Fintech Finance Magazine Autumn 2017

Page 1

Issue 6

Autumn 2017


Meet me in Las Vegas… From Sibos to Money20/20 Comply or die The road to GDPR

Artificial Intelligence Are you ready?

Sorting payments



PLUS INSIGHTS FROM 11:FS Heroes ● Nuix ● iGTB ● ING ● JP Morgan ● Quantiacs ● Kofax KBC ● mBank ● Feedzai ● Wirecard ● IT Governance ● Matica ● Intix ● JP Morgan ● Ulster Bank

"You h ave 6 S GD inv wor oices t h 25 bu k fo tn r pa oS yme GD nt acc ou nt"

Issue 6

Autumn 2017


Meet me in Las Vegas… From Sibos to Money20/20 Comply or die The road to GDPR

Artificial Intelligence Are you ready?

Sorting payments



PLUS INSIGHTS FROM 11:FS Heroes ● Nuix ● iGTB ● ING ● JP Morgan ● Quantiacs ● Kofax KBC ● mBank ● Feedzai ● Wirecard ● IT Governance ● Matica ● Intix ● JP Morgan ● Ulster Bank








∞ networking

CEOs speakers






SIBOS 10 Contextuality and the new payment journey iGTB points to a way out of a potentially profitless cul de sac by avoiding disintermediation

12 High fives! Ireland is proving the ideal test bed for ‘new’ digital challenger, KBC Ireland

14 Striking gold Data is a precious resource and INTIX can help you mine it

16 Catching the trade wind Euro Exim Bank is a new hybrid among trade finance companies

18 Transparent thinking How Credit Suisse and SmartStream have worked together to keep hidden expenses in plain sight

22 Boxing clever When it comes to digitisation, Poland’s mBank has been there, done that and definitely got the t-shirt

24 The power of one Pitney Bowes has advice on how to handle competition and regulation

26 Everybody’s talking... Following the launch of its wealth management assistant, Comarch speaks up for AI

28 First past the post Instant payments isn’t a one-horse race, says UniCredit – so it’s spreading its bets

30 Pointing the way Pendo Systems reveals its new platform for helping banks become ‘AI-ready’




It’s barely a year since the last Sibos event and not even six months since the last Money20/20 – and yet so much out there has changed already, it’s a challenge keeping up! But keeping up is exactly what our valiant team of fintech vloggers will be attempting to do in the second Fintech Finance payments race. We’ll not only be covering both Money20/20 Las Vegas and Sibos in Toronto in depth, we'll also be linking them in our unique event (see page 57). You’ll find more about key exhibitors at both shows in the pages of this issue, alongside regular features on compliance, customer experience, security – and we’re delighted to feature the return of our our popular Fintech Superheros... saving the world one bot at a time!

32 Why Brussels is all-of-a-buzz B-Hive makes a compelling case for a global hub at the heart of Europe

34 Do treasurers dream of electric spreadsheets? Bank of America Merrill Lynch’s approach to digital investment doesn’t keep bankers up at night

36 Go with the flow PSD2 will be a watershed moment for banks, says Allevo. But how will they control the data deluge?

With the future of the industry to play for, the leading figures in banks and are seeking to change perceptions and improve the industry by driving it in their direction. We'll let you decide which direction that might be.. Ali Paterson | Did you recognise last issue’s ‘spine tingler’:

"The harder you work, the luckier you get"– Gary Vaynerchuk, entrepreneur. Meet out newest fintech supehero on page 46.

38 Embracing change From creative destruction to disruptive technology with the CEO of AxiomSL

40 Risk and reward With a worrying decline in correspondent banking relationships, Accuity looks at reversing the trend

44 Why hasn’t transformation transformed? iGTB Director Andrew England gives his perspective on what’s held back transaction banking

32 44 Autumn 2017

18 |



In May 2017, BankservAfrica together with McKinsey & Co. conducted an experiment. We asked experts in developing economies to share their thoughts on national payments system design and we were surprised by the response. It is a common thread that there is a gap in knowledge of how to build a national payments system over time. The most commonly asked questions include where to start, what to focus on, what technology to use and who to involve in the process.

Together with McKinsey, BankservAfrica will bring this conversation to SIBOS in October 2017. We will share insight on the global revolution on payments infrastructure and what it means for developing communities. We aim to connect with other developing economies from around the globe during this community session where will encourage knowledge sharing and debates around national payments system design.

MEET US AT SIBOS 2017! Stand #L33: 16 - 19 October Community Session: Payments system design in developing markets: How are developing markets driving inclusion and modernisation? 19 October 2017 12:30 - 13:30 Conference Room 5


74 46 64 57 11FS SUPERHEROES


46 The Fintastic Four

68 Jurassic gains

Our newest fintech superheroes talk diversity, emancipation, entrepreneurism and playing in the sandbox with three of the original Avengers from 11:FS

MONEY20/20 VEGAS 57 A run for your money The first #money20/20race saw a surprise winner. Will the second from Toronto to Las Vegas be another payments shocker?

60 Commerce & AI: Breaking down the knowledge barriers Leading machine learning provider for payments, Feedzai, takes us below the surface of a new financial ecosystem

62 Let the payment games begin The financial crisis was a tragedy for many in Greece, but allowed Mellon Technologies to flex its muscles

64 Playing their cards right Card issuance solutions specialist Matica Technologies has a game plan for payments challenges

66 Look, no hands! BNP Paribas explains how a digital approach is delivering corporate and institutional banking benefits Autumn 2017

Enough of the dinosaur tag! It’s time for established banks to flourish, says European Banking Federation

70 Every contact leaves a trace Pushfor’s secure content sharing platform could be a critical part of your GDPR defence

72 A change of style Paula Da Silva, Head of Transaction Services at SEB, sees compliance as the new black

74 Shopping for ideas Bank Millennium isn’t about to let any hungry fintech ‘eat its breakfast’

76 Judgement call Financial regulators are constantly having to assess whether intervention in free markets is justified or, indeed, wise. Sweden’s Finansinspektionen is no exception,

78 Changing the DNA Living in a fintech lab has helped sew innovation into the fabric of Ulster Bank

80 GDPR: A journey, not a destination IT Governance doesn’t see compliance with the European data protection law as an end in itself

82 Paying by new rules PSD2 shouldn’t leave banks competing in a commoditised space, says ING – but they need to make smart moves

DATA & SECURITY 84 The force be with you Dark data will have nowhere to hide once the GDPR force awakens. Veritas Technologies is fighting the good fight

86 Shaken not stirred... the martini approach to banking Lloyds’ Innovation Labs was charged with coming up with a cocktail of ideas for taking the bank forward. And that’s what they’ve done

88 Sort it out... or suffer How do you protect what you don’t know you have? The obvious answer is to find out first, advises Nuix

90 Fintech in the fast lane With technology and regulation setting a furious pace for financial services, Swedish bank Nordea, has revved up transformation

92 Hazard warning The Chief Information Risk Officer for commercial banking at JPMorgan Chase looks at how top execs can get IT threats into perspective |




















! ,


? . .?123


94 Special delivery We need to be ever more alert to suspicious packages coming through the digital mailbox. AnubisNetworks is ready to intercept them

96 Curiouser and curiouser Banks have reached an Alice in Wonderland moment, staring down a rabbit hole of possibilities, says SEB’’

96 120

98 A unique impression How IDEX has its fingerprints all over the secure identity industry

CUSTOMER EXPERIENCE 100 Breaking bad UK ‘challenger consultancy’ 11:FS is about to enter new territory and help turn bad banking habits into good digital models

102 Fusionbanking Spar Nord explains how the bank has successfully combined tradition and modernity

106 The have-it-all bank Hitting the customer sweet spot is difficult when customers themselves don’t know what they want. So Millennium BCP is to offer it all

126 118 Have we reached terminal velocity? Banks are rolling out ever-increasing numbers of assisted self-service terminals, but how do they differ from ATMs? RBR explains

108 Digital step change Tracing mBank’s journey from online-only to branch network to ‘the world’s first mobile social bank within a bank’

120 The fast-paced world of finance? You’re having a laugh Ron Delnevo of the ATM Industry Association has a lesson from the chiropodist’s waiting room for the Payment Systems Regulator

110 Going the extra mile Letting the robotic brain take the strain will deliver a more flexible financial services journey, says Kofax

114 Retail therapy Set up by a grocery chain, France’s Banque Edel itself went shopping this year… this is what it bought Erste Group’s fintech store aims to be ‘the iTunes of banking’. It can’t wait for PSD2, so the plug-in games can begin

That’s how Laurent Nizri of Paris Fintech Forum, describes the annual gathering (and he’s talking economics, not Game of Thrones!)

128 Good retail’s all in the details Extensive use of smart data is already the daily norm in ecommerce. Wirecard, looks at what data-driven intelligence can also do for the classic point of sale

122 A Quant-um leap How the world of quantitative finance is being opened up to coders, financiers and even neuroscientists in Quantiacs’ unique marketplace

130 Money, money, money... It’s been making the world go round for thousands of years, but what can ancient civilisations teach today’s financial forecasters? Will Dove finds the answer in the pages of David Birch’s latest book

124 Stronger together Rabobank sees blockchain as the ultimate test of co-operation


126 The Davos of fintech


116 By George, they’ve got it!



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

ISSUE #6 AUTUMN 2017 VIDEO TEAM Douglas Mackenzie, Lea Jakobiak, Daniel Curnme, Richard Webster, Shaun Routledge, Lewis Averillo-Singh,

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

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


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Autumn 2017 |



Contextuality and the new payment journey After consumer banking, payments is the sector most vulnerable to disintermediation. iGTB’s Manish Makaan, Michel Jacobs and Barry Rhodes point to a way out of a potentially profitless cul de sac For too long, banks have been asking clients the wrong questions when it comes to payments. They have focussed on what they offer and not what their business clients are trying to do. Consequently, clients making a payment are typically presented with esoteric choices – ‘do you want to use a wire payment? BACS? CHAPS?’ It’s like an airline asking its passengers what fuel they want for their flight. But what if banks didn’t work like this? What if they took the time to understand their clients’ relationships and intentions and used that information to answer these questions themselves? The relevant invoices, some historical data and an intelligent algorithm would be enough to automate the process. Suddenly, instead of placing barriers between a treasurer and his business, banks are removing them – ‘need to make a payment? Here are your fastest, cheapest and safest options, based on your context.’ Now that’s service. Think about it. It’s an approach that takes a huge load off treasurers’ shoulders. What’s more, it does the job better – for both bank and client. Algorithms don’t tire, or make mistakes; they are consistent and they identify the optimal routes, time and time again. The result? Infinitely improved customer service and operational efficiency, including sky-high rates of straight-through processing (STP). We call this approach ‘contextual payments’ and it’s a direct path to a happy customer. Contextual payments equip banks to not only beat back the competition, but rise above it by finding new ways to be profitable. With that in mind, here’s another question banks should be asking – ‘why should contextual recommendations be limited to the range of products in the service agreement?’ Answer: they shouldn’t. When connected to the bank’s product catalogue and digital cash management



platform, the contextual payments system can recommend not only a best next action (based on the services immediately available), but also a best next offer – a preferable option that involves acquiring new services from the bank’s full range. This is cross-selling gold. Every time a client could benefit from a new bank service, the system will notify them – creating a selling opportunity directly at the point of a need. This is what the iGTB Payments Services Hub and Digital Cash Management platform are designed to do. Contextual payment recommendations are automatic and optimal, and tailored to the specific circumstances and objectives. Digitising the self-service model of easily accessible products in this way – making

The smarter execution of payments – via contextualisation – is largely about intelligent route calculation components such as origination seamless and automated – will significantly reduce risk, human resources and cost pressures.

The client journey Applying the concept of contextual banking to payments means a focus on not just the process of making a payment but also what happens around and after it. Think of a parcel being sent from point A to point B. While the origination and destination are, of course, crucial, so is the purpose and context. What kind of product

is making the journey? What are the most important factors for that particular movement: safety, speed, legality and insurance, counterparty trust, revocability and/or traceability, or other aspects of its context? While corporate transactions differ widely in context – nature, intention, characteristics, and requirements – they have hitherto been treated with little corresponding variance. By tactically applying real-time analytical capabilities combined with machine learning, banks can assess the who, the what and the why, using all the data around a customer transaction to inform both execution and interaction. This approach dovetails neatly with other innovations in the payments field. SWIFT’s global payments initiative (SWIFT gpi), for instance, represents a new and better means of executing cross-border payments – and contextual payments enable corporates to identify when they can benefit from switching to this means. So how do you put contextual payments into practice? The smarter execution of payments – via contextualisation – is largely about intelligent route calculation. Data will be mapped against the available rails or paths of transport between sender and receiver, as well as the defined and synthesised need for irrevocability, risk (including bilateral risk) and urgency. Automated solutions can then be offered to the client – effectively a self-service checkout of optimal and appropriate actions. Leveraging contextual data can optimise a transaction for a banking-specific role, but also determine what the most appropriate best next action is for that transaction at that moment – based on understanding the historic trend for that user and payment type, that specific interaction and the business situation. What’s more, by integrating with other Autumn 2017

applications, such as the bank’s product catalogue and a central digital cash management platform, the contextual system can go a step further – identifying products that are part of the bank’s offering, but not yet part of its agreement with the client, that would be optimal in this situation or in similar future situations. Thereafter, digital payment tracking means far less time and resources are spent helping a client to find out where errant payments have gone or why they have not reconciled. In practice, this requires a transaction management layer – which includes a payments processing infrastructure – which should be completely in sync with an interaction management layer (which has the necessary analytics and smart routing to make it contextual).

The real-time challenge Corporate customers’ expectations are evolving, conditioned by exposure to an increasingly innovative retail market. They want seamless, integrated and digital services (with invisible back offices) in every aspect of their lives. They are also focussed on managing cash positions, centralising operational processes (including accounts payable and accounts receivable) and looking at their receivables and payables management. Contextual banking can address these demands by giving an immediate and up-to-date view on cash positions and balance updates while addressing centralisation, with one hub for information on outbound payments and inbound funds. Parallel to the operational pressures challenging clients, there are a string of regulatory initiatives – with real-time payments one crucial component. Following the success of the UK Faster Payments scheme in 2008, there has been a surge in the number of immediate payment schemes being planned or rolled out. At the time of writing, 35 countries have implemented or scheduled hard launch dates for immediate payment capabilities. So, embracing real time is inevitable and a contextual system is the first step on this journey. By using automated processes to check client funds, limits and other details – as well as decide whether a payment should be authorised, cleared for an overdraft or referred – payment decisioning drastically reduces banks’ human resource requirement. It also increases efficiency, Autumn 2017

with faster processing and fewer errors, and more reliably balances revenue opportunities and risks. Key to implementing this is the payments services hub, which acts as a single source of truth for all payment transactions. It gives the bank the ability to manage on a single platform any type of payment transaction, instrument type, customer, channel and payment standard, thereby increasing a bank’s agility and enhancing the visibility over all payment flows at reduced cost. Payments hubs have been around for a long time but many of them have changed little in terms of functionality. The key requirements of a modern-day payments services hub should be: ■■ Ability to facilitate interaction with the digital world ■■ Ability to execute in real time ■■ Ability to manage additional information about the payment ■■ Open interactions – supporting the API revolution ■■ Flexible interactions – including intelligent routing management and processing for both file-based and message-based payment flows But what banks are in fact mostly using is a patched-up assortment of discrete platforms and payment systems across disparate countries, often without the appropriate interconnectivity. Apart from reducing efficiency, this mix-and-match approach creates another looming issue for banks – the growing risk of payment fraud. What is needed is a single, integrated hub with a flexible architecture that can cover

CONTEXTUAL PAYMENTS IN ACTION The contextual banking system notices that a car manufacturer makes regular payments to a number of long-standing suppliers. The system suggests these payments can be sent as irrevocable Single European Payments Area (SEPA) credits, as there is no bilateral risk. Other payments made by the car manufacturer are domestic and urgent; the system suggests sending them as same-day, automated clearing house (ACH) payments instead of wires at a quarter of the cost. It then suggests the company’s best next action (BNA) or, where the BNA is not part of the corporate’s bank service, the best next offer, which (provided its payments services are integrated into a digital cash management platform) it can accept at the touch of a button. all deployment models, and which can manage surrounding content for payment instructions, as well as provide open access. This would also help to create the foundation for vastly improved compliance with regulatory mandates such as Basel III’s Liquidity Coverage Ratio (LCR) – enabling banks to prioritise payments across all channels, interfaces and instrument types, based on the product and customer in question. It’s time to embrace the contextual revolution and embark on a profitable new payments journey. ■■This article is based on the white paper Payments Done Properly: Contextuality Holds The Key To Operational Efficiency, published by iGTB

Route finder: Contextual payments are faster and smoother |



High fives! Overwhelmingly young, mobile savvy and increasingly well off, the population of Ireland is proving the ideal test bed for a ‘new’ digital challenger. KBC Ireland’s Director of Innovation, Eddie Dillon, explains The descriptor ‘challenger’ isn’t usually attached to a bank that’s been in business for four decades. But the well-established KBC Ireland behaves very much like its fintech rivals, with a speed and fearlessness that defies anyone to argue with CEO Wim Verbraeken when he says it’s a ‘digital-first customer-centric challenger bank in the Irish market’ – despite operating there since 1973. KBC’s strategy as a challenger bank is also challenging. Take its new pledge to get current accounts from application to active in five steps and in just five minutes using a mobile device – oh, and it will deposit five free euros in your account just to prove it can do it. Launched in September and unique to the Irish market, it features an instant digital debit card that is sent to the customer’s phone the minute the account is opened. “We believe it represents a new market standard,” says the bank’s director of innovation, Eddie Dillon. “When we say ‘active‘ we don’t just mean an active account number. That customer will have a digital debit card immediately on their mobile device, and they will be able to provision that card into their digital wallet, either Apple Pay or Android Pay.” The app has already attracted interest from some of the world’s largest tech companies as well as the digital benchmarking agency 11:FS, which described it as a ‘true example of a digital service, rather than a digitised journey’.

Young at heart The super-slick onboarding process is an example of how KBC, part of the Belgian-owned KBC Group that also operates in the Czech Republic, Bulgaria, Slovakia and Hungary, aims to capitalise on Ireland’s willingness to embrace



digital banking. Eurostat data reveals the country has the youngest population among EU members, with a median age of 36.6 last year, compared to an EU-28 average of 42.6. It might explain why the Irish are bigger users of mobile devices than anyone else in the EU. Visa’s Digital Payments Study last year also revealed 78 per cent of Irish consumers manage money or make payments using a mobile. Little wonder then that a sizeable chunk of the €1.5billion invested in KBC Group’s digital transformation came to Ireland – a country seen as a natural test bed for its technologies. Though KBC is still a relative minnow in the Irish banking pond, Dillon says the bank aims to double its customer numbers to 425,000 and digital services are already helping it make big strides in the right

We recognise the importance of collaboration with fintechs. We’re not going to do it all ourselves direction. Six out of 10 current accounts are opened via a digital channel since the launch of Android and Apple Pay – and that was before this summer’s five minute onboarding app. Dillon says: “We’re going to test and accelerate digital capability in Ireland, and then look to transport it to other jurisdictions. To that end, we have implemented a new core banking infrastructure, and we have established an innovation hub. This is a multidisciplinary team, sitting in one location and working in an agile fashion to accelerate the digital

delivery. So not only are we looking to speed up delivery of a defined digital agenda, but we’re trying to foster a level of innovation throughout the bank and in everything we do. The customer is going to be at the heart of that.” They won’t be the only ones to benefit from it, though. According to Dillon, the bank’s new core banking system open architecture ‘will allow KBC to capture opportunities offered by the fintech community and provide services from and to other market players’.

Strength in numbers As the challenger in Ireland, its brief is to leverage proven innovations and learning from some of KBC’s other core markets and work with external fintechs. In order to provide fast validation of identity during its digital onboarding, for example, the bank partnered with IDscan, which is part of the UK’s GB Group. GB’s tech allows customers to provide KBC with a photo of an ID document, such as a driver’s licence and a selfie so the two can be analysed and compared. “We recognise the importance of collaboration with fintechs,” says Dillon. “We’re not going to do it all ourselves; certain fintechs are pioneering new innovations and new capabilities that we would never be able to do in our own right. “With IDscan, for example, we can provide immediate validation of a customer’s identity. We are able to extract the data on a document, and auto-populate it onto our application form and into our backend systems. The customer provides one proof of identity, with their address on it and we validate it through other external data providers. This removes levels of customer friction.’ The provisioning of a digital debit card straight into a customer’s mobile wallet through KBC’s new onboarding app was

Autumn 2017

also achieved by co-operation, this time with the bank’s card processor, TSYS. “It is through an aggregation of a number of different solutions that we can put a complete customer proposition together,” says Dillon. The bank continues to run physical branches – known as banking hubs – in Dublin, Cork, Galway, Limerick, Kildare, Waterford, Wicklow and Kilkenny, with a 24/7 contact centre providing a bridge between the physical and the virtual. “Irrespective of whether it’s a physical or digital interaction, the contact centre is at the core of it,” says Dillon. “Most important is that we actively and intently listen to what customers are telling us and how they want to interact with us. Whether that is a human interaction or a digital interaction, is driven by the customer. “A good example is how we introduced Apple Pay and Android Pay. We were the first bank in Ireland to offer these capabilities to consumers. By listening to customers’ feedback we knew that they

were aware of this capability and wanted it. So, we didn’t sit back and wait for it; we actively pursued Apple and Google to ensure that we were pioneering this capability for Irish consumers. That is our mantle going forward.”

Championing the customer The bank examines around 15,000 ‘customer insights’ each year to identify areas of friction. It also runs a customer board each month where customers meet with the heads of each business area. The head of customer centricity’s role is to be an advocate for customers throughout the business and that person is supported

by a number of centricity champions who work across each business area. “Customers’ expectations are now being benchmarked from outside of the financial services sector,” says Dillon. “As customers deal with non-financial brands every day of the week, they are now assessing us against the experiences that they enjoy with those brands. We must also deliver a seamless experience, irrespective of the product, channel or service type that the customer is enjoying, and not only at a particular moment, but right through the customer lifecycle.” Dillon is aware that the data and analytics that enable such personalisation are now under closer scrutiny by regulators, too. “We are a cashless bank, so ultimately, our solutions are digital ones,” he says. “The integrity of customer data, and the integrity of the digital solutions, is a primary concern, focus and occupation for us. We recognise that if we fail to deliver those assurances to customers, our whole business model will be undermined.“

All in favour: Customers provide the sounding board for innovation

Autumn 2017 |


SIBOS Mother lode: Data is the banks’ new economic asset class

Striking gold Data is a precious resource for financial institutions and INTIX can help them mine those information nuggets, says CEO Marc Braet Data holds untold treasure for financial institutions – but only those smart enough to understand what it is telling them. The information they hold about consumers and their behaviour is ‘the new economic asset of the information age’, INTIX chief marketing officer André Casterman was quoted as saying recently, as well as being identified by regulators as ‘critical to supervise financial markets’. In the same breath, he also recognised that many of those institutions are like miners without a hammer: “Given the many data-related obligations and opportunities, it is not trivial for financial institutions to determine where and how to reap immediate benefits. They therefore need to first determine their own data priorities and then equip themselves with the right data management technology.” That’s where INTIX comes in; it has the power to join the data dots that lead financial institutions to the mother lode of information within their organisations. The data management specialist believes that transaction data is the prime catalyst for growth in today’s financial institutions if it is strategically linked to business outcomes and goals, such as building revenue and improving business



performance. Employed properly, it illustrates how customers consume an institution’s services and how much revenue each generates, as well as shining a light on all key areas of an organisation’s operation, from systems to processes and relationships. This information can help to improve customer engagement, optimise service delivery and increase service profitability. However, these positive results can only be achieved when the data is collected and interpreted in a joined-up way and many institutions’ internal systems don’t make the accessing and exporting of such information easy. Surprisingly, perhaps, INTIX doesn’t see legacy systems as the main blockage. “Legacy internal systems are often pointed to as the source of rigidity and as a main obstacle to driving innovation, but innovative technologies now help to address such issues by increasing data accessibility and intelligibility,” was Casterman’s view. “By combining such advanced technologies as application programming interfaces (API) with the huge amount of content residing in back-office systems, banks can accelerate the time-to-market of new data-driven services in a very cost-efficient way.”

According to Casterman, there are four strategic areas that most need effective data management: regulatory compliance and reporting, business intelligence, customer experience, and risk and audit. These four areas require client transaction data as well as client master data and transaction event history logs to be extracted from various internal systems, and to be combined so as to provide adequate reporting and insights. INTIX can assist in these key areas, with automated reporting for regulators on transactions, risks and ad hoc matters; organisation-wide metrics and business intelligence on any type of transaction and event, as well as client behaviour analysis, revenue analysis and business activity dashboards. From a customer experience point of view, it offers free text searches across systems, archives and transaction types, as well as service level agreement monitoring and alerting, and transaction tracking. It can help meet risk and audit goals with automated calculation of transactionrelated metrics, user activity monitoring and data layering for external API access.

Shining a light on data In some respects, according to INTIX CEO, Marc Braet, banks are the victims Autumn 2017

of their own success when it comes to capitalising on their information wealth. Or, at least of their determination to join in with the latest trends in the financial world. Their plethora of past projects has left them with silos of information that they are struggling to assimilate. “Banks have been around a long time and, as their businesses have evolved, industry events have led them into new kinds of activities and this is still going on today with things like real-time payments. So banks now have situations where they are managing a lot of different data silos. Silos from the past and silos resulting from contemporary challenges,” says Braet. “A really good understanding of the data is something that, today, is very much lacking in the industry.” Not just the amount, but the complexity of data has also grown, juxtaposed, ironically, with increasing requirements for institutions have a handle on it from a regulatory point of view. “The issue is complex and wider, in terms of business opportunities, because you have new things like the real-time payments arena, fuelled by the revised Payment Services Directive (PSD2), and all these things are actually making the data scope larger and larger,” says Braet. “It’s this challenge we are aiming to address, using our technology to help our customers.” INTIX makes sense of data archives that have grown exponentially over recent decades to meet the requirements of regulators and today’s real-time generation. “There is a lot of evolution going on and banks risk being disintermediated, thanks to PSD2 and the new entrants into the market," maintains Braet. "The experience customers expect from a bank is totally different from what we, or our parents, expected. People are not physically going to banks any more and they expect everything to be real time, online, immediate and today. Banks need to be able to deliver that. “We use our technology to ensure that we create visibility of the customer experience and how people are interacting with a specific bank, in a real-time way, across the different platforms.” So how, exactly, does INTIX help organisations strike data gold? “We use our solutions to help financial institutions implement their strategies. Autumn 2017

Data is very much a buzzword at the moment, but they need a solution to make the most of it,” says Braet. “We have a standard product, but we can configure it in such a way that we have the ability to address a lot of different challenges that our customers have with individual technologies, whether related to payments, securities, regulation, customer experience or business intelligence. “Our technology will work wherever the data is located, in whatever format it is expressed or stored, shedding light on everything from liquidity management to the tracking and tracing of transactions, lifecycle management and compliance.” Aside from such profit-enhancing ‘nice-to-haves’, of course, one of the most important reasons organisations need to have a complete view across their data, is for compliance purposes. And INTIX has a tool for this, too.

We provide a kind of Google on the bank using technology that understands what financial transactions, value dates and currency are “In terms of regulation, it comes down to the basic principle of being able to deliver an answer when a certain question is being raised. We know that, since the crisis in 2008, the need for regulatory responses is only growing. So, first of all, we have the ability to respect data integrity. Then, we can provide a kind of Google on the bank, using technology that understands what financial transactions, value dates and currency are,” explains Braet. “Based on this, we can help it understand what a certain institution or person has done with them over the years, in a certain context, value range and currency.

“The current situation is that some institutions are really struggling, and, in some instances, are not able to deliver requested data, which could in future result in the regulator fining them.”

Working smarter Better business intelligence is another, valuable offshoot of this activity. “Gaining a better understanding of what are you doing with a certain customer is also helpful to develop a better product offering for their segment,” adds Braet. Better use of big data also has the potential to galvanise the industry and improve efficiency, he believes. “There is a growing need, not for data – because the data is there – but access to data and the ability to do something valuable with it. We see a lot of value nowadays in lifecycle transaction management, not looking at one specific element in a transaction, but providing insight to a large institution about the whole flow of a certain payment, and being able to eventually detect anomalies in the processing flow. “And now we are progressing new technologies, such as artificial intelligence, machine learning and algorithms, that are going to help us not only tell what has happened, but also predict what might happen, to help institutions address things like fraud and intraday liquidity better.” But it is in the area of customer experience and relationship management that the real gains are to be made. “We’re also implementing our capabilities in bank call centres,” Braet explains. “Previously, a customer might ring the call centre with a question about a certain payment that didn’t appear on their bank statement, and the call centre employee needed to dig into systems and CDs to find out the information for them. This was time consuming and the customer experience was not fantastic because they had to wait for an answer. Using our data analysis technology, the response is there within seconds.” It's just one demonstration of where close collaboration between banks and fintechs gets you, says Braetl “There is an opportunity to work together, instead of trying to kill each other,” he laughs. |



Catching the trade wind

Euro Exim Bank is a new hybrid among trade finance companies, combining human and artificial intelligence to fill a void in transactional banking, especially for SMEs, says Graham Bright, London-based Head of Compliance Operations Selling goods across borders to people you have never met has always been at the riskier end of doing business. But with major banks now deeming some of the trade finance sector just too perilous to deal with, the comparatively small expert team at Euro Exim Bank will be coming to Sibos to explain how it’s navigating growing regulation and criminal threats safely and profitably through automation and cognitive computing. “We’re a relatively small organisation and we’re expending approximately 20 to 30 per cent of our manpower on compliance and legal issues,” says Euro Exim’s head of compliance and operations Graham Bright. “At tier one banks, 30 per cent of their staff involved in the compliance process equates to thousands of people. That’s the level of resource needed to meet compliance and it is coming off bottom-line cost. The result is de-risking by large organisations; cutting



down on the number of international relationships they’re holding, which means they’re not doing business in the same expansive way they once were.” US financial data giant Accuity reports that between 2009 and 2016 there was a 25 per cent drop in correspondent banking relationships – where one financial institution provides services on behalf of another in a different location to facilitate cross-border payments – as regulations and sanctions clamped down on staggering levels of fraud and money laundering. And that was before the Panama Papers revealed the jawdropping extent of international fraud. That scandal ramped up scrutiny of anti-money laundering (AML) and know-your-customer (KYC) processes even further. In the real world, it means people with entrepreneurial flair are in effect denied access to certain markets. “And that’s why our organisation, while we are keen to

make sure we are as risk averse as possible, is offering an alternative,” says Bright. So, if some of the world’s biggest banks are finding this a difficult market to operate in, how has a firm as small as Euro Exim Bank, which operates a London office with around 12 staff, achieved it? A new breed of trade finance institution, Euro Exim developed a proprietary platform called SimpleX to automate trade workflow and counter the real and growing barriers that SMEs in particular are encountering.

A Simple case of needs must Euro Exim Bank is a niche player in the world of trade finance, facilitating international business transactions through the issuance and relay of various trade finance instruments. It offers letters of credit, standby letters of credit, performance bonds and bank guarantees that provide a seller with an assurance they will get paid, even if the buyer refuses to Autumn 2017

A perfect storm: PSD2 and the loss of transactional banking is creating opportunities

settle or, worse, disappears with the goods. Each individual trade document typically demands around 30 pieces of information – from a description of the goods to destination and insurance details. Bright explains: “We couldn’t find a commercial application that did the process in the way we needed it to, so we adapted our own. SimpleX manages the process of invoice capture, creation of indemnity documents, manages the work-flow around scanned images, and supports the whole financial process through its life-cycle.”

An intelligent approach Linked to global secure financial messaging provider SWIFT, the Cloud-based application had already significantly sped up the workflow and cut costs for Euro Exim Bank, but what took it into another league was when it became one of the first European

financial institution to implement iGTB’s due diligence software for trade finance, in 2016. Incorporating cognitive computing and natural-language processing, DDIQ acts as Euro Exim’s inhouse financial crime expert, trawling publicly available, open web content, such as social media sites and blogs and deep web content, including regulatory sites. It examines premium content, such as watch list providers and politically exposed person (PEP) lists, as well as the 200,000 or so offshore entities and individuals associated with the Panama Papers. It then generates a report showing company information, adverse news and noteworthy events, regulatory actions and legal cases – and the entire process takes five minutes. It doesn’t replace staff, but it’s a powerful tool in helping them to interpret the available information, says Bright, and it paid for itself on its first day in the office by raising a red flag that no previous search had spotted. “Everybody talks about artificial intelligence (AI) taking over the roles that people have. What we’ve done is look at AI to do the repetitive work that an operator would have done,” says Bright. “That gives us more time to analyse the results. It’s using intelligence from a search across multiple data sources and aggregating them so we then take an informed view about the responses from that piece of software. It’s a good piece of software in that It gets you to a level where you can trust what you’re seeing in front of you and then you make an informed choice. “We found from the very first time we used it, that we were able to signal an alert that we wouldn’t have found using another system, or, if it was spotted, it would have taken a long time to find.” The interplay between AI and human intelligence is crucial, he says. “Fully automating the process is very difficult because of the number of players in the ecosystem. There are freight forwarders, shippers, transport companies, people creating the documents, customs. We’re told blockchain is going to be a panacea but it will be some time before it becomes a de facto standard in the

non-standard world of trade finance,” adds Bright. “Technology is key and we are investigating advanced identity recognition and the introduction of mobile applications for SMEs and corporates to enable further use of our trade finance services. “But to deliver that we’re not looking at automated procedures powered by autobot technology. We’re talking about providing informed answers to our astute, demanding customers.”

Location, location At Sibos, the team will be launching a commercialised version of SimpleX and explaining why it’s recently relocated its head office from the Gambia to St Lucia. “St Lucia is a highly compliant area, with a very strong regulatory authority that goes to great lengths to ensure that any financial organisation has longevity, provenance, accountability and the capability to sustain its obligations,” says Bright. “Secondly, whilst the Caribbean is famous for sugar, rum, fruit and domestic products, in general the Islands are net importers of goods and services. St Lucia was fortunate to escape the recent devastating effects of hurricanes Irma and Jose, and it is well-positioned to provide financial support to the region with a trade finance hub to rebuild trade. We can provide excellent rates because we offer niche products to smaller businesses." There will be positive trade winds blowing in from the EU, too, where a new era of open banking, facilitated by application programming interfaces (APIs), is likely to make automated due diligence easier. “Open banking will provide aggregation across different banks and the ability to look at total balances, or restricted balances, perhaps geographically, nationally and across individual accounts,” says Bright. “Our focus today is specifically trade finance – facilitating the delivery of goods and services through financial messaging. We believe that by further automating and using APIs, we truly benefit from totally integrated, trusted solutions.”

We’re told blockchain is going to be a pancea, but it will be some time before it becomes a de facto standard in the non-standard world of trade finance Autumn 2017 |



Transparent thinking Credit Suisse and SmartStream have worked together on keeping expenses in plain sight through an automated platform. The bank’s Ben Harrison and SmartStream’s Bharat Malesha discuss clarity, cost control and compliance Credit Suisse and SmartStream are established partners. The Swiss bank and the global software and managed services provider have been cooperating for several years and the result is greater transparency and a joined-up approach that is helping the banking community to contain costs and stay compliant. A foundation of this partnership is Credit Suisse’s Excalibur fee and expense management software, which was developed in 2007 and sold to SmartStream in 2014. A few steps further down the line and Excalibur has led to the development of SmartStream’s Fees and Expense Management Division, that promotes cost efficiencies by enabling banks to keep sight of expenses. The platform is now a cornerstone of SmartStream’s proprietary Transaction Lifecycle Management (TLM) service. TLM focusses on end-to-end transaction flows, from trade inception to settlement, using improved automation and visibility to maximise straight-through processing. Ben Harrison, a VP at Credit Suisse, explains that pressure on costs is one of the biggest challenges facing banks today, particularly in the brokerage clearing and exchange space. "It's been the backdrop for the financial services industry in recent years," he says. “That’s why it makes sense to have a managed service where standard processes are carried out by a number of firms, with the service centralised through vendors such as SmartStream.” Harrison points to consolidation as a significant industry trend, coupled with the growth of new products or slightly different order books. He highlights the example of Electronic Broking Services (EBS): “It used to be just EBS, but the



product line now includes EBS Market, EBS Direct and other initiatives. We’re definitely seeing more industry infrastructure, new services and offerings, which lead to additional invoice processing and complexity. Invoices are appearing in a wider range of formats and trade reconciliation is becoming more intricate and challenging.” This is where Credit Suisse can benefit from SmartStream’s managed service. “We’ve gone through the implementation process and we’re now focussed on realising the potential efficiencies, not just in the actual processing, but also in terms of improved controls around invoice reconciliation,” says Harrison.

Excalibur and the SmartStream partnership give us detailed, trade-level reconciliations, allowing us to be very dynamic in allocating costs to the correct trade “We want in-depth reconciliation of invoices on a trade level, to identify invoices that have been submitted incorrectly and to tighten controls on what we’re paying. If you’re receiving 1,000 invoices a month, you need cost controls. Excalibur and the SmartStream partnership give us detailed, trade-level reconciliations, allowing us to be very

dynamic in allocating costs to the correct trade. It means we provide the business with clear and concise management information.” Naturally, having clear and concise information will help businesses comply with the new regulations coming into force next year. “The second Markets in Financial Instruments Directive (MiFID II) is probably the one that’s most relevant for brokerage, clearing and exchange costs,” says Harrison. “The positive is the transparency it brings to these costs. Inter-dealer brokers will now have to become organised trading facilities (OTFs), with publicly available and impartial rate schedules, which signals a new level of market transparency. It will also remove some of the reconciliation challenges, such as when a broker submits an invoice that doesn’t resemble what you believe is your negotiated fee schedule, thus leading to a significant amount of time to correct invoices.” Thanks to MiFID II there should be fewer disputed invoices and brokers may receive funds quicker. In June 2017, SmartStream announced that its Reference Data Utility had been upgraded to meet MiFID II. A new reference data service is currently being tested with customers to help them comply with the regulation when it goes live in January 2018. SmartStream gives Credit Suisse a detailed transactional level of reporting on a T+1 basis, providing better engagement with the banks’ trading desks and oversight of the costs that they incur as their businesses grow. “We’ve had a number of new joiners recently,” says Harrison, “so this controlled environment keeps everyone in the picture about fees and working to the same end.”

Autumn 2017

Nowhere to hide: MiFID II signals a new level of transaction transparency

Autumn 2017 |


SIBOS While automation is good for efficiency, does Harrison think it’s bad for the job market? “I definitely see more complexity in the market as vendors, exchanges and the inter-dealer brokers develop new offerings,” he says. “Last year, Bats Global Markets released its auction mechanism for US options, and Box Options Exchange recently announced that it will open a trading floor. Consolidation and automation may be changing the landscape, but we’ll also see new offerings and new work opportunities.”

Standardising the market Like Harrison, SmartStream’s Bharat Malesha, EVP of fees and expense management, sees the transparency-cost equation as one of the biggest industry shapers and challenges today. “The rollout of the new OTFs will give buyers and sellers more structure in the marketplace,” he says. “These OTFs will have to provide general rules. That means a standardised rate card for something that used to be primarily bilateral in nature. We’re expecting many of the inter-dealer brokers will play in that area, so we’ll need to provide support.” Malesha adds that there is a growing demand for transparency in client billing, heightened by regulations. “It’s extremely important to get costs allocated back to clients, or the funds, so it’s a pretty interesting area for us in terms of how we present the cost base. Another thing, again related to MiFID II, is the position on the commissions.” Unbundling commissions will mean that research fees will come under closer scrutiny, and be distinct from executions. The quality of the research will also be looked at, which is something Malesha says is not managed by SmartStream. However, there are KPIs for the quality of research provided to the clients and, if the client is subscribing to certain kinds of research articles and other information, it will have to be measured. Speed is always a critical factor, and there is a constant demand to have cost

information more quickly. “If you can get cost information T+1,” says Malesha, “it’s a huge advantage to firms in terms of how they optimise their costs and their flows. And it’s a big area for our business.” The goal is to keep up with market changes, such as new pricing models. “When it comes to providing real-time fee transparency,” says Malesha, “we focus on making sure we can support new pricing models, relationships and business arrangements. We work with inter-dealer brokers and create a sort of utility where we match up trades and fees, and manage any disputes, daily rather than monthly. From a T+1 standpoint, this delivers efficiency and transparency.” When asked if it also delivers transparency about staff performance,

A clear view: COOs have complete visibiity of trading

You can’t fulfil the reporting requirements of the regulators if you don’t have the right level of automation



explains: “We can see if they are billing with the standard rate cards or not, and we often look at commission schedules. If they are outside an agreed threshold, we flag them. So the chief operating officers have complete visibility of irregularities, disputes and so on.” Transparency is growing in step with the digitisation of business. “Digitisation of information at all levels is very important,” says Malesha. “It gives you access, immediacy and insights for business efficiency. When you have cost data at a transaction level, spanning the entire business, you can perform penetrating analyses and develop more robust models to control costs.” But when it comes to automation versus people, Malesha thinks the implied conflict

Malesha says there is an indirect connection. “While we wouldn’t necessarily highlight personnel issues or liabilities, by providing transparency from a cost perspective and allocating that cost back to the businesses, to traders or the cost centre, we can provide very precise and revealing details at every transaction level. We can provide a net profit and loss back to the business and say what trades were done, which were profitable, which were not and if any non-standard rates were being used.” At the same time, SmartStream can also measure third-party vendors, as Malesha

is more apparent than real. “The goal of automation is not to eliminate people; it’s to gain control and understanding by managing information in a better way,” he says. “You can’t fulfil the reporting requirements of the regulators if you don’t have the right level of automation.” Technology provides a clarity and focus that would be hugely time-consuming to achieve if done manually. While automation is reducing the demand for certain types of labour, it’s also freeing time for other activities, he says, and these are where staff can be deployed more constructively and profitably. In other words: transparency + automation = cost benefit. Autumn 2017


Out of the box: mBank is looking to invest in and work with startups

Boxing clever Poland’s mBank has been there, done that and got the t-shirt. Having wrapped up all that experience into the innovative mBox, its seeking more clever ideas, as Wojciech Chmielewski, Managing Partner of its VC arm mAcclerator, tells us



Autumn 2017

How good would it be to open a box, lift out your new digital bank, plug it in and play? It would take all the heartache and pain out of going through a transformation programme, save a fortune on development costs and significantly reduce the business risk. And what if the manufacturer could also bespoke it to your particular brand of financial service? Too good to be true? Well, mBank has just successfully delivered it. The Polish bank’s mBox, a licensed retail banking solution, including electronic platforms, product, process and sales know-how – representing the sum of mBank’s accumulated knowledge since the former BRE Bank reinvented its internet platform in 2013 – has just been delivered to La Banque Postale in France. It’s the first deal in what Wojciech Chmielewski confidently predicts will be the first of many. The managing partner in mBank’s new venture capital fund mAccelerator (of which more later) says ‘it helps that mBank has notoriety for being a really innovative institution – clients are really open to exploring new opportunities with us’. And this bank certainly has the proverbial t-shirt to prove it. A multi award winner for its services, mBank is the most successful online provider in Poland, its own digital transformation driving it to become the country’s fourth largest bank overall with 5.5 million customers at home as well as in the Czech Republic and Slovakia, making it one of the few banks to have expanded beyond the country's borders. It’s now opening up a whole new revenue stream by embracing the banking as a service (BAAS) model and combining the breadth and depth of an established institution with the mindset of a fintech to reach out to the rest of the world. “We are opening the new chapter of Polish banking,” says mBank’s CEO, Cezary Stypułkowski. “By licensing our solutions to foreign partners, we are transferring Polish banking know-how to international markets. This [mBox] project is important not only to our bank, but to the Polish economy as a whole. It proves that the Polish banking sector is innovative and that the solutions it creates are noticed and highly appreciated outside Poland.” Autumn 2017

A few months earlier he had announced that mBank was setting aside €50million for a venture capital fund called mAccelerator, the first fund of its kind in Central and Eastern Europe dedicated to investing in financial technology companies. It was a move he described as ‘a great opportunity for mBank both in financial terms and from the point of view of our market position. It will help us strengthen our position as a company that is well-prepared for the challenges of the digital economy’. mBox and mAccelerator are clearly positioned to take advantage of a new era of open banking as Maciej Szturmowicz, who leads on the mBox project for mBank, explains: “Our mBox initiative is dedicated to banks wanting to establish their digital brands much faster than through multi-year transformation programmes. We offer an integrated solution that proves to work well in practice. It’s a good choice for companies that face the challenge of digital transformation – a challenge that is likely to become even bigger with the revised Payment Services Directive (PSD2).”

This is a great testing ground... if it’s successful at mBank, it’s going to be successful elsewhere mAccelerator, meanwhile, will make sure the bank itself can take its pick of the best new technologies.

Smart money for startups A stage agnostic fund, mAccelerator will invest anything between a few hundred thousand euros up to €8.5million in fintechs that have got beyond first concept phase, although the ideal targets will be those with the vision and courage to scale up globally. It will then invite them into its living lab – a real banking environment with five million customers at its disposal on which to test drive ideas. “We invest in financial technologies that can bring value and benefit to mBank’s clients and beyond,” says the fund’s Chmielewski,

who was on a European tour this summer, hunting down innovative startups in Berlin and London among many others. “We position ourselves as a supplier of smart money to startups and technology companies. We are not only offering financial support and investments to cutting-edge startups, but we want the best startups to apply their technologies within the universe of mBank’s five million clients. “mBank is a pioneer in digital banking, so, if I speak to startups, I can tell them ‘OK, you’re going to get my investment, we like you, but the most important thing is, you’re going to get your first proper implementation with mBank clients. We’re going to test you with them, and if mBank clients like it, we’re going to take you beyond mBank, and make our investment a mutual success for you and us’.” Not to be confused with the GSF startup fund, also called M-Accelerator, the mBank team ensures it stays on the money by having regular discussions about what’s missing from the bank’s current ecosystem. “We’ll have a very close dialogue [with mBank] in understanding what sort of points in customer experience and product offer they are missing, and we will seek out companies that can benefit those clients,” says Chmielewski, who is initially targeting developers involved in robotic process automation, cybersecurity and payments. “We’re focussed on things that mBank itself – as a really innovative institution – cannot produce on its own in the space of a year or two. They have so many projects, so many ideas, but they can’t do it all. So, we’re going to scour the globe for the best ideas, bring them here, check them out with mBank and develop them because this is a great testing ground. Hopefully, if it’s successful at mBank, it’s going to be successful elsewhere.” Meanwhile, the eyes of the banking world will be watching how the first mBox licencing agreement performs. La Banque Postale has already begun to implement the programme, which will be managed and delivered by mBox’s strategic partner, Accenture – which had a hand in mBank’s transformation back in 2013. It says the support offered to mBox ‘partners’ (as the bank prefers to call them) and the ability to modify mBox to their needs makes the programme ‘unique worldwide’. With talk of further deals under way, it looks like mBank has ticked all the boxes. |



The power of one Competition and regulation are placing new demands on the way banks handle customer data. Andy Berry and Kieran Kilmartin discuss how Pitney Bowes is helping clients to focus on the individual Thanks to big data and the versatility of digital technology, your bank probably knows you at least as well, if not better, than your best friend does. Unlike your best friend, however, it is also obliged to respect your data privacy, which means it has to reconcile the gathering of information in order to deliver the services you want with the need for regulation and compliance to give you the protection you deserve. Andy Berry, vice president EMEA at Pitney Bowes Software, says these should not be seen as conflicting forces, but rather as complementary demands – and ones that can work to the bank’s advantage. “Expectations are changing, driven by millennials,” says Berry. “People want a very simple customer experience, an easy way to interact with service providers, so banks must adjust to a new set of priorities.” That, he says, requires taking what's often referred to as the 'single view' of a customer – although it’s perhaps more accurately described as a ‘federated view’. “At Pitney Bowes, we’ve been collecting data for 100 years, which is why many of our clients work with us, and we use it to create customer profiles that span multiple data sources,” explains Berry. “We can swiftly integrate into a client's processes, tying systems together across millions of transactions.” But, however simple or complex, it always starts by asking the bank the same set of basic questions. For example, ‘how do you define a customer from all angles and all touch points?’; ‘what data is tied to that customer?’; and ‘how many accounts and different financial relationships does the customer have with the bank?’. The result of this financial personality test is segmentation and Pitney Bowes’ aim is to end up with discrete information linked in intelligent ways – hence the ‘federated’ nature of the profiling. Whereas in the past the goal might have been a database with all the information located in one place,



Berry says that’s no longer achievable with the sheer weight of data that can be captured today. “What we’re seeing is technology that links different systems together, by key words, key phrases, address data, phone numbers and other details, to achieve a customer view across multiple systems,” he says. “We start by taking unstructured data, then we validate it against structured data and fill in any blanks in data held by the bank. Whether we’re dealing with a few hundred transactions or a few million, the processing power is the same.” What emerges from this interrogation is a profile of a fully rounded individual – one with whom the bank can hold informed conversations and to whom it can make tailored, relevant offers. Which is why Berry believes the upcoming General Data Protection Regulation (GDPR), far from

GDPR is very much a case of treating customers as individuals and addressing their needs being the ‘extinction level event’ described by one high street bank, will in fact have a compelling and possibly life-enhancing impact on them. “GDPR is very much a case of treating customers as individuals and addressing their needs,” he explains. “GDPR can underpin the customer view rather than weaken it, so we’re working with our customers on an approach that fulfils GDPR compliance while raising customer service. In our view, regulation is fundamental to better customer service and trust.” Kieran Kilmartin, marketing director EMEA

at Pitney Bowes Software, agrees. He believes banks are no different to many other businesses holding fragmented data and so lacking a true perspective of the customer; GDPR will provide the framework on which to build it. “All regulations support the principle that you must know your customer, which is the single view by another name; GDPR is no different,” says Kilmartin. “If you truly understand your customers, you’re better able to meet their needs and sell them the right products. “That said, we’re seeing more and more regulations, some of which are at odds with each other, so we need to find the right balance. For example, anti-money laundering (AML) is about having as much data as possible in order to verify who is at each end of a transaction, while GDPR is about minimising the data you hold.”

Discover, prepare, act! The fragmented nature of large amounts of data held on customers is a consequence of the way banks have developed in recent years, says Kilmartin, and it inevitably makes it harder to comply with strict new data protection rules. For those banks that have embraced digital and are working with third party providers to improve their services, there is also a certain amount of moral jeopardy. Kilmartin explains that, while under GDPR ‘the bank is the controller at all times, they also give data for processing. So they need to ensure that their third parties are compliant. It’s complex and challenging for the banks’. He adds: “Another key area of challenge is around consent. A bank might have customer consent to use their data from the point of view that they hold an account with you and therefore contractually you need to process the data, which is fine. But there might be other times where, as a bank, I don’t have a contractual, legal obligation to process your data and I will then need to gain consent to do that.” Autumn 2017

If you fail to meet the requirements of GDPR, you place your reputation on the line, Kilmartin stresses. It is, he says, privacy by design. “So we help organisations become more transparent and accountable by adopting a three-step process called ‘discover, prepare, act’. We help them understand where they hold customer data, whether structured or unstructured – it might be in emails, Excel spreadsheets or databases. Once they have located it, they must ensure the data is accurate and up to date, and that they’re justified in holding it.” The process also helps clients meet another key requirement under the GDPR: to provide customers with details of any records they hold on them on request, and within a strict 30-day time frame.

Media is the message Customer consent and being customer-centric go hand in hand, says Berry because understanding data and controlling data are two sides of the same coin.

Similarly, technology allows customers to do their banking where, when and how they want, while the data it produces gives banks the overview and the insight they need to remain competitive and compliant. “A lot of our clients are looking at different media,” says Berry. “They’re experimenting with smartphones, tablets, video and other technologies, and they’re trying to figure out which type of media best suits their customers. “Consumers want a higher level of sophistication, a service that belongs to the digital age and not something from the 1970s. All sorts of technologies are coming to the fore. Video, for instance, is something we’ve concentrated on looking at for our clients as a powerful way of enhancing the customer experience.”

While the possibilities of applying this and other technologies are endless, the difficulty for incumbents comes, of course, in making changes to embedded systems and practices to accommodate them. “If banks started from scratch with no customers the transformation would be straightforward,” laughs Berry. “But they have years of customer data, across multiple back-end systems, many of which don’t support digital technology.” While that might give challenger banks a head start, Berry wouldn't want to leave you with the impression that there isn’t a lot going on behind the scenes. “The banks we work with are not sitting back – they’re making substantial investments in new technology,” he says. “It may take longer to have an impact, because their systems are bigger and they have larger customer bases, plus their customer data is far more complex and distributed, but they will catch up. And then they may even acquire some of those challenger banks.”

You've got the power: GDPR can strengthen the banks’ position

Autumn 2017 |



Everybody’s talking... Comarch joined the chatbot conversation by launching its financial wealth assistant in 2017. In this Fintech Finance Q&A its Business Solution Architect Sławomir Wójcik speaks up for AI Fintech Finance: What do you see as the biggest challenge facing bankers today? Slawomir Wójcik: Bankers need to increasingly cater for members of an emerging generation, many of whom will be full digital natives. Digital natives are the people thoroughly familiar with the latest technological novelties and expect those they do business with to use them, too. Winning the hearts and wallets of these newcomers, who are independent, risk-seeking, knowledgeable about investments and much more self-directed than their parents, is what the industry must prepare for. Bearing this in mind, the dominant role of financial institutions in the private banking realm is endangered, and so banks should form smart alliances with fintechs, consider them ‘frenemies’, if you will. It’s worth noting that in a 2015 report by FactSet and Scorpio Partnership conducted among high net wealth individuals, ‘Google’ was the most common answer to the question ‘which company would you be most excited to see start a wealth management service?’ The third challenge is where artificial intelligence (AI) comes into play to utilise demographic, contextual, and behavioural data to learn more about those you cater to – and to provide services that truly resonate with your audiences. In banking, you could automatically extend tailored alerts, product recommendations or investment ideas based on client preferences or online activity tracked via dedicated mobile apps. The biggest challenge here is to find a way to harness the capabilities of AI while staying compliant with regulations and relevant to client expectations. FF: What can we expect to hear from Comarch at Sibos? SW: Exactly that – how AI can be of use to us in everyday life! We’ll be looking at the



evolution of AI, driven by customer behaviour and examples of AI being used in banking and finance, including our own AI-driven investment recommendation module. We’ll ask the question ‘how can AI make private banking a commodity?’ and consider the use of AI in the advisory process. We’ll also be considering the challenges ahead for AI.

your front porch, ready to hop into your car and make a dash towards the office. The app you fired up on your phone a few minutes before recognises your new context and switches to the car’s head unit, allowing voice control to take over. A virtual female assistant picks up where you left off, greeting you by your name and presenting you with available options.

FF: How has the consumer’s demand for multichannel and multi-device changed the way banks need to look at their technology? How can you enable them? SW: As the fintech commentator Brett King says, no other industry over the last 250 years has faced as much competition from new entrants as banking is facing. This is partly why bankers have started to think about digital nomads and how to build relationships with them by creating the whole online-offline ecosystem, which is crucial considering the extent to which both of these worlds are now intertwined. But building effective multichannel platforms – and moving from the product-centric to customer-centric universe – is tough, involving as it does a complete new strategy for many market players who still struggle with old business models and legacy systems. In spite of that, more and more banks realise that multichannel does not equal just desktops, tablets and mobiles. The galaxy, so to speak, is, or could be, much wider than that. With this in mind, we have devised our own AI-driven investment recommendation module. Depending on context, it can run on various devices automatically: from smartphones and desktops to virtual reality goggles and car head units. In so doing, it allows financial institutions to seamlessly guide their digital-native clients in the most convenient way possible. Imagine it’s early morning and you’re on

FF: How does an organisation benefit from not just working with Comarch on say a front-office solution, but from becoming a part of your ecosystem? SW: First off, we can efficiently re-engineer selected business areas of any financial organisation or institution by delivering customisable solutions – in banking and beyond. But that’s just the start. Comarch has provided banks with IT solutions and services for more than 20 years, but our expertise goes beyond individual business systems. Apart from them, we offer consulting services in terms of security issues, authentication tools, centralised user management, system integration or IT infrastructure administration. In other words, we take end-to-end responsibility – from solution design and implementation up to maintenance, so our clients may rest assured that whatever happens, we’re there for them. FF: How do you think banks can be in a position where they are able to be flexible enough for future regulations, without having to upturn their IT? SW: Take wealth management: more legal intricacies to follow equals an additional burden for advisors multiplied by the deterioration of personal client-advisor relationships, plus the urge to become more efficient through the use of modern technologies. The conclusion is: good old elbow

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grease may no longer suffice in terms of being on top of multiple ‘rules of the road’, and at the same time, not departing from the same top quality of service without reducing the number of clients per advisor. So you’d rather have some handy tools – systems – at your disposal to get the job done. Good thing is, it’s not always about upturning things. A journey of a thousand miles begins with a single step. FF: Where do you feel most progress has been made, and where is there the most scope for more? SW: Client experience and access to various financial services in the online channel have been significantly improved. This is mostly due to following the fintech way of thinking. But there’s a lot to do in the AI field. A rather slow pace of progression towards machines that can actually think leads some to a slight disillusionment with AI, to say the least. This relates especially to chatbots, a hot topic now. Today’s chatbots are still not quite chatty and struggle to meaningfully answer lots of the questions we ask. Getting to grips with the intricacies of conversational language is the biggest hurdle for chatbots to jump over. Another thing is, chatting with a bot about money matters may be problematic in case of any occurring bug. According to a recent HSBC report spanning 11 countries, only 11 per cent of people would trust a chatbot to open a savings account or provide mortgage advice for them. FF: How do you think the financial services market is going to evolve over the next few years? SW: Voice-controlled assistants employing artificial intelligence are now hailed as the next big thing. They offer a new, improved interface for a myriad of devices and infrastructures, from cars to homes, mostly because they allow users to absorb just as much information as they need at a given moment. The importance of this can’t be overstated in the era of data overload. Some tips on where they should be headed in the financial context were highlighted in a new GfK study, which shows the most pressing – and largely

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Only 11 per cent of people would trust a chatbot to open a savings account or provide mortgage advice for them unfulfilled – of people’s needs related to banks. The first three, with the widest gaps between consumer desire and satisfaction, revolve around pointing out ways to avoid penalties and fees, offering tips to improve finances and identifying changes in spending patterns. GfK believes chatbots that can handle basic customer service interactions online or by phone hold the promise of filling in these service gaps. |



First past the post

Instant payments isn’t a one-horse race and UniCredit is backing a number of runners, as Global Head of Cash Management, Cédric Derras, explains Remember when you had to queue to buy your favourite pop group’s latest chart topper; or physically flick through a magazine if you wanted to read about their lives and loves? In today’s interconnected, consumer-driven world, we’ve all become used to instant digital gratification. Why buy vinyl when you can download it from iTunes, or waste good shoe leather walking to the newsagents when you can read the NME in a subscription app?

Curiously, though, the time it takes to process the ‘instant’ payments behind those transactions, especially if they are across borders, is probably longer than the act of consumption itself. When it comes to real-time, transparent processing in transaction banking, payments definitely have a way to go. That said, Europe takes a big step forward in November with the implementation of Single European Payments Area (SEPA) Instant Credit Transfer, known as SCT Inst, one of several payment protocols that UniCredit has wholeheartedly embraced. “The market is moving fast and we want to be one of the frontrunners with



instant payments,” says the bank’s global head of cash management, Cédric Derras. SCT Inst will allow European payment service providers to offer lower-value instant credit transfers worth up to €15,000. The process will take 10 seconds and transactions can be made 24/7/365 – a world away from existing systems that can take a whole working day. UniCredit will offer SCT Inst for both retail and commercial customers over the new EBA Clearing payments infrastructure RT1, which is primed to launch with 29 banks on the day SCT Inst goes live. Another 100-or-so will come on board during 2018. “One of the biggest challenges for banks today is to clearly decide what to pursue and what to ignore – we have to be super precise in what we choose to work on,” says Derras. But faster transaction times for clients is definitely top of UniCredit’s list.

Achieving faster response The bank was one of the 29 that helped to fund development of RT1, and UniCredit’s German and Italian customers will be offered the service from the outset. It believes they will embrace the system, with the bank’s co-head of global transaction banking Jan Kupfer saying in July ‘with

payers notified of a successful transaction within seconds, we will greatly enhance the effectiveness of our services and increase customer trust’. The UniCredit team attending October’s SIBOS in Toronto will be presenting on its work with RT1 so far. But there’s yet another fast-moving project on the blocks – SWIFT gpi. Offered to corporate customers, it channels payments in 224 countries and territories. So far, 110 banks have signed up and, at the time of going to press, 19 had gone live, including UniCredit. The bank believes SWIFT gpi will become the new paradigm for speed of execution and transparency in cross-border payments.’. “We’re already live with it in Italy and we are working on extending gpi for the entire group,” says Derras. “Our experience has been very positive. It only takes a few minutes to confirm a payment, from beginning to end, and at each and every step of the payment execution there is the possibility to track it. That brings a new level of transparency and traceability into the cross-border payment market. It’s happening today, we’re part of it, and we are absolutely convinced its use will increase quickly as other players choose to get on board with it,” adds Derras.

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Given that SEPA was only recently brought in to do the massive job of standardising and harmonising billions of daily euro payments, the criticism that cross-border transactions are unnecessarily slow is a little unfair, says Derras. “We should not underestimate the magnitude of processing an international payment,” he says. “It has to take into account regulations in the countries involved. There are various intermediaries, so compliance-wise, there are plenty of things that need to be verified. All these factors have slowed things down in the past.” There is another system, of course, that could also become a strong technological option one day – blockchain. And yes, you guessed it, UniCredit is all over that, too. The bank is part of the Digital Trade Chain project, which is a consortium of European banks, including HSBC, Deutsche Bank, Rabobank and Société Générale, collaborating on developing a trade finance and supply chain management platform for SMEs. Like the SEPA, EBA Clearing and SWIFT innovations, the goal is slicker and cheaper domestic and cross-border commerce for European businesses. IBM is building the system and it will run in IBM’s Cloud. UniCredit hasn’t lost any time offering other alternative payment methods to its merchants, too. Derras says it benefitted greatly from being the first Italian bank to provide them with the ability to take payment via China’s Alipay platform.

“It has been an instant success,” he says. “Alipay, and the Alibaba wallet, is part of a complete lifestyle ecosystem, in terms of a solution for Chinese people. They want to continue to use their mobile lifestyle app everywhere they go. And when you look at the number of Chinese visitors to Italy each year, it’s enormous. So we made an agreement with Alipay for all of our merchants, but it has been a particular success for those in airports, flagship stores and luxury brand retailers.

The market is moving fast and we want to be one of the frontrunners with instant payments “We were also the first Italian bank to facilitate the use of Apple Pay. These are two examples of UniCredit innovation that are up and running today.” Returning to his point about the pressure on IT budgets, Derras says partnerships with fintechs are proving crucial, given the highly technical nature of digital projects. He cites the implementation of the revised Payment Services Directive (PSD2), and the resulting explosion in application programming

interface (API) development, as some of the reasons why tapping into external expertise is vital. “The ultimate impact of PSD2 is that the banks will be opened up to the world,” he explains. “Banks will need to develop APIs and will need to decide what they make available to third parties. But more generally we are seeing a switch to an open banking paradigm. “Fintech has a role to play. Banks need to drive the strategy, the level of service and the products they want to offer in this open banking era. But actually making it happen will require IT investment and solutions, and this is where banks can potentially rely on fintech expertise.” In an ideal world, Derras would like to see more collaboration with global technology giants and specialist fintechs. “Give me a blank sheet of paper and I would try to facilitate this with the tech giants and fintech specialists, so that we could use their expertise to boost our systems and provide more efficient solutions for our clients across all sectors. “Leave the banks to focus on their core activity, which is processing payments, executing financial services and managing data to enhance product offerings and support customers. All these functions are made possible by IT systems, but IT development is not the core mission of a bank,” says Derras. “And because we are developing more and more new products, collaboration becomes all the more necessary.”

Odds on: Banks need to back the right tech horse

Autumn 2017 |



Pointing the way Pendo Systems will unveil a new platform at Sibos that’s focussed on helping banks become ‘AI-ready’, as Chief Technology Officer Philip Dodds reveals You could put a cigarette paper between ‘fintech’ and ‘regtech’ these days, so much of the innovation driving change in financial services is being catalysed by regulation – around data retrieval and transparency in particular. “I think, one of the big challenges for banks is trying to make sense of all the different opportunities each of those presents, be it Bitcoin, blockchain, the promise around machine learning or artificial intelligence (AI),” says Philip Dodds, chief technology officer for Pendo Systems. “Then, of course, there’s ‘how do I figure out if the companies offering any of these services are genuinely for real?’; ‘how do I sort out all of those businesses who are claiming to solve my fintech, regtech, AI problems and whether they are in it for the long haul?’. You know, if I were on the banks’ side of the table, I’d probably be feeling a bit overwhelmed and struggling to keep up, too.“ That said, organisations have had plenty of time to consider how to maximise data value and minimise data risk. Dodds notes there’s been an acknowledgement of the issues for at least 10 years, yet many are only now getting to grips with them, galvanised into action by compliance – Europe’s upcoming General Data Protection Regulation (GDPR), due to come into force in May 2018, among the posse of rules threatening big penalties if they don’t. Pendo Systems, which has been implementing software solutions for the financial services industry since 2007, works with a quarter of the systemically important financial institutions (SIFIs) in the US. There’s no question about its staying power. But for the past two years it has been quietly running a new machine learning platform with two of its clients in order to prove its newest solution is ‘for real’. Sibos will be its coming out party. Built as a suite of layers on top of open-source search technology, the



enhanced Pendo Platform can be taught to interrogate files, retrieve, collate, and publish unstructured data – and it can do it at lightning speed, which might be crucial for companies (some say as many as 35 per cent of organisations in the UK) who now have just six months to get their act together for GDPR. Using natural language searching, tagging, optical character recognition (OCR), domain specific language and indexing, the Pendo Platform processed 48 million unstructured documents in seven weeks, extracting the dark data and putting it into a database where it was readily accessible to the client. The project had previously been estimated to take four years.

Production-ready solution The Economist has described data as ‘the new oil’, such is its power and value to whole economies. But how to extract and refine that value still poses a problem, even for the biggest players. “Even though the problem of unstructured data has been around for a while, there has been no real hard and fast production-ready solution in the market,” says Dodds. It was in this context that Pendo Systems took the decision to shift its focus to tackling it, under the aegis of founder and CEO Pamela Pecs Cytron. “At Sibos, we’re going to demo some of the new functionality that we’ve added to be able to develop those accuracy levels, to show the difference when you run something with the Pendo Platform versus something running off a generic natural language processor and the generic algorithm that comes with it,” says Dodds. While it’s not the only production-ready system to enter the market recently, Pendo Systems comes with unusually extensive road-testing and it has more to offer than compliance housekeeping, he adds. “It’s a very robust product, with lots

If I were on the banks’ side of the table, I’d probably be feeling a bit overwhelmed and struggling to keep up, too Autumn 2017

firewall; it’s not something you have to integrate, says Dodds. That will give banks and indeed some regulators who are uneasy about using of Cloud-based platforms to handle personal identifiable information with a degree of confidence.

Expanding the team

of different applications relative to unstructured data. Our clients are using the tool not just for a rear-view mirror view of what the business did, but they’re also using it more predictively to make them AI-ready.” With AI, the devil is in the detail. AI tools generally cannot work with unstructured data, so Pendo Systems structures this data using a range of natural language processing (NLP) approaches. And where generic algorithms generally have 50 per cent accuracy, Pendo Systems’ battle-tested modifications have shown 90 per cent and above. Autumn 2017

Dodds says it’s testament to the hard work the company has previously put in to building its algorithm. “If you were to get where we are, without having access to our algorithm, you’d have to go through 10 million documents, tag them and train your platform to recognise the content within them,” he says. But because the Pendo Platform comes with this machine learning already acquired, organisations are effectively sending in a post-graduate AI to sort out their processes rather than a fresher. And for organisations tired of tinkering with infrastructure, there’s another distinct benefit. The platform happily works alongside a system, inside a

Pendo Systems stands out within fintech for several reasons, but not least because it is a majority-led female firm in a male-dominated industry. Pendo Systems is certified as a Women’s Business Enterprise by the Women’s Business Enterprise National Council (WBENC), the largest third-party certifier of businesses owned and operated by women in the US. CEO Pamela Pecs Cytron is understandably proud of Pendo Systems’ recruitment programme and of the fact that it took on three more senior staffers earlier this year as it expands rapidly. “There’s no better measure of a company’s growth than getting to add hugely talented people to your team. As a WEBNC certified company, knowing we now have a 60 per cent female to male ratio is especially gratifying,” says Pecs Cytron. Perhaps tellingly, given the platform offering Dodds describes, those senior appointments bring particular skills in infrastructure and change management. Pendo Systems has also just announced that industry veteran Bill Woodley will be joining as a non-executive director. Having held a variety of executive roles within global financial firms across Europe, Asia and the USA, Woodley brings more than 25 years in the banking industry to the board, with extensive business and operational experience across strategic, risk management and regulatory issues. Most recently, he was the CEO of Deutsche Bank Americas and DB USA Corporation, the firm's US intermediate holding company. Woodley joins recently appointed, Ruth Wandhöfer, global head of regulatory and market strategy at Citi bank, on the Pendo Systems’ board. As Pecs Cytron says: “2017 is proving to be a banner year for Pendo Systems.” |



Why Brussels is all-of-a-buzz Wim De Waele, CEO, and Fabian Vandenreydt, Executive Chairman, of collaborative innovation platform B-Hive, make a compelling case for a global hub at the heart of Europe Believe it or not, Belgium possesses the highest density of roads and railways in the world. There are more than 4,000 km of train line squeezed inside the country and the Belgian highway system is the only man-made structure visible from space at night. The country also holds the record for the longest tramway in the world, spanning 68 km between the French and Dutch borders. You could say that all roads lead to Belgium. The industrious group of developers and enablers who make up B-Hive believe the fintech superhighway could soon lead there, too. Its mission is to bring the greatest minds in financial services together and turn Brussels into a key fintech hub. “The most obvious reason is because of its proximity to the EU. What’s the first city that comes to mind when you hear the word Europe? Brussels,” says B-Hive CEO Wim De Waele. “Recent political reform has heightened companies’ awareness of the need to establish strong gateways into Europe and developments such as Brexit have served to raise B-Hive‘s profile significantly because firms are afraid to have the door to Europe shut on them before they have a chance to spread their operations within the region.” Brussels isn’t a fintech honeypot just by virtue of its political connections, though. Fabian Vandenreydt, B-Hive executive chairman, outlines the other factors that are boosting the city’s status. “It’s important to note that we’re not trying to compete with the likes of Frankfurt or Paris in terms of financial services,” he says. “On the other hand, we know that there are times when, in certain



areas, Brussels has some significant advantages over these major banking hubs. “The city’s multilingualism is undoubtedly appealing to many international firms and we also have a deep level of competence in market infrastructure. SWIFT, Euroclear and MasterCard have based key operations in the city for years, which proves the stability of Brussels’ financial services network. “Brussels’ prestigious universities are also benefitting the city’s fintech community immeasurably,” adds De Waele. “For any technology company, be it within finance or another industry, access to market and talent is probably the most important factor in determining the company’s location. Nowadays, most technology firms are global companies, meaning physical location is of less importance, however they still need to find the right people with niche skill sets, especially technical and business-oriented expertise. Thanks to our network of universities, Brussels is able to cater for the recruitment needs of financial services firms across the board, however specific they may be. “Developments in payment technology and cyber are flourishing in Brussels due to the efforts of our academic institutions, and this is allowing us to move ahead of other foreign cities within a variety of financial niches,” he adds. The B-Hive team is looking to encourage two-way traffic in financial services and ideas across the Belgian border. Less than a year old, the firm has already set up shop in New York, London and Tel Aviv, and will soon open a hub in Singapore, to strengthen ties with Brussels. All of its locations are carefully chosen because they have something specific to offer to the industry, says Vandenreydt.

“The raison d’être for creating links with these cities is to gain access to views on technologies and startups that are evolving in regions other than our own. These different perspectives will undoubtedly reinforce our own programme and allow us to cater for the needs of firms, regardless of the financial landscape in which they’re situated. “Besides acquiring alternate financial perspectives from different regions, we’re also benefitting individually from each city that we’ve chosen to establish ourselves within,” says Vandenreydt. “Tel Aviv (and Israel in general) is a valuable reservoir of cyber knowledge, with a whole host of companies and experts dedicated to the advancement of cyber operating from the city. “Singapore, on the other hand, is at the heart of a wave of regulatory technology development that is currently sweeping across Asia. “The US and the UK are the forefathers of venture funding and

Working together: Collaboration is key to B-Hive

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startup incubation, so that’s why we opened offices in New York and London as soon as possible. “As you can tell, we’re being very selective about where we choose to install ourselves and we don’t plan to become any less scrupulous as time goes on.” Back home, native innovators in this fintech-friendly city are creating value over what the B-Hive team calls its ‘collaborative innovation platform’. “Banks, insurance companies and all other large financial institutions are facing numerous common challenges within fields such as cyber, regtech, application programming interfaces (APIs)and blockchain. B-Hive is providing a means to address these problems in a collective fashion,” says Vandenreydt. Built on a membership structure, it hasn't taken long for B-Hive to prove its worth. “In our 10 months in existence, we’ve already built a substantial ecosystem of more than 120 technology companies, both mature and startup, with the aim of encouraging these firms to develop concrete solutions together,” adds

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Vandenreydt. “We’re backed by the Belgian government and supported by 13 major financial institutions, all of which are helping us to achieve our dream of ‘connecting the dots in fintech’.” Speaking of big players, B-Hive has already launched two programmes as a result of collaboration with the likes of SWIFT and MasterCard. TrustHive was launched at Money20/20 Europe this year as a blockchain-based platform to support the industry in areas such as know your customer (KYC).

We have already built a substantial ecosystem of more than 120 tech companies with the aim of encouraging them to develop concrete solutions together

“Requirement number one for TrustHive is compliance with the General Data Protection Regulation (GDPR),” says De Waele. “We took every opportunity we had to discuss GDPR with our members during the development process, be they a bank, an insurance company or a startup, in order to collectively identify what was needed in a GDPR-compliant solution. Trust Hive was borne out of these discussions, and we’re confident of the benefits to numerous firms as next year’s regulatory changes draw nearer. “We also recently launched CyberHive, which is essentially a support structure for all our members concerning any cyber-related challenges. We’re continually scouting for interesting technology partners that are active within the field of cyber, with the goal of integrating their ideas into our programme in order to generate an ecosystem that’s unmatched in terms of cyber innovation.” Sure, Brussels may be home to the European Union, and it may have a sound financial services network. Yes, its multilingual culture and great universities are a bonus when it comes to conceiving fresh ideas. However, what might put Brussels in strong contention as fintech capital of the world is the mindset of organisations like B-Hive. Inter-firm collaboration undoubtedly constitutes the next stage of evolution for the financial services industry as a whole, and B-Hive is determined to create a buzz about it. |



Do treasurers dream of electric spreadsheets? Bank of America Merrill Lynch’s approach to digital investment doesn’t keep its bankers up at night, says Head of Transaction Services EMEA, Matthew Davies If there’s one thing currently separating bankers from their beauty sleep, it’s emerging technologies, as fatigued executives spend their nights tossing and turning, trying to evaluate which new ones to invest in. “Companies don’t want to back the wrong horse,” agrees Matthew Davies, head of transaction services EMEA at Bank of America Merrill Lynch. “We’ve seen it before in other sectors, haven't we? Some people championed Betamax as the world turned to VHS; some companies refused to abandon keyboard-based phones when everyone was buying into touchscreens. “The financial industry is facing a similar conundrum, and the fate of those firms who choose unwisely is likely to be just as grave,” he warns. Taking its cue from history, Bank of America Merrill Lynch has eschewed the ‘all eggs in one basket’ approach and adopted a deliberately diverse investment strategy for emerging technologies that has delivered a fat portfolio of digital solutions that spreads the risk associated with new technology. The bank's diverse range of most recent innovations includes a digital travel aid and canny chatbot Erica, a virtual assistant due to launch within the bank’s app this autumn. Erica is an example of how artificial intelligence (AI) can revolutionise the financial habits of customers. At Sibos 2017, Davies and his team will be showcasing another AI solution. Intelligent Receivables, a platform unveiled in a press release in August, streamlines labour-intensive operations that have eroded the efficiency of treasurers for decades. “Whenever there are manual, repetitive tasks, there’s a potential application for AI and robotics,” says Davies. “We’re currently piloting AI technology across a



Technology torment: Which investment is the least risky?

broad spectrum of areas to discover where it is best implemented. “With Intelligent Receivables, we’re trying to tackle a common challenge among treasurers – knowing who has paid you and for what. The vast amount of data involved in cataloguing receivables makes it ideal for AI implementation. Our solution incorporates a blend of AI and robotics to connect receivables data with the appropriate transactions, effectively closing the item for the treasurer and allowing them to apply cash quicker while considerably reducing days sales outstanding (DSO).” It’s not limiting itself to AI and robotics, though. The bank was one of the first to bring virtual accounts to market, and is still leading the world in account digitisation. “Our virtual account solution is particularly sophisticated, and the benefits experienced by our clients in terms of payment factory management are unparalleled,” says Davies. “At first, a lot of companies overlooked the potential of virtual accounts; we’ve persevered in our investment in this field to maximise the advantages of the technology. As more and more global companies reconcile their accounts using our virtual solution, we’re now asking ourselves, ‘how do we globalise this?’. “Every region has its own specific needs,” he says, “but our goal is to create

one globally consistent virtual account solution for all of our clients.” So, what’s Bank of America Merrill Lynch’s secret weapon in the battle to harness emerging technologies? It’s secured a host of helpful new friends. “Traditional firms like ours are realising the benefits of a collaborative approach with fintechs,” says Davies. “Incumbent banks bring large, existing client bases to the table, while fintechs provide cutting-edge technological advantages. When you put the two together, it’s a win-win on both sides. He points to the bank's launch of digital disbursements internationally, proving how effective such a collaboration can be. “We knitted our core infrastructure together with the technology of an established fintech (digital payments firm ModoPayments) to allow our clients to reach beneficiaries without the need for their full bank details,” explains Davies. “For example, a beneficiary receives a text saying ‘X company wants to pay you’, and is then given the choice of how they’d like to receive that money, perhaps via PayPal or another digital wallet. Without ModoPayments, we wouldn’t have been able to bring this solution to market anywhere near as quickly as we did and we’re confident that future collaborations with other fintechs will help us to stay ahead in the race.” Autumn 2017







Visit JobsOhio at: to discover new partnerships, new resources and new innovations in financial services.

Valentina Isakina Managing Director Financial Services 1.614.362.3731


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



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

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

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

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

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

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

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

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

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



Embracing change From creative destruction to disruptive technology, Alex Tsigutkin, CEO of AxiomSL, is finding alternative ways to deal with the new normal Some of you might remember Harvard professor and economist Joseph Schumpeter, who believed that creative destruction was what a firm faced when the choices that once drove its success become those that destroy its future. Many more theories followed, including the innovator’s dilemma, disruptive innovation and disruptive technology, to mention only a few. Today, between the UK’s vote for Brexit, Donald Trump’s successful bid for the White House, 2017 elections in Europe, a slowdown in Chinese economic growth and other world economic factors, the old order is being turned upside down. So how do financial institutions (FIs) ensure sustained growth in this unpredictable geopolitical climate, with ever-changing regulatory regimes and market margins that are under pressure? To identify and recognise opportunities that originate from turmoil, they should create an innovative technological environment that will adapt quickly to these paradigm shifts. A flexible, data-driven technology with strong controls combined with data and process governance are the foundation to meet those demands. To this end, we have seen the financial services industry make significant investments in risk and regulatory compliance systems over the last few years. Today, with technology budgets tightening, firms have to leverage existing processes and enhance their capability to integrate them effectively with remaining legacy systems to address internal management changes and evolving regulatory regimes. Many studies concur with that approach and analysts predominantly suggest that firms need to adopt a technology platform that can be leveraged repeatedly and across projects and applications to be cost-effective, reduce time to market and achieve sustainable growth. Complying with the multitude of



regulations is a complex, time-consuming and costly activity, especially when the regulatory bar keeps rising to meet global standards, such as BCBS 239, or regional standards, such as US Federal Reserve CFO Attestation. These industry initiatives have pushed data lineage to the fore. In the past, data lineage was a concern primarily of the back office and auditing function; now it has moved forward to middle and front-office end users, and even senior management requires access to granular details about data flow and governance rules without being overwhelmed by them. The cornerstone of data governance begins with data lineage. Let’s use an analogy with a GPS system. Imagine driving on a long journey equipped with

Manual processes used to capture data lineage in Excel are not sustainable only a 20-year-old paper map. The chances that you will take the shortest and safest route and get there on time are very slim. GPS was revolutionary because it provided us with an easy-to-use navigational tool that told us the direction for each turn you needed to take to reach your destination. Today, regulatory bodies closely examine FIs’ compliance processes and governance, such as BCBS 239-Risk Data Aggregation and Reporting, and other worldwide regulatory mandates demanding back testing, reconciliations to the source data and attestation rules, as well as requiring financial firms to submit regulatory reports using XBRL, which require prescribed data point taxonomies. As a result, senior executives need to find a reliable tool to get their firms to a data governance strategic advantage point in a

cost-effective and sustainable manner. Let’s look at some data challenges that FIs have been struggling with: low-quality business information resulting from data integrity concerns often caused by unreliable ‘black box’ aggregation processes; lack of data specialists dealing with a high volume of disparate data sets; managing business requirements and processes through legacy corporate data warehouses; and data lakes becoming extremely challenging projects. Systems are ill-equipped to handle these demands and outside of these technical challenges, business and IT leaders are not working collaboratively, which has exacerbated firms’ data problems. To address these challenges and rising global and regional standards, many FIs have begun evaluation and implementation of data lineage tools. However, getting data lineage right is difficult work, starting with the metadata. Some of it is incomplete and when it is available, it is often dispersed. Even when it is effectively funnelled to one place, many systems are not designed to handle or interact with highly complex and granular regulatory reports, which might result in limitations in scaling data lineage projects. Good examples of this are the recent requirements for trade and transaction reporting – e.g. the second Markets in Financial Instruments Directive (MiFID II), the European Market Infrastructure Regulation (EMIR) and Consolidated Audit Trail – where not only granular reporting is required, but also real-time performance and interface with central repositories. Another issue is identifying the practical purpose of data lineage. Often it is used to track the use of a particular data element in assembling records of data from a bottom-up perspective at the downstream processes. On the other hand, someone else might want to track iteration upon the data from the top-down direction, starting with a particular end-product report and Autumn 2017

examining its construction from a business logic or risk analysis-based perspective. In all scenarios, a robust data lineage should create a data environment with high-quality controls, documentation and governance mechanisms aligned with business goals. While most FIs believe regulators will continue to increase requirements for data capabilities, only a few of them have begun to use data strategically to streamline and optimise business processes and, ultimately, support business growth. Data lineage can be the roadmap to new business models and innovation and the enabler to align programmes with the overarching data vision and strategy. To this end, CEOs and senior executives should link data content and metadata using a data lineage tool across systems and applications. Such a tool could act as your GPS navigation system to establish data governance processes, which would drive business growth and make operations more optimal and profitable. In the current volatile environment, it is paramount to quickly access high-quality and trusted business information with an integrated, detailed and governed view of data assets. Tactical approaches and manual processes used to capture data lineage – and even document lineage – in Excel are not sustainable and create operational inefficiencies when building a data

governance process and delivering an end-to-end accountability for data. FI executives need to think strategically about their data, especially in an environment where we find complex and disperse data across platforms, reporting workarounds and incomplete past efforts at enterprise data governance.

Rerouting the data map AxiomSL’s data lineage tool can provide that strategic roadmap as it delivers technical capability where projects implemented in the AxiomSL platform inherit out-of-the-box data lineage. The platform is equipped with visual business rules that can be deployed across the enterprise to address multiple time-critical projects, including data management, finance, audit, risk management and new regulatory demands. It tracks your data route from the source to the final destination while collecting along the way critical information and analytics that can optimise your processes, such as capturing and documenting data flows, data transformations, critical data elements and business logic from the point of data entry to the final regulatory or internal

Change is good: Applying old solutions to new problems will not work

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management report. Thus, it not only yields business value but also delivers the most reliable route to your destination. To adapt to the changing regulatory and business environment, firms will need to build a robust, transparent and flexible infrastructure that should a) deliver the scalability to operate on larger data sets and run risk analysis over longer historical timeframes; b) improve data management to curate and store much larger sets of data; c) provide flexible infrastructure to adapt quickly to new and more stringent regulatory, business and technical mandates; d) reuse and leverage data and processes while avoiding siloed responses to deliver trusted information; and e) provide data lineage that identifies the source of every input and shows how it navigates throughout the entire process. In summary, a platform should seamlessly interface across business functions as ownership of processes and information is fragmented and zealously guarded. Roles are designed around parochial requirements, resulting in internal complexity, which hinders cross-business collaboration. To this end, FIs should set up a cross-functional platform to ensure that duplication of work, such as disconnected processes making the same set of calculations, is minimised, and automate processes to reduce lengthy run times in testing the soundness and sensitivity of results. AxiomSL’s data and process control platform acts as an integration and application development layer that is implemented with minimal internal disruption and without imposing a ‘black box mentality’. Processes can be decoupled, analysed and then reused and leveraged. It brings benefits in various areas across the enterprise, including cost and timeline reduction; steady business transformation; faster time to market; and reliable data integrity with a technology that manages and attests to the accuracy of clients’ data throughout the workflow. Integrating data lineage and control tools into the architecture will ultimately give FIs a competitive edge. Automation and full validation with data lineage will be key to success. If change is the one true certainty, then it is up to us to make the bedrock for any firm – data governance, controls and the ability to adapt quickly – as solid as it can be. |



Risk and reward

Tom Golding, MD of Risk and Compliance for Accuity, considers the worrying decline in correspondent banking relationships and what can be done to reverse the trend US president Donald Trump’s presence at the G20 summit in Hamburg this summer might have dominated the TV news, but inside the conference, something else was getting headline attention from finance ministers.

The decline in the number of correspondent banking relationships since the global financial crisis has occurred at an alarming pace. And it poses two big issues for the world economy. A limit on the ability to send and receive international payments could negatively impact trade; just as worrying, it could drive such payments underground, threatening the stability of financial systems. Ironically, one of the contributing factors to what Accuity estimates to be a 25 per cent fall in the number of correspondent banking relationships between 2009 and 2016 is tighter regulation designed precisely to prevent that from happening. A correspondent bank is one that conducts activities, such as third-party payments, cross-border and clearing services on behalf of another bank. Their role is crucial to emerging markets in particular. Accuity, whose mission is to protect the reputation of payments and compliance professionals with a portfolio of regtech and data solutions, blames the downward trend in these relationships largely on derisking strategies adopted by US and European banks. In one of the first of many such reports to emerge this year highlighting threats to correspondent banking, it found that increased regulatory risk and higher due diligence costs were contributing factors.



It pointed to the total anti-money laundering penalties paid by banks, which peaked at $10billion in 2014. “At this level, the threat to banks of doing business in higher risk nations potentially outweighs the benefits of providing services to their clients in these regions, even if there may be good business opportunities to pursue,” it said. The findings were based on analysis of settlement data collected through Accuity’s payments solution, Bankers Almanac for Payments, between 2009 and 2016, which looked at the number of bank branches, headquarters and correspondent banking relationships, covering around 29,000 banks in 238 countries or regions. But compliance and the associated penalties are not the only reasons that banks are reducing their number of correspondent relationships.

The need to rebalance According to the Financial Stability Board, which presented its concerns to the G20 leaders this summer, industry consolidation, reduced profitability, changing risk appetites of correspondent banks as well as more stringent regulations related to antimoney laundering, combatting the financing of terrorism and sanctions, are all playing a part Whatever’s driving it, the impact is becoming clear. The vacuum left by financial institutions in the West is being filled by those in the East, notably from China; and businesses in regions most affected by derisking are now struggling to access global financial systems. There are macro and micro implications.

A global threat: The number of correspondent banking relationships have declined by 25 per cent, says Accuity

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Accuity’s global head of strategic affairs, Dr Henry Balani, has warned that: “Allowing derisking to continue unfettered is like living in a world where some airports don’t have the same level of security screening – before long the consequences will be disastrous for everyone.” But meanwhile it’s making life tough for middle market operators, says Tom Golding, MD of Risk and Compliance at Accuity. “Let’s take a live example. Say you’re a financial service based in Australia and remitting back to India for migrant workers who want to send money home to their families. As a remittance business, you have to hold relationships with other correspondent banks to manage that transfer of money. But the banks say the business is going to be high risk because it’s a lot of little, low-volume payments in a country where the bank cannot get a good sense of who these individuals that you’re remitting to are. That remittance company might have gone through all its clearance checks, trying to do the right thing, but the banks take a view based

As a correspondent banker, you need to be able to trust what the picture is telling you on the top-line factors. If the cost for them of doing the proper due diligence is just too high, they can’t get the margin – and so the message is ‘if you cannot make our margin, you cannot go after the business.” There is an antidote to this, believes Golding, and it’s through automation. “By automating you achieve better risk assessment around the know your customer (KYC) process at a lower price because you can answer the questions ‘who am I doing business with?’, ‘can I do this business?’ and ’should I do this business?’ more accurately’,” he says. “We have to look at different ways of presenting the risk picture – and that means in a more automated and consistent manner.

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SIBOS Screening: A clearer view reduces risk and cost

“Banks need to understand a business well enough to judge the effectiveness of its controls and be able to adjust the risk assessment accordingly. Taking the Australian example, if they can quickly understand that remittance business and who the person is, their risk is going to be much lower. “As a correspondent banker, I need to be able to trust what the picture is telling me and through the automation of data you can get to that point.” The company will be rolling out the first of such solutions at Sibos. “We’ve been working on a number of innovations around our financial crime compliance screening, financial counterparty KYC and payments portfolios,” says Golding. “They are aimed at

Our solutions anticipate regulatory requirements, increase productivity and ultimately reduce cost anticipating regulatory requirements, making firms ‘regulator-ready’, increasing productivity and ultimately reducing the cost of compliance.” The new solutions build on Accuity’s core payments, and risk and compliance software portfolios – including financial counterparty KYC data and tools from its flagship Bankers Almanac brand – to give greater vertical and horizontal clarity on exactly who is in the payments chain. Among the bundle of products being released this year will also be advanced

Global correspondent banking relationships















Total bank locations Number of times banks used as correspondents



Source: Accuity

counterparty risk management to identify sanctions risk – a particularly opaque area of compliance where nested counterparties can result in unexpected reputational damage by association. The Sibos release coincides with news of Accuity’s collaboration on blockchain initiative R3/Corda and follows key investment in its innovation team this year with a string of appointments, including new head Neela Das, and key staff in its hubs in Europe, Chicago and Singapore. “Our regtech solutions automate compliance screening for an end-to-end traceable view to show compliance policy in action to regulators,” explains Golding. “We have also unified our ownership data with relationship data and risk data for KYC. “Machine learning and industry benchmarking also increases productivity and reduces the risk of false positive results (FPR) in screening which results in fewer investigations – one tier-one client has seen its FPR rate fall significantly. This, together with the reduced risk of fines and failed payments, also greatly reduces cost.” n For further information about the report go to resources/ derisking-demisecorrespondent-banking- relationshipsresearch-report-accuity/ Autumn 2017


1+ Billion Devices

3500+ Businesses

50 Countries


Why hasn’t transformation transformed?

iGTB Director Andrew England gives his perspective on what’s holding back change in key areas of transaction banking – and how to break through A couple of years ago I wrote a piece that heavily profiled a series of capabilities that I called the seven Cs critical to building and developing a sustainable transaction banking business. For Sibos I wanted to reassess some critical patterns and behaviours shaping the industry today and what I think it means for the aspiring leaders of this critical corporate banking business.

In particular, I want to focus on three key topics– digital deployment, standardisation and business development. With most banks well-entrenched in digital transformation initiatives, the jury is still out on how such investments have actually transformed corporate banking. The upfront case for wholesale bank transformation is clear, so I am not arguing the merits for an investment. However, that the initial enthusiasm and expectations have been very significantly checked by tangible results is also becoming a reality. The industry is now seeing a number of projects that have stalled, overrun in execution and cost and not delivered the radical revamp of user experience,



self-service or client intelligence that initial benefits cases promised. Put simply, delivering nice frontend veneer has not been accompanied by core backend content and capability for end clients. So, how do we explain this mismatch of expectation versus results? I think there are a few reasons, some of which are troubling for the financial services industry. Over many years, banks have looked to reduce the cost of supporting their technology assets – trimming staff, outsourcing departments and/or shifting contract engagements to larger utility centres. This, together with a high-velocity rotation of critical product managers in the front office, has resulted in a dramatic loss of knowledge and understanding of the system architectures, capabilities and their interdependencies. Asset stripping in banks over many years has resulted in less knowledge around critical business components remaining in banks. This has made any next-generation commitments very difficult to progress and manage. Secondly, in my view there had been a very real shift in what I describe as C-level behaviour in institutions. The huge pressures on banks have called for

tremendous unanimity of action around a handful of strategic projects critical to their success. Digital transformation initiatives have almost become religious crusades where non-believers have simply not been able to caution expectations, or raise their voices with a strong dose of realism. Whether through fear of retribution or marginalisation, this DNA cloning, verging on cronyism, is another worrying element running through a number of financial institutions today. Finally, and somewhat linked to the above, is the tremendous pervasiveness of consultants. Their zero-option view on how to transform banks into higher performance vehicles through digitisation has been cloaked again with non-proven cases of cost reductions of 20 per cent and revenue increases of 10 per cent. Such margin promises were probably not reviewed with the necessary level of rigour, resulting in some of the consequences that we are now seeing today.

Some positive progress The second topic that I want to review is the call for standardisation. It is Autumn 2017

encouraging that a number of banks now realise that the costs of customisation far exceed client benefits. Again, a history of failed projects in banks has influenced executives to demand product simplicity and replicability and to stay well clear of customisations. The complexity of IT back offices has been accompanied by a strong drive to have consistent platforms or, even better, single platforms that can be managed as products with guaranteed support, regular updates or release versions and visibility over the sustainability of the software itself. In this respect, the development is healthy as it should gradually call into question why certain institutions continue to believe that they should build and develop their own proprietary software which, in effect, supports public, standardised activities in transaction banking. Finally, I want to turn to business development or business relevance. My clear assessment is that transaction banking enterprises can only obtain new investment and commitment based on an evidenced track record of superior business growth against peer products sitting within wholesale banking. Parity status or GDP growth rates will not be sufficient. This is due to the historically large sums committed to transaction banking in the past, the often long tenure of projects and the short to medium-term view on interest rate movements.

A forgotten product segment So, doing more business with growing segments of the economy and delivering core product capability and knowledge to needy client clusters remains critical. The difficult segment remains the SME sector. In the past this was often an overlooked client segment or even outside the purview of transaction bankers. Not so today. With the prize of growing SMEs into high-margin, middle-market customers corporate banking heads are very uneasy with the risk profiles of such companies but know they have to act. This has given a new injection of life into the flagging supply chain product line, the theory being that if the bank can better validate the activity of such clients with larger and more numerous counterparties, then credit decisions can be looked at from a transactional risk perspective rather than from a pure balance sheet angle. Autumn 2017

Digital transformation initiatives have almost become religious crusades where non-believers have not been able to caution expectations with a strong dose of realism The theory continues that, armed with such intelligence, the bank will be far better equipped to address a few client litmus test questions, such as ‘how are you enabling me to improve my working capital and manage critical funding gaps?’; ‘how are you supporting me to access a wider ecosystem of suppliers and buyers?’; ‘what product bundles are you offering me and how easy are they to draw down?’; and ‘how can you help me to manage my business risk and my unexpected events?’. If there was ever a doubt that working capital provisioning was within the responsibility of transaction banking then that is most definitely no longer the case today because the above questions will

remain and they will be targeted at a product owner.

Abandoning the ideology So, what does this all mean for the current and next generation of transaction banking business leaders? Well, there is one important opportunity in the midst of these differing themes. Tomorrow’s successful leaders will need all the IT guidance and support on how to transform their franchises into more successful growth ventures. They will need to fervently argue that in-house IT development can only be a distraction when pitted against the value of a fully dedicated knowledge pillar in architecting tomorrow’s operating model; one that can fully contribute to the decision-making process and then work out the fastest and best way to get there. If these two critical organisations work in tandem then, of course, the voice around digitisation, the expectations and the business case will be much better articulated. And standardised solutions will also prevail as the voices for periphery development will be drowned out by the institutional power of simplicity and relevancy. Finally, delivering all-important customer insights will be fully explored with more likely successful outcomes. So, ensuring that technology ideology is left in the locker room will be a mission critical objective for transaction banking leaders. They should not see this as someone else’s responsibility.


The iGTB Oxford School of Transaction Banking is held in Oxford and culminates at the Oxford and Cambridge Club in London. It is a two-and-a-half-day immersive learning experience that is designed to help transaction banking executives develop a winning strategy and thrive in the complex and fast-moving

world of transaction banking. The programme looks to empower participants to manage the challenges they face better, improve their decision-making skills and help them anticipate and address change. ■ The 2018 School runs from 14 to 16 February. See |



The Fintastic


In the words of Phil Coulson, agent of S.H.I.E.L.D: “Don’t EVER tell me there there’s no way.” That sums up the no-compromise attitude our newest fintech superheroes have towards tackling threats to the smooth running of a digital universe. Here, they talk diversity, emancipation, entrepreneurism and playing in the sandbox with three of the original Avengers from the 11:FS consulting team – Simon Taylor, David Brear and Chris Skinner plus our own Ali Paterson. Fintech Insider is a popular podcast by our friends at the ‘challenger consultancy’ 11:FS. Each week David Brear, Chris Skinner, Jason Bates and Simon Taylor chat through what’s happening in their digital galaxy, joined by some of the biggest names in banking and fintech, from CEOs to the leading lights in reporting and news presenting. Featured among the stellar interviews recently were Lawrence Wintermeyer, Ashok Vaswani and Gary Vaynerchuk. Listen out for Ghela Boskovich, appearing soon! n Don't forget to subscribe to regular industry insights at Lawrence is principle of Capstone, an the advisory firm helping financial and

Lawrence Wintermeyer

technical services to navigate digital disruption, including mobile apps, the Internet of Things, data analytics, artificial intelligence, distributed ledger and digital currency. As CEO of Innovate Finance he was instrumental in helping to establish London as a fintech hub.



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Ashok Vaswani

Not just a Digital Eagle but a digital Falcon, as Barclays UK CEO Ashok has driven a relentless policy of working to make sure that no one is left behind in the online banking revolution. In transforming the bank, he’s introduced everything from in-branch Tea and Teach sessions to app-based City & Guilds classes for consumers and empowered staff.

Gary Vaynerchuk

By their very nature, superheroes are a breed apart and Gary admits ‘most people don’t really love me at first sight!’. But his achievements – from liquor store boy to millionaire investor and head of digital agency VaynerMedia – speak for themselves… Just awesome.

Ghela Boskovich

Ghela was a director at financial software specialist Zafin when she set up the FemTechLeaders community. An ambassador for diversity in banking, she also heads up regtech and fintech partnerships for Startupbootcamp Fintech and sits on several finance industry boards.

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Ghela Boskovich describes herself as a fintech fanatic who’s preoccupied with modernising legacy banking systems (among a number of other small challenges!). A fearless flagwaver for a more inclusive and diverse financial services universe, she is the founder of FemTechLeaders and doesn’t pull her punches when it comes to confronting bias. Aspiring Avenger Ali Paterson went to meet her… Ali Paterson: What is FemTechLeaders and why should people care about it? Ghela Boskovich: It is a network dedicated to amplifying the voices of those who’ve been on the fringes of the industry; those who don’t have equal representation across the board. It’s a platform to talk about the need for diversity. Our fundamental principles and philosophy are that diversity of perspective leads to better solutions and you can’t have diversity of perspective if everyone in the room has the same background, the same education, the same experience, the same schooling – if they literally all look and talk alike. You need people that reflect different races, genders, creative orientations and backgrounds in order to really bring ideas to fruition. We talk about the need to change and look outside our industry to find solutions; also to start making our industry much more diverse to reflect the populations that we ultimately serve. Our end customers are not traditional bankers in suits and if we don’t have similarity with or empathy for customers, if we don’t reflect them in the makeup of the people who are working in the industry, then we’re never going to best serve customers. And it’s pointless to even exist if we can’t serve properly. It’s not just about gender. The name FemTechLeaders speaks to the fact that women are one of the obvious categories of diversity, but really we’re focussed on bringing humanity back





into banking. FemTech is useful as a good hashtag, though! AP: You’re talking about being able to identify with a segment of one. But technology surely helps to make the service more unique to you as an individual, as opposed to stereotyping you? GB: It definitely can, but if future tech is driven by artificial intelligence (AI) and big data, we still have to go back to how we shape or feed that data. If we look at natural language programming (NLP), for example, I see an inherent bias in the language itself. The fact that data can be biased is a risk that we have to be aware of. We can do

customisation and personalisation and that’s wonderful but we need to step back and really look at the root of how we’re framing those algorithms, and teaching the tech; to start to identify our unique needs and desires, and really look at the language that we’re putting inside of those NLP machines in order to come up with the offers. AP: One of my favourite facts is that there are more CEOs in FTSE 250 companies called Dave than there are female CEOs in the FTSE 250. So what can inspire a change at the top? GB: I believe quotas have a place. They can get us to a tipping point where it becomes a natural desire for women to aim for the top. I say desire to aim for the top in the sense that a lot of these positions are structured around a very stereotypical, single or married man that has a support system. A lot of women who are looking for this sort of position have multiple responsibilities beyond it. We’ve framed the role as something that’s not necessarily easy to manage and therefore more difficult to attain for women because of the additional responsibilities that women have placed on them. Structured mentorship has a role to play but those mentorship programmes that already exist require a hell of a lot more support from the men in the organisation. Mentorship programmes structured for women are biased towards women – as in, women promoting women – whereas the people that can give us the best support are those at the top and the majority of them are men. I believe mentorship programmes have to be cross-gender and cross-race, and there has to be an assignment of aspiration. We need mentorship programmes that are not solely run by women for women, but are run by leaders for raising leaders.

We need mentorship programmes that are not run by women for women, but by leaders for raising leaders Autumn 2017


David Brear: Can you give us an idea of where you came from, where you are now and how you got there? Gary Vaynerchuk: Sure. I’m a 41-year-old entrepreneur who failed all his classes for real, even though he was an immigrant from the Soviet Union and immigrants’ normal way out is education. Somebody who couldn’t resist selling baseball cards at 12 and made $2,000 or $3,000 a weekend and will never be that rich again. One who’s very fortunate because his parents are his heroes and they worked hard and saved every dollar when they came to America so my dad could buy a small liquor store in Springfield, New Jersey, and went on to build up a great business. He dragged me into it when I was 14 or 15 and somewhere around 1996 I launched one of the first five ecommerce wine businesses in America. Over the next decade, I took Wine Library from a $4million to a $60million business using email marketing – we had 90 per cent open rates in 1997, which was unheard of; Google AdWords – we were on it the day it came out for five cents a click; banner ads – we’d get 10 per cent click-through because banner ads were new on the internet. My career took a real pivot, though, when YouTube launched and I started a wine show that went viral. When you do things before they’re ‘things’, you get way more value out of them! When YouTube sold to Google for $1.7billion, I realised this talent I had could be used for way more than selling a couple of extra bottles of Bordeaux and I decided to become an investor. My first three investments were Facebook, Tumblr and Twitter – it’ll never get better than that! I went on to invest in internet retailer



Birchbox and mobile wallet Venmo as well as Snapchat, Pinterest and Uber – some of those in later rounds, so I didn’t get quite the same value, but I did quite well, made a lot of money. Then in 2009, my brother AJ and I started VaynerMedia, a full service digital agency including VaynerExperience for activations at live events. We’ve grown from zero to a $130million. Earlier this year, I bought, a female


Gary Vaynerchuk is an American serial entrepreneur, four-time New York Times bestselling author, speaker and internationally recognised internet personality, who founded full-service digital agency VaynerMedia. The Clint Barton of our Avengers series, his superhuman business reflexes have seen him target a number of digital investment opportunities with above-mortal accuracy. 11:FS’s David Brear discovered the man behind the success story…

publishing company. There were no shortcuts in all this. It was a tonne of work and, of course, you have to work smart. The smart part is not controllable; either you’re smart about your strategy or you’re not. The hard part is controllable. You can work five extra hours a day and at the weekends, like I did for every single year of my twenties. DB: We work a lot with banks and it often seems the people in them are insulated from consumers. How do you walk in the customer’s shoes? GV: That’s not just a bank issue, that’s a corporate world issue. And, yes, it is why big companies fail. You fail because the leader navigates this big boat into an iceberg called audacity. You’re only worried

about your stock options, because you’re only going to be there for four years. You’ve become too fancy schmancy and you’re not being smart in the trenches. It’s politics, being worried about your board but not your customer. DB: Day trading is about always watching, playing, always looking for that next opportunity. Is that a metaphor for what you do? GV: Yes, I think that’s exactly right. I’m spending an enormous amount of time right now, for instance, trying to figure out Alexa Voice and Google Home and why people are going to football matches, the rugby world championship, hiking and taking the train to Paris, all because they want to take a picture and put it on Instagram. We are literally doing things now to make a point, to paint a picture publicly. So I think, as a marketer ‘OK, if people are now going to do more things, activating for your company at a rugby championship or at a vineyard in Tuscany is a good idea‘. So, whether it’s digital or traditional, when I day trade attention, it’s attention, it’s not the newest app. It’s ‘what the heck are people doing?’ Everybody tuning into a podcast is watching television with their cell phone, right? That’s important to understand because it means commercials are overpriced. These are the things I think about, the trends I pay attention to – like kombucha, yoga or meditation, tight jeans or sneakers. It’s culture trading and it manifests in how I produce content. I’m obsessed with consumer attention. It’s why I worry about a lot of digital marketers, because they’re very quant-based. They’re all about transactional behaviour, last click attribution, landing page this, that and the other. And that’s great if you care about six months or a year. But it’s disastrous if you care about six years or a decade.

I worry about a lot of digital marketers because they are very quant-based Autumn 2017

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Growing up in India, Ashok Vaswani thought it would be the ‘coolest thing’ to run a five-star hotel – largely so that he got to wear smart suits. Instead, he became the CEO of Barclays UK, the second biggest bank in Britain (and he still gets to wear the suits). Here, he talks to 11:FS’s own sartorial superhero Simon Taylor… Simon Taylor: You’ve been at Barclays since 2010, working in both retail and corporate banking. What’s your favourite customer story? Ashok Vaswani: I think one of the best ones was a little girl who looked at the Twitter logo and asked if it grew up to become the Barclays eagle! Then there was the 103-year-old gentleman who got an iPad for Christmas from his grandchild. The poor guy wasn’t sure what to do with it, so he walked into one of our branches, met a digital eagle, and asked him how it worked. He loves it now, just loves it. ST: There’s a lot of talk around legacy and incumbents. Barclays is more than 350 years old now; what are the advantages and disadvantages of all that history? AV: There are lots of advantages in terms of scale. We touch 24 million customers – one out of every two adults in the UK. That’s an awesome position to be in, right? Barclays might be 350 years old, but I’ve only been in the bank for the last five or six years! So what happens on my watch is what concerns me. I have a responsibility to make sure I don’t let all my predecessors down and to set up my successors in a great way. Yes, we have legacy systems but I think we have been able to bridge the cultural transition. A lot of the culture of a company is defined by the things they celebrate and the things they punish. We really try to celebrate when somebody takes steps towards becoming more digital. We’ve been on this journey for five years now and every single day it’s about hammering home the same message: “This is what



AshokVaswani we want to do… look at what happened… that’s fantastic… that’s the way we want everybody to go…” and you end up getting there. We also try to see transformation from the point of view of other companies and many industries. I’ve now started having dinners with CEOs of other businesses and corporate clients ,and saying ‘you guys are struggling with the same thing as us; can we talk and do stuff together? We’ll help you’. We learn from that as well. ST: So what has been the highlight of your banking career so far? AV: You say it as though my career was over – but the highlights are still to come! I’ve been in retail banking for a while and I can tell you that I have never been as excited about what I’m doing as I am today because of the opportunities that technology affords – stuff you could not even dream of five or seven years ago.

A lot of the culture of a company is defined by the things they celebrate and the things they punish

Taking existing products and services and putting them on a mobile platform is fun but the creation of new business models that are afforded by technology is really critical. So, for example, we’ve 24 million customers, a million SMEs, 25,000 corporate customers and all of these guys are doing business with each other. Surely, we can become the platform that allows us to link these ecosystems. The Rewards programme is the first example of how we’re doing that. Corporate customers want loyalty from retail customers; if they are ready to reward customers we offer to bring them together. How powerful is that? It’s a win for the corporate, the customer and for us. But that is just the first step. This platform where people come to do everything related to money and finance is a big idea. I’ve been focussing this year on trying to automate the bank to a completely different level. The speed of change in this industry is so fast that we can’t afford to spend time looking back. If I’m to achieve automation, I’ve got to stop worrying and start looking forward and then see how things move. You have to start some place, goodness knows where it will move to, but you must start. Learn, learn and see what happens.

Autumn 2017

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X-Man of fintech Lawrence Wintermeyer was, until recently, CEO of Innovate Finance, and continues to use his razor-sharp superpowers to champion the UK as the undisputed global centre of sustainable financial services and technology. Chris Skinner caught up with him to slice through issues surrounding financial sandboxing… e




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Chris Skinner: There’s been an explosion in industry sandboxes. In fact, Innovate Finance only recently published an interesting report on many of them. Can you lay out where you think we are? Lawrence Wintermeyer: Broadly, an industry sandbox is an off-market environment for developing and testing, in this case digital proof of concepts. There’s everything from the basic startup proof of concept sandbox through to some quite sophisticated ones. In my own experience, having worked quite a bit in the Java and open-source community, sandboxes are great environments where quite often people leave all sorts of data, usable code, assets and other things to help developers accelerate solutions. The Innovate Finance report showed there is a demand for them in financial services. So the idea is to try to incentivise industry to put this stuff out there. The other main type of sandbox is a regulatory sandbox and again there are many different variants. The Innovate Finance report found more than 16 variants of innovative sandboxes either up and running or in the process of being designed by regulators around the world. I think the UK’s Financial Conduct Authority – which was the first to market with a regulatory sandbox – and the Monetary Authority of Singapore (MAS) are the ones that have made the most progress. Australia’s trucking along with its own, too. The FCA regulatory sandbox is a cohort model; it’s invited fintechs to apply to do what’s called on-market testing – in fact, that’s probably the easiest way to delineate between an industry sandbox and a regulatory sandbox. In the context of the FCA, it says ‘come and try your proof of concept on a small number of real clients so that we can limit the liability’. It’s |



Industry sandboxes are great as a feeder of engagement before you even get to a regulatory sandbox particularly focussing on technologies that it thinks really deliver an innovative or competitive proposition to consumers. CS: A lot of banks are playing with key technologies and doing lots of proof of concept. Is there a danger that there’s a lot of unnecessary duplication of effort? LW: I would hope that, particularly with emerging technologies, industry sandboxes would offer a greater degree of syndication and collaboration. But institutions do what institutions want to do. I think we’ll have to wait and see whether the incentives for participating, or behaving in that way, actually accelerate things. That said, there is lot of bilateral and multilateral syndication on blockchain, already.

I think the message from industry is that where there is an excellent use case – and typically an excellent use case is solving a ‘wicked problem’, which is generally something that has a high degree of either friction or cost – industry sandboxes are great as a feeder of engagement before you get to a regulatory sandbox. Much of the talk is about issues around know your customer and anti-money laundering, although I personally think when it comes to solving wicked problems, those may be a bit far off. CS: Regulators have been viewed as a barrier/ protector of the financial services industry. Now they seem to be moving through the sandbox programme to becoming more enablers of efficiency. Do you agree? LW: If you’re a startup, you’re in a regulated space and it’s capital intensive. You’ll quite often find you’re a few hundred grand down, just in the time it takes you to get through the preliminary regulatory hurdles and the institutional bias preventing you from getting through the walls to even say ‘hey, this is a cool proof of concept, you should be looking at this’. In the UK, the peer-to-peer community has voted to be regulated but the idea that where we have new technologies you can bring the regulator to the sandbox in an open forum to simply observe and get a better understanding of the operational risks involved could be very helpful. It could help expedite the path to regulation. I think institutions certainly have a much better opportunity for working out which solutions they might be able to work with if, in the sandbox, these solutions have basically gone through a credentialisation process and are in effect badged as saying ‘we’re secure, we’re procurable’. More importantly, if you could get industry sandboxes to do half the things that we’ve been speaking about, they would offer a better opportunity to accelerate not just solutions to end consumers. They would also offer an opportunity to reduce regulatory friction and the capital intensity of getting those solutions to market. Autumn 2017

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A run for your

money The first #money20/20race saw a surprise winner cross the payments finishing line. As runners limber up for another marathon journey – this time from Toronto to Las Vegas – you might want to think about spreading your bets

Money20/20 Las Vegas Dates: 22-25 October 2017 Web:

A strange and unexpected truth about transactional payments emerged at Copenhagen’s Money20/20 this summer. So surprising, in fact, that it out-trended the show’s official hashtag on social media for a while. Autumn 2017

And that truth was… well, no. For those who weren’t there, let’s keep the big reveal until later. But it all began when our executive editor Ali Paterson arranged for eight payment methods to compete in the first sponsored #money2020race from England to Denmark. He was intrigued to find out how much choice consumers really have when it comes to choosing how they want to pay.

Sibos 2017 Toronto Dates: 16-19 October 2017 Web: |


MONEY20/20 VEGAS Money talks: Cash is king in Las Vegas... but who will win the race?

Eight competitors were handed the equivalent of £500 each to complete the 700-mile trip in a limited timeframe. They could use the allocated payment method and nothing else. “I hate monopolies and lack of choice,” says Paterson, with the only wearable in the race – a contactless Kerv ring. “Personally, I hate using cash, but I will fight tooth and nail to make sure that merchants do still accept it. No matter where you are geographically, it’s all about choice of payment and that choice should really come from the customer and not be decided by the industry.” It certainly piqued the interest of payment companies who stumped up sponsorship for competitors to use a mobile wallet, Bitcoin, JCB Card (international payment brand), gold, contactless, Chip & PIN card, coins and a swipe and sign card.

And the winner is… As the rumble in the financial jungle got under way, Paddy Power was tipping Chip & PIN as the odds-on favourite to win, with gold the outside runner at 25-1. In the event, the veteran made the fastest pace, while the yearling was left in the stalls. Gold won not by a nose, but by a country mile, Bitcoin didn’t even manage to leave the British Isles and the rest of the field was spread out along the route. “I doubt gold will ever become common currency again,” says Ash Cooper, the victor who was sponsored by Goldmoney. “But it’s surprising how far it can get you



still. I thought I was going to be sleeping on the streets at one point; 20 minutes later, I was in a penthouse apartment overlooking a golf course.” Bitcoin contestant Dave Erasmus, sponsored by CoinCorner, managed to book a flight but came a cropper when the transaction took so long, he lost his seat. “It’s not easy to use Bitcoin when you’re in a time-sensitive situation,” says Erasmus. “People need to know that it takes a while for a transaction to get locked to the block. And we need more retailers to experiment with the Bitcoin – the more that do, the more likely we are to see decentralised payments working.”

I thought I was going to be sleeping on the streets; 20 minutes later, I was in a penthouse apartment overlooking the golf course Paterson himself, sponsored by TAS Group, came in second using the Kerv ring. Hot on his heels was Chip & PIN racer, Jordan Drew, backed by Banking Circle. Like the surprised crowds who gathered at Fintech Finance’s presentation about the race at Money20/20, Paterson found it hard

to believe the result, but says it underlines technology gaps in the consumer space. “I love technology but it’s very easy to get bogged down in it without actually thinking about consumer trust and ease of acceptance. Everyone knows what gold is whereas, to the general public, Bitcoin is sadly only seen as a payment method for terrorists and criminals with few people able to easily accept it.” The second sponsored #money2020race will challenge the currencies again when racing vloggers set off from Sibos in Toronto on 19 October and head for the world’s largest payments and financial services innovation event, Money20/20 USA, in Las Vegas. They will try to pay their way across 1,147 miles to arrive by 22 October. Simon Paris, deputy CEO of Finastra, the third largest fintech company in the world and a key sponsor of the race, says: “For many years, people have been talking about the imminent arrival of a cashless – or cash-reduced – society. While completely eliminating the need for cash may not be realistic, it is fair to say that new payments methods, powered by digitisation and next-generation technology, are changing the game already. Perhaps the breakthrough moment is just around the corner – or somewhere between Toronto and Las Vegas.” Andrew B. Morris, chief content officer for fellow sponsor, Money20/20, added: “We’re thrilled to be working with Fintech Finance to bring the payments race to the US. It’s daring, fun and innovative – consistent with the Money20/20 brand. We wish all the racers good luck on their journey!” Autumn 2017


Commerce & AI: Breaking down the knowledge barriers

Leading machine learning provider for payments, Feedzai, will be hosting a deep dive into AI at Money 20/20 Las Vegas. Here, it takes us below the surface of a new financial ecosystem The transition to omnichannel banking is well underway. Customers are paying their bills digitally using mobile devices and increasing their adoption of P2P payments.

They expect the same experiences in banking that they do in other industries, where user experience has long been the focus. The objective for banks is to

Taking it to a new level: AI reveals greater depths to data



allow customers to transact freely in the commerce ecosystem without friction and false rejections. However, interactions within the payment ecosystem are fragmented. Internally, banks suffer from having dormant data in silos that they can’t make sense of. Before, it was sufficient to contain fraud analytics within single channels, single payment types and single use cases. But with emerging digital

channels, there are more points of compromise and channels of attack. Banks need to think ahead about how they can make more sense of the data they have; they need to gain complete views of the customer, across products and business units, to deliver seamless experiences and without false declines. In the words of Julie Conroy, research director at Aite Group: “Detection strategies are shifting from analysing siloed transactional activity to instead making better use of data and analytics, building holistic understandings of customer activity. By bringing together cross-product and cross-channel data, and applying nimble machine learning analytics that iteratively optimise results, businesses can understand the context of transactions and make better decisions.“ Jeff McMillan, chief analytics and data officer at Morgan Stanley, expands on those possibilities: “Artificial intelligence (AI) has enormous potential for our entire industry. We are getting smarter about all aspects of our business. This in turn allows us to make better choices, provides our clients with deeply personal insights and creates a virtuous cycle for ongoing learning.” Technology is only one lever for building connected intelligence. Another lever is the ecosystem itself. As AI becomes embedded in the payments space, businesses will benefit from federated learnings from across both sides of the transaction. Organisations in finance have been seeing half the picture. A merchant only knows what a customer buys in his store, but not where he goes to purchase something else. A bank might know the stores a customer goes to, but not what Autumn 2017

they’re purchasing. Combining these two pieces of the puzzle creates a cross-view that benefits both the bank and the merchant, so they can improve their detection rates and complete each other’s transactional understanding. Conroy adds: “This concept extends into the processor space as well, where there is the opportunity to unleash the potential associated with marrying the merchant’s and issuer’s views of the card transaction. “If the walls between the merchant and issuer side of the authorisation process could be eliminated through more effective data analytics, there is vast potential to reduce the false decline problem, which is more than $270billion in the US alone.”

Game-changing insights Due to advancements in AI, banks have a weapon that is uniquely theirs to leverage: machine learning capabilities, together with computing power that can ingest any kind of data at speed and at scale. In the words of Gabriel De Montessus, VP of product and marketing at Ingenico (see below): “AI, on top of enabling less friction and more security, lets us put more intelligence into interpretation and interaction with the end user. In the end, it is all about user experience. “AI allows us to make sure that our merchants, by leveraging the user experience through us, can increase their conversion rate and thus their topline. It is what we could call deep conversion.”

The future of connected intelligence is not just bridging data silos and ecosystem barriers, but also researchers and practitioners It is clear that the winners in this game will be the banks who break down silos to create intelligence that lets them deliver insights to every corner of the organisation, so they can arrest the proliferation of new and unknown fraud and create seamless customer experiences. “We see our customers making significant strides in breaking down data barriers and gaining business results,” says Priya Rajan, head of product marketing at Feedzai. “At one major bank, Feedzai which was able to deliver double-digit increase in new account approvals without increasing fraud.”

Connected intelligence The future of commerce looks like it’s based on breaking down barriers everywhere. Consider the AI Deep Dive event at Money20/20 in Las Vegas, hosted by Feedzai, which specialises in machine

Feedzai’s AI Deep Dive

Gabriel De Montessus from Ingenico will be speaking along with Steve Wozniak and Dr Michio Kaku at Feedzai’s AI Deep Dive during Money20/20 Las Vegas. We asked him for a heads up: What do you envisage as the future of commerce as AI opens up the ecosystem to less friction and more security? It’s all about better user experience. There will be fewer setbacks and disappointments from an end-user standpoint. AI, on top of enabling less friction and more security, allows us to use more intelligence in interpretation and interaction with the end user, giving rise to more accurate dialogues, more precise and customised offers and greater satisfaction in fulfilling a need or a service. When you enter a bricks and mortar shop, you have a human interaction/intelligence that will guide, help, support and advise you. In the online world for the last 15 years entrepreneurs and innovators tried to do so with various successes and outcomes. The AI revolution is bridging this gap and enhancing user experience to a much higher degree.

Autumn 2017

learning for fraud. The day-long event will bring together people inside and outside the financial services industry, from different parts of the full AI spectrum, from research (the inventor, author, and futurist Ray Kurzweil, and Dr Michio Kaku of City University of New York), to hardware and software (Apple co-founder Steve Wozniak and Feedzai CEO Nuno Sebastiao), to industry deployment (Jeffrey McMillan of Morgan Stanley). It’s a new kind of forum, bringing together people who are shaping what AI will look like over the next few years with the people who are bringing AI to life inside the largest organisations operating in today’s economy. Only recently would it make sense to have someone from research speaking right before someone who’s actually deploying that technology as part of their investment strategy. The future of connected intelligence is not bridging data silos and ecosystem barriers, but also researchers and practitioners. The key lies in operationalising the vision. As McMillan from Morgan Stanley says: “AI is not some kind of magic dust that you sprinkle across your organisation and all of a sudden everything just starts working better. Your AI strategy should enable your business strategy. “Organisations need to collaborate at all levels and focus on marrying the possibilities of AI with the practicalities of today. And when this happens, powerful things can result.”

What drives you to want to speak at AI Deep Dive? This very same revolution we’ve talked about. Being in the payments industry I am responsible for what I consider to be the last mile conversion funnel of thousands of merchants. This last mile so far has had various dispersion nodes in terms of conversion, due to various items or hurdles around the checkout experience, the fight against fraud and the processing of transaction itself. AI allows us to make sure that our merchants, by leveraging the user experience through us, can increase their conversion rate and thus their topline. It is what we could call Deep Conversion. What’s the most important thing you are hoping the audience members leave with? That AI aims to better understand, interact with and serve the end customers by avoiding friction and security issues – customising the experience. It is all about the end customer. If the end customer is happy, the merchant is happy. That’s the AI capability. |



Let the payment games begin

The financial crisis was a tragedy for many in Greece, but it allowed Athens-based Mellon Technologies to flex its muscles in the digital payments arena, says MD Haris Constantinidis Not so long ago, if you mentioned the word ‘wearables’ to anyone outside the technology industry you’d have been met with a blank look. These days, they’re likely to flash you their Apple Watch, Fitbit or some such chunky health tracker. And an increasing number will boast of them being fitted with latest payment options, too. We’ve been able to purchase items with Apple Pay using Apple Watches since their launch in 2015; with Samsung Pay on its own Gear timepieces; or with Android Pay on a select number of other watches. Having bought the wearable assets of



Coin last year, Fitbit recently announced its new partnership with Mastercard and Visa credit and debit cards, and nine global banks, including HSBC and Bank of America, to provide near-field communication (NFC) payments. Barclaycard also has a raft of NFC wearables, including a wristband, sticker and key fob for £30-ticket items or less. The company’s wearable range generated £6.6million in transactions between July 2016 and February 2017. Given the dire straits that the Greek economy has been in, you wouldn’t naturally associate Athens with a pioneer in this area. But that’s where Haris

Constantinidis, managing director of Mellon Technologies, has watched seismic changes unfold in the payments industry – and acted on them. The economic downturn had a curious and unexpected impact on his business because one of the effects of Syriza, Greece’s ruling party, capitulating to EU monetary demands in 2015 was to boost card transactions – and Mellon was one of the lucky few to benefit from the financial changes. Mellon Group has reported outstanding rates of growth in the last three years, expanding organically from €60million to €100million. Now it’s taking its technology into broader markets. Autumn 2017

The company, which operates in both the mobile payments and wearables arena as a turnkey payment solutions provider, is driving into central Europe with a proposition that includes an extensive range of technology solutions for payments, product services, call centres, business process management and processing services for card-based and/or point-ofsale-based transactions. “Greece is a peculiar country these days, especially for the banking sector,” says Constantinidis. “Back in 2015, people could not get cash from the banks as they normally would. So, even pensioners had to get their pensions with credit cards or debit cards, and the whole industry changed completely, and it happened over one summer. Transactions moved to digital and the number went up five or 10 times. “It has been a challenge for banks to satisfy the demand, and for the manufacturers to satisfy the banks’ demands in terms of cards, the machines to personalise and the ATMs to give cash through debit cards, and so on. “Times are changing. The pace of change in the whole fintech industry requires companies to provide solutions that are modular, so that whatever investment is made it is not lost within a short time when things change again. It has to be modular to find solutions for the next new thing that will appear on the market.” And that's how Mellon is approaching its own expansion, particularly in contactless and wearables.

Expanding new markets Mellon uses the respected Gemalto’s Optelio Wearable Mini-Tag (and MicroTag), which are fully certified and easily inserted into plastic wristbands designed for chip integration. Similarly, it uses Gemalto’s Optelio Contactless Stickers to introduce a mobile payment option to existing handsets, which makes it ready for contactless payments in minutes. The technology allows it to tap into a rapidly expanding market. According to Juniper Research, by next year the combined mobile and wearable payments markets could reach $100billion, of which wearables will account for just under two per cent, or $1.9billion, which is a significant tranche considering how new the concept is. Business Insider Intelligence also forecasts Autumn 2017

that 62 per cent of wearable devices will come with payment functionality by 2020. And a 2016 Barclaycard survey of UK consumer attitudes towards wearable payments suggests that a new trend of retrofitting treasured accessories with new functionality is emerging – given a choice, 62 per cent would ‘future-fy’ their existing watches while 21 per cent would retrofit inherited jewellery. Has the revolution in payment wearables really arrived? “It’s a different way of doing financial transactions – that’s what attracts young people in particular,” says Constantinidis. “But contactless and wearables will be just another form of transaction, added to the other ones that already exist.” For the moment, though, it’s creating quite a buzz. Constantinidis recalls last year’s high-profile project with the Bank of Cyprus after it approached Mellon to find a way of keeping it competitive and innovative.

The pace of change requires companies to provide solutions that are modular, so that investment is not lost when things change again Mellon proposed contactless payments and wearables. The bank embraced the idea, and Mellon used both of these EMV-compliant payment components and then introduced solutions from Matica Technologies into the mix for the personalisation process of the stickers and tags. By 2016, more than 30,000 had been issued. “That was a very successful project,” he says. “They were widely accepted by consumers in Cyprus. People really liked the whole idea. Everybody in Cyprus was excited – there were adverts on TV about it. “We delivered the Visa-certified Mini-Tags and the wearables and the stickers, and together with JCC, we personalised the cards on the Matica machines. That meant we could personalise them very quickly, very

efficiently, with no issues for the bank or JCC. The whole project was flawless and saw many imitators afterwards.”

A successful partnership Mellon’s long-term relationship with Matica has proved mutually beneficial and has allowed them to consistently evolve in a fast-paced industry. Constantinidis also credits Matica as one of the companies that helps him to deliver value and innovation to his customers across the company’s existing business area. “We set up the company in 1994 and soon after met Matica in our effort to satisfy demand from the banks for instant issuing,” remembers Constantinidis. “Since then, we have installed hundreds of instant issuing machines together.” He recalls one particular joint project. “We managed to offer Eurobank (a first-tier bank in Greece) a complete personalisation platform with features that nobody else had incorporated within one system, including integrity controls. That was only possible because we had the ability to collaborate with Matica and incorporate new technology as it emerged.” Ultimately, says Constantinidis, Matica provides the machinery for card personalisation and Mellon provides the initial relationship with the banks – and, quite often, the software that’s required to integrate into the bank’s environment, too. “Matica is a nimble company and we have been able to deliver solutions to our customers with very close contact with them – that has been the main strength of our relationship, apart from the solutions that Matica is providing, of course.” Mellon has set out ambitious rates of growth for the future. “We have set a new three-year plan to reach €200million by 2020, so we need to realign, find new countries to move into, but also to continue transforming the services and the products that we provide to our customers,” says Constantinidis. He says that, apart from the system integrator’s scalability, innovation and agility, one of the main reasons it has been so successful is its customer interface. “We try to have direct contact with the customers. No matter where they are, we like them to have a single point of contact. That requires people to coordinate very quickly and efficiently. “That’s what we’re good at.” |



Playing their cards right Sandro Camilleri, CEO of card issuance solutions specialist Matica Technologies, has a game plan for meeting challenges in the payments sector Global credit card fraud statistics make stark reading. UK customers lost £500million to fraud in 2016 and latest reports suggest that the number of ATM fraud incidents also rose by 546 per cent between 2015 and 2016. Meanwhile, the cost of credit card fraud to US retailers totalled $32billion in the same period – a staggering $23billion increase over the previous year. And yet crime and the rise of alternative payment methods, such as mobile wallets, appears to be having little impact on the paying public’s loyalty to plastic. Card usage, particularly debit card usage, is at an all-time high and growing globally. According to the latest World Payments Report from BNP Paribas/Capgemini, global payments using cards grew faster than any other payment instrument in 2015, with the Asia Pacific Region seeing an astonishing 31 per cent increase in debit card transactions. The report acknowledged the perceived ‘superior convenience and security’ of using plastic, all of which puts pressure on providers to stay well ahead of the innovation curve. And global card issuance systems manufacturer Matica is doing just that. The company, which provides printers for secure documents, including passports, ID cards, driving licences, security passes, and credit and debit cards worldwide, with offices in Europe, Asia, the USA and UAE, doesn’t deny the size of the challenges facing the industry. But CEO Sandro Camilleri sees the competition from digital payments and concern over card fraud as an opportunity to take the business in new directions. “Digital banking is now a reality and card producers like us need to go with it,” says Camilleri. “But even in the face of trending payment methods, such as near field communication (NFC) with Apple Pay etc, and wearables like the Kerv Ring,



I am in no doubt that cards are here for a long time yet. That said, the emphasis – both among consumers and providers – will shift to the capabilities of the cards and the technologies needed to keep pace with digital payment alternatives and meet people’s growing service expectations. I don’t see plastic card use going down, I see plastic cards becoming more sophisticated and that’s an opportunity for us to open up a new product portfolio in security transactions.“

Going in a new direction So what will those new card capabilities consist of? “The cards is a tool, at the end of the day. It’s going to be a much more sophisticated than it used to be, but it’s still a tool to allow you certain services,” says Camilleri. “So, either you extend the services you put on the card, or

Cards are still one of the most profitable businesses in a bank’s portfolio… they are here for a long time yet you increase the data on that card. “That’s the way we see our business developing. The changing product portfolio has to respond to consumers’ needs – to enable them to do more things with the same cards, or carry more branding and personalisation, such as photos, or include more features, or all three together. The imagination of customers is pretty extensive and we need to keep up with that.” An area that’s likely to see a lot of

activity is card security. “In my opinion, one of the technologies that is going to be introduced very quickly is biometrics for security and data reasons,” says Camilleri. “So we’re looking not just at the security of the cards themselves, but also the process used to produce them, and the machines we’re providing for that purpose. This encompasses cryptosystems embedded into cards, such as biometrics, and finger print scanners for access to the machine or printer producing the cards in the first place. We may get to a point where iris scanning is also used for payment authorisation. I see a blend of all these elements starting to be introduced within the next year.”

Rise of instant issuance Security is not the only major driver of change in today’s card market. As one of the most profitable income streams for banks, cards are important vehicles for providing a wider and more personalised suite of services to customers – so important, in fact, they may even influence where customers choose to lodge their account. Key to this has been the rise in use of in-branch card printing (financial instant issuance or FII) systems. It’s an innovation in customer service that has been led by Matica. Such machines reduce processing and distribution costs for banks while speeding up the onboarding process and providing a frictionless customer experience, especially for those who have lost, stolen or misplaced cards and can simply pick up a replacement in branch. With a card in their hand already activated, spending rates are proven to be higher, too, making instant issuance an income generator. Earlier this year, Matica Technologies commissioned an independent study from MindMetre Research, looking into the key services that bank customers

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from four European countries (UK, France, Spain and Germany) would like to receive through a digitally transformed bank. After a preference for a seamless process between online and in-branch customer service (78 per cent), the second most popular choice (73 per cent) across all countries was to collect, renew or replace bank cards on the high street. “Banks want to reduce costs and, in some cases, the number of people needed in their branches, by optimising their services while at the same time providing a wider range of options to their customers, such as multi-task kiosks and instant card issuing,” says Camilleri. “There is a consolidation process going on at the moment, which will affect the product portfolio we offer to banks in the years to come. “Twenty years ago, the back office was the place where cards were issued. These days, banks also want smaller machines at the counters, which are easy to use –essentially, a lot more technology in a much smaller space. This is why we have developed more than 20 desktop products in this field.” Such technology isn’t confined to the branch, either – portable FII machines are designed to be used in airports, retail stores and even pop-up bank branches. It’s an area where Camilleri foresees a lot more innovation. “We expect to have products that are more and more

sophisticated. If you want to make a comparison, think back to the smartphone era. At the very beginning, it was primarily a tool for communication. These days, you use them to take pictures and play music, among other things, and you also have a lot of other embedded information. I think something similar is going to happen to our industry, where you’ll have to provide, particularly at a desktop level, a lot more features within the same machines.” For all the talk of digital wallets, banks clearly aren’t going to give up on cards any time soon. In fact, quite the opposite. “Cards are still one of the most profitable businesses in banks’ whole portfolio,” says Camilleri. “They make serious money, compared to what they make on interest from loans and savings, certainly in an era of historically low interest rates. “So, they are continuing to invest in the cards side of their businesses. Recently, one of the largest banks in the world bought a credit card bureau for this reason – as well as the access it brings to a large database of customers,

and relationships with those customers through their cards, which enable them to also offer other bank services to them.” As a supplier to the banking industry, Matica needs to stay at the cutting edge of card technology, says Camilleri. “In terms of our desktop offering, we are launching concept products that are going to disrupt the industry. And we’re going to propose to customers that they issue centralised volumes through desktop and medium machines because the desktop suite allows them to run, basically, a farm of printers with the same software platform. So the investment and return on these printers plus the software, is much better.” Increasingly, Matica’s customers are looking for a full suite of services to support card issuance and the company is stepping up to the plate. “The banks are asking for ever-greater customisation of the card printing system, so every machine is different from the previous one in terms of providing batch and card personalisation, in a reliable and cost-effective way,” says Camilleri. “We’re moving into a new market to supply a complete solution to the banks, in terms of hardware, software and card management systems over the next few years.” It looks like Matica has the winning hand.

Winning hand: Matica is moving into new markets

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Look, no hands!

Earlier this year, BNP Paribas announced a €3billion digital investment programme with a focus on removing manual processes, not least in its corporate and institutional banking division. Andrei Serjantov, Global Head of Electronic Primary and Credit Markets, explains how an digital approach is delivering benefits BNP Paribas is a bank with a long digital shopping list. Between now and 2019, it will be spending €3billion on the group’s digital transformation programme, focussing, among other things, on improving operational efficiency and customer experience. That includes looking at the way data is collected, stored and delivered to staff. Andrei Serjantov, global head of electronic primary and credit markets for BNP Paribas corporate and institutional banking, points to a data lab full of mathematicians and data scientists who are designing intelligence to be integrated with internal processes across a wide variety of areas. “You can think of data as the eyes of our front-office staff; it’s what they see, and we want to collect, store and deliver it to them as quickly and efficiently as we can. Workflow is like the hands; we want to fill in key information, record all the data and make things as automated as possible.” Much of this activity is being driven by the second Market in Financial Instruments Directive (MiFID II), which is impacting the business models, internal processes and IT infrastructures of trading banks and the markets in which they operate, with its demand for speed, transparency and more detailed transaction records. Serjantov gives the example of pre-trade transparency. Traditionally, a salesperson asks a trader for a price and then calls the client to supply it, but there’s nothing

to tell them when it has to be published elsewhere first to meet requirements. A digitised workflow, on the other hand, flags what is needed and implements it automatically, transforming not only the process but the trading culture – there’s less shouting across a desk, it’s all done silently within the system. In January, BNP Paribas also announced it was among six investment banks to partner fintech startup Origin Markets on the dealer side of a platform that aims to simplify the way money is raised in the private placement market for medium-term notes. This means collecting information about many different types of small debt issuances in different formats from different issuers. It is then supplied to BNP Paribas over an application programming interface (API ) that allows it to access everything through the backend, so it flows directly into its systems. Staff no longer have to wade through emails for information and input data manually. “There are many different kinds of instruments – fixed, floating, complicated coupons, etc – and different issuers have different formats; data is all over the place,” says Serjantov. “Origin gives us tremendous efficiency by bringing that all that together.” Meanwhile, on the other side of the trading fence is Ipreo Investor Access. It makes sure investors are alerted to new-issue announcements and receive structured information on deal terms and conditions. It also allows them to submit and manage orders, and receive

Different issuers have different formats; data is all over the place 66


electronic notification of allocation and pricing details, along with other information, such as the prospectus and final terms. BNP Paribas became one of the first banks to issue a bond over the platform days after its launch this year. “Typically, when a bond issuance is announced, customers put in orders by calling our salespeople and they input the order into our system manually,” says Serjantov. “Investor Access allows the customer to input orders themselves, but it doesn’t mean the sales team is cut out; they can still see what’s happening and discuss it with the customer if they need to, but this way there’s more efficiency and less operational risk.” Faster communication between buyers and sellers will be key to the industry going forward, says Serjantov. Which is why BNP Paribas has also signed up to technology utility Neptune. A digital pipeline distributing standardised pre-trade bond information, it currently connects 25 participating banks with 50 global buy-side institutions, totalling around US $16.5billion in assets under management. “That’s obviously much more efficient than each of the banks connecting to each of the clients,” says Serjantov. “It’s an example of infrastructure that is useful for everybody – both sell-side and buy-side – and the interesting thing is that it’s owned by a consortium of banks, all sitting around the table together, working out what data we need and what we’re going to communicate down that pipe. This has potential to evolve and create even more effective communication between various market participants.”

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Growing with the business of banking


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Jurassic gains

Enough of the dinosaur tag! This is a time for established banks to flourish, not be dragged backwards, says the European Banking Federation’s Senior Policy Adviser, Pascale-Marie Brien Bill Gates dismissed banks as ‘dinosaurs’ more than a quarter of a century ago, and today they remain under pressure from an army of fintech startups that appear to be out-classing them in a Darwinian fight for supremacy. But traditional retail banks, through innovation, and assisted by balanced regulation, can not only survive – they can compete and thrive. That’s the message from Pascale-Marie Brien, senior policy advisor at the European Banking Federation. She agrees that, on the face of it, big banks look about as agile as a T-Rex on crutches. But that would be unfair, she says. Banks have been innovating for the last 30 years, especially in the payments area. “Banks were the first to invent crossborder means of payment in Europe, for example. It didn’t exist in the rest of the world,” she points out. And this November they will be evolving again with the launch of an instant credit transfer scheme by the European Payments Council. The decision-making and coordination body of the European banking industry will extend real-time money transfers across the Single Euro Payments Area for the first time. “It’s going to be huge for the industry,” says Brien.

Cross-fertilisation is key Strengthening the banking gene pool sometimes requires selective cross breeding if your want to populate your ecosystem with a lot of little financial services products, so banks are not averse to choosing partners elsewhere, says Brien. She even has a word for it. “This is what I call fin-integration. Working with fintechs brings agility, customer-centric, fun products to banks, which are much more solid, secure and have customers’ trust. So working together can only be positive for fintechs and banks. “Banks cannot be everywhere. So, they



have a natural tendency to buy or to make deals with innovative newcomers, who will serve a niche market. This is what they do today, and what they will do in the future.” Disrupters, such as N26 in Germany and Monzo in the UK, which both saw an opportunity to reinvent the banking market on the back of the 2007/8 financial crisis, have had a positive impact, reckons Brien, by making the incumbents realise the best assets in their portfolio are their customers. “Trust in banks was affected by the crisis, but few customers have been impacted directly in Europe. They’ve been protected,” she insists. “Now there is room for innovation and creativity; for anticipating customers’ needs, in terms of payment, credit and financial services in general.” In fact, creativity is becoming an imperative. “I’m sure customers may decide to switch their bank because the banking interface is more fun at another bank, because their husband or their best friend talks to them about their banking interface,

I’m very positive about the industry adopting forward-looking solutions, such as APIs… that should not be stopped by a political agenda or their mobile payment app. So, it is becoming essential to be ahead of the competition,” says Brien, who believes the revised Payment Services Directive (PSD2) will only encourage banks to think outside the box. “In the last five years, regulation has been

a boost to innovation and security. Thanks to PSD2, incumbent third-party providers will be regulated, so they won’t be able to access customers’ accounts in an unregulated way. It’s an excellent opportunity for both existing and new fintechs to get into this market in a regulated and secure environment, and this is what we need.” She admits that banks did not anticipate PSD2 in the form that it eventually emerged. “However, the text that has been finally approved is an excellent compromise,” she says, “and most banks have thought ‘this is a wonderful opportunity for us to become third-party providers, and to really put the customer at the centre of our payment experience’. I haven’t met any bank who says PSD2 is a catastrophe. On the contrary, they are happy that anybody will be able to access their payment accounts in a secure way, that they’ll be able to trace who accesses their customer’s data, and be able to offer these services

themselves. I see many banks going that way. But payment is only the beginning; PSD2 is the door to many other retail services that banks will offer under the same platform.” There is a subtext to that analysis – and it’s to do with the controversial area of so-called screen

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scraping, whereby anonymous third-party providers have permission from customers to collect ‘screen-scraped’ data from their accounts in order to facilitate other transactions, without going through the bank’s application programming interface (API). The EBF has lined up on the side of the lobby calling for screen scraping to be banned – which is certainly what the European Banking Authority indicated would happen when it released its final Regulatory Technical Standards earlier this year. With the implementation of PSD2 just four months away and loud protest from non-banking operators, there is still, however, uncertainty.

Removing obstacles At a meeting in June, Brien’s boss, CEO of the EBF, Wim Mijs, told bankers assembled in Cyprus that the organisation favoured a ‘Same services. Same risks. Same rules. Same supervision’ approach to regulation and supervision of financial technology in the EU’s digital single market. “This would ensure high standards for consumer protection, market integrity and financial stability in a level playing field that supports fair competition and innovation,” he said. And he continued: “The

EU also needs to leave room for partnerships. Our industry is committed to fintech partnerships and in many cases banks already actively work closely with newcomers. Potential regulatory obstacles to such partnerships should be prevented and, if necessary, eliminated.” Brien agrees. “I’m very positive about the industry adopting forward-looking solutions, like APIs, but that objective should not be stopped by a political agenda,” she says. “We are too close to making Europe the most secure and innovative region in the world, and I’m concerned by a lobby that may bring us back to the 20th Century. I hope that the innovative community, made up of fintechs, will make everybody understand that we need to adopt forward-looking technologies, such as APIs. “We are really looking forward to seeing them created everywhere in Europe, and short-term, or medium-term, see all these APIs becoming inter-operable at European level, exactly the way we did it for cards.” There is, of course, an argument that under PSD2, banks could become simply account

holders. “But only if they do not understand the enormous chances PSD2 is offering them,” believes Brien. When it comes to the General Data Protection Regulation (GDPR), famously described by one industry observer as an ‘extinction-level event for at least one major high street bank’, she admits she doesn’t know any data protection officer who’s ‘comfortable’ with it. But that doesn't mean the ‘dinosaurs’ are on their way out, either. Given banks have compliance in their DNA, Brien believes GDPR will have a bigger impact on non-banking personal data hoarders, such as Google, Apple, Facebook and Amazon (the GAFAs). While they are shaping up to be among the financial industry’s biggest challengers, Brien says so long as ‘the GAFAs don’t have an easier life in Europe than other actors in the market, when it comes to data, then we’re OK’.

Natural evolution: Banks will ‘fintegrate’ to survive

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Every contact leaves a trace Pushfor’s secure content sharing platform would defeat the perfect spy. CEO Mike Williams explains why a communication system that mimics everyday messaging apps could be a critical part of your GDPR defence When it comes to sharing content securely, regulatory change is soon to rewrite the rule book for companies across the financial industry. Around 80 per cent of hacking and data leakage cases occur as a result of insecure communications. Even the humble email isn’t safe enough by design and no amount of emojis can change the fact that your favourite instant messaging service won’t adhere to the upcoming General Data Protection Regulation’s (GDPR’s) strict rules regarding the sending of unstructured data. But introducing a secure, GDPR-compliant data communication system within your organisation won’t necessarily offer a foolproof solution to the problem, either. Because if you frustrate the instant messaging generation with clunky (albeit protected) content sharing, the likelihood is that an insecure shadow IT will enter your organisation sooner or later and compromise your efforts. Instead of wrestling with an unintuitive sharing system, an employee is far more likely to pull out their mobile, snap a picture, and then share the data on WhatsApp or Messenger, bypassing your smugly compliant internal IT system entirely and potentially earning your company a whopping GDPR fine in the process. As we all know, even a former Secretary of State wasn’t above bypassing her boss’s high security communication system because it wasn’t ‘convenient’. “Purely ticking boxes from a compliance point of view by installing an inconvenient content sharing system, for example, puts companies in grave danger of creating employee security and productivity issues,” says Mike Williams, CEO of secure content sharing platform Pushfor. “Not only are your staff likely to violate GDPR’s new rules regarding unstructured data sharing, but a poor user experience will undoubtedly lead to customer fall-off. “Intuitive, real-time access to content has become an integral part of modern life, and consumers are no longer willing to deal with companies that employ awkward



communication systems. Implementing a robust content sharing system won’t protect you from the perils of GDPR.” But after three years of continued development and around £3million worth of investment, he believes Pushfor’s secure messaging platform bridges that gap between compliance and convenience. “Our platform allows your business to address the data sharing stipulations of GDPR, while also permitting users to access real-time content on their own devices, as they’re accustomed to,” says Williams. “Our model fully supports instant messaging as well as email formats, eliminating the likelihood of shadow IT entering the workplace as a result of dissatisfied staff.” Herein lies the ingenuity of Pushfor’s platform – it’s fundamentally reinvented the process of digital content sharing, while

This transition to a system of pushing as opposed to sending content immediately solves a large number of data protection issues surrounding GDPR disguising its GDPR-compliant formula as something we’ve all been doing on our mobiles for years. “The entire issue surrounding unstructured content can be summarised in one word: sending,” says Williams. “By sending content, you effectively relinquish control of it, making your data vulnerable to all manner of hacks and leaks. As our name suggests, we rejected the traditional notion of sending content in favour of a safer, GDPR-friendly alternative called pushing,” he says.

“In a push, none of the content moves, but instead remains locked up tight within a server – the data is merely ‘projected’ onto a particular device. The device in question doesn’t require any authoring software to present the content, and nor does any of the content remain on the device once the projection has ended. “This transition to a system of pushing as opposed to sending content immediately solves a large number of data protection issues surrounding GDPR,” Williams explains. “There’s absolutely no chance of losing data to a hack on an external device, since none of the data ever truly leaves your servers. You hold the sole key to your content at all times – you can control who views it, how long they view it for, and even the locations in which it can be viewed through precise GPS monitoring.” Spy novelists pay attention here – you might just have to rethink the genre. “We can do some really clever things in the DNA of the content,” says Williams. “If I was on a train, for example, and was worried about someone looking over my shoulder, we have a frosted window technique so that only the elements on the screen that I run my finger over appear. Should someone try to screenshot the content, the data will be killed on their device and you’ll be notified of the transgression. If any data is forwarded incorrectly, either by accident or maliciously, the live link can be severed and no traces will be left in the hands of the wrong parties.”

Beyond compliance Protecting your data in the first place is obviously of paramount importance. But the aspect of GDPR compliance that companies are more likely to struggle with is the comprehensive reporting of data breaches within 72 hours of their occurrence. Adequately cataloguing a chaotic trail of sent data is an almost impossible task that would defeat the most dogged data detective. Pushing data, on the other hand, procedurally generates complete reports, ready to be sent to the regulators, however Autumn 2017

slim the chances of a data breach, as Williams explains: “Our service monitors every single parameter regarding the end user’s consumption of the shared content, producing full audit trails in line with GDPR stipulations. This is key to compliance come May 2018, since merely reporting the event of a data loss won’t be acceptable under GDPR. Proving you have a complete audit trail is fundamental to compliance, without which you are at risk of a hefty fine, and Pushfor removes all the pain of compiling a report by logging every single interaction with your content automatically, no matter how fleeting they may be.” And it isn’t just a preventative measure; it also has customer service advantages. “GDPR is a fantastic opportunity for banks to completely reset the way they think about sharing content,” says Williams. “Making the move to a content sharing system of pushing, whether prompted by GDPR or not, will deliver benefits that go far beyond compliance. “Due to the real-time nature of the patented, push technology, any customer interactions with your content are fed back to you immediately. Using this information, you can engage with customers at a personal level, helping them to understand your products, based on their particular actions. “Pushing can also assist in your internal processes, such as staff training and management. For example, you can prove that an employee has spent more than 10 seconds reading your 50-page operational policy. “New ways of employing the technology are being conceived every day,” says Williams. “But pushing constitutes the quickest data protection fix there’s ever been. The age-old leak of sending data is being plugged and GDPR has already proved its worth by inciting such a positive change in our content sharing habits.” So, good news for banks, but a sad day for Smiley’s people. Autumn 2017

No more leaks: Pushing content solves an age-old data issue |



A change of style Regulators are introducing new rules like they’re going out of fashion. But Paula Da Silva, Head of Transaction Services at SEB, sees compliance as the new black when it comes to competitive edge Let’s face it, compliance isn’t the sexiest aspect of banking. Payments and branch transformation regularly strut their stuff on the financial catwalk but no-one’s desperate to model the latest directive. That may be about to change, says Paula Da Silva, head of transaction services for leading Nordic financial services group SEB. She believes that, in a world where security and data transparency are front of mind for today’s tech-savvy mobile customers, compliance is about to be right on trend – because it spells enhanced value and differentiation for institutions that do it well. In the financial fashion stakes, compliance could be the new black, particularly in a changing financial services landscape that’s dominated by the revised Payment Services Directive (PSD2) and General Data Protection Regulation (GDPR). “It’s interesting how the whole taste and sound of regulation has changed over time,” observes Da Silva. “In the past it was seen as just a burden, whereas now organisations are looking at it more and more as a way to increase trust, actually talk to their customers and guide them through the changes.” And there is a real opportunity for financial institutions to be seen as these white knights, helping confused customers through uncharted territory. “It turns out that they need as much help as we do,” she says. “And this gives us a level playing field, where the competition is about the value an organisation adds rather than its infrastructure.” This could potentially lead to a reshaping of banks’ entire priorities, Da Silva believes. “They’re separating into value driven and infrastructure providers, in a new world characterised by openness and time to market. You could see this as a threat to our traditional business model, or as an opportunity to enhance other parts of our



business that provide huge value but that we have never made the most of.” This enforced self analysis is highlighting some exciting opportunities for SEB, which specialises in full-service corporate and investment banking. “We’re asking ourselves questions like ‘what does it mean to be trustworthy and safe?’” says Da Silva. “Cybercrime turns out to be one area where we’re really good at reassuring our customers. In the past it was taken for granted, but now it highlights the difference between one player and another. “This is extremely important for the whole banking industry. Financial institutions need to be safe hubs. There’s no point in having the best user experience, but not being sure your money is yours and only you can access it.

Competition is about the value an organisation adds rather than its infrastructure “It’s about trying to understand where threats come from too, because this might not be from your traditional channels. They might come from a garage somewhere in Australia or China. We really need to understand how that works and that might not be within banks. In the Internet of Things (IOT) era this could be refrigerators talking to stoves.” Security is not the only space where SEB hopes to offer added value. “Another example for us is the implementation of the Single European Payments Area (SEPA), which everybody’s struggling to deliver. We have developed a standardised way of formatting payments

based on XML. Instead of having US payment formats on the one hand and European ones on the other, we are converging them into one platform where they can talk to each other,” says Da Silva. SEB is also viewing the onset of new regulation as an excuse to review its whole operation, she adds. “We want to make it easier for customers to use our services and products, by removing silos so that they can access them via different channels and locations. And doing this also necessitates simplifying our operations, which makes it a win win.” Blockchain technology is one of the tools SEB is using to do this in areas such as trade finance. “One of the most exciting examples of this is our collaboration with Ripple, where we are piloting blockchain payments for real with one of our corporate customers. It is connected to the free protocol that Ripple has available in the Cloud, and our traditional legacy settlement systems. This gives our customers the experience of real-time payments but using our old infrastructure as well. “That’s the biggest example but we’re also trying out export letter of credits (LC) through the distributed ledger group, R3, where 80 banks are collaborating to explore blockchain use. We have a seat on the board there and we would really like to influence this and take it from technology to implementation. “Unlike the old, traditional banking products, this really gives customers better access to our world.” Autumn 2017


Shopping for ideas Bank Millennium isn’t about to let any hungry fintech ‘eat its breakfast’. Having helped crack local payments and provided a gateway for government ID schemes, it’s moved into digital shopping… and that’s just the start, says Wojciech Rybak, board member of Bank Millennium For people who live and breathe fintech, Bank Millennium may already ring a bell as one of the founding partners of Poland’s first mobile local payments system – BLIK – in 2015. It’s been incredibly successful in allowing users to make payments through a mobile wallet, withdrawals from ATM machines and peer-to-peer transfers. However, it’s far from being the bank’s only innovation. More recently, it’s moved into smart shopping with the platform goodie, which began life as an in-house start-up. And this summer it became the first among a consortium of Polish banks to offer an electronic invoicing service. The first privately owned commercial bank to be set up in a newly liberated Poland, Bank Millennium opened in 1989 just as the Soviets began marching out and was the first bank listed on the Warsaw



Stock Exchange three years later. It has since morphed into a multi-sector, multi-channel bank with 1.6 million active retail customers, more than 1 million active retail clients of online banking and more than 600,000 users of its mobile

banking service. The Bank’s newly created goodie – its free-to-use smart shopping platform built on artificial intelligence, image recognition and geolocation software – acts as a discount aggregator for retailers and is designed for customers who want to receive personalised information about nearby products and services. When entering Warsaw restaurants, for example, you’ll be presented with dozens of local offers, from Big Macs to mojitos. Wojciech Rybak, a board member of Bank Millennium, explains: “You can use goodie through your phone to get information about discounts that are personalised to your interests. For the merchants, the value proposition is very important

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because they are not offering discounts to everybody, just customers who are really interested in certain products or services”.

Ready for change Operated as a separate entity within the bank, goodie was launched in 2016 and has been expanding ever since. It’s not, says Rybak, just an innovative digital firework, designed simply to attract customer attention. “We see lots of potential. There’s the customer experience, of course, which can combine a lot of daily activities together, not just those connected with banking. But from the bank’s perspective, we’re exploring additional functionality from a social point of view. “This means goodie could become a solution not just for shopping, but also for meeting friends and recommending specific services, such as shops, restaurants and bars.” Meanwhile, its electronic invoicing service, offered by a consortium of Polish banks, will ultimately give customers the option of settling bills through the electronic banking system with one click. Initially launched by the bank’s commercial division to consolidate and improve invoicing and payments for business, the plan is to roll it out to bigger corporate and retail customers, allowing

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them to pay utility charges and other bills quickly and easily. The launch of goodie, the electronic invoicing service and, prior to them, BLIK, is part of the bank’s mission to retain and increase market share by constantly innovating its customer service as it limbers up for life after the revised Payment Services Directive (PSD2). “The most visible challenge in financial services for the last few years has been a difference between growing volumes and decreasing profits,” says Rybak. “We see a trend in major economies towards lower income per customer, or lower in terms of return on equity. That’s a challenge because, on the other side, we have capital requirements that are increasing. “The second challenge is the competition itself and PSD2 will increase that. So we need to be ready.” The bank is already in a strong position with the highest Net Promoter Score among consumer and commercial banks in Poland. Some of its consumer-facing work was even undertaken in conjunction with the Government, developing a citizens’ identification system based on the customer’s account login process and, effectively, turning the bank into a gateway for some public services. When a client applies for an ID card or a driving licence, for example, Bank Millennium automatically confirms their identity through a ‘trusted profile’, established earlier by a customer. Millenet (Bank Millennium’s online system) also enables clients to check their social security details or even apply for some child benefit payments. Rybak is clear about the benefits of this multi-service approach. “We are making things easier and safer for customers,” he says. “There’s a lot of technology behind it, but for our customers it is as simple as one touch – and the number of people using those functionalities is growing. Sixteen per cent of mobile application users are already using fingerprints for an authentication in the app, for instance. “We were also the first to introduce 3D secure internet transactions that are authenticated by phone. This is a necessity for young customers, as they have an open relationship with the bank and use digital solutions.”

Banks as developers As part of the bank’s focus on putting the customer first, it has committed to an ‘omnichannel’ approach. Rybak gives the example of car insurance as a way to demonstrate the benefits. “It normally takes 20 to 25 minutes to fill in all the documents. Anyone who ever made a mistake when typing their car VIN knows how time-consuming it can be – so we introduced a solution that allows an application to scan the Aztec code. This means all the data becomes available in the application and you can finish the process in two or three clicks, or you can stop the transaction to review your current policy, check the pricing and come back, either on your phone or computer.

More and more, our customer experience is our competitive advantage, rather than the traditional product model based on pricing and marketing areas “It’s the same with credit transactions. They can be opened in any channel and then closed in branch or after a telephone chat, if a client needs to clarify any points or ask for advice. This gives customers a lot of possibilities and I believe our high Net Promoter Score shows how much they like it.” Rybak believes this combination of technology and user satisfaction will see it continue to perform well after PSD2. “More and more, our customer experience is our competitive advantage, rather than the traditional product model, based on pricing and marketing areas,” says Rybak. “We know our clients best. Our understanding of their behaviour and needs should give us a lot of advantages, as long as we are at the same level of technological advancement. “This is now happening. Banks are increasingly become software developers, rather than product developers”. |



Judgement call Financial regulators are constantly having to assess whether intervention in free markets is justified or, indeed, wise. Sweden’s Finansinspektionen is no exception, says its Senior Advisor Uldis Cerps Doing nothing might sound like a strange way to earn a living. But knowing when to step in and when to just watch from the sidelines is the tightrope financial regulators walk every day. So says Uldis Cerps, a senior advisor at Sweden’s financial regulator, Finansinspektionen. He and his team have just witnessed one of the country’s biggest banks, Nordea, announce the relocation of its HQ to Finland after rows over government-proposed tax hikes and tough national regulations around deposit guarantees and capital buffers. Finansinspektionen’s official line after Nordea announced the switch was that it was too early to know how the move would affect the regulator’s oversight of the bank, adding ‘our assignment is to promote financial stability and consumer protection, regardless of where the operations are conducted’. But though Nordea said the key reason for the move next door to Finland was the country’s membership of the eurozone’s banking union, it was quick to reveal the savings it expected to make, too. Such a move brings into focus the consequences of governmental and regulatory decisions. Though it is impossible to please everyone all of the time, national policies can have big implications. That latest shock aside, Cerps is proud of Sweden’s position at the forefront of the fintech revolution. Talking more



generally about financial innovation, he explains that a regulator first has to understand what the new service is, and then decide whether it causes issues that may harm consumers or weaken a country’s or region’s financial stability. “If we conclude that we might need to regulate something, then we need to figure out whether the cost of regulation exceeds the benefits from regulation,” says Cerps. “If the costs exceed the benefits, then we should probably do nothing.” Cerps adds that as the country’s regulator, Finansinspektionen must always ask itself if it can do more to facilitate innovation and support the country’s financial firms. Sweden can certainly boast some superstars, especially in the payments sphere.

Innovation v pubic good Peer-to-peer payments firm Swish, which seamlessly links mobile phone numbers to bank accounts, has been a phenomenon; its app has been used by more than half the country’s population since 2015. It was created by a consortium of the country’s top banks and further stands out because it has not relied on venture capital funding. Another innovator in payments is Klarna, which has recently attained a full banking licence as well as launching peer-to-peer payments arm, Wavy. “The banks are very actively either making investments in fintech companies and offering fintech services themselves,

such as Swish, or doing their own incubators and supporting the new startups, which could eventually be linked to their existing services,” says Cerps. “Speaking from the regulatory perspective, we are asking ourselves whether there is anything more we can do in order to facilitate financial innovation while being mindful of our role. Modern technology can get financial services out to more people, people who have perhaps not received such services before. It has to enable consumers to get financial services of better quality at a cheaper cost and perhaps increase the accessibility and ease of use. “At the same time, we must be mindful of public good, because well-functioning financial markets are a public good. That’s why we exist, as supervisors, to make sure that the markets can develop freely and new ideas can flow. But at the same time we must ensure there is financial stability and consumers are well-protected. We have the mandate to make sure that we protect markets from those excesses which cannot be taken care of by private sector actors themselves.” One area that is under intense scrutiny by national and EU regulators is the outsourcing of banking data to third-party Cloud providers. The European Banking Authority (EBA) finished a consultation on the issue in August and is shortly to report its findings. Autumn 2017

Holding the line: A regulator’s job is to prevent the domino effect

Though the use of Cloud computing can drastically cut infrastructure costs for banks, cybersecurity is the prime consideration. The EBA has made clear its concerns about accountability and the potential risk to whole sectors if services provided by a Cloud provider with scores of banking and insurance customers were to fail.

Lessons still to learn With the General Data Protection Regulation (GDPR) and that legislation’s power to impose huge fines for data breaches, banks need to get any migration to the Cloud right first time. Swedish corporate bank SEB Group has admitted it has been wary about migrating data to the Cloud due to its own high security standards, but also because some providers are unhelpful when asked to meet the demands of the regulator. Cerps says: “Cybersecurity is an area which I guess is at the top of the agenda for every single board, of every single financial institution. It is important that regulators think about ways to strengthen cybersecurity, but without implementing measures that impair the functioning of free markets and make financial markets more domestic in outlook. “In a free market, those institutions should have the right to outsource things to the Cloud. If they can’t do things themselves, outsourcing makes perfect

sense. But it has to be done with certain conditions so that if cybercrime occurs it is possible to construct a chain of events and it is possible to draw lessons for other institutions.” That requires access for the regulators, access for the supervisors, access for banks themselves, to the data being held in the Cloud, in the same way as you would expect access if that data was held in-house. “That seems to be a very reasonable requirement, and this is also in line with what the European Banking Authority is proposing right now,” says Cerps. He says issues around data are undergoing a ‘paradigm shift’, formalised by the introduction of GDPR and the revised Payment Services Directive (PSD2). “Access to consumer data is something that consumers themselves can decide on,” he says. “For the time being it occurs in the area of payments, so consumers can decide which other actors should have access to their payments information. But I think in the future, you may ask if such consumer rights should be extended to other information that banks hold about their customers. It could be data around investments or savings. That could potentially be a good basis for building other financial services. “That is a question I think regulators will need to think about.”

Another huge issue for Sweden’s regulator is almost 10 years old and has still not been fully sorted out – how to mitigate against the failings that resulted in the 2008 financial crisis. Cerps is upfront in his view that there is still much work to be done to ensure future financial stability, while getting the regulatory balance right. He says: “In terms of ensuring financial stability, the regulators have not yet taken all the decisions that are necessary to learn from the financial crisis of 2008. At the Basel level what remains to be done is we need to complete the present capital package and implement it. There remains some unfinished business.” And then there is Brexit. “There will be a need for some legislative changes as a result of Brexit, because that is an important event affecting financial markets and there will be a lot of changes stemming from initiatives such as the Capital Markets Union in Europe, which is an important measure to develop more integrated capital markets in Europe,” says Cerps. “I know many people are complaining about the ‘regulatory tsunami’ and there is some truth in that. But at the same time I think we have to make sure that we can protect financial systems against the problems that we suffered in 2008. And, frankly, we are not there yet.”

We need to figure out whether the cost of regulation exceeds the benefits from regulation. If the costs exceed the benefits, then we should probably do nothing Autumn 2017 |



Changing the DNA “Innovation is not just a word. You can’t just say ‘let’s go and hire an innovation team and now we’ve solved innovation’. For us, it’s a way of being.” You’d be forgiven for thinking that statement came from one of the GAFA heavyweights – a Jobs, Bezos, Zuckerberg or the Page/Brin team. In fact, it’s a senior executive of an Irish bank. And it’s indicative of the attitude among even the longest standing members of the island of Ireland’s financial services community. Perhaps it’s something in the air, created by the innovative emissions from Amazon, Google and Apple, who’ve all set up ideas factories in Cork and Dublin, the capital that’s home to 250 global technology companies, many of them centred around its so-called ‘Silicon Docks’ area. Across the border, Belfast, which claims to undercut even Ireland’s famously generous business operating rates, is said to be poised to become the post-Brexit fintech hub nearest to the EU for Britain. But to return to that opening quote from Ciarán Coyle, chief administrative officer of Ulster Bank, who believes the challenge now will be for banks that have ‘changed more in the past five years than in the previous 30’ to keep up the pace. “We’re not interested in just having innovation as corporate speak; it’s got to be innovation that is in step with our customers’ changing behaviours and demands,” he says. Which is why, mindful perhaps of Steve Jobs’ warning that ‘you can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new’, the bank became a founding partner in Dublin’s fintech incubator Dogpatch Labs. A move calculated to make sure the bank stays ahead of the fintech game, it’s so invested in the idea that it’s taken its team to the lab, not the other way around. “Dogpatch Labs is a place for start-ups, including technology start-ups and fintechs. It creates an environment for



Living in a fintech lab has helped sew innovation into the fabric of Ulster Bank, says Chief Administrative Officer, Ciarán Coyle them to share information, connect and learn from each other,” explains Coyle. “To really take it seriously, we felt we needed to base our innovation solution team in Dogpatch Labs, rather than in a corporate head office. That has just been a fantastic decision, which has driven some really interesting things for us,” he adds. “It means that we stand shoulder to shoulder in that innovative environment with startups and fintechs, learning from them, supporting them and then being part of the wider fintech ecosystem here

We stand shoulder to shoulder with startups and fintechs, learning from them, supporting them and being part of the wider fintech ecosystem in Ireland, through Dogpatch’s alliance with Google and others. “This has proven to be really powerful, because we can take the best of what we see there, bring it into our company and expose our staff to it. This makes for a unique environment that is very different from the historic banking culture.” It’s meant innovation has been woven into ‘the fabric of the bank’s being’, says Coyle, and resulted in a rapid acceleration of products to market.

“In the last 12 months, we’ve launched Apple Pay, Android Pay and video conferencing for customers, all of which is innovation, but innovation which makes our customers’ lives easier, and that’s what we’re focussed on. “We are in a transitionary phase, where customer behaviour is changing rapidly. Last month, 65 per cent of all our customers’ interactions with us were digital,” he continues. “However, physical interaction is still a cornerstone of our proposition. To enable that, we have our branch network and our mortgage advice stores for people who want to talk to us at a really important time of their life. Then we have our telephone banking channel.”

Not what you know… One of Ulster Bank’s most exciting crossovers between ‘man and machine’ is its new video conferencing capability, launched in 2016. Exciting not only because of what it can do, but because it’s the result of a collaboration with a company called TokBox, from Silicon Valley in America, made possible by parent bank RBS. It was one of RBS’s California-based opportunity scouts who discovered secure video messaging provider TokBox and paired it with Ulster Bank. “We deployed the capability here in Ulster Bank as the first part of the RBS group to do that, and now we have used it to complete many video mortgage applications with customers all over the world,” says Coyle. “RBS’s scale and investment capacity just cannot be underestimated, and this is our unique strategic advantage in this marketplace,” he continues. “Purely from an innovation point of view, in the last 12 to 18 months, RBS’s innovation network outside of Dublin, in London, Edinburgh and Israel, and its connectivity in Silicon Valley, has given us exposure to immense capability. At the same time, we are able to act as

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a frontrunner for RBS, and it can learn from what we do with these new technologies in the marketplace.” Another example of that is an influential new blockchain project. “We’ve recently announced that we’re leading a collaboration among Irish banks on blockchain, and the opportunities it represents in the Republic of Ireland as a contingency platform for payments,” says Coyle. “We’ve been taking the RBS-built blockchain platform and deploying it in Ireland as a potential use case. “It’s another example of how we’ve become a very powerful test bed and innovation brand for RBS.” For the Ulster Bank team, the symbiotic nature of its work with fintechs is proving to be a catalyst for truly impressive innovation, aided by Ireland’s first open banking application programming interface (API), which gives approved third parties limited access to customers’ account balances and transaction history with the customers’ explicit permission. It uses the industry standard protocol OAuth to share information using a secure token exchange and provides a mechanism for fintechs and carefully selected third parties to develop products and new applications to provide services to Ulster Bank customers.

Hacking into new ideas “One of the reasons that the Dogpatch partnership was so important and strategic for us, was because it allows us to literally sit with fintechs every day, work like them, think like them, help them and change the way we do things as a result,” says Coyle. Hosting worldwide hackathons is one of the ways in which Ulster Bank is aiming to translate the resulting ideas into an influential bow wave across the industry. A recent mammoth 34-country event, led by Ulster Bank and Dogpatch, supported by RBS’s innovation and technology team, saw fintech innovators from across the globe explore the potential of artificial intelligence (AI).

At its February event, Ulster Bank made a test sandbox API available to developers who could use a secure, real-time environment, to build customer-facing apps, based on voice recognition services. “The hackathon was a truly fantastic environment, with a huge number of ideas generated over a 48-hour period,” says Coyle. “We had some brilliant winners, and some of them have come up with ideas we’re interested in pursuing, like how we might use AI to get quicker answers for our customers. Through RBS’s relationship with IBM Watson, we’re already trialling AI for frequently asked questions for our customers online. Other ideas included voice-activated banking and how we continue to roll out new propositions and products on payments.”

Inbuilt innovation: Ulster Bank's commitment to fresh ideas goes right to its core

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GDPR: A journey, not a destination Meeting the letter of the new European data protection law shouldn’t be seen as an end in itself, according to Alan Calder, founder and CEO of IT Governance If the date May 25, 2018, fills you with dread, you must be one of the thousands of people tasked with making your organisation compliant with the General Data Protection Regulation (GDPR). There's no doubt the GDPR represents a seismic shift in data protection for organisations, raising the bar of accountability and threatening substantial fines for non-compliance. But one expert argues GDPR is so significant that next year’s implementation date should not be considered a destination, but merely one step on a much longer compliance journey. Alan Calder, founder and chief executive of IT Governance, says the ethos of the GDPR endorses what he and others have been saying for years – that data protection must be at the core of an organisation’s processes and not a sideline to them. “The GDPR was written out of a belief that has developed among the data protection community over a period of 10 to 15 years that data protection has to be designed into processes rather than added on to them,” says Calder. “You can see the earliest formalised conversations around ‘data protection by design’ among international information commissioners back in the year 2000. They produced a very clear and globally accepted description of what data protection by design looks like. All GDPR has done is taken that, incorporated it into a regulation and made it a mandatory part of what organisations do.” Calder founded IT Governance – a global provider of data protection and information security compliance solutions – 12 years ago after identifying that company boards and their IT departments typically spoke a



different language to one another, which made it pretty much impossible to have a round- table discussion about data. Now those conversations are more important than ever because Calder believes that those company boards that have historically considered data protection as a hindrance or distraction, will have the biggest mountains to climb to achieve GDPR compliance next year. He remains pessimistic about how many UK firms have a clear understanding of what they need to do by May 25, putting the figure at just 35 per cent. “We recognise that organisations have different ways they want to approach compliance, so we’ve built our business in a way that enables us to provide packages of

The levels of fines will be based very substantially on the extent to which organisations ignore their accountability products and services to meet their GDPR needs.,” says Calder. “We can provide GDPR foundation and practitioner training, online staff awareness training, extensive or limited consultancy, software, documentation toolkits in a mix that will give clients the most practical route to compliance status. “At present we're finding organisations are asking for a GDPR gap analysis – an

analysis of what they have to do, and a plan of how to do it. Increasingly that's beginning to shift into a demand for data inventory and data flow analysis, which is trying to work out what data you’ve got, and what you’re doing with it, so that you can determine what you have to do to become compliant. “From the end of this year we predict more clients will be looking to add in a data protection officer as a service, then begin to add in GDPR audits to ensure that what they’ve done is meeting the ongoing requirements of the GDPR. So the makeup of products and services will change.” To briefly recap for anyone who’s missed it, the sea changes for organisations impacted by GDPR – which is every organisation collecting, processing, storing or sharing personal data – are around increased privacy rights for individuals and higher levels of business accountability. That means, for example, that organisations must report any data breach to the regulatory authority within 72 hours so that it can be investigated, and respond to any request by an individual to disclose all the data held on them. The potential fines for non-compliance – up to €20million or four per cent of a firm’s global revenue – have been widely reported. And if you’re trying to find a way of covering those losses, forget it, says Calder. In his opinion, there’s no insurance policy that can be bought or compliance certification to be gained that will protect you against these penalties. “Given that GDPR is a law, and the ultimate decision about whether you’re compliant or not will be made by a judge, I think the chances of there ever being any form of certification that says an organisation is compliant is zero,” he says.

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“A lawyer is going to argue that you’re not in compliance with a particular clause or issue or requirement, and the fact that you claim to be certified is not going to stop them pursuing you. “Likewise, it’s not usually possible to take out insurance against the consequences of breaking a law. You can imagine why that might be. Legislative bodies take the view that if you break the law, you get punished, and no insurance should exist to enable you to avoid the consequences of that. I’m pretty sure the same thing applies to the GDPR. Where insurance schemes are attempting to fill a gap is around cybersecurity – the consequences to an organisation of suffering a breach, the non-regulatory costs of cleaning up and making restitution to data subjects, all the normal subjects of insurance. “The challenge that most insurers have, I believe, is working out how big the potential exposure could be, and nobody really knows quite how much damage could be done to organisations by a concerted cyberattack.” But while there may be no certification that protects against fines, firms can join schemes that demonstrate best practice. And that could very much work in their favour, says Calder. “The regulation does make provision for the emergence of data seals and certification schemes and identifies them as mechanisms by which organisations can demonstrate they’ve done the best they can to meet the compliance requirements of the GDPR. So, you could take a cybersecurity standard, such as

Cyber Essentials, or the international information security standard ISO 27001, and see them as ways in which you can draw on internationally accepted best practice for information security around protecting the rights and freedoms of natural persons. You could implement them, comply with them, and when you suffer a breach you’ll be able to point to the fact that you’ve done the best you can, as part of your argument as to why any fines should be minimised.” Calder says that to successfully meet the demands of such schemes, however, organisations must implement data protection by design and by default. In other words, organisations must implement technical and organisational measures to show that they have considered and integrated data protection into their processing activities. “It has to be at the heart of the culture, the governance framework, the risk management frameworks, the behaviours of the organisation as a whole,” he says. “When the GDPR talks about the six core principles governing how

personal data should be looked after, it adds a seventh – ‘accountability’. This says the organisation has to be able to demonstrate, in applying the six data processing principles, that it has understood it is accountable for looking after data protection. Because of this, the levels of fines will be based very substantially on the extent to which organisations ignore their accountability. So, data protection by design and by default leads organisations to look at GDPR compliance as a journey rather than as a destination. It is a shift from something where you can say ‘well, we think we’ve done enough’, to an organisational strategy that over three to five years moves you from treating data protection as an add-on to something that is fundamental to how the organisation works. “This ultimately means that not only do breaches happen infrequently, but if they do, you’re able to demonstrate that you’ve taken appropriate steps to protect personal data throughout your processing.”

GDPR roadmap: An organisation should get to a position where data protection is fundamental to how it works

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Paying by new rules

Gamechanger: PSD2 has turned the tables on banks – but could they outsmart their rivals?

PSD2 is the gamechanger that threatens to leave banks competing in a commoditised space while fintechs ‘party in the penthouse’... unless, says Erik Tak, global head of ING Payments Centre, you make some smart moves Ten years ago, ING employed more than 100,000 people and was one of the word’s most successful banks. Then the financial crisis struck. ING had to rethink the way it worked, how it handled data, and how to apply technology to meet new customer demands and regulatory requirements. The answer was to simplify the business and act like a fintech. It’s an approach that has made ING what it is today: lean, versatile, technologically advanced. In short, a digital role model for



banking. And now, with the imminent arrival of the revised Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR), the Dutch bank’s ability to innovate is helping it to develop new services on the back of sweeping changes, and to respond to much stiffer competition. With more than 25 years’ experience in payments, and responsibility for payment strategy across all of ING’s business units and geographies, Erik Tak, global head of ING Payments Centre, is aware that regulation presents both opportunities

and challenges. And the one occupying much of his mind right now is cybercrime. It is, he says, the one downside to digital progress. “It’s a huge challenge for bankers,” says Tak. “The more we digitise our businesses and open the value chain, the more we must tighten security. When we talk about the way payments are evolving, and especially the arrival of PSD2, which will dramatically alter the payments landscape, allowing many new players to enter, we must never forget that security is fundamental.” Autumn 2017

Under the rules of PSD2, banks must open their payments infrastructures and their customer data to third-party providers, enabling technology companies to develop payment services through application programming interfaces (APIs). PSD2 therefore supports the concept of open banking, which, combined with the relentless pursuit of instant payments, is revolutionising the financial landscape. It’s been described by Jurgen Vroegh, ING global head of payments, as ‘the gamechanger of the decade – the inevitable, unstoppable opening up of the payments infrastructure for competition and new entrants’. “It is now mainly banks competing with each other in a commoditised space,” said Vroegh. “New entrants take care of the party in the penthouse, where the money is, while we do all the hard work in the basement. This is an opportunity to rethink and redesign our own business models – and make it a better service for our clients – working together with new entrants, embracing new technology, learning from agile competitors.” But with increased openness comes increased risk. “Where we’re unbundling the value chain, where parts can basically be brought together by third parties, the new bundle of services will mean a single party has less control over the total chain,” says Tak. “Of course, that’s the whole point of PSD2, to break up that value chain, but it also means we sacrifice some control. No party can therefore guarantee smooth running throughout the whole chain. And here I’m not only talking about security breaches, I’m also talking about such things as denial of services attacks.” And that is a growing threat. “A contact at another bank told me that they had a huge demand for Bitcoin from corporate customers, and that the number one use for Bitcoin was to pay ransoms to computer hackers,” says Tak. “So, while we’re busy innovating and crossing new frontiers for banking, we also need to keep a parallel investment in cybersecurity. Innovation and security must go hand in hand.”

Open all hours ING has already taken steps to increase the second. “We have a very deliberate strategy to Autumn 2017

keep systems separate, even in our internal private cloud,” says Tak. “If somebody inadvertently manages to bypass all our security in one area of the bank, and we know from situations where parties are hacked that it can happen through silly things, like the camera system or the wi-fi system for guests, we can be confident that it will never affect other systems. Everything at ING is compartmentalised.” Security apart, Tak believes PSD2 is a boon for customer service and will bring welcome variety and choice. “Startups, large tech companies and banks can now all play a part in delivering richer and more varied services,” he says. “The new directive will mean more competition across payments, backed by regulatory control, and more innovation leading to a better level of service. “Together, PSD2 and instant payments will totally reshape retail banking structures

The whole point of PSD2 is to break up that value chain, but it also means we sacrifice some control and processes. In fact, the label instant payments, or real-time payments, doesn’t tell the full story, because the instant part is just a fraction of the value that can be delivered. The real gain is not so much that payments are executed immediately, which isn’t always important to our customers. What matters is that you can make transactions on a Saturday, on Christmas Day or whenever you want. It means we’re open for business 365 days a year, 24/7, and on top of that we can use the payments infrastructure to do far more for our customers.” The move towards instant payments does, of course, raise big questions for the cards space and, in particular, whether the combination of PSD2 and instant payments will undermine cards business? “That’s a key talking point in the industry,” says Tak, “and there’s no consensus as yet. Naturally there’s a threat,

but it’s not clear-cut at this stage, so we’ll have to wait and see how things unfold.” As a proven innovator and fintech pioneer, ING is not only working with third parties to develop services, in the new world of open banking and instant payments it’s working with rivals, too. One such notable development is its international mobile payment service Payconiq, which is designed to make all payments as painless as ‘the Uber experience’. Launched in Belgium in 2015, it is being rolled out across the Benelux region this year. The app enables users to make direct payments online, in-store and peer-to-peer, via a direct connection with the customer’s payment account at any one of the banks backing the ING platform. There are seven so far – ABN AMRO, ASN Bank, Rabobank, RegioBank, SNS, KBC and Belfius. ING global head of transaction services Mark Buitenhek said the genesis of the idea lay in PSD2: “We thought ‘it’s better for us to invent something that will make our services redundant, otherwise somebody else will do it’.” A similar service, called Yolt, was launched in the UK in June this year, marking ING’s re-entry into the British market after an absence of five years. The app combines the balances from different accounts, wherever and whoever they are held with, allowing customers a complete personal financial overview. “Payconiq and Yolt could not have been developed without our ability to adapt and to operate like a fintech,” says Tak. “ING has come a long way since the financial crisis, and we’ve thrived by changing our skills and our work style. Now, embracing the latest technology, we’re ready for the next challenge – the new era of open banking, data regulation, and instant payments. “We’ll deliver the mandatory application programming interfaces (APIs) for PSD2, which will also be a great stepping stone because that gives us the infrastructure we need to move towards open banking, but we will also have a lot of non-mandatory APIs,” says Tak. “Not only must we be compliant, but we also need to make sure we can benefit from the new rules. We need to develop services that meet our customers’ needs and the expectations of today’s consumers, who want services that are fast, secure and available at a click.” |



The force be with you Data – particularly dark data – will have nowhere to hide once the GDPR force awakens. Financial jedis Chris Bridgland, Jason Tooley and Tamzin Evershed of Veritas Technologies explain The clue to global data specialist Veritas’ mission is in the company name. Latin for ‘the truth’, its motto is ‘the truth in information’. And that pretty much sums up what the General Data Protection Regulation (GDPR) is all about – uncovering and classifying all the personally identifiable information (PII) an organisation holds. Veritas helps clients to manage their digital assets and provides business insights through services such as multi-Cloud data management, data protection, and data storage optimisation. And now there is another dimension to its pursuit of the truth – by turning compliance into a competitive advantage, aided by the company’s new Integrated Classification Engine, which provides intelligence about data risks, both on-premises and in the Cloud. We assembled three members of the Veritas team – Chris Bridgland, head of EMEA services business, Jason Tooley, regional VP for Northern Europe, and Tamzin Evershed, senior director and global privacy lead – to talk from different perspectives on GDPR, the importance of data transparency and definition, and the consequences of getting things wrong in a new regulation galaxy that’s very, very close indeed. Fintech Finance: What are the main information challenges that your customers face today? Chris Bridgland: Apart from having access to information and knowing how to use it wisely, customers must also know when information is irrelevant and shouldn’t be kept. GDPR makes this essential. Customer data is mushrooming every year and the challenge is to remove redundant information – particularly unstructured data. We use the term ‘dark data’ for this because you don’t understand what’s in it – all those files, photos and



videos that you’ve been hoarding makes dark data one of the biggest growth areas. FF: GDPR presses a number of panic buttons – the size of the fines, the size of the task in identifying and classifying the data a business holds, and the unknown size of the demand for data requests and the consequences of not complying. How are banks coping with that? Chris: You’re right, GDPR is challenging banks to be on top of all their data at all times. First, they have to understand the data. If they don’t understand it, they can’t search it properly, and if they can’t search it properly, they can’t comply. No organisation wants to be surprised by their data. If you’re surprised by what you find, then you have a problem that could mean big fines. There are two angles to consider with GDPR. If you lose data of a sensitive

Data subjects can sue you directly for damages – possibly leading to class action law suits nature, the fines are significant. So significant that they could be business ending, or stop investment in new markets, new initiatives and new activities, because it’s taken all of your allocated budget to deal with a penalty that’s coming down the line. And once you’ve had a breach, then people are going to start hitting you with more subject access requests. One of the biggest challenges an organisation should consider is whether it’s ready for a series of subject access requests, saying ‘I was, or am, a customer of yours, and I

need to know what data you have on me’. You’ve got a 30-day window to comply or you’re in breach again, but if you can’t respond in 30 days, you’re already a questionable organisation to be doing business with. FF: So is there anything they can do to protect themselves against the penalties – insurance perhaps? Chris: A lot of organisations are saying it’s going to be too expensive to insure against, because you can’t predict how many people are going to say ‘tell me what data you hold on me’, or even understand how much data could potentially be lost. FF: Veritas is now classifying information using its Integrated Classification Engine. Could you explain how this works? Chris: Most organisations know how to search databases. But in the unstructured world, you have to be able to get into files, so Veritas has developed a way of classifying information. Classification is fundamental for GDPR: not only for data when it’s created, but also for classifying, and possibly reclassifying, old data. Rather than have people sift through every single file, Veritas provides overall visibility through classification policies, and we embrace all the necessary reference points. It means you can be confident about what data you hold, and then determine what you need to do with it. FF: What are some of the business benefits of compliance? Chris: Number one, from an IT perspective, is that compliance is a money-saving, data-cleansing exercise. It means I’m no longer hoarding unnecessary data and I’m protecting the data that I do need. Because it drives efficiencies through the organisation, compliance is a force for good – not a stick to be beaten with. Equally, Autumn 2017

when you demonstrate that you’re adhering to regulations, people are more likely to trust you. This trust will then open doors to develop new services. FF: With the financial landscape changing in so many ways, how important is it to maintain customer confidence? Jason Tooley: Banks have to build a culture of confidence. If customers lose confidence, it compromises the banks’ ability to personalise services and offer new ones to differentiate their businesses. Beyond GDPR, there are many regulatory requirements and other developments that are changing the way we do business and determining who is permitted to provide financial services. For example, the deregulation of the payments sector is a really big issue, because you’re talking about something that’s been a highly regulated environment for a relatively long time. The barrier to entry is now lower, and we must ensure that all providers of financial services can meet regulatory requirements and be compliant. It’s really important to maintain the integrity of customer information, transaction information, otherwise customers will lose confidence in transacting online. FF: How does Veritas maximise the value of information while ensuring compliance? Jason: We approach information management from two angles. One is the classification approach, mentioned by Chris, which focusses on both structured and unstructured data. The growth of unstructured data is really driven by today’s digital engagement between consumers and financial businesses. You need to understand all this data, what’s important and what’s irrelevant, so that you can derive maximum value and personalise and improve services, and thus differentiate your offerings. The other angle is how do you govern your information to ensure you

remain compliant as well as extracting the full value? We bring data value and data governance together, making them compatible. Our customers can still use the Cloud and other channels that enable them to be more agile and deliver services more quickly to market. Our original focus was data protection, but we’ve widened our approach. At Veritas, we harness your information, extract the value, and at the same time protect the information and reinforce your governance position. FF: What happens if banks don’t fulfil a subject access request? There’s been scary talk of potential PPI-scale claims. Tamzin Evershed: There are two levels of fines. The top fine is for failing to comply with subject access requests. It’s set at €20million, or four per cent of annual global turnover in the previous financial year, whichever is greater. Below that you have a fine of €10million, or two per cent of annual turnover in the previous year, whichever is greater. That applies to things such as failing to get the right contract terms in place. The fines are purposefully huge to encourage compliance, because in the past they were not high enough to be a sufficient deterrent and for some, evasion was a risk worth taking. Under the GDPR, data subjects can also sue you directly for damages – possibly leading to class action law suits. In addition to individual and class actions, you can also be pursued for breach of contract. So you have three possible lines of action coming at you – the unholy trinity, as I call it – which places banks in a very vulnerable position.

Tamzin: GDPR is totally clear about what you must do. If the Information Commissioner’s Office, or any other regulator in any European country, finds a breach, you will be fined. However, there are degrees of non-compliance. For example, is this the first time a situation has occurred? Have you already been told to sort things out, following an earlier breach, and have you failed to take the necessary steps? Was it intentional? Was it negligent? Did you cooperate? All these and other things will be taken into consideration. So it’s not automatic that you’ll get the top fine. FF: Legally, where does liability lie? Tamzin: If we look at the three different sources of liability under the GDPR for data subjects, the way it works is that anybody in the processing chain can be sued by the data subject for the damage they suffer. This gives the data subjects a better chance of securing their rights and a better chance of recovering damages for what’s happened to them. It’s expected that the controller and the processor will sort the details out among themselves, behind the scenes. For example, a bank could have done a deal with a processor, and the processor might be the one in the wrong. The individual could still sue the bank directly, however, even though the bank hadn’t done anything wrong. If we look at the contractual liability, that generally falls to who has breached exactly what. In terms of fines, GDPR says that both the controller and the processor can be fined.

FF: Is there any flexibility in the application of GDPR?

Might and right: If you’re GDPR compliant, you’re on the right side

Autumn 2017 |



Shaken not stirred...

the martini approach to banking

Lloyds’ Innovation Labs was charged with coming up with a cocktail of ideas for taking the bank forward…. And that’s exactly what they’ve done, as Gill Wylie and Sophie Bialaszewski explain Think cybersecurity and we picture a secretive place, where projects are developed on a strictly need-to-know basis. So you might be surprised to see staff openly discussing the issue at Lloyds Banking Group’s Chiswell Street offices in Islington, Central London, with their hands wrapped around a coffee or even something stronger. A light, airy, building, the Lloyds tower features an atrium where both staff and guests are invited to speak before and after work at casual ‘espresso’ and ‘martini’ events, organised by the Innovation Labs – the banking giant’s innovation accelerator where departmental ideas come to be tested, then developed or binned. “It’s a very open-plan office where we all sit together. It has a vibrant atmosphere,” says chief operating officer for group transformation, Gill Wylie. “Beside me I might



have the mobile team talking to Amazon Echo’s Alexa, asking it to move £50 from one account to another. Testing goes on in the office so we all get to learn from it.” Wylie is part of the 50-strong Innovation Labs team, working with Sophie Bialaszewski, head of innovation. Their job is to ensure the Labs support Lloyds’ group strategy and drive new ideas forward. “Innovation Labs was set up to do a number of things,” explains Bialaszewski. “The first was supporting the purpose of the group, aligned to but not defined by the strategy. We also looked at how we could capture ideas. We know that we don’t have the monopoly on great ideas, so we aim to create an environment to facilitate them from across the group.” The weekly digital espresso and martini get-togethers at which a recent participant was BT, giving a TED-style talk about working practices, are just one way of

doing that. Hardly normal banking culture, the idea took a while to catch on, admits Bialaszewski. “The espresso events started off as just me and a couple of people in a room,” she says. “I sent out a meeting request saying ‘anyone fancy hearing something from someone outside our organisation?’. But it grew so that now we run the espresso talk every Tuesday here in Chiswell Street and live stream it to the rest of the organisation. We’ve even set up espresso cinemas. It’s just one of the ways we bring the outside world in.” It’s a key culture change in an industry that had its citadel shaken by the financial crisis and is now being encouraged by regulators to open up. Invitations are also extended to partners and influential external teams, such as investment group Female Founders, Inspirefest organisers, and fintech association Innovate Finance. Security is a major part of the Labs’ Autumn 2017

workload, and voice recognition using the dulcet tones of Amazon Echo’s Alexa personal assistant is just one of many transaction tools being tested. Lloyds began exploring the personal recognition capabilities of Amazon’s hands-free, voice-controlled device long before Alexa arrived in the UK this summer. It wanted to see how customers could potentially use voice recognition to securely log in to their online banking and then ask questions to get real-time information about their finances, such as checking account and transaction information.

Beating heart of biometrics Its work with Alexa is just one of several biometric projects currently under way. This spring Lloyds also announced it had become the first UK bank to work with Microsoft’s Windows Hello to provide facial recognition, using an infra-red camera on a Windows X device to identify customers. Tested under various light conditions, Microsoft claims it cannot be breached by a criminal waving a photograph. Lloyds begins piloting the technology later this year and, if successful, it will replace passwords for customers who want to use it. It follows the adoption of fingerprint access for the group’s mobile banking apps. The Labs have also run tests on heartbeat authentication ‘tap to bank’ software that reads a contactless card using near-field communication (NFC) technology to support login, and an app that scans handwritten cheques so that customers don’t have to make a trip to a branch. While it all sounds tremendous fun in Chiswell Street, Wylie and Bialaszewski are keen to stress that the Labs do not innovate for innovation’s sake. Their purpose is clear: to come up with technologies to meet customer need or improve group efficiency. “Everything is anchored in what choice the customer would want to make,” says Wylie. “So, we might ask ‘would a customer benefit from having an app that allows them to seamlessly move their money around, irrespective of which bank is their primary bank?’ for instance. “Then we would ask ourselves whether there is a fintech group that could help us meet this need, and if we could integrate them into creating that sort of experience for the customer.” Bialaszewski adds: “The culture is no longer Autumn 2017

about asking, for example, ‘does a customer want to buy a mortgage?’ It’s about asking ‘does a customer want to buy a home’, and then designing a frictionless customer journey that suits their needs. “And then, in the future, it’s about making sure we are more proactive about knowing what our customers want, and getting things to them quickly.” The low-friction mortgage application is one project that is going on in the group right now, with a team in Lloyds’ Halifax arm working towards the holy grail of the one-day mortgage. Wylie explains: “Our ambition is that a customer can get a mortgage in a day. How amazing would that be? We have a lab set up where a multi-skilled team is working on achieving that experience. But it’s absolutely anchored in making that experience fantastic for the customer.

Around one in three of our proof of concepts will go into production “Authentication of documents is a key part of it. The documents that a customer needs to provide in support of an application would normally involve a trip to a branch. If they can upload them from home, it saves a lot of effort and makes for a much more seamless experience.”

Open access to ideas The Halifax project is a good example of how the Labs team operates as the test bed for ideas pitched by the Group’s departments. Lloyds’ span is huge – it is the UK’s biggest retail bank but also covers commercial and corporate banking, general insurance and life, pensions and investment provision, with brands including Scottish Widows, Halifax and Bank of Scotland. Bialaszewski says the Innovation Labs are at the service of the entire business, so staff need to be on top of current trends across financial services. Bialaszewski says: “We are an accelerator that any part of the business can use. They might come to us and say ‘we want to have a new product or service’ or ‘we’ve got an idea’ or ‘we see this thing happening in

the market, is there something we could do here?’. We will then run experiments for them, which usually last for between four and six weeks. “Not everything that we do is going to be successful,’” she adds. “Sometimes we’ll go back to the business that we’re working with and tell them customers won’t like it or maybe they need to make tweaks. “Around one in three of our proof of concepts will go into production, but we don’t actually handle the rollout ourselves. We always hand that back to the business, precisely because we want to be the part of the business that is enabled to fail and learn from that. “That's one of the special things about the Labs – that we’re able to test and learn, and then share that information with the rest of the organisation.

Plugging in to fintech Collaboration with external partners is a key aspect of the Innovation Labs’ remit – and that means ‘plugging in’ fintechs, as Bialaszewski puts it. She explains: “Three years ago a lot of the rhetoric was around how tech startups were going to be challenging the larger organisations. There’s now been a change in the dialogue and collaboration is the way forward now. “I think those organisations that learn and understand how to plug in smaller tech startups will be the ones that will be successful in the future. “So, that’s why we’re delighted to work with organisations like Rainmaking Innovation. We were one of the first banks to sign up for their fintech programme and we’re a part of their InsurTech programme, too. At Lloyds we also want to shape the future of financial services, which is why membership of initiatives like Innovate Finance is so important.” Now approaching the end of a two-year, £1billion investment plan supporting digital capability, the bank’s next tech horizon won’t be announced until February 2018, but signs that it is about to enter a new phase came with the appointment in July of Zaka Mian as group director for a newly created transformation division, comprising all business and IT change, data and IT architecture, customer insights, innovation and applied sciences. It looks like those martini evenings are going to be busier than ever. |



Sort it out... or suffer How do you protect what you don’t know you have? asks Stuart Clarke, Chief Technology Officer for Cybersecurity at Nuix. Come May next year, many companies may find to their cost that they can’t Over the past decade, the problem of big data mismanagement in organisations has reached a new stage known as the ‘garden shed’ dilemma: you keep piling stuff in, then summer arrives and the chances of finding your football under all the junk are about as slim as, well, a single credit card number in a multinational auditing firm’s data lake. Until now, the garden shed-like condition of company data storage might have been highly inefficient, but it didn’t constitute a business risk. But it will no longer be sustainable from next year following the introduction of the General Data Protection Regulation (GDPR). If your data store still looks like the inside of a garden shed come May 2018, then the likelihood of you being able to comply with GDPR’s 72-hour subject access request window will be negligible, and the resultant fines from the regulators could be enough to cripple your organisation. “Following the announcement of GDPR, the onus for companies is now on understanding exactly what is within their data repositories, so that they can take appropriate action towards protecting it,” says Stuart Clarke, chief technology officer at Nuix. “Eighty to 90 per cent of the world’s data is unstructured, for example, emails, documents, messages and social media data. Unstructured data is extremely text heavy, and usually contains a large quantity of personally identifiable information (PII), such as names, dates of birth and card numbers. But identifying PII within such unstructured data is notoriously difficult and if you can’t identify what PII you have, how are you



supposed to protect it?” asks Clarke. The unprecedented adoption of one particular technology – mobile devices – is partially to blame for the exponential rise in unstructured data containing PII. “And with Internet of Things devices, it will continue to accelerate so that plucking minute pieces of PII out of overflowing data lakes will be impossible for ill-prepared companies,” he adds. As they begin to sweat under the mounting pressure of GDPR, Clarke believes that a convergence of different industries could deliver the solutions necessary for compliance. He feels positive that an approach combining cybersecurity and information governance will administer optimum GDPR-proof results. “The two industries very much complement each other,” he says. “Information governance both allows and encourages you to really understand what’s within your organisation’s data, and that information is crucial should you wish to establish robust cybersecurity measures. “Information governance can be broken down into four key principles, each of which is highly relevant in terms of GDPR compliance,” he continues. “The first phase is knowing your data. At Nuix, once we’ve completed our data discovery exercise we begin our clean-up operation, where we remove all ROT (residual, obsolete, and trivial) data. What we’re left with is data that is important to the business, and nothing else. The second phase is called herding, and that’s where you group residual data together, based on its sensitivity or type. “Once herding is complete, and all your PII is neatly organised in its correct location,

then work can begin on the third phase: putting appropriate security in place to ensure that your PII is totally safe. “As a rule, the more sensitive the data, the more money you’ll invest in securing it. Here is where the benefits of herding are realised – your data will already be sorted according to sensitivity, and you can consequently be much smarter in your security spending. “The final phase is simply auditing,” says Clarke. “Having done all that good work, the last thing you want is to let your new, beautifully organised repository slide into a state of disrepair once again. By auditing regularly, you can ensure that all your security measures are still in place, and also certify that the people with access to your PII are still relevant. “Once you’ve completed these four phases of information governance, you’ll have laid the foundations for GDPR compliance,” says Clarke. “Thanks to your efforts, in the event of a hack you’ll be able to quickly identify any vulnerable data repositories, and most likely won’t exceed GDPR’s 72-hour window. That’s why we’re currently witnessing a convergence of the cybersecurity and information governance industries.” A surface-level, retrofitted solution won’t meet GDPR’s cybersecurity demands, he warns. A methodical, comprehensive operation that employs information governance, will.” Nuix has designed and released its own state-of-the-art cybersecurity engine to help organisations carry out the four-stage process of information governance. Clarke is confident that the company’s software is powerful enough

Autumn 2017

The big tidy: GDPR is the catalyst for identifying unstructured data; it’s also an opportunity

to turn even the most cluttered data shed into a crystal clear data lake. “The Nuix engine’s processing capability, with regards to both unstructured and structured data repositories, is really second to none,” he says. “It can trawl through incredibly large volumes of data at remarkable speeds, allowing you to pinpoint the location of PII within your organisation at an unprecedented rate. “This takes all the pain out of the initial discovery phase of information governance, although the capabilities of the Nuix engine don’t stop there. The engine can carry out the majority of herding tasks, too, and will automatically delete data or apply encryptions where necessary. Thus, our engine implements the first three phases of an efficient GDPR compliance strategy, and is an invaluable

tool for any company seeking to lay the foundations ready for next year’s regulatory changes.” Despite the nervous anticipation of GDPR’s arrival, Clarke believes that next May’s regulatory reform constitutes a golden opportunity for companies and shouldn’t be perceived as a thorn in the side of the financial industry. “Legislations like GDPR offer the perfect chance to turn cybersecurity into a competitive edge for your business,” he says. “Data breaches have become much more of a public issue in recent years, and consumers are starting to pay greater attention to the protection of their PII. If you can demonstrate that your cybersecurity initiatives are much stronger than your competitors’, then you’ll be able to instil a greater sense of trust among your potential customers, who’ll eventually

begin to vote with their feet by transferring their business to your firm. “Aside from cybersecurity and compliance, the Nuix engine also offers companies the opportunity to extract a great deal more value from their existing datasets,” Clarke adds. “The engine’s analytical tools can provide a comprehensive indication of consumer behaviour within certain demographics, for example, which in turn can be used to formulate valuable business intelligence. “Sure, there’s going to be a lot of box ticking between now and May 2018 for companies to ensure that they’re GDPR compliant, but the real winners will be those that shed the notion of doom and gloom and embrace the new legislation as the opportunity for competitive advantage that it really is.”

A surface-level, retrofitted solution won’t meet GDPR’s cybersecurity demands. A methodical, comprehensive operation that employs information governance will Autumn 2017 |



Fintech in the fast lane With technology and regulation setting a furious pace for financial services across Europe, Ewan MacLeod, Chief Digital Officer for Swedish bank Nordea, has revved up the transformation agenda and is raring to go There’s a signature line in the film Top Gun that could equally well describe Ewan MacLeod’s approach to business: “I feel the need – the need for speed.” As chief digital officer of Nordea, the largest bank in the Nordic region, MacLeod is an impatient advocate of the digital economy and the transformative power of today’s technology. Whether he’s discussing instant payments in restaurants – he finds it frustrating having to wait to settle bills – or technology for on-demand banking, MacLeod has clear views on how to create faster and more efficient services. “Consumer power is the number one driving force today,” he says. “Consumers expect a high level of digital communication and immediate service. Whereas only a few years ago, before the on-demand age, people had no option but to wait for a service, now service providers must use technology to respond instantly to the needs of their clients.” Change is coming from many directions, not least on the regulatory front, and it’s ‘causing a bit of wheel spin’, says MacLeod. Businesses are having to adjust to new rules of engagement and a different landscape, the revised Payment Services Directive (PSD2) and its open banking paradigm, being just one imminent change that’s reshaping the marketplace. PSD2 has many organisations worried about losing their position and unsure how to react. But not Nordea. “We’re super-focussed on open banking and new business models,” says MacLeod, who was appointed to jointly head up the bank’s new Group Digital division last year. “If you look at Facebook, Google or Amazon, they are all consumer experiences that we’re now very familiar with and can learn from. The challenge for the financial world is to adapt to new consumer offerings that are competing with traditional models and to do so in a more demanding regulatory environment.” A good example of how Nordea is



adapting and even taking a lead is the development of the bank’s open portal. Version one, which is targeted at external developers, was launched earlier this year. It will be fully developed by 2018 to provide a platform for partners and third parties to design new products and services. Not only does it meet the requirements of PSD2, but it also puts Nordea in pole position for application programming interfaces (APIs) in the Nordic market. “The portal reflects our vision of the future,” says MacLeod, “and shows how we are collaborating with fintechs. It will provide our customers with a better service while allowing them to stay in control of their own data.” The latter, however – which will be tightened with the introduction of the General Data Protection Regulation, also

We must not become mere consoles, with customers pressing a button either to share or withhold information next year – must not lead to banks becoming ‘mere consoles’, says MacLeod. Banks need access to data, albeit within the boundaries of new regulations, if they are to improve services, and that behoves them to educate the consumer. “We have a trusted relationship with our customers, but what does that mean in terms of data ownership and data privacy? Does it mean that we should be playing a bigger role in our customers’ data ownership requirement, or does it mean we should be withdrawing and simply providing a console, where you can press a few buttons and say ‘yes, I share this with you’ or ‘I don’t share this with you’ and ‘forget me now’? If that’s the

base assumption that the average consumer has of GDPR then we need to educate them because I think there are some great opportunities for all of us to come up with some really interesting, stimulating services. “I quite like the idea of my bank being a provider or owner or controller of my data. Others will disagree; but yet more will say ‘not a search engine provider or a social media company.’ Actually, I think banks have a long history of managing trust, managing things that are important to consumers. So, I think there is opportunity there. We’re closely evaluating where Nordea should be positioning our services and our products, to capitalise on that opportunity, but also to provide the best possible service.“

More of the cool stuff Front of mind for any bank looking to provide data-driven services, of course, is cybersecurity and how to ensure it. “Cybercrime is the downside of our increasingly digital world and it’s the common enemy of our industry,” says MacLeod. “There’s nothing more important to us than our data, so we must protect it at all times. We do that by employing the brightest minds in the marketplace and forging strong relationships with security bodies worldwide.” That doesn't curb his enthusiasm for tech. “We should make more use of big data, artificial intelligence, machine learning and all the other exciting stuff that’s happening now,” he says. “I am one of the first to try everything and I really want to see all that used to help me, as a customer. “I’ve recently moved from the UK to Denmark and I don’t know how Nordic systems work. I’m unfamiliar with the processes, how taxes work, how much things cost. I’m still dividing by 10 when actually it’s seven-point-something. So, from a budgeting standpoint I find myself using 16 different spreadsheets and what I would really like is a system to have a look and say ‘you’re overspending’ or ‘you’re underspending’ or ‘you’re looking to save? Autumn 2017

Do it this way’. We should be creating smart solutions like this for individuals, for small and big companies; bringing data together to solve day-to-day problems because intelligent use of data makes life easier. It speeds up and extends services, helping us in countless ways.” He’s not suggesting that Nordea moves into Amazon’s space. “But we can certainly enlarge and refine our role. For instance, we can use artificial intelligence to enhance our primary role as banks and financial experts. We’re testing many such ideas at Nordea, and we’ve already deployed a pension service that uses artificial intelligence. This is a fast-moving space for all banks, and you can expect to see many more developments in the near future.” MacLeod is strongly in favour of finding the right external partner to build and deliver them if necessary. “It’s our job to bring the best possible service to the customer,” he says. “But that doesn’t necessarily mean we have to do it alone. If we have a service idea, it’s good to work with partners who can help us experiment with data and then create something that’s right for customers and complies with regulations.” Key to this is the Nordea Startup Accelerator programme. “It’s been around for a couple of years and it’s been a fantastic way to interact with startups and create something new,” says MacLeod. It doesn't hang around, either. “It’s no use taking six months to sign a contract or six months to get

the company into the procurement process,” says MacLeod. “We’re normally geared to working with bigger organisations where the wheels move more slowly, but we’ve had to change our approach completely.” He admit it’s still very much a learning process. ”We had one company with a phenomenal idea, which we took to one of the business sponsors. It was an excellent pitch, and the sponsors listened patiently and then said ‘well done, great product, looks fantastic. It’s illegal. The regulator doesn’t allow this, this and this. You would need to fundamentally change your whole system’. So we went away and adapted the idea. The sponsor loved the revised version and we’re now working with the company. “The trick is to use agile software development, working fast and with team focus; but never rush, never create a waterfall. Collaboration and controlled speed, that’s the aim,” says MacLeod.

Nothing’s off the table Nordea is creating a clear framework for this collaborative approach. “Our partnership model is as open as possible, which is a reminder to everyone in Nordea that we don’t have a monopoly on ideas. There’s a Copenhagen Fintech

Hub, a Stockholm Fintech Hub, a Fintech Factory in Oslo and so on. We’re interested in all these hubs and fintech initiatives, and we’re constantly on the lookout for potential partners. Open banking also means being open to ideas.” Nordea is a bank on the move – quite literally in the case of its HQ, which made headlines in September when it announced it was relocating from Sweden to Finland. It’s a bold step that the bank believes will allow it to operate on a level playing field within the euro area and was the most evident example yet of the bank’s ‘nothing’s off the table’ culture. In 2013 that included sweeping away traditional offices so staff could sit wherever they liked, allowing them to interact more easily and creatively. It was a neat physical demonstration of open banking. “We take a smart approach to everything we do,” says MacLeod. “We don’t believe in having meetings just for the sake of meetings and we’re committed to creating an environment where we get things done without unnecessary obstacles.”

First on the grid: Nordea has led the region in open banking

Autumn 2017 |



Hazard warning Anish Bhimani, MD & Chief Information Risk Officer for commercial banking at JPMorgan Chase, on how top execs can get IT threats into perspective If you’re an executive in the finance industry, you’re probably used to the question ‘what keeps you up at night?’ For those of us who work in technology risk, a more common question is ‘when do you sleep?’. Nobody can worry about every threat our businesses face at once. We must focus on the threats that matter most and, more specifically, the aspects of certain threats that we can control. Thinking deeply and fully about these threats is the job of your top risk, security and control officers. So, if you don’t work in risk, security or control, but you still oversee offices or assets or entire organisations, what is your responsibility? I’m a strong believer that your responsibility is to understand what to fear and to do so strategically. To put it another way, crisis communications expert Peter Sandman has stated that ‘risk is equal to hazard plus outrage’. This is especially true in the information technology (IT) security field. We are inundated with headlines about hackers, threats from nation states, insider risks and frightening data breaches. The outrage is steep, but are the topics that generate this outrage necessarily a response to a true hazard? And, if not, what are the real hazards? Getting past the outrage, then, and gaining a deep understanding of legitimate fears – thus the real risk your business faces – is where I believe you should put your energy.

Communication is key Open communication is essential to understanding what to fear and when to put action and weight behind initiatives to remediate a threat. If you don’t already

have a strong and regular dialogue with the IT security experts in your organisation, start today. Ask them what they see as being the biggest threats you face and the actions necessary to provide greater security and control. There is another side to asking these questions: gaining a greater understanding of the security landscape yourself. Many in the IT security field take for granted that their terms are used in the greater business community. If you don’t know how firewalls work, ask. If you don’t understand what your risk officer means when she says ‘sandbox’, ‘SQL injection’ and ‘white list’, ask. Don’t be afraid to ask questions if you don’t understand – the real hazard lies in not knowing what’s going on.

The paranoia principle A lot of recent headlines have been devoted to fears revolving around what many call the Internet of Things (IoT), which is shorthand for the many objects in our environment that are now interconnected through web and wireless capabilities. These objects – everything from cars to pacemakers – have been the subject of great outrage and speculation on how they could be turned against us in a cyberattack. These threats are real, and in an age where nearly everything we touch involves technology, this speculation can lead to more than a little paranoia. We also know that having this interconnected world provides great advantages. In today’s workplace, we can stay at home and have face-to-face conversations with our counterparts across the globe. Chat functions, mobile devices, teleconferencing and the way we control our home and

work spaces have changed and made work easier and more accessible. So, how best to balance a healthy dose of fear with a realistic view of our modern workplace? It’s perhaps best not to fear the interconnectivity itself, but rather, whether the right people have access to the right pieces. This is where an understanding of your organisation’s posture on employee access plays a huge role. The process of managing identity and access to your critical systems and databases is sometimes a dry topic that is easy to write off as basic ‘hygiene’. However, the importance of properly executing secure onboarding, offboarding and maintenance of your employees’ access is critical to avoiding those above-the-fold headline issues that cause the most fear. Don’t underestimate the importance of access. Hygiene is one of those sterile words that security professionals like to use as a catch-all for remediation, updates and other activities that we should obviously be doing every day to enhance IT security. It’s easy to get lost in the outrage generated over the last big data breach, and it’s just as easy to get lost poring over details of the many small tasks and initiatives that constitute IT hygiene. But if you want to remediate the risk of that big data breach, it is absolutely imperative to keep a strong focus on hygiene. Open dialogue and clear reporting from your IT risk, security and control teams are essential here. Are they staffed and funded properly to deal with what is required for this basic hygiene? Do you have the proper systems of updating, patching, tracking access and assets? These are all essential questions related to hygiene that are worth your worry.

Don’t be afraid to ask questions if you don’t understand. The real hazard lies in not knowing what is going on 92


Autumn 2017

A balanced view: Don’t worry about the headlines, focus on who has access to what

Autumn 2017 |



Parcel bomb: Some of the biggest security breaches start with an email

Special delivery Financial institutions need to be ever more alert to suspicious packages coming through the digital mailbox. Joäo Gouveia, Rui Serra and José Ferreira discuss how AnubisNetworks is creating a safer business environment by using threat intelligence to intercept them Cybercrime is an underworld growth industry with few equals. It’s been described as ‘the greatest threat to every profession, every industry, every company in the world’; and in July 2017 Lloyd’s of London warned that a major attack could be more damaging to the global economy than natural disasters such as Hurricane Irma. Joäo Gouveia, chief technology officer and co-founder of AnubisNetworks, shares this concern and is in no doubt that every organisation is at risk. “Cybercriminals are constantly finding new ways to infiltrate systems and compromise security, so our challenge is to keep up with ever more inventive types of phishing and malware,” he says. For banks and other financial services companies, though, it’s very much a double challenge because not only must they provide secure systems for their customers, they must also help their customers avoid being duped by fraudsters. That’s why they



need the combined power of a good threat intelligence solution and a good mail protection service (MPS),”Gouveia adds. He highlights the rise of spear phishing, but points out that it can’t be beaten by technology alone. “Spear phishing is email-spoofing that appears to be from a known contact, and it’s very hard to defeat with technology,” says Gouveia. “These attacks exploit social susceptibilities. The perpetrators research their targets and get to know them very well, so when they send something, the receiver thinks it’s coming from a legitimate and trusted source.”

Raising a red flag Sensitising staff to rogue emails through training is an important part of a business’s counter offensive, but for its part, AnubisNetworks uses machine learning to identify and highlight potential intruders, rather than ambushing them before they arrive. “We implement standards and best

practices that ensure we can authenticate email messages that enter a customer mailbox,” explains the company’s email security expert José Ferreira. “We use sender policy framework (SPF); domain keys identified mail (DKIM); and domainbased message authentication, reporting and conformance (DMARC). “We try to alert the user if a message looks suspicious. It’s not about outright blocking messages because sometimes that causes a false positive,” adds Ferreira. “We apply a warning tag that says it may be a spoof message, so proceed with caution. This helps to educate users because they learn to be wary. By setting DKIM on your domain name servers, you’re providing a way to tell your receivers that the sender is genuine.” Gouveia emphasises the importance of using technology to stay one step ahead of cybercriminals. “This is particularly the case when the social component isn’t significant,” he says. “While a well-conducted spear phishing Autumn 2017

attack is difficult to block, traditional phishing campaigns, malware and spam can be overcome with technology. Malware, however, is now a big concern because antivirus software is not as effective as it used to be, so that’s an area that we’re focussing on.” There are several ways to detect malicious messages, some of which use AnubisNetworks’ inappropriate fingerprinting algorithms, fingerprinting in this case being a procedure that uniquely identifies an original data file. Once a data fingerprint has been flagged as coming from an untrustworthy source, AnubisNetworks can leverage information in its wider threat intelligence ecosystem to track where it appears next. “By knowing the fingerprint, we can block it across everyone else that receives the same, or similar, messages,” says Ferreira. “Another method, long established in the industry, relates to IP reputation. If you notice that certain devices are constantly trying to send malicious email messages to people, you can track them and block them fairly easily.”

Tracking the bad guys AnubisNetworks strength is enhanced by its being part of, and providing intelligence to, a wider security network. It’s a reciprocal relationship in which the intelligence ecosystem on which MPS is based in turn enhances detection and avoidance of the latest and most advanced threats for AnubisNetworks’ own customers. It also enables companies to gain an insight into the security of third parties as well as their own organisation – and in a world where longtail supply chains can quickly be compromised by hackers, such due diligence is becoming vital to good governance. People are starting to understand the implications of third-party risk following a number of highly public and damaging breaches, says AnubisNetworks product manager Rui Serra. “Third-party risk management will become increasingly important. Just think of the US retailer Target. In 2013 it was hit by a breach that exposed the data of millions of customers,” he says. Still the biggest reported incident of its kind, Target was hit after its network credentials were stolen from a refrigeration, heating and air conditioning subcontractor. Autumn 2017

Gouveia describes the development of the intelligence ecosystem as ‘one of the most exciting developments in our industry… because risk inevitably spreads across the business chain. If you’re concerned about the protection of your data, you also need to be concerned about data held by your contacts and partners.”

Trust and identity AnubisNetworks supported the principles of the European General Data Protection Regulation (GDPR), due to be introduced in May 2018, long before the law was adopted by the European Parliament, and it is already fully GDPR compliant. That said, it believes the new rules pose some contradictions that frustrate rather than promote efforts to improve security. For example, currently when a domain is registered, the personal data associated with it is currently freely available; that information is critical to identifying relationships between domains. “If a domain has tried, somehow, to abuse the system and we know the same person has registered another domain, it probably has the same purpose,” explains Gouveia. “So we might use that information to create, for instance, blacklists of domains, that are known to be used by bad actors.” That personal information, however, is likely to disappear under the GDPR, which seeks to protect individuals' personal identifiable information (PII). “So right now, we, as an industry, are trying to lobby to have that data somehow available – perhaps not as the data itself, we just need to know if it has a relationship with another domain,” says Gouveia. That said, GDPR also plays to the company’s strengths, adds Serra, because both set out to build trust and clarity. Financial institutions have a huge responsibility for the way they communicate, particularly over email, and their customers need to be confident that their personal details are always

handled sensitively and carefully, and that messages are authenticated. “Because we help companies understand their current exposure, we support data protection and regulation from all sides,” adds Serra. “You need to figure out how you’re seen from an external perspective, how others see your data and whether there is a risk factor. Reconnaissance is step one, and step two is reaction.”

A robust combination The threat intelligence ecosystem and AnubisNetworks’ MPS work together to deliver a high level of defence against ransomware, spam, business email compromise (BEC), spoofing and phishing. “We provide a business environment that enables you to detect and avoid the latest and most advanced threats,” says Serra, who adds that the company’s commitment to reporting and forensics means ‘every email on the platform, every transaction, every user and action is rigorously logged and updated’. Its data scientists are continually investigating new dangers, too. “Our research team does a lot of work around botnets and how they behave,” says Gouveia. “If malware is sent through email, they try to use compromised accounts. We track this at the MPS level for such things as distributed denial-of-service (DDoS) attacks, and we use the threat intelligence database to help decide if a message should be rejected. It’s a good example of how MPS and threat intelligence work in tandem.” Managing risk via Cloud technologies, such as AnubisNetworks’ MPS is becoming increasingly important in financial services. “We’ve been using the Cloud for a long time – in fact, we were one of the first companies to provide a Cloud solution and banks are starting to accept Cloud-based security,” says Gouveia. “Banks like us because our platform has depth of analysis, auditing abilities and a wide range of technology defences all in one,” he adds. “With AnubisNetworks, it’s strength in combination.”

If you’re concerned about the protection of your data, you also need to be concerned about data held by your contacts and partners |



Alternative realities: SEB encourages staff to explore new paradigms

Curiouser and Curiouser Banks could be said to have reached an Alice in Wonderland moment, staring down a rabbit hole of possibilities... SEB’s Chief Strategy Officer Rasmus Jarborg believes it’s time for them to be ‘actively curious’ Predicting the future, especially banking’s future, might be impossible, but then not dreaming of the possibilities would be madness. Which is why Swedish corporate banking giant SEB put a stop to its three-year business development plans in late 2014 and craned its neck even further to consider life in 2025. “Of course, making predictions about 2025 means we are bound to be wrong!” says SEB’s chief strategy officer Rasmus Jarborg cheerfully. “But we need to ask ourselves what it could look like, not what it will look like.” Such soothsaying is made even less reliable since the people shaping the future aren’t the ones imagining it; Jarborg says that though banks were pushing their



customers to consider new ideas back in the 1990s, it’s the customers themselves who are the ones driving change today. And that goes for the corporate banking sector just as much as retail. “At SEB, we were used to the drivers of change coming from the large corporate and institutional side – but this time it’s the individual consumers who are entering into digitisation first,” says Jarborg. “That’s down to all the great apps and service providers they’re using. We call this the consumerisation of IT. So, even when we’re dealing with a large corporate client, it’s the individual working at that corporation that we have to imagine. Before they put their suit on in the morning, they are a consumer. They will turn on their Sonos

system, they will order a cab through Uber and they will check their Twitter feed. Then they will go into work where they might be a treasurer and they will be expecting the same level of service and fantastic user interface from a large corporate platform as they experience with platforms they use in their private life. That is the challenge for us.”

Endless possibilities When SEB carried out its Vision 2025 project, the issue of customer behaviour was one of four categories considered. The others were technology (buy the best, says Jarborg), regulation (there is a lot already, it will only continue, he predicts) and new competitors. As far as the last goes, SEB’s response to competition from new entrants Autumn 2017

to the financial market was simply to seduce the best with an offer to invest in and/or work with the bank. The only rival that SEB has to look over its shoulder for now is another big bank that digitises better and quicker. SEB’s venture capital arm began investing in startups last year – among them, Coinify, a blockchain payments provider; ticket leasing platform Leasify; artificial intelligence (AI) vendor Now Interact, and R3, in which SEB joined a consortium of more than 70 of the world’s largest financial institutions to back an open-source distributed ledger provider. And that was just for starters. So far this year, SEB has met with another 150 fintechs. Jarborg says: “If you look at the services and the products we provide, for each one there’s now a newly founded fintech that says it does the same thing faster, with a better customer experience, at a better price – and it has a more colourful and funky logo than we do. “How do you possibly compete? Well, we try to think of these fintechs not as competitors, but as potential partners, and we meet them to see if they have a service or product or a piece of technology that we can bring onto our platform and offer to our customers. Many of them do, but many don’t. We need to examine them. Some are nothing more than that colourful logo and funky name.” Jarborg says one of the fintech partnerships he is proudest of was SEB’s first investment – a Swedish personal financial management platform called Tink. He explains: “Our agreement with them means we invest, we have a seat on the board and we have brought their technology in-house, released through an app. For our customers, it will categorise their costs and give push notifications if it sees double debits, for example. We are also distributing our mortgages on Tink’s platform. So Tink is a good example of how we developed the connectivity with fintechs, how new customers experience our product, how we use their data as we’re onboarding the customer’s entire engagement and how we invest in a fintech and tie them closer to us.”

Cutting loose Tracing a history back to 1856, SEB has faced down its IT legacy issues (arising from an operating system that was developed in Autumn 2017

the 1970s) by ‘decoupling’ the bank’s back end – which still works efficiently and cheaply, says Jarborg – from its front and introducing an application programming interface (API) integration layer to cope with future demand from third parties. The bank’s culture is to encourage all its staff, including IT, to be ‘actively curious’. And this isn’t just a glorified staff suggestion box where constructive ideas go to die. Much effort is put into testing them out. One method of harnessing all this creativity is the SEB Innovation Lab, which was set up two years ago. “It’s to catch the oddball ideas,” says Jarborg. “There is always the risk that ideas like this are pitched to a boss, who shoots them down or says ‘that’s good, but we have a list of 25 other things that have a higher priority’. “The Innovation Lab is a breathing space for those ideas and allows us to say ‘you know what, if you have a great idea but your business line can’t invest in it today, come and at least experiment with us – see where it leads.’ We run innovation days that are open for the entire bank, twice a year.” Staff with the best brainwaves are even invited to leave their day jobs and given the

Some of these things may not lead anywhere, some will perhaps be game changing... We just have to keep an open mind time and resources to test their theories with customers. And even if in the end it all comes to nothing, that person returns to their desk with a new toolkit of skills, a cross-bank network and lots of inspiration. The same spirit is present in SEB’s outward-facing relationships. Jarborg says: “We aim to be transparent and open to partnerships. We rely on our technology partners, but also some of the other companies that we work closely with in other industries. We run an emerging technologies group, whose job it

is to start bringing in some of this tech and test it. We run a lot of proof of concepts and pilots. We were very early to start experimenting with blockchain, for instance. We were one of the first banks into the R3 consortium on the blockchain side and one of the first banks to work closely with Ripple, on their protocol. We’re now working with on some of the things they’re doing with Nasdaq, really to just keep our finger in all the pies. “Some of these things may not lead anywhere, some will perhaps be game changing, we don’t know. We just have to keep an open mind and be open to experimentation and take some risks.” One of the experiments it’s currently engaged in is with AI specialist IPsoft, bringing on board its cognitive agent Amelia (renamed Aida for SEB’s purposes). “We’re seeing how we can use that, both for internal helpdesk needs and by releasing a version to private clients here in the Swedish language, so they can get help from our robo advisors,” explains Jarborg.

Staying in the know This summer, SEB appointed its first chief data scientist and at the same time its engineers launched the architecture to fill the bank’s data lake. A central advanced analytics team, called SEB Analytics, will work with the customer insight and relations management teams to help reveal the lake’s treasures. Together these changes will ‘open the business’s eyes’, says Jarborg. “It means we don’t have to guess anymore, we don’t have to infer; we can use data to start putting together multi-factor models and algorithms beyond what a human can hypothesise.” Taking a leaf out of Amazon’s book, SEB will even use data analytics to suggest product lists to its SME clients. “If you buy a book, the next time you go on Amazon it will suggest other purchases,” says Jarborg. “We’re using that same technology to tell SMEs what financial products and services their peers have.” This use of data can also identify when a customer is likely to move to a competitor. “We sometimes didn’t understand why a customer had left us,” says Jarborg. “Now, with only three months of historical data, we can predict with 74 per cent accuracy when they are going to leave. So that changes the paradigm on marketing. Using data proactively is what it is all about.” |



Double-digit growth: Leveraging off-chip sensors to deliver lower-cost fingerprint solutions

A unique impression IDEX CEO Dr Hemant Mardia describes how the company has its fingerprints all over the secure identity industry IDEX has been in business a long time – for a fintech. Though not quite as long as the fingerprint technology it specialises in. And yet both are experiencing something of a coming-of-age as biometrics creates as big a buzz across the financial industry as blockchain. The first Fingerprint Bureau was established in Calcutta in 1897, after the use of fingerprints in crime detection was initially dismissed by the Metropolitan Police. Since then, the sophistication with which each person’s unique identity tag (more individual even than your DNA) can be used to discover and prevent unlawful activity has exceeded the 19th century pioneers’ wildest imaginings. Norwegian innovator IDEX started concentrating on our digits in 1996 and and remains a leading developer of



fingerprint technology, offering both the conventional silicon-based sensors and unique off-chip sensors. Despite growing competition from potential alternatives in the burgeoning arena of biometrics – witness Apple’s recent decision to forgo a fingerprint sensor in the iPhone X in favour of facial recognition, while maintaining fingerprint biometrics in the new iPhone 8 and 8 Plus models. IDEX CEO Dr Hemant Mardia is unfazed. He’s confident the company’s proprietary technology, which allows fingerprint sensors to be embedded not just in mobiles, but in payment/ID smartcards and even devices connected by the Internet of Things, will allow it to maintain a firm grip on the identity market. “We are a pioneer of fingerprint sensing; in pureplay fingerprint solutions,” says Mardia.

“There are a number of fingerprint sensors deployed in mobiles, for instance, but our solution is unique in that it uses what we call off-chip sensing, as the ASIC is separated from the sensing array, which which means we can make a sensor at very low cost and out of different materials, like polymer. Therefore, we can make fingerprint sensors fit into things that are thin and flexible, for example a standard credit card.” In April, Mastercard unveiled its next-generation biometric card, featuring IDEX's off-chip fingerprint sensor. “Our technology can incorporate very high-quality fingerprints in a robust format and at a cost that allows mass deployment,” explains Mardia. “This is both a breakthrough and an area where IDEX has strong patent coverage and a history of revolutionary product design. Autumn 2017

We also have our own software algorithms that allow fingerprint verification and authentication. Uniquely, this includes highly efficient algorithms designed specifically for biometric cards, which only have a fraction of the power available in a mobile phone,” explains Mardia. “This is both a breakthrough and something where IDEX has strong patent coverage and a strong history of manufacture. We also have our own software algorithms that allow fingerprint verification and authentication. These are super-efficient and able to work in cards that have a fraction of the power that a mobile phone does.” The milestone moment for IDEX was in developing a new application specific integrated circuit (ASIC) to incorporate into the sensor, ready to be used in contactless cards operating with standard near-field communication (NFC) payment terminals. And why is that so exciting? Well, consider what the card industry is worth to banking. Despite the growth of alternative technologies, such as mobile wallets, cards remain the most popular payment method by far in the West – in the UK they are responsible for 77.7 per cent of all spending – with the Middle East, Africa, India and Asia Pacific seeing super-fast adoption rates. It’s estimated that around three billion cards are shipped worldwide every year and the new ASIC would allow them to be made supersmart and supercheap. But while banks are in competition to offer customers ever-more-flexible friends, they are also desperate to ensure these friends can be trusted. And that’s where the IDEX sensor gives them an advantage. “Our sensor uses electrical sensing. It’s not optical, it looks for signals,” explains Mardia. “That means you can’t spoof it with a direct copy of someone’s fingerprint and our solution is also able to overcome unintended environment variables, such as finger moisture and lighting. Our algorithms have very high-resolution sensing with very fine detail that allows us to work with partial finger touches, which is a real-world challenge we have solved.” He’s not competing in a race for biometric supremacy, though. Mardia believes the industry must deploy several such technologies simultaneously. “If you look at any individual type of biometric, criminals can find ways to attack it. But once you start to combine different Autumn 2017

information, you get another order of magnitude in terms of information. “The fingerprint is what I would call a cornerstone biometric. It’s who you are and if the network knows who you are, it can combine that with something like where you are, or a behavioural biometric, or iris or facial detection, for a multi-modal solution that is really powerful.” The IDEX fingerprint sensor has applications in the wizardry that is the Internet of Things (IoT), too, where summoning your WiFi-connected fridge to fetch you a beer is not beyond the realms of possibility. The downside is your bank account could be hacked through your kettle or your car key fob, too. “As the world is getting more and more connected, the security concerns around connecting these devices are increasing, because they are on the grid all the time and therefore more susceptible to bot-net

We’ve piloted our solution in real-world environments. Banks don’t need to change their infrastructure; we’ve adapted to work with it type attacks,” says Mardia. “Some of the risk stems from people having default passwords because they can’t remember a vast array of different ones. Our sensors have already been deployed in some IoT applications, like door locks, padlocks, USB dongles and hard disk drives. “I think the IoT is starting to experience some of the trends we’ve seen in the other markets for biometrics, where the user needs personalised security and where, when they operate something within their home, it knows it’s them and can adapt, according to their needs. Our off-chip technology allows us to make a really flexible solution that works in many different environments and our sensor is small and flexible enough to fit into

things like wearables and watches. It really has unlimited possibilities.”

Finger on the button The aim is to make the adoption of fingerprint sensors rapid and smooth. “To do that, we really want to work with existing infrastructure,” says Mardia. “In the case of payment and ID cards, that means all the electronics have to be packed into the thin-form factors using a standard manufacturing process and also meet existing card requirements in terms of durability. Then, it needs to work with existing readers, so you can take a biometric card and use it with a point of sale (POS) terminal that’s already deployed anywhere around the world.” Successful trials of IDEX sensors have already taken place in Europe, Asia Pacific and Africa, led by MasterCard with banks such as ABSA and UniCredit. “We’ve piloted our solutions in real-world environments, making real transactions on existing infrastructure,” says Mardia. “You don’t need to change it to deploy biometrics, because we’ve adapted our technology to work with it. There’s also ability with software and the network providers to be able to layer on additional services, to exploit the fact you have a biometric and therefore know it’s a particular person. This creates new market opportunities in areas such as financial inclusion and government benefit programmes, particularly in developing economies, where there isn’t a good infrastructure for distribution of benefits and there’s often a lot of leakage. Effective solutions could save billions of dollars. Incorporating biometrics into a payment card that’s compatible with standard infrastructure via trusted brands is about to revolutionize the entire industry.” “There’s also ability with software and the network providers to be able to layer on additional services, to exploit the fact you have a biometric and therefore know it’s a particular person. This has unexpected spin-offs for financial inclusion, in terms of things like government benefit programmes, particularly in developing economies, where there isn’t a good infrastructure for distribution of benefits and there’s a lot of leakage. That is worth billions of dollars. Having identification, combined with a payment card that can use standard infrastructure via trusted brands is huge.” |



Breaking bad UK ‘challenger consultancy’ 11:FS is about to enter new territory and help turn bad banking habits into good digital models. CEO and fintech superhero David Brear shares his thoughts on transacting in the USA “If you know what bad looks like, then you can have an understanding of where you want to be from a good perspective,” says David Brear, chief executive and co-founder of digital gurus 11:FS. After a lifetime in financial services, he’s certainly qualified to know what a ‘bad’ model for a bank looks like. A member of the UK’s edgy community of serial disrupters since its inception just over a year ago, 11:FS (described as ‘the best team of banking, insurance and fintech experts there is. Period’ ) is exporting its services to the States this Fall. There it will attempt to break those bad banking habits, just as it has in Britain. “People are wasting billions of dollars of investment and we can help them spend less and achieve so much more,” says Brear. The 11:FS mantra is that banking’s digital revolution is ‘one per cent finished’, and the consultancy’s job is to help deliver the final 99 per cent, aided by a massively experienced team, including David’s co-founders Jason Bates, who previously helped to launch digital retail banks Monzo and Starling, and blockchain expert Simon Taylor, who drove technology forward at Barclays. For its New York office, 11:FS has recruited Sam Maule, formerly of NTT Data and a host at American podcaster Fintech5, whose from-the-hip,

say-it-like-it-is style of commentary is very much in the same vein as 11:FS’s weekly FintechInsider channel. Brear is clearly undaunted by the sheer scale of banking in the US and Canada and is excited by the prospect of global expansion. “The US market’s really, really interesting because it’s so fragmented over there, state by state, in terms of all the different organisations, and there are just so many banks,” he says. ”There are some truly massive organisations, while in the community banks there are some really interesting people trying to do some really interesting things. “We felt, with all that we’ve done with 11:FS out of the UK, that naturally the Americas market was a strong place for us to go and ply our trade. “Sam Maule is leading that for us, and I couldn’t think of anybody better to do that. He was the first choice.” If 11:FS targets community banks, then it has thousands to aim at, representing a large chunk of the American economy. According to the Independent Community Bankers of America group, its 5,800 members provide nearly half of all small business loans and 82 per cent of agricultural loans. Historically built up to serve geographic communities, these smaller banks typically have a clear focus on their customers’ needs – a vision shared by 11:FS.

Brear is keen for his agency to get its hands dirty and deliver change – and though he shies away from clichéd descriptors, he admits his business is a ‘challenger’ to other consultancies. He says: “The reason why I don’t like the word consultancy is generally because it feels like it ends with a PowerPoint, and really, what we want to be doing is actually make it happen for people. “There’s definitely no shortage of good ideas within big banking organisations but often what they lack is the ability to get things done – getting things through the system into the hands of the customer. “For me, that’s why innovation is a buzzword that really needs to die, because unless you actually get it into the hands of the customer, and it materially starts to make a difference to their lives, whether it be a retail app, a commercial banking proposition or whatever, then it doesn’t matter. “That’s been the problem. We’ve seen a lot of people spend huge amounts of money – each bank is provisioning billions of pounds for transformation – but actually the level of transformation is so small. That’s why we keep coming back to the saying that, at best, the digital journey is one per cent finished.” Brear notes that the regulatory environment is weaker in the US than in

Innovation is a buzzword that really needs to die, because unless you actually get it into the hands of the customer, and it materially starts to make a difference to their lives, it doesn’t matter 100


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Crystal clear: Digital banks are doing more than flexing their muscles; they are shaking the status quo

Europe, partly due to the uncertainty caused by President Trump’s sometimes chaotic administration. But he believes that where the EU leads with the General Data Protection Regulation (GDPR) and the revised Payment Services Directive (PSD2), America will eventually follow. As a driver for change, though, Brear’s general rule is that banks, wherever they are, should be ahead of or guiding regulation, rather than being forced to slavishly comply with it. “If your bar for success is adherence to regulation, then actually you’re probably missing a lot of opportunity,” he says. “If banks just adhere to what PSD2 mandates they do, then they’re generating benefit for everybody else, rather than generating benefit for themselves. So I don’t feel innovation mandated through regulatory change is the way to go. “GDPR and PSD2 lead to a better experience for the customer. Whether they lead to a good scenario for the banks or not is yet to be seen – but, to be honest, I think that applies to any industry that’s inherently focussed on protecting itself, rather than generating new revenue opportunities and customer experiences that actually push forward where the level of capability actually is. “That’s when regulatory change starts to step in. If you look at the major regulatory change in the past five years, it has come about due to the lack of innovation within the banking space. That’s meant the regulator has had to step in and say ‘hang on, guys, we feel like you are probably holding back a little bit here, and you’re probably holding back because it’s in your interests to do so’. Autumn 2017

“Now they’re being forced to do it, the question is whether they’ll take advantage of it. If they don’t, somebody else will.” Brear’s whole approach to business starts with the customer, and he believes many major banks need a cultural shift to ensure employees remember who they should be serving. In every organisation he has worked with, he’s discovered pockets of people who share that focus, and the challenge is to set them free. “They need to be given the permission to really serve the customer in the way that they would want to, and not be inhibited by the organisation,” he says. Challenger banks, such as Monzo, are doing much of the legwork for the big players – but the incumbents will only benefit if they sit up and take notice, says Brear. “The retail space is becoming incredibly busy and is actually showing a lot of the big banking organisations where to go. You know, the Monzo guys have shown people the road map. If they realise that what Monzo delivers are the ingredients for what good user experience looks like, they know what to copy. I guess the challenge for them is, can they do it?” If they can’t or won’t, the danger is they’ll continue to carry the burden of current account provision while realising none of the advantages of the digital age, says Brear. “There’s a whole zombie customer culture that’s kind of coming down now. I bank with Lloyds and, actually, as far as Lloyds are concerned, I’m a customer and I’m active because there are transactions happening, and occasionally I’ll log into internet banking. “But you’ve got Monzo with 200,000 customers, and then if Starling makes a dent, and Atom makes a dent, with all the progress they’ll make around marketing and positioning, very quickly the big

incumbent organisations will be incurring all the cost and achieving no benefit,” says Brear. He believes digital banks are more than flexing their muscles now; they are beginning to shake the status quo. And especially in Europe, where ‘regulatory changes will create swathes of opportunity for other organisations’, fintech is no longer about presentation. The threat to incumbent banks is real. “In the early stages, particularly in the US, everything we saw, with Moven and Simple and these guys, was about presentation, while they were actually running on someone else's rails,” Brear explains. “But with what Nigel Verdon has done at Railsbank, and solarisBank in Berlin, and even ClearBank [the UK's first clearing bank in more than 250 years], the interesting stuff, particularly from a technology perspective, is moving to the back office. It’s where literally billions of pounds of savings can be made in the really big organisations, which is very exciting. Fintech is not just skin deep.”

n 11:FS’s David Brear, right, meets US serial entrepreneur and vlogger, VaynerX’s Gary Vaynerchuk in our Fintech Avengers special on page 96. |



Fusionbanking Spar Nord’s Head of Innovation, Kim Ostergaard, and Ole Madsen, SVP Communication & Business Development, explain how the bank has successfully combined tradition and modernity Every country has its traditions. Spaniards love their tomato-hurling festivals; the Italians prefer a good masquerade ball. When it comes to Denmark, most of its customs are culinary. The kingdom can lay claim to one of the greatest breakfast combinations of all time: a hearty sandwich of Danish bacon on top of an inch of Lurpak, with a sumptuously sweet pastry on the side. A bottle of Danish lager is an optional extra, and probably one best reserved for the weekend. But while some traditions are to be savoured, in the evolving world of finance, they can easily inhibit an organisation from keeping up with the pace of innovation. Like other nations, Denmark has its fair share of traditional firms dotted across the financial spectrum, with Spar Nord Bank an example of one of the country’s longest standing monetary institutions. Having successfully wrapped itself around a business model that satisfied its needs for 200 years, it’s now changing the filling. “Our ambition is to become the personal bank of the digital world, and our new core business strategy reflects this goal,” says Ole Madsen, SVP communication and business development. “We aim to utilise the advantages of pure digitisation in order to offer a seamless transaction banking experience, but also to incorporate that crucial personal touch into all of our services. We want our customers to have access to the most advanced digital solutions, as well as personal advice tailored to them, at the touch of a button. It really is old meets new,” says Madsen. Spar Nord is soon to implement a new enterprise-wide customer engagement management system, which promises to aid the bank in its customer selection, interaction, and business development processes. “What I find most interesting is when



the two extremes of data and customer interaction come together,” says Madsen. “That’s what’s happening within our customer engagement management system. Using algorithms and machine learning, the system analyses all of the data we have on our existing customers to generate a unique revenue potential diagram for each of them. Account managers receive a daily overview of their portfolios drawn from these diagrams, which helps them to decide which customers to talk to, and what to talk to them about. “We’ve been using a similar mechanism within our underwriting operations for years,” he adds. “However, technology is

PSD2 is going to widen our market potential immeasurably. There’ll be nothing to stop us taking our digital initiatives abroad. There hasn’t been this good an opportunity in years now enabling us to renovate our traditional methodologies to exploit our data to a much greater extent. This blend of old, tried and tested principles and contemporary data handling capabilities will strengthen our colleagues’ engagement with clients, and help to deliver a customer experience of unparalleled personalisation.” Spar Nord is also turning its attention outwards with regards to future expansion. The name Spar Nord is an abbreviation of ‘Sparekassen Nordjylland’, which translates as the Savings Bank of Northern Jutland.

But Madsen and his team have set their sights well beyond this beautiful region of northern Denmark. “Historically, Spar Nord has only been focussed on the domestic market,” says Madsen. “Now we’re beginning to test digital initiatives on our current customers, with a view to scaling them internationally. “We’re already very grateful to the revised Payment Services Directive (PSD2), as it’s opening the door for us to expand our operations across the whole of the European Union,” he says. “Thanks to new regulation, traditional banks like our ourselves are being given the chance to do overlay banking – to act as a third party, just like the startups. That’s going to widen our market potential immeasurably. There’ll be nothing to stop us taking our new digital initiatives abroad. To view PSD2 as a threat is remarkably short-sighted. There hasn’t been this good an opportunity in years.” PSD2 may be helping to close the gap between the incumbents and the startups, but it certainly won’t eliminate it altogether. Traditional banks, such as Spar Nord, have become wise to the fact that, in terms of innovation, they’ll never truly be able to match the speed of the featherweight fintechs. However, instead of making a futile attempt to compete with its nimble juniors, the Danish bank has opted to follow a more harmonious route – one of cooperation rather than competition, in what the bank is calling an ‘open innovation strategy’.

Better together Kim Ostergaard, head of innovation at Spar Nord, explains the company’s decision to ally itself with its competitors, in a move that epitomises relaxed, Scandinavian diplomacy. “We admit that we can’t follow the speed of innovation by doing everything ourselves,” says Ostergaard. “Collaborating with the whole fintech ecosystem is the only means we have of bringing great Autumn 2017

products to market in good time. We recognise that we are a relatively small company, hence a strategy of reaching out to the development community beyond the bank seemed like a very natural choice. “Practically speaking, over the last 12 months we’ve both opened up our platform technologically and also implemented the necessary legal framework to support partnerships with firms across the entire fintech landscape, be they fledgling startups or more established players.” Over the past decade, the financial services industry has been rife with

incumbent banks claiming that startups are going to turn up, steal their business and then drive off into the sunset with a boot full of cash. However, Madsen is confident that a collaborative scenario can deliver greater results for parties on both sides of the disruptive equation. “Collaboration between fintechs and traditional banks can only be mutually beneficial,” he says. “As incumbents, we have a lot of the fundamental groundwork in place to be able to produce results quickly. More importantly, we also have existing customer bases and we are trusted by the consumer.

“What we’re missing is that crucial innovation power that comes from being a fresh-faced firm with no legacy whatsoever, that can more easily relate to the man on the street and devise new solutions that appeal directly to them. “We can tap into some of that power by teaming up with startups. At the same time, they can benefit from our established position in the market and gain access to our customers. A marriage between a fintech and an incumbent is unlikely to end in divorce when you consider just how advantageous one is to the other.” Keen to practice what it preaches, Spar Nord has already invested in several startups as part of its open banking initiative.

Opposites attract: Spar Nord sees no reason why legacy banks and fintechs can’t co-operate

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CUSTOMER EXPERIENCE Madsen and Ostergaard believe that by cherry-picking and nurturing the finest fintech ideas, they’ll help the bank to bridge the gap between traditional and digital. In fact, they’ve already started. In August, the bank launched its first fintech collaboration, as Madsen explains. “The product is an application that runs in a Messenger platform to help our customers manage their various subscriptions. The app will remind users to cancel any services that they may have forgotten about in order to optimise their subscriptions,” he says. “It’s a simple process of analysing basic transaction data, but it’s solving a problem that a lot of our customers genuinely experience. That’s the type of solution that we’re looking for to supplement our core traditional business model.” To deliver digital solutions that the financial ecosystem really needs and wants, as opposed to something that is quick and easy for a traditional bank to serve up, has become the mantra at the heart of Spar Nord’s open innovation strategy. Its second fintech investment – a digital piggy bank app called Ernit, aimed at young savers – reflects this doctrine, says Ostergaard. “Before investing in Ernit, we’d been discussing how to bring a product to market that addresses the need for more thorough financial education among young people,” he says. “The continuous introduction of more convenient methods of payment is having an alarming impact on children’s perception of money. A whole generation is emerging that regards the credit card as something that’s powered by magic – a piece of plastic that grants the user unlimited wealth. Of course, that’s an irresponsible and downright treacherous way of thinking. “We’d been following Ernit’s journey since the very beginning on Kickstarter,” he continues. “The company has designed a digital piggybank to help teach young people about the tangibility of money in

an innovative and engaging way. They recognised that the way to appeal to children was through their senses, hence they’ve developed a physical product that does exactly that. When you insert money into the piggybank, lights will flash, the pig will move and a voice will speak, informing the child of what they could purchase with their savings.” As well as sharing Ernit’s commitment to greater monetary education among young people, Ostergaard feels that the fintech is much better placed to deliver an effective solution to the problem than a traditional bank, such as Spar Nord, ever could be. “Ernit’s team are focussing solely on this one specific product, and that’s something that I’ve never seen work in a traditional bank,” he says. “If we had decided to develop this piggybank on our own, it would

A marriage between a fintech and an incumbent is unlikely to end in divorce when you consider just how advantageous one is to the other



have merely been a project, as opposed to a fully-fledged business. Why would we build it ourselves when we could collaborate with a cool Danish startup that’s working on it all day long, not just in between board meetings and compliance workshops? The benefits are mutual – we can profit from their dedicated team, and they can take themselves to market using our licence and distribution channels. It’s a perfect match.”

Incubating more ideas The radical nature of Spar Nord’s open innovation strategy doesn’t stop at talking piggybanks, however.

In January 2017, the bank launched its technology incubator to collaborate with universities across Denmark. Ostergaard hopes that by developing its own research centre to explore and engage with new technology, Spar Nord may be able to challenge the stereotypical business model of the ‘traditional’ bank even further. “We have teams working in the fields of virtual reality, artificial intelligence, chatbots and screenless interfaces, such as Google Home and Amazon Alexa, to name a few,” he says. “Gamification is also a key theme that we’re examining with a view to developing future services and products. Just about anything can be made more engaging through the use of games, and personal finance is no exception. We’re not planning on bringing a game to market tomorrow but we are intent on investigating elements of gamification to see if it could ultimately generate innovative solutions for our customers in the future.” So, Spar Nord is one traditional bank that is making the right moves This little piggy: Ernit is the first collaboration

to appeal to a new, digital generation without alienating the core clientele that have helped to elevate the bank to a position of trust during the past 200 years. Its multifaceted innovation strategy considers its existing, potential, and future customers to deliver a service that blurs the line between incumbent institution and fintech fireball. ‘Out with the old and in with the new’ might sound catchy in the fast moving world of fintech, but tradition isn’t always such a bad thing. Just remember those Danish bacon sandwiches… Autumn 2017

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The have-it-all bank Hitting the customer sweet spot is difficult when customers themselves don’t know what they want. In Portugal, Millennium BCP’s strategy is to offer it all, as Sérgio Magalhães and Andreia Teixeira explain In a land where pockets are stuffed with notes and coins, the bank branch is far from finished. So, while many major European banks have a laser-like focus on digital, Portugal’s Millennium BCP is also revamping its physical estate. “We know that cash is still king here in Portugal,” says Sérgio Magalhães, head of Millennium BCP’s Branch of the Future Project. “We cannot say to our customers ‘you can only have a card’. They still use cash, and so we have to serve them better in this way, and that’s why we have implemented our project, Customer Branch Experience 2.0.” The move is a clear reflection of popular financial culture. Portugal has the highest number of ATMs per head in Europe at 154 per 100,000 people in 2014, compared to an EU average of 96, according to UK Payments data. Millennium’s branch revamp, while being customer led, aims to modernise the bank’s processes for a time when they can be completed from beginning to end using digital channels. A huge amount of effort has been put into the project, with department chiefs from across the business seconding staff to ensure a smooth delivery. Magalhães and the bank’s head of marketing Andreia Teixeira, explain that current Portuguese banking regulations demand that customers must use a

branch for certain transactions. But they agree this won’t be the case forever, so the branch revamp has one eye on the now, and the other looking to the future. Teixeira explains: “The new model that we have in our branches is not only a more modern layout. We define the different areas inside the branch. For example, we have created an area that is our lounge. It is a digital space with free wi-fi, where customers can interact with our website or use our app. Then we have an area that is self-service for our teller transactions. This will give our customers the opportunity to make teller transactions, deposits (with coins also) and withdrawals, 24/7. “If a customer needs assistance, they can go to the third area, the service area, to talk to staff. So, we create different options for different people. The branch is not just for a traditional customer, but also for the digital customer who has a transactional need.”

A branch ‘for everyone’ Millennium’s branch modernisation programme is a reaction to the need for greater efficiency following years of economic turmoil in Portugal. In 2011 the country was bailed out by the EU and International Monetary Fund to the tune of €78billion and deep austerity measures followed. As recently as 2014 the Government had to step in to rescue Banco

Espirito Santo, the country’s largest private bank, to avoid wider financial collapse. “In Portugal, because we have been in recession for so many years, the bank’s sustainability was really important for us,” says Teixeira. “We are looking to become more efficient, more sustainable, and to create a very stable base for our shareholders, and our stakeholders as a whole. “To expand our business model, we must be very open, have partnerships and overcome the traditional way of doing banking.” That drive for efficiency means Millennium’s branches reflect who the customers are in each given location. So, in shopping malls, branches will have areas providing services to businesses and merchants. Others will be unmanned, with an ATM that provides a multitude of services. Because Portugal has a fully integrated cross-bank network, many ATMs already typically offer far more than cash withdrawals – cheque deposits, cinema ticket purchasing, tax and bill payments and mobile phone top-up features are common. But Millennium, one of the country’s biggest banks, has developed teller machines that also provide the customer with back-up from its call centre. Magalhães explains: “One of the things clients value is the possibility of making withdrawals and deposits 24 hours a day,

Customers want everything… a branch, to be served immediately, to be served without cost; they want to be served for things they don’t even want to think about, because they expect we can guess what they want 106


Autumn 2017

seven days a week. When a branch is open, clients can use the machines to make transactions with assistance from bank staff, should they need it. Then, out of hours, our contact centre can make authorisations, or a video teller can interact with the customer. We will have different formats of branch. Some will be self-service, with just a machine.” Underlining the importance of branches in Portugal, one of the country’s most successful newcomers is Banco CTT, the country’s post office bank, which, with a network of 203 branches, has added 200,000 new customers in just a year. But while Millennium has an eye on the physical competition, the move to digital cannot be ignored, says Magalhães, because customer expectation will increasingly be driven by their online experiences outside the banking sector.

Towards a digital future Millennium BCP – part of the BCP group with banking operations in Poland, Switzerland and Mozambique – was the only bank in Portugal to provide an all-digital consumer account last year and the app on its website is impressive, including biometric recognition and a comprehensive list of services. “Customers want everything,” says Magalhães. “They want a branch, they want to be served immediately, they want to be served without cost; they want to be served for things they don’t even want to think about, because they expect we can guess what they want.”

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Spoilt for choice: Customers can elect to use a branch, app, or call centre

To meet that need, the Millennium team asked themselves what their 2.3 million customers desired, and how they could best serve them through multichannel services now and in the digital future. “First, we needed to recognise what type of customer we were working for,” says Teixeira. “We asked: how many digital customers do we have, how many traditional customers do we have, which channels do they prefer? Then, with this knowledge, we could create better processes and products, and ultimately better results for Millennium BCP. “Many banks in Europe say branches are dead, and you might ask ‘why is Millennium BCP still improving and refreshing its layout when it should be betting only on digital?’. We do not see it like that. We know that some functions within the branch are already dead. But some are very much alive. Some will die in the short term, but we believe in an integrated system, between the physical and the digital capabilities. “Of course, we are building digital capabilities. But we also understand that, in the short term, the branch is still going to continue to have an important role.” Teixeira explains that the bank is also hamstrung by local regulations around signing up customers for new products. Though Millennium is working towards a fully digital onboarding process, at present customers must physically sign

contracts to hold a current account or take out a mortgage. So, the bank’s challenge has been to minimise friction during these processes so as to maintain customer goodwill. Teixeira says: “We have to create this seamless experience between channels in order to offer the most convenient, fastest and most secure experience for our customers. “We are trying to overcome the regulation itself by talking to the Portuguese central bank. But we are still working with what we have by simplifying our processes so that it is more convenient for the customer. For example, if you apply for a mortgage and begin the process on our website, the other channels, such as staff in a branch or the call centre, can pick up the process and continue with it. “We know we cannot follow a mortgage right through to completion online, but a customer won’t have to start from the beginning again when they enter a branch. We are reducing the customer effort to meet that need. In our branches we guarantee that these regulatory constraints are not going to be difficult for our customers and are not going to create a bad experience for them. The way we can do that is to become more integrated between channels; between the branches and digital.” |



Digital step change mBank’s journey from online-only to branch network to ‘the world’s first mobile social bank within a bank’, is a lesson in pragmatic evolution. And it all follows the customer, says Jacek Iljin, MD, Retail Banking Sales and Business Processes It doesn’t matter who you are: a rock star, international best-selling writer or bank with an attitude – once you’ve set a precedent it’s always going to be hard to best yourself. The nerves behind that second album, follow-up book, latest innovation… But in the case of mBank, the fourth largest Polish bank and owned by Germany's Commerzbank,, it has managed to stay in poll position, at least as far as innovation and disruption goes, thanks to successive reinventions. mBank began life as a purely online bank in 2000 – the first Internet-only bank in Poland, launched by the already well-established BRE bank in just 100 days. But it listened to its customers and in 2001 built the branches they wanted to become multichannel, while continuing to develop its digital services. Then, in 2013, it revealed the results of a project to take the first established European bank through a ‘comprehensive, mass-scale, ‘Bank 3.0’ revolution of its direct channels’. Its redesigned Internet and mobile services wowed with state-of-the-art, end-to-end customer experience and unparalleled sales effectiveness. The new online banking platform, launched with partners including Accenture, Artegence and Meniga , featured user interface (UI), user experience (UX), personal financial management, video banking, real-time marketing, social channels and gamification. It led respected fintech commentator, Chris Skinner, to observe at the time that mBank had become ‘the world’s first mobile social bank within a bank’ because it had successfully integrated the use of social media (Facebook) and SMS money transfers into its customer experience. The transformations followed a $31million overhaul of its services, which took less than 14 months to



implement. BRE’s digital offspring, by now the biggest online bank in the country, then reverse-engineered the entire brand and the former BRE became mBank with the strap line ‘To help. Not to annoy. To delight… Anywhere’. It’s a promise that it is emphatically delivering on.

Beyond the ‘niche’ Most Polish banks haven’t successfully transitioned to exportable brands and only constitute 0.3 per cent of the international banking sector, whereas mBank established branches in the neighbouring Czech Republic and Slovakia in 2007. This has bumped up its customer base to an impressive 5.5 million. And France is next on its destination list when mBank unwraps its new white label fully fledged digital banking model, mBox, later this year. Could world domination be next? Jacek Iljin, mBank’s managing director for retail banking sales and business processes, is cautious about overstating digital banking’s progress in the market. He has strong views about our perceptions of digital and our willingness (or desire) to embrace it. “I think there’s a huge discrepancy between what we see in the media and what we talk about in the industry – and then the reality,” he says. “For example, Netflix only has 40 million subscribers – it’s a pretty small player – and yet it still makes headline news. It’s the same

for 100 per cent digital banking. Digital banking is still a niche solution, and this is why we evolved from solely an Internet bank into a multichannel bank. Customers need a human touch.” He says he’s proud of the human-centred services that have been added to mBank over the years ‘because we are practical and pro-customer. It’s multichannel, but you can also call it omnichannel because we do not consider that any channel is the owner of the customer’. Iljin sees himself as a sort of watchman of the customer experience, which needs to cater for everyone through enhanced personalisation but must be seamless and alert to customers’ changing needs. And he's ruthless in the pursuit of those aims. “In the mBank customer journey, customers are using all the channels,” says Iljin. “My role, as a supervisor of these channels, is to kill any conflict channel at the moment of its birth. I promote synergy and cooperation. “For instance, if you are developing a mobile app, one of the pillars of this is a channel gate. So, it’s very important for us that our customers can very quickly reach a contact centre, or the relationship manager in a branch, from their mobile app. “I promote synergy sales, so if I see that a customer is interested in a product in a digital channel but hasn’t bought it, we’ll send the lead to the contact centre or to branches and they approach the customer and ask

Autumn 2017

them whether they need more information or advice about what they should buy.” It is this intelligence, this convergence of digital data with human-led customer service – ‘real-time marketing’ – that mBank prides itself on. It believes it is critical to shaping its digital architecture. “Then, the digital channels can become more human,” says Iljin. “I believe strongly in adding this conversational economy to digital channels. We promote chats, some of which can be automated. It adds a level of interaction between the user and the digital channels where we are also changing the language in which we communicate. It’s much more friendly and sounds less like the bank institution and more, let’s say, a friend, or the person who is going to help you.”

Going up a gear Creating a seamless customer journey also depends on the speed with which mBank’s services deliver decisions or results. Its ‘one-click loan’ is offered on mobile and desktop, for instance, but because the bank believes the mobile customer won’t wait around as long as the desktop customer, it wants to accelerate the process further. So, it is exploring how technology can help to quickly amass the large amount of data required to calculate if a loan can be safely granted then ‘the only thing the customer has to do is click on the button. “We analyse a lot of data when assessing a loan application, some of which is ours, but

we are also connected to many other databases,” explains Iljin. “We are engineering this process, cutting out unnecessary pauses and steps and adding more computing power, to actually make these decisions in seconds. So, if not instant decisions, all these complex processes could take a maximum of 60 seconds.” Transactional security, as well as customer data protection, says Iljin, is so embedded into mBank’s customer service that it barely warrants further mention. Whereas the role data plays in better positioning the bank to convert an enquiry into a real sale – and build a valuable customer relationship – is more dynamic. “If, for instance, we see the customer is looking for something in the digital channels and is unable to finish their task, we know what’s happening and we address it. Within seconds we can call the customer. “We are using data to personalise the communication, really understanding the customer’s context. Take, for example, a very successful travel insurance product of ours – because we implemented the geofencing technology in our mobile app, we are able to canvas customers with products just as they are close to an airport, or when they are close to a border.” As you’d expect from a bank not afraid to push boundaries, it’s also exploring the use of artificial intelligence (AI). Iljin illustrates this with a chatbot, which is being developed on the back of a large

We are practical and pro-customer. It’s multichannel but we do not consider that any channel is the owner of the customer

data bank of customer questions initially put to bank staff. The facility is still in test phase, but Iljin explains: “We are using AI to make our chats with the customers more efficient. We taught the bot to handle typical customer questions, saving our resources and time since the customer doesn’t have to wait at all to start an online chat with us. Plus, we are able to provide them with the best answer possible. In the past there could be many answers for these questions, but only a few of them were actually perfect. With this approach, we will always provide the customer with the perfect answer.” He shares two more examples of where data provides app users with better customer service. “Currently, we have two assistants: the payment assistant is a pretty smart guy. He is tracking all historic, recurring payments that a customer has made through our bank – like electricity, water, mobile – and, at exactly the right moment, suggests ‘OK, this is the moment you usually pay your rent (or whatever) and typically it’s this value. Would you like to make this payment right now?’ The customer can accept or modify the payment and it’s done. “We call the other assistant ‘speedometer’. Every day, it calculates how much you spend and compares it to your spending for the last three months, so you know whether you are spending heavier this month or whether you will be able to save. “In terms of using data and AI for customer benefit in the future, I think this is a very interesting direction – to be more proactive and transform raw data into valuable knowledge, recommendation and advice.”

Digital progress: The customer leads the way

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Going the extra mile Kofax’s Regional VP, UK & Ireland, Jim Close, believes technology is paving the way for a more flexible financial service where the robotic brain takes the strain ‘Imagine all the people’ says the song. But what Jim Close invites us to do is imagine less of them, at least in some areas of financial services – in a world where robots and AI do the donkey work so that humans can enjoy a wealth of convenient new services, cheaper. Kofax’s VP for UK and Ireland believes we’re nearing a point where not only can automatons do the most mundane tasks within financial services organisations; they can also anticipate what consumers want and make it happen, without us having to lift a finger. “This is the digital age – even my parents, who are in their eighties, use the Internet to do their banking,” says Close. “People now expect a digital experience akin to Amazon: quality product, low price, very easy to transact with a single click. For the financial services industry, that’s the benchmark that’s being set.” The banks’ challenge is to connect their powerful, safe but cumbersome legacy systems, with the whizzy new platforms needed to make this happen, in order to retain their impressive customer reach and market share. Simple to say, but is it so easily done?



California-based software provider Kofax believes it is. It specialises in data capture – what it calls the ‘first mile of customer engagement’ – using a variety of technologies. “The banks that have massive legacy systems also have massive customer bases, massive trust and brand reputation,” says Close. “While new organisations may be more fleet of foot and have what seem like better systems, all that legacy brands need do is build a front end that creates the impression that they have lightweight, agile systems, like the new digital banks. Most organisations have apps these days, but we’ve got to take that further, adding value and transacting in a different way.” Apps that make daily tasks easier act as virtual shop windows for a bank’s brand and services and are therefore a neat way for them to build their customer base, says Close. “Everyone has an app on a mobile, but the big conundrum in this industry has been, will customers use an app to engage with us for the first time? And the answer is absolutely, yes they will. Just this morning, for instance, I parked at the station and there was a new parking

system in place and I had to download an app in order to transact. “Look at what else is on that mobile: it’s interactive, it’s digital, it’s a miniaturisation of your internet experience, in effect. But there are certain aspects of modern smartphones that banks can take further advantage of. So, if you know the phone’s location, you probably know the owner, it’s probably a verified device that’s already on your system. It also has a touchscreen and a camera that you can connect to your back-end systems to create a secure scanner and basically let the customer do the input work for you. It means you can carry out your anti-money laundering (AML) and know your customer (KYC) checks automatically, in real time, without any involvement from your knowledge workers. You have the touchscreen for the customer to sign, so the transaction can be completed, from start to finish, on the mobile device.”

Time really is money Of course, staying competitive is not just an issue of convenience, but also of cost. “We live in a world of comparison, where it’s very easy to go to the internet and

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compare the price of a product. So, it’s important that institutions also look at their pricing,” says Close. “To remain competitive, they have to get their costs as low as possible, while retaining the quality of their product and ease of transacting. And to do that, they need to address their productivity,” he says. You’ve guessed it; this is where the robots come in. Kofax has invented its trademarked Kapow robotic process automation (RPA) and web data integration platform to help organisations dramatically increase their outputs, reduce cost and focus their human resource where it’s really needed. Kapow helps to acquire, enhance and deliver information from virtually any application or data source, including websites and portals, desktop applications and enterprise systems, without any coding. “The banking industry is full of simple repetitive, manual tasks, involving people in front of screens, that could be automated. Financial organisations are increasingly looking towards RPA for these,” says Close. “Take high-value transactions by high net worth individuals. The risks here are very large. Last year, a bank was fined tens of millions for one transaction where it failed to perform the AML checks properly. What that bank used to do with a transaction like this, was Google the individual to see if they were a person of interest, in which case they would need to

perform further checks. Wherever a person is Googling or connecting spreadsheets and systems, this can be automated, freeing up the knowledge workers to do more productive and profitable things instead. “Another example might be handling an insurance claim, from start to finish, without human intervention. Customers can now create a claim and scan a receipt on a mobile device, submit it and get paid, all without a single person being involved. We have a client in the Far East – Aviva in Singapore – where 75 per cent of its claims are handled this way. “We’re seeing RPA increase productivity tenfold. This significantly reduces the back-end cost. That means that you can offer a better value product, perhaps a faster and more adaptable product, to the consumer and they’re more likely to buy from you. We think the winners that emerge from this will be those organisations that automate and improve their productivity the fastest.” “Clients are looking for significant improvement in process quality and productivity, and the benchmark is 30 per cent,” says Close. “We’re seeing 99 per cent improvement in throughput.”

Myriad uses for RPA Improving productivity through automation is helping financial services catch up with other industries. And it’s about time, says Close. “If you look back at the 1970s and 80s, we automated productivity in the manufacturing industry to an extraordinary extent and now take it for granted that, when we buy a car, it’s been built by a robot. This is why a car today costs pretty much the same as it did back then. “In the 1990s and early 2000s, business performance management (BPM) systems emerged for process automation, improving productivity and allowing financial organisations to extract processes from their core systems of record and create new ones. These were built in web service-based environments but never really delivered the improvements everyone expected. “I think RPA is that missing link from the BPM world. You now have your system of record, your BPM system and, sitting on top of that, your RPA system, which is effectively doing the keystrokes and providing the automation levels that we’ve never been able to achieve with BPM,” says Close.

We’re seeing robotic process automation increase productivity tenfold… the winners that emerge from this will be those that automate fastest

The race for productivity: Financial services are among the last industries to benefit from automation

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CUSTOMER EXPERIENCE Will all this mean more mass job losses in an already hard-hit industry? “Actually, it doesn’t mean that at all,” Close insists. “Twenty years ago, we exported our repetitive manual processes. We took them to India, to the Philippines and to Eastern Europe, and what we now have there are highly educated individuals doing repetitive manual tasks. If you go to a call centre in India, everyone answering the phone and following a script on the screen in front of them, has probably got a high quality degree. They were cheaper to employ than people in the West, but economics and demand have forced the prices up, so the savings aren’t as great as they used to be. “RPA provides the opportunity for businesses to bring those processes back in-house, automate them and localise their knowledge workers again. I think there may be a shift from exporting manual work to cheaper economies, to exporting it to a software robot, making organisations more compact without the issue of managing across geographies and cultures.” The technology might exist, but leveraging the innovation within an organisation to bring about significant change is a different matter. “Many organisations have heads of innovation. Very often they’re blue-sky

multidisciplinary team, find a problem, solve it, improve it, automate it, and then move on to the next one. We’re seeing the greatest success where these teams are set up to solve challenges, working through a whole organisation, one small step at a time. “When organisations set achievable goals and these teams deliver against them in a short space of time, word gets round very quickly and the rest of the business will come to them, asking them to automate their processes. This kind of incremental approach, with the right people working together and empowered to make changes, works better than the ‘big bang’ approach.” Close believes RPA – and the interlinked artificial intelligence (AI) – could be two of the next biggest things to impact the financial services industry, with huge potential customer experience benefits.

Helping hand: Digital transformation is a ‘win-win’

Twenty years ago we exported our repetitive manual processes… RPA provides an opportunity to bring those processes back in house thinkers and very clever people with entrepreneurial backgrounds. But they don’t empower them,” says Close. “They’re there to come up with great concepts and ideas but have no money to spend and no ability to change anything. “In most organisations, systems of record are owned and run by IT, while business process is owned and run by the business. This is why bringing together multidisciplinary teams, empowered by IT to make changes to systems, and by the business to make changes to process – and customer engagement – can be very powerful.” “In the most successful cases, heads of innovation are given power and money to invest, and allowed to create a small,



automate the policy creation so that everything is handled electronically, through a mobile device that can input the information, create the payment and register with your back-end systems, there’s no real cost of sale.” In the sharing economy, where news broke only this summer of another sector tie-up, this time between Daimler and Uber to provide electronic car pools, just such a gear change in financial service provision is needed fast. “What we have is digital transformation providing a win-win, where products are flexible, easier to use, easier to buy, and cheaper,” says Close. “We’re seeing automated transactions and billing in other areas, such as shopping and transport toll payments. The same could apply in financial services. I don’t think you’ll be able

“They offer a step-change in productivity, and the opportunity to be considerably more intelligent with your go-to market,” he says. “Financial services firms can improve their customer experience, reduce their sale and transaction costs and introduce more granular products. “For example, if someone’s going to buy a car insurance policy, why buy a 12-month one every year? Why not buy a policy per trip? They’ve been out for an evening meal, they want to drive home, they give their keys to a friend who they know hasn’t had a drink. They should be able to buy cover through a single transaction on a mobile phone, there and then. “The inhibitor to this, in the past, was the cost of creating the policy. If you can

to walk into a bank, pick up a £10,000 loan and walk out. But there will be instances where, perhaps, your car insurance policy is governed by the location of your mobile phone. Maybe, when you get into your car, there will be a technology that’s fixed in the car, a fingerprint that identifies you. “Certainly, we’re seeing the growth of car clubs, for example, where you can pick up a vehicle on the corner of the street using your mobile phone. All of these things are financial transactions: the insurance, the rental of the car, the money transfer, all happening through mobile devices and digital technology in the background. So, there’s nothing to stop that extending into the financial services world, as well. “The challenge, of course, is regulation. Buying a book from Amazon isn’t regulated in any way, shape or form, whereas banking has to have some form of regulation and audit trail. But technology is changing to make this feasible,” says Close. "And it will come.” Autumn 2017

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Retail therapy Set up by a grocery chain, France’s Banque Edel itself went shopping this year. Its new acquisition, Morning, is just one way in which Chief Strategy Officer William Levy is reshaping payments There is a French saying, il n’est rien tel qui balai neuf, that roughly translates as a new broom sweeps clean, which is a neat summary of the journey that French neobank, Morning, has been on since Banque Edel became 79 per cent majority stakeholder in March this year. (It’s probably good to note early on that, in this case, the ‘sweeping clean’ alludes to the bank’s identity and proposition and not to its employees, since the 35-strong team was retained in the overhaul). Originally set up as a peer-to-peer transaction platform called Payname in 2013, it didn’t quite reach its objectives. With progress stymied, last year Payname (by now rebranded as Morning) became something of a loss leader for its owner. Banque Edel, owned by French retail brand E.Leclerc, stepped in and secured Morning’s accreditation to operate as a payment institution. It was a new dawn for Morning, which is now positioned as a platform that's 'waking up banking' by offering a full range of payment services, including MasterCard cards. “In a booming market, driven by digital technologies, new purchasing behaviours and an evolving regulatory environment, all development opportunities must be considered, whether in B2B or in B2C,” said Richard Pouillaude, general manager of Banque Edel, and chairman of Morning, in a statement at the time of the buy-in. William Levy, who acts as chief strategy officer for Edel and chief marketing officer for Morning, says changes to the platform were implemented against the background of a fast-developing market. “Within one year, we’ve seen tremendous developments in fintech,” says Levy. “I think



there are a lot of challenges because of all the digitalisation, whether it’s in payments or know your customer (KYC), regtech or cross-border processing. “And from what seemed to be, at first, startups working on last-mile payments – last mile a lot of things – now they are switching their strategy from business-toconsumer (B2C) to working with traditional actors in business-to-business (B2B).”

Waking up to cobanking Indeed, since putting Morning in its shopping trolley, Edel has overseen a new strategy with B2B offers being developed alongside Morning’s B2C propositions, which come with a medley of

We made Paywe.l channel all the transactions for Leclerc – 600 million of them... We hope to get to a billion very soon personalisation options such as custom card design and contactless payment blocking. On the consumer account side, the big marketing push is around ‘cobanking’, which allows the consumer to put money aside in a separate kitty or collection fund, which they can manage alongside a group of friends or family. There are accounts for non-French people travelling or living in the country on the

horizon, too. And everything’s available to the customer in real time. “We have tonnes of projects,” says Levy. “We have a B2C strategy with some offers for young people, like students, and for tutorship as well. We also have B2B and B2B2C strategies, issuing cards for malls and stores, as well as working on future evolutions, such as knowing your balance on your gift card.” Morning’s new personal accounts go head-to-head with young disruptors on the European market, such as the UK’s online and mobile Atom bank, Carrefour’s C-zam account, which can be picked up along with the groceries from the French supermarket chain, and Germany’s mobile bank, N26. On its website, Morning claims ‘transparency, pragmatism and proximity are our key words’ although the full extent of its new B2B strategy is still a little opaque. “It’s more about selling our technology as a white label, and we have some very interesting projects coming up,” is all Levy will confirm. It may, however, line up neatly with Levy’s other payments project – the integration of Edel’s centralised payment platform Paywe.l into all 500-plus of Leclerc’s stores. Levy was part of the project team that designed and launched the scheme with a view to liberating the retailer from the heavy restrictions of Payment Card Industry Data Security Standard issues (PCI DSS) among other challenges. “We made Paywe.l channel all the transactions for Leclerc – 600 million of them – and we are on the path to onboarding other players. We hope to get to a billion transactions very soon,” reveals Levy.

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Paywe.l also provides an Alipay turnkey solution for other merchants who don’t even have to operate an account with Banque Edel. With more than 1.7 million Chinese visitors a year to France and Alipay used by almost one in two of them, Edel’s service allows merchants to accept payments with an Alipay Chinese digital wallet. The merchant needs to invest in Edel’s pocket terminal (which resembles a mini tablet) that reads the QR code issued by the customer’s smartphone when she or he is ready to pay. Once Alipay has validated the transaction, the platform credits the merchant’s bank account.

The new ‘retail’ bank As a once traditional bank entering new financial territory, Edel is acutely aware of the regulatory environment,

particularly the changes brought about by the introduction of the revised Payment Services Directive (PSD2), the General Data Protection Regulation (GDPR) and the latest Markets in Financial Instruments Directive (MiFID II). “We think a startup like Morning needs to comply with these new regulations, even when some of our competitors don’t have to, as we believe it’s ultimately good for the customer,” says Levy. Protection and authorised use of data are increasingly relevant as the lines

between banking and other sectors blur – and, having been established by the second biggest retailer in France, there are few banks better placed than Edel to understand that. “Leclerc has a very high level of confidence from customers, so we shouldn’t jeopardise it; we should use it and be very careful with our security,” says Levy. “As a retailer, that’s why we always ask permission from the customer to use their data and show them what we are going to do with it to produce a better customer journey or make personalised offers. You should never ask for data if you are not doing anything with it. This is very important.”

Going shopping: Banque Edel’s latest acquisition takes it into a new payments arena

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By George, they’ve got it! Erste Group’s fintech store aims to be ‘the iTunes of banking’. Head of Retail Strategy Birte Quitt can’t wait for PSD2, so the plug-in games can begin It’s hard to remember a time before app stores. Apple’s veteran mobile marketplace will celebrate its tenth birthday in 2018, as will the Google Play store. Over the past decade, these digital bazaars have enriched our lives immeasurably by providing us with infuriatingly addictive confectionerysmashing games, as well as state-of-the-art facial recognition software (for livening up dull selfies with doggy ears and floral crowns). However, as endlessly comical as conducting a face swap with your cat is, perhaps the time has come for a new type of app store – one designed to help you save, not encourage you to spend your money on yet more candy hammers and novelty soundboards. As the fintech industry continues to flourish, fresh young startups are developing and releasing innovative digital solutions at an unprecedented rate. What if there were a way of taking all these digital solutions and making them available to consumers through a single marketplace – a fintech app store, if you will? Such a platform would surely prove popular with consumers as a gateway to the latest fintech solutions, and startups would leap



at the opportunity to market products to a ready-made audience, right? Erste Bank Group already know the answer to that question. Its digital banking platform, George, hit the one-million-customer milestone in June 2017. Every week, around 10,000 new users sign up to the platform in the bank’s home country of Austria. And what’s driving the success? George is one of the few European banking platforms to offer the option of add-on features via a plug-in store. Remember that idea for a fintech app store? The Austrians have beaten us all to it.

Getting a buzz out of digital As head of group retail strategy at Erste Bank, Birte Quitt’s job is to keep her finger on the pulse of fintech developments in order to generate new product ideas that appeal to customers. “Hearing what other companies are doing within the fintech scene is key to conceiving effective solutions that fit neatly into the market,” she says. “That’s what we did with George, and the results speak for themselves. With over 117,000 plug-ins currently available

and over a million active users in under three years, our goal of turning George into the iTunes store of banking is coming to fruition.” However, it wasn’t just sheer intuition that helped Quitt and her team to devise the concept of a plug-in enabled banking platform. George is a product of the Erste Hub – a think tank established by the bank in 2012 as a means of developing new products and services for its existing customer base of 16 million Europeans. At the hub’s core is the BeeOne Digital Workshop – a multidisciplinary team of bankers, business analysts, developers and designers, tasked with turning strong ideas into concrete solutions. BeeOne’s bee logo echoes the branding of the first Austrian savings bank with its motto ‘work, collect, increase’, which is just what it’s doing; combining the bank’s incumbent benefits with added-value services offered by fintechs. “We are a bank that is almost 200 years old,” says Quitt. “We were founded in 1819 as the first bank in the Austrian market to give normal people access to helpful banking products, to make their lives easier and better. This is still what drives us every single day, and products like George are just a

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means of continuing this legacy in the current landscape of disruptive digitalisation,” she says. Digitalisation isn’t the only thing set to cause disruption across the financial sector. The implementation of new regulatory legislations, such as the revised Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR), are sure to throw a spanner in the works for many banks across the European Union in 2018. But Erste Bank is welcoming PSD2 with open arms. Quitt explains why it represents such a golden opportunity for the bank, and how the release of George couldn’t have been timed any better. “The clause of PSD2 that plays to our strengths the most is the requirement for third-party banks to provide their clients’ data if asked for it explicitly,” she says. “We’ve always received feedback from our customers about how they would love to be able to organise all of their accounts, whichever banks they’re with, through our intuitive online platform. This function is already available through George, but PSD2 will allow us to offer a lot more complementary services around it,” says Quitt. Thanks to the platform’s modular structure, George users are able to build

their own interface by choosing services to add to the platform’s range of core functionalities. The ‘import banking’ function, allowing users to link accounts from other banks with their George profile, has been the platform’s pièce de résistance from the beginning, and PSD2 will only serve to strengthen this innovative USP. “New legislation will grant users the option to apply George’s personal financial planner tools and analytics to all of their bank accounts, regardless of whether they’re with Erste or not,” says Quitt. “In a sense, PSD2 will instigate the ‘platformification’ of banking; applications like George will form the core of consumer banking operations, with customers personalising their banking experiences to perfectly suit their own needs.”

Going up a level With roughly one in eight adult Austrians (and one in four online banking users) already signed up to George, Erste Bank has decided that the time has come to expand the platform’s reach across its customer base in the central Eastern European region. George will launch in the Czech Republic and Slovakia towards the end of 2017 and will then be introduced to the Romanian market at the beginning of 2018. These expansions will

introduce George to around 10 million existing Erste Group customers in these countries and the bank aims to have the platform accessible to its entire customer base across seven markets by 2020. However, taking George abroad isn’t quite as simple as offering Czech and Romanian translations, as Quitt explains. “The starting point is different in every country that we operate in,” she says. “For example, Croatia is incredibly mobile dominated, whereas Romania is still heavily cash oriented. Therefore, we’re having to tweak the platform on a case-by-case basis so that it maintains its appeal across our broad customer base. We’re prioritising cooperation with third-party banks in each country, to ensure that there are a suitable number of country-specific products and plug-ins to satisfy the needs of any nationality.” George recently won third prize in the Digital Distribution category of the Efma & Accenture Innovation Awards, and Autonomous ranked Erste Group among the top three retail digital banks in Europe. If that weren’t enough, Erste Group can take pride in the fact that it may have invented the first fintech app store in George, with not a cartoon filter or smashable sweetie in sight. Now that’s an idea… Credit Card Crush, anyone?

In a sense, PSD2 will instigate the ‘platformification’ of banking; applications like George will form the core of consumer banking operations

Crushing it: The fintech app store created by Erste Group could be as big a hit as Apple and Google game stores

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Have we reached terminal velocity? Banks are rolling out ever-increasing numbers of assisted self-service terminals, but how do they differ from ATMs and will they be a success? RBR’s Managing Director, Dominic Hirsch, discusses its latest research An assisted self-service terminal is a mostly self-service banking device that offers the option for a member of the bank’s staff to provide assistance if required. There are two main variables: how the assistance is provided and the types of transaction that are covered. In-person assistance allows a member of branch staff to simply offer guidance or to play an integral role in transactions, for example by reviewing identity documents or providing manual authorisation. It also plays a critical role in the transition phase of customers who need encouragement in using self-service, particularly certain demographics that value the personal contact of a traditional teller. Remote assistance is generally more cost-effective for the bank as it allocates human resources efficiently and, more significantly, it allows product experts to be located centrally. This may seem like just a cost-saving measure, but in practical terms it allows face-to-face expertise to be provided across a wide range of products in every branch – something that many banks have never offered, or not in a very long time. So, how are ATMs different from assisted self-service terminals? In theory, ATMs and assisted self-service terminals can be similar, but in practice they are often very different. ATMs tend to be heavily standardised with a somewhat limited range of functions – constrained by the range of automation included in the machine. They also tend to be relatively compact. Assisted self-service terminals are not bound by the same constraints, meaning they can be larger and incorporate extra or enhanced hardware features, such as a larger or second screen, coin handling, large format printing, barcode readers, passbook printers,



document scanners etc. It is easier for a bank to justify the higher cost of such terminals because of the savings being made by migrating transactions from the teller.

A complex task One of the challenges that RBR faced during its current research into assisted self-service terminals was defining exactly what was included – which might help to explain why banks are currently at varying stages of their development and deployment! And if choosing the right ATM from the plethora of suppliers and models out there seems complicated, then deciding your strategy for assisted self-service is vastly more complex – not least because many solutions are bespoke or semi-bespoke, and the device is just one part of an overall solution. RBR’s research indicates that a significant number of banks in many countries are piloting assisted self-service devices. The number of large-scale rollouts is more limited, however. This is partly because of recent capital expenditure constraints and ongoing questions about the ideal branch network footprint. But, more than anything, it reflects uncertainty about what is required and what will be embraced by customers. Do all transaction types need to be covered? How critical is coin? Do current regulations restrict what can be done? Will customers actually be prepared to use video – and, if not today, what about in 12 or 24 months’ time?

Critical moment We have not yet reached the tipping point where assisted self-service terminals have become mainstream, but we may not be far away. More large-scale, high-profile deployments would make a huge difference – showing confidence

about the concept in general and giving guidance as to appropriate solutions. Suppliers play an important role here, too, by providing clearly positioned, reasonably standardised solutions, which make it easier for banks to make the leap. Most of the geographic focus for assisted self-service terminals has been on the mature and relatively highly branched regions of Europe and North America. This is logical as the banked populations in these regions are relatively stable, and falling footfall in branches is putting pressure on branch costs. The benefits are not all cost driven, however, and, just as with other aspects of banking automation, banks may skip steps on the traditional automation path and jump straight to assisted self-service in some cases.

Chance to consult One of the best ways of monitoring the development of assisted self-service solutions is RBR’s upcoming Branch Transformation 2017 conference in London. This annual event is based around a two-day speaker agenda, packed full of presentations on how banks from different countries are transforming their branches. Each year, more and more of these case studies include examples of assisted self-service. The parallel expo is a great opportunity to view, first-hand, the latest solutions. Branch Transformation has gone from strength to strength as an event and RBR once again expects a record number of delegates to attend this year’s conference, indicating the ongoing interest in branch automation in general and assisted self-service in particular. n To find out more about RBR’s Branch Transformation 2017 conference in London on November 28 and 29, go to Autumn 2017

ing M s o o t AT h c f I igh ated, r e th plic our m co ing y ed s t m see decid r assis n the tegy fo e is stra servic e self ly mor t vas plex com

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The fast-paced world of finance? You’re having a laugh Ron Delnevo, Executive Director Europe of the ATM Industry Association, has a lesson from the chiropodist’s waiting room for the Payment Systems Regulator. And it’s this: you need to get your feet back on the ground The Payment Systems Regulator (PSR) has just published the results of the deliberations of its strategy forum on UK payment systems. It contains well over 100 pages and yet LINK – which has nearly three billion cash withdrawals a year through its ATM network – gets just one mention. That mention is ‘out of scope’. Cash processing is not mentioned at all, despite the fact that cash is still the single most used payment method in the UK. Neither is there any mention of the impact of the closure of bank branches on the ability of the public and businesses to access payment systems. The PSR is, of course, based on Canary Wharf. No shortage of bank branches near those offices. Staggering omissions? Sadly, ‘typical’ would be a more accurate judgement. How can any assessment of financial services and payment systems fail to include a comprehensive analysis of the impact of bank branch closures? The UK figures are shocking; at least 1,000 gone in the last two years and more shutting down every week. Once, there were nearly 20,000; now they are down to under 8,000; by 2020, there will be perhaps only 4,000. The sign in the window of the Halifax Branch in Leatherhead, Surrey, is typical of thousands posted around our small



island in recent years. Fixed by Blu Tack, it tells customers they still have the option to use other Halifax offices. However, the nearest is more than five miles away. Hobson’s choice. For now, Leatherhead is lucky. The town, which is in some ways a lay-by for the M25, still has branches of Barclays, HSBC, Lloyds, NatWest and Santander. But for how much longer? There are towns in the UK that had five bank branches three years ago and now have none. By 2014, 1,400 communities around Britain had lost their last bank branch. In 2017, that figure has more than doubled. Make no mistake, these closures are destroying local businesses and undermining community life. Here is a typical quote from a retailer forced to close as sales dropped drastically: “Losing the banks killed the town within six months. It’s the ruination of an entire area.” Back to Leatherhead. There I am, waiting for my chiropodist appointment – she keeps me on my toes – when the previous patient arrived at the reception desk to pay. The lady started to write a cheque – yes, folks, in the real world that still does happen – but the chiropodist asked her to pay in cash instead ‘because, with the Halifax closed, I can’t bank my cheques in Leatherhead’.

Crippling lack of progress The issue of the banking of cheques brings me back to ATMs. Most things do. Several years ago, the UK Government told banks it wanted the UK public to be able to deposit cheques at ATMs by electronic imaging. Essentially, the ATM would photograph your cheque and that image would have been used in the clearing process. So, it was convenient for the public and for the banks. No more visits to branches for you and me to deposit bits of paper and no need for the banks to physically handle the many millions of cheques still produced each year in this country. It was a great innovation in terms of customer service – one, incidentally, that they have had at ATMs in the United States for more than a decade. So, that was several years ago. What has happened? ZERO. There is not one ATM in the UK where electronic cheque imaging is in use. The PSR and its CEO Hannah Nixon oversee both LINK, the UK’s ATM network and the Cheque & Credit Clearing Company. That oversight includes fostering innovation. What have the PSR and Ms Nixon done to get electronic cheque imaging at ATMs implemented? ZERO. Here’s a wider question: how many

Autumn 2017

national innovations at ATMs or in cheque clearing in the UK have been implemented in the two years since the PSR has been in existence, producing lavish reports and multiple press releases? ZERO. Meanwhile, the Bank of England is spending hundreds of millions of pounds on innovation, centred on the introduction of a shiny range of polymer bank notes. The Royal Mint has innovated by introducing a radical new design for the £1 coin. So, the UK’s favourite payment method – cash – is rightly enjoying real investment in innovation. The question I have is what is being done to ensure the future smooth circulation among the public of those wonderful new polymer bank notes and sparkling new £1 coins? ZERO. Back to my chiropodist in Leatherhead. She asked her patient to give her cash because she can no longer deposit cheques locally. Of course, the same is true of the cash that she receives, but at least she can spend that cash anywhere she chooses. No bank branch, no convenient cash deposit facilities for businesses or the UK public. Why is that? Because there has not been the required innovation at UK ATMs. I have noted in previous articles that, elsewhere on our shrinking planet, cash deposits at ATMs have been

around for decades. In Japan, cash has been deposited – and recycled – at ATMs by a grateful public since 1982. Yes. That is correct. 1982 – 35 years ago. How many ATMs in the UK accept deposits of and then recycle cash to make it available for withdrawal? I am sure you know the answer by now. ZERO. The LINK Network does, in fact, already have a superb solution available that could solve this problem. It is called the universal cash deposit transaction. This transaction would allow the public and businesses to deposit their cash at any ATM in the UK. At how many ATMs in the UK has the universal cash deposit transaction been enabled? Here’s a bit of innovation from me. LESS THAN ONE. Tragic. Soon, there will be only 4,000 bank branches in the UK but there are

How many national innovations at ATMs or in cheque clearing have been implemented while the PSR has been in existence? Zero

70,000 ATMs, each of which, with proper innovation, could become a mini bank branch, serving the needs of every community around our country. What is the PSR doing to ensure the required innovation takes place in the industry it nominally oversees…? You can fill in the banks for yourself. The buck stops with Hannah Nixon, CEO of the PSR, who it seems would welcome the UK becoming a cashless society. She is, of course, entitled to her personal viewpoint, even if it is out of touch with the needs of the 65 million residents of our islands. What she is not entitled to do, in her role as overseer of LINK and cheque clearing, is to stand idly by as innovations that would help the public, businesses and the UK economy, sit on the shelf, gathering dust. Time is running out for the PSR. It needs to get the innovations implemented now or vacate its lofty offices in London’s business district in favour of an organisation that understands what’s happening on the streets. Because in the real world, bank closures and a lack of innovation in the ATM network are causing real problems for the British public and businesses. But no one is listening. My chiropodist in Leatherhead helps the public keep their feet on the ground. Perhaps she needs to pay a visit to Canary Wharf – and soon.

Not so fast: Innovation in the ATM network is non-existent; it’s needed now more than ever

Autumn 2017 |



A Quant-um leap Martin Froehler wanted to open the world of quantitative finance to anyone with an interest in developing algorithmic trading programs – coders, financiers, even neuroscientists. The result was a unique marketplace called Quantiacs Welcome to Fintest Finance – the world’s most popular fintech game show! All that stands between you and a top prize in a cryptocurrency of your choice is one question: What is a quant? Is it a) a recently discovered subatomic particle? b) a small marsupial closely related to the possum? or c) someone who creates automated trading programs based on formulae and statistics? Congratulations! The correct answer is c). Quants are indeed a new breed of coding whizz-kids using their talents to develop new quantitative trading programs. Martin Froehler, CEO of Quantiacs, speculates on the reasons behind the recent rise in the number of quants who



are hoping to earn their stripes in the quantitative finance marketplace. “The most obvious explanation would be the increasing popularity of the quantitative style of trading,” he says. “It’s a methodical technique that guarantees a much higher rate of success due to the rational decision-making involved and absence of human error. Quants aren’t necessarily just coding buffs looking to indulge their passion; they’re smart traders who are serious about making money on the markets.” Froehler’s company is proud to call itself the first marketplace for quantitative trading programs. It offers institutional investors the world’s largest selection of quantitative software, at a zero per cent management fee, and will even tailor

individual products to meet the specific investment objectives of each of its customers. And how can it provide such an extensive catalogue of specialised quantitative trading software? The answer is quants themselves. “Our quants come from all over the world to accept our offer of software, data and investment capital to support their algorithms,” says Froehler. “Here at Quantiacs, we believe that talent is evenly distributed globally, but opportunity is not. Our goal is to change this by empowering fledgling coders across the world who wouldn’t normally have the means to enter the quantitative finance sector. How are we doing this? By reducing the barrier of entry to quantitative trading software writing to zero. Autumn 2017

Punch the numbers: Quants are in high demand among investors

“The thing that most often deters people from attempting to code is the prospect of a steep learning curve for any programming language that they choose,” explains Froehler. “However, our broad range of transparent tutorials and sample algorithms make it very easy for non-proficient coders to try their hand at tweaking our example programmes. Having dipped their toe in the water, we encourage them to embrace their creativity and continue trying to modify the samples. That’s the best way to gain an understanding of programming. “You don’t need a PhD in computer science to become a quant,” he continues, “just a sense of curiosity and the determination to find the patterns that nobody else has.”

They're in it to win it Not only does Quantiacs provide a wealth of educational material for those interested in sampling the delights of Autumn 2017

data science, it also offers to test your fresh trading algorithm with institutional investor capital – at no expense. Quantiacs has found coding competitions to be the most effective way of offering this service to a broad range of budding quants, and it has run no less than nine major competitions since 2014. “In our most recent Q8 competition this summer, a guaranteed sum of $2,250,000 was set aside for investment, with the best three algorithms receiving $1million, $750,000, and $500,000 of capital respectively. The quants responsible for these algorithms pocket half of the performance fees – so long as their algo actually performs!” The majority of previous competition winners remain active on the Quantiacs platform, contributing to subsequent contests in an effort to retain their coding crowns. Such a high rate of retention is indicative of a strong future for the quant community, believes Froehler. “We already have more than 7,000 quants working with us and that number is growing at an exponential rate,” he says. “Some of our quants are students, some are university professors or data scientists. They’re people who are perfectly happy with their day jobs, but view quantitative finance as a hobby. Over time, that hobby can become something that they’re especially skilled at, and something that perhaps even pays more than their main occupation. What’s not to love?” When it comes to developing their own quantitative trading algorithms, incumbent banks often act in an extraordinarily protective manner, defending their data from the public eye at all costs. However, the Quantiacs’ motto is something akin to ‘sharing is caring’, judging by the company’s open attitude towards external contributions. “We are not a competitor to the big firms,” says Froehler. “What we are is a service provider to asset managers, banks and all sorts of other institutional investors. That’s why we are continually building partnerships with them – to democratise access to quantitative finance through our platform. We want to work with the large asset managers and banks, not compete with them. “In terms of what an institutional investor will gain from working with us,

we believe our offering is totally unique,” continues Froehler. “Investors get access to the largest selection of quantitative trading programs in the world, and can cherry pick the strategies that are best suited to their own products and portfolios. “It’s very important that quants get to retain the intellectual property of their formulae, however any bank or asset manager on our platform can run an algorithm, license it and include it within their own products. Should an investor have certain preferences around asset classes, for example, we can provide them with specialised algorithms to serve their needs. The infinitely customisable nature of the software we provide is something that big institutions can really appreciate. That, and the world’s largest pool of freelance quants that are chomping at the bit to supply them with their alpha!”

You don’t need a PhD in computer science to become a quant, just a sense of curiosity and the determination to find the patterns that nobody else has Best time to be a quant Froehler has grand plans for the future of Quantiacs and believes that the key to success in quantitative finance software lies in it continuing to nurture a robust quant community. “We want to provide our quants with even better tools and even more data,” he says. “Our dream is for those who currently regard their quant coding as a hobby to make the leap and start programming full time. “It’d be in their interests to do so sooner rather than later. We’re going to see a lot of discretionary trading moving into quantitative trading, purely due to the highly successful nature of the latter. There’s never been a better time to try your hand at coding.” |



Stronger together Wiebe Draijer, Chairman of the Executive Board of Rabobank, sees blockchain as the ultimate test of co-operation in the global supply chain. Now the bank is about to test the true strength of those links… Cooperation and innovation are two words that define the Netherlands’ leading bank. A progressive member of the financial community, Rabobank is also noted for its commitment to environmental issues and historic relationship with the food and agricultural industries in which it has its roots. A model for socially responsible banking, working with and for its customers to promote economic development and a sustainable future, Rabobank is regarded as a powerful force for change within its own sector. Chairman of the executive board, Wiebe Draijer, is the embodiment of that force. He talks frequently of sustainability and the circular economy, of Rabobank’s mission to build better lives and working environments, and how it can have a positive impact through green initiatives.

developed to support the digital currency Bitcoin, but it can do far more than support cryptocurrencies. We need to explore what that means for banks and their customers. “No one asks for a blockchain as such,” he continues. “It’s not a standard product that you can slot in and use. Blockchain is a means to an end, a versatile supply chain solution, but it’s not something you can just roll out ready-made across banking or any other industry. Although we know it can greatly simplify and improve commerce and finance, whether for exports, international payments or any other form of data storage and exchange, we have to be specific and precise about how and where it’s used.” As with any promising technology, blockchain must go beyond proof of concept and establish clear use cases. And that’s where the DTC project comes

“Over the last two years, we’ve seen the blockchain hype grow,” says Draijer. “The Silicon Valley visionaries have even predicted the end of banking as we know it, but that’s based purely on the potential of blockchain, not real-world, here-and-now applications. “Our task is to validate the potential and to focus on concrete applications rather than abstract possibilities. The DTC project is one of the first use cases for blockchain in financial institutions.” Trade finance was an obvious choice for a test bed, he says, as it’s one of the business environments with the most opportunities to apply the technology. “Global trade is complex and fragmented, involving buyers, sellers, transporters, the banks that finance the deals, and so on,” explains Draijer. “Each party usually deals directly with just one other party, rather than

He also believes that technological innovation will bring banks closer to the communities they serve and help the financial industry collaborate for mutual benefit. Which is why he’s particularly excited by the Digital Trade Chain (DTC), a new blockchain technology that Rabobank is developing in partnership with other banks. “Everyone today knows about blockchain. It’s been talked about in almost mystical terms for the last few years,” says Draijer. “It’s a distributed ledger, a platform for digital assets, and was originally

in. Rabobank is a member of a consortium of seven large European banks (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Société Générale and UniCredit) that are working with IBM to build a blockchain solution to support international trade for SMEs. IBM has strong credentials as a blockchain technology partner and is currently also exploring a blockchain-based supply chain innovation with Pacific International Lines and PSA International – two key organisations linking Singapore to global trade.

with all the players in the chain, which means it’s not transparent. Blockchain gives you the big picture and has enormous potential for both document handling and identification, and, of course, payments. This is fundamental to trade finance. The value is in creating an interface for complex transactions, where multiple players will be linked seamlessly and securely in a global chain.” The DTC will help all parties to track, manage and, ultimately, transact internationally. “When a merchant sells goods to another party and those goods



Autumn 2017

arrive, the blockchain triggers a payment to take place,” explains Draijer. “Although we take care of payment via existing payment technology, the whole infrastructure and administration is supported by blockchain. In time, payment will also move to a blockchain solution.” The plan is for the DTC to go live by the end of the year, using an application that will simplify and streamline international exports, making it particularly appealing for smaller trading organisations, as Draijer explains. “The technology will be built on a hyperledger fabric, an open-source blockchain framework, and will be implemented through Rabobank and the other six banks in the consortium. We’ll provide an open platform that will enable SMEs to make their exports with greater ease and reliability. While larger companies use documentary credit as a way of reducing business risks, it’s not always suitable for SMEs or for companies that prefer open account solutions. With blockchain technology, it will be easier to handle documents and ensure security.” The platform promises to bring peace of mind and certainty to transactions where previously it was sometimes little more than a matter of crossing your fingers and

devices, confident that those transactions are tracked all the way.” The project perfectly reflects Rabobank’s core principles and its vision for digital trade. “We’re a mission-led bank,” says Draijer, “deeply rooted in the global food chain. We serve farmers in Africa, Australia, New Zealand, South Africa and North America, and connect the whole food supply chain to the biggest companies in the world. When we innovate, we always do it with our customers in mind, and this particular blockchain initiative will pave the way for similar developments that can help communities worldwide.” Looking at banking in general, Draijer says there is an ‘urgent need to modernise and adopt fintech’. This can be viewed in two ways, he believes. One is simply to look at costs, people and whatever it takes to deliver products more efficiently, and to realise that antiquated practices have no place in the digital age. The other viewpoint is more farsighted and exciting. It means going beyond piecemeal improvements, and working with fintech players and other banks to fully explore the potential of technologies, such as blockchain, and how they can better serve clients. In other words, a true paradigm shift.

individual customer contact and working closely with communities, all depend on trust and cooperation. As a standard of behaviour, trust must be strongly present when we open up the back end and give everyone access to the banking platform. “If properly implemented, open banking will encourage innovations that can transform and improve the banking experience for customers,” he adds. “When data is shared or published using open application programming interfaces, it can be used to build applications that help people in numerous ways. It will mean more efficient money management, more choices and transparency, and

Open banking is a philosophy and a standard as much as a system or infrastructure, and that is something we’ve fully embraced

Testing the links: The Digital Trade Chain is designed to make international commerce easier for SMEs

hoping for the best, whichever end of the supply chain your were at. “You know that uncertain phase when an entrepreneur thinks,‘where are my goods and where’s the money; is the counterparty trustworthy?’” says Draijer. “Here, the chain of partners in this network provides that certainty, because everything is seen and accounted for. In other words, you take things out of the unknown. By using a secure, closed network, enabled by blockchain, customers can make transactions online or through mobile Autumn 2017

With Rabobank’s emphasis on community awareness and social and economic improvement, fintech has a special appeal as an engine of change, but open banking is much more than a technology platform, says Draijer. “Open banking is a philosophy and a standard as much as a system or infrastructure. The openness provides access to all the players, and that’s a good thing and something we’ve fully embraced. Companies like Rabobank, the ones grounded in different societies, which value

more suitable products for customers.” For Draijer, innovation is inseparable from cooperation. “Our job as bankers is to make things work. We must cut through all the hype and find practical uses for blockchain and other new technologies. Although blockchain can revolutionise identity, documentation and payments, we must first validate and simplify those uses – and we must do that together. The Digital Trade Chain is a good example of how the industry is working as one and finding the right focus.” |



Panel show: Five parallel stages host speakers over two days

The Davos of fintech

That’s how Laurent Nizri, CEO & Founder of Paris Fintech Forum, describes the annual gathering (and he’s talking economics, of course, not Game of Thrones!) Fintech Finance: You’ve been involved in the digital/mobile economy for the past two decades. What, in your view, is the most significant challenge facing the industry right now? Laurent Nizri: The financial industry has faced challenges every day since forever. Today’s disruption is just a new phase following many other disruptive periods, like the real-time/Internet one in the 1990s, or the appearance of electronic money in the 2000s. Then, of course, there was the financial crisis 10 years ago. What’s new is everything coming at once. Consumer demand, ready-to-use technology, smartphones, new regulation pushing for more competition, and transparency, as well as new digital risk putting all actors on the same level of fear [when it comes to cybersecurity] ,as we’ve seen recently with Equifax issues. FF: Cybersecurity, as you say, is a clear challenge, but what are some of the other perceived risks in fintech and more globally in finance in the digital era? LN: Today, everybody is at risk. Incumbents risk losing market share. Their employees risk losing their jobs, not because of new fintechs or new competition, but just due to the reality of digital transformation, such as



automation or artificial intelligence (AI). When you have a job in a bank that could be automated, it will disappear. And then, of course, fintech startups face the risk of market reality. Making noise and fun at the launch is easy, especially in a market where no one loves the incumbents. But in reality, you need time, trust, and a lot of money to make

Banks are not used to trying and failing. So fintech is doing the trying and failing for them money in the financial industry. And most business plans we’ve seen until now aren’t really taking that into account, especially in the B2C field. You have thousands of fintechs in B2C but the number of true global winners in that field will doubtless be very low. The rest will either shift to B2B, or they will die – or they will be

bought by a bank, an insurance company, a telco or one of the digital giants – Google, Apple, Facebook, Amazon, Microsoft (GAFAM). FF: Do you think we are at a tipping point in digital transformation? LN: Incumbents had the money and the environment to push for real changes but for years it wasn’t their priority. Today, everybody wants to change, even the top management. Technology is ready, the customer is asking for it, the crisis is far gone and margins are still good enough to invest. Incumbents’ employees will be able to shift from low-value repetitive tasks to more value-added missions. Customers of the digital age still need advice, support, customer relationship and so on, so it is a transition for the better. Fintechs will begin to focus more on the business model and find the sweet spot to develop. In 2015, many of them were based on a B2C model; over the next two years they diverted to a B2B2C model. Some of them still keep a B2C face but really they are more B2B2C; it’s less sexy, of course, but it’s much more lucrative. Autumn 2017

FF: Fintech has gone from being presented as a ‘threat’ to the incumbents, to more of an opportunity for collaboration. Is this really the case? LN: At the beginning, fintechs needed to make noise – war is good for selling stories. But the reality is in the financial markets; the real warriors are not so numerous. Most of fintech now works with and not against financial institutions. That was the big pivot in 2016/17. At the last Paris Fintech Forum, the majority of fintechs were speaking about cooperation or coopetition. Finance is a very specific market where you traditionally don’t have research and development (R&D) because for years banks sold the same product – credit and payments. It was good for them. They didn’t really want to do something else because with banks usually the big money goes on maintaining infrastructure or your branch model. R&D is about trying and failing. When you want to have a new

treatment or concept, you try many times, you fail, and sometimes you find one. Banks are not used to trying and failing. So for many years fintech has been doing the R&D for them and when something begins to work, banks and insurers look at it, bid to buy it or work with it. Sometimes they buy out the company or they just buy the tech or acquire a licence. In other words, it’s externalisation of the R&D department, and they will need that more and more. Today they really want to work with that. So, to come back to your question, yes, there is a lot of collaboration, and many more opportunities to collaborate. Investment is only a part of it. FF: Tell us a little about the concept behind the Paris Fintech Forum and what visitors can expect in 2018. LN: We want to be the Davos of digital finance, so each year we invite CEOs from banks, insurance, financial institutions, telcos and fintechs from all over the world to gather on our stage at the end of January. It’s an event by doers for doers – 72 per cent of 2017’s attendees were at the level of CEO, EVP, director or MD – and in 2018, as we've discussed, a key focus will be about cooperation. Wealth management, insurtech and AI will also feature heavily. Of all the applications we receive to present on the

Paris Fintech Forum stage, one in two speaks about AI although, to be honest, in many cases it is often more automation than AI. But that is only the beginning. Another theme will also be very important – and that’s about internationalisation. With Brexit, most companies understand the future is between China, America and Europe now. So, how do we build international players, not only local ones? Last, but not least, we will feature blockchain for real use cases. FF: And, finally, why Paris? LN: Why not! Who doesn’t like Paris? But seriously, France has a huge local market with 60 million people used to financial innovation; we have the infrastructure to hold such an event; and there’s plenty of high-level financial activity going on. The first and only big telco operator to have a banking strategy is French. The most recent big European fintech buyouts have been French – BPCE bought Fidor for more than €100million; BNP bought Compte-Nickel for more than €200million. The biggest investment in personal finance management is French – €20million from Crédit Agricole, Crédit Mutuel Arkéa and MAIF in the Linxo app. French players have shown they are very willing to invest in international fintechs. And what better place to hold this event than where people are willing to put money into the market?

PARIS FINTECH FORUM The 2018 edition of the Forum, which takes place on January 30 and 31 in the former french stock market exchange, the Palais Brongniart, in the very center of Paris, will include two full days of debates, panels, interviews and keynotes with 200-plus CEOs and C-level speakers on five parallel stages. Among more than 2000 attendees will be key financial industry and fintech CEOs and other senior executive from all over the world (in 2017 almost half of the attendees came from more than 45 countries). Among the key topics to be discussed will be:

■■ Coopetition: Innovation in financial institutions, how to work together with fintechs ■■ Private banking disruption in the fintech age

Autumn 2017

■■ Insurtech: from brokerage to full stack digital insurers. What’s next ? ■■ Wealth management: time for AI! ■■ Alternative finance: time for consolidation? ■■ Blockchain for real ■■ Neo banks v market reality ■■ Transfers & remittance: a global game ■■ Fintech v employment: we need talents! ■■ International development ■■ Growth v fintech: From early stage to unicorn ■■ Regulation in Europe: Path for disruption? ■■ How to promote the development of major European-level players ■■ Testimonies of fintech founders’ success stories ■■ Which business models for these new financial players? ■■ Data privacy, monetisation and fintechs |



Good retail’s in the details Extensive use of smart data is already the daily norm in ecommerce. Here, Markus Eichinger, Executive VP for Global Product Strategy at Wirecard, looks at what data-driven intelligence can do for the classic point of sale

Fast-moving business: Retailers need to get up to speed with data

No matter which industry you are examining, data is the key to success and drives disruptive changes. Take the example of car manufacturers. In former times, car manufacturers were judged according to the high quality of their automobiles. High quality in hardware was the key differentiator between premium products and entry-level products. This trend moved to software as the key differentiator five years ago; entertainment, navigation and innovative control concepts were the features that distinguished premium cars from the mainstream. Today, these features are standard and car manufacturers are panting for artificial intelligence (AI) to make driving decisions based on tonnes of data that is fed into the car from all possible sensors. It will not be the electric car but autonomous driving that will significantly change the way we think of mobility. The same applies to the biggest technology players. Formerly, Apple built on its elaborate and well-designed hardware, in combination with functional software. Later, software and apps played an increasing role – it had to enable as well as to look good. Whereas today, Facebook, Apple, Microsoft, Google and Amazon unanimously consider artificial intelligence to be the most important area for significant investments.

The customer-centric view Digitisation has also naturally affected retail and resulted in a fundamental change, shifting from an organisation-centric to a customer-centric culture. Commerce is now operating in an omni-channel environment



across multiple devices and touchpoints. To achieve a connected and yet seamless customer experience, the questions retail businesses ask themselves have changed. ‘What products/services can we sell to our customers?’ became ‘what do our customers need and how can we help?’ Instead of deciding ‘what relationship do we need to establish with our customers?’ retailers began to consider ‘what relationships do our customers want to establish with us?’. And ‘how can we make money from our customers?’ turned into ‘what value do our customers need to see before they are willing to pay?’

Diving into the pool of data is all about gaining insight and creating value The good news is that there is a way to find answers to all of these questions – it’s called smart data. As traditional methods of analysis become increasingly incapable of handling the volume of customer data now generated efficiently, special data-driven solutions are needed. And the big challenge is that these solutions must be not only responsive and dynamic, but also user-friendly and easy to maintain. In terms of hardware and software, this means using a dynamic data platform for easy generation and flexible use of POS-relevant, real-time data that creates added value. It can be used to link

customers to their transactions and forward transaction data to the loyalty system for earning and redeeming loyalty points, for example. But that is not all: diving into the pool of data is all about gaining insight and creating value. All transaction data can be enriched with consumer profile information and be used to analyse customer behaviour to ensure a seamless, consistently pleasant shopping experience across all channels. The principle data sources are retail stores and the cashiers within them, ecommerce and consumer platforms, alternative payments, point of sale (POS), mobile POS (or M-POS) solutions, and smart POS. In order to locate customers the merchant needs to know where they come from, how many are in nearby regions and on which categories they spend most of their money. You might want to know, for example, if your consumers buy their tomatoes at a large grocery store, a vegetable retailer next door or whether they prefer to order pasta al pomodoro from the delivery service. Using data gathered from the sources described above, you can easily cluster consumers according to specific categories and monitor how consumers purchase and where they purchase afterwards. It’s then possible to match product sales and campaigns with the consumers’ purchasing journey. In order to successfully stand out from the competitive crowd in the long run, merchants should make use of the full potential of smart data and profit from the favourable conditions. So retailers, it is time to pick up pace! Autumn 2017


Money, money, money... Every day across the financial world, an extraordinarily large number of extraordinarily large brains set to work, trying to predict the next big trend in transactions. Firms from all four corners of the globe are hell-bent on developing a crystal ball for future payment systems, terrified of putting all their eggs into the shared ledger basket just in case millennials decide to start buying their fidget spinners with cheques again. Everything from PayPal to pigeon post is being assessed in terms of potential to transfer the money of the future, but therein lies another question. What is the money of the future? In his latest book, Before Babylon, Beyond Bitcoin: From Money That We Understand To Money That Understands Us, David Birch takes a step back from the current climate of transaction hysteria to investigate just what will be lining our wallets in 20 years, digital or otherwise. After all, what’s the point in designing new transaction technologies if you don’t know what you’re going to be transacting? Birch begins by delivering a concise history lesson on the evolution of money, before moving from the past, through the present and into the future (which he insists began back in 1971, paradoxically). His musings on the grain banks of Babylon and the rise of paper money in China may seem irrelevant in a cashless age of cryptocurrencies, but they in fact highlight the intrinsic connection between money and technology that has dictated the development of global finance over the past 5,000 years. This is the first clue of

Most valuable are Birch’s case studies on revolutionary forms of money, be they subversive success stories or misguided flops 130


It’s been making the world go round for thousands of years, but what can ancient civilisations teach today’s financial forecasters? Will Dove finds the answer in the pages of David Birch’s latest book

Past, present, future: Pinpoining what will emerge next is tough

many that Birch gives us about where to look for the money of the future. According to Birch, while technological advances and new forms of money are undeniably linked, the speed at which the former drives the later has constantly fluctuated. It’s this fact that makes pinpointing the rise of one specific type of money at any given moment in the future such a difficult task, but he does a remarkable job of considering a broad array of past innovations to give us the best possible chance of anticipating what’s to come next. Perhaps the most valuable elements of Before Babylon, Beyond Bitcoin are Birch’s case studies on revolutionary forms of money, be they subversive success stories or misguided flops. Having co-founded Consult Hyperion (a secure electronic transactions consultancy) in 1986, Birch draws upon three decades in the payments industry to deliver first-person experience of ventures such as Mondex and M-Pesa. His humorous anecdotal accounts of using these and other technologies give us an interesting industry insight.

Before Babylon, Beyond Bitcoin is an impressive achievement in financial literature, both in scope and presentation. David Birch was recently rated as Europe’s most influential commentator on emerging payments and as far as extraordinarily large brains go, this man takes the biscuit. Or should that be Bitcoin? Before Babylon, Beyond Bitcoin: From Money That We Understand To Money That Understands Us is published in hardback by London Publishing Partnership, priced £22.50. Also available on Kindle. Great for: Currency buffs unsure whether to take the plunge and invest in Dogecoin. Best read: On the factory floor of the Royal Mint (if it even still exists). Good read rating: ★★★★★

Autumn 2017






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