there as a bare minimum.” For the footie fan who found himself in the stand on match day, MBNA certainly rose to that challenge.

Ultimate goal: Sometimes you have to deliver the unexpected

Autumn 2016 |



Time’s money

Apply Financial’s new reporting tool, designed to eliminate time-consuming payment processing errors, is already paying big dividends, says MD Mark Bradbury If someone told you they could save your business tens of thousands of pounds each and every month, just by solving a simple input error, wouldn’t you want to know how?

That’s the scale of what can be achieved with a straight-through payment processing API designed to prevent data blunders from costing financial institutions and corporates an arm and a leg. Chief culprit is erroneous or missing BIC (bank identification code) numbers, resulting in payment failures that typically cost between £50 and £100 a time. It’s easy to see how the bills mount up – at least, it is now, thanks to Apply Financial’s latest reporting tool, which forms part of its Validate suite of products. The tool, released earlier this summer, has the ability to see just where repetitive mistakes are made and is already having an impact, according to the company's MD



Mark Bradbury. “Apply Financial is a generation on from the reference data providers. We are providing a complete end-to-end solution for payment validation,” he says.“It’s all about automation, fine tuning and intelligence around straight-through processing and how our clients manage the relationship with their client. We’re providing them with really smart tools.” The latest is primarily designed to help the financial institutions that make up the majority of Apply Financial’s customers, pick up on common mistakes by their individual and corporate clients. Armed with this knowledge, they are able to educate them on where and how errors are being made, so that they can avoid making them with future payments and, importantly, avoid fees. To demonstrate the point, Bradbury logs into some real-time information. “This particular client is saving more than £100,000 this month because they’re not

sending erroneous payments. They process about 40,000 payments a month and the biggest issue they have is with BICs. We can see their clients are not putting in the right codes. What our system does is suggest the correct one for them. "Two thousand payments that they put through have passed now, but when these customers first tried they’d put in an incorrect BIC. Imagine if those payments had gone – they might have reached their destination, but chances are they would have bounced back and had to change the BIC and send it again. Then the person who’s sending the money gets charged extra for having to make another payment; the person receiving the money doesn’t get it on time; and the people in the middle – at the bank – have to put in manual effort, contacting, emailing, phoning or fixing. That’s where the costs are.” Instead, this client opted to use the full Validate suite of data, management and Autumn 2016

functionality tools that are at their disposal, including detailed real-time analysis of how it can save on those costs in future. “Our clients can now see where they’re making the errors that our system is correcting and how much they save by it doing this,” says Bradbury. “It provides a league table of the most common errors and also shows which currencies, countries and users are interacted with the most.” Ultimately, the client can decide just how flexible and forgiving it wants to be. “Our software will advise whatever it is that they need to fix and we give that to our clients to provide to their clients as part of our API. They decide what they want to use and what they don’t. “We also allow our clients to configure the functionality of the API to have flags in,” says Bradbury. “So you can decide that if somebody makes a particular kind of error, it won’t stop the payment going through. We’ll have a caution on it, maybe some suggestion, but we’ll still allow it. It’s basically putting the emphasis back on the person who’s entering the data to get it right; we’re not just saying ‘it’s wrong', we actually suggest to them why, so they can fix it themselves. All that capability, the fine tuning, we now give to our customers so they can give a much better experience to their customers.”

Margin for errors The system works at a granular level, using a combination of daily updated global reference data and algorithms that use that data intelligently. Whenever somebody makes a payment, fills in a payment instruction or sends a payment file, a sub-second web call to Applied Financial’s Validate API is instigated. “As somebody is doing that our tool will tell them ‘you’re doing this wrong, you’re making an error, that BIC code you’ve given us will not work with that IBAN, or that bank account detail’. Or it might say that the bank account detail, or the IBAN, or whatever it is you’ve given us, is not correct. It’s the wrong length, the check digits are in the wrong place, the payment component for the branch is wrong and it doesn’t match with the BIC,” says Bradbury. There is an infinite variety of data entry errors caused by inputter ignorance, missing information, fat-finger syndrome or simply falling foul of cultural calendars and Autumn 2016

regional data preferences. Not least, payments frequently stall over IBAN numbers, which, ironically, were introduced to speed up processing. “In most cases, they’ve put in too many or the wrong check digits,” says Bradbury. “Depending on the country, the check digits are in different places. The IBAN is supposed to be standard across Europe, but every country has its own rules. So we have a 24-digit IBAN, Malta has a 31-digit – don’t ask me why, but it’s another big issue. “Let’s say somebody’s sending money to the UK, so they’ve put in an IBAN number but the receiving bank is looking for local details – a bank account and a sort code, not an IBAN or a BIC. Our system will automatically recognise that and change the IBAN and the BIC into a bank account number and a sort code, and vice versa.” And if you’re trying to authorise a payment for when an entire country is out of the office, it’ll tell you that, too. “Our software says if you’re sending a payment to that county on that date, it will not be received because there is a holiday. So we tell them to just change the date.”

It’s all about automation, fine-tuning and intelligence around STP and how our clients manage the relationship with their client Then there are individual country payment compliance rules you’d never even guess at. “If you’re making a payment to some countries, you have to add addresses and not just an address, it has to be the four lines of the address – for instance, for Canada. So we have that in our API. If you make a payment to Russia, Jordan or India, you have to include an official payment reason code and we have all those on the system. It will prompt the user with a dropdown, so you can find the correct one.” No wonder corporates with as few as 1,000 payments a year are paying to adopt the service. “Our typical clients are some

kind of financial institution – we have some of the biggest banks in the world and foreign exchange brokers. They could be other non-banking financial institutions that have a big payment portfolio to deal with – pensions administration companies that make overseas pension payments, insurance companies, asset managers. We have governments that do their financial payments, cross-border. And then we have many corporates,” says Bradbury. “Our smallest account does 1,000 payments a year. They’re relatively small, in terms of cross-border payments, but they use our API because it automates the validation so they don’t have any issues with their bank anymore. It’s an interesting cross-section. Anybody who’s doing reasonable amounts of payments could use our Validate tool.

Regular updates "Clients have the option to get to know us by buying our comprehensive global data on an API with seamless daily updates or a complete solution that incorporates all the data, management and functionality, which resides with it in the Cloud and is also accessed via the API. More tools are planned for release at the end of the year based on customer feedback. “Any institution that’s digitising its operations and removing manual intervention is perfect fit for us, be it in a mobile app, customer portal or in the back office,“ says Bradbury. “And because of this our clients are increasing the bandwidth for payments growth, reducing costs without increasing staff. We get more money out of our clients because we provide better products and their volumes go up. So you only pay for what you use.” Validate monitors and forecasts the number of payments a client is likely to ask to be processed by the end of the year, allowing Apply Financial to advise if they should increase their limit – or lower it. “We put our clients top of the list of importance,” concludes Bradbury. “I know that sounds a bit hackneyed, but we get fantastic reviews. Everything we’ve done, including the reporting tool that helps us fine-tune the service to get 100 per cent STP, is because we listen to clients. And if you don’t listen to your clients, then you will eventually suffer, because they will go somewhere else.” |



Stronger together

With alternative business lending heading towards £2billion in the UK, one established player says it’s time the sector redefined its relationship with banks. Capify’s UK Managing Director Tony Pegg explains They came through the crash, rebranded as a global finance platform in 2015 and now they’re waving the flag for alternative business lenders everywhere.

Capify, previously known in the UK as United Kapital, had issued more than 5,000 fundings worth £75million by the time founder David Goldin changed the name above the door in Manchester, along with that of his four other firms offering liquidity to SMEs starved of it by the banks in Australia, Canada and the States. Now Capify’s internal transformation is complete, UK managing director Tony Pegg is broadening the agenda. “Along with some of our peers, we’re looking to form the Association of Alternative Business Finance to bring the industry together, give it a voice and provide confidence and transparency to



the business of the alternative industry leaders,” says Pegg. “I think the industry has recognised that, standing alone, it’s a very difficult market.” That said, Capify has done pretty well over the past 14 years, riding one external wave after another – although with total alternative business lending reaching £1.82billion in the UK in 2015, just 3.43 per cent of gross national bank lending to SMEs, there’s still a lot to go at.1 The danger is, the alternative finance industry could become a victim of its own success. With so many new products and lenders entering the frame, it risks paralysing borrowers with confusion. Another good reason for a trade association, says Pegg. “As more and more entrants come into the marketplace, it does create uncertainty, so awareness of ‘what is the best product for me and why

should I buy it?’ is more challenging. Probably one of the things we could focus on is the fact that the banks have been mandated to refer their declined customers to the alternative lending industry. It’s not there yet, but the Government has appointed three platforms. These are not lending platforms; they're almost like comparison sites where you can select which lender suits your particular business requirement. “But it’s about more than that. The banks really need to embrace the alternative community in partnership. In the US, we have seen JP Morgan Chase partner with OnDeck and a couple of other banks have started to partner with lending platforms directly to support all their customers. ‘So I think one of the challenges we face is ensuring that banks in the UK see the alternative lending community as a Autumn 2016

Collaboration: A win-win for lenders and borrowers

positive force, rather than a competitive environment.” That could become more important to small firms in a post-Brexit Britain. “We do think there may be a downturn over the next 12 to 18 months, particularly with the Brexit announcement,” says Pegg. “But those market players that have been there a long time and gone through the credit crisis of 2008, have the experience to be able to take any downturn. “Some of the newer players have not been through that credit cycle. A downturn will really find out whether their processes and services are strong enough. "We’ve been around for almost 14 years as an organisation, globally, and we are prepared and have utilised the experiences of the past to make sure that we’re able to ride the storm if it appears.” Capify has a simple two-product offer for SMEs. First is business loans with the flexibility to repay small amounts daily; second is a merchant cash advance of up to £500,000 with repayments managed directly by Capify, which deducts them at the point of processing every card transaction, thereby evening out repayments in line with peaks and troughs in a small business’s cashflow. “The main difference between ourselves Autumn 2016

and the banks is our ability to take various different data points at speed, using an applied line technology that means that we can offer the capital within days and not weeks,” says Pegg. “Ownership and business verification is a very important part of what we do. Our underwriting necessitates getting to know the customer and their borrowing capacity. Technology enables us to pull in various different data sources, whether it’s from Companies House or bureau data. There are technologies where you can verify bank

One of the challenges we face is ensuring banks in the UK see the alternative lending community as a positive force, rather than as competitors

statements and passports and various other data very quickly, so we combine that information with our underwriting experience to make quick credit decisions.” All of which has required considerable and ongoing investment, not only in technology, but also in staff. “We train our staff to really get to know and understand our customers and their business needs before we offer any of our products – and really take them through the end-to-end process. In this way we make sure that they have the confidence that Capify and the process is right for their business,” concludes Pegg. “The biggest investment Capify has made is in its technology and people. In order to scale a business, you need to have both working in tandem and we constantly evolve and invest in both. "It’s a bit like Formula One. You know you’ve got a very technical, skilled car, but you also need the driver to match that performance to deliver the result. “ 1Pushing Boundaries: The 2015 UK

Alternative Finance Industry Report, University of Cambridge/Nesta, February 2016 |



The way to pay E-payment specialists PPRO Group, already one of the fastest growing fintech businesses based in Europe, is going global. We asked CEO Simon Black what’s pushing the payments envelope Fintech Finance: What are the biggest customer experience challenges facing financial services? Simon Black: The biggest challenges are reducing friction and fitting into changing consumer lifestyles. When PPRO creates a new product or service, the first thing we ask ourselves is ‘how will this benefit the customer?’ Without a compelling benefit, the market will reject it. Particularly, we want to see if a payment can be made more easily, faster or more reliably. But that’s not enough. The next thing you have to ask yourself is how the product fits into the customer’s day. Modern consumers are pulled this way and that by competing demands on their time. For a new product to gain acceptance, it has to make the consumer’s life easier and simpler by offering increased convenience and zero friction. Take, for example, mobile payment apps. Clearly, the payment function is the core product and the app has to excel at that. But it also needs to go beyond payment to provide further benefits. That could mean something as simple as the ability to collect loyalty points, or it could mean advance warning of up-and-coming deals, or personalised marketing that helps the customer hone in on products relevant to them. A really interesting example of the focus on convenience is the new trend for incorporating payment functions into chatbots. Soon, consumers won’t need to switch from one app to the other. When they agree a sale with the customer service representative, they can pay right in the chatbot. FF: How does this affect PPRO? SB: PPRO has been in the e-payments market for more than 10 years and whether we’re working with our payment service providers and card acquiring partners to accelerate their access to alternative payment methods, or issuing e-money products for consumers and



businesses, we have to consider every aspect of the customer journey. So we build customer experience into everything we do. For instance, when we acquire or design a payment product, we make sure we include features such as refund capabilities – and we make them easy to find and use. That goes for both businesses and consumers. In the B2C environment, we’re really proud of our Via Buy customer journey. At every stage, it’s as seamless and easy as possible. For instance, you can load cash onto your card in real time. FF: Has Brexit had much of an impact so far on your business? SB: Brexit creates uncertainty for the UK but it doesn’t have any direct impact on PPRO’s commercial activities. Our business has always been very international, so we are not dependent on the UK economy. We expect UK e-commerce to continue to grow and UK online businesses to benefit from increasing cross-border e-commerce. We have contingency plans in place for Brexit and we don’t foresee any disruption to our business or our support for our partners. FF: How does your payment platform work? Can you give us a few examples? SB: PPRO’s payment platform, Girogate, unifies payment methods by abstracting from the individual platforms the many different processes for collecting and confirming payments and then unifying those in one system. Behind the scenes, the different payment methods may have different time constraints and operational details, but as far as the user is concerned, the entire process is unified in a single, simple transaction. For example, let’s say Joe Bloggs wants to buy a book online. He clicks on ‘buy now’. The website sends order details to Girogate, which identifies, approves and then contacts Joe’s bank. Once the handshake with the bank is successfully completed, Girogate handles the

transaction and finally updates both Joe and the merchant website, to tell them that the purchase has been successful. So we enable our partners to support their merchants entirely through a single integration to Girogate; no one else. This includes not just the processing, but also the collection and reconciliation that follows the transaction. FF: Have any regulations, for instance the revised Payment Services Directive, had a particular impact on PPRO? SB: Absolutely. The revised Payment Services Directive (PSD2) and the Anti-Money Laundering Directive (4MLD) will both have a significant impact on our customers and on PPRO’s business operations. PSD2 expanded the scope of financial regulation to include payment technology companies that are not actually party to the transaction, something that some in the industry strongly approved of and others equally strongly opposed. PSD2 has opened up a whole lot of possibilities for fintechs, like PPRO, as it creates a regulatory framework for new payment technologies and more competition between traditional banking services and the fintech market. In turn, we anticipate that alternative payment methods will become more prominent and will be used more regularly by consumers who feel more confident using new payment technologies that operate in a regulated environment. In the long run, we will see an uptake of alternative payment methods that will help our business grow. 4MLD will have an impact on sales and compliance processes for fintech companies issuing e-money products. New purse restrictions and customer due diligence requirements will make it more difficult for customers to take up and use certain e-money products. If the industry is to continue to grow, there should be a balanced approach towards how risk assessments will be viewed by regulatory authorities concerning these products. Autumn 2016

We are therefore working with our partners to find suitable solutions that are compliant with regulation while delivering a commercial benefit. FF: What does PPRO do to ensure customer information is secure? SB: PPRO is an authorised e-money institution, regulated by the Financial Conduct Authority (FCA). That means we comply with all of the confidentiality and security requirements placed on us by the regulator. What’s more, we are an e-money issuer and are principal members of MasterCard and VISA. As such, we are level-one certified by the Payment Card Industry Security Standard Council. That’s the highest level of security certification in the payment card industry. On top of that we have our own information security officer, who looks after all IT and non-IT related security matters in the company. In short, we take security very seriously.

Simple as: The global trend is for ever more user-friendly payment services

For a new product to gain acceptance, it has to make the consumer’s life easier and simpler Autumn 2016

FF: How can we expect to see PPRO expand in the next few years? SB: Our business has always been very international and is driven by the fundamental shift to digital money and digital commerce. These trends are global and will continue. With our market-leading acquiring and issuing products, we are extremely well placed to maintain our growth. We are going to start operations in the US at the end of this year and will open an office in Asia in 2017. You can expect to see us integrate more and more alternative payment options for our B2B partners. Our goal is to provide them with additional services and to continue developing highly user friendly e-money programmes for both end customers and corporate clients. FF: How do you think the industry is going to evolve in that time? SB: The payments industry is very diverse but there is a common factor driving all payment methods, which is digital commerce. Whether you are a consumer shopping in store or online, a business trading with another business, or you're sending money overseas, everyone is pushing for simple, instant, low cost and easily integrated methods. And the added value of incorporating useful transaction information with every payment will become expected. |



Addicted to banking

The best mobile banking provider in Russia is setting out to be a one stop shop for online financial services – not just for this generation but, more importantly, the next, says Tinkoff Bank’s Mobile Strategies and Product Manager, Maxim Evdokimov ‘Cool, fun, young and active’ is how one viewer described Tinkoff Bank’s digitally savvy customers in a film on its YouTube channel.

Typically, the bank’s account holders are only as old as the Russian banking industry itself, which was freed from state clutches 25 years ago. But even these sassy millennials aren’t as young – or active – as the pre-schoolers featured designing their own Tinkoff credit cards on its Instagram account. The crayon workshop was, admittedly, linked to a charity event and intended to encourage parents to set up automatic donations to good causes via the bank. But Maxim Evdokimov, Tinkoff’s mobile strategies and product manager, is keen to identify potential customers early. In fact, it’s crucial to the bank’s future plans. “We’re focussed on Generation Y and Generation Z, so we are working with



not children but the youth segment, who in three maybe five years are going to be bank clients,” he says. For these nascent online consumers, Tinkoff’s branchless, digital-only interface, which broke new ground at its launch 12 years ago, won’t be nearly enough. The bank has to offer more. “It’s not about technology, it’s about user experience and service provision and you need to broach it with them now, so that when they are old enough to make a decision about which bank to open an account with, they think of Tinkoff, because we were the bank that was familiar to them growing up.” Widely seen as the trendsetter bank in Russia, Tinkoff is moving away from investing in the user interface (UI) in favour of enriching the user experience (UEX). It wants to make it so good that it’s ‘addictive’.

“We have a policy of ‘not revolution but evolution’,” says Evdokimov. “So we are making some smooth changes to the UI but where we are really investing is the UEX. We are serious about separating these functions, because while the ‘wow’ factor you get with changes to the interface is good, it only lasts for one month. The UEX is something that people are addicted to, so they make more transactions with more sessions inside the mobile application.” Its new UEX is creating an army of ambassadors for the Tinkoff brand. “Because we have one of the best applications in the digital sphere, these people are promoting Tinkoff, not so much because of our bank services but because of the digital approach we take.” The app and online site are aimed at anyone looking for a financial service, not just Tinkoff customers. In effect,

Autumn 2016

it’s creating a supermarket bank. “We’ve created a marketplace for any financial service, so when you’re looking for insurance, a mortgage, lending, a credit/ debit card or account, you can find it on our portal and in our application. If we don’t have the service, we provide you with it through a partner bank,” says Evdokimov. Crucially, customers don’t have to leave the Tinkoff portal. “We take a brokerage approach but we do all the service internally – all the communicating with you and collecting the documents – then we come back to you with the decision and all you need to do is sign the final paper and get the money from our bank partner.” While growing your own customers in the way that Tinkoff does isn’t something European banks with several hundred years of tradition behind them need worry about, mature markets would do well to keep an

eye on these smart, unencumbered rivals, observes Evdokimov, because ignoring change is ‘how developed markets lose out to emerging markets’. “In the UK, you have history that fights against innovation. In emerging markets, we don’t have history. We start from a technology step. In some areas, Russia is maybe even ahead of the UK in mobile banking and mobile payments.” Voted the best mobile bank in Russia for four years in a row, 20 per cent of Tinkoff’s customers exclusively use its mobile channel to communicate with their bank. “The biggest trend we’re seeing right now is near field communication (NFC) payments of all kinds,” says Evdokimov. “Almost half of payments with the card use pay pass or pay wave. People are adopting smartphone NFC payments because it’s clear to them how to use them.” Threats to the global mobile banking

In the UK, you have history that fights against innovation. In emerging markets, we don’t have history. We start from a technology step

market – including Tinkoff's own segment – will come not from rival financial institutions, he believes, but from rival technology firms, who offer even greater levels of convenience and service. “What we see happening next is that Apple and Google will try to jump into this payment industry and put pressure on banks.” He draws an analogy with the experience suffered by mobile operators whose technology services were hijacked, reducing them to simple carriers. “Other companies and banks started to generate revenues out of these operators’ customer base. We now see the same struggle against Apple and Google, because they’re jumping into banking and they have huge potential because customers' payment cards already link to Google and Apple, so they don’t really need to communicate with banks. “Apple and Google are inserting their pay buttons into e-commerce websites and mobile, in-app purchases. So we’ve still got our share of transaction fees, but in terms of customer communications and user experience, these companies are trying to change the world of mobile payments.” And when they do, credit cards will just be something those pre-schoolers learn about in history lessons.

Hooked: Tinkoff Bank aims to get customers to stay within its app

Autumn 2016 |



The heat is on

Technology companies are muscling in on the payments sector, but established provider Paysafe is keeping its cool. Experience counts, says Chief Operating Officer Danny Chazonoff, but if you don’t adapt, you die

Hot topic: Competition in the payments sector is intense



Autumn 2016

“There have been some material changes in the payments industry over the last three or four years. The pace has accelerated significantly. There has been a lot of innovation and a lot of newcomers. It is an incredibly hot space to be,” says Danny Chazonoff. And, as chief operating officer of Paysafe Group, which offers a full suite of global payments solutions with a particular focus on mobile, he’s been helping it raise the industry's temperature. Last year, the group, which was founded in 1996, announced a €1.1billion acquisition of Skrill, an e-commerce company, one of the most incendiary topics within the industry. Paysafe followed that by paying a reported £23million this September for the affiliate technology firm Income Access, which already provides to NETELLER value-added services that extend beyond payments. The deal was described by Paysafe’s divisional CEO Lorenzo Pellegrino as making the company’s overall offering ‘stickier’ to merchants. He didn’t rule out similar acquisitions in the future, either. Chazonoff’s ambition is for Paysafe to become recognised as a ‘one stop global payments solution provider’. However, international transactions come with their own set of problems. “There are a lot of countries where credit and debit cards are not that prevalent, or are not necessarily considered to be mainstream. Therefore, we want to make sure that we can offer consumers a very wide range of payment types, and merchants the ability to accept them,” he says. “We’re constantly looking at ways of ensuring that, when a global client comes to us, we are not in a position where we have to say no. If they say, ‘look, we are in North America, we want to expand to Europe,’ the answer is, ‘yes, and we will help you’. If they want to expand into South America, we say, ‘Here is how you can do it’. We’re always looking at ways of either partnering or extending or expanding our product functionality.” If you don’t adapt, you die, says Chazonoff. And Paysafe has no intention of becoming a dinosaur. Its modus operandi is to evolve with its existing customers to ensure that it stays relevant.

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“We’ve been working with some clients for many years and they are either expanding, extending or changing their business models. When they do that, there are changes that are required from our end,” says Chazonoff. “Maybe the traditional way of paying that has served them well in the past is no longer the only way in which they want to interact with their customers.” That doesn’t necessarily mean they are chasing digital rainbows. “There are a couple of very interesting examples where we have large clients that have traditionally been online only merchants, now looking at expanding into bricks and mortar, some on a small scale, some on a slightly larger scale. They come to us automatically. “They say, ‘look, you guys have serviced us so well for payments that we want to make sure that everything is handled in the same

We have large clients who traditionally have been online only merchants now looking at expanding into bricks and mortar way. You been a trusted and good partner and have delivered constantly and regularly, therefore can you help us expand?’ This is the crucial one, because as the clients’ needs expand, so do Paysafe’s,” says Chazonoff. There are fundamentally two ways to stay relevant: through natural growth from within and through acquisitions. The second has enabled Paysafe to branch into different technologies and industries. “For instance, one of the products that we’re going to be launching at Money 20/20 provides a lot of different functionality for many different small to medium-sized retailers that would like to be able to engage with consumers who are not necessarily physically in their storefront,” says Chazonoff.

“It’s been very interesting to see that transition. One of the things you will constantly hear from Paysafe when we talk about our business is, ‘how do we stay relevant?’, ‘how do we make our customers want to continue working with us?’ It’s through services like this.” Paysafe will be making its presence felt in Las Vegas, fielding a suite of senior managers to interact with partners, clients, potential clients and the media. Such events are critical to the Paysafe story, says Chazonoff. It’s not only a chance to reflect on where it has come from but to see where it is going. “Money 20/20 is very exciting for us. It certainly has become, in our industry, the most important and the most relevant display opportunity. We will be talking about how our business has evolved since last year and the acquisitions that we’ve made. “We had just announced the Skrill acquisition last year as we went into Money 20/20. Now it’s a year later and we'll be explaining how our business has evolved and how we've integrated the product.” Among the latest developments that the company will be keen to showcase is its Pay Later solution from the Group’s Austrian Payolution product stable; its pre-paid and wallet businesses, NETELLER and Skrill; and paysafecard. In some of those product sectors it will be going up against new kids on the block. But experience counts for a lot, says Chazonoff. “When you look at Apple, Google and Amazon as they get more entrenched in payments, some of the things they are doing, such as providing wallet technology, are things that Paysafe has done well for 15 years,” he says. “We recognise that the most important element is the interaction with the customer and security. It’s about understanding what is required from a risk management point of view and making the experience as frictionless as possible. At Paysafe we are investing in technology to not only be the pioneer of the past, but also the innovator of the future.” |



Shopping the world Julian Wallis, Country Manager for UK & Ireland at Ingenico ePayments, explains how best to tailor your fintech strategy in a fragmented global e-commerce market During 2015, e-commerce revenues across Europe rose from €402billion to €455.3billion. By the end of 2016, they are expected to exceed €509billion. Cross-border e-commerce is predicted to grow by 27 per cent a year until 2020, when it will be worth more than €1trillion. That’s a lot of shopping. Wherever they are, customers want greater choice and they are increasingly prepared to look beyond their borders to get it. Fintech is developing fast to both meet and drive this digital demand. Payment systems are being continuously re-imagined in R&D facilities around the world and developments, such as contactless payments, Apply Pay and digital wallets, have already proven that consumers are willing to take up new technologies enmasse if they can see a clear benefit to them. As these developments become more commonplace, consumers have come to expect a more frictionless checkout experience. If they are not presented with an optimised experience that offers them the payment methods, language, currency and other options they have grown accustomed to, the merchant risks losing business. So, when setting their sights overseas, merchants would do well to partner with an expert that can not only process international payments, but process them in a way that is tailored to local customs and preferences.

Expanding domestic markets Looking at this on a local level, many merchants harbour no ambition to target customers across the world. The UK market, for example, is Europe’s largest e-commerce market, worth more than €157.1billion in 2015. By trading domestically, vendors have the advantage of dealing in their own currency and within a familiar regulatory landscape, but the way we pay continues to diversify. In-app payments, digital wallets,



tokenisation and mobile-optimised payments pages have all seen significant take up over the past five years. For many customers, card-only payment options create a barrier and if they are not offered their preferred method, they may well abandon the transaction. Increasingly, traders are required to provide seamless mobile payments online, near field communication (NFC) payment methods for low-value purchases in store, and a more well-rounded omnichannel experience. Building this holistic approach to payments brings new challenges and fintechs must ensure they can offer this experience to merchants and their customers.

Local to international New markets bring local complexities that must be overcome. These range from consumer behaviours to banking protocols,

Asia will command 39.7 per cent of online sales by 2019, despite being home to 900 million people outside the banking system shipping preferences and regulations to currency management. Fintechs must be willing to meet these challenges and more if they are to enable greater merchant access to a new wave of international shoppers. In 2015, 16 per cent of all individuals in the EU purchased goods and/or services through the internet from sellers outside their country of residence but still within the EU border – an increase of 33 per cent compared to 2013. If merchants can make their products

available to these customers, they stand a good chance of securing their business. The cultural, regulatory and economic nuances that exist between European markets often become even more distinctive in countries further afield. However, the rewards may be far greater. It is estimated that there will be €800 billion up for grabs in global e-commerce over the next decade. Asia, for example, will command 39.7 per cent of online sales by 2019, despite being home to approximately 900 million people outside the banking system. Here, 34 per cent of global e-commerce sales are made on mobile devices, with most people using tablets and phones as their main means of transferring money and buying products.3 Again, fintech has changed the way customers expect to shop, and we must now continue to accelerate innovation to cater for evolving expectations. Before launching expansions into these territories, traders must understand the implications of local cultural differences when it comes to the use of fintech. For example, the importance of accepting Alipay, the most popular digital wallet service in China, cannot be overstated, boasting over 800 million users and more than 8.5 million transactions every day. It’s why we recently announced that Alipay will be imbedded into our in-store payment gateway, allowing acquirers across Europe to easily integrate and offer Alipay acceptance to their merchants. This means that Alipay is integrated into the acquirer’s merchant portfolio, so that Chinese tourists visiting Europe will be able to conveniently pay via the Alipay App at any store that uses the Ingenico solution. Apart from offering the right payment options, merchants must also be able to confidently navigate the various government-led financial inclusion programmes as well as new local and global fintech players. China has recently dwarfed the US online transaction value,

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but if foreign merchants have ambitions to tap into this market, there’s a web of complexity that must be addressed first.

Exercising data Taking payments in foreign languages, currencies and payment cultures is key to doing business overseas and merchants should look to the fintech industry to provide guidance here. It’s not enough today to simply build the technology and sell it to them. Fintechs must evolve to offer a new value-added service, allowing merchants to manoeuvre through regional trends. Progressive organisations, including Ingenico ePayments, will also be able to offer business insights on the customer journey, revealing how customers are engaging with vendors and buying from them, in a way that would not be possible without fintechs. Customers around the world are slowly becoming accustomed to a more omnichannel experience where they can browse in store, order online and have the option of click-and-collect if they’re not available to receive deliveries. Tracking this journey can provide merchants with the crucial insights that can inform significant strategy decisions. Delivery of this new service is essential from a merchant’s point of view. Huge amounts of raw data are of little use without knowledgeable analysis that focuses on the real business questions. They need to know how they are performing in a certain country, what their authorisation rate is, and what their current fraud level is. Ingenico ePayments has the knowledge, data and experience in providing actionable insights using our data analytics tool Elevate, helping to enable a successful omnichannel offering. Analytical answers to the above questions become truly powerful when they are benchmarked against market trends and competitors. Fintechs

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should not assume that businesses know, for instance, what authorisation targets they should be hitting – 85 per cent may be excellent in one country and poor in another. It is important to understand the local market and know how the competition is performing. This is when data really comes to life and provides valuable information for expansion. Payment service providers have built payment pathways that connect merchants and customers across the globe. But a mere connection is not enough. Vendors must ensure that they offer a tailored service, accepting payments in the right ways, in the right markets. Speed and ease of use will boost conversion in any circumstances, but preferences for

how this should be achieved vary hugely across the globe. By offering a targeted payments service, fintechs today can allow merchants to focus on their core offering. The key to maximising orders and reaching full overseas potential is to choose an expert partner that can guide a business through the process, on both a local and global level. Today’s fintechs need to provide cutting edge, industry leading technology backed up by local expertise that spans the globe.

Global marketplace: Cross-border e-commerce is expected to grow by 27 per cent a year to 2020



Why is MENA the next market for PayExpo? The Middle East and North Africa is a region thirsty for payment solutions, as a digitally savvy population and a huge migrant workforce put demands on banks to change, says Zehra Chudry of Clarion Events There are two prevailing stories shaping the payments industry in the Middle East and North Africa (MENA) region. The Gulf Co-operation Council (GCC) countries – Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman – make up a part of the region that is not only known for its affluent population, but also for its huge number of migrant workers. Prepaid cards have, over recent years, established a strong position in the market with a wide range of products, from corporate payments to currency, travel and payroll cards. But what is the future role of prepaid plastic in a fast-digitising world,

especially after United Arab Emirates banks joined to launch a digital wallet? This generation of consumers have also contributed to the rise of the apps that have led to in-app payments becoming commonplace. Brands such as Uber have changed consumer payment behaviour at a speed that could never have been predicted.

Outflow of cash This is just one chapter of the MENA region’s story. Another would be one of outbound remittance As a region with a vast economic migrant population, it needs to

ensure there is a fast, cost-effective infrastructure for the safe dissemination of hard-earned funds. This has in turn led to remittance receiving countries, such as Egypt and Pakistan, deploying a number of unique programmes to cater for this inbound payments stream, such as Mwallet networks, which are P2M enabled, and cardless ATM withdrawals. Payments innovation is rife and understanding which solutions sit comfortably with your audience and their needs is key to ensuring you have a robust

Payments capital: Dubai hosts PayExpo MENA in 2016



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payments network capable of evolving with your population. This diversity of requirements across MENA has produced some interesting developments to date. For example, despite having a high smart phone penetration, mobile payments just haven’t taken off. But they are imminent. The era of digital payments is dawning, with many significant players in the region taking active steps to build and deploy digital payment programmes: P2P, P2M, G2P. The move to digital/virtual wallets has given rise to the second coming of peer-to-peer payments, following and building on the appetite that early mobile money programmes created.  Next will be the introduction of contactless payments, already starting to establish themselves in the UAE. Contactless payments through the likes of Apple Pay, Samsung Pay and (soon to

enter the market) Android Pay have changed customer buying experience and behaviour around the rest of the world. The MENA region is next.

A cash-light society The PayExpo team at Clarion Events has been organising industry-leading events for more than 10 years, creating quality exhibitions and gathering key influencers to lead content-rich conference sessions all over the world. We do this because we believe in a cash-light society in which the entire value chain needs to be involved to achieve real change. We are committed to supporting the industry to achieve this around the world by creating quality expos that are fun, high-energy, interactive and bring the entire value chain together in one place at one time. We provide a platform for the entire audience to discuss and debate the

Payments innovation is rife and understanding which solutions sit comfortably with your audience and their needs is key

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evolution of the payments industry and its relevance to their business. PayExpo MENA in December will be an opportunity for merchants to reflect and prepare for how the customer-merchant relationship is changing in order to ensure that paying for goods and services is no longer a chore. The show will gather the newest technology under one roof for visitors to be fully informed ahead of their buying decision-making process whilst moving towards a faster, safer and more commercially viable check-out experience. At PayExpo we are committed to building a community for the payments industry and we are excited to be expanding this to the MENA region. PayExpo MENA takes place from 5-7 December at the Intercontinental Hotel, Festival City, Dubai. Merchants, banks, start-ups, governments, investors and NGOs are invited to attend the event for free. For more information, visit To find out how you can get involved, contact us at |



Let’s get real Real-time payment systems will form the basis for all future customer-facing innovation, says Jeroen Hölscher, VP of Payments and Transaction Banking at Capgemini Financial Services. Banks need to reset the clock… For those banks that survived the financial meltdown of 2008, did their penance and began rebuilding their reputations, the simultaneous explosion in fintechs and regulation – including the revised Payment and Services Directive (PSD2) and Mifid 2, governing derivatives trading – must have felt like waking up from a bad hangover only to be hit with the kitchen sink. Jeroen Hölscher, VP of Payments and Transaction Banking Capgemini Financial Services, one of the world’s largest technologies, consulting and outsourcing companies, has some sympathy for them. “On the one hand, you have to run and manage the business, cope with the regulatory context while the fintechs are managing to stay outside of the regulatory space,” he says. “The regulatory changes that are out there impact the way the banks operate and behave and the ability to invest or not to invest.” Traditional banks are caught in a potentially painful spasm, desperate to keep up with the pace of innovation at the front end, fuelled by increased competition for the customer, while still maintaining a solid payments operation behind the scenes.

Adaptability is key “One of the questions we asked ourselves was: how innovative does the back end have to be to cope with front end innovation?” adds Hölscher. “The answer is they need to be adaptive and innovative and flexible and optimised, otherwise you are not able to cope with front end changes. They don’t need to be flashy towards the customer but they have to be adaptable to cope.” The banks are not quite there yet. “But what I see are banks and banking



processors in a period of transformation in optimising and consolidating their payment processing landscape,” says Hölscher. He advocates a ‘factory-based model but with some flexibility’, so that they can adjust at the customer interface without impacting efficiency at the back. In his view, divorcing the two functions is likely to be the only way forward, particularly in light of PSD2. “I think one of the major impacts coming from PSD2, coming from open banking, is a clear split between the provider to the customer and the back end, which is the factory type of supplier model. I think those two roles will continue to evolve. Of course, an organisation can play both but there’s a distinct business model for each of them.” The instant movement of payments will in his view be a major driver as the importance of cash declines in mature

The best solutions will be the real-time payment initiatives that are out there markets and plastic loses the battle to real-time transactions. “The best solutions will be all the real-time payment initiatives that are out there in the market that are tuned to replacing a lot of cash – especially if you combine them with some innovations on the front end to be able to do B2B and P2P transactions in an electronic way. That can be a real substitute for cash.” Anticipating the long-term demise of cold, hard cash for most transactions, Capgemini has introduced its own online payment solution, a Cloud-enabled, multi-platform service operating on websites, mobile apps and over the phone.

With 150 connections worldwide with other acquirers, high levels of availability and a large choice of payment methods, it connects more people and businesses than ever before. Among Capgemini’s in-house teams, one is focussed exclusively on digital transformation, enabling clients to participate fully in the digital revolution. Another provides data insights to add customer value and pave the way for more digital services. “The way we do it is we bring clients and innovations together, using fintechs or our own insights in a more collaborative environment to come out with a better proposition,” explains Hölscher. Mobile payments are a case in point. “They are very much a front end design and I would say they are piggy-backing on the existing payment infrastructure.” Here again, real-time payments can make a difference in terms of getting away from the usual layered infrastructure and going directly to the current account. “You need to differentiate between the scheme that I think is the core, which is real-time payments, and the way you’re engaging with your customer, whether it be Apple Pay or Samsung Pay.”

Playing catch up So what’s taking the banks so long to catch up with real-time payments? “There are multiple arguments. One is that loads of processes are batch-oriented so it’s a massive investment to come from patchy real-time to full real-time. Second, payments also have significant value, so there’s a lot of security, a lot of matches that need to be in place to ensure it’s done properly. In that sense it’s much heavier in design. And they need to migrate from one business model to another, which takes careful planning and calculations.”

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Time to think: Real-time payments will drive innovation

Autumn 2016 |


Beyond Brexit: Contis already had a Plan B

Autumn 2016 |



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Bit better

Cryptocurrencies struggle to achieve mainstream acceptance, but Pavel Matveev, founder of hybrid personal banking platform Wirex, may be about to change that According to the latest World Bank remittance report, the average cost of sending $200 across the globe is 7.4 per cent. In the poorest countries, those with the least choice of payment channels can find themselves losing as much as a fifth of a transfer in fees, claims Pavel Matveev, founder of Wirex, which has set out to even up the odds.

The first company to combine blockchain finance with traditional currency in one account, Wirex offers a hybrid personal banking solution and secure Bitcoin wallets linked to Visa and MasterCard debit cards, supported by online and mobile applications. Customers can use the Wirex card to load, spend, save, and receive traditional money or Bitcoin from all over the world. For some, it’s a freedom they’ve never had. “The unbanked population don’t have any choices,” says Matveev. “Ordinary people find it very hard to get a bank account or a card in these countries and if they do, they pay huge fees.” Bitcoin, on the other hand, is by its universal nature cheap to transfer and, despite concerns that it’s been hijacked by the dark web, secure according to Matveev. “People new to Bitcoin might think it’s totally anonymous, but in fact all transactions are recorded in a blockchain and publicly available online,” he says. “Wirex has very sophisticated data analysis tools that can identify inappropriate blockchain transactions. So, we can say, ‘this transaction is from a dark web’, or, ‘this transaction went through coin mixers’. Or, Autumn 2016

‘this is from a gambling website’. And we also know the good entities, like major Bitcoin wallet providers. We can evaluate the risks of any incoming transaction and every outgoing transaction.” It is, he claims, superior to cash in every respect but one: it’s very hard to use Bitcoin on the high street. “Bitcoin is very good for micro transactions on the internet, on social networks, social games, and in forums like Reddit. It’s obviously good for cross-border, international payments – it’s cheap and it’s fast, compared to traditional methods. But

Digital currency will never replace fiat money, but it will coexist with major currencies like USD, GBP and EUR you can’t go to your local Costa and buy a cup of coffee with Bitcoin, because this particular merchant won’t accept it. And this is the problem.” So Wirex came up with an elegant solution – a Bitcoin debit card that links Visa and MasterCard to your Bitcoin wallet. “You can convert your Bitcoin into fiat currency and vice versa, instantly and conveniently,” says Matveev.“That means, you can basically use Bitcoin anywhere Visa and

MasterCard are accepted – in stores, at an ATM, everywhere. Solving this main problem of how to use Bitcoin in everyday life, allowed us to solve the problem of money transfers, too. So a Bitcoin debit card is the best last-mile solution for blockchain-based remittances.” The ability to hold parallel Wirex accounts in Bitcoin and a local currency of their choice allows customers to make instant transfers between the two using the Wirex mobile app, with transfers subject to the spot rate. Wirex offers both a plastic and virtual card account, with mobile pay on an Android wallet due to be added later this year. That has the potential to transform Bitcoin or any other cryptocurrency of the future from being an online-only tender to a true payment instrument. “Digital currency will never replace fiat money, but it will coexist with major currencies like the USD, GBP and EUR,” says Matveev. “Bitcoin is the most popular digital currency in the world and at some point it will hit exponential growth.” Inevitably, its future is linked to the development of the blockchain. “Blockchain is super trendy at the moment, even more trendy than it’s supposed to be!” says Matveev. “Everybody wants to put everything on a blockchain, so there are a lot of inappropriate uses but we will also see a lot of adoption in financial services – for insurance, for different types of settlement, for different assets, equities, commodities. I personally believe there will be some room for digital currency, too. It might be Bitcoin, it might be not, but there will definitely be cryptocurrencies.” |


Ill-gotten gains

Determined to shake off compliance’s reputation as ‘anti-business’, a new breed of ‘regtech’ firms are reimagining how financial institutions manage their financial crime risk. Stephen Ball, VP of Sales & Marketing at ComplyAdvantage, explains how big data, AI and machine learning can help fight corruption



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Each year businesses spend billions on software and data as they attempt to comply with regulations to prevent financial crime. And yet only a fraction of illicit funds – a tiny fraction – is captured. In the UK alone, it’s estimated that just 0.1 per cent of the ‘dirty’ money criminals tried to reintroduce into the economy in 2014/15 was seized by the authorities. In other words, for every £1 identified by businesses’ anti-money laundering (AML) procedures, £999 washed straight through. The question, given the intense scrutiny most transactions are now subjected to, is why the protocols are failing so badly. ComplyAdvantage believes the way businesses screen and monitor their customer relationships to prevent money laundering, terrorist financing and sanction violations is fundamentally broken. Put simply, for most companies the current approach just isn’t working. According to Stephen Ball, VP of sales and marketing and one of a team of risk experts, engineers and data scientists who make it their business to know the criminals’ business, regulation itself can be its own worst enemy. “The Financial Conduct Authority in the UK is quite forward thinking but, in general, regulations focus on principles. They don’t talk about how you’re actually going to achieve it,” says Ball. ”As regulations require the industry to monitor more and more things, it becomes increasingly complex for businesses to monitor anything. They end up layering technologies on top of each other to try to remedy the situation. “MLD 4, for example, the fourth money laundering directive to come out of Europe, will mean more companies are now covered by the regulations. However, those companies that were already covered will now have to be more proactive and conduct enhanced due diligence across more of their customer base. If they've got static systems, it’s hard to keep up.”

A question of attitude Legacy technology solutions and obsolete data are insufficient to cope with today’s fluid, fast-paced and multi-jurisdictional commercial environment, especially when combined with increasingly tech-savvy and sophisticated criminals. On top of which, the attitude companies take to compliance within the industry is often wrong, says Ball. “Many compliance folk are quite jaded. Autumn 2016

They got into the role to fight financial crime, but now they're just ticking boxes, knowing the system is ineffective at stopping the bad guys. Even worse, fines at banks are often expected and baked into pricing models.” Too often, the question businesses ask themselves is ‘what do we need to do to comply?’ rather than the more visceral and compelling ‘what do we need to do to stop money laundering and terrorist financing?’ “For example, companies tick the box to say they are screening for the US Office of Foreign Assets Control sanctions. But does it work? If I was a criminal on the sanctions list, I could easily manipulate my name very slightly to not get picked up, or use a relative or associate to transact with a financial institution instead,” says Ball. This failure is costly both for financial institutions and for society at large. For companies, compliance becomes a painful tick-box exercise, framed by the threat of ballooning fines for violations. For everybody else, the failure of AML and counter terrorist financing programmes damages all aspects of the world we live in – from anti-crime efforts and confidence in government to the integrity of the global financial system and international security. It’s too much to expect overwhelmed compliance departments, often relying on

from their decisions and doesn’t keep showing them the same information repeatedly, that means their compliance team can focus on issues that matter rather than irrelevant alerts. Then they can be much more effective at stopping money laundering.”

Reducing human error ComplyAdvantage has used machine learning and artificial intelligence to create a proprietary dynamic global database of individuals, organisations and their connections that pose financial crime risks, either because they are on sanctions and watch lists or because they are politically exposed. It also monitors those linked to criminal activity in the media. Its screening platform helps automate the process for deciding the level of financial crime risk that a customer or transaction poses, along with an integrated platform to monitor customer behaviour and spot suspicious activity in real time. The aim is to minimise human error by maximising the use of intuitive technology. “Big banks will spend a huge amount of money on a very complex system to satisfy a regulator and, two years later, they’re still only using three per cent of its functionality,” says Ball.“It’s all very well having technology, but you need to be able to use it.” The ComplyAdvantage platform takes an

As regulations require the industry to monitor more and more things, it becomes increasingly complex for businesses to monitor anything legacy technologies generating hours of manual work, to adequately police such a system, says Ball. That's where AI comes in. “AI makes sense where you have any process that is largely manual and relies on low-level decision-making. Your sanction list might be reasonably static, but the connections to the people on the sanction list and the stories in the media, are incredibly dynamic. Monitoring those is no longer really possible using manual processes and it’s one key area that we see as being ripe for artificial intelligence. “It’s also about reducing the number of false positives. Businesses have a problem trying to see the wood for the trees if they've got too many of those going through. But if they can use a smart system, something that learns

easy-to-use approach providing real time rich and reliable data. ”What we find is that if we give better information to the compliance team in a readily accessible format – things like news articles, pictures from around the web – then that can really help them make the right decision faster. “Our product continues to develop very rapidly, so we’re trying to build a community of users who can feed into it,” says Ball, who’s preparing to enter the US market and grow the company in Asia as well as Europe. “If you look at the way the good tech companies build their products, it’s all about the users and the community. They have good ideas too and together we can help solve their problems.” |



Risk and reward

Compliance isn’t a stick with which to beat the industry – it demonstrates just how well you know your customers and that’s a sure way to profit, says Mary O’Connor CEO of Financial Lines at Willis Towers Watson If anyone understands the role of trust in a financial relationship, it’s a lawyer. And for Mary O’Connor, who worked on some seminal cases during the UK banking crisis – an event that went to the heart of faith in financial services – it’s a non-negotiable asset. In fact, she’d go so far as to say its presence – or lack of it – will define the success of financial services in the future.

“Ultimately it comes down to choice and trust. The people who can provide the best products are going to be the people who understand their clients best. Trust is about who can demonstrate that they have the customers’ best interests at heart,” says O’Connor. Trained in law and economics in the States, she joined the then Financial Services Authority (now the Financial Conduct Authority) enforcement team before becoming CEO of financial lines at global risk advisory firm Wills Towers Watson. Her CV gives her a unique perspective on how regulatory changes on both sides of the Atlantic will help shape the future of financial services. “I think the biggest difference between the US and the UK is that the US is much

more rules-based,” says O’Connor. “What the US legislation – which is the size of a phone book – tries to do is to respond to everything. As a result, companies in the US are extremely focussed on the letter of the law, whereas in Europe it is much more of a principles-based approach. What they want is good outcomes. “The downside is there’s less certainty, which can stifle innovation. The drawback to the US approach is that you can end up doing things that are wrong but actually comply with the rules. For companies that have to operate across the globe, which is increasingly everyone, there’s a real challenge to making sure that you comply with both the letter and spirit of the law.” In Europe the instrument she believes will have most immediate impact on trust is the new Markets in Financial Instruments Directive II legislation (MiFID II). “It could be really transformative,

MiFID II is going to create transparency and change how the economics of certain transactions work

particularly in the asset management industry,” says O’Connor. “It’s going to create transparency and change how the economics of certain transactions work. As a result, I think there’s a real opportunity to serve customers better. “Customers will understand what they have to pay to receive services and also what services they’re getting. The impact will be on larger firms first, because that’s where the volumes are and where most people have their money. At the same time, I think it’s going to create real opportunities for smaller firms around technology, because with their more nimble architecture they have an opportunity to take costs out of the system. They are able to do things in a transparent way at potentially lower cost than traditional companies. I think the challenge will be for the regulators, to make sure that everyone’s operating on a level playing field.” It is here that O’Connor believes technology – and particularly the use of blockchain – could provide a solution to those traditional areas of financial services that are ‘because of regulations, stressed in terms of profitability’, as demonstrated by the rise of peer-to-peer lenders and alternative payment providers. “That’s probably the biggest piece that we’re seeing. Payment providers moving in and being able to provide a service at a much lower margin than traditional banks

Perilous choices: Knowing you customer better will help reduce the risks



Autumn 2016

would be able to with their standard architecture and all the processes that they have around it. Blockchain, I think, is the future, though. That, to me, is going to be a game changer.” Emerging ‘regtech’ companies will, she believes, become an increasingly important part of financial services, whatever jurisdiction the client is in. “Regtech is a direct response to the need to provide more transparency and more accounting around some of the activities that are happening,” says O’Connor. Not least of which is in the contentious area of data collection. “As a lawyer, I don’t underestimate the importance of record retention. The struggle is in finding the right records because there’s so much noise,” says O’Connor.”One of the ways we could change things, is by being able to search unstructured data better and having better ways of storing information so that it’s easily retrievable. It’s the telematics concept – looking at information now, to decide what’s wrong or right about it and how we can improve it as well as just storing it. “Obviously, there are real privacy issues, but there is also the issue of stifling innovation. I think this is where the difference in regulation between the US and the UK really plays out. In the UK, if you don’t save something, there’s an expectation that somehow that’s wrong. So there’s a real burden on companies to try to save everything. The big thing for companies, is to step back and say, ‘what am I trying to do here? I’m trying to help the customer, I’m trying to serve the customer better, I’m trying to understand

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my risks’. I think if you have a programme that is based on those things, that gives you an opportunity to be able to retrieve data in a meaningful way and that lets you interrogate it periodically. That’s the key, so if things go wrong you can say, ‘I did this in a meaningful way’. Because I do think it’s impossible to save everything, and there are a lot of good reasons why there are some things you might not want to save.” For O’Connor, know your customer (KYC) and compliance are intrinsically linked and those companies that do both well will rise to the top. “It’s a real business advantage, knowing and understanding compliance,” says O’Connor. “But if you understand your customers, If you appreciate the risks that your business brings to customers, you are 99 per cent of the way towards being compliant. The best companies out there now are the ones that truly understand their customers and are able to serve them in a sustainable way.” |



You are the weakest link

One of the hardest frauds to detect is the one perpetrated unwittingly by the victim themselves. As Featurespace’s artificial intelligence ARIC moves across the Atlantic, Commercial Director Matt Mills explains how it keeps us safe Name one similarity between being scammed by an online fraudster and being used as a hostage? Apart from neither of them being a position you would rush to put yourself in, the answer is body language. It’s what Featurespace, the world leader in adaptive behavioural analytics – the science of understanding how predictably boring we are in our everyday lives and using it to identify tiny but significant changes – specialises in, using a big, digital ‘brain’ called ARIC. Featured in the last issue of Fintech Finance, Featurespace’s machine learning software platform is designed to combat fraud in the financial, insurance and gaming sectors. It's just made its first move into banking in the US, where, according to the 2016 Identity Fraud Study from Javelin Strategy & Research, $15billion was stolen from 13.1 million consumers in 2015. “One of the biggest indicators of whether or not someone is who they say they are is their behaviour and it’s one of the hardest things for a fraudster to emulate,” says commercial director Matt Mills.

“On the dark web, fraudsters can find out your PIN code, your passcode and your address. They can find out pretty much anything on you. But harder for them to discover about you is how you use your websites; how you interact with your mobile phone; the types of products you normally purchase; the amount of money you normally spend in a month. “Those behavioural characteristics, because they are so hard to fake, are what allow Featurespace to very accurately tell who is being manipulated,” says Mills. Back to the hostage analogy and the nature of how someone behaves under stress. “Watching if a hostage is blinking strangely is a good analogy for customer behaviour. If customers are unconsciously aware of being manipulated, what happens is the types of pages that they go to, the order and the frequency of the pages they visit, those sorts of things, start to change. ARIC can use that to then make a risk decision as to whether or not there’s something strange going on,” says Mills. It's an approach that is being used to spot the subtle

anomalies that indicate the crime of social engineering, which usually starts with a phone call from a ‘trusted’ source, such as a bank, and ends with the victim coerced into doing something they don’t wish to do. “When you add in the behavioural analytics element, you start to understand that actually this person is who they say they are – they tick all those boxes – but there’s something in the behaviour that suggests that they’re being coerced into doing what they’re doing. This means for the first time ever we can actually give our customers a level of protection against even the most sophisticated fraudsters.” It’s ARIC’s job to identify them. Best described as a benign Skynet, ARIC crunches behavioural data drawn from both individual patterns and peer group patterns, constantly relearning characteristics to make the likelihood of blocked transactions (or ‘false positives’) remote – those annoying and potentially expensive lockouts from your account, triggered by a perfectly legitimate change in your financial routine. “Let’s say we've got your profile and then

Vulnerable: Social engineering renders most authentication systems useless



Autumn 2016

you go out and you spend £100 at a gambling shop and we’ve never seen that before," says Mills. “Well, actually, it’s the day of the Grand National and we can see by comparing your change in behaviour against your peer group’s change in behaviour that, yes, it’s weird and it’s out of profile for you, but it’s in line with the profile of the change for your peer group. “Maybe we can see that Apple Pay is a new purchase for you, but guess what? Going back to the Grand National example, it’s the first day of Apple Pay. So we can also see everyone else is signing up for Apple Pay on that day, so is that out of profile for you? Well, yes, it is, but it’s in profile for your entire peer group, so it’s not an issue.” The reassuring thing about ARIC is that it starts with the assumption that the vast majority of people are the good guys, says Mills. No risk of this Skynet letting loose the Terminators, then. “When someone gets defrauded, chances are they are going to report it, so it’s very easy to find examples of frauds that have happened in the past,” explains Mills. “But what we also do is apply what’s called ‘unsupervised machine learning’, which is a very intelligent approach to understanding what normal good behaviour is. Then you start to build up your profiles for normal and expected behaviour and look for your outliers from that. “Everything within the system is about understanding the balance of multiple different data inputs. So we’re not just profiling you, we’re also profiling where you spend your money.”

Intelligent learning It's so smart in understanding and predicting individual financial behaviour, that ARIC will probably know about some

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of the biggest milestones in your life even before your nearest and dearest. “There are so many little signals within the data that suggest that you’re saving to buy a house,” says Mills. “The system’s intelligent enough to understand it looks like that’s what you’re trying to do. “We don’t look for specific events in isolation. We actually also look for what we call ‘time series information’. “People sit in multiple groups and they sit in a group of their own. I have a two-and-a-half month old, so of course, my spending patterns change. We re-profile you every time we see a transaction. So the first time I go to Mothercare and I spend more money than I ever thought I would on a buggy, there’s a change in spending behaviour. The system’s learning all of the time. It doesn’t just build a baseline and stick to that. “If you won the lottery and your spending profile changed so dramatically overnight, it would, to a large extent, forget everything that’s happened before that big change, because it’s just not relevant to your spending profile any more. It’s intelligent enough to understand.”

Flexible systems Half of Featurespace‘s clients opt for a Cloud-based function, the rest preferring an on-site solution, a choice afforded by the system’s design flexibility. “We see this as being one of our big USPs,” says Mills.“We don’t require the customers to conform data to our application processing interfaces (APIs), so we can work

Behavioural characteristics, because they are so hard to fake, are what allow us to very accurately tell who is being manipulated

with data in its existing format, however it’s structured, and we can simply tune the system to work with that data. We also provide a hosting solution, so, if the customers don’t even want to set up hardware for a hardware environment, then we have an option for those clients, as well. “The advantage of the Cloud, of course, is it allows you to get up to speed a little bit quicker. What’s great is that ARIC doesn't mind. The system performs the same in both environments, so it’s entirely down to customer preference.” ARIC’s dynamic learning capability doesn't solve crime, but it gives banks and their customers a head start on the hackers. Perhaps it’s the best that the digital detectives can ever offer. “Every single time you stop a criminal, they find another way in,” says Mills. “I think there is an assumption that channels are now secure because we have better authentication systems, like 3D Secure and Chip & PIN. The problem is, as more transactions go through, the more we become reliant on a system and the more the criminals want to break it. “So, for us it’s always around building fraud systems that aren’t thinking about the fraud we’re seeing today, but the fraud we’re probably going to be seeing tomorrow, and having a system that’s able to adapt to those changes, regardless of whether or not it’s a fraud type we’ve seen before. “With social engineering, fraudsters are able to get around all of the authentication systems that the bank has put in place by using the customer to genuinely authenticate themselves. So, you know, people are always going to be the weak link in the process weak link in the process, but ARIC enables financial organisations to outsmart that risk.” |


Security: It takes a major breach to make companies sit up and listen, says Al-Bassam



Autumn 2016


The last laugh Former LulzSec hacker turned blockchain and cybersecurity advisor, Mustafa Al-Bassam, is using blockchain to help companies improve security “We are raising a generation where fending for yourself in a digital world is a privilege reserved for nerds,” reformed hactivist Mustafa Al-Bassam tweeted earlier this year in response to a report about teaching computer skills in schools. At 16 he was a member of LulzSec, a group that led a 50-day series of high-profile cyber attacks on organisations in 2011, crashing websites and accessing information ‘just because we could’. Back then, he’d probably have counted himself as one of the nerds. Today, studying for a doctorate in computer science and an advisor on digital security and the blockchain to payments providers among others, he’s using the privilege of a digital education to help companies avoid the chaos he previously unleashed. Now a long way from his blackhacker persona of ‘TFlow’, who posted stolen information on behalf of LulzSec – an abbreviation for ‘we laugh at your security’ – Al-Bassam’s projects include a blockchain-enabled identity management system and the evolution of ‘smart contracts’. At a Secure Trading event, held in London earlier this year, he was a guest speaker on the use of blockchain in financial remittance. “Blockchain introduces new use cases, not just for financial companies but for any company, and one of the most interesting is smart contracts,” says Al-Bassam. “It’s a way to create contracts that can be automatically fulfilled by a computer, rather than by a lawyer or a court system. Like we have smart TVs and smartphones, it’s the next evolution of contracts.” In trade finance, especially, smart working could significantly speed up what is, by comparison with retail banking, an extraordinarily long process, with a paper trail legacy that dates back to the first letter of credit issued in the Qin Dynasty.

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“It’s almost quicker to ship the money, physically, rather than do it online because there a lot of intermediaries involved, making it a long process. Smart contracts can be fulfilled in minutes,” says Al-Bassam. Perhaps more pertinent is Al-Bassam’s work on digital identities, using blockchain as a safe depository. “I’m working on a fully fledged identity management system for any purpose. It can be, for example, to store cryptographic keys for websites and banks on the blockchain, or to store company data, like directors’ information. It could in the future even replace Companies House.” Ultimately, he’d like to see the widespread adoption of cryptography to secure documents in much the same way that modern passports are embedded with data. “That’s where the future lies,” he says. “A cryptographic signature is impossible to

Bitcoin definitely has a role to play and it’s not as easy as you think for another cryptocurrency to take its place forge and you can take it further by using blockchain as a ledger for that kind of data.” He doesn’t believe much has changed in larger organisations’ attitudes to security in the five years since LulzSec was active, particularly among the banks. “They often tend to be many years behind more cutting edge technology companies. It’s a structural problem. They just need to be more ahead of the game when it comes to adapting their security

practices, because banks are often the slowest,” says Al-Bassam. “I think the biggest lesson I’ve learned is that companies in general really spend very little effort when it comes to cybersecurity and they only really start to care about it when they suffer a big breach.” That said, the biggest heists this year didn’t rob the digital vaults of sterling, dollars or data, but of cryptocurrency. In August, hackers breached Bitcoin exchange Bitfinex, withdrawing somewhere between $60million and $72million from various consumer accounts – the exact value was difficult to determine as the immediate effect was to hit the cryptocurrency exchange rate, affecting everyone holding Bitcoin – not least the robbers themselves. Despite the nervousness over its security, Al-Bassam believes that if not Bitcoin, then cryptocurrency is here to stay. “Bitcoin definitely has a role to play and it’s not as easy as you think for another cryptocurrency to take its place. There has already been so much infrastructure invested in the Bitcoin network that it would be very difficult to replicate. And a lot of the investors want their money back from the Bitcoin network, not from a different cryptocurrency. “Bitcoin is very much in the Wild West phase. Exchanges that were compromised in the past have died. So you have this natural evolution taking place that fixes the market. Of course, that’s unfortunately at the cost of many customers that have lost money, but that’s what you get for being an early adopter – you have to take that risk. There are practices now in the Bitcoin community to secure the currency. For example, if you have a large amount of Bitcoin to store, then you shouldn’t store it on a computer that is connected to the internet, because if it’s not connected to the internet it can’t be hacked.” Coming from the man formerly known as TFlow, it seems like sound advice. |



Vive la fintech!

One of the new generation of crowdfunding platforms in France, is helping to change the fortunes of borrowers and savers in a country with traditionally conservative attitudes to finance, says company President Thomas de Bourayne When the French government made it legal to lend to small businesses without a banking licence in October 2014, Thomas de Bourayne and his partners in were already well on the way to welcoming their first customers.

One of around 50 such platforms now operating in France, they recently passed the €3million milestone without a single default, making their 5,800 investors, who on average enjoy a seven per cent annual return, very happy indeed. By the time was ready to grant its first loan in March 2015, it had €4million in equity behind it, the well-known French investment fund Truffle Capital on board and one of the toughest criteria for lending among the next-generation financiers. In the 15 months since then it has received more than 18,000 applications from SMEs, with the rate of requests now running at somewhere between 40 and 70 a day. Just 0.5 per cent of them will be approved. “We are very select,” says de Bourayne, former CEO of both Cofidis, the fourth largest player in the French consumer credit industry, and Experian France and Belgium. “We have developed proprietary scoring, which enables us to find the good enterprise and the ones that are able to pay their monthly reimbursement. We invest a lot in our scoring capabilities, decision-making tools, engine rules, strategy management, anti-fraud software. We have financed something like 82 enterprises for more than €3.7million and we have no arrears, no late payments and no defaults.” According to a recent European

Commission report on business lending, around 15 per cent of SMEs in France are either rejected by the mainstream banks, only part-financed or decline the money because the costs are too high, although interest rates are only running at around two per cent. In the country that invented the word bureaucracy, de Bourayne believes there’s another compelling reason for SMEs to seek alternative sources of finance: speed. “In France, when your are a small or medium-sized enterprise, you have access to credit but sourcing it is quite painful and slow. You need to have an appointment in a branch, you need to bring lots of documentation. With a traditional bank, it typically takes three weeks between your application and the money being in your account. For many SMEs, it's two months. “ gives a response in less than 48 hours and the crowdfunding campaign on average lasts 12 days; the median is five. So, in 50 per cent of cases it takes 10 days between the first application and the money being in their bank account.” For those that pass the bar at – and they are scored against 400 parameters – the payback is around eight per cent to the investor and three per cent commission to the crowdfunding platform. “The average loan is €60,000 so the difference they pay compared to credit from a bank is something like €45 a month,” adds de Bourayne. In his view, most companies would be happy to foot the extra for a fast, uncomplicated service. “We do an evaluation of the owner, the shareholders, the company, the sector, the region, the activity, the financial statements

and how they pay their providers. We select companies with not too much indebtedness,” says de Bourayne, whose team of 14 help to gather applications via the website, from other digital partners with whom they have agreements and traditional brokers. “On average, the companies we are serving are nine years old with €1million turnover. We are really targeting the three million small enterprises we have in France. Local companies – hotels, restaurants, industrial SMEs, services.” In a savings-savvy country like this, where the average earner squirrels away nearly a fifth of his or her income, investors haven’t been slow in coming forward. De Bourayne claims a loan is made every two minutes via the website. There are also 100 enterprises actively pledging, with plans to bring on board more institutional investors later this year in stage three of the capitalisation plan, which should help the platform scale much faster. For now, though, the market in France is enough.

An appetite for growth “Crowdfunding for SMEs this year will be something like €100million when we know that in France they borrow €80billion in total, so there’s lots of potential,” says de Bourayne. That said, with banks accounting for about 80 per cent of long-term corporate lending in Europe, there’s definitely room for another HQ outside Paris. “We will likely go to the south of Europe,” says de Bourayne. “Not next year – maybe 2018 or 2019 – but we still have a lot of work to do here.”

Crowdfunding in France for SMEs this year will be something like €100million when we know in France alone they borrow €80billion in total, so there’s lots of potential 118


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Financial electricity: iwoca delivers ‘instant working capital’

Power to the people Credit platform iwoca plugged into an SME community desperate for a surge of alternative finance. But having beaten the traditional lenders at their own game, CEO Christoph Rieche now wants to join forces with them When former investment bankers Christoph Rieche and James Dear first came up with the idea of creating an online lending platform for internet-based businesses, there was an immediate surge of interest – and not just from the dotcoms. Before long, iwoca was funding SMEs in any and every sector, who were desperate to be released from the financial straightjacket traditional lenders had placed them in. “There are so many exciting stories of people we are providing funding to and what they are doing to grow their businesses,” says founder and CEO Rieche. “There’s satisfaction in being able to help people achieve their dreams and relieve the depressing problem they have had in the past.” That was mainly the result of mainstream banks’ inability to understand and differentiate between the risks of underwriting finance to companies as diverse as a high street butcher and an online jewellery seller – the five and a half million businesses all sitting uncomfortably together under the banner ‘SME’. It was a failure of data capture and analysis as much as anything. And it’s something those start-ups for which



online processing is as natural as mother’s milk are fixing fast. “If you cannot understand the risk it’s very difficult to make the decision to invest in that company,” says Rieche. “We cut down the application process to a few minutes and still have more information than the traditional lender would have after weeks of manual processing. “Our customers turn over up to £2million annually and the median is around £250,000. They have had the least access to finance. Millions of small businesses were critically underfunded for many years, even before the financial crisis. That’s a big structural problem that we are solving.”

Intelligent risk assessment iwoca, short for ‘instant working capital’ does what it says on the tin – not by comparing apples with pears, but by amassing in granular detail information about an applicant’s specific market and their trading position within it. It pulls in intelligence from anywhere its revolutionary risk technology can access it – in the case of internet traders that might include customer feedback scores, seasonal trends and even reviews on social media. “All the information we have on our customers is either in the public domain

or given to us by the customer,” explains Rieche. “In the UK, we have a good electronic footprint in order to do the compliance checks that enable us to know our customer within a very short period. We are replicating a bank’s commercial due diligence, but we reduce manual input to an absolute minimum. All that data is processed in real-time as far as possible.” The aim is to produce a finance offer that’s as ‘simple, seamless and powerful as electricity’, says Rieche. “Electricity is both a really boring commodity – you just want to switch it on and off – but incredibly powerful if you have great access to it.” iwoca has energized more than 10,000 clients since its launch in 2012. Now with operations in Spain, Poland and Germany, as well as the UK, where it offers Autumn 2016

loans of up to £100,000 at between two and six per cent interest, its ambition is to extend credit to one million small business across Europe within a decade. One of the so-called ‘network lenders’ who plug in directly to other online infrastructures, including payment platforms, it collects real-time performance data through integrations with banks, Alibaba, Amazon, eBay, PayPal and Sage Pay, among others. And having financed many of the UK’s five million SMEs, it’s been pretty successful itself at attracting investment. In 2015, it secured $20million in a Series B equity financing round, led by German venture capital firm Acton Capital Partners, and CommerzVentures, the subsidiary of Commerzbank. That was swiftly followed by a €60million deal with the European Investment Fund to deliver loans to more than 3,000 small businesses with financial backing from the European Commission.

Seamless access to finance

A lot of banks will adopt the best of fintech to access their competitiveness. We’re engaging with banks and finding the doors wide open for that discussion Autumn 2016

Thanks to all that financial electricity, the future is bright. “A lot of the work that we are investing in – our technology, products and processes – is designed to make access more seamless,” says Rieche. “Over time we will have similar products; there are small businesses that want more long-term funding and why would we not provide them with additional products? “A business current account would be a fantastic project for us. If I look at our business banking account, it’s not particularly exciting. It’s a great opportunity and at some point we might surprise on a product.” As for the rest of the industry, he predicts ‘dramatic change for the better’. “A lot of banks will adopt the best of fintech to access their competitiveness and make them as attractive as necessary to avoid losing too many customers. There will be some losers who might risk becoming marginal. Those who do adopt the best of fintech – from credit to foreign exchange to asset management – will be doing really well,” says Rieche. “Banks have two significant competitive advantages; one is a huge customer base that they have been doing business with for years; the second is low-cost funding. We are engaging with banks and finding the doors wide open for that discussion.” |



Street smart

SMEs power the UK economy, so why do so many struggle to gain access to flexible, affordable, fast finance? That’s what alternative lender Growth Street has set out to fix as it builds a model bank just for them, says CEO James Sherwin Smith James Sherwin Smith sees SMEs as the Cinderella sector; working hard in the basement of the economy in the hope that Prince Charming, in the form of a commercial loans manager from their local bank, turns up with the cash to realise their dreams. Like Cinders, many of them have a long and frustrating wait.

“Banks have traditionally found SMEs difficult to serve. They are so diverse, no two businesses are the same, and traditional banks can’t serve SMEs effectively by treating them as a portfolio,” says the CEO of business lending platform Growth Street. “Secondly, the banks have just had so many bigger challenges to cope with since the global financial crisis. They’ve been struggling with legacy technology, which means they’ve not been able to provide the types of services that SMEs are really looking for, and there’s a requirement now for banks to ring fence different parts of their businesses. SMEs have fallen down



the gap between retail and corporate; it’s an unloved sector.” Sherwin Smith is on a mission to make them feel wanted. “They deserve the most support and we’re frustrated when we read the various reports about the way they are treated,” he says. “That’s what motivates us.” It sounds a heroic gesture. In fact, it’s a well thought-out business model that paves the way for Growth Street to provide a full range of banking services, exclusively for SMEs. Its current marketplace for borrowers, who can also be lenders, is just the first step towards it. “We see the opportunity to deliver something significantly better in terms of product and service and that’s what SMEs are responding to,” says Sherwin Smith. There are three qualifications before an SME will be considered for finance. They must be a limited company, registered in the UK; they must be profitable or have invoices to large organisations; and they must use accounting software. This last requirement is crucial.

“We have built integrations into the Xero and QuickBooks Online Cloud accounting platforms, which means at the point of application an SME can connect up their accounting platform and that allows a lot of information to flow into Growth Street to support the underwriting process,” explains Sherwin Smith. “It means that we can assess a business’s application for credit much more efficiently and, more importantly, we ask businesses to continue to share that access with us so that we can continue to monitor performance and provide them with insight on how to better manage their finances. It sets up a much more positive relationship with the finance provider because instead of spending a lot of time gathering data, we can move on to more important topics that are at front and centre for the SME.” The idea is to build a virtuous circle; a community of successfully funded businesses that can draw down funds when they need them and lend to others when they have cash to deposit – and both at significantly better rates than those being offered by the banks. Autumn 2016

Open for business: SMEs deserve better financial services

“We support a wide variety of companies, everything from a brewery through to a creative agency, and a lot of those businesses have real seasonal or cyclical needs,” says Sherwin Smith. “At some times of the month, if not some parts of the year, they are cash flow positive and they have excess cash. Other parts of the year they’re cash flow negative and they need to be able to borrow. If they don’t have access the kind of facility that Growth Street provides, what they end up doing is holding on to cash to get them through a dip in the future. If it’s just sitting there in a bank account, it’s earning nothing and that reduces the ability for the business to grow and to reinvest its profits. “At Growth Street we are aiming to be a single solution for businesses to manage their cash flow, whether that’s using Cloud accounting data to understand how that cash flow position’s going to develop, the ability to borrow, or the ability to lend. So, they can make the most of the situation they’re in and really flourish,” he says. The 10-minute online application process if followed by a phone call or an invitation to meet with Growth Street to put the figures into context, understand the business management and what their goals and ambitions are for the year ahead. “That informs our decision on whether to lend in the first place, as well as how Autumn 2016

much of a limit we should provide that company to draw down against and the rate of interest that we think is appropriate to charge, given the risk that business presents,” says Sherwin Smith.

Ongoing relationship The Cloud accounting information not only provides granular detail about the company’s performance, it also allows the platform to offer an ongoing ‘GrowthLine’

Businesses see no reason why they should be suffering such a protracted process of credit, because it can continually reassess whether the limit, the rate, and any drawdown requests are appropriate. “We can also signal back to the company if we see things aren’t developing the way we’d expect them to,” says Sherwin Smith.“What that ongoing access allows us to do is make sure we are managing the risk appropriately on behalf of the lenders on our platform. I think that’s what really differentiates us, because most alternative finance platforms are only geared up to deal with a point-in-

time problem. They’re either setting a business up with a fixed-term loan, or maybe an individual invoice that they’re financing against. They’re making a decision once, sometimes for up to five years in the future, whereas with Growth Street, we are constantly reassessing and looking at the performance of the business, providing insight back to that company so that it can be better managed and people can make informed decisions. “We are also making sure that we’re keeping a close eye on the level of risk that represents. That gives lenders confidence and they don’t need to charge as much for their money. Ultimately, it produces lower cost funds, which means as a borrower, businesses don’t have to pay as much. “Transparency floods through the system and that is what really allows this to be a fundamentally better proposition than a traditional bank lender.” But Growth Street wouldn’t be living up to its name if it stopped there. The company is continuing to build its lending site into a marketplace and is preparing to make a version of the analysis and forecasting software it employs available in beta format to any company that uses Xero or QuickBooks Online, regardless of whether they’re a borrower or a lender with Growth Street. Its ultimate aim is to offer SMEs transactional banking services. “Businesses will be able to set up an account with Growth Street and can use that as their primary transaction account, which allows them to manage cash flow more efficiently,” says Sherwin Smith. “From Growth Street’s perspective, it’s about covering 90 per cent of what small businesses need from financial services.”

Good for one, good for all The platform’s leadership team is backed by an impressive advisory board, bringing experience in the regulatory, investment and mainstream financial services sector to bear on SMEs. “SMEs are by far and away the most important sector in the UK economy,” says Sherwin Smith. “They are responsible for the vast majority of economic growth, a huge driver of employment and accumulation of skills. By providing them with a better banking alternative, these businesses can grow much faster. That has a knock-on effect because if the sector is well provided for it’s a massive boost to growth.” |



Bright idea: Taviq's Finnish founders thought long and hard about their business model


Taviq wasn’t set up as a disruptive rival – it’s more of a digital friend to wealth managers, says CEO Juho Isola In the land of the midnight sun, Finnish technologists have plenty of time to stay up and think of great ideas to disrupt financial services. But when Heikki Nättilä and Juho Isola hit on creating a web-based risk profiling solution for investment advisers to replace their old investor risk assessments, they had no intention of becoming the next Nutmeg. “We would much rather see established companies disrupt themselves,” says Isola, CEO of one of the newest fintechs on the block, Taviq. Its business model didn’t set out to provide a robo-advisor to individual investors, but rather to the wealth managers whose clients they were. Indeed, Nättilä and Isola’s mission ‘to make investment services accessible to everyone’ was predicated on preventing established players from being wiped out by new, online competitors, such as Nutmeg, Wealthfront and Robinhood. “If we fought against the whole



industry, it would be much harder to achieve this mission than it is to help the industry to achieve it,” says Isola. “The whole reason we exist is to make investment services more usable, streamlined and cheaper for the consumer by improving the existing services that banks and wealth managers are offering. This means that more consumers can afford the personal service offered by a human advisor and the advisor has the possibility to take more clients due to saved time, thanks to our products.” “This, for us, is a more profitable and scalable way to go,” he adds. “There's also a lot less competition in the business-to-business (B2B) market than there is in the consumer-facing one.” Aimed at banks, investment advisors, wealth managers, internet brokers and other fintech companies, the Taviq risk profile solution generates an objective investment risk profile for clients, which can be used to provide the client with a customized range of investment services in the traditional adviser model or via

robo-advisor, working across application programming interfaces (APIs). “Our service is a way to make their expertise more accessible and scalable, while they keep their core investment skills to themselves,” says Isola. While established companies, including Charles Schwab, Vanguard and Nordea, have all launched consumer-facing digital services, Isola and Nättilä were aware that wealth managers had a proprietary investment philosophy that they were keen to preserve. “But wealth managers need to think about what differentiates them and what brings value to their clients,” says Isola. “The public are not that educated about wealth management services. They don’t know or even recognise the need for them. A lot of the differentiating factors that companies have already are based on financial jargon, it’s very theoretical and methodological. But the consumer just sees two identical wealth management companies. “The challenge is to provide some kind Autumn 2016

of service that differentiates them from the competitors, and I would say a digital service, usable from a mobile and desktop, and accessible every hour of the day in different geographical areas, would be one way of solving the problem. Because if you can make it very usable, very intuitive, and people can get familiar with it in their own time, you can add a lot of information to it. So it’s more self-educating than an ordinary investment service would be.” But even if financial advisors were open to the idea, Taviq recognised that many lacked the necessary skills to make it happen. Where they did, IT departments already had their hands too full updating legacy systems to keep pace with changing regulation. That’s where Taviq found a niche. “Solving the legacy system problem is one of the obstacles in the way of new digital solutions,” says Isola. “A lot would if they could and had the additional resources to make it happen. We’re helping them solve those problems by offering to build something new. “We definitely believe more in cooperation than in competing with established companies that have existing distribution networks, existing brand, existing trust, existing client base and, very Autumn 2016

importantly, existing data. These assets are very valuable for them, their partners and many operators. So I don’t see any reason why we would want to fight against this and waste these assets because they are so valuable if used in the correct way.” Having secured six-figure seed funding in Finland, Taviq’s team of five is preparing to roll out version 1.0 of its risk profiling system this autumn. But it is already looking beyond its Helsinki horizon. “One of the reasons we believed it would be more profitable and scalable for us to be a B2B provider is the geography,” says Isola. “The European Union, with different regulations, different taxations, different buying habits and different languages is a very fragmented market. It’s not like the United States. So it’s extremely difficult to break into the consumer segment from Finland. “We decided we’d stay here because, well, we’re Finnish and we believe in the Finnish workers’ skills set. We want these assets to stay in Finland. Finland is also one of the leading countries in e-banking

and financial mobile applications, and it is therefore a great test environment for Taviq’s solutions and services. But now we are interviewing and building partnerships in Sweden, too. Moreover, we’re looking for IT vendors that deliver backend systems for financial companies, so we can add our client-facing solution to their platforms. The UK and Denmark will follow soon as we are already opening discussions in those markets. “Robo-advising is a hot word at the moment but it hasn’t dramatically changed the industry yet,” Isola adds. “It takes time to get consumers used to it, understand it and be able to use it. I’m excited to see what will happen in augmented reality, virtual reality, artificial intelligence, machine learning, data science and the heavy quantitative stuff, but these things will take time, too. “What we do know is the transformation into the digital age and changing customer preferences are affecting companies across industries. The financial services industry is no different.”

If we fought against the whole industry, it would be much harder to achieve our mission |



Digital nuggets: Wealth managers must mine new technology

Rich pickings

Traditional wealth management firms have been slow to exploit digital technology – and now they risk paying the price. Chuck Thomas, Research Director in the Banking and Investment Services Research Team at Gartner, has three suggestions for a more profitable future A new generation of digitally sophisticated investors is threatening to squeeze the profit margins of wealth management firms out of existence as companies try – and fail – to meet their escalating demands.

Real-time personalised advice, mobile platform compatibility, total fee transparency and full advisor collaboration are just a few of the things that today’s tech-savvy clients expect as standard. But, according to research and advisory company Gartner, the necessary technical infrastructures to provide them are yet to be implemented in many companies. In fact, it’s seen a worryingly significant gap forming, with only 25 per cent offering digital access to clients beyond email.



It’s not that companies are not investing. “But they spend too much of their IT budgets on maintaining legacy infrastructures and not enough on developing their digital channels,” says Chuck Thomas, Gartner’s research director for banking and investment services. He believes that the growing disparity between evolving client expectations and firms’ ability to meet them poses a tangible threat to the wealth management sector. “Client preferences are often not mapped to the proper platforms, such as smartphones, tablets, and ultramobile PCs,” he says. “This is leading to client dissatisfaction and consequently major retention risks that could result in loss of revenue and market share.” And that’s not the only pressure. “Regulatory agencies are seeking to better

protect investors, but many companies cannot examine large datasets in anything close to real time,” adds Thomas. “As a result, they are unable to uncover potential regulatory problems as they occur and this exposes firms to incremental risk.” Thomas has identified three technologies that he believes could turn the tide for wealth management profitability. The first in his toolbox of digital solutions is advanced analytics (AA), which can help wealth management firms in meeting their clients’ expectations of fully personalised investment solutions. “Firms can use advanced analytics solutions to generate more sophisticated, more in-depth customer segmentation, as well as enable advisors to provide proactive stage-of-life advice to individual clients,” Autumn 2016

says Thomas. ”Deploying advanced analytics tools can also allow clients to enhance and manipulate their own data to provide additional insights and deepen clients’ trust in advisors.” But in order to maximise the benefits of AA technologies, it’s important to recognise just how the process differs from traditional business intelligence solutions. “Advanced analytics won’t replace business intelligence (BI) solutions – it simply answers different questions,” says Thomas. “Basic analytics derive insights by simply explaining what has happened. By contrast, AA is designed to solve problems by diagnosing root causes and effects, and by anticipating and optimising outcomes, behaviours and processes. “Approximately 2.5 billion gigabytes of data are generated every day, and 80 per cent of this data – including video, audio, and social media– is semi-structured or unstructured. This data is becoming increasingly important to wealth management decision-making and AA tools can enable advisors to incorporate this more complex and diverse data. As a result, advisors can ask more predictive and prescriptive questions that will allow them to develop robust scenario analysis, personalised for individual clients.” The advantages of advanced analytics solutions extend beyond just enhancing the client experience. A digitised wealth management environment creates substantial opportunities for the advisors, too. “The massive volume of data available would enable firms to better tier their customers to ensure appropriate and timely support,” says Thomas.“Automating the collection and presentation of this data allows advisors to focus on the value-added aspects of their jobs and the granular client information enables them to be more accessible and responsive to their clients’ needs. This means that they can support more clients with more investment opportunities, without substantially increasing their cost. Also, firms can use insights on clients and advisors to better map new clients with the most appropriate advisor.” Only once a wealth management firm has established a strong AA system within its database can it sufficiently profit from Thomas’ second technology – mobile apps. Many wealth management firms have already deployed mobile apps, however they are failing to provide the meaningful Autumn 2016

differentiation and personalisation that customers are demanding, he says. “Basic transaction-centric mobile apps or those that push general information are not sufficient to meet clients’ more sophisticated needs. Many firms are simply deploying mobile extensions of their desktop offerings, while limiting interaction and collaboration between clients and wealth managers. Firms that lack an advanced level of mobile sophistication risk alienating their digitally aware clients, as well as advisors who view these tools as critical,” says Thomas. Wealth management clients expect access to personalised information and services relevant to their portfolios where and when they need it, he says. At the same time, wealth managers need the tools to access, update and share information, schedules and calendars, and to collaborate with clients, regardless of their location or time of day. “It’s therefore imperative that mobile apps are integrated with the customer relationship management (CRM) system and advanced analytics software,” says Thomas.

Many firms are simply deploying mobile extensions of their desktop offerings, while limiting interaction and collaboration Adopting a pre-existing software can prove to be the most effective option. “Solutions such as Appway Platform and Temenos WealthSuite (among others) provide integrated, multichannel platforms to support the increasingly complex investment requirements of clients. Other options, such as Wizzio and Adviscent, include content consumption and adoption metric capabilities, so that advisors and their managers can determine the impact of material provided to clients. MicroStrategy Mobile for iPad is capable of supporting a complete range of tools such as BI, visualisation and multimedia content.” That said, there’s no reason they shouldn’t develop their own, so long as

the focus is on simplicity and usability. “Co-creation of mobile apps with clients – through panels of clients from different demographics, surveys or other means of customer-led development – ensures that apps will align with client preferences,” says Thomas.“Numerous vendors have developed, or are developing, collaborative platforms. By reaching customers more often, firms can increase client loyalty, improve client retention, and identify more opportunities to sell other products and services. Investing in the development of their own app may prove more effective for firms in the long term.” The third technology is one that was initially viewed as more of a threat to wealth management than a solution to the industry’s digital shortfalls. “Roboadvisors have the potential to decimate margins and disrupt customer relationships in wealth management,” admits Thomas.“Current DIY-centric roboadvisors enable basic investment management functions, such as portfolio construction, rebalancing and tax-harvesting. They appeal primarily to households that lack the investable assets necessary to engage a wealth management firm or financial advisor. DIY roboadvisors have called attention to the fee structure that wealth management firms charge for these basic management services. For example, in 2016, on a portfolio of $2million, wealth managers charge, on average, 0.91 per cent. By comparison, the average fee charged by the nine largest roboadvisors in terms of AUM was 0.32 per cent. Over time, we expect that this will put pressure on the fees wealth managers can charge their clients.” And yet, Roboadvisor 2.0, the latest generation of the technology, could offer a way forward for traditional advisors. “Roboadvisor 2.0 offers the opportunity to integrate digital capabilities and deliver a more efficient cost base,” says Thomas. “They can be linked to the advisor’s or wealth management firm’s CRM application to provide a holistic view of individual clients. Consequently, Roboadvisor 2.0 can meet the needs of clients interested in a partial DIY solution, while maintaining the firm’s and advisor’s relationships with the client. Supported by advanced analytics engines, they can provide a cost-effective way to identify and provide more complex solutions for individual clients.” Three technologies, three solutions. And it all starts with advanced analytics. |



Check this out

RBR’s international conferences on ATM and branch banking are well known across the industry. But it’s just one aspect of the research and consulting firm’s work, which has an increasing focus on the retail checkout process, as MD Dominic Hirsch explains in this Fintech Finance Q&A Fintech Finance: What does RBR do and how long has it been around? Dominic Hirsch: RBR has been an independent company since 1992, but our origins date back to the late 1970s. We have four main business areas: research, consulting, newsletters and events. In terms of expertise we focus on three distinct sectors: ATMs and banking automation, cards and payments, and retail automation. We are probably best known for our published research on ATMs and payment cards, which is used by organisations such as the European Commission, and leading suppliers including the international payment card schemes and ATM hardware and software suppliers. FF: What does RBR stand for? DH: Our original name was Retail Banking Research, which was not very snappy, but told people what we did! People often called us RBR, and when we expanded our work to include retail automation, we formally started using the RBR name. FF: How long has RBR been organising conferences? DH: We have been running conferences for

more than 10 years. Most of our events are in the ATM, self-service banking and branch transformation areas. We realised that in these sectors we are uniquely positioned to be able to bring together our extensive bank contact network with industry suppliers, creating value for both groups. RBR focuses on the two primary reasons that people attend conferences: to network and to learn. Our conferences benefit significantly from our research and consulting activities as we closely follow the latest industry trends and can reflect these in our speaker agendas. We leverage our extensive bank contacts to ensure good quality speakers and high levels of bank attendance. FF: What are RBR’s conference plans for next year? DH: Our first conference will be Self-Service Banking Asia 2017, which will be held in Manila in March. The Philippines is one of the largest and fastest growing Asian ATM markets and an ideal venue for our next event in the region. In May we will be running our flagship Self-Service Banking Europe 2017 conference in London. This is our largest event and attracts 600 delegates, not just

from Europe, but also from around the world. We have rebranded the event to reflect the changes we are seeing in the ATM industry, including greater emphasis on software, omnichannel, multi-vendor, outsourcing, video, near field communications (NFC) and mobile. ATM and Cyber Security 2017, in October, has also been repositioned for next year to ensure that we cover not just traditional ATM fraud, but the ever increasing threat of malware and cybercrime. This will make it attractive to a broader cross-section of people and organisations involved in keeping ATMs secure. Our final event, at the end of the year, will be Branch Transformation 2017. This continues to be one of the hottest topics in the industry and extremely popular with banks and, because of the more diverse content scope, attracts a wide range of industry suppliers. FF: How would you characterise RBR’s research? We specialise in primary research, which means our products contain data and insights that are not available anywhere else. We have an extensive global contact network and

In terms of growth, China and India have been a major focus for RBR for some time, but Bangladesh, Indonesia and the Philippines are also worth keeping an eye on 128


Autumn 2016

speak to literally thousands of banks every year. Unlike many other research firms we carry out almost all our research in-house. Our work is very much global. The exact number of countries varies by product but, for example, our global ATM study provides data on 180 countries and includes 64 separate country reports. FF: Which countries should we be looking out for in the future? DH: In terms of growth, you have to look first at Asia. China and India have been a major focus for RBR for some time, but there are several other countries in the region that we believe are worth keeping an eye on, in particular, Bangladesh, Indonesia. In particular, the Philippines. More mature regions such as North America and western Europe are also interesting, but for different reasons. We are seeing all sorts of innovations in countries in these regions, in all three of RBR’s sectors. FF: What type of consulting work does RBR carry out? DH: Most of RBR’s consulting clients are also customers of our research and they come to us because they want more detail, or

more tailored information, than is available in our published work. Due diligence for mergers and acquisitions is another area where RBR is asked to provide expert input. FF: How would your clients describe RBR? DH: You should really ask them, but I would like to think they value RBR for its expertise, long-term industry commitment and, perhaps most importantly, our fiercely independent and objective advice. FF: Can you tell us more about what you mean by retail automation? DH: Retail automation is a large sector, but RBR focusses on the retail checkout process – more specifically EPOS and self-checkout. That may not seem like an obvious area for RBR, but there is significant overlap with banking automation in terms of technology. For example in cash handling and in suppliers. FF: How is your Banking Automation Bulletin different from other industry newsletters and websites? DH: Banking Automation Bulletin is a research rather than a news publication. Unlike our research studies, which are published annually or biannually, the

RBR’S 2017 CONFERENCE LINE UP Self-Service Banking Asia 2017: Manila, 22-23 March Self-Service Banking Europe 2017: London, 23-24 May ATM & Cyber Security 2017: London, 10-11 October Branch Transformation 2017: London, 28-29 November Bulletin is published monthly. It contains regular summaries of our work as well as commentary on key industry topics. In addition, every issue contains a country profile based on our ATM and payment cards research. Advertising in the Bulletin is a fantastic way for industry suppliers to reach a high quality global bank audience. FF: How do people find out more about RBR’s conferences and other work? DH: The starting point is our website www., which provides details on all of RBR’s activities. RBR’s conferences are managed by Emily Camara (emily.camara@ so please contact Emily directly if you would like to get involved in future events. To discuss RBR’s other activities please call us on +44 20 8831 7300 or email


The hole in the wall gang

Cennox Group is a security hardware specialist that helps ATM and card providers keep customer data safe. But as Patrick Phelan, Head of Security and UK & EMEA Sales Manager, explains the villains aren’t always who you might think… Shocking pictures earlier this year of a small town bank in Sweden, its walls blown out by an explosive 3am raid on its ATM, was a reminder that in an age of digital crime, technology isn’t immune to physical attack. In fact, according to Patrick Phelan, such threats are on the rise. “Physical crime has increased significantly over the last few years. Criminals will always hit what they consider to be the weakest point. If card data devices or security measures get better, they go back to the more traditional, physical attacks on machines,” says Phelan, Head of Security and UK & EMEA Sales Manager at Cennox Group. “We’ve gone from seeing them ram-raid the machine from its location and take it somewhere they can get the cash out, to criminals opening the safes in situ. Gangs are getting so efficient they can break into an ATM safe within two to three minutes and, as manufacturers of security devices put countermeasures in to stop it,



the criminals have moved on to using explosive and gas attacks. The first gas attack in Sweden looked like a war scene.” For Cennox, which began life providing equipment to support card data fraud countermeasurers by banks, it’s meant an interesting new challenge for the business. “Customers have come back to us and said, ‘this is where we’re getting hit’,” says Phelan.“They’ve got chains and clamps and concreting around the ATMs to make ram-raiding, cutting or grinding the safe in situ more difficult, but the attacks continue to happen. And why is that? Because at the end of the day, the criminal knows the cash is all there for him and, unlike other robberies, he gets the full value.” So that’s where Cennox, which is expert at foiling payment technology fraudsters – it was the company that installed 850 anti-skimming devices at Transport for London’s bike hire terminals – began thinking outside of the ATM box. “The industry has got to a point where it feels it’s buying layer upon layer of

security to protect against individual attacks,” says Phelan. “Cennox is taking a different approach.” Instead of creating another security jacket, it decided that when all else failed, it would make the money inside effectively worthless by imbuing the notes with DNA dye using its proprietary CSD-ARCIS cash spoiling device. Triggered by cutting, drilling, ram-raiding, gas detection, and even explosions, the small electronic devices built into the ATM cash cassettes spray the notes with a fluid that fuses them together as a solid block. Attempts to peel off the notes or remove the hardened fluid, permanently destroy the currency. Crucially, however, this spoiler leaves serial numbers visible, so the notes can be redeemed via the central bank. “Dye systems have been out there a long time, so it’s not a new thought process but dyed notes are still usable in some format or another. We came up with a system that actually takes away the prize from the criminal,” says Phelan. Autumn 2016

ATM versus IAB The introduction of ATMs in the late 1960s made it more convenient for people to draw out cash from their accounts at bank branches. Fast forward to the 21st Century and you’re as likely to find a cash dispenser at a petrol station, a convenience store or a tourist information centre as at a bank. The widespread introduction of ATMs not linked to a banking network by so-called Independent ATM Deployers (IADs) has been the biggest single structural change in the industry that Cennox has seen. “I think it’s going to be nearly 50/50 between bank ATMs and IAD machines by the end of the year,” says Phelan. And as consumers reach for the plastic to pay for everything from a trip on the Tube to a Big Mac, transacting over a variety of different and often very public payment devices, it means keeping card data safe is more challenging than ever. “The principles of ATM fraud, or card data fraud haven’t really changed much over 15 years but criminals have become more efficient at building devices to capture the information, not only from a point of view of the methods they use – analogue, digital or skimming devices – but also in how they counteract the security measures put in place to make it more difficult for them,” says Phelan . “All criminals are looking to take the data off the card and to use that data in a fraudulent manner. Card trapping, for instance, is still the most frequent form of fraud within the ATM marketplace. It accounts for around 80 per cent of the fraud in the banking sector. But the biggest Autumn 2016

issue now is criminals moving away from using the traditional magnetic strip for data to the Europay, MasterCard and Visa (EMV) chip. “There are numerous devices out there now that are able to read the EMV chip and take data off it, which is then recreated for fraudulent activity. As a company, we’ve identified that our next focus point for research is combatting those new devices.” Cennox looks for a mixture of physical and technical protection in its designs, to create products that will withstand all attempted breaches and interrogation by criminals in the real world. “Our approach is to keep it simple,” says Phelan.“We learned very early on, by working in partnership with some of our banking customers, that you can come up with really intricate solutions in a laboratory environment, but when it actually comes to putting these out in the field, the criminals are very enterprising at trying to break them. The simple solutions always work best.” But the risks won’t ever go away – especially when consumers don’t acknowledge their presence. “All these new, convenient methods of payment come back to the one thing,” says Phelan.“If you’re using your card, there is a

security risk and other types of transactional equipment need to be protected just as much as traditional banking ATMs. People think, I’ll cover my PIN, I’ll be more careful what I do when I’m at an ATM’, but watch somebody when they go to a petrol station, for instance. “No one ever covers their PIN there, or when they’re putting it in a car park ticket machine. Because they’re not getting cash, people do not associate it with being a risk.” Contactless fraud is a major concern. “We are all very well aware that contactless cards can be cloned,” says Phelan. “One of the popular ways of transferring that kind of data is an Oyster travel card. There were 10,000 of them stolen six months ago and we all knew it was because criminals could transfer a touch payment to those cards. “Whenever you’re using your card, there’s got to be a data transfer. Whether that’s reading it from a magnetic strip from a chip and PIN, or from an RS tag or touch, the data is there and therefore susceptible. But you can obviously make that as difficult as possible.” And that’s what Cennox will continue to do.

Card trapping is still the most frequent fraud within the ATM marketplace. It accounts for around 80 per cent of fraud in the banking sector |



Going the extra mile Women in fintech have a new voice as the emerging payments industry takes on gender inequality. Founder of the new Women In Paytech group, Andrea Dunlop, CEO for Acquiring and Card Solutions at Paysafe Group, explains why it’s needed Described as one of the City’s ‘inspirational women’, Andrea Dunlop cut her teeth in fintech as a consultant for, among others, Experian, MasterCard and Visa. She moved to Paysafe Group in 2013 where, she says, she tries to ‘lead with spirit every day’. As CEO for Acquiring and Card Solutions at Paysafe, which offers digital payments and transaction-based solutions with a focus on emerging payment technologies, Dunlop has become something of a role model. She actively encourages other women to make their mark on fintech and to support them, she recently established the Women In Paytech platform. This is her view of what it takes to be a femtech pioneer. Fintech Finance: What one piece of advice would you give to young women looking for a career in financial technology? Andrea Dunlop: Sadly, there is quite a gender imbalance in financial technology, which can make it harder for women to break into. That said, it can be easier for really great women to shine. It’s not always easy but I would advise young women looking for a career in fintech to go the extra mile; not just in knowing the industry and excelling at their specific day-to-day tasks, but in really knowing themselves and building their own brand. Women need to take courage and champion themselves to ensure they get the same opportunities as men. I’m lucky to now be in a senior position but I still have to lead with spirit every day. The priority is to be the best that you can be as a woman in business and be on the front line in Autumn 2016

leading change. In short, really know your craft, be sure of who you are. In standing up for yourself as a woman in business and fintech, you help pave the way for others following in your footsteps. FF: What role do you think mentorship plays in helping women succeed? AD: I think mentorship can be very important. For me, becoming a member of the Paysafe executive team was really thanks to two things: it was the outcome of establishing the acquiring and issuing businesses in Europe; and the support of two entrepreneurs, Joel Leonoff and Danny Chazonoff – my Group CEO and COO respectively – who saw something in me and valued my ability to get stuff done. In many companies, people who focus on delivery are rarely elevated, so being offered a position on the leadership team because of this was very rewarding. I’d say that you don’t have to wait to be offered a mentor. If your organisation doesn’t offer this as a way to develop employees, then women should just take it upon themselves to find someone. What’s more flattering than an aspiring young person asking for career support? There also isn’t a one-size-fits-all mentorship: for one individual, an occasional after-work drink might be all they need, while for others, an introduction to an industry networking group might be more appropriate. Because there aren’t many women in fintech, I’d be surprised if any of us would turn down the opportunity to help support a kindred spirit.

In standing up for yourself as a woman in business and fintech, you help pave the way for others following in your footsteps |


CSR FF: How do you manage to keep your work-life balance? AD: It’s hard. Not only am I a member of the Paysafe executive team, I am also on the Paysafe Limited Board, which is where the acquiring business sits from a legal point of view. I was also elected to be a board advisory member of the Emerging Payments Association (EPA), which is a community for the world’s most progressive payments companies, helping them to have influence over the payments landscape and advance innovation globally – so there are a lot of commitments! I also feel it’s important to work on issues that affect the wider industry, in order to push myself and to improve the industry as a whole. For example, I actively worked on the Bank of England settlement access issue for non-banks, which was incredibly rewarding. However, from talking to other women, I suspect that many feel they just don’t have

the bandwidth to do this on top of their normal working hours. Family commitments can make it hard for women to give 100 per cent and getting the right work-life balance is something I’ve struggled with too. What I would say is that both career and family commitments evolve fairly rapidly. Different roles offer varying degrees of flexibility and family needs change over time. There will be periods when it’s hectic beyond belief, and that can be daunting but also extremely exciting in equal measures. I don’t think any of us would necessarily say we’ve cracked the work-life balance nut, which is why we’ve created the EPA Women In PayTech group. We’re hoping to share all issues that affect women – from achieving that balance right through to pay, promotion and how to champion the industry to young women considering this as a career option.

Career and family commitments evolve fairly rapidly... there will be periods when it’s hectic beyond belief. That can be daunting and exciting in equal measure

Women In Paytech A recent survey by the Emerging Payments Industry Association found that 90 per cent of respondents wanted an advisory board of women to represent their interests in the sector. In June 2016, the Women In Paytech Group held its inaugural meeting to begin addressing some of the issues raised and provide a much-needed platform for women in the industry to speak and have their voices heard. Its goal is to create a forum of influential individuals to represent women’s interests. It welcomes the thoughts and experiences of others in paytech. n For further information, go to women-in-paytech/ or email

Commitments: Hitting the right work-life balance key is hard



Autumn 2016

We are a global media house. We publish specialist content marketing campaigns, distributed to a vast and highy targeted print and online audience. We are launching our annual FinTech campaign on 15th July, in time for London FinTech Week. To get involved, contact: Alex Williams, Business Developer


CSR Assistive technology: Software has improved, but developers could do better

A new look at accessibility Mike Taylor is a senior accessibility analyst at the Digital Accessibility Centre, responsible for testing screen reading software for blind people accessing websites on their desktop or mobile devices. Mike also provides training and posts content to the DAC’s own site. Here, he tells developers what gets him frustrated… I am a tech-savvy person and use technology almost every minute of every day. Thanks to developments in technology, I enjoy much more participation in the digital world than I could ever have hoped for. I am totally blind and rely on my assistive technology to enable me to manage my finances securely and independently and this gives me the confidence to play an equal part in society and not be limited by my lack of vision.

Knowledge is the key I learned how to use assistive technology with some basic training many years ago and then trained myself on the rest. Like many people, it’s word of mouth and just



getting my hands on the software that provides the best lessons but, of course, this is not the best for all users. My ability to use a touch-screen phone, for example, was learned by reading the software manual, listening to podcasts and speaking to friends – as well as making mistakes. Many devices now include built-in software with a quick tutorial to help people get going. If I can manage my money easily and be as independent as possible when dealing with my various banking requirements, I can make informed decisions about my finances, get into the savings habit – as we are all being urged to do – and access statements and important information about my accounts. Like many people, I got my first account when I was 16, but I had to rely on braille

statements to make the account truly accessible to me. Moving forward 20 years and I now prefer to access electronic information via various sources, such as the bank website or the mobile app. I can use my assistive technology to view my credit file and keep track of my credit score and resolve any errors if they arise. I am able to view my latest statement from my pension provider and, hopefully, make the correct decisions about my future. I am able to put some money away for my daughter for when she gets older. So, that’s what can be done using technology that is available to blind people. But what happens when things don’t work so well and what do developers need to know so they can improve accessibility even further? Autumn 2016

What about cash machines? Cash machines can be confusing. While some provide a tactile keypad in the form of braille or embossed print letters, such as an ‘x’ on the ‘cancel’ button, I need to remember which buttons to press once I have entered my personal identification number. I also need to remember where the ‘cancel’ button is if I make a mistake and, of course, where the cash dispenser and card slots are. My memory gets a workout every day and, yes, there have been times when I have become confused and needed to rely on a hopefully trustworthy member of the public to tell me what was on the screen or just hit that ‘cancel’ button and start again. Does this stop me from getting my money? No, but each time I go to the cashpoint I am extremely cautious and I need to be fully alert with my memory muscle working.

Assistive technology

performs what action and so on, as well as being responsive to keyboard or touch gestures when they are used. Many things work as expected for a blind user on my own bank’s website, although when I log in and view my statement, for example, the table that contains the relevant information is not clearly structured, making it difficult for me to navigate. In this instance, clear column and row information to tell me what part of the table I am viewing would improve this experience. Enter the mobile app. While I generally find it is significantly easier, some items don’t always indicate if they are a button that can be selected, such as for different accounts – although thankfully, my bank has improved its button labelling so this problem is significantly diminished.

Inaccessible versus accessible

My job gives me a unique advantage as I am able to check websites and apps to ensure they work with the assistive technology that blind people use, as well as providing training and helping the web and app developers to identify problems so that a fix can be implemented. I walk two paths: that of the end user and that of the analyst and developer. Many aspects of an app or website can either improve usability or inadvertently create barriers to accessing the content with screen reading software. The big areas of confusion are typically forms that do not clearly convey what data should be entered, error messages that do not clearly indicate what information should be corrected after a form has been submitted with errors, or links that don’t contain clear information relating to what action will be performed when the link is selected. It is difficult to list every problem in this article, although I personally and professionally encounter the issues above at least once a week. A lack of a headings structure causes navigation problems, as users will not be Barrier: CAPTCHA can cause significant problems able to move through a page The assistive technology I use is called a screen reader. There are many on the market, costing from £550 for a standard licence. However, some are free, or come pre-installed onto a user’s device. Screen reading software will announce through a synthetic voice what is on the screen and, depending on the device being used, a user can interact with keyboard commands or touch gestures on a touch screen. Screen reading software will work as long as the information it is announcing is clearly structured. Where websites, apps and programme user interfaces are concerned, the information needs to be clearly coded with regards to what button

section-by-section easily and it will take longer to complete a task when looking for information. Although they are implemented to reduce security risks, CAPTCHAs can cause a significant problem for blind people online. The prompt to enter the letters from an image or to hear an audio challenge both have their limitations. An image based CAPTCHA is inaccessible by default, as blind people will not be able to identify the image or letters; while some audio-based CAPTCHAs are difficult to hear due to the heavy processing applied to the audio. Content that automatically updates without the user being made aware of it can confuse users and reduce their confidence as well as their independence when attempting to carry out a task. An app or website that has unclear button and tab labelling, or contains items that do not respond to keyboard command or touch gesture, can make the difference between someone using it or not using it. An accessible offering will have all items respond as expected when a user employs a keyboard on a desktop computer, or equally responds to a touch command from a tablet or mobile device. So, including consistent labelling for all items that can be selected, such as links, buttons, drop-down boxes and form fields, will make all the difference. Including an alternative verification method to CAPTCHA, such as sending an SMS or email, would be another advantage. An alternative is the ‘honey pot’ option, where a hidden field, if completed, will not allow the form to submit. Alternatives include the ability to stop submission if it is completed too quickly. The ‘honey pot’ option is particularly effective as blind users (like all other users of online forms!) will typically take longer than a few seconds to view, understand and submit the form. A clear and logical headings structure makes the difference between difficult and easy navigation, which is a win-win on any page. Implementing fixes as indicated above improves the lives of not just blind people, but all users, giving the ultimate freedom of choice and independence to all.

Including an alternative verification method to CAPTCHA, such as sending an SMS or email, would be an advantage Autumn 2016 |







RFi Group is pleased to announce the final edition of the

Global Digital Banking Conference 12TH OCTOBER 2016


Speakers include:

Jay Sidhu Chairman & CEO, BankMobile and Customers Bank

Faisal Khan Banking & Payments Consultant, Faisal Khan & Company

Ali Allawala Head of Islamic Banking, Standard Chartered

Arup Mukhopadhyay Group Head of Consumer Banking, Abu Dhabi Commercial Bank

Media partners Global Retail Banker

Supporting partner UAE Priority & Retail Banking Council

Tirad Al-Mahmoud Chief Executive Officer, Abu Dhabi Islamic Bank

For information about the event or sponsorship, please contact: Natasha Dochniak, Commercial Director – Media and Events, RFi Group +44 (0)20 3862 2143 I


A chain for the better Humanitarian activist Jaz O’Hara of The Worldwide Tribe believes fintechs have a significant role to play in tackling one of the biggest crises in modern history

Anonymous: Having lost their homes and often their family and friends, 1.5 billion people moving across the world have also lost their identity

It’s influenced political decisions – not least Britain’s exit from Europe – fuelled activism and left many of us feeling morally uneasy. But where does the biggest displacement of people in a generation fit into fintech? Earlier this year, humanitarian activist Jaz O’Hara shared a platform at the inaugural Identity20/20 conference, at which 50 technology businesses, at least half a dozen of them blockchain-centred, contributed to a UN-facilitated debate on how to restore the identities of 1.5 billion ‘invisible’ people. Like many on the podium in New York, her concern was for the most vulnerable – the shifting community of migrants who are prey to trafficking, prostitution and child abuse. In particular, she worries for those trapped in Calais’ man-made Jungle, without passports, birth certificates or evidence of bank accounts. “Along my journey I’ve met many people who have issues around identity,” says O’Hara. “My own little brother arrived in the UK, aged 14, on his own. He didn’t have a passport or a birth certificate and it’s the same for a lot of people. They lose them on the crossing from Turkey to Greece, or from Libya to Italy, because they’re not allowed to take bags onto the boats. The boats are overcrowded and their bags get thrown overboard or they capsize and they lose everything they have.” Without a verifiable past, they struggle to build a future. Following the New York event, writer and fintech commentator Chris Skinner, who had been in the audience, blogged:“Would a Autumn 2016

biometric blockchain mobile inclusion system, providing identities for all, overcome human trafficking, abduction and sexual slavery? No. But a United Nations agreement to accept a biometric blockchain mobile inclusion system to provide identities for all might. One day. That is the impossible dream and we are going to try to make it possible.” As part of his promise to make good on that pledge, he invited O’Hara to speak at the Financial Services Club, the European networking forum he chairs in London, in September 2016. By telling her personal story, O’Hara hopes to ‘encourage people from a very

I want people from the finance sector to think differently different space – the finance sector – to perhaps think slightly differently’. Not least, she wants to inspire them to consider how blockchain could provide a safe, secure identity for the one fifth of the world’s population that doesn’t have one. “My talk really encourages each person to take responsibility, to use the resources that are available to them to make positive social change, because as an individual you are powerful,” says O’Hara. Founder of The Worldwide Tribe, a personal blog that turned into an unstoppable movement that uses creative storytelling to highlight humanity in crisis and funds

grassroots action to help, she campaigns on behalf of those whose loss of identify means they are denied basic human rights. “None of the dentists in Calais, for instance, will see any migrant unless they have ID, even though they are legally allowed to be in France,” says O’Hara. She welcomes the idea of a blockchain-based identity system for the world to keep every proof of ID – including bank account verification – safe and accessible for people, wherever they are from and wherever they end up. “A lot of people that I’m dealing with are from the middle class. They’re people that did have money and did make it to Calais, which is very expensive. They’ve worked as doctors or lawyers. They have bank accounts in their home countries but it is very tricky for them to access their finances,” says O’Hara. Her ambition is to give every member of the human race the dignity and protection of an identity that can’t be taken from them, so people like her little brother stand a better chance of building a new life. “Coming to the UK, he didn’t really speak English, he didn’t know anybody and he wanted to make friends,” says O'Hara. “He was really into football, so my mum tried to get him into a club. She found the local under-15s and took him along but they wouldn’t accept him. He wasn’t able to play, because he didn’t have the relevant documentation to prove he was under 15.” In the Calais Jungle there's a much bigger game at stake – and fintech could make it fairer. |



Back to the future

In the follow-up to his 2013 bestseller Digital Bank, leading fintech commentator Chris Skinner uses the past to give us a compelling vision of global finance’s future in ValueWeb. And it’s a real wake-up call, says Will Dove (right) Chris Skinner believes we are on the cusp of a banking revolution, with worth shifting away from the traditional tokens of cash and cards to the digital values of views, likes and shares. He’s even coined a new term for it: the ValueWeb.

Both the subject and title of the new book by the man voted one of the Wall Street Journal’s most influential people in banking, it’s neat shorthand for describing the challenge the Internet of Things poses to our current notion of value. Through eight chapters it analyses where we’ve come from – the technical foundation for the change, with fascinating observations on subjects such as social media, Web 3.0, and even online gaming – and where we’re going, including how through mobile technology ‘every single person on the planet can now be part of the value ecosystem’. Despite the book’s broad ambitions, ValueWeb is a clear, concise read, starting with Skinner’s own explanation of the Internet of Value and concluding with his intriguing views on what to expect from communication technology over the coming decades. But his detailed analysis is so rigorous that at no point do you feel the book’s ideas are far-fetched or incoherent. For example, in his chapter on cryptocurrencies, Skinner takes the reader from the birth of money 5,000 years ago in ancient Sumer, through to the emergence of bitcoin in 2008, the historical tour of financial systems neatly contextualising the revolutionary potential of cryptocurrencies. In fact, ValueWeb’s chapter on cryptocurrencies is the best introduction to the technology that I’ve yet come across and Skinner’s accounts of the Mt. Gox bitcoin exchange and the Silk Road controversies serve well to stress the increasing importance of bitcoin across finance and society. At a time when many experts are focussing solely upon established banking regions as bellwethers of financial development, Skinner uses fledgling economies to provide a window on the future. ValueWeb’s examination of the



He repeatedly challenges our understanding of value in an online world interviews with various experts across M-PESA transfer service in Kenya, for the fintech spectrum, divided into three example, highlights the evident benefits of categories according to the general themes building a mobile-based banking system of the book: the bitcoin scene, the fintech from the ground up and calls on us all in unicorns and the new disruptive banks. the West to consider whether traditional, Skinner has talked with incumbent banks can ever some of the leading minds compete with such a in each area and in reading streamlined, legacy-free the interviews – most model. Ever the pragmatic notably with Brock Pierce analyst, Skinner later goes (Chairman of The Bitcoin on to provide his own Foundation) and Craig suggestion of how Donaldson (CEO of Metro traditional banks can Bank Europe) – I found defend against the threat myself understanding the of these unencumbered evolution of the author’s start-ups, but remains ideas even more clearly. candid in emphasising ValueWeb’s case study the difficulties they can interviews are a remarkably expect along the way. Consequently, ValueWeb ValueWeb: How Fintech enlightening resource in their constitutes both a Firms Are Using Mobile own right, but in tandem with Skinner’s analysis of the past, progressive evaluation And Blockchain of innovative fintech Technologies To Create present, and future of fintech, they produce a book that and a practical guidebook The Internet of Value repeatedly challenges our on how best to ride is published by Marshall understanding of value in an the breaking waves Cavendish International, intrinsically online world. It’s of development. priced £19.99. Also a wakeup call for traditional The second half of available on Kindle. financial firms everywhere. ValueWeb is devoted to Autumn 2016

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