Bridging & Commercial Magazine - Medianett Roundtable Supplement: Technology in Banking

Technology in banking

Technology in banking

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The Software Platform for Specialist Banks and Lenders

Aurius from Apak Group, a Sopra Banking Software company, is the only platform targeted specifically at the UK Specialist Banking & Finance market.

The nature of the target customers and the scale of the banks and finance organisations mean it is a sector which has particular needs and challenges: •

The need for flexibility to help precisely target borrowers in specific niche markets

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The requirement to be able to innovate and quickly respond to changes in those markets

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The ability to originate and manage deposits to fund the organisation’s lending in a frictionless but flexible manner

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The need to control the number of systems and suppliers the organisation uses The requirement that systems scale with the organisation

Traditional system vendors with generic banking and lending platforms fail to understand the needs of Specialist Banks and Lenders. Aurius is specifically designed to meet the challenges of these organisations. It provides: •

Low-touch retail and SME Deposit taking, including web-based acquisition

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A flexible and configurable lending module which can be targeted at different Specialist Finance niches (Development Finance, Bridging, VAT finance, SME finance, etc.)

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Open API access through the Aurius connectivity suite

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Configurable, embedded workflow and document management

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Tried and tested accounting, payments and transaction handling

This is delivered using a cloud-based Software as a Service model meaning that, unlike traditional software delivery models, organisations have a low cost of entry and pay based on the amount of business handled by the solution.

Technology in banking

Technology in banking It’s a statement of the obvious that specialist banks are, by definition, driven by specialisation. They have prospered over the past decade by identifying and targeting niches which are underserved by mainstream banks and lenders. They thrive on being able to respond quickly to changes in the market, and being able to target services in their chosen niche; this presents a problem when it comes to IT systems.

preference for a solution which is at least capable of being run in the cloud. Let’s be clear, there isn’t anything magic about the cloud—it’s all essentially just ‘somebody else’s computers’—but, in addition to the technological advantages, it’s the change in business model inherent in cloud-native solutions which will be attractive to specialist banks. Properly designed cloud offerings prioritise service delivery above licence and implementation revenue, so your supplier is incentivised to get solutions up and running quickly with a low barrier to entry. Cloud solutions are inherently scalable; they allow you to start small and will grow with your business. They are, by nature, less territorial, with cooperation between varied services from different suppliers being commonplace.

IT systems in the banking world have historically been built with the big retail banks in mind. They’re generic, expensive, difficult to implement and hard to change. This means that many specialist banks are left trying to force their business model onto systems that weren’t designed for them. Too often, IT has been a hindrance to specialist banks and lenders—a necessary evil to work around rather than an essential driver for innovation and efficiency.

Tech-savvy specialist banks are going to seek out software providers who are not tied to the traditional licence-implementation-maintenance model. They will want suppliers who embrace not only the cloud technology, but the cloud ethos: a service-based commercial model, low barrier to entry, quick time to market, scalable and configurable. This will allow specialist banks to use technology to experiment and innovate, but without exposing themselves to the levels of risk associated with traditional big IT projects. The IT ecosystem is catching up with the idea of niche, specialised, targeted offerings to customers, and the specialist banking world will benefit.

The future will be different. We now have a world where solutions can be composed of cloud-hosted ‘micro-services’, which are combined in unique ways to quickly build innovative and specialised solutions. Banks’ attitudes to cloud services have rapidly changed over the past few years from being seen as risky, cutting-edge technology to regarded as necessary and fundamental. It’s striking that banks have moved very quickly from a position of suspicion, through acceptance and now to insistence with regard to the cloud. We rarely receive a request for a proposal now which doesn’t express a

Mark Elliott, BDM for Aurius from Apak Group, a Sopra Banking Software company

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Aurius from Apak Group, a Sopra Banking Software company

In February, Medianett hosted a Specialist Banking Filmed Roundtable, in association with Watson Farley & Williams, and supported by Aurius from Apak Group, a Sopra Banking Software company, to discuss how important technology is in the current specialist banking space, and what impact the industry expects it to have on its businesses in the future. Here are the highlights from the conversation.

our authorisation from the FCA in September [2019], opened our doors to trade in October and, obviously, tech has played a massive part throughout that journey. Without that, we [could not] open our bank. All the way back to the creation of our regulatory business plan and how we planned to operate and proceed, tech [was involved] the whole [way] through. Where we’ve had to be really careful is [not to] build solutions to problems that don’t exist. We’ve had to do a lot of learning and testing—whether that’s with brokers, other professional introducers, or direct to the SMEs— and make sure we’re using technology to deliver something that’s actually required in the market.

One thing we’ve been reflecting on now as a multi-site business—we opened our offices in Milton Keynes recently, and we’re based in Moorgate—is how can technology keep the team engaged as well? When we’re trying to empower [our staff] to really deliver valuable SME relationships, one of the biggest kick-backs of [having] technology, so far, is how we can keep the business aligned. So, whether that’s one of our business relationship managers in Manchester being able to use technology to dial into our weekly updates … it plays a vital role [in] that as well.

Mark Elliott, BDM for Aurius from Apak Group, was joined by Ranjeev Kumar, partner at Watson Farley & Williams. Also in attendance was Jon Hall, chief commercial officer and deputy CEO at Masthaven Bank; Mark Evans, chief information officer at Hodge Bank; Nick Baker, head of intermediaries at Allica Bank; and Marc Champ, managing director at Wharf Financial. Chairing the event was Beth Fisher, editor at Medianett, who kicked off the discussion.

Beth Fisher: Nick, you’re a very new bank.

Marc Champ: From a broker’s point of view, you have different systems for different banks, and each lender has a completely different way of accessing underwriters and inputting data into the lender. If, say, there was a way to ... have a uniform platform

Nick Baker: Brand new.

BF: How has tech impacted your launch?

NB: It’s been everything. So, we received

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Technology in banking

… we need to seek that full feedback because, if we’re providing a blocked experience for [brokers], we will not achieve our commercial goals—and the SME at the end won’t get the transaction.

all the way across the different lenders, it would make it so much easier for the brokers, which in turn will make it easier for the customers. [It would also] probably make it easier for the banks going forward.

MC: I agree, because we have to translate that to the customer, and it’s very hard to do that if you don’t have a reason. And it’s only with personal relationships with the people within the banks and lenders that you build this picture.

BF: Does it take quite a while to get used to each lender’s platform?

MC: It does; it [can] be a nightmare. It’s a challenge when you’ve been working on one lender’s platform, then you have to go to another lender’s and different data is needed, and there’s a different format. It would be a lot more beneficial, I think, for everybody, if there was one platform.

BF: In that sense, how important is it for lenders/ banks to pilot any kind of tech update, and for how long? Also, how large should that piloting panel be?

JH: I think there’s two sides. One is you don’t want to put off all your customers who are used to using [your services in] one particular way, and think it’s better, but not know that it really isn’t … and the other one is that it just needs to be operationally fit for purpose and it needs to do what it says it’s going to do—it does what it says on the tin. It’s not just about piloting at the end, it’s actually about road testing all the way through a process . . . we’ve always viewed that piloting approach as a sensible way of doing things.

Mark Elliott: I think it’s not necessarily about one platform, it’s about interoperability between platforms. What’s been forced on the large-scale retail space, of course, is Open Banking, and that’s exactly what it’s doing—it’s standardising the interfaces between banks. And I think that we’ll see much more of that coming into the commercial and specialist space, just because banks will get used to doing it, and so that opening up of their data so that it’s usable by external sources … there’s difficulties around that—the security and the commissioning and all that kind of thing. But, that, I’m sure, will [see] major movement over the next five years.

MC: The bigger the bank, the harder it is to get anything done. These are the guys that should be leading tech because they’ve got the bigger budgets and they probably have the staff numbers to be able to do it. Unfortunately, the amount of red tape they have to go through to get all these different levels of sign off—you just can’t do it. So, nothing gets done, and then they miss the boat and go to the back of the line.

Jon Hall: On the Open Banking side, already this week, we were talking to a provider where you provide the front end, and then it links all of the transactional data that you want to move through and assess quickly, which helps the job of a broker, [and brings] all of that transactional data out of current accounts, [which means you can] underwrite much more, with much more data ... and that’s where you are starting to see connections between different providers coming together. We’re in specialist lending markets as well, which means we don’t all want to be on a Lloyds or a Santander system.

Mark Evans: I think it’s also about challenging the way things have been done. Traditionally, you’d kick off a project, we’d do the requirements gathering and build a solution, hopefully get some engagement from the folks who are going to use it, and some feedback in the design process, then pass it across the line to some poor folks in the operational team and they disappear [over] the horizon. That’s a very traditional way of doing things … even if you do incorporate that user testing and feedback in focus groups, the reality of it is [that it is] only when our system is released into the wild and people are using it in all these complex, different scenarios that you really start to get some feedback. So, recognising that you need that ability to change quickly thereafter and challenge that traditional project mindset.

ME: No, precisely that! (Laughter) JH: Just the reaction there, that says, ‘I can imagine nothing worse’—a single provider dominating. You know, we’ve got close to dominance already, we can do without that.

NB: If we’re asking a broker to transact with us in a certain way, we need to explain why… If we need to change that within the realms of possibility

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Aurius from Apak Group, a Sopra Banking Software company

BF: How can specialist banks benefit from and experiment with technology, without committing large amounts of money upfront?

take a punt on that kind of thing, try something, and if it doesn’t work out, walk away from it. Whereas, with some of the other elements of the stack, you’re going to take a much more considered approach.

I spent a fair bit of time in the public sector and the joke there used to be that some vendors, some suppliers, are hostages rather than customers. (laughter) But what we are seeing more and more is software as a service, cloud-based offerings—the commercial model does allow you to dip your toe in the water [with] minimal investment.

ME: Traditional tech commercial models don’t suit dipping your toe into a market at all, because they’re very expensive things to [implement] in the first place. So, you’ve got to make a very big commercial decision to enter a market, to try something new and, certainly one of the things we’re looking at is about lowering that barrier to entry, so you’ve got the ability to try something. I think, as banks, you need that ability to experiment, and traditional commercial arrangements with technology companies don’t really allow for that.

ME: That’s been a massive change over the past three to four years …we’ve been technically capable of putting systems in the cloud for years, but the demand just wasn’t there—particularly from the banking and even the specialist banking sector, which is the more innovative bit. If you responded to a proposal saying you’d like to put it in the cloud, it was like, ‘Oh no, [we] can’t do that.’ Now, actually, that’s the first question: ‘Can we take it from you as a service, cloud provided?’ And the answer is, ‘Yes, we’ve always wanted to do that [and we’re] glad you’ve come around to our way of thinking.’ But [that attitude has] only really quite recently changed.

NB: A lot of the arrangements have been really tough and it’s a significant sum of money to get a bank off the ground with a robust process which we’d hope [would] make sure the system is as safe as it can be. I completely agree about this whole core banking system and supplier relationship. As it stands, the market offers very little, supplier-wise, by way of trying things out. And I do wonder . . . if you are committed, it’s like playing a game of poker: you’re in so far, you know you’ve probably got a 40% chance of winning the hand, but you’re in, and you keep going—and that can deliver products that do not have a market fit.

BF: How can specialist banks future-proof the technology they are currently utilising?

Ranjeev Kumar: I think underpinning all of this is the inherent challenge of all businesses: how to maintain trust, integrity and confidence in the system and allow people to use things in a relatively secure way.

MEvans: At the front, you may see more churn and making an investment in something which you know is only going to be fit for purpose for two or three years. Maybe a sensible strategy, then, if your exit costs or exit effort is minimal, is to say that we can

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Technology in banking

MC: I was doing a deal for a customer recently and they had 10 different properties. You couldn’t do that all as one deal; it was 10 separate transactions.

So, every time I uploaded something on their online system, I got 10 separate emails. That’s not great because it fills up my inbox, and you’re thinking, ‘I’ve got to read through every one to make sure I don’t miss any detail.’ If there were ways to communicate—even a WhatsApp message—to say, ‘This is what’s happened, this is the next stage,’ you can forward that to a customer really quickly and it saves everybody time, and you can then get on to the next deal and make everything just work a lot [smoother].

for me: customer experience, efficiency through automation and getting value out of data.

BF: As specialist banks can embrace technology much easier than their larger counterparts, could that mean they will one day hold monopolistic power in the banking market?

NB: The generation of SME business owners, from our perspective … have grown up with the big five; the monopoly isn’t [ending] any time soon. But, as demographics change… For example, we went on a work event recently. I was sadly one of the oldest there, and they could not believe that I had a Barclays debit card, because they had blue debit cards and coral debit cards and they just couldn’t believe I was that far behind… Those people are the future SME owners, so that will change. We have to deliver trust and a good product, and we have to really speak to the customer, say what it is we stand for and what we believe we can provide for them.

Ultimately, it will just drive more choice.

MEvans: Personally, there are three areas where we do leverage technology— JH: (pulls out a notepad and pen) If there are three, I’m going to write them down. (laughter) MEvans: —That customer experience piece, which is around, ultimately, minimising that customer effort.

How can I get there through channel of choice, real-time feedback and get there quickly? There’s the productivity thing, which I think, arguably, has been oversold, but automating some of those lower value-add tasks, which then frees up resource for the underwriting team. For example, [for] one of the developments we’re working on now, the underwriting team is presented with a rich dashboard which [shows] credit and affordability … and the one or two areas they need to focus their attention on, freeing them up from the burden of lots of manual tasks and providing them with that information to make an informed decision. The third one, I think, it’s kind of a stretch, [because] it’s not technology, but technology provides us with the access to data to make better decisions. That may be around data from some of the sourcing platforms: what are the kinds of products people are searching for? Those are the three key areas

RK: There is an interesting collateral benefit of what’s going on in fintech, and that’s where professional services firms come in ... in a way, I suppose what we’d say is, we and other professional services firms are looking to complement the process. There’s no point in you having a supercharged front end and then finding that things get stuck with other professional services firms that are just tired dinosaurs and not really keeping up. There’s a lot of interesting tech around and our south-east Asian offices that do a lot of fintech for SEA banks and firms are reporting back to us that there are some really interesting, fastmoving developments that, arguably, will be over here very soon as well.

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Aurius from Apak Group, a Sopra Banking Software company

Mark Elliott

Business development manager at Aurius (Apak Group) Mark joined Apak Group as a graduate developer in 1996 having graduated with a BSc (Hons) in Computer Science and Music; over the intervening 24 years, Mark has worked in areas across the business, from development through to pre-sales, taking in some time as a business analyst along the way.

Since Apak Group was acquired by Sopra Banking Software in Oct 2018, he has been proud to be business development manager for the Aurius product line. Mark worked on the team that initially designed and built the Aurius platform, and has been instrumental in its development in the specialist banking and finance market.

He is a firm believer in, and advocate for, the ability of technology to improve peoples’ lives, but understands that, a lot of the time, people see it is a frustration. He is passionate about working at the interface between the world of techies and non-techies and helping the latter to get the best out of their technology providers.

Outside of the technical world, Mark has a keen interest in music of all kinds and feels fortunate to have a career in computing, whilst maintaining his musical interests as director of music at Christ Church in Bath.

Nick Baker

Head of intermediaries at Allica Bank Nick Baker has over 14 years’ experience as a financial services professional specialising predominantly in commercial mortgages.

He started his career at a national commercial mortgage brokerage and rose through the ranks to become managing director. In this role, Nick built a national team of commercial mortgage brokers and implemented highimpact business plans, strategies, policies and procedures, in alignment with corporate objectives.

Nick has extensive knowledge and first-hand experience of the commercial mortgage and commercial finance brokerage markets, blending a strong background in financial services with sales, distribution and marketing acumen.

Nick is also an Enterprise Mentor with The Prince’s Trust and Volunteer with Young Enterprise.

He graduated from the University of Northampton with first-class honours in Advertising & Public Relations.

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Technology in banking

Marc Champ

Managing director, Wharf Financial Services Ltd Marc Champ is the managing director at Wharf Financial Services Ltd. He is an experienced and successful commercial banker who has recently moved into commercial finance broking. With 15 years of commercial/ corporate banking experience, including 13 years in business development, Marc has adapted his skills to the world of commercial finance broking, specialising in property finance. With a keen eye focused on the technological advancements of the industry, Marc remains at the forefront of real estate finance and focuses on customer and introducer relationships.

Wharf Financial offers expertise across a range of financial solutions from property finance to traditional business loans. Regularly dealing with complex transactions, Wharf Financial is active across all sectors and prides itself on a highly personal and professional service. It will consider the customer’s entire financial position when making a recommendation to ensure it is tailored to them.

Mark Evans

CTO at Hodge Bank Mark Evans joined Hodge in September 2016 and his focus has been on driving forward the digital strategy, which has of late involved directing efforts on a new intermediary portal and underwriting capability to support Hodge Bank’s mortgage product offering.

Prior to this, Mark gained over 20 years’ experience across a number of technology and change leadership roles in both the private and public sectors. Most recently he was chief architect at the DVLA, where his role was to help drive forward the digitisation and modernisation of the agency’s service offerings.

Mark describes himself as a ‘recovering technologist’, someone who has a real passion for technology but recognises that the sweet spot is understanding the business context and business need and then leveraging technology to address them.

When Mark has not got his head buried in a screen, he enjoys spending time with his wife, Kath, his two rescue Greyhounds, and kayaking and cycling—basically, anything that involves the great outdoors.

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Aurius from Apak Group, a Sopra Banking Software company

Jon Hall

Chief commercial cfficer and deputy CEO at Masthaven Jon led Masthaven Bank from idea to becoming a retail bank, starting his career with PwC before joining Aviva, then becoming CEO of Saffron Building Society.

During his time at Saffron, it won Moneyfacts’ Best Service from a Mortgage Provider and was nominated for Best Specialist Lender in the Mortgage Strategy Awards. Jon was named one of the European Digital Financial Services Power 50, a prestigious award for the most influential leaders within financial services.

Since Jon joined Masthaven, the bank has secured a number of awards, including Most Innovative Digital Retail Bank in the UK (2018 and 2019), Best Second Charge Mortgage Lender 2018/19 and Mortgage Customer Service of the Year for 2019.

Today, the bank employs more than 180 people, has completed more than £1.1bn of lending and generated over £1.2bn of retail deposits.

Ranjeev Kumar

Partner at Watson Farley & Williams Ranjeev is a partner in the real estate group and head of the real estate Finance Group. He advises on all types of domestic and cross-border real estate transactions, including sales, purchases, lettings, developments, financings, joint ventures, business mergers and acquisitions, and real estate funds formation.

Ranjeev’s particular focus is secured and unsecured, domestic and crossborder real estate finance transactions, including restructurings. He regularly represents investors, developers, borrowers, banks and other financial institutions, and private equity, real estate and hedge funds.

Beth Fisher

Editor at Medianett Beth Fisher joined Medianett in 2014 after co-creating an award-winning B2B magazine as a journalism undergraduate. In just under six years, Beth has helped design and launch two online specialist finance publications and increase broker readership by more than 50% through the use of informative features, in-depth interviews and exclusive content.

Recently, she has been the face of Medianett’s filmed roundtable series, bringing together guests from all parts of the transaction chain to discuss niche areas of the bridging and development finance markets. In January 2019, Beth was integral in the launch of the brand new bi-monthly Bridging & Commercial Magazine, which has revolutionised how property finance brokers keep abreast of the industry’s zeitgeist.

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Technology in banking

Want further info?

Continue the conversation and contact us at apak.info.team@soprabanking.com

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The Platform for Development Finance and Bridging Lenders AuriusDF from Apak Group, a Sopra Banking Software Company, is the only platform targeted specifically at the UK Development Finance and Bridging Market.

Lending for Development Finance presents unique challenges: •

The flexibility demanded by the highly changeable nature of the projects being funded

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The need to monitor complex deals to make sure they stay within their agreed parameters

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The involvement of brokers and multiple third party professionals

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The requirement for close management of the relationship with the developer

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The difficulty of producing clear, consolidated business information in order to be able to manage risk and predict cash flow

Meeting these challenges is vital to a successful Development Finance lender in order to manage risk and increase efficiency. This helps control the cost of managing these complex loans which ultimately increases the margins available in this competitive and dynamic market.

Based on Apak’s Aurius platform, AuriusDF meets the business needs of Development Finance lenders by providing market specific functionality, including: •

Loan Schedule Modelling (both preapproved and in-Life)

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Facility Limit, Advance Limit and Loan Tranche Management

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Tracking of involved Brokers, Third Partied and Professionals

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Guarantees and Security Monitoring (including tracking constantly moving LTVs)

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Notes and Diary Management

On top of the Development Finance specific functionality, AuriusDF clients benefit from access to all the underlying Aurius platform capabilities: •

Open API access through the Aurius connectivity suite

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Configurable, embedded workflow and document management

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Tried and tested accounting, payments and transaction handling

Delivered using a cloud-based Software as a Service model, unlike traditional software delivery models, lenders have a low cost of entry and pay based on the amount of business handled by the solution.

Want further info?

Continue the conversation and contact us at apak.info.team@soprabanking.com