The Editors’ Letter written for the Sibos 2022 edition of Financial IT had a rather grim tone. Entitled ‘Technology in the Time of War’, its main message was as follows: ‘In any event, the world is one where the leaders of financial services organisations need to become, as one of the contributors to this edition of Financial IT put it, “Wartime CFOs”. We would suggest that a Wartime CFO is one who can respond very quickly to a rapidly changing situation. A Wartime CFO may work for a longestablished and traditional financial institution. Alternatively, he/she may work for a recently formed fintech that challenges the status quo in its particular field. He/she needs a certain mindset that can look through the disinformation that pervades any war. He/she needs to see the opportunities that arise – often in greater numbers than in periods of peace and tranquillity – and seize the day. Perhaps most
importantly, he/she needs access to the best technology that is available – which is, hopefully, better than the technology that is being used by his/ her organisation’s main rivals.’
One year later, it appears that financial services leaders have risen to the challenge. The theme of Sibos 2023, which takes place in Toronto on 18-21 September, is Collaborative Finance in a Fragmented World. This theme embraces two ideas.
One of the ideas is fragmentation –which is a complex idea that is much more than the reversal of globalisation. It was globalisation that had explained much of what happened in the world’s economy and financial system from around 1980 to about 2016. Fragmentation can involve greater numbers of losers relative to winners. It can involve uncertainty, which means that many parties are exposed to new risks – even if they do not yet realise it. Fragmentation can also involve heightened fear and mistrust of new technology – Artificial Intelligence (AI) being a particularly important example.
The second idea is that the fragmentation is a soluble problem – so long as the various collaborate in the right way. Financial services involves many players – banks, fintechs that challenge the banks, fintechs that provide technology that can help banks, trade associations, regulators, brokers and intermediaries and operators of market infrastructure. What matters is that the collaboration seeks to achieve a specific outcome.
The organisers of this year’s Sibos have helpfully identified several outcomes to which financial services leaders can commit. One is a sustainable and inclusive financial industry. A collaboration between two or more players should produce outcomes that are clearly greener than what happened before. Alternatively, the collaboration can result in a wider
dispersal of benefits – lower costs, greater choice for end consumers or greater employment. Many examples can be found among the articles that have been contributed to this edition of Financial IT. Another possible outcome is risk management in a time of uncertainty. The uncertainty is unavoidable – but it can be managed. Items in this edition of Financial IT deal with varied topics such as the benefits that a data fabric can bring, the crisis-proofing of a particular economy in Central Europe and a reduction in operational blunders.
One big change to have happened since Sibos 2022 has been the surge in publicity around AI. AI carries the idea that technology can destroy a lot of jobs in a short period of time. It carries the idea that new technology is unlikely to be accepted readily if it contributes to fragmentation. This edition of Financial IT includes a discussion of Generative AI, among other articles that deal with the restoration of the balance between technology and trust. However, AI’s time in the spotlight is not the most important change to have taken place over the last year. We have moved
out of a period of war, in which financial services leaders needed an aggressive mindset. We have moved into a time of peace, in which the main theme is indeed Collaborative Finance in a Fragmented World.
Our congratulations go to the organisers of Sibos 2023 for identifying what really matters for technology in a time of peace. We wish all participants a successful conference.
Andrew Hutchings, Editor-in-Chief, Financial ITAlthough Financial IT has made every effort to ensure the accuracy of this publication, neither it nor any contributor can accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or any opinions or advice given. This publication is not a substitute for professional advice on a specific transaction.
No part of this publication may be reproduced, in whole or in part, without written permission from the publisher. Entire contents copyrighted. Financial IT is a Finnet Limited publication.
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For over four decades, SWIFT's Sibos event has been the premier annual gathering for the global financial industry. Sibos provides a platform for banks, financial institutions, technology companies, and industry leaders to connect, share best practices, and to discuss the latest trends and challenges in the financial services space.
For me, it is the "Olympics of Banking". Anyone who has been to a Sibos knows that you must be like an Olympic pentathlete to survive. Sometimes you will be running. Sometimes you will be swimming. Perhaps you will be riding…
Sibos goes from early morning bank and vendor breakfasts to dinners, party invitations and late-night clubbing. All the time, the players are focused on doing business. Many banks and providers gauge their year based – at least in part – on having a good or bad Sibos.
Sibos started in 1978 when SWIFT, the global provider of secure financial messaging services, launched its first international banking operations seminar in Brussels. The event was aimed at educating the global banking community on the use of SWIFT's new messaging system. Since then, Sibos has evolved into a massive week-long event that attracts thousands of delegates from all over the world.
One of the most memorable Sibos events occurred in 2000 in San Francisco. During the event, 500 protesters stormed the Moscone Center and disrupted the keynote address by former US Treasury Secretary Lawrence Summers. Despite the chaos, Sibos went on and successfully convened the financial industry's most influential players, discussing topics such as the future of banking, the role of technology in finance, and cybersecurity. The highlight was the legendary party on board the retired aircraft carrier, the USS Hornet: those decks were rockin’ that night!
In 2008, Sibos traveled to Vienna, where over 8,500 delegates from 134 countries came together to explore the theme, ‘Harmony:
The New Imperative’. This Sibos event saw notable speakers like: Nobel Peace Prize winner Muhammad Yunus; former Austrian Chancellor Franz Vranitzky; and Sir Bob Geldof, musician and founder of Band Aid and Live Aid. This event ended with what was the last of the all-out Sibos parties. It was hosted at the Hofburg Palace, former home of the Habsburg Emperors. It was a fitting end to the Thursday night surprise parties of Sibos.
The year 2011 marked another significant Sibos event, held in Toronto. This four-day event attracted a record 8,000 delegates and featured an impressive line-up of speakers, including UK Prime Minister David Cameron, Indian banker Chanda Kochhar, and Canadian Prime Minister Stephen Harper, among others. This Sibos event discussed topics such as leadership, innovation, and diversity, among other things.
In recent years, Sibos attendance has continued to grow, with nearly 11,100 delegates from 150 countries attending the 2019 event in London. Besides attendees, Sibos also attracts a significant number of banks, with more than 200 institutions exhibiting.
For the Sibos 2023 event, we are back in Toronto and the theme is ‘collaborative finance in a fragmented world’. This theme is a nod to the challenges and opportunities that banks face in an increasingly digital world.
Sibos 2024 will be held in Beijing, marking the arrival of the event in mainland China. Many of that country’s most influential leaders and speakers will be attending.
Sibos also has its humorous side. Every year, the SWIFT team puts a lot of effort into creating fun moments for delegates to enjoy outside the serious business of banking. In 2019, for instance, the SWIFT team organized a "Cabaret Night" that had everyone from bankers to fintech enthusiasts dressed up in their most dazzling outfits and dancing the night away to live music.
As the financial services industry continues to evolve, the technologies
by Chris Principe, Publisher, Financial IT
driving changes in banking, such as AI, will undoubtedly remain an important focus for Sibos. AI and machine learning, combined with big data analytics, are transforming how banks operate, allowing them to make faster, data-driven decisions and providing more personalized customer experiences. AI is a game-changer, with Gartner predicting that AI in banking will deliver $450 billion in business value by 2024.
In conclusion, SWIFT's Sibos event is undoubtedly a must-attend for any professional in the financial industry. The event offers tremendous opportunities to learn, to network, and to share insights and experiences with other like-minded professionals from all over the world. Whether it's the serious business of banking or more lighthearted social events, Sibos never fails to deliver. We can't wait for the 2023 event in Toronto to continue the tradition of the iconic global event that is the Olympics of Banking.
OF PEACE
Andrew Hutchings, Editor-In-Chief, Financial IT
6 SIBOS –THE OLYMPICS OF BANKING Chris Principe, Publisher, Financial IT
30 HOW THE FINANCIAL SECTOR CAN IMPROVE ITS RESILIENCE IN THE FACE OF EVOLVING DIGITAL RISK
Dr. Richard L. Harmon, Vice President, Financial Services, Red Hat
10 DOES YOUR ORGANISATION NEED A DATA FABRIC?
Mike Heffner, Vice President of Solutions and Industry Go-to-Market, Appian Corporation
12 MANAGING LIQUIDITY IN REAL TIME
Andy Schmidt, Vice President & Global Industry Lead, Banking, CGI
14 PAYMENTS CANADA: OVERSEEING A WORLD-CLASS SYSTEM
Tracey Black, President and CEO, Payments Canada
18 BNPL IN THE CROSSHAIRS OF LEGISLATORS
Mohamed Ata, VP Customer Success, IXOPAY
22 CORRESPONDENT SERVICES: FASTER, BETTER, STRONGER Till Wirth, Product Director, Wise Platform
24 MAKING IT EASIER TO GET PAID
Nick Barna, Head of GTM, Payment Providers, GoCardless
26 UNLEASHING THE POWER OF GENERATIVE AI IN FINTECH
Sam Edge, Global Head of Fintech for Startups, AWS
32 BANKING ON ECOSYSTEMS: MEETING CORPORATE DEMANDS IN THE FACE OF CHANGE
Lekshmi Nair, Chief Revenue Officer, Lending, Finastra
34 ADAPTING BANKING TO MODERN NEEDS WITH PAYMENT ORCHESTRATION
Andrew Riabchuk, Founder, Akurateco Payments Orchestration Company
36 EMBRACING THE NEW DIGITAL LANDSCAPE THROUGH VIRTUAL CARDS
Gloria Colgan, SVP, Global Head of Products, Visa Commercial Solutions
37 HUNGARY IS A FINTECH COUNTRY… …BUT IS IT CRISIS-PROOF?
Andrew Hutchings, Editor-in-Chief, Financial IT
38 DEFENDING THE JEWEL IN THE CROWN Ezechi Britton MBE, Chief Executive Officer, Centre for Finance, Innovation and Technology
40 WHAT’S THE SECRET TO BANKFINTECH COLLABORATION?
Gavin Maclean, Head of Payments, Lloyds Bank Corporate and Institutional Banking
42 FROM TREND TO TRANSFORMATION: BNPL'S REGULATORY FUTURE
Krista Griggs, Head of Banking, Financial Services & Insurance, Fujitsu UK
Financial IT: Mike, thank you for speaking with us today. If you had to summarise the current state of play with the use of data by businesses and other organisations in just two words, what would those two words be?
Mike Heffner: Lost opportunity.
Only 44% of data and analytics leaders think their teams are effective in providing value, according to a new Gartner® survey. And business users are still struggling too, citing accessibility issues and complexity as barriers to data use. Combine this with low executive confidence in data, and it’s clear that data challenges are ubiquitous. Further, and according to Forrester research, fewer than 10% of organisations are advanced in their use of data.
Let’s put it in plain English, but in two sentences rather than two words. Almost everyone has access to huge amounts of data. However, they are typically not doing nearly enough to turn that data into valuable insights.
Financial IT: What do you see as the main reason for this problem?
Mike Heffner: I’d say that most organisations are just not structured to gain insights from the data. Sometimes, there is a lack of clear objectives. In other instances, the data is siloed or of poor quality. Frequently IT teams are resource-strapped so they may be lacking the in-house talent that can gather worthwhile insights. For instance, to cite Gartner again, the lack of available talent is noted as an impediment to the success of data and analytics in an organization.
Businesses leverage more and more technology each year, and each of these technologies provides rich opportunities to collect and take action on new data. Yet with all the options available it’s easy for information collection to spiral out of control, with so many disparate systems available to collect copious amounts of data.
Financial IT: What do you see as the main solution?
Mike Heffner: Reducing the answer once again to two words, I’d say: data fabric.
Data fabric is an architecture layer and tool set that connects data across disparate systems and creates a unified view. It is a virtualized data layer. That means you don’t need to migrate data from where
it currently lives, say in a database, enterprise resource planning, or customer relationship management application.
The data may be on-premise, in a cloud service, or in multi-cloud environments. Pair this with AI, and a data fabric becomes an even more powerful tool in combining business data in entirely new ways, with particular benefit for digital transformation work. It’s a concept that Gartner calls “composable design.” That’s one reason Gartner named data fabric its top strategic technology trend for 2022.
Implementing this approach as part of your data strategy has an extra advantage: it helps solve the problem of not having enough skilled people. When a data fabric is used as an architectural layer, it can make, create and keep data connections working without needing specialized experts like data scientists or database administrators to maintain the technology at every single stage.
Financial IT: Great. What does a data fabric actually involve in practice?
Mike Heffner: I’d say that you can use a data fabric both as a tool itself or as an architectural layer. Both use cases are correct but it depends on the context.
Regardless of whether you’re talking about it as a tool or an architecture, the end result for the organization is the same. Different sources of data that were separated and isolated are now connected. Employees have real-time data to make better, faster decisions. Developers no longer wait weeks or months for migrations before creating new applications.
Take, for example, a multinational financial institution. This institution would likely have challenges with data quality, security, and access. And they would handle a lot of sensitive information –like customer and financial data – that would need to comply with regulations across different countries and regions. A data fabric provides a foundation for addressing these issues by keeping the data where it is. No migration to get everything into one spot. Instead, a data fabric sits on top of these systems and stitches them together thus avoiding any sensitivities related to governance or regulatory compliance.
Financial IT: So, a data fabric is an innovative way to look at data strategy?
Mike Heffner: Right. A data fabric can help with data governance initiatives. Data governance, which is a framework that defines processes, policies, and for handling data, isn’t enough to help you realize the full potential of your enterprise data. Even the best framework will only provide part of the puzzle. That’s because getting value from data comes down to a combination of a good data governance framework, people's ability to use and rely on data, and the right tools to get the job done. Having a solid, rigorous data strategy that takes into account all those factors is becoming a requirement for organizations, not just a “nice-to-have,” as regulators demand better risk management reporting. A data fabric provides an easy and accessible way to unify and connect data across your organization.
In a real-life example, the upcoming SEC ruling, which goes into effect mid-December, requires companies to notify the SEC and public within four days of cybersecurity incidents that will have a material impact on business operations. With these sorts of regulations it’s not just about detecting and blindly reporting when the event happens, it’s about how one detects, evaluates and ensures reporting is timely, accurate and comprehensive.
So, in the case of the new SEC ruling, if a cybersecurity breach takes place, a data fabric can take the incident and then ingest it into a common process across the enterprise and help effectively manage it. For this sequence of events to occur, the process needs to be smooth and transparent. This enables the back-, middle-, and front-office to understand their roles and collaborate effectively in managing the data and coming up with an appropriate response.
Financial IT: Great, so how does a data fabric help an organisation?
Mike Heffner: I’d highlight a few key things.
First off, a data fabric provides a unified view of all the data. That makes it much easier to apply governance policies in a consistent fashion across all data sources.
Further, you can apply the governance policies in real time. That reduces the risk of decisions being influenced by outdated information. In the Gartner survey I mentioned earlier, it noted the most successful chief data and analytics officers outperform their peers by building an agile and strategic data and analytics function that shapes data-driven business performance and operational excellence.
Because you can see the history of any piece of data, it is easier to ensure compliance with regulations governing handling of data. A data fabric is flexible, scalable and secure. Say no more.
Finally, a data fabric reduces the workload on the organisation’s IT department, boosting overall efficiency.
Financial IT: Thank you.
Appian’s data fabric.
The Appian AI-Powered Process Platform includes a powerful data fabric for connecting and unifying data across your organization to support faster, better business processes.
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Andy Schmidt, Vice President & Global Industry Lead, Banking, CGI
Liquidity is the lifeblood of any organization, including banks and their corporate customers. Too much liquidity equates to sitting on idle cash, and that’s just bad business. But, without enough liquid assets, you could soon find yourself out of business.
Inflation, rising interest rates, asset deterioration, and other factors have resulted in an uncertain economic climate that has disrupted cash flows and made it very difficult to forecast liquidity, let alone manage it effectively.
Further compounding the issue of liquidity management in 2023 is the global race to “real-time everything” in banking. Market, customer, and regulatory demands for immediacy are driving banks to invest in real-time capabilities, just as other industries are doing. The move to real time, in turn, is impacting how corporate customers manage their own businesses, including their cash flows and liquidity.
However, despite all of the good that comes from satisfying the need for speed, both banks and corporates face some novel challenges when it comes to managing liquidity in a realtime world.
Settling transactions in real time, i.e., 24/7/365, means that banks must now be able to respond to changes in liquidity throughout the night, during weekends, and even on holidays. At the very least, this could require additional personnel for their funding desks.
However, investing in automation and artificial intelligence is a potential solution. Both technologies can help banks manage liquidity-related activities in real time such as regulatory reporting, monitoring, liquidity stress testing, and decision support, without the need to hire more staff.
For corporates, uninterrupted availability is a more complex challenge. The ability to send and receive payments around the clock requires a greater understanding of their cash inflows and outflows, as well as real-time monitoring. If outbound payments are sent in real time automatically, but expected inbound payments are delayed, the result will be an unexpected cash flow imbalance.
Monitoring, especially, can be a challenge for corporates whose banks have real-time payment systems but batch-based accounting systems. This is because a payment can be received in real time during the evening, but with a batch accounting system, the corporate may not know about it until the next morning.
Effective cash forecasting is a first line of defense for corporates. This can then be backed by real-time monitoring via a “single pane of glass” (to see what’s coming in and going out) and an automatic liquidity facility provided by the corporate’s bank in the event of an overdraft (e.g., working capital line of credit).
A tangled system of levers influences bank liquidity. On one side is a diverse group of funding sources, and on the other, a growing collection of real-time institutional payment rails – each with its own funding model. This is a lot to manage. To address the complexity, it’s crucial to have a real-time, comprehensive view of all bank balances. A modern payments infrastructure can offer this type of monitoring capability, as well as controls for quickly redirecting funds and restricting payment channels, as necessary.
On the corporate side, corporate treasurers are increasingly seeking cash management services and liquidity solutions, including pooling and netting, from their financial institutions to help simplify their cash flow and liquidity management processes. As the world becomes smaller through global trade and real-time payments, corporate treasurers want – and need – better cash forecasting and liquidity management capabilities.
Perhaps one of the best simplification tools that a bank can offer is an online portal that provides corporates with a single view of their financial position across their entire banking relationship and real-time account access and information. Ideally, this single banking portal also would provide access to multiple banking services and seamless integration of corporate and bank processes.
Bundling cash flow forecasting and liquidity management capabilities –things that banks already do quite well for themselves – into a corporate customer offering, whether delivered by the bank or a third party, benefits the bank tremendously by providing deeper insights into the behaviors and preferences of corporates, as well as creating a sticky revenue line because corporate treasurers increasingly want their banks to provide all of these capabilities.
Currently, some of the most popular use cases for real-time payments are emergency funding and earned wage access, neither
of which help alleviate the fickle nature of real-time payments and their unpredictable impact on cash flows.
Helping corporates with cash flow forecasting represents a significant business opportunity for banks. Banks, for example, can educate corporates on the benefits of better forecasting through use cases, especially in areas involving stable cash volumes, such as payroll, taxes, subscriptions, and recurring bill payments. They also can deliver insights made possible by machine learning and predictive analytics to assist corporate customers in making more informed forecasting decisions.
For corporates, managing unpredictable cash flows can be facilitated by leveraging integrated payables and integrated receivables capabilities, which leads to better cash flow visibility and more business opportunities. Through integration, corporates benefit from important trend information such as who pays and when. If a large number of payments are made on the 29th of each month, for example, this can wreak havoc on cash flows. With such trend information, payment terms and conditions, as well as payment processes, can be improved.
As the pressure to go real time increases, it will be more difficult, but no less important, for banks and corporates to stay on top of their liquidity, not only for their sakes, but for the sake of their customers and the greater financial community. The global financial system functions as a delicate ecosystem, where localized concerns can generate systemic risk.
Learning to effectively mitigate the impact of real-time payments won’t be a quick or easy process, but it’s a necessary one that all businesses, including banks and their corporate customers, will have to undergo eventually. Do the work now by investing in the right expertise, data, and technology solutions so that the right structure is in place when needed.
Tracey Black is the President and CEO, Payments Canada.
Building on the organization’s past success, Tracey provides the leadership to define the next stage of Payments Canada’s evolution, supporting the payment needs of Canadian consumers and businesses, and empowering a new era of modern payments.
Prior to Tracey’s appointment as President & CEO in March 2020, and since joining the organization in November 2018, Tracey was the Executive Director of Modernization, responsible for leading the modernization of the Canadian core clearing and settlement payment infrastructure.
Tracey has held executive roles at TD Canada Trust and RBC Royal Bank, and has consulted extensively in the financial services industry as an independent consultant, and with McKinsey & Company. Previously, Tracey was the President of GFH Group Inc, where her responsibilities included the launch of chip cards (or smart cards) in Canada.
Tracey has more than 20 years of professional experience with extensive industry knowledge and deep expertise in payment strategy and innovation.
Financial IT: How do you best describe Payments Canada’s role within the payment ecosystem?
Tracey Black: The Canadian economy depends on the exchange of hundreds of billions of dollars each day. Payments Canada is a non-profit organization that owns and operates Canada’s national payment systems and ensures that financial transactions are cleared and settled securely and efficiently. In 2022, the value of payments cleared and settled by Payments Canada’s systems was approximately $119 trillion, or more than $475 billion every business day.
Payment systems are typically operated by a country’s central bank, so Payments Canada’s role and arrangement are somewhat unique. Our mandate is defined by legislation, the Canadian Payments Act; our public purpose objectives, defined by the Department of Finance, include promoting the efficiency, safety and soundness of Canada’s clearing and settlement systems and taking into account the interests of users.
Our position at the centre of the payment ecosystem provides opportunities for efficiency, and we often must navigate competing stakeholder priorities. Working closely with our regulators, members and stakeholders, Payments Canada has a proven history of operating payment infrastructure and providing supporting services that ensure our members can meet the payment needs of Canadians and Canadian businesses.
Financial IT: What are some of the payment trends reshaping Canada’s payment landscape?
Tracey Black: Payments Canada closely monitors global payment trends and conducts market research to better understand the attitudes and payment behaviours of Canadians and Canadian businesses in order to confirm and inform our strategy. Some of the global topics we’re keeping a close eye on include payment initiation methods, the introduction and adoption of ISO 20022 and cross border real-time payments. Domestically, we are following developments in open banking and digital ID.
ISO 20022 is an international messaging standard designed to simplify global business communication through the use of data-rich payments – more information about the payment traveling with the
payment. The standard has the potential to dramatically reduce payment processing costs and to support the introduction of enhanced payment experiences for all end users. In March 2023, more than 11,000 financial institutions in over 200 countries and territories around the world, including Canada, participated in the start of Swift’s global migration to ISO 20022 for crossborder payments and reporting. Working closely with our system participants, Payments Canada introduced ISO 20022 to Lynx, our high-value payment system. To date, just over 50 per cent of Lynx transactions are already using the ISO 20022 (Swift MX) message standard.
Payments Canada intends for all of our payment systems to support ISO 20022. We will continue to work closely with our members and stakeholders to provide the education needed to inform end users about the value of data-rich payments and the potential benefits for Canadian businesses and consumers.
Financial IT: I know that Payments Canada is a strong proponent of broadening competition within Canada’s payment industry. Why do you believe this is so important?
Tracey Black: Our legislation, the Canadian Payments Act, defines which entities must be, or are eligible to be members of Payments Canada. Membership in Payments Canada was last reviewed in 2001, and is currently limited to a narrowly defined group of financial institutions. Members of Payments Canada that meet payment system participant requirements are able to directly connect to our systems. The payment ecosystem continues to evolve, and there are more participants in payments than ever before. Amendments to the Canadian Payments Act would allow credit unions, regulated payment service providers (PSPs) and designated financial market infrastructure entities that meet the necessary requirements to become members of Payments Canada.
Payments Canada believes that broader competition will result in more payment options and experiences for Canadians and Canadian businesses. Defining broader access to Canada’s national payment infrastructure within the Canadian Payments Act will ensure innovation happens within – not outside – the regulatory system. Broader membership will create the opportunity for broader
direct participation in Payments Canada’s systems, and will result in increased competition in Canada’s payment industry.
Financial IT: Are there any learnings or insights that Payments Canada has garnered from payment innovation initiatives that have been rolled out in other markets?
Tracey Black: Globally, we’re observing the benefits of digital ID, a secure way to verify an individual’s identity. In the payment industry, use of digital verification can enhance security, reduce costs and facilitate the adoption of new payment methods and services. Payments Canada is closely monitoring developments in other jurisdictions and participating in industry discussions related to the future of digital ID in Canada.
Another area of interest to Payments Canada is Confirmation of Payee, a service that asks the sender to confirm the name associated with the receiving account to ensure a payment is being sent to the intended recipient. Pay.UK introduced
Confirmation of Payee in 2020 to prevent misdirected payments – an error that occurs when incorrect information is provided and a payment is sent to the incorrect account. Today, over one million Confirmation of Payee requests are completed per day in the U.K., providing greater assurance to the sender that the payment is being sent to the right recipient.
If introduced in Canada, Confirmation of Payee could reduce the occurrence of misdirected payments and introduce an additional layer of assurance and security for consumers and businesses.
Financial IT: What is your vision of what the future of payments will look like? Looking to the future, how do you think Payments Canada’s role will evolve as the payment ecosystem continues to innovate?
Tracey Black: Canadians have demonstrated a continued and growing preference for electronic payments and payment experiences that are embedded and frictionless, even invisible. These experiences are made possible by the use
of technology and mobile applications that can authenticate the initiator and the receiver of the payment. Canadians are comfortable with these experiences because they trust payment providers to ensure the security of their transactions.
Payments Canada’s mandate includes facilitating the development of new payment methods and technologies. With the introduction of broader membership and broader access to Canada’s payment systems, managing more diverse member needs, ensuring the efficiency, safety and soundness of Canada’s payment systems while providing a platform for innovation will present opportunities and challenges. Payments Canada will continue to facilitate important discussions between our members, regulators and stakeholders, and to enhance our systems and services to meet the payments needs of Canadians. We will continue to educate our ecosystem about the important role payments play to support the Canadian economy, and to ensure that Canada remains globally competitive in the larger payment ecosystem.
Buy Now, Pay Later has established itself as a popular payment option, particularly among millennials, who are most likely to use BNPL to pay for household bills and other essentials like groceries. For merchants, BNPL has become another payment option that they need to offer, given that consumers have come to expect it. For consumers, particularly among the younger generations, BNPL has become an accepted means of paying for items where they need to spread payments over installments. But for legislators, BNPL has become an area of concern.
While the vast majority of consumers use BNPL without issues and meet their payment obligations on time, a subset of consumers are taking out BNPL loans they cannot afford. This has been exacerbated by the cost of living crisis, leading to BNPL being used for small purchases of essentials and to cover basic household expenses. With high penalties for missed installments being the norm, these missed payments can lead to the financially
vulnerable being drawn into a spiral of debt, unable to meet their payment obligations. This is particularly true among millennials, who are not only the most likely to use BNPL, but also the most likely to miss payment deadlines. According to Statista , 56% of millennials in the US use online schemes that allow for interest free payment of multiple installments, with 14% of millennials having incurred extra costs due to failing to meet their obligations over the previous 12 months. The figures for Gen Z are in the same ballpark, with 49% having used the service and 11% experiencing payment difficulties over the 12 months prior to the survey. Similar results can be found elsewhere, which has led to a flurry of news coverage on the subject over the past years.
These developments have led to governments around the world reviewing and overhauling existing legislation. Many
BNPL providers benefited from exemptions that applied to low value loans with 0% interest rates. The approaches taken differ in the details from jurisdiction to jurisdiction, but the general tenor is that additional oversight is required and that credit checks should be performed before issuing these loans.
Mohamed Ata, VP Customer Success, IXOPAY
The UK has introduced new requirements for lenders to carry out affordability checks on BNPL and other short term interest free loans. Furthermore, lenders offering these products will need to be approved by the Financial Conduct Authority (FCA), the terms and conditions need to be made clear in promotional material, and consumers will be able to take any complaints to the Financial Ombudsman Service (FOS). This may well turn out to be a blessing in disguise for BNPL providers; around half a year before the new requirements were announced, 37% of respondents to a Statista consumer survey responded that they would not consider using BNPL at all – probably in part as a result of negative press coverage.
The EU has made a series of proposals to regulate the BNPL industry by overhauling the Consumer Credit Directive. New credit rules will now apply to loans below a value of EUR 200 of interest free credit, which were previously exempted. Similar to the UK, the means in which information is presented to consumers in advertising and contracts will be regulated to ensure adequate information is available to consumers and pre-ticked boxes will no longer be permitted. Lenders will also be required to assess the credit worthiness of consumers before they are able to sign up for BNPL products to ensure the consumer’s ability to repay the loan.
In the US, the Consumer Financial Protection Bureau issued a report on the BNPL last September, outlining areas where BNPL has the potential to be detrimental to consumers. These included the lack of standardized disclosures and unsatisfactory rights to resolve disputes. The potential for BNPL to cause consumers to overextend their credit lines is highlighted. This can lead to an inability to make repayment obligations, with BNPL borrowers more likely to already be heavily indebted. At the state level, BNPL
lenders in California are already subject to rules and regulations and BNPL products are considered loans, meaning providers must be licensed. Other states are also monitoring the situation, and we may well end up with a patchwork of regulations that differ between jurisdictions.
These legislative changes will have an impact on how BNPL payments can be offered in future. With the onus on BNPL providers to change the way they operate, merchants will only experience the impact indirectly. In particular, checks on the ability of consumers to repay the loans may well lead to a decline in the number of consumers able to use BNPL at checkout. Merchants offering BNPL solutions are thus likely to experience more payment failures as a result of a small sub-section of consumers having their BNPL applications rejected. This can have an impact on merchants’ bottom lines, especially those who rely heavily on this payment option. However, merchants can – and should – continue to offer BNPL to consumers, as many shoppers actively look for this option and it is already well-established. Not offering consumers the payment options they desire is one of the major reasons for cart abandonment. Catering to different consumer preferences means that merchants should ensure that they offer a wide variety of payment options. Not only does this reduce card abandonment, but if one payment method is unsuccessful, consumers can fall back on other alternatives, giving merchants the chance to still close the sale. This approach is already commonplace – if a credit card transaction is rejected, it makes sense to offer consumers an alternative (bank transfer, PayPal etc.) and this applies just as much to BNPL as any other payment method. However, offering consumers a choice of payment options brings with it its own
challenges, especially with consumer preferences and providers varying from region to region. The IXOPAY payment orchestration platform integrates a wide variety of BNPL payment methods alongside other payment options ranging from credit cards and bank transfers to a plethora of global and local alternative payment methods. With all payment providers integrated using the same API, merchants are easily able to offer consumers a choice of payment options popular in the consumer’s region and adhering to local regulations. This allows merchants to maximize conversion rates and offer consumers an alternative option if their preferred payment method fails.
IXOPAY is a best-of-breed payment orchestration platform offering flexible and independent global payment processing options. Fully PCI-DSS Level 1 certified and highly scalable, IXOPAY caters to the needs of enterprise merchants and white label clients, including payment service providers (PSPs), acquirers and independent sales organizations (ISOs). Built upon modern, easily extendable architecture, IXOPAY provides smart transaction routing with cascading, state-of-the-art risk and fraud management, fully automated reconciliation and settlements processing, comprehensive reporting and access to hundreds of acquirers, payment service providers and alternative payment methods.
IXOPAY is trusted by national and international enterprises and has offices in Austria and the USA. The owner-led and financed company has grown from 2 to over 80 employees by delivering innovative eCommerce solutions. For more information, visit: https://www.ixopay.com
Financial IT: Till, please explain to us what is Wise.
Till Wirth: Wise was founded 12 years ago with a simple mission: money without borders for everyone. Our mission is to make cross-border payments fast, transparent, convenient, and eventually free.
Wise customers are individuals and small businesses who are looking for a better way to move and manage their money across several currencies. Too often, it’s complex and expensive for them to do this through their domestic banks; our edge is that we are faster, cheaper, transparent on fees and that we provide a better user experience (UX).
Financial IT: So, you’re a fintech that is in competition with traditional banks, right?
Till Wirth: Yes and no. At Wise we have always set out to fill the niche of international payments, which are historically underserved by traditional banks. Over time, we have seen many customers of big banks use Wise to send money internationally. But we actually want to collaborate with banks, not compete with them.
That’s why we set up Wise Platform, which allows banks to leverage Wise’s global payments network and offer
faster, cheaper international payments from within their own platform. It was clear to us that we can help banks make significant improvements to the cross-border payments services that they provide to their clients by opening up our technology over API, and via the SWIFT network.
Our partnerships are beneficial for all parties; customers benefit from an improved UX and a more seamless experience of sending, receiving and managing money across borders. Banks gain access to our technology and global network, which is operational in most relevant markets and settles over 57% of payments instantly. And Wise benefits from opening up our services to more customers around the world. Everyone wins.
Quite often, our integrations are white labelled. In other words, bank customers who benefit from faster or cheaper payments powered by Wise are unaware of our involvement, which is absolutely fine by us.
Financial IT: Wise speaks about its partners. Are the partners the banks with whom you are collaborating?
Till Wirth: It is true that the partners include banks – both traditional and of the challenger variety. Our traditional
bank partners include Bank Mandiri, one of Indonesia’s largest banks, Shinhan Bank in South Korea, GMO Aozora Bank Ltd in Japan and IndusInd Bank in India. We also work with challenger banks including EQ Bank in Canada, Aspire Singapore, Monzo, N26, and neon in Switzerland.
However, we also work with nonbanks. Examples include Human Resources (HR) services provider Deel, New Zealand-based accounting software firm Xero, Singapore-based trading platform Tiger Brokers and US-based expense management tool provider, Brex.
In short, our partners are organisations whose activities are such that they are involved with cross-border payments. We make their lives easier.
Financial IT: In an elevator pitch to a potential partner, what are the strengths that you would emphasise?
Till Wirth: Wise exists to facilitate faster, cheaper and more transparent crossborder payments for everyone, and we’re very good at what we do. We’ve been around for over a decade and are a regulated payments services provider in many jurisdictions around the world. We are not an aggregator – Wise built our own global payments network, securing
over 50+ licences, 4 direct connections to central banks and payment schemes, and over 100 banking partners. Every payment that is made via Wise is executed via a local payout – money never actually crosses borders.
Thanks to Wise Platform, our partners have access to everything Wise’s network can provide.
Financial IT: Presumably correspondent banks present you with an opportunity?
Till Wirth: Absolutely. Correspondent banking today isn’t working – it’s still too expensive and slow. That’s why we have developed our own Correspondent Services offering.
As I mentioned, Wise Platform offers our partners the ability to send and receive money internationally in two ways: either by leveraging our easy-touse APIs, or by redirecting their SWIFT messages to us. Both options make sending and receiving money faster, cheaper, and more convenient for banks and their customers.
The product we’re most excited about right now is our ‘send’ solution for banks. This product allows banks to redirect the same SWIFT messages they send every day to Wise, where we instantly translate them into payouts over local rails on Wise’s global
payments network. As I mentioned, over 57% of international payments made via Wise arrive instantly (in less than 20 seconds), made possible by our proprietary tech which is built and automated so that money never actually crosses borders. A SWIFT message that comes to us will be paid out in the local currency to the recipient without needing to go through additional correspondent banks, which means fewer fees are collected and the beneficiary always receives the correct amount.
Many banks want to speed up and cheapen their international payments but can’t easily change their infrastructure. This product means that they don’t have to.
Financial IT: Taking a three-year view, what do you think will be the main changes for correspondent banks?
Till Wirth: To paraphrase the Olympic Games’ motto, I think that they will be faster, better and stronger. Correspondent banking is by no means outdated, but it is in need of a refresh. Rather than having multiple correspondents sitting between each payment, we might expect there to be one or two only, which will automatically make international payments faster and cheaper for customers.
Wise is a global technology company, building the best way to move money around the world. Over the last decade, Wise has built an entirely new cross-border payments network that will one day power money without borders for everyone, everywhere.
Thanks to Wise Platform, large companies and banks can leverage Wise’s technology and embed the best way to send, receive, and manage money internationally into their existing infrastructure. With over 60 partners worldwide, Wise Platform saves banks and businesses time and money by allowing them to seamlessly bring fast, cheap, transparent and convenient cross-border payments to their customers.
Nick Barna: GoCardless is a global leader in direct bank payments. We help more than 85,000 businesses to collect both recurring and one-off payments, processing more than US$35 billion of payments across 30+ countries every year. Our name reflects the fact that making a payment directly to/from a bank or payments service provider (PSP) is usually cheaper than a payment using a debit or credit card. There are other advantages, too.
Our clients are primarily merchants – businesses, payments companies or enterprises. Our mission is to make payments easier, cheaper and faster for our clients. The businesses range from massive multi-national retailers to small operations.
Financial IT: Here in Europe, it is possible to move money from a bank in country A to another bank in country B with the result that the money is available in B in a matter of hours. That’s not an instant payment, to be sure, but it is very quick. And it’s fairly simple. All you need to do is provide the bank in A with the IBAN of the account in B and respond through the first bank’s app when it asks for confirmation. Incidentally, you don’t need to be physically in A or B to do this. So, what is the problem that you are trying to solve?
Nick Barna: I’d begin by noting that your example involves a transfer in euro between two banks that are in the Single European Payments Area (SEPA). As soon as you complicate the payment with another currency, or move one or both ends of the payment out of SEPA, you’re going to find that the exercise is less easy. It may well be that the payment happens quickly – but with less certainty as to when the money actually arrives at B.
It’s also worth noting that bank payments have evolved over the past few years, and there are now lots of different ways of paying via your bank. From the point of view of merchants – or, indeed, any organisation that is receiving substantial numbers of payments – bank payments are usually a lot cheaper than the main alternative, which in a lot of cases is debit/ credit cards. However, manual bank transfers can come with their own challenges. We’re here to remove those hassles so merchants can focus on the benefits of bank payments.
We have a significant client base in the EU. However, we have a big and/or growing presence in markets like the United States, the UK, Australia and New Zealand as the demand for direct bank payments continue to rise.
Financial IT: Great. Can you please elaborate?
Nick Barna: Consider a small business that is working with us. We make
it easier for them to receive money instantly: in doing so, we improve their cashflow. Our solutions provide them with the alerts in real time that keep the business in the picture in relation to inwards and outwards payments, in particular our open banking-powered products give real-time verification and payment confirmation. Better security and visibility of payments is a key pain point for both merchants and payers, in fact in a recent survey we found that security was the top driver behind choosing which payment method to use in a checkout.
Our solutions can also be automated meaning less time is needed to handle payments – providing another saving. Our solution also reduces the number of failed payments, which can be a major headache for small businesses. Did you know that credit cards have an average of 15% failure rates, with failure having a direct correlation on customer churn?
Overall, we bear in mind the total cost of payments – not just the upfront fees. A smooth payments process has the power to encourage a business’ customers to do more with that business: in other words, we help to boost conversions.
Financial IT: What about (very) large enterprises?
Nick Barna: Businesses of all sizes share a lot of the same pain points, just on a
different scale. From our own research we know that 90% of businesses are finding the cost of running their business higher compared to a year ago – that’s across small and very large enterprises. However, one area that is more applicable to larger enterprises is their desire to effectively scale internationally. With GoCardless, a large enterprise can collect payments from over 30 countries and settle in one home currency in just one account. There’s also the fact that bank accounts are the most accessible payment method, whereas some types of cards or digital wallet options are region specific. This leads to enterprises needing to overhaul or have multiple payment strategies. We offer the economic solution.
Financial IT: What are the common misconceptions that you have to overcome?
Nick Barna: The main misconception is that bank payments are somehow traditional or old-fashioned and, therefore, inferior. This misconception ignores the reality that pretty much all relevant parties have long been working to make payments faster, simpler, cheaper and better. The massive SEPA initiative is a good example. So too is Faster Payments in the UK. Banks and fintechs are looking to provide consumers with greater protection and an improved user experience.
The momentum is positive, and we are part of that momentum.
Financial IT: GoCardless recently launched GoCardless Embed, a bank payment integration for PSPs. Can you tell us more about what Embed offers and its value to PSPs?
Nick Barna: Embed is not just for PSPs. In today’s world, pretty much every company is becoming a payments company. They are all looking for greater efficiency in inwards and outwards payments. In essence, this is a Golden Age for embedded finance – where payments systems are central to online business. Embed is our solution for companies that understand the opportunities from embedded finance and who want to pursue those opportunities.
Financial IT: Let’s move from opportunities to challenges for a moment. What are the implications of the current global economic and financial climate for your business?
Nick Barna: You are right that the current economic and financial climate is difficult. There is low growth in many areas. Inflation is rampant in many countries. The dislocations from the Covid pandemic, Brexit and the war in Ukraine have not yet been fully addressed. However, these are much more challenges for our clients than
for us. Almost all of our clients are under pressure to reduce costs and improve cash flows. More efficient bank payments help them to do that – which is why our business is growing.
Financial IT: Finally, let’s look forward two-to-three years. What are the main trends that you see in the payments space?
Nick Barna: From our point of view, the main trends are exciting. Payments will become faster as the world moves towards the paradigm of transactions in real time. There will be greater emphasis on the experience of the end client or consumer – meaning that use of bank payments will increase. Embedded finance will grow. Open banking will become more important as fintech companies do clever things with the data that they acquire.
There will also be huge growth in remerging markets. This is partly because financial institutions and payments services providers will take advantage of lower payments costs to boost financial inclusion.
Financial IT: Thank you.
Financial IT: Sam, please introduce yourself, and tell a bit about your professional background
Sam Edge: I’m the Global Head of Fintech for Startups at Amazon Web Services (AWS), where I lead a team of former founders and investors to support the world’s best and brightest fintech startups and venture capital funds building in the cloud. Prior to joining AWS, I was a founder myself, and have spent the majority of my career in financial services and fintech both as a consultant, and as a mentor to other startup founders through programmes such as Techstars, Plug & Play, and Startupbootcamp.
Financial IT: What are the most exciting topics that you heard at Money 20/20 Europe this year?
Sam Edge: Generative AI was certainly number one on my list, perhaps unsurprisingly given how much change, innovation, and excitement it has created across every industry this year. It was particularly interesting to hear about how fintechs are thinking through generative AI applications for improving operational efficiency and customer service, as well as increasing personalization, and optimizing back-office functions. At AWS, we see great potential for generative AI to usher in what we are calling the era of "self-driving money", where every consumer with a smartphone can have access to an affordable, trusted financial advisor that will help them manage their expenses, invest their money, and achieve financial health.
Financial IT: How does AWS support fintech startups in terms of infrastructure, scalability, and costeffectiveness?
Sam Edge: We know what companies need to be successful in this segment. Over the past 15 years, we’re proud to have developed the most comprehensive suite of tools and services in this space to help startups build and prove their ideas, and shape the future of the industry. We’re proud to say that no other cloud provider has helped to create as many startup unicorns as we have.
AWS has a global infrastructure spanning 99 availability zones and 31 geographic regions , enabling fintech startups to build and grow reliably and across any market they need to be in. In addition, the AWS tech stack has been designed to meet the most stringent security, compliance, and regulatory demands seen in this space. We have 143 pre-loaded security standards and thousands of global requirements validated by third-parties , to help startups build with confidence, while meeting the strictest regulations.
A big part of how we provide to founders and developers goes beyond just the technical capabilities of the AWS platform, though. We have dedicated support teams consisting of seasoned financial services experts – with expertise in everything from go-tomarket to solutions architecture – that really understand what it takes to be successful in a such a heavily regulated industry to guide these startups in their journey.
It’s for these reasons and more that AWS is already trusted by financial institutions of all sizes – from big banks such as Goldman Sachs, HSBC, and Capital One, to newer, nimbler startups, such as Affirm, Plaid, and Stripe.
Financial IT: What is the purpose of the AWS Global Fintech Accelerator
program? What regions are eligible for the program? What benefits do the selected startups receive during the program? Will there be partnership opportunities with investors and advisors?
Sam Edge: Today, 91% of financial services institutions are using artificial intelligence (AI) to drive business transformation and change, and 80% of fintechs are leveraging machine learning (ML) in particular – there was never more demand for a program to support startups to build with AI/ML than now. It’s clear we are at the cusp of a technological jump – one that will offer the opportunity for every customer experience and application to be reinvented with AI, especially generative AI. This accelerator's focus is to usher in the next generation of fintech companies at the forefront of this evolution.
We launched the AWS Global Fintech Accelerator, a six week program to meet the needs of fintech startups in key global markets – specifically North America, EMEA, and Latin America. Following a successful fintech accelerator pilot launched last year in the United Kingdom and Ireland, the Accelerator aims to turbocharge growth for fintech startups leveraging AI and machine learning to usher in a new golden age for financial services. The program offers participating startups with business and technical mentorship tailored to fintechs leveraging AI and machine learning to build their solutions.
We will select 150 startups to participate in the program and they will receive up to $25,000 in AWS Activate credits to build their products and services, as well as dedicated business
Sam is the Global Head of Fintech at Amazon Web Services, leading a team of ex-founders and investors to support the world’s top Fintech startups and venture capital funds. Prior to AWS Sam has been a founder, investor, and consultant, with 15 years’ experience in banking, capital markets, and fintech. Recently named by the UK's Evening Standard as a leading Global Fintech Influencer, Sam founded AWS’s first ever Fintech accelerator, and is a mentor to startups through programmes such as Techstars, Plug & Play, and Startupbootcamp.
and technical mentors matched based on their specific needs/company stage. The top 15 companies will be invited to present their products and services to a curated list of potential investors and customers on an in-person Demo Day and will receive up to $75,000 in additional AWS credits.
Applications are open until August 14, so if you are building a cool fintech solution leveraging AI/ML, we want to hear from you!
Financial IT: Can you provide an overview of the specific AWS services and solutions tailored for fintech startups and venture capital firms?
Sam Edge: From idea to IPO, AWS empowers fintech startups to deliver exceptional customer experiences through the deepest and broadest set of innovation tools, including machine learning (ML) and artificial intelligence (AI) services. We also provide specialized guidance for fintech startups with our team of financial services experts. A big benefit we have is that the startup journey is part of our DNA – most of us are former founders, VCs, technologists, product leaders, and industry experts ourselves who know what startups need because we’ve been there.
From a solutions standpoint, we also offer a Fintech Blueprint “Quick Start” – a reference architecture for fintech applications built in the cloud that enables companies to get up and running quickly. The architecture has partitioned virtual private clouds (VPCs) that separate fintech production, management, and development processes. Startups can develop or host B2B or B2C fintech products in this environment. In addition, they can use the AWS Service Catalog to install prepackaged financial tools from leading fintech software vendors and opensource tools. They can also launch any applicable AWS Quick Start – such as
SWIFT Client Connectivity – from the link provided on its webpage or in its deployment guide.
Financial IT: How does AWS support the development and deployment of AI models through its machine learning services?
Sam Edge: AI and ML have been a focus for Amazon for over 20 years – many of the capabilities Amazon customers use on a daily basis are driven by ML, from our recommendations engine, to the paths that optimize robotic picking routes in our fulfillment centers, to Alexa, which is powered by more than 30 different machine learning systems. We also have helped more than 100,000 customers of all sizes and industries innovate using ML and AI.
We’ve invested in all three layers of the ML stack: performant, scalable infrastructure and frameworks for expert ML practitioners; Amazon SageMaker, which is the easiest way for all developers to build, train, and deploy models; and a range of services to help add AI capabilities – like image recognition, forecasting, and intelligent search – to applications with a simple API call. We take the same democratizing approach to generative AI: we work to take these technologies out of the realm of research and experiments and make it available to customers of any size and developers of all skill levels.
With 70+ state-of-the-art services for big data analytics, artificial intelligence and machine learning fine-tuned over two decades of experience, AWS has the broadest and deepest solution set to help fintechs make better decisions faster and provide outstanding, personalized services to their customers.
We are betting big in this space because we believe that generative AI is poised to change the game for fintechs – contextualized understanding of consumers' behaviors and risk profiles
enables fintechs to personalize products and services to their customers' real needs and better serve them. Here are some example of startups already building with generative AI at AWS:
• Cleo: Generative AI is making chatbots like Cleo more sophisticated and easy to use, automating financial analysis and investment recommendations that apply to each customer's individual financial situation, nudging them to better behaviors, and expanding access to services, such wealth management and business bookkeeping.
• Ramp: Generative AI is helping Ramp provide better insights and easier management for SMB owners on their business expenses and overall financial management, such as offering IT buyers wisdom of software pricing by benchmarking SaaS contract quotes against millions of aggregated purchasing data points, helping review complicated business contracts, and automating expense reports and accounting processes.
• Klarna: Generative AI is helping Klarna provide more personalized payments and online shopping experiences to its customers, including curating product recommendations based on customers’ preferences and answering a wider variety of customer inquiries. Modern AI application also helps Klarna ease its customer service staffing requirements.
The financial sector has been characterised by a high level of digitalisation to drive more personalised customer engagements. Indeed, this has only intensified in recent years as a result of increasing demand for always-on services accessible from anywhere.
The Covid-19 crisis has also served to accelerate this evolution, which has led to greater technological dependence. In this context, digital risk management is becoming increasingly essential.
Governments and regulators are paying close attention to these developments and are working on mechanisms to improve resilience and cybersecurity within the financial sector. The European Union, for example, has implemented DORA (Digital Operational Resilience Act), which obliges companies to ensure the resilience of all technologies used and the operational stability of digital systems by January 2025. It is a regulation that will apply to all entities operating in this area, from banks to insurers, asset managers, cryptocurrency exchange platforms and crowdfunding platforms. North American regulators, including the U.S. Security Exchange Commission (SEC), the U.S. Office of Comptroller of the Currency (OCC), and the Canadian Office of the Superintendent of Financial Institutions (OSFI), have also openly discussed adding new guidance. And regulators continue to update guidance to keep up with technological change.
The aim is to ensure that these financial institutions can continue to operate in a resilient manner in the event of a severe operational disruption. This means that all actors in the financial sector, including critical ICT providers such as cloud platforms and data analytics services, must comply with uniform requirements to ensure that they can withstand, respond to and recover from any type of ICT-related disruption and threat.
A key focus for regulators is the risk of cloud concentration. That is, the systemic risk associated with outsourcing business-critical
functions, such as payments or clearing, to a single cloud provider. The spillover impact of a disruption or vulnerability occurring at one such provider could be significant if several financial institutions rely on that service and do not have sufficient redundancy.
The high level of digitalisation of the financial sector means that its technology environments are highly complex, which also poses a risk to the technology vendor chain. The benefits of the cloud for financial institutions will lead to more business-critical workloads being moved to the cloud, which requires dedicated security measures, not only on the part of the industry but also on the part of service providers.
As a result of this increased use of the cloud, we have a hyper-connected financial sector with a potentially more vulnerable attack surface. According to a report by the European Systemic Risk Board (ESRB), the high level of interconnectedness in the financial sector may constitute a systemic vulnerability because localised cyber-incidents could spread rapidly from any of the financial institutions in the European Union to the entire financial system, unhindered by geographical boundaries. This could disrupt the stability of the EU financial system, leading to a liquidity panic and a general loss of confidence.
The exposure of the financial sector to these digital risks points to the need for a more community-based approach. In the proposal for DORA regulation, the EU encourages financial institutions to collectively leverage their individual knowledge and practical experience at strategic, tactical and operational levels to improve their capabilities to assess, monitor, defend against and respond to cyber threats.
Resilience and security must become a team effort, as financial systems no longer exist in isolation. A unified and transparent solution must also be the goal for the entire industry.
A central challenge facing the industry, then, is how to be resilient when using cloud services. The answer lies in having the flexibility to use different digital environments, depending on the needs and circumstances of each entity, and that is an attribute that can be achieved with open source technologies and a hybrid cloud strategy.
An open hybrid cloud strategy provides the flexibility to run and scale applications consistently across environments – from physical to virtual machines (VMs), edge computing, private cloud and multiple public clouds – without having to rebuild applications, retrain staff or maintain disparate environments. These are key components to drive the development and deployment of innovative applications.
At the same time, it provides the standards and features needed to enhance the security posture of multiple cloud environments, while maintaining application portability, enabling financial institutions to maintain flexibility in choosing future cloud options.
With DORA, the European Union has the opportunity to foster innovation and competitiveness while mitigating the risks of digitalisation, and has the tools to stimulate the adoption of a global approach. With open collaboration and a holistic approach, financial institutions can build security into the DNA of the ecosystem for a fitter future.
Dr. Harmon is the global head of Financial Services at Red Hat. He joined Red Hat in December, 2020 and has over 25 years of experience in Capital Markets with specializations in Risk Management, Advance Analytics, Fixed Income Research and Simulation Analysis.
Prior to Red Hat, Dr. Harmon was Managing Director of Financial Services at Cloudera for 5 years and has held senior positions at Citibank, Bankers Trust, JP Morgan, BlackRock, Bank of America/Countrywide Capital Markets, First American Core Logic and at SAP.
Dr. Harmon holds a PhD in Economics with specialization in Econometrics from Georgetown University.
Dr. Richard L. Harmon Lekshmi Nair, Chief Revenue Officer, Lending, FinastraMarketplace volatility, new technologies and the evolving expectations of customers – the financial services industry is going through a period of rapid change. Banks are having to balance effective risk management, plans for long-term growth and innovation, all while keeping costs down.
Optimizing workflows, reducing manual inputs and automating core processes are crucial for banks to adapt quickly. Technologies such as AI – and more recently generative AI – open APIs and cloud are also quickly progressing from industry trends to providing real-world use cases that enhance how institutions do business. In fact, technology is redefining how financial services are delivered and managed across the whole sector.
Most corporate banks have accelerated their digital journey to drive their own efficiencies and help their customers navigate this environment, with global banks citing that they have digitized nearly half (47%) of their customer-facing corporate banking processes. However, the speed of digitization, application of technology and the investment required to keep up with the pace of change, remain blockers for many institutions. Slow time to value and having the necessary skills internally also present barriers for many.
Overcoming these challenges is integral for banks to future-proof their own business, while providing corporates with lending and working capital finance services that help them grow theirs. Like banks, businesses are also trying
to navigate marketplace uncertainty and new pressures from their customers. With seamless services tailored to individual business needs, financial institutions can play a big role in ensuring their customers’ success.
Thankfully, they don’t have to figure it out alone. Ecosystems of banks, fintechs and technology companies are rapidly expanding, promoting industry collaboration to support fast innovation and the delivery of enhanced customer experiences.
When it comes to lending and working capital finance, corporates are increasingly demanding more from their bank. They want to access funds quickly and easily, without having to go through lengthy and cumbersome processes. They prefer digital channels with self-serve capabilities that allow them to apply, submit documents and track the status of their loan applications online. For larger corporates especially, managing various platforms and portals with each bank they use can be time consuming and complex. Many want access to a multi-bank portal where they can view their loan exposures in one place.
However, balancing digitalization with human relationships is key. Businesses want to bank with an institution that offers them the best experience, utilizing the latest technology, data analytics and tools to enhance their growth and competitiveness. At the same time,
strong and long-lasting relationships based on trust and understanding play an important role. Customers, whether corporates or consumers, need to feel like their bank offers solutions tailored to their needs, delivered via a combination of seamless digital experiences and access to personalized advice and support from a human advisor.
Additionally, a major development in financial services is the increasing importance of Environmental, Social and Governance (ESG). In terms of sustainability, reducing their own carbon emissions is the primary ESG goal for 49% of global banks, followed by board and management alignment on sustainability initiatives (46%).
Alongside their own initiatives, banks have a responsibility to help corporates reduce their environmental footprint too. For many businesses, making the necessary changes can be a huge undertaking that feels overwhelming. The lack of transparency and consistency of industry standards also means many don’t know where to start.
By offering sustainability-linked loans (SLLs) with attractive borrowing rates that act as incentive levers, banks can help their customers achieve their sustainability goals. Corporates considered “green” can be rewarded with attractive loan offers for continued growth, while businesses that are “greening” are provided with incentivized offers to adapt. However, SLLs utilize complex pricing structures that need to be tracked against
agreed sustainability KPIs. This can tie up resources and introduce risks associated with manual processes.
Meeting these demands requires willingness from banks to quickly innovate by implementing advanced technology solutions. Collaborating with software providers that offer holistic and cloud-based services can help to expedite this process.
For example, Finastra Loan IQ is a syndicated lending solution that enables financial institutions to service multiple lending business lines. Institutions can efficiently consolidate all corporate banking loan types on one platform, from the most complex syndicated lending to simple, high volume bilateral loans. As a full end-to-end loan servicing solution, Loan IQ reduces processing times and integration costs, allowing for greater automation and improved controls throughout the loan servicing lifecycle. Corporates ultimately benefit from quicker and easier access to funds, and banks can free up time to focus on providing additional value to their customers.
Additionally, Finastra’s ESG Service is a cloud-native SaaS solution that streamlines sustainability-linked lending. By automating KPI management and ESG pricing, the solution helps banks to overcome challenges
associated with complex pricing structures, targets tracking and manual processes. This makes it easier for banks to offer corporates tailored loan services that are linked to the sustainability KPIs set out in their agreement. Banks can then effectively oversee and manage the ESG performance of their customers, providing them with a seamless and transparent experience.
It is important that such solutions support third-party integrations to add additional value, reduce total cost of ownership (TCO) and improve time to value. Software companies that orchestrate fintech ecosystems enable banks to easily integrate, through open APIs, specialist applications that utilize the latest technology to solve specific needs.
For example, Conpend’s TradeAI, available on FusionFabric.cloud, is an application that automates document checking under a trade instrument such as a Letter of Credit, for compliance with ICC standards and relevant regulatory requirements. It uses optical character recognition (OCR), natural language processing (NLP) and progressive machine learning (ML) to extract data from scanned paper docs to perform all checks for trade transactions.
Additionally, ClearTrade drives efficiencies in trade finance processing by automating document scrutiny, rules validation and compliance checks. The app provides fast end-to-end processing, a flexible rules engine, NLP and advanced AI capabilities and does
not require any back-end intervention. By integrating the solution, banks can improve operational productivity by up to 70% and automate stringent regulatory and compliance processes, as well as highly manual and paperintensive operations.
Strong partner ecosystems also go beyond fintech applications. Other industry partners provide additional benefits for banks, such as supporting the adoption of cloud and microservices. For example, we are partnering with IBM to deploy Trade Innovation on IBM Cloud for Financial Services, which is designed to help customers mitigate risk and accelerate cloud adoption.
Our world is becoming increasingly fragmented, but the financial services industry is becoming more connected than ever before. Open APIs and open finance enable the industry to better collaborate, integrate and communicate. The industry is coming together with one goal in mind: to create better outcomes for customers. Despite future challenges that the industry may face, banks that embrace the power of technology platforms, partnerships and ecosystems will continue to thrive.
Banking is no longer confined to brickand-mortar institutions. The rise of digital transactions and evolving customer expectations have pushed traditional banking systems to evolve. One groundbreaking innovation that's reshaping the industry is Payment Orchestration, a concept that's transforming how banks handle transactions.
Think of Payment Orchestration as conducting an orchestra. It's about bringing together various payment methods, channels, and providers in a seamless symphony. For banks, this means giving customers more payment choices while ensuring transactions remain smooth and secure.
By combining payment processing under a single platform, banks may centralize their operations and gain a complete picture of all payment activities. Due to the elimination of dealing with various payment process players, including merchants, PSPs, and ISO/MSPs, operating costs and administrative burdens are decreased. Additionally, a unified platform makes it possible for thorough reporting and analytics, which offer insightful data on transaction trends and performance indicators. Some companies use a different name
for Payment Orchestration – a Merchant Management System for banks, which makes sense from the point of view of consolidating merchants’ information and data in one place.
Fully-flexible payment page
Banks can have access to a fullycustomizable payment page – it’s possible to add or remove fields, payment methods, and recurring options, and give a seamless payment experience to customers. This flexibility includes both design and functionality, improving the overall user experience which, in turn, raises customer satisfaction.
Fully-covered fraud protection
Payment Orchestration may have a combination of technologies that can
quickly identify suspicious transactions and potential threats. Normally it’s done with complex algorithms and real-time monitoring. The first step is an in-house anti-fraud model, but there also can be third-party fraud prevention providers. By using both, banks can tailor risk management strategies so that low-risk merchants experience a frictionless payment journey, while highrisk ones undergo stringent verification procedures. This combination of antifraud rules optimizes the flow of scam transactions on the one hand and ensures maximum conversion on the other.
Payment routing that rocks
To ensure compliance with legal requirements and meet regional payment preferences, routing can automatically direct transactions to
Andrew Riabchuk is the Founder of Akurateco Payments Orchestration Company, established in 2019. With over 15 years of hands-on experience in online payments, Andrew has a solid understanding of how to build a product that helps to increase revenue and save on processing costs. Since 2019 Andrew has been leading the development and architecture of Akurateco, which delivers easily customizable PCI DSS-certified white-label payment software to payment service providers and international merchants.
internal bank systems, international card networks (for example, Visa, American Express, and Mastercard), or regional card brands like Verve in Africa, Cartes Bancaires in the SEPA region, Elo in Brazil, or Mada/NAPS in the MENA region. In this way, banks can decrease transaction failures, delays, and errors while also saving time and money.
Akurateco’s Payment Orchestration empowers banks to seamlessly integrate different payment methods, ensuring transactions flow seamlessly and customers stay satisfied. Andrew Riabchuk, Akurateco's Founder, notes, "Payment Orchestration bridges the gap between traditional banking and the digital
demands of today. It's never too late to update the banks’ core software to make it future proof".
As we navigate a digital future, banking must keep up with changing preferences. Payment Orchestration, or Merchant Management System for banks, emerges as a game-changer, giving banks tools to streamline transactions, enhance customer experiences, and uphold the security that banking demands.
In a world where convenience and security rule, Payment Orchestration stands as a beacon of modernity in banking. It allows banks to meet evolving customer needs while preserving the trust and integrity that define the industry.
While we've seen an acceleration of digital adoption in recent years, many companies continue to face complexities and money movement challenges. Both businesses and consumers alike are calling for more seamless payment options with added flexibility and ease. In today’s ever-changing payments landscape, businesses are recognizing that being “digital first” can help them streamline the ways they pay and get paid, and ultimately help maximize their opportunities for doing business globally, transacting more efficiently, and collect money faster.
As the demand for digital continues to accelerate, virtual cards bring a wide range of benefits for businesses – from the ability to track and monitor spending easily to the ability to improve organizational efficiencies. In the US alone, B2B virtual card revenue will reach $71 billion by 2027, representing 72% of global revenue1
A 2021 study conducted by RFI Group and Visa titled, “Capitalizing on the potential in virtual cards”, found that virtual cards are becoming an important option for businesses across the globe. In many regions, the appeal of virtual cards continues to increase. In Canada and the U.S., where many corporates already use purchasing cards, 74% and 93% of surveyed businesses indicated they find virtual cards as an attractive option2.
One of the most compelling reasons to make the switch to virtual cards comes down to security. By their nature, virtual cards eliminate the risks associated with issuing plastic, hence reducing potential for loss, theft, or compromised data; not to mention making compliance and auditing simpler. Additionally, because virtual card numbers can be issued for both single use or multiple related purchases and can be limited to specific suppliers, the risk of fraud is significantly reduced too.
A second major benefit of virtual cards is efficiency. Virtual cards can help improve organizational efficiency by allowing payments to be fully automated, whether they are recurring or one off. They also enable automated reconciliation for invoice or on-demand payments
1 Juniper Research, 2022
2 RFI study, 2021, Capitalizing on the potential in virtual cards
and employee spend, hence minimizing the time and resources spent on doing these tasks manually.
Another closely linked benefit of virtual cards is transparency This payment method offers corporates centralized, customizable data on every transaction, which can inform decisions going forward. Virtual cards also offer the ability to align invoice settlement with preferred workflows to effectively manage working capital easing the burden on finance teams and business owners alike.
While the global B2B payments space represents a significant opportunity for payment players to deliver on global high value payments, there is still room for innovation. Recognizing the vital importance of improving cash flow for businesses and eliminating outdated manual processes, Visa and Conferma Pay launched Visa Commercial Pay back in 2020, to accelerate B2B money movement away from slow, outdated methods to fast, data-rich, secure digital payments and give businesses better control over their finances. Visa Commercial Pay provides comprehensive card-program management capabilities, including on-demand virtual card issuance to employees’ mobile devices via an app, created exclusively by Conferma Pay and Visa, for Visa’s commercial clients. Visa Commercial Pay also simplifies money movement between buyers and suppliers, and features enhanced data, automated payment processing and expense reconciliation.
More recently, the two leaders extended this partnership to further improve cashflow for businesses and empower financial institutions to deliver on their corporate customers’ unique virtual payments strategy and continue to drive innovation with connectivity to market-leading invoice management platforms – all through a single, flexible connection.
As global money movement continues to become increasingly digital, businesses are looking to not only digitize but simplify their payment processes. By empowering business owners with the cashflow, purchasing power and expense management, virtual cards can help keep businesses moving forward at the rapid pace required to succeed in today’s digital-first world.
Before and at the huge Money20/20 Europe conference that took place in Amsterdam on 6-8 June, 2023, foreign fintech companies told me that they were working with major Hungarian banks.
Various sources – including Mafisz, the local trade association – indicate that there are dozens of fintech companies based in and near Budapest.
A major conference on artificial intelligence (AI) is scheduled to take place in the city on 11 September.
All this is well and good. However, even an economy where innovation thrives is likely to suffer in the event of a sharp shock.
This was the main topic of a conference – Is Hungary Crisis-proof? – that I attended in Budapest on 26 May. Hosted by Napi.hu, a leading business media group, and sponsored by the Hungarian National Bank and MBH Bank, the conference revealed the thinking of key policy-makers.
The latest hard numbers point to an economy that is making a good recovery from the disruptions associated with Covid-related lockdowns, volatile energy prices and the war in neighbouring Ukraine.
After a strong rebound through 2021 and 2022, GDP growth stagnated early this year. At its meeting on 23 May, the Monetary Council of the Hungarian National Bank noted preliminary data which showed that GDP actually contracted by 0.9 percent year-on-year in 1Q23.
The Council observed that weakness in industrial output had been partially offset by growth in agriculture and services. Meanwhile household confidence is weak. However, unemployment is very low.
At its May meeting, the Council kept its Base Rate and Overnight Deposit Rate unchanged at 13.00 percent and 12.50 percent respectively. Meanwhile the Overnight Collateralised Lending Rate was reduced by 100 basis points to 19.50 percent.
The latest policy decision reflects a 1.2 percentage point fall in annual inflation from March to April. Nevertheless, with headline and core annual inflation at 24.0 percent and 24.8 percent respectively, returning Hungary to price stability is a key priority.
The Council anticipates that its tight monetary policy will bring headline inflation down to 15.0-19.5 percent in 2023, 3.0-5.0 percent in 2024 and 2.5-3.5 percent in 2026. Thanks mainly to a fall in energy imports from EUR17 billion last year to around EUR8 billion this year, the current account balance is also improving: the Council is looking for a deficit of 3-4 percent of GDP in 2023.
Nonetheless, it would be premature for the authorities to declare victory over inflation. Speaking at the Napi.hu conference, Előd Takáts, the Rector of Corvinus University, emphasised the need for inflationary expectations to be moderated.
The speakers at the conference identified a number of strengths in the Hungarian economy. Tibor Tóth, the Finance Ministry’s State Secretary responsible for macroeconomic and international affairs, noted that the number of people in the workforce has grown by 1,000,000 people to 4,700,000 since 2010. This is likely in part because of the dynamism of Hungary’s small company sector: over the last 30 years or so, the number of limited companies with fewer than 20 employees has risen 15-fold, according to László Parragh, the President of the Hungarian Chamber of Commerce and Industry. Barnabás Virág, the Deputy Governor of the Hungarian National Bank, remarked on the strong capital position and liquidity of the banking system.
In other words, Hungary’s economy and financial system are in a much better state than they were at the time of the Global Financial Crisis in 2008-09. The upside potential is substantial. Also speaking at
Andrew Hutchings, Editor-in-Chief, Financial ITthe conference, Levente Szabó, the Deputy CEO of MBH Bank responsible for individual business, envisages that corporate lending could surge if lower inflation makes it possible for interest rates to fall below 10 percent.
Further, the government’s 2024 budget, presented at the end of May, shows an optimistic picture. Key numbers include expected GDP growth of 4.0 percent, a deficit of 2.9 percent of GDP and public debt of 66.7 percent of GDP.
Finally, it is worth bearing in mind that there is a major, and positive, wildcard. This is the potential release of around EUR28 billion (equal to about 17 percent of GDP) in funds currently being withheld from the Hungarian government by the European Commission. As noted by the Intenational Monetary Fund (IMF), ‘full and timely receipt of EU funds … will help finance reforms in critical areas such as energy transition, digitalization and governance’.
In his speech at the napi.hu conference, the Hungarian National Bank’s Barnabás Virág answered the key question – Is Hungary Crisis-proof? – with a single word: Yes! The economy has made a good recovery from the disruptions associated with the Covid pandemic. The challenges – including global competition for skilled labour – are well understood by the policy-makers. The banking sector is in good shape. Key economic measures – inflation especially – are moving in the right direction.
I fully agree with the optimism expressed by the Deputy Governor and the other speakers at the Napi.hu conference. Hungary is crisis-proof. That being the case, I am also very confident about the prospects for the country’s fintech sector over the coming years.
My thanks go to Napi.hu for arranging this excellent conference and for inviting me to attend.
FINTECH IS ALIVE AND WELL IN HUNGARY.
I was somewhat skeptical when I was asked to interview Ezechi Britton in late July.
Reflecting on my personal experience of the previous two months, I felt very strongly that things were going well for fintech in general and UK fintech in particular. The contributions that we received for inclusion in the Money20/20 Europe 2023 edition of Financial IT were the best yet. The numerous people that I spoke with at that conference and at the FinTech B2B Marketing conference in late April confirmed that innovation and investment are flourishing. A huge variety of companies – ranging from long established financial institutions to small start-ups – are fully engaged.
There were several other very positive stories that I had encountered. Many of the companies that are involved with fintech are – in one way or another – clearly working to improve environmental social and
Financial IT: Ezechi, could you briefly summarise the state of play with the UK’s fintech industry?
Ezechi Britton: Fintech is the jewel in the crown of the UK’s economy. By most qualitative and quantitative measures, the protagonists in the UK’s fintech industry have done a tremendous job to achieve the second place globally – after the United States. The level of investment and activity is larger than in any of the leading economies of the European Union (EU). The UK remains a leader in terms of financial services and innovation.
Financial IT: That is what we see. So, what is the problem? Why was it necessary for the government to commission the Kalifa Report?
Ezechi Britton: A thriving fintech industry is not an end in itself. Fintech should promote international trade. It should promote employment. It should promote inclusivity.
governance (ESG) outcomes. Among senior decision-makers in the world of fintech, women are very well represented. So too are ethnic minorities. At Money20/20 Europe, it was obvious that fintech is thriving from one end of the UK to the other – and not just in Greater London.
My first questions to Ezechi Britton were deliberately provocative. With so much good news, why had the UK government felt it necessary in the first place to commission Ron Kalifa OBE to produce a report (released in February 2021) on the state of fintech in the country? Why, indeed, had it been necessary to create the CFIT?
The interview with Ezechi Britton is summarised below. By the end of the interview, I was convinced that the Kalifa report and the work of the CFIT illustrate an enormously important story. Indeed, it is probably the biggest story that – up to this point – Financial IT had missed in the eleven years of the publication’s existence.
Andrew HutchingsWhat really mattered back in 2020, when the report was commissioned, was that it was NOT clear that these things were happening. There were, indeed, a lot of startups with exciting stories. However, if you looked deeper, it became apparent that many of these enterprises were looking to take a small slice of the businesses of incumbent financial institutions. They were not really contributing to the creation of a dynamic and sustainable new industry.
Further, if you took a really deep dive into what was happening in the UK fintech industry, as the Kalifa Report did, you would find big challenges in five areas. First, the regulators were struggling to keep up with actual developments in fintech. Second, a number of entrepreneurs lacked access to the capital that they needed. Third, many of the players were struggling to find the talent that they needed. There were constraints on international trade: these constraints served to limit the opportunities that would otherwise have been available. Finally,
groups of protagonists across the industry – in government, academia and educational institutions, in financiers and in the fintech companies themselves had been operating in silos. They had not been talking enough to each other.
Financial IT: Where does the CFIT fit into all this?
Ezechi Britton: In one sentence, I’d say that we promote communication among the various protagonists. That way, it should be possible for them to work together to solve the five problems. Without solutions to the problems, the UK’s fintech industry will not boost employment, inclusivity and international trade as it should. Communication is essential. No one company on its own – or even a group of companies – can solve the problems. On their own, the government and the regulators cannot solve the problems. Nor can the financiers, if they move independently of the others.
Put another way, we sit at the intersection of industry, regulators, policymakers and academia, and work to build the coalitions that are needed.
Financial IT: Great. What are the outcomes that you seek from the building of coalitions among the various protagonists?
Ezechi Britton: First of all, we want to promote innovation. In the world of fintech, innovation is boosted by competition. However, it is also boosted by collaboration. We want to boost the entire fintech industry in this country in terms of the total investment, players and activity. We want to encourage new outcomes that are positive for both producers and consumers of fintech – more services and innovation, greater choice and more revenues.
Financial IT: Tell us about the coalition that you have built since 28 February 2023, when you were launched.
Ezechi Britton: Our first coalition sought to show the general way forward for CFIT. In particular, we have been looking to open up datasets that are available from the various protagonists in fintech in order to promote Open Finance.
Open Finance goes beyond the concept of Open Banking, which is already well understood. It encompasses a broader range of financial information such as savings, pensions, investments, insurance, mortgages, and other crucial aspects of personal finance.
There are benefits for both customers and providers. The former can gain a comprehensive view of their financial information, enabling them to make more informed decisions and unlock a host of innovative services tailored to their specific needs. The latter benefit from the opportunities that come from knowing more about actual and potential customers.
A CFIT coalition is a dynamic and purpose-driven collaboration of industry experts committed to driving tangible change in the financial technology sector. Through a research-led approach, these coalitions bring together the brightest minds and thought leaders to tackle complex challenges and unlock innovative solutions that have a real-world impact.
What sets a CFIT coalition apart is the focus on generating tangible outcomes. We go beyond theoretical discussions and aim to deliver practical solutions that drive meaningful change in the industry. Whether
it’s developing minimum viable products (MVP’s) for groundbreaking technologies, shaping regulatory frameworks, or fostering strategic partnerships, CFIT coalitions are at the forefront of innovation, making a lasting impact on the fintech landscape.
I consider that we have achieved more in the last three months than most would have reasonably looked for us to achieve in six-to-nine months. In particular, we have collaborated closely with the regional groups that promote fintech in their respective geographic centres across the UK namely Fintech NI, North, Wales, West, Scotland and Supertech. That is why we had the official launch of CFIT in Leeds, for instance.
Financial IT: OK. Who is actually in the coalition?
Ezechi Britton: The identities of the first coalition give a good indication of who is really who and what is really what as we work together to achieve real outcomes for the UK’s fintech industry. In alphabetical order, the initial coalition partners supported by the FCA includes the Association of British Insurers, Allen & Overy, Amazon Web Services, Experian, the City of London Corporation, EY, HSBC, IBM, Innovate Finance, iwoca, KPMG, Leeds City Council, Lloyds Banking Group, Mastercard, MBN Solutions, Monzo, Open Banking Limited, Open Finance Association, Revolut, Smart Data Foundry and Zopa Bank.
Financial IT: What’s next?
Ezechi Britton: The next priority is to unlock the data sets that are available throughout the ecosystem. That should make it possible to define API standards. It should also make it easier for consumers to understand their options and opportunities. We will also prepare case studies that will make it clearer what we are doing.
We will be looking at why small and medium-sized enterprises (SMEs) cannot get funding, along with other strategic problems.
We will be making new hires here at CFIT and will be looking more closely at the problem that some companies have in finding the talent that they need.
We will be delivering action not words. As noted, fintech is the jewel in the crown of the UK economy. We will defend it.
Financial IT: Thank you.
Britton MBE, Chief Executive Officer, CFITAs a serial tech entrepreneur, Ez’s journey has taken him from Software Developer to Co-Founder and CTO to a Venture Capital Partner. Ez previously worked as the Principal and CTO in Residence at Impact X Capital Partners LLP, a venture fund focused on supporting underrepresented entrepreneurs. Ez also co-founded Code Untapped, a digital skills accelerator that helps companies find innovative-led solutions by providing them with access to a pool of diverse and underrepresented technologists. Ez’s work in providing opportunities for underrepresented communities saw him awarded an MBE for services to diversity and to young people in the New Year’s Honours List 2022.
Ez also co-founded Neyber, a multiaward-winning fintech firm focused on financial well-being, where he helped launch the company as the founding CTO and held numerous roles during his tenure, including brand ambassador and NED. Amongst other work, Ez is also a Trustee to the board of Crisis, which invests in, supports and creates ventures to end homelessness.
Another Sibos is here.
The summit is a melting pot of businesses and perspectives from across the global financial services ecosystem. And it’s another chance for banks and fintechs to come together to discuss shared challenges, shared opportunities – and to lay the foundations for future partnerships.
Fintech collaborations are a strategic priority for major financial institutions around the world.
But while each party may share similar goals and ambitions, they are often very different types of organisation. Like any relationship, they each need to understand and appreciate their respective abilities, limitations and objectives to make their partnerships a success.
Here, we look at what’s driving the appetite for bank-fintech collaboration, the advantages they can deliver and, crucially, what each party should keep in mind to make them work.
Banks and fintechs are jostling to meet customer demand for a fundamentally new way of delivering financial services.
Where once banking models were structured around linear, bilateral processes, the new world requires that they instead are networked, automated and driven by real-time data. This is prompting a re-think of how certain systems and processes are done – the digital revolution in what is still predominantly paper-based trade finance being a good example.
Fintechs are innovating at pace and keeping incumbents on their toes.
And this is a great thing. The ‘traditional’ banks are rising to the challenge, and every bit of competition ultimately means better services for clients.
However, there are also great outcomes being delivered through collaboration. By working together, banks and fintechs are adding value to the customer experience that simply might not have been possible, as quickly, had they each worked in isolation.
This is because they can complement each other’s strengths and limitations. Fintechs have an agility that large incumbents may not be able to match, perhaps simply because
of their scale, regulatory requirements and sheer range of services.
But incumbents can have the strength to take a great idea and scale it quickly; providing a route to market, funding, additional expertise, regulatory support and access to huge testing capabilities that fintechs might not otherwise have.
The result? Better products, better results, faster.
While the differences between banks and fintechs are a reason why partnerships are so beneficial, they can also be a point of friction if not anticipated and managed.
For incumbents and fintechs looking to work together, there are a few simple but important things that, from my experience, can help set them off on the right foot.
First, each partner in a potential relationship needs to clearly define their value proposition. Both bank and fintech should identify the pain point they are looking to address and exactly how their insight, technology, market access, risk management processes or expertise will help move towards a solution.
Here, it’s important that fintechs don’t just emphasise their technical capabilities. They should also highlight the wider value that their contribution would bring, for example, supporting their banking partners’ customer experience. If a collaboration supports a partner’s wider strategy, or hits many objectives at once, it has a far better chance of being carried forward.
There also needs to be a mutually beneficial partnership model that’s agreed before any work takes place. How the partners work together, and under what terms, is essential to sustaining the relationship over its intended timeframe.
In initial discussions, banks and fintechs should help each other to understand the regulatory or licensing considerations they face, such as anti-money laundering measures.
And each partner needs to foster a genuinely collaborative and understanding culture within their respective teams; one that empowers their respective colleagues to work effectively with one another.
This needn’t mean losing what makes each culture unique and special. It’s about creating room for different ways of working
to deliver their individual advantages, while being respectful and mindful of each party’s requirements.
Some ways of working that may augment a partnership include co-located working, combined leadership teams and fostering a ‘one-team’ ethos across people on the project.
At Lloyds Bank, we’ve continued to forge new fintech partners since the last Sibos.
In June, we announced a £2m investment in Fennech Financial – an AI and machinelearning driven corporate banking platform. This follows earlier notable partnerships with the likes of construction payment platform ProjectPay to help reduce rates of missed or delayed payments in the UK sector, and with working capital fintech Demica to provide a new supply chain finance platform for UK businesses.
And we’re always looking for new partnerships with fintechs that can help us transform our business and deliver innovative customer propositions, as well as constantly reviewing what we can do to make collaboration as easy and fruitful as possible.
One way we’ve been doing that is through the introduction of our Innovation Sandbox. This is a digital environment that lets us run ‘proof-of-concepts’ with fintechs using synthetic data to help model the benefits a partnership would deliver.
Prior this this, our early-stage evaluation processes were lengthy, convoluted and often costly for the fintechs involved. This, in turn, hindered our ability to collaborate at pace. The new system is a key milestone in the way we work – offering a much smoother way to partner with fintechs and has significantly sped up our collaboration process.
As we see it, fintech collaboration is vital if we’re going to create the best possible outcomes for our clients and customers.
We’re looking forward to the future, together.
Gavin Maclean is Managing Director and Head of Payments at Lloyds Bank Corporate and Institutional Banking. Gavin leads the products team, designing and developing solutions that allow Lloyds Bank’s corporate customers to effectively and efficiently make and receive payments within the UK, and across borders. This includes working with fintech partners to apply cutting-edge technologies to help transform corporate payment processes.
Consumers have spoken: Buy Now, Pay Later (BNPL) is here to stay. Having emerged as a preferred credit method for many, including businesses, the sector must now grapple with its newfound position within the mainstream.
During the Black Friday shopping period of November, 2022, BNPL sales jumped 68% and revenue reached new heights. What was once considered a novel trend has become a new, ingrained approach to credit.
While this will be seen as a promising financial opportunity by many executives, it’s a shift that has not escaped regulators' attention. The question now becomes how the sector will be overseen going forward to protect users – and that requires understanding the reasons behind BNPL’s growth.
The allure of BNPL has always lay in its power to reshape spending patterns and modernise credit options. Unlike conventional methods that often require lengthy approval processes and commit borrowers to long-term agreements, BNPL services offer immediate liquidity. This reshaped consumer behaviour by empowering them to make purchases that they otherwise wouldn’t have been able to afford, uplifting businesses in a similar fashion.
Attention from banks is no longer confined to consumer-centric offerings, with companies such as Citi, BNP Paribas and Deutsche Bank all working on partnerships with business-to-business (B2B) BNPL providers. By providing an alternative to the traditional ways of securing credit, businesses have been freed from the confines of legacy options and can enjoy greater flexibility.
The evolution of BNPL has been a direct response to widespread financial stresses –the pandemic and recent economic pressures to name a few. But as the sector becomes a mainstay, regulation will naturally follow. The cryptocurrency boom a few years ago was a prime example, with global regulators all actively prioritising methods to regulate the market before it became too challenging to manage. New technologies always raise questions about possible risks, and those posed by BNPL still need to be addressed.
The current lack of regulatory oversight poses a threat to consumers who can easily fall into the trap of spending beyond their means. Three out of 10 individuals already report finding it difficult to manage their BNPL expenses, be it missing payments and incurring late fees or falling behind on other essential bills as they grapple with their BNPL payments.
Debt is still debt. Borrowing a few hundred pounds may feel less daunting than taking out a mortgage or car loan but make enough of those small purchases and repayment obligations swell quickly. If consumers aren’t careful, they risk running into the same problem traditional credit poses, finding themselves entangled in repayment obligations with few avenues of escape aside from taking out even more credit.
In turn this puts providers at risk of incurring heavy losses as a result if their operational costs – including any capital funding – exceeds what struggling customers are able to repay.
Regulators like the Financial Conduct Authority will have their work cut out for them to manage the sector without erasing
the clear benefits it brings consumers. They also will not want to stifle the innovative attitude that makes the UK’s fintech industry so vibrant.
Striking this balance will be difficult, but it’s encouraging to see that steps are already being taken in the right direction. Changes to the Consumer Duty Act are already aimed at protecting vulnerable borrowers, and providers like Klarna have started rolling out advisory services to users.
Great potential also lies in the increased use of open data, which would allow BNPL companies to assess and validate the affordability of the credit they are lending in real-time to avoid putting their and consumers’ wallets at risk more swiftly. It could also spark the creation of a fresh market for transaction handling, creating growth opportunities for providers.
Increased regulation will be inevitable and hopefully, the largest organisations will be on board. While few like to see new rules and red tape being put in place, the BNPL market has grown too large to continue being overseen so minimally.
Hopefully the industry leaders will get on board, for both their own benefit and that of their customers – such is the price of success, right?
With over 20 years’ of experience in designing and implementing digital transformations across various business domains, Krista is changing the way Fujitsu helps its customers transform their business. She’s built a strong team of consultants who bring deep business and technical expertise. With their support, Krista is constantly looking for innovative ways to help Fujitsu’s customers succeed and grow. In recognition of her ongoing commitment to financial services and technology, she was a finalist for Role Model of the Year in the Women in Tech Excellence Awards 2022, Top 100 Women in FinTech 2022 and Transformation Leader of the Year in the Women in Tech Excellence Awards 2021.
Krista Griggs, Head of Banking, Financial Services & Insurance, Fujitsu UK
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