www.retailbankerinternational.com Issue 758 / febuary 2019

THROUGH THE ROOF

MIDDLE EAST SHARES SCORE WORLD-LEADING GROWTH

INNOVATION DISTRIBUTION FEATURE

How Yapı Kredi is 86 400 will soon give US regional bank BB&T has revamping the Turkish Australians an alternative the potential to weather an banking industry to the dominant Big Four economic downturn

RBI 758 February 2019.indd 1 14/01/2019 14:48:21 contents this month

COVER STORY NEWS 06 05 / EDITOR’S LETTER 18 / DIGEST • Italy issues decree to stabilise struggling Banca Carige • RBS acquires 25% stake in millennial- focused fintech Loot • Linedata acquires French fintech Loansquare • BMO Financial Crimes Unit announced • Starling looks to France and Germany • ProBank austin launches financial compliance training • Ghana completes banking industry consolidation • ConnectOne completes Greater Hudson Bank merger • China reduces reserve requirement ratio • National Bank of Kuwait launches SWIFT gpi services THE MIDDLE EAST 19

Editor: Group Editorial Director: Head of Subscriptions: Douglas Blakey Ana Gyorkos Alex Aubrey +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]

Senior Reporter: Sub-editor: Director of Events: Patrick Brusnahan Nick Midgley Ray Giddings +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]

Junior Reporter: Publishing Assistant: Briony Richter Mishelle Thurai +44 (0)20 7406 6701 +44 (0)20 7406 8633 [email protected] [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected]

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2 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 2 14/01/2019 14:48:32 contents february 2019

10 ANALYSIS INNOVATION FEATURE 06 / THE MIDDLE EAST 12 / YAPI KREDİ 14 / BB&T 2018 was an excellent year for the share The Turkish banking sector has strong growth US regional bank BB&T has the potential to price performances of Middle East . As potential, and has overcome upheavals. Briony weather any imminent economic downturns Douglas Blakey reports, more than one half Richter speaks to Yakup Doğan, assistant due to its stable management team, a of the region’s largest banks by market cap general manager at Yapı Kredi, about how the diversified business mix and a strong customer posted double-digit price rises bank is revamping the industry base. Robin Arnfield reports 17 / OPEN BANKING 16 / BELGAZPROMBANK It has been a year since Open Banking Belgazprombank has implemented a system 12 launched; however, the movement has to screen transactions and customers to help been fairly quiet since its much-advertised prevent crime. But which security issues need introduction, and banks have not been addressing? And how will working with FICO impressed. Patrick Brusnahan writes resolve them? Patrick Brusnahan investigates DISTRIBUTION 08 08 / 86 400 With the launch of digital challenger 86 400, Australians will soon have an alternative to the dominant Big Four. Travis Tyler details the bank’s journey to date, and what to expect in 2019. Briony Richter reports 10 / BANCO POPULAR INDUSTRY INSIGHT DOMINICANO 22 / WIPRO DIGITAL Banco Popular Dominicano has launched Too many senior bank executives fail to a wholly digital branch in the Dominican appreciate the importance of their business’s Republic’s capital, Santo Domingo. Is it culture in the drive to digitise operations, enough to bring consumers back to branches? argues Alexander Kalinovsky, director of Patrick Brusnahan writes engineering at Wipro Digital

www.retailbankerinternational.com | 3

RBI 758 February 2019.indd 3 14/01/2019 14:48:39 London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING

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1118Timetric_RBI_Ad.indd 1 26/11/2018 10:17 editor’s letter happy birthday, Open Banking Douglas Blakey, Editor

s RBI goes to print, Open Banking in the UK ad campaign across London’s public transport system. If ever celebrates its first birthday on 13 January. there was a case of what is essentially a prepaid card product A Before looking forward, let us look back very offering more hype than substance, this is it. And if it persists briefly to the launch of Open Banking. There was a lot of with its expensive fee structure, it is hard to see it gaining hype surrounding the launch, and many industry observers significant customer numbers. who ought to know better spoke a lot of nonsense about how Far from viewing Open Banking as a new revenue quickly Open Banking would transform the industry. opportunity, the impression given by many incumbents is that It was, we were told, a game-changer. Open Banking would this is more of a regulatory-compliance requirement. Off-the- disrupt the incumbents. It would help to accelerate switching record comments from senior UK bankers suggest that many rates. There would be innovation on a scale not previously have only developed a limited Open Banking strategy to date – witnessed. The end result would be considerable benefits to and privately, many admit that they are not satisfied with their consumers, who would gladly share their personal data with progress. third parties. A degree of rational, calm, realistic reflection is more appropriate at this stage, rather than the hype of the Big ambitions evangelists or the negativity of those eager to write off Open Many evangelists went even further and claimed that Open Banking prematurely. Data-breach embarrassments such as the Banking represented a new revenue-generating opportunity for Cambridge Analytica scandal do little to encourage a sceptical the incumbents. The Open Banking revolution would be such a public to share data. Data sharing is, after all, core to the success in the UK that markets outside Europe would be keen potential success of Open Banking. to accelerate their plans for similar plans. It would, however, be wrong to argue that such scandals We heard similar arguments and ridiculously optimistic mean Open Banking is doomed to fail to catch on. Nor do I forecasts around the time the UK rolled out seven-day accept the argument, advanced by some, that the requirements switching. The ludicrous claims by some that seven-day of the Strong Customer Authentication initiative have the switching would bring about 6% or even 10% switching rates potential to make the consumer experience worse, and in turn were always a nonsense – and that is borne out by the figures: kill off Open Banking’s prospects. as previously noted in RBI, switching rates remain stuck at around 2% per year. Yolt – one of many early successes Open Banking supporters’ ambitions were undoubtedly It was always going to be a slow – or slowish – process, and ambitious, but it is not objectionable to promote innovation, talk of quick, seismic and transformational changes was always encourage customer choice or empower customers. The unrealistic. Equally unrealistic are those forecasting now that fact that it is an opt-in system, and the safeguarding of data 2019 will be the year that Open Banking really takes off, is at the heart of the system, is to be applauded. It is also whatever that means. It was always going to take time. The unarguable that for certain types of transaction, such as established banks are still working out where to develop in- international payments and travel, the likes of TransferWise house or work with external consultancies and tech providers. and Revolut are helping to lower costs for a growing number of But on a positive note, account-aggregation services are now customers. readily available – and for free – on the app stores. To give one example, Yolt – the first TTP to connect to all CMA9 banks Nationwide – Open Banking for Good using the Open Banking APIs in September 2018 – surpassed There are also examples of how Open Banking may boost 0.5 million registered users last year. financial inclusion. Nationwide’s Open Banking for Good As the Open Banking Implementation Entity reports, there initiative, focusing on boosting products that encourage are now 100 regulated providers, of which 17 Third Party financial inclusion, is deservedly attractive favourable Providers are now using Open Banking in the UK. Open comment. Banking technology was reportedly used 17.5 million times in However, the claims that disruptors help to boost November last year, up from 13.9 million in October and 6.5 competition and lower costs do not apply across the entire million in September. sector. Take Viola Black as just one such example. A new There was never going to be a killer app in the first year. In player on the scene has kicked off the New Year with a mega brief: give it time, but for Lord’s sake, cut down on the hype. <

Get in touch with the editor at: [email protected]

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RBI 758 February 2019.indd 5 14/01/2019 14:48:42 analysis | the middle east

after a strong 2018: middle east m&A activity set to accelerate in 2019

2018 was an excellent year for the share price performances of Middle East banks. As Douglas Blakey reports, more than one half of the region’s largest banks by market cap posted double-digit price rises

nding 2018 as the largest by market remain at around 1.7% of capital – and well within the bank’s risk capitalisation is Qatar National Bank (QNB). appetite. E QNB’s share price soared by just over 50% during 2018 for a The largest eight Qatari banks posted combined net profits of market cap of $49.0bn. Qatar Islamic Bank’s share price is up by 57% QAR12bn in the first half of 18, up more than 10% year-on-year. while of Qatar (+40%) also enjoyed a strong 2018. Returns on equity are about 14% across the sector. Analysts forecast And each of the above Qatari banks outperformed the Qatari stock deposit growth of around 6% in 2018, rising to 7.5% in 2019. Loan exchange, which soared by 20% in US dollar-denominated terms in growth of 5% in 2018 is forecast to rise to 7% in 2019. 2018. UAE GAINS QATARI STRENGTH Eleven of the largest 50 Middle East banks by market cap are based in In all, eight banks from Qatar feature in the list (see table). The the UAE. performance of Qatar’s banks is all the more impressive after four The UAE ADX General Index rose by more than 11% in 2018, and countries cut trade ties with the country: the UAE, Saudi Arabia, a number of UAE banks share prices performed even more strongly Bahrain and Egypt cut diplomatic ties with Qatar in June 2017, – notably, the country’s largest bank, First Abu Dhabi Bank: its share alleging Qatari support for Islamist groups. price rose by 28.4% in 2018. But Qatar’s banks boast strong levels of liquidity, high asset quality Emirates NBD (+12.2%) and Abu Dhabi Commercial Bank and strong capitalisation. The largest eight Qatari banks posted (+13.6%) also outperformed the market. 2018 represents a most combined net profits of QAR12bn ($3.3bn) in the first half of 18, significant year in the history of Emirates NBD. In May, it agreed up more than 10% year on year. Liquidity injections from the Qatar to acquire Turkey’s fifth-largest bank, Denizbank, from Russian state are helping to offset the effects of the trade blockade. lender Sberbank for $3.2bn. There is also evidence of non-resident deposits returning to Qatari Emirates NBD’s reputation for digital innovation is also being banks, highlighting foreign depositors’ confidence. boosted by a number of successful initiatives. In December, Emirates Analysts do not expect the Qatari banks to require any additional NBD became the first bank in the region to support Fitbit Pay and central bank support. Capital levels at Qatari banks of around 17% Garmin Pay. That news followed the November announcement that remain well above Basel III guidelines, and non-performing loans Emirates NBD debit and credit card customers can use Google Pay.

6 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 6 14/01/2019 14:48:49 analysis | the middle east

LIV GOES FROM STRENGTH TO STRENGTH MIDDLE EAST – TOP 50 BANKS BY MARKET CAPITALISTION, 2 JANUARY 2019 In addition, Emirates NBD is the first bank in the region to integrate Rank Bank $bn 2018 price its core systems with WhatsApp, enabling the bank to launch change customised banking services via the messaging app in the UAE. 1 Qatar National Bank Qatar 49.0 50.6% Liv, the Emirates NBD digital sub-brand, also goes from strength 2 First Abu Dhabi Bank UAE 41.6 28.4% to strength. It was established as a lifestyle-led proposition featuring 3 Al Rahji Bank S Arabia 39.8 38.1% intuitive tools to help customers keep track of finances on one app. Liv 4 National Commercial Bank S Arabia 38.4 27.9% now has over 100,000 customers. 5 Samba Financial Group S Arabia 17.6 33.6% Another 2018 highlight for Emirates NBD is the roll out of 6 National Bank of Kuwait 17.1 20.7% EasyHub. In partnership with Diebold Nixdorf, EasyHub is the region’s 7 Riyad Bank S Arabia 15.6 50.3% first integrated digital mini-branch. It enables customers to sign up for 8 Emirates Islamic UAE 14.8 2.1% new products, and also offers a variety of teller services open beyond 9 Emirates NBD UAE 13.8 12.2% normal banking hours. 10 Saudi British Bank S Arabia 13.8 26.1% Elsewhere in the UAE, local banks’ 2018 performance was mixed. 11 Kuwait Finance House 13.0 13.9% Loss-making Invest Bank, in particular, is being hit by exposure to the 12 Abu Dhabi Commercial Bank UAE 11.7 13.6% UAE’s challenged real estate and construction sectors. The 15-branch 13 Banque Saudi Fransi S Arabia 10.5 10.2% strong Invest Bank’s loan book comprises loans to these sectors of 14 Qatar Islamic Bank 10.1 57.8% around 40%. 15 Alinma Bank S Arabia 9.6 22.6% At the end of 2018, the Sharjah government announced that it 16 Dubai Islamic Bank UAE 9.1 -11.8% was to take a majority stake in struggling Invest Bank, in an effective 17 Bank Leumi Israel 9.0 6.5% bailout. Invest Bank has been linked to a potential merger with local lender Bank of Sharjah. 18 Arab National Bank S Arabia 8.9 29.9% 19 Masraf Al Rayan Qatar 8.7 3.4% MERGERS ACCELERATE 20 Bank Hapoalim Israel 8.7 -7.1% 21 Arab Bank Jordan 5.6 8.9% Looking ahead to 2019, bank merger talk will remain front-page news 22 Ahli United Bank Bahrain 5.5 4.6% in the region. 23 Alawwal Bank S Arabia 4.7 30.5% The UAE is grossly overbanked, with 22 local banks serving a 24 Bank Aliblad S Arabia 4.6 30.9% population of less than 10 million. That is changing, however, with one 25 Commercial Bank Qatar 4.5 43.8% mega-merger expected to close in the first half of 2019. This involves 26 Boubyan Bank Kuwait 4.3 33.1% a three-way merger of Abu Dhabi Commercial Bank, Union National 27 Mizrahi Tefahot Bank Israel 4.2 -1.5% Bank and Al Hilal Bank. 28 Abu Dhabi Islamic Bank UAE 4.0 13.2% If successfully concluded, the new bank will have combined assets 29 Mashreqbank UAE 3.8 11.4% of about $115bn. It will be the fifth-largest bank in the region, after 30 Housing Bank Trade & Finance Jordan 3.7 0.0% QNB, FAB, Emirates NBD and National Commercial Bank. 31 Union National Bank Abu Dhabi 3.6 23.8% 32 Saudi Investment Bank S Arabia 3.6 17.1% SAUDI ARABIA SOARS 33 Israel Discount Bank 3.6 13.4% 34 Bank AlJazira S Arabia 3.3 29.3% Of the 50 largest 50 Middle East banks by market cap, 12 are based in 35 Commercial Bank of Kuwait 3.1 32.4% Saudi Arabia. 36 Bank Muscat Oman 3.1 5.1% In 2018, 11 of the 12 Saudi banks posted double digit-rises in their 37 Commercial Bank of Dubai UAE 3.0 -2.5% share prices. Merger activity is also in evidence in Saudi Arabia. In 38 Qatar International Islamic Bank 2.8 14.4% particular, Saudi British Bank agreed a $5bn deal to snap up Alawwal 39 Gulf Bank Kuwait 2.7 8.7% Bank in May 2018. Once that deal closes, the new bank will have assets 40 National Bank of Bahrain 2.3 6.1% of more than $70bn. An even bigger deal may result from a possible 41 First International Bank Israel 2.2 8.8% merger involving National Commercial and Riyad Bank. If that deal 42 National Bank of Fujairah UAE 2.1 4.5% comes off, the combined entity would have assets of around $180bn. 43 Blom Bank Lebanon 2.0 -20.2% Elsewhere in the region, Barwa Bank and International Bank of 44 Bank Audi Lebanon 1.9 -14.1% Qatar reached an agreement to merge in August. And in Oman, National Bank of Oman is considering a merger with Bank Dhofar. 45 Doha Bank Qatar 1.9 -24.8% Looking ahead, the World Bank is upbeat about the region’s growth 46 National Bank Ras Al Khaimah UAE 1.9 -8.6% prospects. Growth in the GCC countries is estimated to have improved 47 Ahli Bank Qatar 1.6 -12.5% to 2.0% in 2018. Increased oil production and prices have eased 48 National Bank Umm Al Qaiwain UAE 1.5 0.5% fiscal consolidation pressures, enabling higher public spending and 49 Arab Banking Corporation Bahrain 1.3 23.8% supporting higher current account balances. 50= Byblos Bank Lebanon 1.2 -10.4% In 2019, the World Bank forecasts GCC growth of 2.6%, with 50= Al-Khalij Commercial Bank Qatar 1.2 -13.3% higher investment and regulatory reforms anticipated to support 50= Bank Dhofar Oman 1.2 -18.9% stronger growth. < Source: RBI

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RBI 758 February 2019.indd 7 14/01/2019 14:48:50 distribution | 86 400

seconds out: 86 400 prepares to make its challenge

With the upcoming launch of digital challenger 86 400, Australian consumers will soon have an alternative bank to the dominant Big Four. Chief product and marketing officer Travis Tyler details the bank’s journey to date, and what to expect in 2019. Briony Richter reports

he Big Four banks in Australia consumers desire from banks. “86 400 was systems or processes, no unnecessary clutter, have come under fire from the unveiled in June 2018, after being worked on no hoops, no hurdles, no barriers – only what TBanking Royal Commission set up in stealth for two years,” he explains. “Led by makes sense for the customer, delivered clearly to investigate whether any of Australia’s CEO Robert Bell and chaired by Anthony and concisely.” entities have engaged in Thompson, founder of Metro Bank, the It is clear that many banks in Australia misconduct. UK’s first new bank in 150 years, and Atom have lost sight of what is important to the The commission’s inquiry into banks and Bank, the UK’s first digital-only bank, we’re customer, focusing more on profit than the financial organisations revealed extensive supported by a highly experienced board, overall banking experience. Tyler agrees that malpractice in the areas of customer data and executive and 80-strong team.” there are significant challenges facing the protection. Now, new kid on the block 86 Australian banking sector. 400 aims to transform the banking sector for AUSTRALIANS WANT MORE “The Royal Commission into the banking consumers. industry highlighted key issues on how The challenger has been working with the “86 400 is currently in beta testing, and we customers have been treated and profits Australian Prudential Regulation Authority plan to launch to consumers early next year. prioritised over customers. (APRA) on securing a full banking licence, For now, we’ve opened a waitlist on our “The changing consumer landscape also and plans to launch to the public in early website for anyone interested in being the calls for the banking sector to evolve. More 2019 with transaction and savings accounts. first to know when we’re launching,” Tyler and more people are managing their lives via The new bank’s name, 86 400, represents continues. mobile; for many, it has become their primary the number of seconds in a day; the idea being “Australians want more from banking, source of information gathering. They expect a that 86 400 will work to support customers and we’re building it – the easiest version of banking experience which is built for mobile, every second of every day. banking, which provides total visibility of first and foremost.” Speaking to RBI, chief product and the stuff that matters, proactive help that’s It is not just incumbents that 86 400 will be marketing officer Travis Tyler talks about the easy to action and the best possible rates and competing against. The advent of challenger journey behind creating 86 400, and what fees. That means no jargon, no complicated digital-only banks is likely to stir up fierce

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RBI 758 February 2019.indd 8 14/01/2019 14:48:52 distribution | 86 400

competition in the Australian banking sector over the coming years. Volt Bank received a Restricted Authorised Deposit-Taking Institution licence from the APRA in May 2018, enabling it to offer a limited number of products and services before a full banking licence is given. Fintech start-up Xinja is also seeking a full banking licence and hopes to break into mainstream banking. The changing regulatory landscape in Australia is also driving competition. In February 2018, the Reserve Bank of Australia and its Payments System Board rolled out a new payments infrastructure known as the New Payments Platform, which allows customers with accounts with different banks to make payments and transfer funds in real time. It is available 24/7, 365 days a year. IMPROVED EXPERIENCE

With competition racing into 2019, what is it about 86 400 that sets it apart from the rest? “We are a bank designed to help customers get the most out of their money, every second of every minute of every day – all 86,400 of them,” Tyler says. “What we’re really excited about is our Travis Tyler, 86 400 proprietary Customer Experience Engine (CXE), which sits between the ledger and The challenger started its beta app testing in Tyler notes. “That’s why we’ve developed 86 the app. This technology will deliver a better December 2018. Prior to this, 86 400 invested 400 to be a control room for Australians’ mobile banking experience for Australians by heavily in proprietary technology in order to entire financial world, giving them visibility providing real-time insights, enabling them to successfully build an efficient digital bank. of the stuff that matters and proactive help make better financial decisions. 86 400 has also been building its core that’s easy to action. By delivering a beautiful “It’ll help them understand what’s going banking platform, which has been developed experience and banking services that help on with their money by cutting through the to seamlessly integrate with the proprietary customers out, rather than catch them out, we clutter and surfacing only the most relevant, CXE. It uses data and cloud-based technology expect customers will seek to do more with 86 actionable information – for example, helping to allow users to view all their financial 400 over time.” customers avoid late fees or unnecessary transactions on a single platform. It is gearing Globally, the financial landscape is evolving charges, and providing comparisons for major up to launch officially, and 86 400 has already rapidly. New entrants, greater consumer bills and expenses, and highlighting when announced that a fully functional debit card demands and new technology will shape the there’s a better deal out there.” is also live in testing. The Visa debit card has a way banks interact and operate. As 2019 kicks simplistic yet sophisticated design that enables off, 86 400 has a lot to look forward to – its payments through Apple Pay, Google Pay and official launch for starters. “We are a bank Samsung Pay. “2019 promises to be a big year for 86 400. In true fintech fashion, the 86 400 mobile We are on track for launch in the first quarter designed to help app promises to offer an unparalleled banking of 2019, and we will continue beta-testing our experience for consumers. Harnessing the app and card up until launch,” Tyler says. customers get the power of customer data, the app will provide a “86 400 will launch with transaction and seamless and secure platform with the aim of savings accounts, but we’ll also be adding most out of their improving the financial wellbeing of its users. home loans shortly afterwards. Market competition is certainly rife in “Finally, while currently fully funded money, every second Australia, but while fighting for top spot, one by Cuscal, Australia’s leading independent problem that many challengers experience is payments business, our business plan requires of every minute of persuading their customers to commit to a in excess of $250m of capital over the first bank to the extent that they use it for their three years of operation. We, therefore, every day - all 86 400 primary account. expect to add more shareholders over the “People tend to be reluctant to change their next 12 months, and will be starting those of them” primary accounts, and we understand that,” conversations in early 2019.” <

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RBI 758 February 2019.indd 9 14/01/2019 14:48:54 distribution | Banco Popular Dominicano

the dominican republic: bringing banking into the digital era

Banco Popular Dominicano has launched a wholly digital branch in the Dominican Republic’s capital, Santo Domingo. It is the first of its kind in the country, but is the trend expected to take over the region? And is it enough to bring consumers back to branches? Patrick Brusnahan writes

entro Digital, designed by FDP project director Simon Bird explains GOING DIGITAL consultancy FDP, is on a mission to to RBI: “[Banco Popular Dominicano is] Coffer a new digital service for Banco midway through a transformation programme The Centro Digital branch is a prototype for Popular Dominicano’s customers. which is looking at developing all of their an omnichannel branch to meet emerging “Our new Popular Digital Centre offers a channels through the bank. consumer requirements. There are no tellers, new concept of banking in the Dominican “The digital bank branch is one part but 12 staff members work across the day to Republic, with the goal of improving the life of that, which included development of assist customers. Furthermore, their main of our customers by using the most high-tech their app, continued development of their goal is to assist the migration from traditional service solutions,” says Arturo Grullón Finet, online banking, looking at their banking banking to digital channels. executive vice-president of personal businesses processes and sales processes, and their overall Bird says: “One of the key aims was and branches at Banco Popular. transformation towards taking a lot of their customer education, driving migration across Currently the country’s largest bank, Banco banking products and services into digital those other digital channels. It is about Popular Dominicano has over 200 branches channels. moving away from the traditional service servicing the 10 million-strong population. “The reason they wanted a ‘digital bank platforms towards online channels and self- So, with such a strong branch proposition, branch’ was on a number of fronts. They service machines. why go digital? wanted something that would promote their “There was a migration target, and a target Over one million of the bank’s customers move into digital channels and keep them a on improving sales and customer relations. are utilising digital. In addition, 77.5% step ahead in the market. They wanted to still They do have a very well-developed online of transactions were made through these be the leader in the field, and they wanted presence. It’s very user-friendly. They wanted platforms; internet banking alone witnessed to really test out the process of what a digital to take that into a bank branch environment 16.7 million transactions during 2017. branch would be.” and see what that means for a branch.

10 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 10 14/01/2019 14:49:00 distribution | Banco Popular Dominicano

The brief was to create an open retail environment Interactive tables feature tag-recognition technology

The event and promotion space ‘By your side’ customer service “We took out tellers in the wholly new “In the country, it’s a leader,” Bird explains. America, they are quite advanced in what they branch without any existing client base in a “It is the first place to do this in the market. are doing.” shopping mall. They made the call to take out No one else is quite thinking that way.” On how the bank and FDP will rank its tellers completely and use it as a showcase for He continues: “We know in the banking success, factors include how well the facilities their technology and their different platforms. industry around the world that everyone is are used, and tracking customers’ immigration “The primary aim was changing customer trying to get their heads around this and find to other channels. behaviour but also demonstrating their a way of delivering this as an experience. Every Bird says: “I think the easy one would be commitment to technology.” new accounts and sales. I know that they’re An important aspect of the design was a running at the same type. They’re genuinely “removal of barriers”. This means the staff using it as a prototype branch; they are are on the floor and wearing bright blue gaining customer feedback all the time and we polo shirts to make them easily identifiable were very clear with them that they needed to. and approachable. Furthermore, the branch “This is a branch that needs to develop is created so the customers can navigate it They made the call over time; we won’t get it right first time, and themselves. it needs to adapt and things will change. It However, while Banco Popular Dominicano to take out tellers needs to be a flexible platform. They’re using wants its customers to migrate to digital this genuinely as a prototype to gain feedback channels, it does not want them to stop using completely and use from customers. This is a step to a different branches altogether. As a result, the location way of thinking, which is an omnichannel can also be utilised as an event space. It has it as a showcase strategy.” cameras and presentation equipment, so Overall, both sides of the project need to seminars can be hosted on various banking work together for the concept to succeed. activities; the plan is that there “would be Bird concludes: “Crucial in this is things going on there all the time”. economy is slightly different as well. Here collaboration – and the biggest challenge How does this fare compared to other banks [in the Dominican Republic], they have still – was bringing together all departments, as in the market? It is the largest bank in the quite a heave use of cash in their economy, we’re challenging all of them at the same time. country, but does this translate to its digital more than we do [in the UK], but I think the Without a real collaborative approach, these offerings? change will happen very quickly. In South things don’t happen.” <

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RBI 758 February 2019.indd 11 14/01/2019 14:49:13 innovation | yapi kredİ

yapi kredİ: transforming the turkish banking market

The Turkish banking sector has strong growth potential and has overcome financial upheavals over the past decade. Briony Richter speaks to Yakup Doğan, assistant general manager at Yapı Kredi, about how the bank is revamping the industry

apı Kredi is one of the largest banks analysis, and digitisation of infrastructure and “At Yapı Kredi, we are moving beyond in Turkey, with a network of over processes. multichannel: we are designing and switching Y842 branches across the country. “We plan our investments in the digital to an ecosystem. Lately, we have significantly Yapı Kredi was established in 1944 as domain accordingly, and implement these in increased our investments in digital banking. Turkey’s first national retail-focused private line with the latest technologies and trends. In the last two years, we have introduced bank, and has TRY365.1bn ($67.1bn) Yapı Kredi has a strong digitisation strategy; crucial new products to the sector, and added in assets. In 2018, Turkey’s political and we adapt our digital channels to technological value to our customers’ lives. While doing economic turmoil caused its currency to hit a developments constantly. With our innovative this, first and foremost we have positioned new low, unsettling investors in the process; approach and devotion to pioneering the Yapı Kredi Mobile as the Remote Control however, the banking sector seems to have digitisation of our sector, we continue to of the Bank. Consequently, we integrated pulled through, and Yapı Kredi certainly introduce new technologies that will make life innovative functions into Yapı Kredi Mobile, shows no sign of slowing down on innovation. easier for our customers.” introducing new milestones in the digital Rapid changes across the banking sector transformation of banking.” are transforming the way in which banks STRATEGIC PILLARS Digital and mobile banking enables communicate with customers. There is greater customers quick access and a secure platform focus on customers’ financial habits and Doğan continues: “While we are delivering to conduct a wide range of banking tasks. lifestyles to better understand their needs. digital products and services, and As digital continues to surge, one wonders Speaking to RBI, assistant general manager implementing our strategic pillars, our focus is if branches will survive in the future. Doğan Yakup Doğan describes how Yapı Kredi on driving innovations that make customers’ explains that while mobile banking is connects with its customers. lives easier. enhancing customer satisfaction, Yapı Kredi “Users now demand products and services “Since 2015, we have been launching firmly believes that branches will remain via new channels, such as mobile or wearable one innovative solution every month, or at a fundamental part of the industry. He technologies, which are becoming more and least bimonthly, and we continue to deliver highlights that all banks will continue to take more prevalent in everyday life,” he explains. new innovations at an increasing pace. At advantage of digital tools, but communicating “It is now critical to develop products and this point, it is crucial to map the specific face to face will still have its place for services compatible with the new technologies customer need with the right experience supporting customers when searching for new that meet customers’ needs, make their lives and technology. At Yapı Kredi, we offer our products or services. easier and offer them special solutions.” customers the innovations or products that we For many customers, it is about having the For banks aiming to enhance the overall apply the right technology at the right time.” balance between both worlds. Customers still customer experience, it is critical to embrace As of November 2018, the bank’s digital feel it necessary to go into a branch to discuss the personalisation tools that will facilitate a banking customer base had increased by 27% advisory services such as mortgages, car loans seamless and tailored banking experience. and the mobile banking customer base by and investment products. “Yapı Kredi has set its vision to lead the 33% year on year. Furthermore, the share of At Yapı Kredi, Doğan says the “hybrid digital transformation in banking, and digital channels in non-cash transactions has banking” model will become the key to renovated all its platforms and infrastructure grown to 96%. growth across the financial industry. The accordingly,” Doğan says. “In the last three “Currently, the focus of banking is a bank has already started to implement digital years, we have focused on designing The multichannel strategy – a term that describes transformation within its branches, and will Digital Bank of Turkey. Our three-pillar all end-to-end digital banking transactions,” continue to combine both physical and digital strategy focuses on customer experience, data Doğan highlights. innovations.

12 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 12 14/01/2019 14:49:13 innovation | yapi kredİ

YAPI KREDİ MOBILE He adds: “With an innovative approach, we use NFC technology on Yapı Kredi Mobile The popularity of mobile payments has surged login, a first in Turkey. Our customers simply in recent years following increases to spending need to hold their credit cards near their limits on contactless payments, as well as a NFC-based phones and enter their card PIN. rapid expansion in the locations where such “We have also added the Jet Transactions payments are accessible. menu on the Yapı Kredi Mobile login Consumers regularly log on to mobile screen. We have thus enabled cash deposit banking to conduct routine tasks such as and withdrawal via QR code, remittance checking balances, transferring funds and to mobile, and payment via QR code making quick P2P payments. However, in transactions to be carried out in a swift and order to keep customers engaged, banks need convenient manner. to take service levels up a notch by providing “Moreover, Yapı Kredi has come up more unique and personal services, coupled with innovations to expedite the payment with heightened security. experience in online shopping. When The Yapı Kredi Wallet was introduced for shopping online, our customers can complete the bank’s card customers in January 2016, payments by scanning QR codes via Yapı enabling registered users to add credit card Kredi Mobile. As the leading corporation in details to the wallet and make contactless Yakup Doğan, Yapı Kredi Turkey’s banking sector, our newest feature in-store mobile payments. Users can also find “Using Yapı Kredi Mobile, our customers allows consumers to become Yapı Kredi information on nearby shopping locations, can book appointments at requested dates customers without visiting to a branch, by claim promotional campaign benefits, and and time slots at any branch. They can view simply contacting video assistants via Yapı access credit card transaction details and other branch density maps to decide which branch Kredi Mobile.” financial information. to pick. Customers who have lost their cards Expanding on what sets Yapı Kredi Mobile can use the Don’t Panic button on Yapı Kredi ADOPTION AND LOYALTY apart from other competitors, Doğan says: “In Mobile to instantly place a temporary block the last two years, Yapı Kredi has introduced on their cards and continue transactions on The number of consumers using mobile 35 innovations that constitute milestones in their mobile app,” he says. payments in Turkey increased throughout the digital transformation of banking. “They can notify the bank for lost or stolen 2018. Furthermore, the proportion of those “Using Yapı Kredi Mobile, our customers cards, and request new cards. Furthermore, not aware of mobile wallets fell by nine can carry out banking transactions wherever customers can make donations to prestigious percentage points, indicating that Turkish and whenever they wish. Yapı Kredi offers its civil society organisations via Yapı Kredi consumers are gradually embracing new customers secure and password-free access to Mobile, as well as our internet branch. technology and are keen on mobile wallets to Yapı Kredi Mobile via Eye-ID, as the first in With all these features, we not only expand make payments. To further increase mobile Turkey and Europe. We make our customers’ the boundaries of Yapı Kredi Mobile as the wallet use, banks such as Yapı Kredi will have lives easier through features like cash Remote Control of the Bank, but also those of to continue creating innovative and rewarding withdrawal and deposit via QR code without mobile banking in Turkey overall.” solutions to maintain brand loyalty. touching an ATM, and direct connection to Aiming to assist its customers beyond Asked what is on the horizon for Yapı the Customer Relations Center. banking tasks, Yapı Kredi has collaborated Kredi, Doğan concludes: “In line with our “The Banking Keyboard enables fast money with Ford, and introduced a new feature digital banking strategy that foregrounds both transfers via messaging apps on smartphones, to make drivers’ lives easier. The Yapı Kredi the human aspect and technology, we will without switching to another screen or app. Mobile app integrates into vehicles with Ford’s continue to work on technologies that will Our customers can transfer money swiftly and Sync 3 Applink technology, enabling Ford make an impact in the near future, such as conveniently via Siri and iMessage with voice customers to safely access Yapı Kredi while machine learning, artificial intelligence, Big or text messages. driving, keeping their eyes on the road and Data and the Internet of Things. Moving to “Through the mobile payment feature hands on the wheel. Drivers can also use the the future, we will mostly focus on machine of Yapı Kredi Mobile, our customers enjoy app to receive market updates and exchange learning, deep learning, neuro-linguistic contactless and secure shopping by holding rates through voice commands in Turkish, programming, speech recognition and their NFC-based Android phones near POS and also connect to the Yapı Kredi Customer computer vision, blockchain, and an Open devices. Moreover, we offer banking services Relations Centre while on the road, without Banking API that we believe will completely via the WhatsApp and Facebook Messenger having to dial a number, also through voice change the definition of the banking. chat bots – another first in the sector.” commands in Turkish. “We will continue to publish According to GlobalData, 43% of Turkish Via Yapı Kredi Mobile, Ford drivers who comprehensive APIs that we believe will make consumers have a mobile wallet, while 27% have the stock navigation system in their a difference in the world of finance technology like being early adopters and a further 26% vehicles can get directions to the nearest ATM by helping innovative ideas become realities. are comfortable with using mobile wallets for or branch through voice commands. The We think these advancements will democratise payments. Furthermore, 48% of smartphone service is currently available for iOS devices, banking, create smarter experiences, and make owners are ready for mobile payments at the but Doğan states that it will be made available customers’ daily lives much more seamless POS as soon as they are available. for Android users in the near future. than ever, wherever they are.” <

www.retailbankerinternational.com | 13

RBI 758 February 2019.indd 13 14/01/2019 14:49:15 feature | BB&T

BB&T: a solid approach that is paying off

US regional bank BB&T has the potential to weather economic downturns due to its stable management team, a diversified business mix and a strong customer base. Robin Arnfield reports

inston-Salem, North Carolina- A key area for acquisitions is insurance. Amazon-style digital banking. based BB&T operates 1,958 “BB&T hasn’t been active in buying mortgage “Substantial change is going on in BB&T, Wbranches in 15 states and companies, but insurance is its primary all of which are conceptually about building Washington DC, serving 7.6 million clients. acquisition area,” Tischler notes. “BB&T is the new bank,” BB&T chair and CEO Kelly Organised as a group of autonomous one of the largest players in the insurance King said in November 2018. “We have to community banks, each headed by a agency and brokerage business globally, and build a new bank by pruning the old bank; community bank president, it also owns will continue to make insurance acquisitions. close a bunch of branches to invest in digital; an insurance business, BB&T Insurance Being in insurance helps to diversify BB&T’s make backroom changes to create a new Holdings. In June 2018, BB&T was the 11th- revenues.” technological system. largest financial institution in the US, based “We can either wait for someone to disrupt on domestic deposits; by branches, it is the BRANCHES us, or we can choose to disrupt ourselves. sixth largest US bank (see table). We have huge opportunities to position our Unlike other US banks, BB&T did not BB&T is engaged in a “reconceptualisation” company to be a survivor and a thriver for report quarterly losses during the 2008-2010 process to transform itself into a new type decades to come, as we’re absolutely willing to financial crisis, and has the benefit of a stable, of bank, in response not just to disruptive change anything that needs to be changed – long-term management team, says Allen fintechs but to consumer expectations of except our vision, our mission and our values.” Tischler, senior vice-president at Moody’s Investor Service. BB&T income BB&T MAJOR MARKETS – Q3 2018 Historically, BB&T has actively acquired BB&T net income by segment branches deposits ($bn) other FIs, but in recent years has slowed its North Carolina 319 30.4 pace of acquisition. Its most recent was the Insurance Virginia 299 23.5 April 2018 purchase of Regions Insurance holdings Florida 288 18.3 Group from Regions Financial Corp., Financial 7% reinforcing its position as the fifth-largest US services Pennsylvania 231 13.3 insurance broker. commercial Retail banking Georgia 141 12.6 finance 17% In 2016, it bought National Penn consumer finance 43% Maryland 150 10.1 Bancshares, following its 2015 purchases of South Carolina 99 8.4 Bank of Kentucky and Susquehanna Bank. Texas 115 6.3 “Since 2015, BB&T has stepped back Commercial 33% Kentucky 91 6.1 from bank acquisitions and focused more on West Virginia 63 5.3 organic growth,” says Tischler. “But it’s open to acquisitions. It might make some modest Alabama 75 3.7 acquisitions of banks in the future, but not as Tennessee 42 3.0 frequently as in the past.” Source: BB&T Source: BB&T

14 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 14 14/01/2019 14:49:18 feature | BB&T

As part of this effort, BB&T is realigning which is where other banks focused. BB&T In its 2017 annual report, BB&T said: four of its 24 community bank regions, which has a more granular deposit base, as it focuses “Using robotics, we reduced the time needed will drop to 20 regions in total. on smaller accounts.” for financial reconciliation from 50 minutes “We’re elevating the role of the [20] to fewer than 10 minutes. We expect the cost community bank regional presidents,” TECHNOLOGY savings from this reconceptualisation and spokesperson David White tells RBI. “They others like it, and from optimising our branch now report directly to Community Banking “The challenge for BB&T is to keep up structure, to help pay for our expanding president David Weaver, a member of with the national US banks in technology technology investments.” BB&T’s executive management team. These spending,” Tischler notes. “BB&T is one of In January 2018, BB&T allocated up to changes help us simplify our community bank the few regional banks to detail how much it $50m to invest in and/or acquire fintechs structure, which allows us to be more agile in spends on technology. to benefit clients, lower operating costs and decision-making and more nimble in the way “Its figures show that, in absolute dollar provide a competitive advantage. we respond to our clients.” terms, it can’t compete with the big banks, but BB&T’s digital transformation began in “BB&T, like most other US banks, has been in relative terms it invests as much as them. 2015 by appointing W Bennett Bradley as reducing its branch count,” says Tischler. “I BB&T invests over $1bn a year on technology, chief digital officer. Since then, BB&T has think it plans to reduce its branch numbers by with 20% of this being focused on innovation launched near-real-time payments for retail several hundred more from its current 1,900.” and fintech investments. That goes a long way and commercial clients, and the U by BB&T At the end of 2017, BB&T had just over if you deploy it strategically.” digital banking platform. 2,000 branches. In its public statements, BB&T says its Its first fintech investment occurred in “As BB&T particularly focuses on retail and technology investments focus on two areas: September 2018 when it took a $5m stake small business depositors, it has more branches retail and small business customer-facing in Enigma, a New York City-based data- in rural areas or outside metro areas relative to platforms such as digital banking, and process as-a-service company. Enigma is providing other banks,” says Tischler. “It does have a lot efficiency. “BB&T has invested heavily in enhancements to BB&T’s anti-money of branches in metro areas, but, unlike banks software robotics to automate its manual laundering controls, and is expected to that focus entirely on larger cities, BB&T is processes and reduce its paper usage,” says provide cost-savings in other areas of the more spread out. That gives it more stability Tischler. company. < in terms of the smaller markets where it has strong market share.” us market comparison

DEPOSIT BASE Largest US financial institutions by deposits, end June 2018 $bn Since 2015, BB&T has been transforming 1,500 its deposit base to include more non-interest- bearing accounts, which are less sensitive to 1,200 interest-rate changes. 900 “BB&T has a diverse revenue stream, limited concentration risk, a granular loan 600 portfolio and deposit base, and minimal leveraged lending exposure,” a December 300

2018 Moody’s report on BB&T says. 0 “Moreover, BB&T’s deposit mix has PNC BB&T HSBC Citigroup SunTrust shifted to include a higher portion of core Wells Fargo US BancorpCapital One Charles SchwabMorgan Stanley Goldman Sachs Bank ofJP America Morgan Chase non-interest-bearing deposits in recent years, Toronto Dominion Bank of NY Mellon strengthening its funding profile and partly offsetting higher deposit funding costs. Largest US banks by branches, end June 2018 BB&T’s non-interest-bearing deposits climbed 6,000 to 34% of total deposits in the third quarter of 2018, up from 23% in 2012. Over the same 5,000

period, the peer median, comprising 14 of the 4,000 largest US banks, fell slightly to 29% from 3,000 30%.” “When interest rates were extremely low, 2,000

BB&T focused extensively on offering non- 1,000 interest-bearing chequeing accounts for small businesses and retail customers,” says Tischler. 0 Citi PNC BB&T M&T “The consumer and small business segments Regions SunTrust Keycorp Citizens Fifth Third of the non-interest-bearing account market Wells Fargo US Bancorp Huntingdon JP MorganBank Chase of America have proved to be stickier now rates have Toronto Dominion risen, compared to the large corporate sector Source: FDIC

www.retailbankerinternational.com | 15

RBI 758 February 2019.indd 15 14/01/2019 14:49:19 innovation | Belgazprombank

“Our process for choosing FICO Tonbeller was complex,” Kalecits explains. “It should Belarusian bank makes be noted that the software was chosen on a competitive basis. What worked in favour of FICO Tonbeller were the quality of its solutions, how those solutions matched our crime prevention requirements, the company’s reputation and its considerable experience in working with AML solutions.” Torsten Mayer, vice-president for the key priority compliance solutions at FICO, says: “Regulators worldwide are focused on preventing the financing of financial crime. Belgazprombank has implemented a system to We help Belgazprombank and other banks worldwide to keep up with new lists of high- screen financial transactions and customers to risk persons, and screen every transaction.” help prevent crime. But which security issues need He continues: “Regulators worldwide addressing? And how will working with FICO are focused on preventing the financing of financial crime.” resolve them? Patrick Brusnahan investigates The partnership was agreed in October 2018, and so far “the solution has had very elarus-based Belgazprombank has positive results, and meets the requirements of taken the initiative with security – the bank”. Band given its place in the market, to do otherwise would be irresponsible. INNOVATION Founded in 1990, Belgazprombank is controlled by the Gazprom Group and serves Belgazprombank prides itself on innovation, retail banking customers. with security falling into that category. As part According to executive director Irina of its educational and innovation activities, it Kalechits, Belgazprombank is “one of the organises an annual international conference backbone banks of our country”. In 2017, New Reality: Challenge for Belarus; the bank its assets increased by 36.5% and the bank considers this to be a landmark for the ranks third in the country in terms of assets. country. Its market share in the year grew from 5% to With an aim to identify and strengthen the 6.7%. Total assets amounted to BYN4,303m potential of Belarus, the future is discussed ($1.97bn) while profit totalled BYN104.3m. with regards to technology, banking, finance, With such a sum of money in its assets, IT and entrepreneurship. The list of topics has security is obviously an utmost priority; this is also recently expanded to include blockchain, where FICO and Tonbeller come into play. fintech, artificial intelligence and machine learning. SECURITY OPTIONS The business also implemented a number of Irina Kalechits, Belgazprombank innovations in 2018. These include: Speaking to RBI, Kalechits says: “The need “In terms of international banking practice, • Belgazprombank is the only bank in the to adopt new financial crime solutions was we needed to take into account the factor of country to provide customers with the dictated, firstly, by the requirements of the international economic sanctions. High- Samsung Pay service for both Visa and legislation of Belarus in the field of AML and quality automation of these processes was laid Mastercard cards; counter-terrorism financing, and secondly, in the basis of the requirements of the bank.” • It has one of the most modern and by the requirements of international banking To meet these requirements, the Belarusian advanced mobile applications for practice. lender turned to FICO, but it was not the individuals, which has been repeatedly “Belarusian legislation requires automated only option on the table. In the end, two noted as a leader not only in its home detection of participants in financial solutions were selected: Siron@Embrago and country, but also in regional ratings; transactions who are involved in terrorist Siron@KYC, which perform both online • The bank is one of the few that has activities, in order to apply further appropriate checks and retrospective analysis. implemented sending a PIN-code for cards measures such as blocking a financial Both parts are built on a single database and via SMS; transaction or freezing funds. Also, the share access to downloaded or external and • It has a unique procedure for car loans to Belarusian legislator requires programmatic internal lists, such as National Bank lists and individuals in car dealerships, and verification of information about customers the Dow Jones database. Information about • The bank is one of the few in the country and their beneficial owners in order to classify high-risk customers is also available to identify to allow users to bind cards from other them as public officials. and analyse transactions more accurately. Belarusian banks into its mobile app. <

16 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 16 14/01/2019 14:49:19 analysis | open banking

set to change the face of banking. Banks with agile and lean systems that allow them open banking: to update their offering and continue to meet consumers’ demand for more valuable, convenient and easy banking experiences will thrive. Banks that fail to seize the opportunity not all it was may well disappear. “The public may not fully appreciate Open Banking, but they are certainly starting to feel the benefits. The industry’s views on cracked up to be? Open Banking are mixed, but it has to be seen positively. I believe that banks need to collaborate more openly with other players. It has been a year since Open Banking launched and was We share the same goals; why don’t we share innovation and technology? Open Banking supposed to take the banking world by storm; however, the architecture promotes collaboration between movement has been fairly quiet since its much-advertised banks and fintechs, and that is a significant introduction, and banks have not been impressed. Was opportunity.” PSD2’s bark worse than its bite? Patrick Brusnahan writes WILL THE FUTURE CHANGE?

pen Banking and PSD2 were Facebook and Apple (GAFA) rather than the Open Banking is not what people hoped hyped up to be a revolution for incumbents, while 64% of UK retail banks, – at least not yet. So what will the future Obanks, but some have argued such as Barclays, TSB, Virgin Money and of banking look like? Lumley says: “Banks, that it has arrived not with a bang but a RBS, believe it has given GAFA the advantage. just like any large, multi-siloed and heavily whimper. Also, 24% of respondents believe it has given regulation organisations, have inherent UK fintech influencer Liz Lumley tells fintechs the distinct advantage. structural problems and they are working very RBI: “I don’t think Open Banking has had a Furthermore, two-thirds of decision-makers hard to resolve these issues. But if a fintech negative impact on banks at all; they just don’t think tech giants will offer full banking start-up has developed a service or an app that realise the potential. services within the next five years. However, consumers want to use, and that gets around “Think of Open Banking like this: You walk relatively few consumers – a mere 29% – the issue of internal siloes, banks shouldn’t be into McDonald’s and order a McDonald’s believe GAFA will overtake banks. making it hard for their customers to use these hamburger, McDonald’s French fries and a Asked why retail banks are slipping, 65% apps.” Coca Cola drink. McDonald’s and Coca Cola claim it was because there is a reluctance Hertzog concludes: “A bright, promising are two separate companies but you are buying to adopt external technology. On the other banking future is possible, but only if retail a Coke inside McDonald’s. McDonald’s hand, 54% believe collaboration with fintechs banks put customers at the heart of every allowed that because they didn’t see the value is essential to innovate faster. An additional decision. They must forget about product in developing a proprietary drink brand. benefit of collaboration, at least according to development and cost cutting, and think McDonald’s offered Coca Cola its API (in this 48% of decision-makers, is to cut through the differently. All too often, banks are too case it would be the style of drinks fountain) red tape that Open Banking brings with it. ‘proud’ to adopt technology that is not their and Coca Cola used it to deliver a drink that Speaking to RBI, Pepper CEO Michal own. They must recognise the importance was compatible with these drink fountains. It’s Kissos Hertzog says: “Despite the concern, of collaboration to meet growing customers’ good for customers and it’s good for business.” Open Banking won’t cultivate a winner- digital demands. Only then can they truly With the new system, banks had to open takes-all scenario. Regulations like PSD2 embrace digital and provide a more consumer- their payments infrastructure and customer and initiatives such as Open Banking are centric banking experience.” < data assets to third parties. The goal was to make the incumbents more customer-focused, consumer preferences but it has not had its desired effect; in fact, everyone except banks seems to have gained Reasons why consumers have chosen online-only banks an advantage. According to a report from Pepper, the digital sub-brand of Israel-based More efficient Bank Leumi, banks are not happy. According More control over managing money to the Change In Banking report, 58% of Easy to access mobile apps decision-makers at banks stated that Open Lower account costs Banking had had a negative impact on their organisations. However, 56% of banks still More personalised banking service believe it represents an opportunity. 0 10 20 30 40 50 The consensus is that Open Banking favours fintechs and Google, Amazon, Source: Pepper

www.retailbankerinternational.com | 17

RBI 758 February 2019.indd 17 14/01/2019 14:49:20 News | Digest

february news

Italy issues decree to stabilise struggling Banca Carige The Italian government has issued a decree At the beginning of January 2019, the ECB with the aim of stabilising troubled lender appointed three temporary administrators and Banca Carige. a three-member surveillance committee to In a statement, the government said the take over Banca Carige. decision had been taken to enable the bank to It placed the bank under temporary admin- reduce bad debts and maintain capital ratios. istration after a majority of the Banca Carige The decision came a week after the European board members resigned. Central Bank (ECB) placed the bank under The new ECB-appointed board will work temporary administration. to revive Banca Carige, and consider merger The decree will enable Banca Carige to partnerships to ensure continued stability. receive funds from the central bank as well as In November 2018, Banca Carige received issue new bonds with state-backed guarantees. €320m ($366m) from other Italian peers to It will also enable the bank to seek pre- meet capital requirements; however, it failed cautionary recapitalisation, although Banca to secure shareholder approval to raise up to Carige will only apply for this if it requires €400m through new shares. new funds or unforeseen problems, according At the end of September 2018, the lender’s to sources. The EU authorises such measures capital ratio was 10.8%, above the ECB-man- only when a bank is financially secure. dated minimum threshold of 9.63%. < RBS acquires 25% stake in millennial-focused fintech Loot into the spending habits of millennial consumers. It currently has nearly 175,000 customers. As a part of the acquisition, RBS has invested £2m ($2.5m) in the company, which follows a £3m investment made in the last year. The Financial Times quoted Bó chief executive Mark Bailie as saying: “Loot is a really exciting brand, and one that we’re proud to be associated with. “Through its innovative use of technology and intention to change the status quo, it’s quickly built a following of loyal customers, with potential for rapid future growth.” The deal also represents the first official transaction for Bó, which is currently undergoing beta testing. It is also expected to collaborate with many other fintechs. Following the launch, the RBS digital platform will target customers with minimal savings, and help them to better manage their money. RBS recently applied for a banking licence in Germany in preparation for Royal Bank of Scotland (RBS) has acquired Launched in 2014, Loot offers current Brexit. Once it receives the German licence, a 25% stake in millennial-focused fintech account and prepaid debit card services RBS plans to redevelop its Frankfurt branch Loot through its digital bank Bó, which is to students and other young customers. to improve the bank’s access to other set to launch later this year. The app also provides customised insights European markets. <

18 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 18 14/01/2019 14:49:22 News | digest

Linedata acquires French fintech Loansquare

Linedata has acquired French fintech start- up Loansquare, which digitises exchanges between lenders and borrowers. The acquired platform has two web plat- forms. The Borrower Portal enables bor- rowers to provide their financing require- ments to lenders, while the Servicing Portal allows lenders to automate and manage financial flows and commitments. The Loansquare platform also features messaging and document management features. With the Loansquare acquisition, Linedata expects to bolster end-to-end capabilities in its platforms and services for lenders. Linedata founder and CEO Anvaraly Jiva digital solutions to manage their operations Following the acquisition, Loansquare said: “I am delighted to start 2019 with the simply and efficiently. works over Linedata Ekip360, a global acquisition of Loansquare. “The complementarities between the leasing, car finance and consumer loans “We are engaged in an ambitious process Linedata and Loansquare platforms enable solution. of enabling digital transformation and are us to satisfy this need in a truly innovative It also interoperates through Linedata’s thrilled to be able to integrate innovators way, connecting banks and borrowers with commercial and syndicated loans servicing from the startup community.” the same user experience and standards platform, Uniloan360, and Capitalstream, Loansquare CEO François Lévy said: demanded by consumers in their dealings a global commercial loan-origination and “Companies are constantly searching for with institutions.” risk-management platform. < BMO Financial Crimes Unit announced technologies, the financial services industry is faced with more sophisticated financial crime activities that often exploit misaligned fraud and cybersecurity practices. “It is critical that we continue to invest, and develop our talent and processes to protect information of our customers, the bank and our partners.” White added: “Banks have been at the forefront of cybersecurity for years. They invest heavily to protect their customers’ most valuable and sensitive information. BMO continually accelerates its digital transforma- tion, but that too must be complemented with enhanced security.” Steve Tennyson, chief technology and operations officer at BMO, added: “We are continuously improving our security threat BMO has announced that it will create a Fi- As web attacks become more sophisticated detection and response company-wide, and nancial Crimes Unit to combat various forms and frequent, cybersecurity has become a bringing together our capabilities under one of cybercrime. priority for financial services. As head of the leader is an important next step. The BMO Financial Crimes Unit brings BMO Financial Crimes Unit, Zelvin will be “Moving deeper into the cybersecurity together existing capabilities around cyberse- responsible for defining and executing strategy market will certainly present challenges. Banks curity, fraud and physical security from across and mobilising stakeholders. He will work in that do so will face stiff competition in this the organisation into an integrated central full co-ordination with other businesses across sector from more digitally native challengers.” function. The new unit will be led by Larry the bank. The Financial Crimes Unit will also work in Zelvin, who joins the bank with effect from BMO CEO Darryl White said: “Giv- partnership with BMO’s anti-money launder- 14 January 2019. en a growing reliance on advanced digital ing operation. <

www.retailbankerinternational.com | 19

RBI 758 February 2019.indd 19 14/01/2019 14:49:26 News | Digest

Starling looks to France and Germany UK mobile-only Starling Bank is planning to The bank aims to safeguard its Single launch operations in France and Germany Euro Payments Area licence, which enables as it prepares for Brexit. it to conduct direct transfers and payments The bank has already announced that across the EU region. The licence will it would create a subsidiary in Ireland become invalid if the UK leaves the EU before the UK leaves the EU. Starling without any agreement. chief executive Anne Boden also assured Founded in 2014, Starling offers current customers that normal banking services will accounts, business banking and payment not be disrupted. services. It received a banking licence from Boden said: “It’s no secret that Brexit is the Financial Conduct Authority in July a major cause of uncertainty for everyone. 2016. We’re putting contingency plans in place to In November last year, the bank ensure that normal service to customers is partnered with the Post Office to offer not interrupted. Everyday Banking services to personal and “Starling is targeting expansion in Ireland, business customers. where we will establish a subsidiary. Starling also introduced personal loan Subsequently, we will target the French and services and a current account dedicated German markets.” for teenagers in August 2018. < ProBank austin launches financial compliance training ProBank Austin, a financial institution ProBank Austin MD Martin Mitchell The bankED programme can be accessed consulting and education business with said: “We conducted a ‘soft launch’ of from any electronic device. Once signed in, offices throughout the US, has introduced bankED about six months ago, and the users receive a list of course modules with an online financial compliance training user feedback thus far has been extremely supporting instructional videos. programme called bankED. positive. ProBank Austin focuses on providing The programme was developed by “Users know they are required to keep advisory services in financial management, bankers, compliance trainers, former up with their training, and they appreciate investment banking, strategic consulting, attorneys and federal examiners, and being able to accomplish this on their own regulatory and compliance. includes training options on various schedule and at their own pace.” It is also active in providing training, financial industry compliance issues. Topics The training programme can be used by partnering with banking associations include anti-money laundering, the Bank financial companies to up-skill a specific and agencies. Its clients range from Secrecy Act, consumer protection and the group of employees, or train new hires with small community banks to international Fair Credit Reporting Act. company objectives. institutions. < Ghana completes banking industry consolidation Ghana has completed the consolidation of solidated Bank Ghana to assume the assets its banking industry, in a move aimed at and liabilities of five failed lenders. strengthening the sector, the country’s central In August 2018, it created Consolidated bank has announced. Bank Ghana to transfer the assets of the failed Ghana now has “23 well-capitalised” banks, uniBank Ghana, the Royal Bank, Beige Bank, down from 34 previously, Bank of Ghana Sovereign Bank and Construction Bank to the governor Ernest Addison told a press briefing. new lender. The central bank initiated a reform process Smaller banks Omni Bank and Sahel-Sa- in September 2017 in an attempt to make the hara Bank will merge their activities, as a domestic banking system more resilient and part of the consolidation. The local unit of driven by a proper supervisory framework. India’s will transfer its assets The process included a range of initiatives, to Standard Bank Group, while South Africa’s including mergers and the withdrawal of FirstRand will acquire GHL Bank. licences from struggling lenders. Bank of Ghana has also downgraded GN It also infused up to GHC12bn ($2.49bn) Bank for failing to fulfil capital requirements. in bonds to rescue some lenders from failure. In addition, five local banks received fresh During the consolidation process, Bank of capital from special-purpose vehicle Ghana Ghana awarded a GHC1.4bn bond to Con- Amalgamated Trust. <

20 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 20 14/01/2019 14:49:28 News | digest

ConnectOne completes Greater Hudson Bank merger ConnectOne Bancorp, the parent company of ConnectOne Bank, has completed its previously announced merger with Greater Hudson Bank. Greater Hudson has now been merged with and into ConnectOne. In July last year, both entities signed an agreement to merge through an all-stock transaction valuing around $76.3m, with each outstanding Greater Hudson Bank common stock share exchanged for 0.245 shares of ConnectOne common stock. Greater Hudson director Daniel Rifkin has been inducted into the ConnectOne’s board of directors as part of the transaction. ConnectOne chair and CEO Frank Sorren- tino said: “Our acquisition of the commer- cially focused Greater Hudson Bank is both a financially attractive transaction and a compel- ling expansion opportunity in a complemen- tary market. mous with our commitment to be ‘a better specialised in the provision of customised “It allows us to better serve the Hudson place to be’.” banking services, commercial mortgages and Valley region by adding experienced bankers As of 31 March 2018, the Greater Hudson business credit lines. to our team and by offering a product set that franchise had $401.7m in deposits and The acquisition strengthens ConnectOne’s rivals the largest institutions, while continuing $340.7m in loans. New York operations and its footprint in the to deliver the level of client service synony- Established in 2002, Greater Hudson Hudson Valley region. < China reduces bank reserve requirement ratio The People’s (PBoC) has that “overall banking liquidity stays system, the central bank said. Medium- anounced plans to reduce the reserve reasonable and sufficient while balancing term lending facilities due by the end of the requirement ratio (RRR) for the country’s internal and external factors to keep the first quarter will not be rolled over. banks by 100 basis points. yuan’s exchange rate at a reasonable and China’s central bank reduced the RRR The RRR will be decreased in two equilibrium level”, PBoC was quoted as ratio four times last year, during a period of phases: on 15 January 2019 it will be cut saying. sluggish economic growth. by 50 basis points, followed by another PBoC’s RRR reduction is a targeted China has made several efforts to open 50-point reduction on 25 January. easing measure rather than a wide-ranging up its financial sector. In 2018, the country The aim of the move is to increase stimulus. The decrease in the ratio is eliminated the foreign ownership limit in liquidity to support the country’s economic expected to release a net CNY800bn domestic financial entities such as banks growth. The phased reduction ensures ($116bn) of liquidity into the banking and asset management firms. < National Bank of Kuwait launches SWIFT gpi services National Bank of Kuwait (NBK), in Head of real-time payments at ACI Mohammed Al-Khorafi, general collaboration with ACI Worldwide, Worldwide, Craig Ramsey, said: “Effectively manager of NBK’s operations group, has launched SWIFT Global Payments leveraging the richer data of SWIFT said: “NBK is committed to maintaining Innovation (gpi) services. gpi messages will allow NBK to further its leading position in Kuwait through The SWIFT gpi community, which optimise the customer experience and ongoing technological innovations – and now includes nearly 300 banks, enables differentiate against competitors. this means improving efficiency and members to transfer and receive funds “NBK now delivers customers greater adopting the latest advancements to offer swiftly across the world to anyone. transparency and traceability in cross- better services to customers through the The payment process also ensures full border transactions, which facilitates better implementation of SWIFT gpi. transparency. communication and reconciliation.” “ACI’s certified gpi module enabled us to The new service, which integrates gpi NBK upgraded its implementation to configure ACI’s Money Transfer System and capabilities into ACI Worldwide’s global enable the new service. The launch of lead as the first bank in Kuwait, and one payments engine, enables same-day SWIFT gpi services will also enable the of the first in the wider MENA region, to transfer and use of funds. bank to develop new value-add services. become a SWIFT gpi member bank.” <

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RBI 758 February 2019.indd 21 14/01/2019 14:49:30 industry insight | wipro digital

away from leaders and executives to the people on the ground dealing with issues digital transformation: on a day-to-day basis. These people have a better understanding of what is going wrong or where to make improvements, and – once listened to – feel empowered and engaged, not small changes, only in themselves but in the company. A positive workplace culture attracts talent, drives engagement, impacts happiness and satisfaction, and affects the performance of not bigger impact only individual staff members, but also teams, management and, ultimately, the overall Many senior bank executives fail to appreciate the importance business strategy. The majority of change begins with altering of culture in the drive to digitise operations, argues Alexander internal perceptions and triggering original Kalinovsky, director of engineering at Wipro Digital thoughts in employees to get them engaged in a new and, more importantly, exciting ways. inancial institutions (FIs) are aware When considering IT operations and digital Rather than measuring success by the amount that digital is the lifeblood to stay transformation, technology is repeatedly the of processes or technology implemented, for Fcompetitive, and that they need to focus in financial services, and the people who example, it should be measured by a team’s either transform into a digitally centric are leading this change – the drivers – are not health and excitement. business or risk becoming obsolete. a priority. Changing culture to a digital one This excitement then has a ripple effect on Most modern leaders at FIs realise that requires a working environment that not only the way of working. An ongoing conversation digital transformation needs to be a strategic embeds digital from the top down, but also in financial services is hiring and retaining goal, however many still fail to recognise that ensures that employees are informed, engaged talent, as the industry’s current environment a cultural transformation, to onboard digital and – most importantly – empowered to can be extremely tough and competitive. By effectively, is just as important. help nurture and develop a digital mindset making employees feel listened to, they are In any industry, it is often easier to change in-house. far more likely to not only stay, but want what people do than how they think – and to develop and further their career in an this is undoubtedly the case in financial DELIVERING CHANGE organisation that cares about them. services. In Gartner’s 2018 CIO Survey, When scaling digital transformation within 46% of CIOs named culture as the biggest Delivery of culture change within FIs is a traditional institution, FIs need people to barrier to digital transformation, with often undertaken with big transformation engage in news ways of working as a part most approaching culture change with big efforts across an entire organisation, such of this. To flourish in the ever-evolving transformation efforts that are unlikely to as overhauling enterprise architecture or digital landscape, rather than dictating that succeed. Instead, FIs should try to change the implementation of a new internal technology is the solution, FIs must look at culture with small and intuitive adjustments communication platform. However, effective how it can use it to streamline and enable a that alter the decision-making process, culture change is, in fact, done by making seamless journey for its modern-day customer. allowing a business to become more customer- small strategic changes. However, to do this, any changes must be centric and provide competitive services. To do this, FIs should undertake a phase- taken on inherently, pushed out and through Culture is the heart of every organisation. by-phase approach to allow staff to become the business via positive employees. Unlike strategy, it is not something that is open to opportunities available to them. This FIs must remember that executing strategy simply implemented; culture is the personality, way the business can start new and positive begins primarily with staff, and continues the character, and by developing it organically, conversations within the organisation. The with products and services. The idea that underlying values, ongoing interactions, simplest and most effective changes provoke digital is all-encompassing must permeate innate behaviours and attitudes develop. emotional responses, as these lever behavioural the organisation, and in financial services, For some businesses, however, this is change. If FIs give power to employees, this is particularly true for front-line staff. not necessarily always a good thing. Often they will feel listened to, empowered and Cultivating an open culture that embraces in larger organisations – and occasionally intrinsically involved in the business. collaboration and communication, using small FIs – tag lines or mottos that people say are FIs can do this by allowing team members strategic steps, results in increased productivity adopted. However, unfortunately, when a to opt into a project, rather than being and innovation. culture is left alone to cultivate naturally, automatically obliged due to role or position. In the modern day, with digital at the these negative mantras are heard and repeated FIs can also look to exploit a single point top of the agenda, FIs now more than ever throughout the organisation. As is often where culture is susceptible to deep change, should work with employees at all levels to the case, the more people say something, particularly in instances where employees develop a digital mindset, as increasingly the ‘truer’ it becomes. The biggest mistake spend most of their time – for example in the most important assets are not financial organisations make is letting their workplace processes, projects and team meetings. ones, but openness to new ideas, ingenuity culture form naturally, without first defining A large part of digital transformation is and creativity from employees throughout a what they want it to be. around shifting the decision-making process business. <

22 | February 2019 | Retail Banker International

RBI 758 February 2019.indd 22 14/01/2019 14:49:30 HEAR l NETWORK l DISCOVER l CELEBRATE Digital Accountancy Forum & Awards London 2019 3rd October 2019 l London Shape the Future of Digital Accountancy The Digital Accountancy Forum & Awards has grown from strength to strength in recent years. Starting as an awards reception in 2012, we will be returning to London in 2019 with our industry forum followed by a gala awards ceremony aimed at UK, European and global accounting firm leaders. On the 3rd October at the iconic Waldorf Hilton we will once again bring together c-level professionals from accounting firms, regulators and industry bodies, consultancies and advisors, law firms and tech vendors to discuss some of the most pressing issues the industry faces today.

Event highlights l Deploying and using artificial intelligence for better services in accounting and auditing l Getting on Blockchain – hype or reality for auditing and reporting l Automation of services in accounting and the effect on the businesses l Uncovering the potential of machine learning for your business l Developing future leaders with new technology l Implication of digital transformation on accountancy and their firms’ business model l Cloud adoption by accounting firms: Latest trends and developments l Post GDPR review and key takeaways from small, medium and large firms l Creating real business value through your data strategy

Badge and Knowledge Partner Silver Partner Lanyard Partner Lunch Partner

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

1019Timetric_DAF_Ad.indd 1 12/12/2018 10:23 HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE OF PRIVATE BANKING

Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.

Key Issues l How is the regulation change set to challenge industry practices? l What is the future of Europe without Britain? l How can the private banking industry in Germany rival its neighbours? l Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? l How can robo-advisors present opportunity to traditional wealth managers? l How are FinTech start-ups rivalling the market? l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry

Gold Partner Lunch Partner Silver Partners Exhibitor

For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689

0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37