www.retailbankerinternational.com issue 771 / march 2020

THE NEXT LEVEL

VIRGIN MONEY REIMAGINES THE ROLE OF THE PHYSICAL STORE ANALYSIS FEATURE INDUSTRY INSIGHT

How Colombia’s OmniBnk Gender inclusion: which Open Banking is underway, extends credit to SMEs lead the way in a but only a tiny proportion using real-time data male-dominated sector? of services have opened up

RBI March 2020.indd 1 10/03/2020 13:51:12 contents this month

COVER STORY NEWS 05 / EDITOR’S LETTER 08 18 / DIGEST • Asian banks reassess coronavirus plans • Russian Premier League marks Tinkoff’s boldest marketing deal • Subscription-only Aion launches in Belgium • to close 52 branches, slash 500 jobs in restructuring • Revolut raises $500m in Series D funding • Grab seeks to expand into consumer banking • Intuit to buy Credit Karma for $7bn 18 VIRGIN MONEY

Editor: Group Editorial Director: Director of Events: Editor:Douglas Jonathan Blakey Minter GroupAna Editorial Gyorkos Director: Editorial Executive:Ray Giddings Joe Xxxxxxxx +44 (0)20 74067936 67056856 +44 Ana(0)20 Gyorkos 7832 4396 +44 (0)20 79367406 6512XXXX [email protected]@verdict.co.uk [email protected]+44 (0)20 7406 6707 [email protected]@verdict.co.uk [email protected] Reporter:Senior Reporter:Saad Ahmed Sub-editor: DirectorHead of of Events: Subscriptions: Ray Giddings +44Mohamed (0)20 7406 Dabo 6538 Sub-editor:Nick Midgley Nick Midgley +44Sharon (0)20 3096Howley 2585 [email protected]+44 (0)20 7936 6997 +44 (0)161 359 5829 [email protected]+44 (0)20 7936 6587 [email protected] [email protected] [email protected] News Desk: Head of Subscriptions: +44 (0)20Reporter: 7406 6538 Sub-editor:Publishing Assistant:Sophia Bell Alex Aubrey Evie Rusman Asena Değirmenci +44 (0)20 3096 2603 +44 (0)20 7936 6975 +44 (0)20 7936 6969 [email protected] [email protected] [email protected]

Customer Services:Customer +44 Services: (0)20 3096 +44 2603(0)20 or 7936 +44 6587, (0)20 [email protected] 2636, [email protected]

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2 | March 2020 | Retail Banker International

RBI March 2020.indd 2 10/03/2020 13:51:21 contents march 2020 10

FEATURES 10 06 / AI AND AML 10 / INCLUSION Recent money laundering scandals have The theme of this year’s International exposed weaknesses in banks’ technology, Women’s Day is #EachforEqual, but in such among other failures. Do artificial intelligence a male-dominated sector it can be difficult to and machine learning hold the key to fighting find women in leadership roles. Evie Rusman financial crime? Jane Cooper reports analyses how top banks measure up 08 / VIRGIN MONEY 15 / OPEN BANKING The £60m ($77.5m) rebranding programme Canada faces a radical overhaul with the for Virgin Money is one of the most introduction of Open Banking and real-time significant in recent UK banking history. As payments, creating opportunities for banks, Douglas Blakey reports, it incorporates a new fintechs, payment service providers and generation of Virgin Money stores consumers. Robin Arnfield reports 06

ANALYSIS INDUSTRY INSIGHT 14 / OMNIBNK 22 / ISG Colombia-based OmniBnk provides SMEs While the disruption of Open Banking is well with a digital alternative to bank business underway, in reality only a tiny proportion loans. It is able to extend credit to SMEs by of banking services have opened up. This has evaluating a company’s financial health using 08 already taken its toll on the traditional banking real-time data. Robin Arnfield reports model, writes ISG partner Bryn Barlow

www.retailbankerinternational.com | 3

RBI March 2020.indd 3 10/03/2020 13:51:25 11th Annual Retail Banker International Asia Trailblazer Summit & Awards 2020 9 October 2020 Singapore

Share experiences, challenges and opportunities with an unrivalled selection of peers from the and wealth management global community.

Register now on rbiasiatrailbalzer.verdict.co.uk

RBI March 2020.indd 4 10/03/2020 13:51:25 editor’s letter

Editor’s letter , metro bank and nationwide refuse to relinquish the top three Douglas Blakey, Editor

lus ça change, plus c’est la même chose: First Direct RBS versus NatWest top, RBS bottom. The results are released just after RBS announces P The latest CMA personal banking service quality long-overdue plans to rebrand at group level from RBS scores are in, and yet again First Direct, Metro Bank and to NatWest. And the relative strength of the NatWest th Nationwide dominate. Indeed, it will really represent a brand compared to RBS is highlighted by the CMA 11 Annual Retail Banker big news story if either First Direct or Metro does not rankings. For overall service quality, NatWest ranks sixth rank top for service in such a survey. equal with 61%, against RBS last with 46%. For online International Asia Trailblazer It is a case of same old same old, with First Direct, and mobile, NatWest ranks ninth with 76%, against RBS Metro Bank and Nationwide the top three ranked. at 12th on 70%. NatWest and RBS both score weakly in Summit & Awards 2020 And yet again, Royal Bank of ranks last (46%). the services in branches ranking: NatWest is third bottom But this time, First Direct just pips Metro Bank by one with 63%, while RBS is last with 50%. 9 October 2020 percentage point (83% v 82%) for overall service quality. New RBS group CEO Alison Rose – or rather the new Singapore Nationwide (74%) again ranks third highest of the 16 NatWest CEO, as we have to get used to saying – has a largest personal current account providers. huge challenge on her hands to improve its CMA scores. The last UK personal banking service quality scores And then there is its expensive and unnecessary digital were published in August 2019. On that occasion, Metro sub-brand, Bó. It is surely only a matter of time before Bank and First Direct were joint first, each with 82%, that experiment is quietly killed off. ahead of Nationwide with 74%. At the bottom of the Mutuals continue to rank top in Australia class, RBS scored 46%, some way behind the next two Meantime, mutuals Heritage Bank and People’s Choice weakest performers. Six months ago Cooperative Bank Credit Union continue to dominate the JD Power and both scored 55%; Clydesdale and TSB, Australia Bank Brand Authenticity Study. Share experiences, challenges and both on 56%, rounded out the bottom five. Customer-owned banks rank highest in perceived Personal banking service quality: RBS remains bottom brand authenticity (569 on a 700-point scale). Top of opportunities with an unrivalled selection There is little change at the bottom of the league with the poll is Heritage Bank with a score of 605, ahead of RBS still scoring 46%; Tesco Bank (49%), TSB (55%) and People’s Choice Credit Union with 576. Commonwealth of peers from the private banking and Clydesdale and and Coop (56%) also still Bank ranks highest out of the Big 4 banks in perceived have work to do. brand authenticity (489), with ANZ (474) bottom. Personal current account holders are asked how Customer trust in Australian banks is only improving wealth management global community. likely they would be to recommend their provider – in slowly. Nearly a third (31%) of customers do not particular, their provider’s online and mobile banking, completely trust their primary bank, down from 34% in branch and overdraft services – to friends and family. 2019. The Big 4’s customers are more likely to perceive The results show the proportion of customers who said their bank as profit-driven rather than customer-driven. they were ‘extremely likely’ or ‘very likely’ to recommend ….and finally each service. Ipsos Mori carried out the independent As RBI March goes to print comes the cheery news that survey between January and December 2019. fiscal 2019 goes down in the record books as the second- Metro tops for branches, online and mobile most-profitable year ever for US banks. In total, US banks For many, the perception of Metro Bank is of a branch (or reported net income of $233.1bn in 2019, down by just store) focused provider. And it is no surprise that Metro 1.5% from the record year of 2018. Bank ranks first for service in branches (84%). For branch Other positives include a 14-year low for banks listed Register now on service quality, Nationwide (80%), Lloyds (71%) and on the FDIC’s list of ‘problem banks’. That falls from HSBC (70%) round off the top four places. 55 to 51 so-called problem banks, the lowest number rbiasiatrailbalzer.verdict.co.uk But Metro Bank also ranks top for online and mobile since 2006. Moreover, the total assets of problem banks banking services, with 85%. (83%), First declines from $48.8bn in the third quarter to $46.2bn. Direct (83%) and (80%) also perform strongly. 2020 already looks tricky, with another interest rate Clydesdale (67%), Coop (64%) and Tesco Bank (62%) rank cut and growing global concerns over the coronavirus. weakest for online and mobile. That 2018 record year looks safe for a little time. <

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

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RBI March 2020.indd 5 10/03/2020 13:51:26 feature | ai and aml

banks grapple with technology in the fight against money laundering

Recent money laundering scandals have exposed weaknesses in banks’ technology, among other compliance failures. When it comes to anti- money laundering (AML) technology, do artificial intelligence and machine learning hold the key to fighting financial crime?Jane Cooper reports

egulatory pressure to fight Westpac CEO Brian Hartzer, before he the Estonian operations onto its group IT financial crime is increasing, and stepped down, said: “Like many banks platform. It was deemed too expensive. R recent lapses in banks’ AML efforts around the world, we have been heavily With little oversight at group level, the show how not having the right technology investing in a programme of work to improve AML risks in Estonia only came to light after in place can have serious consequences. and bolster the management of financial someone blew the whistle. To rectify the In November 2019, Australian regulator crime risks including strengthening our issues, Danske chair Ole Andersen said in Austrac alleged that Westpac had breached policies, data feeding systems, processes and 2018 that the bank was investing in “new and AML laws, which included a number of controls.” robust IT systems”, and increased automation failures such as not assessing risks among its with its AML. correspondent banks. Each of its 23 million breaches could IS TECH THE ANSWER? potentially incur A$21m ($13.8m) in fines, bringing the potential total to a staggering “The current approach has not really worked and business-ending A$483trn. Aside from too well,” says Taavi Tamkivi, CEO of Salv, a this, there was reputational damage: the bank The current fintech firm that specialises in AML. had failed to stop transactions that were “People [at banks] may say their intention “indicative of child exploitation risks” – or, approach has not is to fight crime, but when I see their as Australia’s Home Affairs Minister Peter working procedure, there is no way this can Dutton described it, Westpac had “given a really worked be effective against crime,” notes Tamkivi. free pass to paedophiles”. He adds that banks have been focused on too well complying with the regulatory requirements, DEFICIENTTECHNOLOGY but have missed the overall objective of fighting crime. Customers with no family ties to the “Banks are constantly worried about trying Philippines and South East Asia, who Deficient technology was also a feature to do things right, rather than doing the were sending small amounts to multiple of the Danske Bank scandal, the details of right thing,” says Philip Creed, director at beneficiaries within a short period, should which were revealed in 2018 after a thorough compliance consultancy fscom. “They are have been flagged as suspicious; however, investigation. When Danske acquired its trying to follow whatever processes and make according to Austrac, Westpac’s technology branch in Estonia in 2006 – where €200bn sure they do not get fined; they need to take a did not adequately filter out these kinds of ($220bn) was eventually laundered for step back and think how to combat financial payment. non-resident customers – it never migrated crime.”

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RBI March 2020.indd 6 10/03/2020 13:51:28 feature | ai and aml

When asked if the technology that banks from that do not rely so much on manual example, but when it comes to replacing are using for AML is sophisticated enough, labour. For example, machine learning detects existing methods, they are more conservative,” Creed says: “The easy answer is no. But we patterns as it goes along, teaching itself new Kremer explains. have seen banks spend millions on technology rules, and technology like network analytics In terms of new technology such as and not implement it properly, so it is can spot relationships and connections artificial intelligence and machine learning pointless.” that would have been previously hidden in for AML, Kremer says they are “by far not Banks have become burdened by legacy transactions. the whole answer to the challenges financial systems, and Tamkivi argues they have institutions face”. lost sight of the original idea of what AML REGULATORYPRESSURE McLeod notes that because regulation regulations are addressing – something has moved away from rules and become that fintech firms are more likely to grasp. Regulators have encouraged banks to explore more risk-based, it is now more difficult to This plays into the growing popularity of the latest technologies. In the UK, for operationalise. “How to assess financial crime regulation technology – or regtech – which example, the Financial Conduct Authority risk indicators? This is a really tricky aspect of is expected to grow further. KPMG estimates has encouraged businesses to play in its regulation,” he says. the proportion of regtech spending will grow ‘sandbox’ and test innovative ideas in a In the onboarding process, for example, from 4.8% of all regulatory spending in 2017 controlled environment. And in December operationally the people making judgments to 34% by 2022. 2018, a number of US regulatory agencies are much more junior than the people who publicly stated that they encouraged banks are accountable for making sure they are FINTECH PROBLEMS to take innovative approaches to meet their complying with regulations – and often there AML obligations. is a disconnect between the two. McLeod Craig McLeod, expert at Loo Siew Yee, assistant MD at the adds that in applying a risk-based approach, PA Consulting, notes a trend where banks Monetary Authority of Singapore, said in a “it is extremely difficult in the operational are keener to buy specialised technology speech in late 2019: “We are heartened to context. Banks need to support their people from individual providers and stitch the see that [financial institutions] have made by empowering them through better components together themselves, rather good progress on this front over the last two processes, and get more effective governance than going to a one-stop-shop vendor that years, by increasingly using automation, data and oversight.” provides a range of solutions. analytics and artificial intelligence [AI] to This approach, however, is not without its enhance the effectiveness and efficiency of EMBEDDED AML challenges. Young fintech companies have their AML [and counter-terrorism financing] had to scale rapidly, explains McLeod, which controls.” According to Kremer: “AML needs to be leads to teething problems. “It’s a challenge embedded in the culture of the institution as for banks to put faith in young fintech firms,” MACHINE LEARNING a key risk that needs to be managed,” adding to ensure they have compliant, robust AML that similar processes of training, onboarding protection, he adds. Even though technologies like machine and governance should be applied that would The environment in which banks are learning may be better at detecting financial be used for managing credit risk – which working has also become more challenging. crime, regulators are hesitant to engage in banks do have deeply embedded. With newer, faster ways to make payments, advanced technology, says Andreas Kremer, “AML needs to be embedded way beyond “money changes hands more rapidly and it is partner at McKinsey & Company’s risk technology,” continues Kremer, who adds that much harder, because of the complexity, for practice. He adds: “These new methodologies although he is frequently asked about what a banks to keep up with that pace of change are much less transparent to regulators as to quick fix would be, “there is no magic bullet. within their customer base,” notes McLeod. how they work.” This is a transformational activity where you need to embark on a journey.” He advises institutions to connect AML Banks are trying to reduce the costs of to other elements of financial crime, such as fraud and cyber-risk. Fraud is similar, in compliance; they are looking ahead, but that banks need to protect their customers by monitoring transactions. “Leveraging these they also need to have an eye on the past synergies is crucial,” says Kremer. Also, notes McLeod, looking to the future and having all the latest technology will not Also, the predictability of customers has With a scenario-based methodology, it alone solve banks’ AML problems. “Banks are changed. In the past, customers would have is easier to see which kind of transactions trying to reduce the costs of compliance; they phoned their bank if they went abroad. would be filtered out. Machine learning, on are looking ahead, but they also need to have “Now people don’t do that. The world is a the other hand, is something of a ‘black box’ an eye on the past,” he says. smaller place; people are travelling to more with complex algorithms that make it more From the regulators’ perspective, he notes, interesting and exotic places,” he says. difficult to demonstrate what is actually you can have all the latest technology, such Instead of fixed rule-based screening or happening with the model, says Kremer. as AI and machine learning, but there is no backward-looking risk models, banks now “Regulators have encouraged banks to point pushing forwards if they have ignored have an array of technologies to choose explore modern technology in the UK, for their legacy issues and past failures. <

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RBI March 2020.indd 7 10/03/2020 13:51:28 feature | branches

virgin Money reimagines the role of physical stores

The £60m ($77.5m) rebranding programme for Virgin Money is one of the most significant in recent UK banking history. As Douglas Blakey reports, the rebrand incorporates a new generation of Virgin Money stores designed to bring to life the core Virgin brand DNA

he Virgin Money rebranding ’s was the behaviour, the bank is investing heavily in the exercise is big – and not just in largest shareholder in Virgin Money, with branch network. Tterms of its scale, budget and a near 39% stake. Virgin’s foray into UK ambition. A major bank rebrand is not a financial services turned out to be profitable Virgin Money launches network of novelty, but the Virgin exercise has a lot but short-lived: in June 2018, CYBG, owner Dynamic Experiences designed by riding on it. of and Yorkshire Bank, I-AM The UK has witnessed many a bank snapped up Virgin Money for £1.7bn. Following the merger, leading international rebrand over the years. For example, the design agency I-AM was appointed to design Midland Bank brand was dropped by Clydesdale Bank, Yorkshire Bank the first generation of new Virgin Money UK HSBC in 1999, some seven years after being brands axed stores to hit the UK high street. acquired by HSBC. But while CYBG purchased Virgin Money, it I-AM has developed a customer-centric, That exercise encompassed about 2,000 is the latter brand that is to survive. So the store-format strategy. This includes a family branches at the time, and gave agency Lowe Clydesdale and Yorkshire brands, which date of concepts specifically tailored to serve and Partners a much-coveted multi-million back to 1838 and 1859 respectively, are to be the needs of local communities, the first of advertising budget at the time to promote the dumped. Moreover, CYBG is paying Virgin which are being trialled at the High Street new brand. Group an initial £12m a year to use the Kensington, London, Birmingham and Fast forward a few years and Santander Virgin Money brand. stores. rebranded its three UK acquisitions: Abbey At the time of acquisition, Virgin Money National, Bradford & Bingley and Alliance & operated 73 outlets. Clydesdale Bank Virgin Money stores: brief and Leicester. operated a Scotland-based branch network approach And then, of course, came the much- of 71, while the Yorkshire Bank branch The overall objective for the project was to publicised failure of . One network included 99 outlets – all a far cry build on the Clydesdale digital sub-brand’s of the first victims of the financial crisis, from back in 2002 when Clydesdale and -Works concept. This project amplifies Northern Rock was such a shambles that it Yorkshire operated a combined network of that experience and seeks to bring to life the had to be nationalised in 2008. 490 branches. core Virgin brand DNA attitude, values and It was 2011 before the government sold Since the 2019 deal, the combined branch personality. off Northern Rock in a deal worth around network for the three brands has shrunk from I-AM group MD Jon Blakeney tells RBI: £750m to Virgin. 2012 kicked off with the 243 to 218. Moreover, by the second half of “This required an agile format strategy, focused new owner of Northern Rock adopting the 2020 that number will drop to 166 branches on delivering ‘brighter money’ experiences in Virgin Money brand in an urgently needed once the rebrand is complete. store.” rebrand. That covered some 75 branches, While the physical channel is shrinking To really understand what customers want serving around 4 million customers. in the face of the radical change in customer from the physical spaces, I-AM visited 26

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RBI March 2020.indd 8 10/03/2020 13:51:29 feature | branches

branches in 11 cities. In particular, the I-AM range of networking events, seminars, panel UK BANK BRANCHES, Q1 2020 team devoted over 120 hours to observation discussions, even morning yoga and evening q1 2020 Jan 2019 and conversations, conducting 50 in-depth gigs – all tailored to the needs of the local interviews among staff, customers and market.” Barclays 963 1,058 stakeholders. The stores are a pivotal component of Lloyds 808 893 “Through our research, we reviewed the Virgin Money customer proposition, Halifax 576 609 the positive features of the existing estate to support the 6.6 million personal, small 183 198 along with issues that were common across business and mortgage customers. Virgin Lloyds B Group total 1,557 1,700 the majority of branches. This provides a Money intends to use the stores as a launch RBS inc. NatWest 648 701 platform to position the new stores within vehicle to introduce customers to new NatWest Scotland 5 5 the hearts and minds of the customers. products and services within its own and RBS Scotland 89 91 Blakeney says the new stores create a truly Virgin group companies. RBS NatWest total 742 797 memorable experience that reimagines the Blakeney adds: “We have created the first Nationwide 660 680 role of physical stores. in a national network of ground-breaking Santander 616 766 “People are at the heart of the experience, spaces, that genuinely enrich the banking HSBC 594 626 and we have created a series of feature experience from a consumer perspective. TSB 454 551 modules built to engage and serve customers “Virgin Money has a platform to engage Virgin Money 166 230 throughout the space. customers on a different level, to reach out 207 207 “The new stores, open to both customers into their communities with open arms and and non-customers, provide facilities for to shift the dialogue of banking from money Cooperative Bank 68 68 entrepreneurs to co-work and create in the to wellbeing for the mind, body and soul. Metro Bank 74 62 social media studio, fuelled by bottomless “The new Virgin Money stores will turn Building societies 700 700 cups of free coffee. banking on its head. We are proud of the (excluding Nationwide) “The stores are a platform for social success of B Works, and we are delighted to Total 6,811 7,445 engagement, host destinations for a diverse help take Virgin Money to the next level.” < Source: RBI

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RBI March 2020.indd 9 10/03/2020 13:51:33 feature | inclusion

Gender diversity in : canada tops the table as spain falls behind

The theme of this year’s International Women’s Day is #EachforEqual, but in a male-dominated sector such as retail banking, it can be difficult to find women in leadership roles.Evie Rusman analyses how top banks measure up in gender diversity, and speaks to women leading the way n 8 March, International Women’s Canada’s largest bank by assets, RBC, fronted retail banking sector, as in 2013, across the Day (IWD), people across the the results with a promising 42.9% of female top five retail banks, only 18.4% of board Oglobe celebrate the achievements directors. Next is Scotiabank, which has five members were female. of women in an attempt to further the fight women in directorial positions out of a total towards an equal society. of 13, a rate of 38.5%. FRANCE Over the past decade, retail banking has Following closely behind Canada is the seen a positive shift towards this society, with UK, with 37.9% female directors (25 out of France ranks third in terms of gender many banks increasing the number of women 66) across the five biggest banks. Of the UK diversity. Across the top five retail banks in being given executive positions. banks surveyed, RBS leads the way as 46.2% France, 26 out of 79 directors are female, Speaking to RBI, Andrea Bracht, head of (six out of 13) of boardroom members are a rate of 32.9%. This is an improvement group audit at Commerzbank, discusses how female. RBS’s goal is to have at least 30% from 2013, where the proportion of female the banking industry has changed over the women overall in its top three leadership directors across the five biggest banks was last decade, and argues that good female role layers – which currently total around 800 30.9%. models are essential. She says: “First of all, good female role models are needed to encourage other women good female role models are needed to to follow such a path in the first place and take on responsibility. It is also important to encourage other women to follow such promote women at all levels along their career path, for example by actively encouraging a path and take on responsibility them to take on leadership roles. The idea of equality has become increasingly important in most companies in recent years. roles – in each of its businesses by 2020, and Of the five French banks surveyed, BNP “Fortunately, this can also be seen on the achieve a full gender balance across the bank Paribas scored joint highest with six out of 14 executive floors, where there are many good by 2030. As of December 2018, the bank’s (42.9%) of its directors being female. female role models today.” top three leadership layers were 37% female Caroline Courtin, head of diversity and on aggregate, an 8% increase since the targets inclusion at BNP Paribas, tells RBI how THE BEST PERFORMERS were introduced. gender equality is at the forefront of the HSBC has six out of 14 (42.9%) female bank’s culture. “Financial services have, so When it comes to the percentage of women directors, Barclays four out of 12 (33.3%), far, progressed towards gender equality by in directorial roles, Canada’s top five banks Lloyds four out of 13 (30.8%) and Standard focusing on their workforce,” she says. performed the best with 28 out of 71 board Chartered five out of 14 (35.7%). These “This narrow focus has helped tackle members being female, a rate of 39.5%. figures show a massive upturn in the UK’s low-hanging fruit like workplace gender

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RBI March 2020.indd 10 10/03/2020 13:51:34 feature | inclusion

“It starts with attracting the best female talent to our industry, and extends to the ways we support their professional development, career growth and engagement once they’re here,” she says. “This means demonstrating that we have a culture that works for them – one that offers not just a job, but a rewarding career with opportunities and resources to help them grow and develop – as well as a workplace environment that recognises and rewards performance and offers a range of benefits to help women balance their work and home lives. “At Bank of America, for example, our commitment to gender diversity is rooted in leadership accountability, starting with our board of directors and CEO, and permeating through the company. We are proud that 50% of our global workforce are women, over 45% of our management team are women, Andrea Bracht, Commerzbank Cynthia Bowman, Bank of America and our manager population is over 40% discrimination and stereotyping. Now we female. Bank of America is also one of only measures to seek out a work-life balance, such need to go further, by driving behavioural and four S&P 100 companies with six or more as teleworking and flexible working hours for cultural change in individuals. women on the board.” the entire workforce.” “For BNP Paribas, the question of gender Also in Spain, scored equality transcends gender discourse, and the THEWORST PERFORMERS highly with 37.5% (six out of 16) female only way for us to truly progress effectively directors. is by having both men and women engaging Of all the countries surveyed, Spain’s retail in a frank dialogue. This is why our group banking sector is the worst when it comes to GERMANY joined the HeforShe movement, in order to gender diversity – just 23.3% (17 out of 73) provide a systematic approach in which men of board directors across the country’s top five Germany ranked the second lowest; can share in the engagement and become banks are female. collectively, across Germany’s top five banks themselves agents of change, geared towards Despite a poor show overall from Spain, 30.2% (29 out of 96) of directors are women. the achievement of gender equality.” CaixaBank performed considerably well with DZ Bank is the only bank to have just one Courtin continues: “In a heavily male- six out of 18 (33.3%) of its female directors, female on its board of directors. This brings dominated industry, the fight against according to its website. its female directorial proportion to 14.3%. inequality must have the full backing of the Anna Quirós, corporate director of However, Commerzbank shows more promise male workforce. Having men onboarded onto labour relations, culture and development at with eight female directors out of a total of those initiatives will enable us to enlarge the CaixaBank, tells RBI: “Diversity is part of our 20, a rate of 40%. scope of work aimed at changing behaviour culture at CaixaBank, and we strongly believe Bracht explains: “Commerzbank has done and culture.” that diversity adds value to organisations, a lot in recent years to enable women to France’s lowest-performing bank was making them more competitive, more take up management careers. These include BPCE with four out of 19 female directors, profitable and sustainable over time. a guarantee of return after parental leave, representing 21.1%. “The company values, develops and childcare, flexible working hours and job includes diversity in all its aspects, notably sharing. THE US featuring a diversity programme, Wengage, “In addition, we have set ourselves the which seeks to develop talent and provide goal of always giving female candidates the The US maintained a middle ground - across equal opportunities by fostering the inclusion opportunity to fill a management position the top five banks, 31.3% of directors are and involvement of all people,” she adds. alongside male candidates. This means that if female. “In order to boost the presence of women there are not both genders in the selection for Citi tops the US ranking, as seven out of in managerial positions, at CaixaBank we have a position, we specifically address potential 17 (41.2%) of its directors are female. It is included the scope of gender in managerial female candidates.” closely followed by Bank of America, which development programmes, and in promotion, has six out of 17, representing 35.3%. recruitment and training processes. We also INDUSTRY SHIFT Speaking to RBI, Cynthia Bowman, chief have a specific female mentoring programme, diversity, inclusion and talent-acquisition which has already been taken by more than Speaking to RBI, Prema Varadhan, chief officer at Bank of America, explains how 400 women at the company. architect and head of artificial intelligence at the banking industry can ensure that more “The company has an equality agent figure banking software company Temenos, explains females are put into senior roles. in all its regional centres, and we also promote how women must overcome the biases 

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RBI March 2020.indd 11 10/03/2020 13:51:35 feature | inclusion

that is beside the point. All individuals face different types of challenges throughout their careers; what we do to overcome those is what defines the individual. “Ultimately, your actions must speak much louder than your words. We must not focus on complaining about there not being enough opportunities. It’s what we do with the opportunities that are in front of us that matters the most.” IMPROVEMENTS

Bowman also argues that the number of women in the retail banking industry has improved considerably over the last decade. “There’s no denying that the representation of women in senior roles is improving – at Bank of America for example, female representation at the highest levels of Anna Quirós, CaixaBank Rossana Thomas, Fiserv leadership increased from 33% in 2015 to presented to them in the financial world, 42% in 2018,” she says. “I’m incredibly proud travelling and late hours. I was just as busy as and argues that banks should focus on hiring to be part of the progress we are making, but the men I worked alongside, but there was a people based on merit. we still have more to do. social expectation that I should be spending She says: “I believe that the focus should “What’s been noticeable over the more time at home. always be on meritocracy. If someone is a past decade is the focus on leadership “Over the past decade or so, the workplace good leader, they should be able to obtain any accountability, with many financial services environment has changed, and great strides senior position regardless of their sex, which firms baking diversity and inclusion into their have been made to break down some of the has no correlation to performance. business scorecards, talent and succession unintentional barriers that women have previously faced. The best advice I can give women who are facing a similar struggle is: There are plenty of biases out there, whatever decision you make – whether it’s tending to business or a family obligation – and as a woman you must not let these don’t second-guess your decision. Make the most of the moments you have, whether at distract you from achieving your goals the office or at home. “ Thomas also discusses how she has not let being a woman stop her from achieving “There are plenty of biases out there, and as planning, and quarterly business reviews. her goals. “I’m very proud of what I’ve a woman you must not let these distract you Our own research notes that stakeholders are accomplished in the last 30 years, and don’t from achieving your goals. placing increasing importance on intangible feel that being in a male-dominated industry “In many industries today, there are many assets such as gender diversity, to assess the has held me back during my career,” she says. biases, and not just towards women. We see overall value of a company and its chance of “In my nearly two decades at The Clearing these biases in every industry today – not just long-term success.” House, I set the strategic direction for The in banking, software or technology. If you’re Clearing House’s ACH, wire and check a woman just starting out or at an early stage INDUSTRYCHALLENGES image exchange solutions. I played an active of your career, you need to be clear on your role in the National Automated Clearing personal goals and make sure these are aligned Rossana Thomas, VP for product House Association (Nacha), changing the with the goals of your organisation. Pursue management, enterprise payment platforms way payments were made and moving the your passion with conviction, and where at Fiserv, discusses with RBI what it is like needle for introducing electronic payments you need to compromise, be absolutely sure to be a woman in a heavily male-dominated for consumers. I also served as a Nacha board that you are doing it for the right reasons. In industry. member and was the chairperson of Nacha’s my view, following this approach keeps an “Balancing a successful career with family marketing management group. individual happy and much more likely to life has been a challenge,” she says. “When I “At Fiserv, I’m developing and thrive as a result.” first started my career, many women stayed implementing strategies for our enterprise Varadhan adds: “I have faced difficulties for at home to look after their children, and payments platform. Key initiatives I’m a number of reasons, including my gender, most companies did not offer flexible hours currently working on include how we enable the fact that I’m relatively young, and also or the option to work from home. My roles financial institutions to transition their global because I am not a native English speaker. But throughout my career involved a lot of high-value payments systems to ISO 20022,

12 | March 2020 | Retail Banker International

RBI March 2020.indd 12 10/03/2020 13:51:37 feature | inclusion

Furthermore, Thomas suggests that women WOMEN IN DIRECTORIAL ROLES should have the confidence to step out of their comfort zone and prove themselves. Number of female Percentage of “Keep learning and try new things. Be directors female directors curious about other people’s roles and see HSBC 6 of 14 42.9% what you can learn from them,” she adds. Lloyds 4 of 13 30.8% “Don’t ever feel like you have to restrict Barclays 4 of 12 33.3% yourself to a certain career path. If there’s an opportunity that you’re curious about, make RBS 6 of 13 46.2% the most of it.” 5 of 14 35.7% Thomas continues: “Build your own plan. JP Morgan Chase 2 of 11 18.2% Find a role model, preferably in the financial Bank of America 6 of 17 35.3% services industry, who represents what you Wells Fargo 4 of 14 28.6% want from your career. Understand what they are doing that makes you respect them, and Citi 7 of 17 41.2% observe how they make decisions and carry US Bancorp 6 of 21 28.6% themselves in different settings. What you RBC 6 of 14 42.9% learn from them will help you as you build TD Bank 5 of 14 35.7% your own career. Scotiabank 5 of 13 38.5% “Never give up. Learn from your failures BMO 5 of 15 33.3% and work hard to never repeat them. No one is perfect, but we should always aspire to do CIBC 7 of 15 46.7% the best we can, staying true to ourselves. Deutsche 7 of 19 36.8% CaixaBank’s Quirós also advises that Commerzbank 8 of 20 40.0% women believe in themselves and dare to KFW 8 of 37 21.6% apply for managerial positions. DZ 1 of 7 14.3% UniCredit Bank AG 5 of 13 38.5% BANKS AND IWD

BNP Paribas 6 of 14 42.9% In celebration of IWD, banks and finance Credit Agricole 7 of 18 38.9% organisations are increasingly launching Société Générale 6 of 14 42.9% and partaking in numerous initiatives. BPCE 4 of 19 21.1% For instance, Bank of America promotes Crédit Mutuel 3 of 14 21.4% awareness of women’s history through company-wide programmes and by sharing Banco Santander 6 of 16 37.5% teammates’ personal stories. BBVA 0 of 11 0.0% Bowman says: “As part of our Courageous CaixaBank 6 of 18 33.3% Conversation series, which engages our Banco de Sabadell 3 of 16 18.8% teammates in candid dialogue on a variety of Bankia 2 of 12 16.7% topics including diversity and inclusion, and Source: RBI emotional wellness, we’ll host a conversation focusing on the importance of women looking at how we offer value-added services diverse and inclusive teams? What do their looking after their own emotional and with data analytics and artificial intelligence.” diversity statistics look like? Are they actively physical wellbeing.” promoting gender equality in their workplace Additionally, Fiserv celebrates through ADVICE through committees and offering programs a series of ‘did you knows’, highlighting that specifically focus on the advancement of important milestones and achievements, Entering the retail banking industry can be women to senior levels?” including recognition of the 100th a daunting process for a woman, and comes Bowman continues: “Women should also anniversary of the ratification of the 19th with a series of challenges. Bowman advises take advantage of learning and development Amendment to the US Constitution, which that women looking to enter the banking opportunities provided by their company granted women the right to vote. world should do carry out some research on – these can have a huge impact on their Fiserv also offers year-round programming companies before applying for positions. career. For example, 92% of the women that supports women, including the Fiserv She says: “Seek out companies that put who have participated in Bank of America’s Women’s Impact Network, which fosters diversity and inclusion at the top of their Women’s Next Level Leadership program – supportive and productive relationships agenda – make sure they are walking the walk, which addresses the unique challenges many between female associates and their male allies not just talking the talk. multicultural women face in progressing their across the company, with an aim to enhance “Look at their leadership: are they holding careers – reported being more effective in engagement and create an environment of their managers accountable for having their role following the training.” equality and success. <

www.retailbankerinternational.com | 13

RBI March 2020.indd 13 10/03/2020 13:51:38 ANALYSIS | OMNIBNK

finance; and OmniGrid, an analytics platform OMNIBNK: for OmniBnk clients. Because in many Latin America countries tax authorities mandate that businesses file e-invoices with them, OmniBnk is able to base its credit-scoring on AIMING TO BE LATIN this publicly available information. “Our lending system is 100% driven by alternative data,” says Caicedo Mosquera. “We don’t depend on any of the financial AMERICA’S KABBAGE statements that a bank would use, as we rely 100% on tax returns, invoices and social security information to assess and create a Colombia-based OmniBnk provides SMEs with a fully digital loan of up to $1m for an applicant. Around alternative to bank business loans. Its platform is able to 90% of our clients are ‘thin-file’ applicants, which means there is little or no information extend credit to SMEs by evaluating a company’s financial on them at credit bureaux.” health in minutes using real-time data. Robin Arnfield reports Caicedo Mosquera says OmniBnk’s data- driven approach is similar to Kabbage’s in here is a massive opportunity for payables finance,” says Patricia Hines, Celent’s the US. “We look at everything that our digital fintech B2B lenders such as head of corporate banking. “Some of the loan applicants buy and sell, as well as their TOmniBnk, as Latin American banks more well-funded fintech lenders include financial relationships, in order to build a focus on lending to large companies, and Konfio (Mexico), Afluenta (Argentina, comprehensive data model,” he says. “For their underwriting and risk management Mexico, Peru), and eFactor Network example, who do they owe money to? And systems are not set up for loans to SMEs. (Mexico). Receivables finance is an attractive what have they bought from their suppliers? “If banks do lend to small businesses, alternative to short-term loans, whether Has a client worked with its suppliers for they just provide a very small loan and take supplied by bank or non-bank providers. a long time, or has it just started working months to process an SME’s application,” says “According to The Cambridge Centre with them? in which case it might have some OmniBnk CEO Diego Caicedo Mosquera. for Alternative Finance, 85% of alternative operational issues.” “Banks lack tools to assess the risk of an SME, lending in Latin America and the Caribbean Hines adds: “A user-friendly, efficient, so they use the same process for underwriting is business-focused. Business lending in the decision engine can lower the cost and a $100m loan to a corporate that they use region grew by 142% between 2016 and improve the accuracy of credit decisions while for SMEs. This means the cost-to-revenue 2017, amounting to $566m lent to 25,639 providing small businesses with immediate ratio for the bank is non-existent in the SME businesses in 2017.” funds. A digital platform eliminates lending sector.” traditional paper-based processes such as According to OmniBnk, banks cannot lend B2B LENDING faxing invoices or mailing paper documents to SMEs in Latin America for three reasons: to the lender. The best measure of success of a lack of any way to evaluate SME risk, high The Latin American B2B lending sector OmniBnk’s technology will be its accuracy in origination and servicing costs, and a lack of is attracting major investors. In August predicting the creditworthiness of borrowers hard assets as collateral. 2019, Goldman Sachs provided a secured over the long term.” OmniBnk is currently active only in credit facility of $100m to Konfio. Then in She continues: “We first invested in Colombia and Chile, but plans to expand December, Japan’s Softbank Group led a OmniBnk in 2017 after it won our regional to Mexico and is looking at other Latin $100m investment in Konfio in the Mexican fintech competition,” says Magma managing American countries to enter in 2020, such as firm’s fourth financing round, partner Nathan Lustig. “We have since Brazil and Peru. Ultimately, OmniBnk aims reported. In August 2019, another Mexican followed-on twice because the OmniBnk to provide SME loans across Latin America B2B lender, Credijusto received $42m from team and its tech are clear winners. They’ve and become the region’s equivalent to US Goldman Sachs, Point72 Ventures and other created a solution that not only has the small business lender Kabbage. investors, with Goldman Sachs providing a potential to help millions of SMEs access During 2019, OmniBnk originated $250m credit facility of up to $100m to Credijusto in credit at fair rates, but also could become a worth of loans to around 2,500 SMEs, and March 2019. billion-dollar business. aims to have 5,000 borrowers on its books in OmiBnk operates in accounts receivables “Latin America leads the world in 2020. It has a wide spectrum of businesses finance, allowing companies to receive early electronic invoicing and tax payments, which on its books. As of early December 2019, payment on outstanding invoices. In 90% of gives OmniBnk access to thousands of data OmniBnk had raised $5.4m in venture capital loan applications, OmniBnk is able to make points that enable it to analyse SME risk investments, led by Latin American fintech a same-day credit decision. All credit supplied faster and more accurately than anyone else investment firm Magma Partners. to clients is securitised, with a lien taken on on the market today. OmniBnk has a multi- Latin America’s small business lending future receivables. OmniBnk offers three year lead-creating machine learning model market is getting crowded. “There are many financial products: OmniCash, unconfirmed that will help create global credit scoring for competitors to OmniBnk in Latin America receivables financing; OmniCredit, pre- SMEs, democratising access to finance for for SME loans, receivables finance and invoice financing, effectively working capital millions of entrepreneurs around the world.” <

14 | March 2020 | Retail Banker International

RBI March 2020.indd 14 10/03/2020 13:51:38 feature | open banking

open banking and canada: payments modernisation to benefit banks and fintechs

Canada’s banking and payments industry faces a radical overhaul with the introduction of Open Banking and real-time payments over the next few years, creating opportunities for banks, fintechs, payment service providers and consumers. Robin Arnfield reports

riven by consumer demand and In February 2018, the government Finance Minister Bill Morneau has inspired by jurisdictions that have introduced amendments to the Bank Act, announced that the second phase of the Open Dalready adopted it, such as the expanding the scope of technology-related Banking enquiry will focus on data security UK, the Canadian Government has been activities in which banks can participate. and privacy in financial services. edging towards introducing Open Banking. These amendments removed the barriers “The committee found that, while some The government is keen to provide restricting certain types of relationship data sharing is already happening, the opportunities for Canada’s burgeoning fintech between banks and fintechs, which included development of more secure infrastructure to industry, while providing greater choice for lengthy approval processes and curbs on the use and move financial data would establish consumers. Opening up Canada’s banking investments banks can make in fintechs. They better protection for consumers,” the infrastructure will also make it easier for provide greater flexibility for banks to partner Department of Finance said. foreign fintechs to operate in Canada. with or invest in fintechs, and to offer digital “For the second phase, the committee will The government’s March 2018 budget identity verification services. work with stakeholders from spring 2020 announced a review of Open Banking’s Canada’s banks such as RBC, TD and to provide advice on potential solutions and merits, leading to the creation of an Scotiabank have adopted a policy of standards to enhance data protection in the independent advisory committee on Open partnership with fintechs, and in some cases financial sector, examining issues such as Banking in September 2018. have either invested in or acquired them. One governance, consumer control of personal In January 2019, following the publication of the best examples is SecureKey, which has data, privacy, and security. The committee of a consultation paper, the Department partnered with Canada’s largest banks and will deliver the results of its findings to the of Finance invited comments from telcos to develop Verified.Me, a blockchain- minister later this year.” stakeholders. Separately, a 2019 report based federated digital ID platform. The report said the term ‘consumer- by Canada’s Standing Senate Committee With an estimated 4 million Canadians directed finance’ is preferable, as ‘Open on Banking, Trade and Commerce issued already using potentially insecure screen- Banking’ misleads consumers into thinking recommendations for the government to scraping services to manage their finances, their data is exposed. protect Canadians’ financial information by the report called for a secure Open Banking “The concept behind Open Banking is moving forward with Open Banking. framework to safeguard consumer data- that customers own their financial data and sharing. The biggest provider of third-party control access to it,” says Lisa Shields, CEO BOLD,CLEAR, CONCRETE account aggregation services is Montreal- of Fispan, a Canadian provider of business based Flinks, which received C$1.8m banking connectivity solutions. “Open In January 2020, the Department of Finance ($1.35m) in seed capital in 2018 from Banking doesn’t mean data goes into the wild published a report on the first stage of its National Bank of Canada and Luge Capital. and consumers lose control.” advisory committee’s Open Banking enquiry, “Flinks is Canada’s equivalent of Plaid, the Consumer-directed finance: the future of US account aggregation platform recently PRIVACY AND RISK financial services. It recommended that the acquired by Visa,” says Christie Christelis, government announce a “bold, clear and president and CEO of Technology Strategies The committee said facilitating secure data concrete timeline” for delivering consumer- International. “Because it has access to sharing would help Canadians better manage directed finance, its term for Open Banking. users’ banking log-on credentials, Flinks is a their finances, while giving them greater It suggested that, based on other jurisdictions, potential security risk.” choice in financial services providers. a time-frame of one to two years is reasonable. Christelis notes that younger consumers are “Without making data sharing more secure In tandem with its Open Banking more willing then their older counterparts to and trusted, a broader group of Canadians consultation, the government is making it risk sharing financial data with fintechs that won’t benefit from the tools that consumer- easier for banks to collaborate with fintechs. help with financial planning or saving. directed finance could offer,” the report said. 

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RBI March 2020.indd 15 10/03/2020 13:51:38 feature | open banking

“In addition, screen-scraping isn’t a secure Banking within the Canadian context,” a behind its peers. The government needs to connection for businesses trying to build out CBA spokesperson tells RBI. “We believe take a leadership role and set the legislative new applications, and it creates unreliability Open Banking can enhance the financial framework and objectives. Ideally, it would in the services they offer, which can seriously services landscape for Canadians, but key rely on an implementation body with constrain the growth of their businesses.” risks should be addressed. In order for a public-purpose mandate and diverse Stakeholders told the committee Canadian consumers to truly benefit from representation in its governance, to bring the that an accreditation system to admit Open Banking, risk-mitigation strategies legislative framework to life. Open Banking service providers into the Open Banking are needed to address consumer protection, isn’t something that should be designed by a ecosystem could be an appropriate way to privacy and confidentiality, financial crime few people behind closed doors.” manage privacy and cybersecurity risks. and financial stability.” “What we’re seeing on the fintech side An accreditation system could require is atomisation,” says Christelis. “Fintechs participants to meet certain standards for risk THIRD PARTIES can have a very narrow scope, but they are management, and could be overseen by either fulfilling a very useful service to consumers. a regulator or independent expert body. The report left undecided whether Open Banks can’t play in a segment where there Stakeholders also called for strong processes Banking in Canada should include payments might be 200,000 users of a particular type to authenticate and identify consumers in initiation by trusted third parties. of app, as this wouldn’t generate sufficient order to ensure the security of the system and “Based on the level of activity with many revenues for them.” prevent financial crimes. One option would current Canadian paytech/payment service Shields believes that Open Banking be an interoperable digital ID scheme such as providers (PSPs), the concept of leveraging benefits not just fintechs but banks as well. blockchain-based Verified.Me, which would a third party to facilitate payments on “There’s a massive opportunity for banks to enable consumers to verify their identity your behalf is increasing in popularity, really benefit from their position of trusted when interacting with fintechs. Separately, even without a comprehensive legislative custodian and facilitator,” she says. the Digital ID and Authentication Council framework in place,” says Doug Kreviazuk, “Take the example of B2B lending of Canada is developing a Pan-Canadian executive director at PayTechs of Canada platforms. This use case becomes really Trust Framework for public and private-sector Association. “Increasingly, Canadians are interesting if a bank can easily partner organisations to enable secure exchange of expressing trust in paytechs and with five of six alternative B2B sensitive data with each other and consumers, fintechs’ services.” lenders. When a bank’s Stakeholders called for interoperable and Kreviazuk says that a underwriting appetite isn’t standardised Open Banking APIs to be national Open Banking high for a particular small introduced, following the UK and EU Open framework, establishing business, it can facilitate Banking model. clear rules of engagement, the introduction and the “There was a view among stakeholders roles, responsibilities and provision of customer data that industry has the expertise to develop liabilities, would promote the to the alternative lender and leading-edge technical standards, but that this use of current and emerging still be seen as a partner in should be done with government oversight payments applications. finance by the business.” to ensure fairness and consumer protection,” “This will undoubtedly take time Since 2015, Payments Canada, the report said. “Many stakeholders called to put in place,” he says. “But even with which operates Canada’s clearing and for the government to mandate standardised enabling legislation, the issue is that Canada’s settlement systems on behalf of financial APIs. There was general agreement that any financial services sector effectively operates institutions, has been modernising Canada’s implementation of consumer-directed finance as a tight oligopoly. For years, the business of wholesale and retail payments systems. This should be done in alignment with payments payments and value-add financial services has will result in the introduction of new ISO systems modernisation.” been largely controlled by the largest financial 20022-based high-value settlement (LYNX), Spokespersons for two federal agencies, institutions, and they won’t want to see their batch retail clearing and real-time payments the Competition Bureau and the Financial marker share eroded by non-bank players.” (Real-Time Rail – RTR) systems. Consumer Agency of Canada, tell RBI that “In Canada, we have the benefit of The Settlement Optimisation Engine will they believe Open Banking, provided security learning what’s worked and what hasn’t in replace the Automated Clearing Settlement safeguards are guaranteed, has the potential to the UK and Europe,” explains Anne Butler, System (ACSS), which handles retail benefit Canadian consumers and businesses. Payments Canada’s chief legal officer and VP, payments such as cheques, bill payments and “The bureau believes Open Banking has the research and policy. “Open Banking can’t be Automated Funds Transfer debits, and the potential to deliver significant benefits to implemented overnight, especially in Canada US Dollar Bulk Exchange platforms. LYNX consumers and businesses through increased where the regulatory landscape and its will replace the Large Value Transfer System, competition and innovation in Canada’s challenges are unique.” which facilitates the transfer of irrevocable financial sector,” a Competition Bureau Kreviazuk also notes that Canadian payments between Canadian FIs. spokesperson notes. provinces would need to be involved in Open The RTR will be an always-on “The Canadian Bankers Association [CBA] Banking legislation, as each province has its infrastructure supporting immediate strongly supports innovation and competition own financial legislation. payments and funds transfers. As a platform in Canada’s financial services sector, and Butler adds: “It’s shaping up to be an for innovation, the RTR will enable payment supports the government’s ongoing efforts initiative that will require everyone to come system participants to provide overlay to explore the benefits and risks of Open together to make sure Canada doesn’t lag services, offering new ways to pay for goods

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RBI March 2020.indd 16 10/03/2020 13:51:38 feature | open banking

and services and transfer money. According to risk-based access to foster competition and relationships remain at play for some time to Payments Canada, the RTR is scheduled to innovation in the ecosystem. come.” roll out in late 2021 or early 2022. “The RTR is expected to have the Ubaghs adds: “Canada has a robust The Department of Finance has proposed greatest degree of openness to encourage payments infrastructure and isn’t shy about the creation of a Retail Payments Oversight innovation by both financial institution and modernisation, but it’s never been a market Framework to manage the risks associated non-financial institution payment service leader in experimenting with new concepts with real-time payments. To be overseen providers,” she tells RBI. “There are several and tools; it’s more of a follower. The by the Bank of Canada, the framework will critical building blocks to enable broader Canadian financial sector tends to be fairly provide a risk-based approach to regulating payment service provider participation, cautious but open about change, unlike PSPs in order to help facilitate greater beyond what is currently available to them in the US where a lot of bankers and industry participation in, and access to, Canada’s core collaboration with FIs. The first of these will stakeholders are actively anti-Open Banking.” retail payment systems. be the implementation of the government’s “The framework is a vital building block in Retail Payments Oversight Framework, which PROCESSES Canada’s payments systems governance and will bring payment services providers under a must be enacted by the government before common regulatory framework. Christelis advises the government to hold enabling PSPs to connect to the RTR and use “Payments Canada will rely heavily on back from formulating a solid Open the core payments infrastructure,” the CBA this framework to build the risk-based Banking framework until the RTR and spokesperson says. “The framework is needed criteria for access to the RTR. We expect payments modernisation process are to provide an all-important baseline level fintechs will have opportunities on the RTR, completed. “Otherwise, it risks duplicating of assurance to customers, payment system particularly as providers of overlay – or efforts by regulating and setting standards participants including banks, and Payments value-added – services, which will leverage in an environment where the payments Canada in dealing with other ecosystem the RTR core infrastructure to offer new, modernisation hasn’t stabilised yet,” he says. participants. It will also build customers’ trust innovative payment solutions to consumers “My position is that the vast majority of and confidence that the modernised payments and businesses.” fintechs wouldn’t qualify for direct access system is reliable and secure.” Aite Group senior analyst Gilles Ubaghs to the Real-Time Rail, nor would they says Open Banking is less of a priority for necessarily want it,” says Shields. “But the ACCESS banks, regulators and industry bodies, as fact that direct access was available as an they focus on payments modernisation. alternative to the sponsorship model would Currently, only deposit-taking financial “The payments modernisation project is keep things more competitive. institutions can become members of quite resource-intensive in terms of the “Also, if there were a quorum of fintechs Payments Canada and enjoy direct access to development of the high-value LYNX system, that were poorly served by banks, then direct its core infrastructure. However, Payments the changes to the retail batch and automated access creates an opportunity for either a Canada members can act as indirect ACSS fund transfer clearing and settlement system, bank or a fintech to act as a service provider clearers for non-members. and the Real-Time Rail. to fintechs. In the US, bespoke banks As part of its review of the Canadian “The development map for these three have taken advantage of the opportunity Payments Act in 2018, the government pillars of modernisation is aggressive. We’re to serve fintechs, and have developed a proposed an associate member class for still a few years out from European-style unique regulatory and compliance regime Payments Canada to widen access for Open Banking, but it’ll happen much for on-boarding and serving money services non-bank service providers to the ACSS sooner here than it will in the US. Much businesses.” and its replacement and also to the RTR. of the Canadian payments modernisation Prior to founding Fispan, Shields founded The government published a report on the drive is focused on ISO20022 messaging Hyperwallet, a Canadian payout provider findings of its consultation in February 2019. standardisation and creating an environment acquired by PayPal in 2018. It was proposed that associate members where compatibility and open standards are “Hyperwallet is one of many examples of would be able to directly exchange payment more prevalent.” Canadian fintechs that augment and enhance messaging over the ACSS, while clearing Ubaghs continues: “Improving access to the core capabilities of the payments network and settlement of the actual payments would payments infrastructure, particularly for for either a particular vertical or a particular continue to be undertaken by direct clearers. fintechs and paytechs, is a central goal of use case,” she says. “But Hyperwallet’s In March 2019, Butler told RBI sister the broader modernisation initiative. That’s business model was greatly constrained by publication Electronic Payments International being factored into the design of the new the fact that it was completely dependent on that Payments Canada is supportive of non- infrastructure and to changes to the rules banks for access to clearing and settlement bank players becoming associate members on access and membership status within networks. and gaining access to the RTR, provided Payments Canada. “It was building a product layered on safeguards protect the financial system. “My understanding is that access to LYNX top of the payments infrastructure that was “Our view is that if non-bank PSPs become and high-value transactions will stay very potentially seen as high-risk and competitive Payments Canada associate members, restrictive and really be limited to the big by banks, as it encroached on their wire they should be regulated under the Retail banks, but the RTR will have a much more transfer revenue. You don’t have to be a Payments Oversight Framework,” she said. open access model. The pool of eligible rocket scientist to understand this creates an Butler says Payments Canada believes Payments Canada members will grow, but awkward market dynamic and leads to an a modern payments system needs open, I’d expect to see partner and sponsor-type unfair playing field.” <

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RBI March 2020.indd 17 10/03/2020 13:51:39 News | Digest

march news Asian banks reassess coronavirus plans

Global banks including UBS Group and may force them to set aside more money for spokespersons said, asking not to be Bank of America are expanding contingency soured loans. identified. plans across Asia to ensure that their In South Korea, infections have topped UBS has put South Korea on a so-called operations continue to run, as the spread of 1,200, making it a new hot spot for the virus level 2 alert as part of it business continuity the coronavirus accelerates outside China. that has so far killed more than 2,700 people planning, in line with Hong Kong and Amid continued fears of the spread of the globally. Infections in South Korea jumped Singapore. China is categorized at level 3, epidemic, banks in Asia are having to review from 51 in late February, with a US soldier signalling the highest risk. the preventive and emergency measures they stationed in the country becoming the first South Korea is rated as ‘increased caution’ have in place. reported American military case. by HSBC, meaning business travel can Credit Suisse Group is among lenders that Around two dozen countries, including continue but employees should reconsider are starting to implement alternative work Singapore, have placed restrictions on the need for travel and avoid the worst- arrangements in South Korea, adding Asia’s travellers from South Korea, while flights affected areas of Daegu and Gyeongbuk, a fourth-largest economy to the list of areas and tour-group trips to the nation are being spokesperson said. where staff are being moved into different cancelled. Morgan Stanley and Standard Chartered offices. The hope is that operations can In Japan, Prime Minister Shinzo Abe called have also restricted travel to and from South continue should an infection prompt the for major sporting and cultural events to be Korea. Morgan Stanley employees travelling closure of one location. Banks are considering called off, postponed or scaled down over the from South Korea, or those who have been similar moves in Japan. next two weeks, saying the move was crucial in close contact with someone who has Firms in Shanghai, Hong Kong and now in preventing the domestic spread of the been there, should work from home for the Seoul are rethinking how they work and virus. Japan has 164 confirmed cases. following 14 days, a spokesperson said. travel, to keep staff safe and ensure that The rapid spread of the virus has prompted Banks are also starting to take measures in business continues. Deals involving Chinese the Bank of Japan to ask major banks about northern Italy, where more than 250 people companies have slumped, as have initial their preparedness for a worsening of the have been infected. Large businesses including public offerings in Hong Kong. outbreak. Initial findings from the talks Unicredit and Fiat Chrysler have requested HSBC Holdings and Singapore’s three indicate that large financial institutions that employees work from home and cut back largest banks have warned that the virus are well placed to deal with the situation, on business travel. <

18 | March 2020 | Retail Banker International

RBI March 2020.indd 18 10/03/2020 13:51:47 News | Digest

Russian Premier League marks Tinkoff’s boldest marketing deal brand. It focuses on a modern, energetic, digital audience – one that the Russian Premier League is strategically betting on. Cooperation with the RPL marks a new level of Tinkoff’s involvement in football. We are happy to welcome this new partner to our football family.” Tinkoff VP Anna Mikhina commented: “We have been looking at Russian football, the most popular sport in Russia, for a long time. At the same time, we have also studied successful private businesses in Europe becoming title sponsors of major national championships. “We see an opportunity to enrich Russian football and its clubs with unique marketing opportunities, and attract new fans to the stands. Therefore, we are confident that this will be an interesting and mutually beneficial partnership for The Tinkoff Russian Premier League (RPL) the title partner of the RPL. Russian both Tinkoff and the RPL.” is the new name for the country’s leading football is very popular with our team. Tinkoff follows a number of other banks soccer league. We see many opportunities for mutually that have agreed naming rights deals for Tinkoff has signed a sponsorship beneficial cooperation in this partnership. football leagues. The best-known example agreement to become the Russian league’s This includes business integration and is Barclays’ title sponsorship of the English title partner until the end of the 2021- marketing.” Premier League from 2004 to 2016. 22 season, with immediate effect. The RPL president Sergey Pryadkin added: Elsewhere, Clydesdale Bank sponsored Tinkoff brand will be integrated into “We are happy to start working with the Scottish Premier League from 2007 to TV broadcasts, digital platforms and in Tinkoff. It is an innovative and dynamic 2013, following on from Bank of Scotland’s stadiums where RPL matches are held. business, and one of the leaders in its field. sponsorship of the league. Danske is the Tinkoff CEO Oliver Hughes said: “We “We are very impressed with the current sponsor of the local premier league at Tinkoff are very excited to become young sporting character of the Tinkoff in Northern Ireland. < subscription-only bank Aion launches in Belgium A new subscription-only bank, Aion, has open a flagship branch on Avenue de la launched in Belgium, promoting itself Toison d’Or in Brussels later this month. as being designed to “help customers Aion CEO Wojciech Sobieraj maximise their money”. commented: “Moving money, withdrawing The new bank features an AI-powered money, investing money, exchanging service, MoneyMax, which encourages money, borrowing money, and even customers to earn money on their savings, saving money shouldn’t cost you money. save money on household bills and spend Aion is on a mission to change the way less on online purchases. banking is done. Instead of trying to upsell Aion CMO Vic Walia said: “Members and maximise profits per customer, Aion can earn more, spend less and save more charges a flat subscription fee.” when they use MoneyMax. Enabled by Aion’s subscription model has eliminated AI, MoneyMax searches for lower loan charges in areas such as ATM transactions, interest rates, finds ways to cut household currency exchange, investments and utility bills, and compares online shopping withdrawals, with an aim to help members with lower-price alternatives.” maximise their money. In addition, the Belgian bank offers an Explaining how Aion will benefit the to deliver unparallelled services, value exchange-traded fund asset management Belgian market, Daniel Zilberman, MD and trust to both individual and business product, and a personal concierge service and head of Europe at Warburg Pincus, customers, via an easy-to-use app.” to all its members. said: “Aion will revolutionise the financial As of 2 March, customers can download Aion, which is backed by global services market in Belgium. Aion’s cloud- the Aion mobile app on iOS or Android investment firm Warburg Pincus, will also based proposition has been designed devices. <

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RBI March 2020.indd 19 10/03/2020 13:51:47 News | Digest

Virgin Money to close 52 branches, slash 500 jobs in restructuring Yorkshire Bank. Lucy Dimes, group business transformation officer at Virgin Money UK, said: “The decision to close branches is never taken lightly. The changes announced today are focused on consolidating branches as well as closing a number of branches to reflect changes to customer demand. As our customers change the way they want to bank with us, we are evolving the role of our stores.” Rival banking giant Lloyds, the UK’s largest domestic bank, and insurer Direct Line have also confirmed that they will cut hundreds of jobs. Lloyds said it would cut the equivalent of 780 full-time jobs this year across its branch network. “As customers are using our branches less often, we are reducing the number of roles across our branch network,” a Lloyds spokesman commented. UK-based Virgin Money has announced it North East and Scotland. Direct Line has announced plans to is closing 52 branches and cutting 500 jobs The company said: “Branches within half axe 7% of its workforce. A spokeswoman as part of a restructuring process. a mile of each other will be consolidated to for the company, which also owns the The said it will eliminate duplication and create a national Churchill and brands, said: completely scrap 22 branches, and network fit for the future.” “Like many companies we are having to consolidate a further 30 within others at The cost-cutting move comes after the prepare for changes in the way we operate nearby locations. There will be roughly merger of Virgin Money and Clydesdale reflecting changing customer behaviour 215 jobs lost through the closure of 52 and Yorkshire Banking Group in 2018. where people are increasingly opting to branches overall, with the remaining cuts Each consolidated site will serve customers interact with us digitally.” < being made at central offices in Leeds, the from Virgin Money, Clydesdale Bank and See feature on page 8 Revolut raises $500m in Series D funding Revolut has raised an additional $500m in active customers by 380%; however the expanding its workforce in multiple locations; Series D funding. As a result, the total raised business is yet to report its fiscal 2019 results the company now employs over 2,000 people. by Revolut totals $836m. and remains loss-making. Revolut founder and CEO Nik Storonsky The Revolut series D funding round was Other plans include lending services for said: “We’re on a mission to build a global led by US-based growth capital business retail and business customers. It also aims to financial platform. That is a single app where TCV, with a number of existing investors also extend high-interest savings accounts beyond our customers can manage all of their daily participating. The latest funding round values the UK. It will focus on further developing its finances. This investment demonstrates the business at $5.5bn. Premium and Metal subscription accounts, investor confidence in our business model. According to Revolut, the new capital which Revolut says are proving to be Going forward, our focus is on rolling out was secured following high customer successful revenue streams. banking operations in Europe, increasing demand and engagement, and strong Revolut’s Premium and Metal accounts the number of people who use Revolut as financial performance. Revolut will use the include a variety of benefits for customers. their daily account, and striving towards Series D funding to strengthen its product These include unlimited foreign exchange, profitability. development in existing markets; it also airport lounge access, commission-free stock “TCV has a long history of backing continues to target further international trading and travel insurance. founders who are changing their industries expansion. Revolut aims to improve customer service on a global scale. So, we are excited to partner In 2019, Revolut increased customer and roll out banking operations across with them as we prepare for the next stage of growth by 169% and the number of daily Europe. It will also continue to invest in our journey.” <

20 | March 2020 | Retail Banker International

RBI March 2020.indd 20 10/03/2020 13:51:48 News | Digest

Grab seeks to expand into consumer banking South East Asia’s Grab has received $856m from Japan’s Mitsubishi UFJ and IT services firm TIS, as the ride-hailing company seeks to expand aggressively into financial services. Backed by SoftBank Group, Grab said it will use the funding to offer lending to South East Asian consumers and small and medium-sized enterprises. The company will also be providing insurance and wealth management products and services. MUFG, Japan’s biggest bank by assets, is providing the bulk of the funding, $706m. Separately, TIS, part of TIS Intec Group, is investing $150m in the Singapore-based Kamezawa, MUFG’s deputy president and according to experts. MUFG and other company. In Singapore, Grab has teamed incoming CEO. Japanese banks are looking to catch up by up with Singapore Telecommunications, “We believe this alliance will also investing in new technology companies Singtel, and applied for an online banking generate additional momentum for abroad. licence in the country. our digital transformation of MUFG,” Meanwhile, Grab and Indonesia-based “MUFG’s investment into Grab is a vote Kamezawa added. rival Gojek are evolving from ride-hailing of confidence in our super app strategy and Faced with a low-interest-rate operators to become one-stop shops for our ability to build a long-term, sustainable environment at home, MUFG has turned a variety of services, including payments, business,” said Grab president Ming Maa. to South East Asian businesses, investing lending, food delivery, logistics and hotel The Japanese bank, for its part, will in some of the lenders in the region. booking in South East Asia. combine Grab’s advanced technologies Progress in the digitisation of banking Reports of a possible merger between and data management expertise with its and fintech services has been slower in Grab and Gojek are, however, not true, financial services, according to Hironori Japan than in other advanced countries, Gojek confirmed. < Intuit to buy Credit Karma for $7bn Intuit is nearing a deal to buy personal Joining forces could allow both largest transactions announced so far this finance platform Credit Karma for around Credit Karma and Intuit to fine-tune year, including Morgan Stanley’s $13bn $7bn in cash and stock. recommendations to customers. They will purchase of E*Trade Financial Corp., The mega deal, Intuit’s largest also be able to expand the pool of financial announced in February, and Visa’s $5.3bn acquisition by far in its 37-year history, data they use to make suggestions. acquisition of start-up Plaid, which was would push the business further The move would cap a rapid announced in January. into consumer finance. rise for Credit Karma, which is Credit Karma offers customers free Assuming that talks are backed by funders including access to their credit scores and borrowing successful, the agreement private equity firm history, alerts about possible data could be announced as Silver Lake and financial breaches, and credit monitoring and tax early as this month. technology venture firm preparation and filing services. Customers Bookkeeping software Ribbit Capital. receive offers from other companies for giant Intuit is looking Based in San Francisco credit cards and loans tailored to their to acquire the privately and founded in 2007 by Lin, credit history, with Credit Karma earning held Credit Karma, which Nichole Mustard and Ryan commission when the products are used. was valued at roughly $4bn in Graciano, Credit Karma at one Adding the start-up would strengthen a private share sale around two years point was eyeing an initial public offering Intuit’s foothold in the burgeoning realm ago. The deal would be the first sizeable no earlier than late 2019; however the IPO of online personal finance. In addition to transaction made under chief executive market has looked less attractive after the TurboTax, the online software that millions Sasan Goodarzi, who took over a little disappointing debuts of start-ups including use to file taxes, Intuit’s offerings include more than a year ago. Uber Technologies. the QuickBooks bookkeeping software Under the deal being discussed, Credit Despite this, the merger market, used by businesses, and Mint, an online- Karma would operate as a standalone unit, especially for financial technology budgeting platform that also pitches with current CEO Kenneth Lin remaining companies, has remained strong. Such individual financial products. Intuit has a in charge. deals have accounted for several of the market value of roughly $77bn. <

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RBI March 2020.indd 21 10/03/2020 13:51:50 industry insight | isg PRIVATE BANKER

HEAR • NETWORK • DISCOVER • CELEBRATE the real Private Banking and Wealth Management: challenges of London 2020 Conference and Awards banking as a service London • 11 June 2020 Following an incredible 2019 edition, we are delighted to announce our 2020 date for your diary. While the disruption of Open Banking is well underway, in reality only The daytime conference will explore core themes impacting the UK private banking and wealth a tiny proportion of banking services have opened up. This has already management sector, including how technical innovations can offer solutions and improvements taken its toll on the traditional banking model, writes Bryn Barlow, to enable companies to win greater market share. The event will showcase how private banks partner at global technology research and advisory business ISG and wealth management companies can remain competitive, become future-proof and capitalise olaris Bank defines banking as a In the past, people were loyal to their The stiffest competition will come from on affluent markets to ultimately enhance profitability margins. service as “licensed banks that enable banks – although in truth that loyalty was the next wave of market entrants – those The evening will celebrate the most impressive and successful initiatives from the sector over the Sother businesses to integrate digital probably more to do with how painful the that have learned the lessons from the early banking and payment services directly into process of moving was than out of any real challengers. And look to other markets, too. past 12 months. Awards will be given for a wide range of achievements, and will highlight leaders their own products”. love for the bank. Today, we know that It takes less than three years to build a billion- in the industry and efforts to progress the overall sphere of private banking. This ability for non-banking organisations people coming into banking in their late dollar business now and disrupt a market to create their own banking products is teens or early 20s would be prepared to – look at Tesla, Uber and Facebook. Will We look forward to welcoming you. arguably the biggest shake-up in the industry move banks for a better deal and a better banking follow the same trend? since digitisation. It is great for consumers, of experience. There is potential for a positive societal course: they are seeing more exciting services For some banks, though, that will not impact here. The traditional banks have never from a broader range of providers than ever matter: they will be happy to become served all areas of society well. If you have before. It is not so great for the traditional invisible in the transaction. BBVA, for a well-paid, regular job, then a mortgage banks, for which the implications in terms of example, has a deal with US retailer Target, is no problem for example, but if you are risk management, and even their fundamental where a customer takes out a loan that a contractor, or run a small business, many operating model, are huge. appears to them to be with Target, but banks will not touch you. As the gig economy The impact is growing fast. Even though which is provided by BBVA. BBVA’s chief grows and more people work for themselves, PSD2 is still deliberately limited in scope, executive, Javier Rodriguez Soler, has business will grow for the relevant. in the UK we saw 138 million API calls in gone on record saying he is “comfortable October 2019, and 110 regulated Third- with the bank being invisible in that NEWTECH, NEW THINKING Party Providers (TPPs) are already registered. transaction”. The key, he says, is in the An early braking mechanism lies in how customer getting a good deal, not where All this is giving rise to a new stack of vendor complicated it remains for consumers to give that deal comes from. management tools and techniques that banks data permission. 3. Loss of value. Many banks cannot can use to manage the ever-growing list of move fast enough to keep up with the TPPs they are dealing with, and to track data CHALLENGESAND RISKS challengers, to offer the experiences that and mitigate risk. consumers want. This will get worse It is a start, but legacy banks are changing The challenges and risks are becoming clearer: as other financial products, such as not just their processes and technologies, 1. Confidentiality and data access. If mortgages and loans, open up to TPPs. but their thinking, too. The idea of opening you are allowing a TPP to execute 4. Loss of revenue. This is a very real threat. up to new models of business requires an banking services on your behalf, you New, challenger banks are emerging, and entrepreneurial mindset that can be hard to are still responsible for protecting users’ they do things harder, faster, better. We activate in a well-established system. Some confidential information. The challenge is can look to other economies to see our will succeed, some will consolidate, others how to control what data is outsourced to future. In Germany – which is far more will simply extend their death – or not. which TPP, to know what they are doing ‘Open’ than the UK, for example, new Ultimately, banks need to find what with that data, and to be able to prove banks like Fidor and N26 are cleaning up. segment of people they are relevant to, and to regulators that you have that control. give those people what they want. And This is leading to a wave of technology But some of the challengers are making perhaps this is the biggest shift in thinking solutions and processes that help banks regulatory mistakes – they do not have of all. That banking should follow what Become an event sponsor! keep track. the same culture of risk aversion that the consumers want, not what banks traditionally Contact us to find out more. 2. There is a real risk that banks will lose traditional banks do. They could do with have offered. If you can do that, you have a touch with the end customer completely. some ‘old bank thinking’. bright future. <

22 | March 2020 | Retail Banker International To register now, or for more information, contact Carlo Mancini on [email protected] or call +44 (0)20 7832 3584

RBI March 2020.indd 22 10/03/2020 13:51:51 PRIVATE BANKER

HEAR • NETWORK • DISCOVER • CELEBRATE Private Banking and Wealth Management: London 2020 Conference and Awards London • 11 June 2020

Following an incredible 2019 edition, we are delighted to announce our 2020 date for your diary. The daytime conference will explore core themes impacting the UK private banking and wealth management sector, including how technical innovations can offer solutions and improvements to enable companies to win greater market share. The event will showcase how private banks and wealth management companies can remain competitive, become future-proof and capitalise on affluent markets to ultimately enhance profitability margins. The evening will celebrate the most impressive and successful initiatives from the sector over the past 12 months. Awards will be given for a wide range of achievements, and will highlight leaders in the industry and efforts to progress the overall sphere of private banking. We look forward to welcoming you.

Become an event sponsor! Contact us to find out more.

To register now, or for more information, contact Carlo Mancini on [email protected] or call +44 (0)20 7832 3584

RBI March 2020.indd 23 10/03/2020 13:51:51 HEAR • NETWORK • DISCOVER • CELEBRATE Retail Banking International Conference and Awards London • 22 April 2020 SHAPE THE FUTURE OF RETAIL BANKING

Following a phenomenally successful 2019 edition, Retail Banking International will return in 2020 for its 35th annual conference and awards. The show will bring together industry leaders to examine how the retail banking sector is embracing digital innovation, enhancing operational efficiency and delivering new, improved services for customers. We will explore the current banking landscape, industry collaboration and how to protect against economic upheaval to thrive in a fast-paced and critical time for creating innovative customer products. The content-driven conference will offer delegates the opportunity to hear the latest developments, and explore new innovation through thought-provoking sessions. We look forward to welcoming you.

Silver Partner Bronze Partner

To register now, or for more information, contact Carlo Mancini on [email protected] or call +44 (0)20 7832 3584

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