Digital Darwinism

Scott Harkey EVP Financial Services and Payments, Endava explains how in the current digitisation era, regional banks can best adapt to the challenges, competition and the requirements of authorities, to thrive while also providing delight to their customers

Cross-border payments are key to UAE consumers. Describe the latest payments developments, and how banks can support these advancements. There is no doubt that cross-border is huge in the area. I think it comes second to maybe the US in terms of total dollars being exported out of the country or being sent out. So obviously, developments in cross-border payments are really important here. The interesting thing is, I think 80% of cross-border money movement flows outside of the major banks. So, they are using exchange houses or some other third party to transfer the money. That is a big deal for banks. So figuring out a way for the banks to continue to be involved in crossborder payments, continue to get more of a foothold in cross-border payments so that it’s not moving outside of the bank system, there’s probably some technology that needs to help drive that, whether it’s looking at alternatives to the kind of traditional correspondent bank model, looking at whether it’s blockchain or its other forms of, I won’t say cryptocurrency, in the way that it’s commonly talked about. But certainly, developing the technology underpinning it, whether it is blockchain or its other elements of that; to really try to figure out if there are more economical ways for the banks to move the money, to become part of that ecosystem, and then how do they pass that on to the consumers?

So ultimately, consumers want cheaper money movement. They want the convenience of the digital experiences they are getting from the third parties. And the banks have to start to develop some of those to really make sure they are part of the ecosystem.

With the UAE launching its instant payment scheme, how can banks and financial institutions comply with the framework?

Instant payments are really interesting, especially as you look country to country and how it is rolled out differently. Certainly, in countries where there has been some sort of government regulation or push to ensure that the banks and the ecosystem is enabling it, they have seen a lot faster traction. Markets like the US where it has not been pushed, but it has been created, we actually have two different competing systems, so there is not an impetus to adopt at all times, and that becomes a challenge.

But I think in markets like the UAE where it’s being pushed, mandated, regulated, however you want to word it, I think what it means is that as the banks start to make these investments in the real time network, they will naturally start to push use cases onto it because they’re making the technology investment. So, when you are making big technology investments, you want to spread it across as much as you can, volume wise. So, what are the use cases that provide a better experience when you enable real time or faster payments? Looking at both B2B use cases; so, in a lot of countries, the business-to-business use cases are where a lot of the value initially is created, and then also looking at consumer use cases with bank-to-bank transfers or other ways, you can look at how you can really take advantage of the speed. I think a lot of the systems too, often they enhance the transaction and transaction data that comes as part of it as well. And that is another big thing we see, a lot of value in the system for the banks is as more data comes through these flows, then you can start to look at how do you do things like tying invoices to accounts payable and other things especially in

So, if you think about it in a lot of cases, it is not just about the money moving faster while certainly that has value. It can also be about what is the experience that you can enable when you know that the money is going to move at a very specific time. You can start to schedule it. You can start to plan it. You can start to build value added services around the timing of those transactions.

So again, if you’re a small business or you’re a consumer and you start thinking about bill pay or some other scenario where you know that you want the money to move at a very specific time, as the business or the receiver of that money, you want guaranteed funds, you want to ensure that it’s there, well, the B2B space. So, there is a lot to be done there but certainly once the system gets built and in place, the impetus kind of shifts to how do you identify the use cases that drive the most value and then ultimately enabling those.

I think a good way to think about that is for banks to look at where do they have relationships today with third parties that they could use or switch over to realtime payments to enable either a better experience or more value add. Again, I think a big piece of this is around the data and the data that can come along with some of these transactions because a lot of times that is where the value can be added.

those things can start to be automated and scheduled when you start using realtime payment systems.

So, just looking through your existing customer transactions today, looking through your existing customer flows today and saying, again, where would speed, where would the fact that the money is guaranteed arrival, the fact that there is clarity into when it is received, how could you start to leverage those to add value? And I think that is where most banks will ultimately find those use cases where they can monetise it. There is value being created that they can start to charge for.

How can traditional banks, the powerhouses of the UAE finance sector adapt to the presence of FinTechs?

It is tricky for the big banks because in a lot of cases they have gotten used to being the large incumbents and kind of having the ability to maybe move a little bit slower and not necessarily have to respond as fast to the market. I think that’s changed a lot with the FinTechs that have come into the space with now the large institutions being held almost to the same standard of innovation and experience. I think that is really where they can take cues from a lot of the FinTechs and even some of the smaller banks that have maybe advanced faster in terms of their experiences, is to look at the user experience.

So, I am big on user experience and that driving a lot of investment for institutions and looking at what is the ideal customer experience for any given product or any given flow and then really trying to design around that. So, in a lot of cases, the challenge for the large banks is they serve so many different customers that the experiences get kind of watered down a little bit. If you think about a FinTech that has a very specific use case and is solving one specific problem, well, they can design for that problem really well because that is all they’re designing for. But then you take a large bank and they have an audience ranging in age, an audience ranging in demographics and they have to water down the experience.

So, what they can start to do is to look at the experience being created by the FinTech and say, where is the customer delight in that. What part of that is it that our customers would react to or would see value in or would enjoy as kind of a delighted experience? And then frankly copy them for lack of a better word. Not to say copy the specific UX but start to copy those experiences in terms of offering something similar. And that is a really good way to look at it, just start to go through those experiences. Most institutions are doing customer research, they are getting feedback from their customers on what they like, and do not like and then just ensure that they are allowing for innovation to come in and that they are trying to keep up. They are not just sitting back and watching the others build better experiences around them. What are the main challenges regional banks face in realising their digital transformation ambitions? because this is what we do. And I think what is interesting about it is no matter where you are in the world, a lot of the challenges that banks are facing are the same challenges. They are trying to figure out how to compete with the FinTechs. They are trying to figure out how to modernise their technology, how to adopt the new technology that is providing the most delight for customers. And I think the challenge is always how do you do all that, again, with a limited budget? Even if you have a big budget, it is still limited. It is still not infinite. And how do you do it in a way that basically creates reuse or creates the ability to evolve as opposed to having to constantly rebuild?

The biggest challenge for regional banks is not having enough money. At the end of the day, the large banks in any market always outspend the small banks to a massive degree. And so, the challenge is always how do you do the same things, or some of the same things with way less money and way less resources, whether that’s people inside the bank to actually do the work or that is the capital that is spent on making the investment. And there again, I recommend just looking at the customer delights or pain points.

That is what we do at Endava; helping our customers build technology, helping our bank clients modernise their back-

A lot of times in banks, product gets created by internal bank people who have an idea about a product and they go and they push it forward rather than listening to the customer. And so, I think really looking at that customer feedback, really bringing in customers to advise on where they would see value, what could be added to the experience, etc., and then really building around that and prioritising those things. You have to accept, as a smaller bank, you are not going to be able to spend the way the large banks are and that is okay. It just means better prioritising the things that make the most impact for customers. And I think that is best done through looking at customer feedback and really looking at those experiences.

In the current phase of the UAE’s financial sector’s evolution, what is Endava’s value proposition? This is a really exciting space for us end infrastructure so that they are not having to rebuild over and over again. My perspective is that we are at a stage with technology now, especially in the banking space, where it is evolutionary. It is a constant. Digital transformation is not a thing anymore because it is ongoing. It never stops. Transformation implies that you did it and it is done, but it never stops. It is an evolution. There will always be a new thing. There will always be some new technology to adopt.

And so rather than chasing that and constantly trying to build to that, we really try to help our clients build iteratively and build components that can be reusable; so that as new things come along, they are able to scale faster, they are able to adopt that technology faster. So that is a big part of what we do, whether it is the experience, or it is the back-end technology. And we are really excited to be in this space.