August 2016 Issue 728 www.retailbankerinternational.com

SCOTIABANK: STANDING STRONG IN LATIN AMERICA

● CASH DISPLACEMENT: Scandinavia ● INCLUSION: Gender Equality ● CUSTOMER SERVICE: Toronto Dominion ● M&A:

RBI 728.indd 1 26/07/2016 14:31:33 Multichannel digital solutions for fi nancial services providers

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IE RBI final design.indd 1 05/05/2016 10:36:41 Retail Banker International EDITOR’S LETTER

CONTENTS VocaLink is a great 2 CASH DISPLACEMENT: SCANDINAVIA Patrick Brusnahan reports on the continuing popularity of the cashless movement in Scandinavia. People and deal for MasterCard companies are rejecting cash, but is this a smart move? 4 DISTRIBUTION: SCOTIABANK Robin Arnfield speaks to Stacey Madge of Scotiabank and its efforts in Latin or MasterCard, the VocaLink deal channel stats jump out from the pages, such America and the Caribbean, a region looks a good bet. as the one relating to customer bank branch that many players are beginning to The £700m ($920m) cash deal to interactions. reject acquire a 92.4% stake in VocaLink They declined from 476 million in 2011 to 6 CUSTOMER SERVICE: TORONTO F will have a negligible effect on MasterCard 278 million in 2016; in 2016, this equates to DOMINION earnings, reducing earnings per share by an 71 average branch visits per day – a 32% fall Senior executives at Toronto Dominion talk to Robin Arnfield about how the estimated $0.05 per share for a couple of since 2011. This decline is forecasted to con- North American bank is exploring years. tinue with a further fall to 51 average branch emerging payment technologies to sati- For VocaLink’s UK owners: RBS visits per day by 2021. ate its customers’ needs for example will no doubt find it handy to Meantime, the BBA reports that there 8 DIGITAL: BRAZIL book a £150m pre-tax gain; ditto Barclays were nearly 11 million logins a day to mobile Brazilian startup Banco Original and mobile-only issuer Nubank (£104m) and Cooperative Bank will surely banking apps in 2015 – a 50% year-on-year are looking to benefit from the Brazilian find a good use for the £22m that it will rise. consumers’ love of technology. Robin pocket. A number of tipping points have been Arnfield reports In a conference call, MasterCard’s chief reached in the past year. HSBC, for example, 10 INCLUSION: GENDER EQUALITY financial officer Martina Hund-Mejean said saw the number of logins to its mobile app Jessica Longley investigates how inclu- that the deal was an ‘important component eclipse the number of logins to its internet sive banks can be at the top level. As it turns out, there is still a lot fo work to of our strategy to actively participate in all banking service for the first time. be done across Europe. With exclusive types of electronic payments and payment Functionality has improved beyond all research, the gender gap in the banking sector is examined flows’. recognition at a number of banks; RBS’ 3 13 EVENT: THE DIGITAL BANKING CLUB The deal will do a little more than that. million m-banking customers can now set Are fintech firms the friends or the foes MasterCard’s current share of the UK up a and cancel their direct of incumbent banks? June’s debate market is a miserable 4% or so. debits from their mobiles. from the Digital Banking Club (TDBC), Expect that to rise in the medium term as At this rate of relative growth - internet sponsored by Mitek, aimed to find out. Jessica Longley reports on the action MasterCard will target new revenue by try- banking logins actually dropped last year to ing to shift UK banks debit card portfolios 4.3 million a day in 2015 compared with 4.4 16 STRATEGY: DISRUPTIVE CHANGE away from Visa. million in 2014 – it may not be long before Patrick Brusnahan writes on new research from PricewaterhouseCoopers VocaLink has enjoyed international suc- mobile app payments overtake payments (PwC) regarding disruption in the cess with the expansion of its real-time being made using internet banking. financial sector. Is it a motivator for network and has licensed its technology to There is much to celebrate as regards UK change? Can the banks change quick enough or are they doomed to succomb support faster payments systems in the US, banks’ digital banking innovation but just to the new? Sweden, Singapore and Thailand. in case any hint of complacency creeps in,

20 M&A: VODALINK MasterCard will no doubt look to cash a sobering note is sounded by the analysts MasterCard’s acquisition of VocaLink in on the growing international demand for Forrester. bolsters confidence in Britain interbank infrastructure services. In mid-July it released its 2016 Global remaining an attractive destination for If, however, MasterCard looks to recoup Mobile Banking Benchmark report, ranking international investors. But what effect will it have on consumers in the UK? the purchase price through increased connec- 46 major banks across 14 countries. Only Patrick Brusnahan investigates tivity and transaction fees, the VocaLink deal one UK lender – Lloyds – made it into the may not look quite such a good deal for all top 10. stakeholders in a few years time. For the record, Westpac just edged out As MasterCard ramps up its cash displace- Caixabank for top spot, ahead of CIBC and ment strategy, how long can UK consumers Scotiabank, followed by Garanti, Bank of expect over 97% of all LINK ATM transac- America Bank ZachodniWBK, Wells Fargo tions to be free? and CBA.

The way we bank The third version of the British Bankers Association’s Way We Bank report (with EY) Douglas Blakey is out and it is a must read. A number of the [email protected]

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RBI 728.indd 1 26/07/2016 15:13:20 CASH DISPLACEMENT: SCANDINAVIA Retail Banker International

Who needs cash? Not Scandinavia

While a ‘cashless society’ is often brought up in thinkpieces and discussions worldwide, there is only one region taking the initiative with this movement. Scandinavia is closest to truly being cashless, but how is the market shaping up? Patrick Brusnahan writes on this region with help from Timetric’s research

he cashless revolution is truly under- Minimising cash 4.4 million users in Sweden as of June 2016. way in Scandinavia. In Norway, Banks in Norway are slowly adapting their In December 2015, $688.4m worth of reports say that only 6% of the popu- branches into cashless locations. In 2014, 64 transactions went through Swish, increasing T lation are still using cash. branches of DNB were made cashless. Simi- to $892.3m in May 2016. According to Sweden’s central bank, the larly, Nordea stopped handling cash at all its In addition, MasterCard launched its Mas- Riksbank, cash transactions made up barely branches in October 2015. This initiative is terPass digital wallet in association with Nor- 2% of all payments made in Sweden in 2015, anticipated to accelerate the shift towards dea, SEB and Swedbank in December 2015. a figure which has been predicted to drop to electronic payments. ICA Banken and Resurs Bank also joined 0.5% by 2020. In January 2016, Swedish banks expanded in early 2016. MasterPass users can shop Over the past 10 years, Danish banks have Swish, a mobile app for online transactions. online without having to enter payment and closed down every fifth cash machine and While previously used for P2P and in-store shipping information with every purchase. every second bank branch in the country. payments, it has grown in popularity with Government policies, as well as a rising

n DEBIT CARD ISSUER SHARES IN SWEDEN, n DEBIT CARD ISSUER SHARES IN DENMARK, n DEBIT CARD ISSUER SHARES IN NORWAY, 2015 2015 2015

Sydbank 5.5% Nykredit Handelsbanken 1.5% 4.4% SpareBank 1 ICA Banken Danske 2.4% 4.5% Others Bank 7.1% 14.6% Nordea Bank Swedbank Norge 7.4% 33.4% Nordea Handels- 18.3% banken 8.0% Others Others 41.9% 48.0% Nordea 16.2% Danske Bank DNB SEB 26.8% 23.1% 36.7%

Source: Timetric Source: Timetric Source: Timetric

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RBI 728.indd 2 26/07/2016 14:31:43 Retail Banker International CASH DISPLACEMENT: SCANDINAVIA

consumer preference, are aiding the push n REGIONAL BENCHMARKING OF PAYMENT CARDS, 2015 towards a cashless society. The Danish gov- Average Annual Spend Average Monthly Card ernment proposed a plan in May 2015 that Country Cards Per Inhabitant Per Card ($) Transactions would allow certain retailers to refuse cash payments; it is expected to be implemented Norway 2.78 6,350.4 11.3 in 2016. Moreover, the government has set a Sweden 1.35 5,540.8 10.4 deadline to make Denmark completely cash- Denmark 1.68 7,390 14.9 less by 2030. Finland 1.76 5,067.3 12.2 This seems to be working, as cash pay - ments are declining in Denmark. Cash trans- Lithuania 1.18 3,807.2 4.5 actions accounted for 35.7% of total pay- Estonia 1.4 2,794.6 11.8 ments in 2011 and this decreased to 28.1% Latvia 1.21 1,965 7.5 in 2015. In comparison, in other developed Source: Timetric European markets, cash took 44.1% of the overall volume. The Swedish government is equally the second-highest number of contactless in September 2015 in partnership with 100 focused on bringing about a cashless society, cards in the Nordic region as of 2015. retail outlets in Norway and with Rema a policy supported by retailers’ reluctance to In November 2015, there were 5.3 million 1000, a supermarket chain, in 2016. accept cash. contactless cards in the country – equivalent In an attempt to increase consumer con- Examples include retailer Kungsaengen to 55.6% of overall payments cards – and venience, BankAxept is planning to launch and mobile phone retailer 3, neither of which 61,000 contactless POS terminals in the a new online payment service in 2016, accept cash. The payment cards market grew country, approximately 43.8% of the overall BankAxess, to allow customers to transfer at a compound annual growth rate (CAGR) number of POS terminals. funds from their account directly. The ini- of 8.58% between 2011 and 2015. To capitalise on its growing popularity, tiative is anticipated to increase the value of Danske Bank and Jyske Bank began offer- online and mobile payments. Contactless technology ing contactless cards from August Non-banking firms are starting to offer Norway is still in the early stages of adopt- 2015. Contactless mobile payments are also banking and in Sweden. ing contactless technology, with only DNB, gaining ground. The invoice-based payment solution pro- Danske Bank and Handelsbanken offering Nets entered into an agreement with JCB vider Klarna applied for a banking license in contactless cards. in April 2016, allowing merchants to accept October 2015. In an attempt to increase uptake, banks are Dankort debit card payments via smart - It is still awaiting approval from the Swed- differentiating product offerings with new phones using J/Speedy, JCB’s contactless tech- ish Financial Supervisory Authority (FSA) features. In 2016, Danske Bank rolled out its nology. This can be used to make contactless and plans to offers savings accounts and MasterCard-branded contactless cards with payments up to DKK200 ($29.80); a security debit cards. integrated fingerprint sensors in association code is required for transactions above this A number of mobile POS (mPOS) provid- with the Norway-based fingerprint authenti- amount. ers are trying to capitalise on the increasing cation technology provider Zwipe. number of transactions made at retail out- It is the world’s first fingerprint-activated Looking at alternatives lets by foraying into the Danish payments contactless card, combining authentication A number of new payment options have industry. with convenient contactless technology. cropped up in Norway. Seqr was launched The latest of these is the introduction of a In June 2016, debit network BankAxept in January 2013, followed by MeaWallet in cloud-based POS solution by startup Shop- partnered with Canada-based debit network October 2014. box in April 2016. This solution aims to to accelerate a rollout of NFC-ena- In October 2015, SpareBank 1 acquired provide faster transaction processing at small bled mobile payment solutions. mCash, which had 100,000 users and was merchants such as coffee shops, clubs and Contactless technology is still in develop- accepted in 600 stores at the time of the deal. sports arenas. Shopbox’s POS solution runs ment in the Swedish market and only a few Danske Bank also launched Mobile Pay on both iOS and Windows-based tablets. banks, such as ICA Banken and Danske In addition, iZettle launched the iZettle Bank, offer contactless cards. n PAYMENT INSTRUMENT SHARES IN SWEDEN Card Reader Lite in February 2015, a chip- It certainly suffers from a lack of promo- (2015) and-PIN card reader that can be connected tion from the bigger banks. ICA Banken is to tablets and smartphones to accept card- Direct debit 3.3% the largest issuer of contactless cards, with Cash 1.4% based payments. Payment plans to issue 560,000 cards 6.2% To expand its reach in the Nordic and cards by the end of 2016. Baltic regions, Nets signed a $255.5m agree- This seems fairly ambitious as Timetric ment with Nordea in June 2015 to acquire its estimates that, at the end of 2015, there were merchant acquiring business. only 100,000 contactless cards in Sweden. The agreement enables Nets to service With the rising number of small businesses 240,000 merchants across the Nordic and and street vendors accepting payment cards Credit transfers Baltic regions. for small-value transactions, the introduc- 89.1% The company is also focused on the tion and further adoption of contactless is improvement of payment infrastructure and expected to drive the market’s growth. signed an agreement with Dansk supermar- According to Timetric, Denmark had the ket in 2014 to upgrade its POS terminals highest number of contactless terminals and Source: Timetric with contactless technology. <

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RBI 728.indd 3 26/07/2016 14:31:45 DISTRIBUTION: SCOTIABANK Retail Banker International

Scotiabank invests in the Latin American retail banking sector Many international retail banks are discontinuing services in Latin America, but Scotiabank is bucking the trend. Stacey Madge, senior vice-president of international retail banking at Scotiabank, outlines the bank’s Latin American and Caribbean branch transformation and digital strategy to Robin Arnfield

nlike HSBC and Citigroup, which investments are part of a multi-country pro- recently formed an alliance with Linio, Latin have been disposing of retail bank- gramme to increase primary customer rela- America’s largest online retailer, which ing operations in Latin America, tionships through online and mobile channels. includes launching a co-branded Visa credit Scotiabank is investing in the region. In January 2016, Scotiabank launched four card in Colombia and Mexico. We will soon U prototype digital branches in Mexico City, be offering digital applications for the card in Scotia has seen strong performances at its subsidiaries in the Pacific Alliance (Chile, with tablets and smartphones that enable cus- Mexico with immediate approvals.” Colombia, Mexico, and Peru) region. tomers to do online and mobile banking, use In May 2015, Scotiabank bought 51% of Mexico, Peru, Colombia and Chile are core financial planning tools, and provide feedback Latin American retailer Cencosud’s Chilean to the bank’s strategy, and they continue to on their banking experience. credit card business. achieve more robust GDP growth than Can- “We also have a partnership with Cencosud ada and the US. In Mexico, Scotiabank has Mobile sales officers in Colombia through [Scotiabank-controlled] around 2.8 million retail banking customers, Scotiabank has equipped its mobile sales offic- Banco Colpatria,” says Madge. followed by 2.5 million in Chile, 1.6 million ers in Colombia and Chile with tablets for use As part of Scotiabank’s recent purchase of in Peru, and 1.5 million in Colombia. outside the branch, with other countries in Citigroup’s retail banking operations in Costa In January 2016, Scotiabank appointed the Caribbean and Central America to follow Rica, Panama and Peru, it acquired Citi’s Ignacio “Nacho” Deschamps as strategic later in 2016. credit card businesses in those countries. advisor, global digital banking to Scotia CEO Bank officer productivity is expected to “What’s nice about our Citi credit card Brian Porter. improve by 20% as a result of tablets simpli- acquisition is the American Airlines AAdvan- Deschamps, who was formerly chairman fying the application process while reducing tage alliance and loyalty programme, which and CEO of BBVA Bancomer, Mexico’s larg- the time to acquire products. is very beneficial for our customers,” explains est bank, has extensive fintech relationships “In some Latin American countries, people Madge. and digital experience in the US and other don’t want to go to the branch,” says Madge. “Citi has been a great acquisition for us markets. He was appointed as Scotiabank’s “They want you to come to them. So our in the credit card space and in the premium group head, international banking and digital mobile sales officers have tablets so they can banking space – mass affluent customers.” transformation in February 2016. take a full digital product application and A unique aspect of Latin America’s banking Scotiabank is investing heavily to cater for get a digital signature and digital copy of the market is the use of biometric authentication. digital consumers in Latin America. customer’s ID. In Chile, you can use your fin- “Many Latin American countries have col- “We’re digitising our processes, implement- gerprint, and all your key demographic infor- lected their citizens’ fingerprints for years, for ing digital business models, and partnering mation is immediately prepopulated onto the example Chile,” Madge says. with fintechs so we can provide customers tablet via your fingerprint.” “This was done to formalise the economy, with faster service and better offers,” Stacey Scotiabank is also equipping its premium but it enables banks to improve the process of Madge, senior vice-president of international banking officers in Chile with tablets so they authentication. In our Cencosud stores, you retail banking at Scotiabank tells RBI. can visit customers at their home or place of can use your fingerprint to get a pre-approved Over the last five years, mobile banking work. The bank will shortly start equipping loan and pre-approved credit card. We have penetration has grown by 700% in Latin its premium banking officers in other coun- introduced kiosks which instantly print out a America, while Scotiabank has seen its mobile tries with these tablets. credit card in the store.” banking penetration grow by 70% year-on- In its Latin American markets, Scotiabank “We recently carried out a project with year, Madge says. is primarily targeting the emerging middle and IDEO, a leading design firm, in collabora- Scotiabank is investing $185m in a new upper-middle classes, or mass affluent. tion with Scotiabank Canada. IDEO did a core banking technology system in Mexico to Mass affluent customers are served through lot of ethnographic research with us and our enable staff to provide high-quality customer Scotia’s Premium Banking brand in which customers to understand the needs of Latin service and advice. they have a premium service model, premium American consumers. It has also enhanced its Mexican online and products and premium privileges. “Working with IDEO, we designed four dig- mobile banking platform and will be rolling This has been very successful in growing itally-enabled branch prototypes in Mexico out this enhanced mobile and online banking the bank’s presence in this segment. In some City. These range from a flagship branch with platform across its Latin American and Carib- markets, it has dedicated brands to serve the specialist services down to an in-store branch bean subsidiaries. consumer and microfinance segment, such as which could be as small as 250 square feet Later this year, and into the next, Scotiabank CrediScotia in Peru. in size. will offer enhanced and more personalised Madge says credit cards are an important “As part of our branch transformation plan- services to customers such as online advice, part of Scotiabank’s business in Latin America. ning, we did research across four of our major tools and pre-approved solutions. These “Credit cards are a big priority for us. We countries: Chile, Colombia, Mexico, and Peru.

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RBI 728.indd 4 26/07/2016 14:31:46 Retail Banker International DISTRIBUTION: SCOTIABANK

“Our new CRM platform ties into our ana- Scotiabank in Latin America and the Caribbean lytics platform. We’re spending a lot of time Scotiabank is the only Canadian retail bank to Scotiabank acquired Citi’s Peruvian retail in the bank focusing on analytics and working operate in Latin America. Its four core retail banking operation in May 2015, and also with fintechs in the area of credit decisioning banking markets in Latin America are Chile, bought a 51% stake in Latin American retailer and using non-traditional forms of data for Colombia, Mexico and Peru. Cencosud’s financial services business in a credit decisioning, collections and fraud man- It also has operations in Uruguay, Costa 15-year strategic alliance. agement.” Rica, El Salvador, and Panama as well as in 21 The partnership includes the management A big digital initiative for Scotia is its new Caribbean countries including the Dominican of Cencosud’s Chilean credit card portfolio and online and mobile banking offering that is Republic and Puerto Rico. the provision of additional products and ser- going live in Mexico, followed by the Carib- In February 2016, Scotiabank completed its vices to customers of both organisations. bean and Panama. Chile, Colombia and Peru approximately $360m purchase of Citigroup’s In Peru, Scotiabank’s CrediScotia subsidiary will follow after that. consumer and commercial banking operations offers credit cards and loans to lower-income Madge says that the key to developing deep- in Costa Rica and Panama, boosting its cus - consumers and microfinance loans to small er relationships with customers is to make it tomer based in these countries from 137,000 businesses. Scotiabank also has consumer easier for them to bank with the bank. So it to 387,000. finance operations in Mexico and Uruguay. < has simplified every customer journey from log-in to paying bills and checking balances “The intention is for the prototype digital and deploy digital tools to keep these custom- to make everything very easy. branches deployed in Mexico City to become er nuances in mind.” As part of this, it has made a major invest- our new standard for branches when we build ment in consulting customers and researching a new branch or refurbish an existing branch.” Customer relationships in Latin America their journeys. Madge adds that Scotia is trying to enable “Right now, across many of our markets, our Scotiabank Canada has recently intro - a distinctive and proactive service culture that people-based channels are a source of differ- duced Touch ID and its Android equivalent helps customers understand its self-service entiation. We tend to do well in terms of cus- for mobile banking. It will use the same channels and provides helpful service steps. tomer feedback for our people-based channels. technology as Scotiabank Canada to roll out A key element of this involves deepening “Now we want to be the best bank in the fingerprint authentication into international relationships with customers, holding needs- region for digital customer experience. We markets. based conversations with them, and fostering want customers to able to do their sales and “Number one is about the customers becom- a learning environment for customers. service activities at their channel of ing more digital and their expectations being “What is important for us is to make our without having to restart their application or set by digital leaders such as Uber. branches as digital as possible with tablets refile a complaint. “Also there is 100% mobile phone penetra- throughout the branches where customers “Across our Latin American markets, we are tion and over 50% smartphone penetration can do online and mobile banking, complete trying to build out the exact same technology in Latin America, which is also the fastest- customer feedback surveys, and do simple, platform, and we also share learnings across growing internet population in the world and goals-based planning through the ‘Mi Plan’ markets. This means that any innovation that has active social media. (My Plan) app. is implemented in one market can be used “Latin American digital transactions have “These tablets, which are being rolled out to benefit another market, instead of having been growing at 40%, driven by Uber, Spotify with our new branch formats starting with separate platforms in different markets. and online retailers. So the consumer digital our prototype branches in Mexico, can be “If you look at a lot of digital leaders like experience is very important to us, as we think used on an unattended basis or with a cus- Apple, Uber, Netflix or Spotify, they offer the about how fast we need to go,” Madge says. tomer service and sales officer in attendance.” same experience irrespective of what country “By digitising our processes, we can lower Financial education is a big opportunity in you are in. So the experience we give a cus- our cost to serve. The cost of a digital trans- Latin America, so the bank has held learning tomer in Mexico will be the same experience action is a couple of percent of the cost of a events and provided financial tools focused on as they will want in Chile or Peru. branch transaction, so it’s very cost-effective helping clients meet their goals. “To strengthen our customer relationships in for us to invest in digital channels to improve Around its Latin American branches, tips Latin America, we’re really investing in CRM the customer experience.” are posted on signs to help customers become and analytics. We are currently launching a “We are offering digital product sales in better off, and tellers also give customers new front-end CRM platform in our branches Latin America primarily in Chile, which is our financial literacy tips. starting in Chile. This new platform enables most digital market in the region, Colombia, “In Canada, we talk a lot about financial sales officers to have a more natural conversa- Peru, and Mexico. Later this year, we will be advice and savings for retirement to our cus- tion with customers and more readily identify accelerating digital sales in Mexico. tomers. In Latin America and the Caribbean, opportunities to help them become better off “Some products such as pre-approved loans we talk about financial literacy. or deepen the relationship with clients.” or credit cards or credit line increases are very “Sometimes, when customers are given a “Some of the screens have been simplified for natural candidates for selling through digital credit card, they have to be educated on how sales officers, so they can see at a glance if a channels – you can do these largely via digital. to use the card and make sure they don’t customer has a complaint, if they have a good So we’re putting a lot of focus on our digital spend up to their and compromise credit rating, if they have a pre-approved offer, sales agenda,” Madge continues. their ability to make repayments. or what assets and liabilities the customer has. “In Canada, we’ve been setting up digital Unlike Canadian consumers, Latin Ameri- “The sales officer can also tell if the customer factories to bring together IT, risk, and com- can and Caribbean consumers’ goals can be is using our online and mobile banking service pliance teams to re-engineer our processes more near-term – ‘something I will do a year and whether they are primary customers. This with our digital sales agenda in mind. These or two from now’ versus ‘20 years from now’. means the sales officer has a much more natu- digital factories will feed into what we’re “We are trying to train our front-line staff ral conversation with the client,” Madge adds. doing in Latin America.”<

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RBI 728.indd 5 26/07/2016 14:31:46 CUSTOMER SERVICE: TORONTO DOMINION Retail Banker International

Customer-centricity at the heart of Toronto Dominion’s strategy From P2P payments and wearables to the Internet of Things and the blockchain, senior executives at Toronto Dominion talk to Robin Arnfield about how the North American bank is exploring emerging payment technologies while keeping customers at the heart of the proposition

e see emerging technologies in the innovation team to determine what we want banking sphere as a transforma- to move forward with.” tive arena for us to deepen our TD’s pilot only involved using one payment relationships with clients,” Hish- card on Nymi Band. “W “Consumer expectations are going to am Salama, Toronto Dominion (TD)’s head of digital payments tells RBI. change in the future so, as rewards and loy- “TD wants to be very convenient for our alty become integral to wearables, consumers customers – this is a core part of who we will want the ability to payment cards,” are at TD. We always try to ensure our tech- says Salama. nology innovation has a customer-centric “We need to ensure we offer technology that approach. We evaluate the spectrum of what is very flexible and that anything we put into technology is emerging and what is actually the market meets consumer expectations such available, but we wouldn’t necessarily offer it as the ability to use multiple payment and loy- to our customers.” alty cards on wearables.” Salama has worked for TD since 2012, ini- Salama says that TD is looking at peer-to- tially covering digital banking security, and peer (P2P) payments, for example embedding for the last two years emerging and digital P2P transfers within social media. payments. He had held various roles in the “We at TD continue to evaluate what is hap- digital space at Bank of America in the previ- pening in areas such as loyalty gifting and ous seven years. money movement, and, when we find the “When a new piece of technology emerges right product to deliver to our customers, we and comes across the desk of someone at TD, will do so,” he says. we generally want to run a proof of concept Ugo Wallet a Canadian open mobile wallet to try it out,” says Salama. in which TD participates, already offers a P2P “This is where our technology partners such transfer capability to its wallet-holders, Sala- as (US-based IT firm) Cisco are great in help- ma notes. TD customers can load their TD ing to enable these ideas. As head of the digital TD MySpend personal financial management credit cards in the NFC-based wallet, which payments team, my first issue to solve is: can (PFM) app.” is offered by Ugo Mobile Solutions. this device make a payment?” Like other banks, TD is following devel- Salama says that TD spends a lot of time Wearables opments with Faster Payments, Salama says. talking to customer focus groups when it The Apple Watch provides an example of a Both Canada and the US are among countries designs a new payment technology. technology that TD immediately knew it had which plan to migrate their payment systems “We’re finding from these discussions with to participate in, Salama says. to Faster Payments. clients that people are using online and mobile “We knew from speaking with our custom- “Globally, as ISO 20022 [the global pay- banking so differently – there are things you ers and doing market research that wearables ments messaging standard] becomes mandat- use your mobile phone for and things you use was a space we wanted to play in from day ed and a common centrepiece, every market your PC for. one,” he says. will be looking at adopting Faster Payments,” “So the products we’re creating are all about In Canada, only TD’s mobile banking app Salama says. being customer-centric – what do you need to is available on the Apple Watch, whereas “Every bank I’ve spoken to around the have on a mobile device versus what do you customers of its US subsidiary TD Bank can world is keeping an eye on Faster Payments.” need on an online platform for PCs and lap- make payments via using Apple’s TD is exploring the potential of offering tops?” wearable device. In 2015, TD carried out a cardless mobile ATM withdrawals in Canada From an omnichannel perspective, TD contactless NFC payments trial in Canada and the US, says Salama. “We will embed is finding that consumers are migrating to involving the Nymi Band, a wearable smart- mobile ATM into our mobile banking ‘mobile first’. band that uses the wearer’s heartbeat to app,” he says. “Through hours of discussions with our authenticate transactions. In March 2016, TD became the first Cana- customers and looking at data, we saw that “We were able to carry out multiple pay- dian bank to use the host card emulation our customers are very mobile-focused,” says ments as a proof of concept using the Nymi (HCE)-based Visa Tokenisation Service in its Salama. Band,” says Salama. new Android mobile payments app. RBC, by “So this is why we partnered with [US- “So now we’re looking at Nymi’s technol- contrast, uses proprietary tokenisation tech- based neo-bank] Moven on our mobile-only ogy and holding internal discussions with our nology in its mobile payments app.

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RBI 728.indd 6 26/07/2016 14:31:46 Retail Banker International CUSTOMER SERVICE: TORONTO DOMINION

“Tokenisation provided by a card network “We could tell customers: ‘Sure, you’re buy- Waterloo region to build innovative digital such as Visa is now the de facto standard,” ing this new smart appliance with a payment systems for TD,” says Martin. Salama says. capability, and we will be able to protect you.’ “We want to bring quickly products that the In a tokenisation scheme, a token is used to “The phrase that fits best in IoT is ‘connect- Tech Centre team develops to our customers, represent a card number at the point of sale, ed commerce’; this is how the world is evolv- get feedback from customers and essentially with the actual card information being stored ing. Ten years from now, every device and co-design the products with them.” in the cloud by the issuer. every utility that you use will be connected One example is a family allowance test app In April 2016, TD launched its TD to you.” which helps TD customers to teach their chil- MySpend app in Canada, based on its collab- dren about responsible money management. oration with Moven. In December 2014, TD Innovation labs The app was originally developed by the TD signed an agreement for the exclusive Cana- “Most banks have an innovation unit, but we Lab at Communitech. dian rights to Moven’s PFM app. are taking a different approach,” says Salama. “We solicit ideas from our entire workforce, “We see TD MySpend as an easy way for “Instead of having just one innovation bet, and one suggestion was for a banking app for clients to manage their finances,” says Salama. we have multiple bets. We have different game consoles or the Apple TV,” says Martin. “It is coupled very closely with the actual minds from very diverse demographics exam- “The TD Lab then built a proof of concept payments that customers make from their TD ining different types of technology. Having for a TV set-top box, but decided that you accounts. Unlike traditional money manage- these different demographics in our labs is wouldn’t do your banking on a set-top, since ment software, when a client registers for TD important, as they will be thinking about dif- you can bank on your phone. MySpend, they don’t enter any information ferent problems to solve, since all our custom- “Then they thought parents might want to manually. We pull in all their transactions ers are not the same.” teach their young children about financial over a 13-month timeframe and do all the In 2014, TD established the TD Lab at literacy using set-top boxes. Eventually, this analysis for them. Also, we provide them with Communitech, a technology hub based in turned into the Family Allowance test app for visual depictions of how they are performing Ontario’s high-tech Waterloo region, which Android- and iOS-based phones, which is run and trending on a month-over-month basis.” involves students from local universities sec- out of the Waterloo Region Tech Centre.” TD MySpend is mobile-only. “The client is onded to work with TD staff. The Waterloo In September 2015, TD joined a consortium walking down the street and needs to know area is home to some of Canada’s most inno- led by US software firm R3 which is explor- if they can afford a new jacket,” Salama says. vative high-tech companies and University ing how blockchain technology will shape the “With one touch into the app, they see a researchers. financial services industry. Currently, the R3 visual and can make a decision instantly. Also, “We created the TD Lab at Communitech consortium comprises 42 global banks. every time they use a TD credit or debit card to get closer to the startup community,” says Originally created to record Bitcoin transac- or do an ATM transaction, they get a real- Martin. tions, the blockchain is a decentralised ledger, time anti-fraud notification within millisec- “We’ve been very successful at using the verified and shared by a global computer net- onds. We’ve had very enthusiastic feedback Lab to understand the startups’ methodol- work, which can be used to exchange data, on MySpend on Google Play and the Apple ogy, and use their methodology for exploring including commodities or currencies, without App Store.” ideas and proof of concept around customer a centralised clearing house. In September 2015, TD signed an exclusive experience.” According to the Aite Group’s Blockchain: Canadian agreement with tech firm Flybits to The TD Lab did an IoT proof of concept What Is It Good for? Absolutely Something provide TD’s Canadian mobile banking cus- involving linking Nest thermostats to a TD report, the blockchain has great potential to tomers with more personalised experiences. mobile app. disrupt many aspects of financial services by Flybits’ cloud-based software enables “The idea was that you could not only con- lowering costs, reducing barriers to entry, sup- mobile apps to deliver contextual experiences trol the thermostat via the mobile app but porting new products and services, and dis- to each user, including personalised financial also see what the savings would be by turning intermediating players that have been central advice and relevant content and services. down the thermostat and put these savings for many years. “A focus for TD’s digital roadmap is to cre- into your retirement plan,” says Martin. In January 2016, TD was one of 11 banks ate more intuitive, personalised experiences “This is an example of how banking could belonging to the R3 consortium which carried that make customers’ lives simpler,” says connect with the IoT.” out a test involving the transfer of virtual cur- Rizwan Khalfan, TD’s senior vice-president Since January 2016, TD has been partner- rency to each other via the blockchain without and chief digital officer. ing with Cisco on technology solutions tar- a centralised third party. TD is taking a great interest in the Internet geting customer and employee experience in “At TD, we view the blockchain as an of Things (IoT). Cisco’s Toronto Innovation Centre. important new innovation that holds great “The Internet of Things ties back to consum- “With Cisco, we are partnering with a major promise, but is still in the very early stages ers’ day-to-day life, and there are banking and IT firm which is very innovative. We are of its evolution,” Chris Owen, vice-president, payment needs in every-day life,” says Salama. working with them on smart buildings, call enterprise platforms, TD Bank Group, says. “For example, your smart fridge can tell you centre technologies, employee mobility and, “Over the last two years, TD has run a num- that you need to buy more milk, or you man- especially, the IoT,” says Martin. ber of successful test cases and pilots that have age your Netflix account which has your card “We also have the Waterloo Region Tech brought notable efficiencies to several of our on file from your smart TV.” Centre which is an accelerator enabling TD existing products and processes. “As the IoT takes off, we want to be there employees to bring new ideas to market in a “But what is most exciting about block- for our clients,” Jeff Martin, TD’s CIO for fast way,” says Salama. chain technology is its potential to create new channels, says. “We created the Waterloo Region Tech Cen- markets and enable ways of doing things we “Once IoT technology grows, the security tre with developers in mind, so it’s very un- haven’t yet imagined. That said, much of the and trust offered by TD will really come into bank-like. The Waterloo Region Tech Centre benefit associated with blockchain requires play,” says Salama. is leveraging the ecosystem of talent in the external engagement.” <

www.retailbankerinternational.com August 2016 y 7

RBI 728.indd 7 26/07/2016 15:15:03 DIGITAL: BRAZIL Retail Banker International

Brazil’s digital challengers ramp up the competition Brazilian digital-only startup Banco Original and mobile-only credit card issuer Nubank hope to benefit from Brazilians’ love affair with smartphones and challenge incumbent players. These new entrants are disrupting the status quo and giving the big banks something to worry about. Robin Arnfield reports

razil is the world’s fourth-largest starting a new digital operation on the side.” technology so we can develop and use it. smartphone market with an installed “Secondly, we make acquisitions such as base of 70 million smartphones in Banco Original the 51% stake we took in PicPay, a mobile B 2014. According to a study by Bra- Banco Original, a subsidiary of Brazil - wallet similar to Apple Pay, last year. zilian banking association Febraban (Fed- ian holding company J&F Investimentos, “Thirdly, we develop products and services eração Brasileira de Bancos), internet and launched Brazil’s first digital-only consumer which add value to Banco Original and help mobile banking accounted for 52% of total banking platform in March 2016 offer - improve its relationship with its clients.” Brazilian banking transactions in 2014. ing current accounts, credit cards earning Meirelles was quoted by Reuters in March “The digital-only banking space is heating cashback, and seven different investment 2016 as saying that Banco Original expects up in Brazil,” Lindsay Lehr, senior director products. Its publicity campaign features returns on its retail banking unit to match at US-based Americas Market Intelligence, Jamaican athlete Usain Bolt. those at the bank’s corporate and agribusi- tells RBI. The bank, which targets customers with ness segments within four years. “This is highly relevant, since the top six monthly income of over BRL7,000 ($1,996), He said he expected the retail division to Brazilian banks control about 70% of all has no branches, although it does operate a post ‘acceptable’ returns by 2018 and ‘attrac- bank assets, and the top four control 80% of call centre. tive and very positive’ ones by the end of the deposits and credit cards issued.” “Our offer is intended to simplify custom- decade, according to Reuters. “Digital banking is advancing in Latin ers’ management of their finances,” says Lacerda estimates that Banco Original will America,” says Juan Mazzini, a senior ana- Marcos Lacerda, Banco Original’s chief mar- sign up 100,000 customers in its first year of lyst, financial services, at US-based consul- keting officer. operation and 250,000 in 2017. tancy Celent. “Customers open their accounts using their “We are targeting the growing demand “In a Latin American bank and fintech sur- smartphone, and are able to carry out trans- among banked consumers to communicate vey Celent carried out recently, 100% of the actions using voice commands and deposit with their banks through digital channels,” participants recognised that a scenario where cheques using their smartphones. They have he says. all financial products get digitised, needs to access to a personal financial management In a December 2015, Fitch Ratings said be addressed sometime in the next seven (PFM) programme providing a timeline of that it views Banco Original’s “plan to devel- years, and 59% believe this scenario needs their transactions grouped in different cat- op a retail bank focused on high-end indi- to be addressed immediately. egories.” viduals as an ambitious undertaking that will “There was also a general consensus among Banco Original is the result of a 2011 require disciplined risk management, given survey respondents that most Latin Ameri- merger between Banco JBS, a J&F subsidiary the challenging operating environment. can banks are entering digital late, and over providing loans to agribusinesses, and Bra- “The bank’s revamped management team 70% of respondents believe the predomi - zilian retail lender Banco Matone. In 2013, is composed of professionals with vast expe- nant threat of competition won’t come from Banco Original added corporate banking to rience in leading local financial institutions, incumbent banks,” says Mazzini. its existing agribusiness. which will be essential for the successful Whereas Nubank only offers credit cards, Right from the start, it was Banco Origi- implementation of the bank’s plan to build Banco Original’s vision is to be Latin Ameri- nal’s vision to become a digital-only bank. Its a solid franchise and become a relevant mid- ca’s first 100% digital universal bank, Mazzi- digital banking project began in 2013 under sized bank in the Brazilian market.” ni notes. the direction of Henrique Meirelles, chair- “Celent’s view is that incumbent banks, man of J&F Investimentos and former presi- Open API particularly those which are direct com - dent of Brazil’s Central Bank. “Banco Original has an open application pro- petitors to Banco Original, will rethink their “The total amount of our investment in gramming interface (API) banking platform,” investments in digital, as the threat is now our digital banking platform is around says Mazzini. real,” he says. BRL600m,” says Lacerda. “This open platform enables fintech com- “Banco Original isn’t entering the market panies to access Banco Original’s APIs and to play minor league, but to challenge the Innovation datasets easily, and enables the bank to react big players. Banco Original has three approaches to inno- to a changing and complex ecosystem.” “Celent also expects to see other [incum- vation. Mazzini says that Banco Original is one bent] banks create separate digital institu- “Firstly, we partner with a technology start- of the rare cases where a 100% digital bank tions, as, for some of the larger banks, the up accelerator in the US,” says Lacerda. has obtained its platform from a vendor, US- rapid transformation required is a barrier “When we identify a project which meets based Technisys. Other digital-only banks too high to jump and they may be better off our objectives, we make an investment in the around the world such as Mexico’s Bankaool

8 y August 2016 www.retailbankerinternational.com

RBI 728.indd 8 26/07/2016 14:31:49 Retail Banker International DIGITAL: BRAZIL

or Germany’s Fidor opted to build their own established in 2011,” says Lehr. As at January 2016, Nubank’s cardholders platform instead of buying it from a third- “ has been steadily cannibalising Visa had carried out over eight million transac- party vendor. cards as these issuers push out Elo cards, and tions in 140 countries. Nubank’s growth has new, digital-only banks could be interesting occurred largely through recommendations Nubank partners for Visa and MasterCard to defend by customers, the issuer says. São Paulo-based Nubank offers an interna- their share.” “The majority of our users are in the A and tional MasterCard-branded Platinum credit B social classes, although we don’t require a card without any fees and with lower-than- Smartphone app minimum income,” says a Nubank spokes- average interest rates, an attractive feature Customers can only manage their Nubank person. as Brazil has some of the highest credit card card using a smartphone app. Nubank’s “Around 80% of our users are under 35 interest rates in the world. app allows customers to apply for a card, years old.” “Average Brazilian annual credit card inter- and, once approved, activate, block and Nubank says it has developed an advanced est rates reached 99% in November 2015, unblock their card, manage and pay their data science infrastructure to enable it to with some charging rates as high as 415.3%,” bills, increase and decrease their credit limits, process and make decisions about card appli- says Mazzini. and see all purchase information in real time. cations. As of May 2016, Nubank’s revolving cred- “Nubank is hoping to provide better cus- “We do all our own development internal- it interest rates ranged from 2.75% to 12% tomer service than incumbent banks,” says ly,” the spokesperson says. “Our team of 300 per month. Mazzini. people includes over 10 data scientists and Americas Market Intelligence’s Lehr says “Brazilian banks are among the companies over 40 engineers.” Nubank’s offer is ‘very interesting to Brazil- that generate the most customer complaints ians who are dealing with high debt levels, in Brazil. Investments inflation, and unemployment. It also has the Nubank sees youth as an important demo- In April 2016, Nubank signed an agree - advantage of being an international card’. graphic, and is currently targeting people ment with Goldman Sachs for loans total- Like Nubank’s card, Banco Original’s who can afford smartphones and already ling around $50m to finance its credit card two MasterCard-branded credit cards, a have credit cards from Brazilian banks. receivables portfolio. Platinum card and a Black card, can be used Over time, it expects to expand its credit The loans consist of a $25m Senior Secured internationally. Lehr says that 80% of credit modelling to reach people with more varied Facility and a BRL100m cards issued in Brazil are enabled for domes- credit profiles.” Senior Secured Revolving Credit Facility tic purchases only. Nubank says that, between its app’s launch through Nubank’s proprietary securitisation. “The credit cards issued by Nubank and in September 2014 and April 2016, around Nubank had previously raised almost Banco Original are interesting, since Brad- two million people had applied for its card, $100m in its four equity fund-raising rounds esco, and Caixa Econômica including rejected applicants, successful led by Sequoia Capital, Tiger Global, Found- Federal have all become highly committed to applicants and people on a waiting list for ers Fund, Kaszek Ventures and QED Inves- issuing the Elo card, a domestic a card while their credit history is checked. tors since its launch in 2013. <

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www.retailbankerinternational.comwww. www.privatebankerinternational.com August 2016 y 9

Digital touch briefings ad copy - RBI 18042016.indd 1 18/04/2016 10:59:39 RBI 728.indd 9 26/07/2016 14:31:49 Untitled-2 1 26/07/2016 15:01 INCLUSION: GENDER EQUALITY Retail Banker International

Where are the women? Where are women in the banking sector? France and Norway are the two rising stars of gender equality. Women are reaching top positions in Spain but are forgotten on boards of directors. Germany is still lagging behind while Switzerland and Ireland finish last.Jessica Longley investigates

ime and time again, the benefits of gressive step towards gender equality while committee, Norway and Spain score best. gender diversity in the workplace others show a less clear picture with more Women represent respectively 15.47% and have been praised but women are still nuanced results. 18.53% of the executive committee. At having trouble breaking through the If we can be sure of one thing, it is that the opposite end, women in Germany and T Ireland reach a measly 6.94% and 7.04% glass ceiling. This is especially the case in there is still a recurring problem of women the banking sector where progress has been failing to reach the top, not being put in respectively on executive committees of top grindingly slow in recent years. charge of executive decisions and not getting banks. In recent decades, efforts have been made promoted to positions of high standing (CEO The average percentage of women on the in an attempt to bridge the inequality sep- and chairman). Some progress has however executive committee of the top banks is arating men and women. In the pursuit of been made on the board of directors, with a 11.35%. These numbers are considerably increasing female representation on boards, high percentage of women being present on lower, nearly three times smaller, than the some countries have chosen to impose gen- these boards across Europe. numbers found for the board of directors. der quotas to top businesses whilst others The average proportion of women on the These observations unveil the extent of the have decided to follow a more voluntary board of directors of the top banks across problem as it applies not to a small, con - approach where companies vow to increase our sample is 30.43%. Reaching the 30% tained group of European countries but to gender equality and set their own targets. target set by many as a guideline is a good the whole of Europe. Are gender quotas the best approach to indicator that we are heading in the right Alarmingly, only 30% of European coun- tackle the lack of gender diversity in the direction and starting to see change in the tries in this sample have at least one woman workplace? Which countries are faring best banking sector. Nevertheless, large discrep- in the executive committee in all of their top and who are being left behind in terms of ancies can be observed from one country to banks. gender equality? the next as the median is set at 26.32%. To offer some insight into this problem of In terms of gender diversity on the board Germany, lagging behind long standing and provide some potential of directors, France and Norway are leading Back in 2013, an RBI report on gender remedies, RBI conducted its own research the way with women representing on aver- equality in the banking sector ranked into the subject. The results of this report are age respectively 43.38% and 47.28% of their Germany at the bottom of the list, with published and analysed in this article. top banks’ board of directors. At the bottom, a meagre 4.9% of women on the execu - with some catching up to do, Spain and Swit- tive committee of Germany’s top banks. A The Top 10 zerland’s comparable figures are roughly one harsh light was shone onto Deutsche Bank To get an overall view of the situation in half of the leading countries, standing respec- in particular, with not one woman present Europe, RBI sampled the four biggest banks tively at 22.03% and 22.69%. on their executive committee. However, by asset size in 10 European countries: As for gender diversity on the executive women in Deutsche Bank had a better rep- France, UK, Germany, Spain, Italy, Norway, Ireland, Netherlands, Switzerland and Bel- n GENDER EQUALITY (NUMBER OF WOMEN ON THE EXECUTIVE COMMITTEE) FOR BANKS gium. RBI acquired data on the members of the 1st UBI Banca (Italy) board of directors and executive committees 2nd Swedbank (Norway) of these banks in the aim of filing a country- per-country profile of women representation 3rd BPCE (France) in the banking sector and get an overall pic- 4th Banco Santander (Spain) ture of where the European banking sector is heading. 5th Belfius (Belgium) To understand where the problem stems Joint 6th RBS Banking Group (UK) from, RBI also examined the gender of the Joint 6th Caixabank (Spain) people at the top, in charge of the important decisions: the CEOs and chairmen of these Joint 8th KBC Bank (Belgium) banks. Joint 8th UBS (Switzerland) Europe’s stagger towards gender equality Joint 8th BBVA (Spain) There are a number of major trends present Joint 8th KFw Bankgruppe (Germany) in the European banking sector. Some obser- Source: Timetric vations point towards a positive and pro-

10 y August 2016 www.retailbankerinternational.com

RBI 728.indd 10 26/07/2016 14:31:50 Retail Banker International INCLUSION: GENDER EQUALITY

resentation in slightly lower and less pow- n GENDER EQUALITY (NUMBER OF WOMEN ON THE BOARD OF DIRECTORS) FOR BANKS erful positions, with 40% of their board of directors made up of women. 1st Société Générale (France) Since then, Germany is still lagging behind 2nd SEB (Norway) and is bottom for gender equality in respect of the executive committee, with a modest Joint 3rd BNP Paribas (France) 6.94% of women on the executive commit- Joint 3rd ABN Amro (Netherlands) tee of their top banks. Indeed two major banks, Commerzbank and DZ Bank, have 5th Swedbank (Norway) no women on their executive committee. 6th Nordea (Norway) Germany fares only slightly better at board level, placing fifth but still boasts no female 7th Crédit Agricole (France) CEO or chairwomen in its four biggest 8th ING Group (Netherlands, Belgium) banks. This is an alarming phenomenon in the banking sector whereas women seem to Joint 9th Deutsche Bank (Germany) plateau at a certain level –the board of direc- Joint 9th Intesa Sanpaolo (Italy) tors – and cannot breakdown the barriers to reach the top of the career ladder – executive Source: Timetric committee, chairwoman or CEO. In January 2016, Germany implemented 2008. France also recently implemented quo- country in terms of gender equality on the a 30% quota for the top 100 publicly traded tas in 2010 with a 40% target to be achieved executive committee while, on the other companies. These include two of Germany’s by 2016 for public-limited companies. hand, it is the worst European country in top four banks, Deutsche Bank and Com- Norway has successfully reached and sur- terms of gender equality on the board of merzbank. Both of these have successfully passed its target. France has made substan- directors. surpassed the 30% quota reinforced on the tial progress and is on its way to reaching Spain has made the most significant pro- board of directors. its target with two of their top banks hav- gress compared to other European coun- ing already achieved it. BPCE and Credit tries when it comes to the representation of France and Norway leading the way Agricole still have to catch up. Nevertheless, women at the top. Three of its top banks Norway and France are topping the charts Credit Agricole is very close to achieving this appear in the top ten banks for gender equal- in gender equality both in terms of the board 40% target and both banks have over 30% ity on executive committees and it is one of of directors and the executive committee. of women on their board of directors. the countries with the biggest number of Three of Norway’s top banks and three of Norway is a particular rising star when chairwomen. Although it is having trouble France’s top banks are in the ten best banks it comes to gender equality, being the only achieving gender equality on the boards of in Europe for gender equality on the board European country out of the sample to have directors, it seems Spain has entrusted more of directors and both countries have one of two female CEOs, yet alone one. women with the executive decisions than any their top banks ranking in the top ten banks other European country in our sample. in Europe for gender equality on the execu- Spain, the inbetweener Furthermore, Spain has made some pro- tive committee. Spain is an intriguing case. It is hard to - gress since 2013. In 2013, the percentage Norway and France are also leading the point the country’s stance on gender equality, of female board members stood at 18.7%. way in gender equality, placing in first and Spain being on both ends of the spectrum. Three years later, this number has increased second place respectively in the ten best On the one hand, Spain is the top European to 22.03%. countries in Europe for gender equality on boards of directors while they are second and n n third respectively in the ten best countries GENDER EQUALITY (NUMBER OF GENDER EQUALITY (NUMBER OF in Europe for gender equality on executive WOMEN ON THE EXECUTIVE COMMITTEE) BY WOMEN ON THE BOARD OF DIRECTORS) BY committees. COUNTRY COUNTRY Since RBI’s 2013 feature, France has seen considerable improvements in the 1st Spain 1st Norway representation of women in its banking 2nd Norway 2nd France sector. In 2013, France was also leading 3rd France the way in gender equality with 30.9% 3rd Netherlands of France’s top banks’ board members 4th Italy 4th Italy women. Banks in France have not stopped 5th UK exceeding themselves over the years, with 5th Germany women currently representing 43.38% of 6th Netherlands 6th Belgium the members on the board of directors in 7th Belgium these top banks. 7th Ireland 8th Switzerland 8th UK So, what makes France and Norway thrive? 9th Ireland Well, gender quotas might just be the answer. 9th Switzerland Norway put in place quotas in 2003 with 10th Germany 10th Spain a target of 40% of women on the board of Source: Timetric Source: Timetric directors of top companies to be reached by

www.retailbankerinternational.com August 2016 y 11

RBI 728.indd 11 26/07/2016 14:31:50 INCLUSION: GENDER EQUALITY Retail Banker International

zerland, gender quotas were introduced in How can we tackle these two problems? 2006 with a target of 30% to be achieved For some countries, such as Norway, France by 2011. It is now 2016 and not one of Swit- and to some extent Spain, quotas have zerland’s top banks have come close to that ensured that women have a place in the target, UBS being the top bank with the most decision branches of the banking sector. It women on its board: 25%. is no surprise that two countries coming out A similar case can be observed in Ireland on top in terms of gender equality are two where quotas were implemented in 2004 countries that actually implemented gender with a target of 40% to be achieved at an quotas. undetermined time. Nonetheless, it cannot be ignored that However, none of Ireland’s top banks Switzerland and Ireland have implemented have reached that target although two of quotas somewhat unsuccessfully, not reach- Switzerland’s top banks have managed to ing their target. get 33.33% of women on their board of However, it could be argued in favour of directors. quotas that Ireland should reinforce quotas For these countries, progress remains to legally to insure a positive result. be made. The UK, where there are no quotas, is ranked as one of the worst countries for gender equal- Which way forward now? ity; proof that quotas may force businesses into The conclusive image shown by this research action when simple initiative is not enough. is one of an invisible barrier that stops Across our sample of European countries, women getting from the board of directors gender quotas have largely ensured that the Spain introduced in 2007 a recommended to the executive committee. number of women on board of directors has quota of 40% to be reached by 2015 via the For all countries in the sample, with the not stopped growing. Gender Equality Act. This quota, however, is exception of Spain, the percentage of women Moreover, when quotas are implemented, a recommendation rather than an obligation on the executive committee is at least twice they often only apply to the board of direc- and applies only to public-limited companies as small as the percentage of women on the tors. with more than 250 employees. board of directors. The large discrepancy observed between None of Spain’s top banks have achieved Spain, on the other hand, has a similar per- numbers of women on board of directors this target, Banco Santander reaching the centage of women on the board of directors and executive committees may be explained highest percentage of women on their board and on the executive committee of their top by this. of directors at 31.25%. banks, respectively 22.03% and 18.53%. If we were to implement gender quotas Another trend uncovered is the few number on executive committees as well as boards Ranking bottom of women present in the top two positions, i.e. of directors, the gap could potentially close Switzerland and Ireland rank bottom. Both chairwoman and CEO. Norway is the only and the banking sector may start to look countries feature no women as chairwoman country with female CEOs running their top more attractive and with leadership posi- or CEO in any of their top banks. Further- banks, while Italy, Spain and the Netherlands tions attainable to women. more, both countries implemented quotas are the only countries in our sample to have The question is, who will dare to make the that top banks have not respected. In Swit- chairwomen in their top banks. first step?<

n BREAKDOWN OF WOMAN IN SENIOR BANKING POSITIONS BY COUNTRY (%) Percentage of Percentage Percentage of Percentage of Worst Bank Best bank women on board of women Chairwomen female CEOs for female for female of directors on executive representation representation committee France 43.38% 14.74% 0% 0% BPCE Société Générale UK 25.29% 11.24% 0% 0% Lloyds HSBC Italy 27.66% 12.5% 25% 0% Banca Mediolanum Intesa Sanpaolo Spain 22.03% 18.53% 25% 0% Bankia Banco Santander Germany 26.34% 6.94% 0% 0% KFw Bankgruppe Deutsche Bank Norway 47.28% 15.47% 0% 66.66% Nordea SEB Ireland 25.83% 7.04 0% 0% Bank of Ireland N/A Switzerland 22.69% 8.33% 0% 0% Julius Baer UBS Netherlands 37.5% 9.52% 33.33% 0% Rabobank ABN Amro Belgium 26.31% 9.17% 0% 0% Belfius ING Total Average 30.43% 11.35% 8.33% 6.66% Median 26.32% 10.38% 0% 0% Source: Timetricc

12 y August 2016 www.retailbankerinternational.com

RBI 728.indd 12 26/07/2016 14:31:59 Retail Banker International EVENT: THE DIGITAL BANKING CLUB

Fintechs: Friend or foe in the world of financial services? London has gained a reputation as a leading fintech hub, hosting more and more innovative technology start-ups but can they be considered as friends or enemies of financial services? This is exactly what June’s debate from the Digital Banking Club (TDBC) set to find out.Jessica Longley reports on the action

osted at the prestigious Law Soci- dled business models. The fintechs’ disrup- ety in London, and sponsored by tive models can find great synergy in working global leader of mobile capture together rather than bending over backwards H and identity verification software to accommodate banks.” Mitek, June’s TDBC debate took a slightly Not only can fintechs survive without more traditional approach. easier to experiment under a new brand than banks, they are also threatening banks’ prof- Sophie Guibaud, George Depastas and Jon under a 100-year-old brand.” its as they start to encroach on the end-to-end Hall argued for the motion against a team She illustrated that ‘the P2P lending part- value chain. comprising Simon Cadbury, Roy Vella and nership between Zopa and Metro Bank is a According to Cadbury: “The opposition David Parker. The motion: fintech, friend or perfect example of fintechs and banks work- might argue that only a small percentage of foe? Guibaud, vice-president of European ing together hand in hand. Zopa offers Metro revenue is migrating to fintechs, but it should expansion at Fidor, kicked off the debate in Bank clients a service that the bank itself be the potential that is concerning them. support of the motion. would not be able to offer’. Experts believe that 40-60% of global bank- She argued that in spite of a rocky start, the ing profits worth $1trn are at risk.” relationship between fintechs and banks have The end of the ‘toothbrush era’ Cadbury expressed his fears that tradition- evolved and continue to evolve – with the In response, Simon Cadbury, director of strat- al banks are ‘having their no-frills moment, arrival of PSD2 – into a more symbiotic one. egy and innovation at Intelligent Environ- just like the national airlines in the 1990s. ments, made his case against the motion with They’ve had to accept lower profitability and Fintechs and banks, a symbiotic relationship? five concise points. remodel their proposition’. Guibaud explained how fintechs were born, Basing his arguments on research from PwC He considered that banks are unprepared painting a picture of a change in consumer and McKinsey, he stated that fintechs are dis- to face the second stage of advancement of behaviour over the past 20 years with the arriv- ruptive, steal profits, do not need banks and fintechs. Indeed, the future of fintechs is al of the internet and smartphones, allowing are a threat to the future of banking. As a expected to be propelled by the proposition customers to be permanently connected. result, the traditional players are left unde- of a launch that will create a central hub for This led to the emergence of new agile com- cided and unsure of how to proceed. fintechs called the marketplace bank. panies as banks struggled to keep up with the He said: “We’re undergoing a natural evo- Cadbury explained: “The marketplace change. lution. You can describe the previous two or banks will compete directly with the tradi- “Banks took a while to adapt as quickly to three years as the ‘toothbrush era’, where tional banks on core banking services with- change as other sectors for a few reasons such fintechs have been taking one function and out the need to build all the products. And on as legacy and strict regulation. Organisations performing it considerably better than any- this model, there’s a very good chance that have a strong hierarchy and are not used to one else.” they will actually scale much more quickly listening to what customers want. Cadbury clarified: “Fintechs are typically than we’ve seen historically.” “For fintechs, it is easier to swiftly develop bound to be light, free from the burden of As Cadbury’s speech came to an end, it new products and respond to customer needs meddlesome systems and have smart unbun- was the turn of George Depastas, the head of because of their new business model and bet- ter customer experience,” Guibaud explained. She further outlined the banks’ and fintechs’ need for each other. On one hand, banks depend on fintechs to better connect with their customers and improve their understanding of their customer base. On the other, fintechs need the investment and brand that banks offer to assert themselves in the market. Partnerships between the two entities can come in the form of affiliations or through the banks’ use of fintechs’ already-developed-and- tested technology. Guibaud clarified: “Investments are a way for fintechs to reach out to other audiences that are not their main target audience. “It is also a way to experiment as it’s always

www.retailbankerinternational.com August 2016 y 13

RBI 728.indd 13 26/07/2016 14:32:02 EVENT: THE DIGITAL BANKING CLUB Retail Banker International

techs and great white sharks are the banks. Vella concluded that we no longer need a middleman, such as the bank, in a world where we have diversity and choice. Jon Hall, in favour of the motion, fought back the opposition by playing into their analogy game. He decided to compare fintechs to Tesla, arguing that Tesla is a company that turned electric cars from geeky to cool and acces- sible. Hall explained that fintechs are to finan- product and real-time analytics at Barclays, Parker dubbed banks the ‘manufactur- cial services what Tesla is to the car industry: to point out the inaccuracies and supposedly ers of rich tea biscuits,’ and introduced fin- appealing to a niche market and developing false arguments found in Cadbury’s speech. techs as the ‘Tesco providing the rich tea through innovation and understanding of the “You’ve said that the essence of startups biscuits”’to explain how profits depend on customer. is disruption. This is so last year; creation is who knows the customer best and who con- Hall commented: “Fundamentally, fin- the new bloc. trols the margins. techs are advancing in gaps. They are dealing “The big players in the market are not In short, Parker showed the dependence of with underserved markets, they are listening trying to chip-in the existing pipe, they are banks on fintechs for customer data. to what customers want and they are there trying to create new markets,” announced He stated: “Fintechs, with all their weird responding to customer needs. It is about a Depastas. and wonderful logos, are building brands social purpose more than a numbers game.” Indeed, Depastas is convinced that ‘the pie and emotional relationships to their custom- Hall disputed that by working with finan- is large enough to feed everyone. They don’t er base. Banks are purely manufacturers; they cial services, fintechs were demonstrating have to kill each other’. have no understanding of where the market their maturity, sustainability and scalability. Banks and fintechs have complimentary is going and no idea what the consumer is He believed the recipe for success for banks sets of skills and resources that allow them looking for in the future.” was a combination of two things: “Financial to work together. Depastas called it co-com- Parker argued that fintechs could not be services need to be emotional and rational as petition: “Cooperation with some elements considered friendly when they were effective- well. They need to perform and they need to of healthy competition.” ly taking profits away from the banks. “A look good.” The huge potential for them to be and profit pie was mentioned. It’s a bit like a bal- remain friends comes from, as Guibaud men- loon. I don’t believe that profits go up and up The bloodbath tioned, two things. until that balloon explodes. There is only a As moderator Douglas Blakey, group edi- “For one, fintechs need the funding, certain amount of profit available,” he said. tor of consumer finance titles at Timetric, branding and established relationships the According to Parker, fintechs are now serv- opened up the floor to questions. The panel banks bring. The slow dinosaur banks on the ing the profitable customers of that profit pie got their claws out to fight it out one last time other can benefit from the agile mindset and while the banks are left with the unprofit- before voting on the motion. cutting-edge technology the fintechs offer,” able customers: “[The banks] are left with When asked about how fintechs could be claimed Depastas. the commodity-based wholesale business.” considered foe when they need such high Depastas further proved his point by As a dramatic conclusion to his speech, capital requirements to survive, Vella replied: admitting that very few startups have actu- Parker specified: “This lack of real customer “The aspect that you’re missing is time. ally passed the 100,000 users threshold. He insight therefore becomes self-fulfilling. “When it is explained that there is a poten- explained that these startups rely on banks’ “The less you understand about them tial to hack into the $1trn industry and that brands to provide their customers with the today, the less you understand about them all the current players are dinosaurs, there is trust and loyalty they desperately need. tomorrow and the less you know about them money to be had.” On the other hand, banks cannot survive in the future. Fintechs will leave with 60% of An audience member reiterated the ques- if they do not jump on the digital wave: they your profits in the pocket.” tion: “Are they a foe now or in 20 years’ understand the urgency of investing in fin- Vella backed Parker’s arguments up by cre- time?” techs. ating his very own analogy around sea ani- Vella took up the question once more: In his closing statement, Depastas conclud- mals. He first described the paradigm shift “You stole my thunder! They may appear to ed that the $20bn investment in fintechs by financial players are currently facing. be friendly at the moment, but time is the fac- banks reflected the confidence banks have in In this highly connected world where the tor that people are not considering.” start-ups: “Fintechs have proven that essen- global digital participation is unprecedent- Guibaud retorted: “Fintechs need larger tially they want to participate in the wider ed, there is “in Murdoch’s words, a signifi- players over time. If you don’t have the capi- ecosystem. They want to optimise processes cant dynamic of the fast beating the slow,” tal, you need to stop. and build on top of APIs.” explained Vella. “A lot of investment money needs to be “We are no longer in waters that worry spent on marketing to actually reach out to Biscuits, piranhas or electronic cars? about great white sharks, but rather we are people and build a customer base.” Speaking for the opposition, David Parker, now scared of the little players taking little Another member of the audience added: CEO of Polymath Consulting, and Roy bites. Piranhas are cute when you see a pic- “Let’s assume it is 10 years from now. Vella, digital expert and consultant, chose ture of them, but once you zoom in on the Describe what the world would look like original and quirky analogies to express their teeth, they become threatening,” admitted after all these great partnerships.” opinions. Vella, insinuating that piranhas are the fin- “[Fintechs and banks] will be able to go

14 y August 2016 www.retailbankerinternational.com

RBI 728.indd 14 26/07/2016 14:32:04 Retail Banker International EVENT: THE DIGITAL BANKING CLUB

It is slightly to their detriment’. A member of the audience asked if innova- tion will bring the death of money licenses. Parker purported that they are increasingly easier to get: “It is easier to buy it off a manu- facturer. That is Tesco’s attitude.”

The aftermath As the debate came to an end and as the results were about to be announced, a mem- ber of the audience added that the IT depart- ments throughout large corporations are often the blockers of innovation. The battle had been fought and the audi- ence had made up their minds. So, who is the clear winner? Prior to the the extra step. Fintechs feel there is a gap in “Certain things are predictable. It’s very debate, the voting stood at 84% for the the market and can offer services that banks simple: when someone gets good service and motion in comparison to 16% against the can’t; such as loans to high risk customers,” good products, they tend to go back. motion. Guibaud replied. “Banks will lose the customer relationship After the debate, the second poll resulted Depastas regretted to say that it is ‘hard to as fintechs gain that customer relationship.” with only 55% for the motion and a stagger- imagine the future in three years, even more Hall cut in to explain that ‘the future will ing 45% against the motion. so in 10’. be more diverse, but I don’t think it’s a ques- It was decided at the beginning of the He stated: “You go to banks for their over tion of one or another. Banks need to be clear debate that the winner would be based on the all package. Insights, advice... Customers on what they are going to serve. Choice is swing between the number of votes before want specific offerings from fintechs but are going to be phenomenal’. and after the debate. still customers of the big banks.” Meanwhile, Cadbury felt that ‘banks can- On that basis, the opponents of the motion Parker shut Depastas down by affirming: not fulfil certain services that fintechs offer. won the debate, with a swing of 29%. <

n DEBATE PARTICIPANT PROFILES FOR THE MOTION AGAINST THE MOTION George Depastas, head of product, real-time analytics, data products and Simon Cadbury, director of strategy and innovation, Intelligent Environments platforms, Barclays Depastas heads the real-time analytics product for Barclays Africa, driving the wider Cadbury is a product marketer and strategist with 18 years’ experience working for a innovation agenda and working closely with start-ups, to deliver cutting edge dynamic range of major international brands. customer experiences. Cadbury’s role is to work with Intelligent Environments’ investors to set and deliver the Depastas comes from an engineering background, and has experience in the areas of company’s mid- and long-term strategy, as well as overall responsibility for product digital user experience, business optimisation and innovation strategy. development and management for Interact, the company’s core product offering. Cadbury joined in 2013 from Lloyds Banking Group where he was responsible for payment technology, and also sat on the credit card division’s leadership team. Prior to this he worked on the launches of a number of firsts in new technology: the Blackberry (BT Cellnet), BT Openzone (BT Retail), 3G Live! (Vodafone Australia) and Sky HD (BSKYB). Sophie Guibaud, vice-president European expansion, Fidor David Parker, CEO, Polymath Consulting Guibaud started her career in investment banking in New York before joining a growth Parker is founder and CEO of Polymath Consulting, which has now delivered over 50 capital fund in Paris. Along with investing in startups, she advised them on their projects for clients in prepaid cards and emerging payments. The company’s current development strategy. work includes projects in the Middle East, US, Asia, Africa and Europe. However, wanting to be more involved in startup operations, she moved to London and Parker has an in-depth knowledge of payments and payment cards and is known for his was instrumental in launching HelloFresh, a Rocket Internet food subscription-based work with prepaid cards, mobile money/mobile wallets and M-pos. company. Parker has previously worked for companies such as the Gaming Bourse, the Pepper After heading product strategy and commercialisation at Bankable, a payment Corporation and Saatchi & Saatchi (Saudi Arabia). solutions company, she is now in charge of the European roll-out of Fidor. Jon Hall, MD, Masthaven Bank Roy Vella, digital expert and consultant Hall will lead Masthaven Bank, which has unveiled plans to become a new UK retail Vella is a digital entrepreneur and independent consultant to brands such as Visa, bank with a launch planned for the summer of 2016. Vodafone, GSMA, and small startups. Hall joined Masthaven in January 2015 from Saffron Building Society where he had Before offering his expertise at large, Vella served as leader of RBS global mobile been CFO since August 2004, and subsequently CEO from 2011. banking efforts. Before this, he spent five years at PayPal, starting out as director of Hall was part of the senior management teams with CT capital, a specialist mortgage business development in USA merchant services before leading the mobile payments lender and intermediary, Aviva and PwC, both in the UK and Bermuda. initiative across Europe. Prior to PayPal, Vella worked as VP of sales and marketing at 4charity, Inc., then as partner of Quantum Technology Ventures, a corporate VC firm focused on the storage industry.

www.retailbankerinternational.com August 2016 y 15

RBI 728.indd 15 26/07/2016 14:32:06 STRATEGY: DISRUPTIVE CHANGE Retail Banker International

Disruption as a force for change Every week, it seems that there is a new entrant to the banking sector claiming to be ‘disruptive’. However, is this really the case? Big banks do not appear to be heading anywhere. New research from PricewaterhouseCoopers (PwC) states that they well might. Patrick Brusnahan reports

any experts have looked at the financial sector in its current state and decided that while banks are M under threat, there is still time to move the ship away from the iceberg. On this point, the report asks: “Have [banks] done this? So far, not really.”

Bank inertia While the report, entitled The Future Shape of Banking in Europe, gives credit to banks for progress on fronts such as regulation, legacy remediation, trust, customer service, and operational innovation, it claims that this has not been enough. and payments. collectively customer issues and con- In the midst of a ‘crisis in European bank- This is growing at an alarming rate. Fund- temporary challenges such as financial ing’, the sector has consistently missed its ing of fintech start-ups more than doubled in exclusion, under-funding of lifetime performance hurdle rates (meaning their 2015, hitting $12.2bn in 2015 from $5.6bn a financial security, and under-investment average return on equity was less than their year before. Rather than sticking to their usual in new infrastructure and productive average cost of equity) by some way. home territories of Silicon Valley and London’s capacity. A rather optimistic scenario. While some underpeformance can be Canary Wharf, fintech firms are expanding to attributed to one-off asset write-downs, fines wherever they see opportunity. Asia-Pacific Miles Kennedy, financial service partner restructuring charges, and the like, net eco- is now one of the fastest growing regions for at PwC and the report’s co-author, told nomic spreads have stuck at around – 6% for fintech, astoundingly quadrupling their fintech RBI: “The third of our possible scenarios is the past two years. investment in the last year. the most likely and the most positive of the The report posits that one reason for this is PwC believe that the current situation will three. It is not just wishful thinking; there is that Europe is overbanked. Europe has 130 lead to one of three scenarios: evidence to suggest that it is already under- large banks (over €30bn in assets) working way. The combination of Brexit, ongoing in a €15.3trn marketplace. That equals one • The trend of multi-paced transforma- economic weakness and the challenges faced bank per €118bn of GDP. In contrast, there tion continues: banks gradually adapt by incumbents is likely to be a disrupter that is one large bank per €302bn in the US, one and consolidate, but not fast enough only quickens the pace of change.”< per €214bn in Canada and one per €144bn to prevent challengers from taking a n in Australia. chunk (the report states possibly 20%) HOW ARE YOU CURRENTLY DEALING WITH As a result, cost-efficiency in the European of the market permanently; FINTECH COMPANIES? market is not as high as in others. Cost-to- Do not know 7% income is an average of 80%, compared to • The trend might quicken and reach a Other 9% the global average of 65%. tipping point. This means that the chal- We acquire fintech companies 9% The report states: “The bottom line is that lengers become the incumbent and the there are too many banks in Europe, doing current incumbents fade away or, at We launch our own fintech subsidiaries 11% too much, in a structurally unfavourable best, are reduced to a utility role. In We set up venture funds to fund fintech 14% market environment.” this scenario, a new banking crisis and services more public intervention is possible, or We rebrand purchased fintech services 14% The vigour of the challenger We establish start-up programmes to 15% With all of this in mind, surely the market • A third scenario, one that doesn’t accept incubate fintech companies should not be encouraging new entrants to the opinion that incumbents and chal- We buy and sell services to fintech 22% stake a claim. lengers need to be locked in permanent companies On the contrary, there is a large amount combat, is that a new ‘symbiotic’ rela- We do not deal with fintech 25% of innovation and investment interest in the tionship is formed. A new banking sys- challenger sector. This interest is from new tem will be formed where ‘incumbent’ We engage in joint partnerships with 32% fintech companies banking names to technology driven start- and ‘challenger’ are redundant terms. ups to existing firms encroaching on banking This would lead the market to address Source: PwC

16 y August 2016 www.retailbankerinternational.com

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FINTECH countries, and launched its pan-African The bank aims to build an active customer Lloyds rolls out mentoring mobile banking offer in April 2015. base of 100,000 in its first year of operation. scheme for fintech start-ups Customers of the bank will be issued one M&A physical and one virtual Visa-branded card. Lloyds Banking Group has launched a new Qatari royal family becomes The physical card can be used for point-of- mentoring scheme to support startups in the main shareholder in Deutsche sale purchases at retail locations, and the financial technology space. virtual card for online purchases. The scheme will help fintech startups ben- Bank Neon will use Daon’s IdentityX platform efit from knowledge sharing with the bank’s Qatar’s royal family has increased its stake for biometric authentication. Customers of experienced staff, including refining concepts in German banking group Deutsche Bank to the digital bank can use facial recognition to to improve business models, the UK lender nearly 10%, for an undisclosed amount. access their account and to make payments. said. The scheme will involve participation The royals owned the stake in Deutsche Daon CEO Tom Grissen said: “Daon of mentors from diverse areas of the banking Bank through investment groups Para- works with some of the most innovative group. The bank initially plans to enrol 100 mount Services Holdings and Supreme brands in the financial services industry and mentors to work with the same number of Universal Holdings. As of August 2015, we’re excited to be working with Neon to startups. the family controlled 6.1% of the bank provide their customers with a superior user Lloyds Banking Group innovation and through these two groups. experience through the use of biometrics. digital development director Marc Lien said: The rise in stake now makes the fam - “Convenient and secure authentication has “The mentoring programme is an opportunity ily the biggest shareholder in the German become critical in today’s digital economy as to boost our support to the UK as one of the lender ahead of BlackRock which controls customers embrace their smartphone as the main fintech hubs, allowing us to share the about 6% of the lender. preferred device to do business online.” insights of the challenges and opportunities In addition, Deutsche Bank has also that come with scale and an existing custom- appointed lawyer Stefan Simon to replace STRATEGY er base to provide fintechs with a comple- supervisory board member Georg Thoma, Citi creates ATM Community mentary understanding of the market.” heeding to the advice of the Qatari share - Network to offer surcharge-free The bank will collaborate with fintech holder. accelerators Innovate Finance and Startup- Simon will stand for election as a mem - ATM access to credit unions bootcamp to identify ideal candidates for the ber of the supervisory board at the bank’s US-based bank Citi has created the new scheme. annual general meeting on 18 May 2017. Citi ATM Community Network to offer The lender eventually intends to roll out a Chairman of Deutsche Bank’s supervi - surcharge-free ATM access to partner credit bespoke platform where these startups can sory board Paul Achleitner said: “We are unions as well as minority-owned banks. register their interest, highlight their reasons pleased that our Qatari shareholders are The network will give participating organ- to look for mentorship, and their required banking on the success of Deutsche Bank isations free access to about 2,400 branch support areas. as shown through their long-term holdings. ATMs of Citibank including those in Chi- “Through collaboration and partnerships We welcome Stefan Simon, a highly qual- cago, Los Angeles, Miami, New York, San with startups, we can support the evolution ified attorney, to the Supervisory Board. Francisco and Washington DC. of how the financial services sector will serve He has a great deal of experience in corpo- Citi head of US retail banking Will Howle its customers. This programme will be mutu- rate law, corporate governance and com - said: “The Citi ATM Community Network ally beneficial as we can also learn lessons pensation oversight.” will expand access to ATMs in key areas by from fintech firms’ successes and failures that Meanwhile, US attorney Louise Parent capitalising on our branch network in six will help shape and inform our digitisation will replace Thoma as chair of the super - major urban centres in the US. journey,” Lien added. visory board’s integrity committee. Parent “We take seriously our role of providing has held the role on an interim basis since financial services to the broad spectrum of MOBILE April 2016. populations in the communities in which we Société Générale invests in operate, and the Citi ATM Community Net- mobile payments outfit TagPay DISTRIBUTION work is yet another way we will do it.” New mobile bank Neon debuts Citi Inclusive Finance and Community French banking group Société Générale has in Brazil Development global director Bob Annibale acquired an 8% stake in mobile banking ser- added: “The Citi ATM Community Network vice company TagPay. Neon, a new mobile-only bank with no enables us to collaborate in a new way by Launched in 2005, TagPay enables users monthly or annual fees, has launched in Bra- expanding access and convenience for the to check balance statements from anywhere, zil, targeting millennial clients. customers of these partner institutions while and make fund transfers and bill payments The digital bank, founded under the stew- at the same time, strengthening local trusted via their mobile phones. ardship of entrepreneur Pedro Conrade, is a credit unions and minority-owned banks.” The platform makes use of cloud comput- spin off from fintech firm Contro.ly that was Organisations participating in the Citi ing and can be used on all devices irrespec- established in 2014. ATM Community Network include the Dis- tive of network operators. The French lender Neon boss Pedro Conrade said: “My dis- trict Government Employees Federal Credit paid $1m to TagPay for the stake. taste with the traditional banking model Union, the Lower East Side People’s Federal According to Société Générale’s Alexandre started after a disastrous experience during Credit Union, the Neighborhood Trust Fed- Maymat, the deal represented a significant international travel where my bank didn’t eral Credit Union, the New York University step to grow the bank’s business in the conti- bother to help me through a tough situation. Federal Credit Union, the Brooklyn Coop- nent in the face of rising infrastructure costs. “It was then that I realised I was just anoth- erative Federal Credit Union, and the North Société Générale is present in 18 African er number to them.” Jersey Federal Credit Union.

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RBI 728.indd 17 26/07/2016 14:32:07 NEWS: DIGEST Retail Banker International

DISTRIBUTION Through the alliance, the companies key commercial card issuer in the UK and Starling Bank secures UK intend to equip financial institutions’ ability helps us to continue our position as the lead- banking licence to protect clients by statistically scoring the ing European commercial card processor. behaviours they use during transactions. We will continue to support Lloyds Banking Starling Bank, a digital challenger bank Users’ actions – such as the way they swipe Group and work together to further grow founded in 2014 by former Allied Irish Bank smartphones – are very distinct, so continu- the business and our relationship.” COO Anne Boden, has been granted a UK ous machine learning can authenticate users Lloyds Banking Group, which was formed banking licence by the UK’s Prudential Regu- based not on what they do, but on how they in January 2009, has the largest private latory Authority and the Financial Conduct do it, NetGuardians said. shareholder base in the UK. The group has Authority. BehavioSec’s VP of engineering, Ingo more than 30 million customers and approx- The mobile bank, expected to formally Deutschmann, said: “This is superior trans- imately 75,000 employees. launch in January 2017, will allow custom- actional security to older methods such as Operating a multi-brand strategy, the ers to do everything from one account and passwords. A password can be hacked, but a group’s main brands include Lloyds Bank, help customers gain insights on their spend- swipe style cannot. At the same time, because Bank of Scotland and Halifax. It has more ing habits. Starling Bank will also incorpo- it does not require users to take additional than 2,000 branches throughout the UK. rate advanced security features, card control security steps, it offers the ease-of-use that technology and real-time notifications. consumers ask for. SECURITY Starling Bank CEO Anne Boden said: “We “Users are protected in such a way that they Nearly 30% of consumers are delighted to have the confidence and sup- don’t have to think about their security. Secu- worldwide have experienced port of the regulator, to move forward and rity is built into their own actions.” introduce a new style of banking. NetGuardians added that financial firms card fraud “For the past year, our team has been can add this transaction-level protection to Nearly 30% of consumers across the world focused on building our product and tech- its operational risk solutions, which will pro- have been a victim of card fraud in the past nology from the ground up. vide end-to-end risk mitigation and continu- five years, according to new global bench- “By 2020, the number of UK mobile bank- ous control for fraud protection and regula- mark data from ACI Worldwide and Aite ing users will double from 17.8 million to tory compliance. Group. 32.6 million, and our aim is to empower NetGuardians COO Raffael Maio said: The global fraud study, in which over these people to better manage their finances “Financial institutions today need fraud pro- 6,000 consumers from 20 countries partici- with an incredible app, purpose-built for tection integrated into everything they do. pated, revealed that compared to ACI’s 2014 those who happily manage their lives on Bank clients think about fraud risk most at benchmark study, card fraud rates – unau- their phone.” the time they conduct transactions. thorised activity on debit, credit and prepaid Moreover, the bank has also committed to “With BehavioSec, we help financial insti- cards – are rising worldwide. join UK’s real-time payment service Faster tutions provide strong security for transac- The study also highlighted that 14 of the Payments later in 2016. tions, contributing to overall security and 17 countries surveyed in both years reported “Starling Bank is on track to be the first client confidence.” an increase in card fraud rates between 2014 next-generation bank to connect directly to and 2016. the Faster Payments system. PAYMENTS It further revealed that risky behaviours, “This will allow us to offer the best possible Lloyds Banking Group renews such as leaving a smartphone unlocked, payments experience to our customers and payments agreement with TSYS have a direct correlation to fraud. The report partners,” Boden said. pointed out that the overall risk for fraud is To date, the bank has received $70m of Lloyds Banking Group has renewed its growing due to the global increase in smart- investment from Harald McPike, founder agreement with payment solutions provider phone and tablet use. of Bahamas-based quantitative investment TSYS to continue to process the bank’s UK Mexico recorded the highest rate of fraud, manager QuantRes. commercial card portfolio. followed by Brazil and the US, according TSYS will continue to process the Lloyds to the report. The US is the only country to SECURITY Banking Group’s portfolio on the TS2 Com- remain in the top three of the list for both NetGuardians forges fraud mercial platform following the contract years, due in part to being slow to roll out protection partnership with extension. EMV-enabled chip cards and security chal- It will also provide additional customer lenges with skimming and data breaches. BehavioSec services to the bank through TSYS Managed The survey also found that around 54% Swiss banking software company NetGuard- Services including customer servicing, collec- of consumers globally exhibit at least one ians has forged a partnership with Sweden’s tion and fraud management. risky behaviour, such as keeping a PIN with BehavioSec to use their complementary tech- Lloyds Banking Group head of commer- the card, which puts them at higher risk of nologies to deliver complete fraud protection cial cards Jennie Hill said: “Having worked financial fraud, compared to 50% in 2014. to financial institutions globally. with TSYS since 2007, we are continually Nearly 17% of debit and credit card hold- NetGuardians is known for its specialised shown the strength and resiliency of TSYS’ ers who participated in the study said they expertise in user behaviour analytics and commercial card platform. We look forward experienced fraud multiple times during the profiling to implement controls for fraud to continuing to work with TSYS, benefiting past five years compared to 13% in 2014. and compliance challenges, while Behavi- from the continued investment in the plat- ACI Worldwide vice-president and global oSec develops behavioural biometric tech- form so we can offer the best solutions for lead of fraud and data Andreas Suma said: nology to precisely analyse behaviours at the our customers.” “This study confirms that card fraud remains user transaction level, and alert behaviour TSYS International group executive Rob an issue of deep concern for consumers changes that signal misuse. Hudson said: “Lloyds Banking Group is a around the globe.”

18 y August 2016 www.retailbankerinternational.com

RBI 728.indd 18 26/07/2016 14:32:08 Retail Banker International NEWS: DIGEST

DIGITAL REGULATION coordinated responses. IBM to establish blockchain Major US banks pledge support All EU countries are required to implement innovation centre in Singapore for London following Brexit a national NIS strategy. Parliament rapporteur Andreas Schwab Major US banks have pledged to help Lon- said: “Cybersecurity incidents very often don maintain its position as a global finan- have a cross-border element and therefore cial centre following the UK’s decision to quit concern more than one EU member state. the European Union. Fragmentary cybersecurity protection makes The banks, which include JPMorgan, us all vulnerable and poses a big security risk Goldman Sachs, Bank of America Merrill for Europe as a whole. Lynch, Morgan Stanley and UK-based “This directive will establish a common Standard Chartered, promised the UK’s level of network and information security then-Chancellor of the Exchequer George and enhance cooperation among EU member Osborne that they would collaborate to iden- states, which will help prevent cyberattacks tify new opportunities that may help the UK on Europe’s important interconnected infra- Tech giant IBM is planning to open its first retain its position as one of the most attrac- structures in the future.” blockchain innovation centre in Singapore to tive places worldwide for business. accelerate blockchain adoption for finance “One of Britain’s key economic strengths DIGITAL and trade. is that it is a world-leading financial centre. South African lender Absa The company will work with the Singa- It has one of the most stable legal systems introduces Masterpass digital pore Economic Development Board (EDB) in the world, a brilliant workforce and deep, and the Monetary Authority of Singapore liquid capital markets unmatched anywhere wallet (MAS) to explore the use of blockchain and else in Europe, all of which are underpinned South African financial services giant Absa cognitive technologies to improve business by world class regulators,” the banks’ lead- has launched MasterCard’s digital payment transactions in several different industries. ers and Osborne said in a joint statement. platform Masterpass, to enable clients to The Innovation Centre will be staffed with “Today we met and agreed that we would make online payments with a virtual wallet. technical talent from Singapore as well as work together to build on all this with a com- Called Absa MasterPass, the app can be researchers from IBM Research Labs world- mon aim to help London retain its position used to make online purchases wherever wide. It will work with government, indus- as the leading international financial centre,” Masterpass is accepted. tries, and academia to develop applications the statement added. Absa, a wholly owned subsidiary of and solutions based on blockchain, cyberse- Just ahead of the Brexit vote, JPMorgan Barclays Africa Group, said that its custom- curity and cognitive computing technologies. CEO Jamie Dimon had warned of shedding ers will also soon be able to pay for in-store The centre will also engage with small up to 4,000 UK banking jobs in the event of shopping using Absa Masterpass. and medium-sized enterprises to create Brexit, while Citi had warned of an organisa- Introduced in 2013, MasterPass securely new applications and grow new markets in tional restructuring of its UK business. stores consumers’ credit, debit or cheque finance and trade. card information, and shipping and billing IBM Research global labs vice-president REGULATION address details in a secure data centre at the Robert Morris said: “Now with new cloud Tesco Bank, MasterCard partner issuing bank, and sends cardholder informa- services that make these technologies more to enhance in-store mobile tion to the merchant during the payment. accessible, leaders from all industries are To pay, users open the app and scan the beginning to take note of the resulting pro- payment experience quick response (QR) code on the website, found and disruptive implications in a range The European Union (EU) has given the go- select the card they wish to use, and enter of settings including finance, banking, the ahead to its first legislation on cybersecurity their bank PIN on their own device. Internet of Things, healthcare, supply chains, to help vital services, including banking, to Mastercard launched the digital payment manufacturing, technology, government, the combat cyberthreats. service in South Africa in July 2014. Cur- legal system and more.” The new law will also impose security and rently, Masterpass is accepted at more than The first projects for the centre will reporting obligations on operators in other 270,000 merchants globally, including South focus on trade solutions using blockchain industries, including energy, transport and African merchants such as Vodacom, Forever to improve efficiency of multi-party trade health. Resorts, Lancet Labs, Lottostar, South Afri- finance processes and transactions. The law also requires digital operators can Airways and Takealot. The solutions and associated blockchain such as online marketplaces, search engines Willie van Zyl, head of card issuing, Absa platform will be designed and developed in and cloud services to report breaches to retail and business banking, said: “We are Singapore, IBM said. national authorities, though security and seeing a huge change in the way our cus - MAS chief fintech officer Sopnendu notification requirements are lighter in case tomers shop and pay for things and the Mohanty said: “The financial sector is well- of these operators. The new law excludes Absa Masterpass App is another step on our placed to play a leading role in Singapore’s micro- and small digital companies. mobile banking journey as we respond to the vision of being a Smart Nation. The legislation on cybersecurity calls for changing needs of our customers. “Given that technology is a key enabler of the formation of a strategic cooperation “It also gives them access to a smooth shop- financial services, MAS is pleased to contin- group to share data in cybersecurity capac- ping experience from start to finish and in ue to work with companies like IBM to pro- ity-building. Member states are required to real time. mote technology innovation in finance, and establish a network of computer security “It allows people to conduct the transaction encourage the adoption of safe and efficient incident response teams to manage risks, dis- of their choice through the channel of their technology with the financial industry.” cuss cross-border security issues and detect choice – at any time and in any place.”<

www.retailbankerinternational.com August 2016 y 19

RBI 728.indd 19 26/07/2016 14:32:12 M&A: VOCALINK Retail Banker International

VocaLink finally captured by MasterCard

MasterCard’s acquisition of VocaLink bolsters confidence in Britain remaining an attractive destination for international investors. It’s been argued that the sale will improve competition in the UK banking industry, but will it deliver a new payments proposition? Patrick Brusnahan writes on the deal

fter months of speculation, buy VocaLink shows that Britain remains an MasterCard has entered into a attractive destination for international inves- £700m ($920m) agreement to tors. Britain is and continues to be an open acquire VocaLink. VocaLink’s inves- and globally facing country in which to do A business.” tors could also receive a potential £169m earn-out if performance targets are met. With the banks losing a huge chunk of Under the agreement, a majority of their stake in VocaLink, there are worries VocaLink’s shareholders, primarily UK- that this will lead to increased costs to the based banks, will retain 7.6% ownership for banks, which would be moved onto consum- at least three years. ers. The sale process effectively kicked off in Dunne believed this to not be the case: February this year when the UK Payment “We have contracts in place to run the core Systems Regulator Hannah Nixon recom- service for 4–5 years and those contracts mended the UK’s biggest banks sell their were fixed at the time of renewal. There is stakes in VocaLink. She argued that such a no additional cost or fee to the end consumer. sale would help to improve banking compe- Consumers benefit from most of these ser- tition in the UK and deliver clear benefits to vices for free anyway and that’s the nature of challenger banks, fintechs, UK consumers the payments ecosystem.” and small businesses. recently in other markets. We have won a One of VocaLink’s more promising prod- Nixon said: “There needs to be a funda- number of contracts to take the technology ucts is Zapp, also known as Pay by Bank mental change in the industry to encourage that we’ve been running here in the UK into app. It has had a turbulent time with launch new entrants to compete on service, price other markets, such as Singapore.” delayed more than once and its CTO, Ian and innovation in an open and transparent Mark Barnett, president of MasterCard Sayers, leaving to join Danske Bank. How- way.” UK and Ireland, explained the reasoning for ever, Barnett remains enthusiastic. Italian payments group, SIA, and a num- the acquisition. “Zapp is a fantastic e- and m-commerce ber of private equity firms had also been He said: “The best real-time ACH plat - solution. It reverses the logic of a payment linked with possible bids for VocaLink prior form in the world is VocaLink’s. They proved so consumers push a payment rather than to MasterCard’s successful bid. they can take it internationally to a few mar- getting pulled. MasterCard can bring that In an investors’ call following Master- kets and, with our global reach, we think we solution to the POS market. We have 40 mil- Card’s acquisition of VocaLink, VocaLink can take it to many more. lion acceptance locations globally. Combine CEO David Yates claimed that the compa- “In addition, there are a bunch of new those two things and I think you have a new ny had ‘outgrown its UK bank shareholder value added services that VocaLink have payments proposition which is cheap, secure, base’. added which, given where MasterCard is in simple, and smart. It is a real innovation,” Speaking to RBI, Chris Dunne, director of the UK, makes it really important to scale Barnett said. market development at VocaLink, expanded that bit of business in the UK.” That’s a lot of expectation, but Dunne on Yates’ point. Barnett isn’t the only one pleased with believed that ‘people will be using this very He said: “I think David was talking about the deal. The UK’s finance minister, Philip soon’, even as early as the beginning of next the success that VocaLink has been having Hammond, said: “MasterCard’s decision to year.<

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RBI 728.indd 20 26/07/2016 14:32:19 Title Sponsor

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