www.retailbankerinternational.com Issue 757 / january 2019
THE INSIDE TRACK
THE INDUSTRY’S PREDICTIONS ON THE WAY AHEAD IN 2019
NEWS DISTRIBUTION AWARDS
Australian digital challenger Coventry Building Society Nominations are open 86 400 commences beta reinforces its commitment for all categories of the testing on its app to the physical channel prestigious RBI awards
RBI 757 January 2019.indd 1 17/12/2018 15:07:35 contents this month
COVER STORY NEWS 08-21 04 / EDITOR’S LETTER 22 / DIGEST • 86 400 beta testing begins ahead of 2019 launch • EU reaches deal to reduce risks in banking sector • Scotiabank Women Initiative launches • Airtel plans payment service bank in Nigeria • Monzo hits £20m fundraising target • Zopa digital bank set for 2019 launch as FCA grants licence • Green light for Revolut to expand into Singapore and Japan • Mastercard-Microsoft partnership to advance digital ID innovation
2019 PREVIEW
Editor: Group Editorial Director: Head of Subscriptions: Douglas Blakey Ana Gyorkos Alex Aubrey +44 (0)20 7406 6523 +44 (0)20 7406 6707 +44 (0)20 3096 2603 [email protected] [email protected] [email protected]
Senior Reporter: Sub-editor: Director of Events: Patrick Brusnahan Nick Midgley Ray Giddings +44 (0)20 7406 6526 +44 (0)161 359 5829 +44 (0)20 3096 2585 [email protected] [email protected] [email protected]
Junior Reporter: Publishing Assistant: Briony Richter Mishelle Thurai +44 (0)20 7406 6701 +44 (0)20 7406 8633 [email protected] [email protected]
Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected]
Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0261-1740 Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers. For more information on Verdict, visit our website at www.verdict.co.uk. As a subscriber you are automatically entitled to online access to Retail Banker International. For more information, please telephone +44 (0)20 7406 6536 or email [email protected]. London Office: John Carpenter House, John Carpenter Street, London, EC4Y 0AN Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected] follow RBI on twitter @retailbanker
2 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 2 17/12/2018 15:07:38 contents january 2019
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07 26 DISTRIBUTION INDUSTRY INSIGHT RBI AWARDS 2019 07 / COVENTRY BS 08 / REVIEWS & FORECASTS 26 / CATEGORIES Coventry Building Society is reinforcing its Experts from the retail banking sector look These prestigious awards are well regarded commitment to the physical channel via a back at the major talking points of 2018 and in the industry as a mark of quality, and significant branch investment programme. look ahead to 2019 to discuss with Douglas represent immense achievement and success. Matt Mannings tells Douglas Blakey that the Blakey and Patrick Brusnahan the industry’s Nominations are open for all categories until human touch is at the heart of the new look key priorities for the New Year the deadline of 14 February 2019 08 10 12
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www.retailbankerinternational.com | 3
RBI 757 January 2019.indd 3 17/12/2018 15:07:50 editor’s letter
The world’s largest banks by market cap: a sea of red
Douglas Blakey, Editor
018 is a dismal year for the largest banks by ANZ all show double-digit falls; by contrast, non-consumer market cap in terms of share price performance – focused Macquarrie is ahead by 13%. 2 with a very few notable exceptions. Turkish challenges are reflected in share price drops at First off, let us focus on the positives, as they will not long Garanti (-25%) and Akbank (-31%), and Greece is having detain us. The year just ending witnesses healthy share price another difficult year with NBG and Piraeus both down by gains at notable banks in the Middle East: Qatar National is up more than 50%. by more than 50%, with Riyad Bank ahead by more than 40%. In Germany, Deutsche Bank now only just makes it into the Meantime, First Abu Dhabi, Al Rahji and National Commercial biggest 100 banks by market cap, in 98th place. Deutsche is are all ahead by more than 25%. National Bank of Kuwait and down by more than 50% for the year to date. Commerzbank no Emirates NBD, boosted by its digital lifestyle brand Liv, are also longer features in the top 100 and is down by more than 40%. enjoying a strong 2018. The UK banks are enjoying a dismal 2018. For once, RBS is In South America, Banco do Brasil and Bradesco are also not the worst-performing UK major bank share, down by 26% posting healthy gains, up 33% and 19% respectively, and in for the year to date. The most unloved UK bank shares are South Africa, Standard and First Rand are also ahead. In India, Metro Bank (-46%) and Clydesdale -44% for the year to date. the position is mixed. HDFC, Kotak Mahindra and ICICI are Of the major banks shown in the table, Barclays, Lloyds and all ahead by double digits but SBI is down slightly. But that is Standard Chartered are all down by more than 20%. about it for 2018 positives. Looking ahead, there are grounds for optimism in Central and World’s largest banks by market cap: 2018 drops Eastern Europe. Erste and Raiffeisen are down only modestly in You know it has been a disappointing year for bank shares 2018 and look well placed for the year ahead. In Hungary, OTP when even the Canadian banks are down – albeit modestly. is up by 8% for the year to date. The 2018 of the Australian major retail banks has been well But when even Chase and RBC are down a shade, you know documented. It is no surprise that NAB, CBA, Westpac and it has not been a great year for bank shares. <
LARGEST BANKS BY MARKET CAP SHARE PRICE PERFORMANCE 2018 YEAR TO DATE price change market price change market Rank Bank 1.1 to 12.12 cap $bn Rank Bank 1.1 to 12.12 cap $bn 1 JPMorgan Chase -7.4 333.1 21 Morgan Stanley -27.1 68.8 2 ICBC -14.2 268.8 22 Scotiabank -9.4 65.9 3 Bank of America -17.6 241.2 23 Goldman Sachs -31.6 65.5 4 Wells Fargo -16.7 229.2 24 Sberbank -15.4 65.1 5 China Construction Bank -11.1 220.1 25 Westpac -19.3 61.7 6 Bank of China -10.3 184.1 26 Bradesco 19.4 60.4 7 Agricultural Bank of China -6.3 178.3 27 Bank of Communications -3.5 59.6 8 HSBC -10.9 160.4 28 BNP Paribas -34.3 58.5 9 Citigroup -23.5 137.7 29 PNC -21.6 56.9 10 China Merchants Bank -1.5 107.7 30 Charles Schwab -22.4 55.1 11 Royal Bank of Canada -9.6 100.9 31 ANZ -13.6 51.1 12 Toronto Dominion -10.5 94.9 32 Japan Post Bank -14.3 49.9 13 American Express 8.7 88.9 33 Qatar National Bank 54.9 49.5 14 Commonwealth Bank Australia -14.6 87.3 34 Sumitomo Mitsui -21.2 48.9 15 US Bank -5.8 81.4 35 Industrial Bank of China -7.7 47.9 16 Itaú Unibanco -3.6 80.2 36 Lloyds -23.3 47.2 17 Postal Savings Bank China 7.9 79.4 37 Bank of New York Mellon -14.3 46.7 18 HDFC 9.8 79.1 38 UBS -32.9 46.6 19 Mitsubishi UFJ -29.3 72.9 39 National Australia Bank -20.3 46.2 20 Santander -26.2 72.4 40 Shanghai Pudong -15.5 46.1
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RBI 757 January 2019.indd 4 17/12/2018 15:07:51 editor’s letter
price change market price change market Rank Bank 1.1 to 12.12 cap $bn Rank Bank 1.1 to 12.12 cap $bn 41 Bank of Montreal -8.1 44.1 90 Svenska Handelsbanken -11.6 20.7 42 ING -35.4 44.0 91 Northern Trust -11.3 19.6 43 DBS -7.4 43.7 92 Standard Bank South Africa 3.1 19.4 44 China Minsheng -15.4 43.5 93 Danske Bank -41.3 18.8 45 Hang Seng Bank -8.7 43.1 94 Bank of Shanghai 10.7 18.4 46 Bank Central Asia Indonesia 17.9 43.1 95 Synchrony -30.4 17.9 47 First Abu Dhabi Bank 25.4 40.9 96 Credicorp Peru 7.2 17.7 48 BOC Hong Kong -23.7 39.6 97 National Bank of Kuwait 21.1 17.4 49 Capital One -14.7 39.1 98 Deutsche Bank -53.5 17.2 50 Intesa SanPaolo -29.6 38.6 99 KB South Korea -31.5 16.9 51 Al Rahji Bank 27.5 37.5 100 Samba Financial Group 21.2 16.8 52 National Comm. Bank Saudi A 27.2 37.3 101 Keycorp -20.7 16.5 53 China CITIC -2.2 36.5 102 Fifth Third -18.1 16.3 54 BB&T -12.8 36.2 103 Natixis -30.3 16.2 55 BBVA -35.1 35.7 104 Erste Bank -7.9 15.8 56 Mizuho Financial -12.5 35.3 105 Citizens -24.8 15.0 57 CIBC -8.9 35.3 106 Hartford Financial -24.7 15.0 58 State Bank of India -7.8 34.9 107 Regions Bank -17.2 14.9 59 Prudential Financial Inc. -21.5 34.4 108 National Bank of Canada -5.8 14.8 60 Nordea -20.7 34.4 109 First Republic -1.3 14.8 61 OCBC -9.7 34.3 110 Emirates Islamic Bank 1.9 14.8 62 Barclays -24.1 33.3 111 Siam Commercial Bank -4.7 14.5 63 Crédit Agricole -27.3 32.4 112 Hauxia Bank -14.4 14.3 64 Kotak Mahindra 22.3 32.4 113 Riyad Bank 41.6 14.2 65 Banco do Brasil 33.1 31.9 114 Kasikornbank -15.3 14.1 66 Royal Bank of Scotland -26.3 31.1 115 Huntington Bancshares -10.3 13.8 67 ICICI 11.1 30.7 116 Emirates NBD 8.6 13.5 68 Bank Rakyat Indonesia -1.8 30.3 117 The Saudi British Bank 22.3 13.4 69 United Overseas Bank -6.1 30.2 118 Chinatrust Financial Taiwan -1.6 13.3 70 KBC -14.7 28.1 119 Banorte -20.7 13.1 71 Credit Suisse -34.8 28.1 120 CIMB Group -9.1 13.1 72 DNB -2.6 27.7 121 Bank PKO Poland -9.4 12.7 73 Société Générale -30.8 27.3 122 Kuwait Finance House 17.8 12.4 74 UniCredit -32.5 27.2 123 Comerica -16.3 11.7 75 Macquarie 13.6 27.0 124 OTP Hungary 8.6 11.5 76 First Rand 6.6 25.9 125 Abu Dhabi Commercial Bank 16.1 11.5 77 Ping An Bank -22.5 25.5 126 Resona -12.5 11.4 78 Swedbank 0.6 25.3 127 ABN Amro -20.3 11.3 79 SunTrust Banks -14.3 25.0 128 Allied Irish Banks -31.4 11.1 80 Standard Chartered -23.5 24.7 129 BDO Philippines -17.2 10.9 81 Maybank -2.2 24.7 130 Silicon Valley Bank -13.1 10.9 82 State Street -38.6 24.3 131 Bank Negara Indonesia -1.1 10.7 83 Bank Mandiri Indonesia -5.3 23.9 132 Bank of Jiangsu -16.2 10.5 84 Public Bank Bhd 17.8 22.9 133 Banque Saudi Fransi 4.3 10.1 85 Caixa Bank -15.3 22.5 134 Ally Bank -15.9 10.1 86 Discover Financial Services -12.3 21.8 135 Attijarawafa -7.4 9.8 87 M&T -9.8 21.8 136 Commerzbank -46.4 9.6 88 SEB -6.1 21.7 137 Bankia -28.1 9.5 89 Axis Bank India 8.6 21.6 Source: RBI
Get in touch with the editor at: [email protected]
www.retailbankerinternational.com | 5
RBI 757 January 2019.indd 5 17/12/2018 15:07:52 HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE OF PRIVATE BANKING
Private Banking & Wealth Management: Germany 2019 Conference & Awards brings together private banks, family offices, independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.
Key Issues l How is the regulation change set to challenge industry practices? l What is the future of Europe without Britain? l How can the private banking industry in Germany rival its neighbours? l Is Germany the traditional wealth hub we all know or will it become the new FinTech centre? l How can robo-advisors present opportunity to traditional wealth managers? l How are FinTech start-ups rivalling the market? l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry
Gold Partner Lunch Partner Silver Partners Exhibitor
For more details please contact Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
RBI 757 January 2019.indd 6 17/12/2018 15:07:52 0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37 distribution | coventry BS
HEAR l NETWORK l DISCOVER l CELEBRATE Private Banking and Wealth Management Germany 2019 coventry takes 30th April 2019 l Frankfurt, Germany SHAPE THE FUTURE wraps off major OF PRIVATE BANKING branch redesign
Private Banking & Wealth Management: Germany 2019 Conference & Awards Coventry Building Society is reinforcing its commitment to the physical channel via a brings together private banks, family offices, independent wealth managers and significant branch investment programme designed to transform its branch network. The intermediaries in an active discussion of the key issues facing the industry. The Coventry’s Matt Mannings tells Douglas Blakey that the human touch is at the heart of the informative and inspiring keynote sessions and informal conversations provide new look, with greater interaction between employees and members setting for you to join other high-profile guests in engaging discussions. oventry Building Society’s branch and the fourth-largest by number of branches, ALLEN INTERNATIONAL network is enjoying a major firmly believes there is value in bucking the Credesign to create a more spacious, wider branch-closing trend. The new-look branch has been designed relaxed and friendly feel. Matt Mannings, head of branch network in partnership with design specialist allen The design has been rolled out in seven at Coventry, tells RBI that the society is fully international, part of the Accenture Group. of its 70 branches, including Leicester city committed to maintaining its current branch James White, design director at allen centre and Birmingham’s Corporation Street, network. international, tells RBI: “The success of any with other branches to follow in the coming “While other banks and building societies partnership stems from the client clearly Key Issues months and years ahead. are closing branches at an alarming rate, we’re articulating the desire for change, and then l How is the regulation change set to challenge As RBI reported in November, UK bank investing heavily in our network,” he explains. working together to define a differentiating industry practices? and building society branch closures this year “Our multimillion-pound investment will but appropriate design. total 682 outlets. With almost 1,200 branch ensure that we continue to meet the needs of “It has been very clear from the start l What is the future of Europe without Britain? closures in 2017, one in five branches have our members and the local communities in that the Coventry team have a natural l How can the private banking industry in Germany closed in the past two years. which we serve. understanding of who they are, the needs of rival its neighbours? Since the first issue ofRBI went to print in “Our focus for our 70-strong network will their members and the important role their 1981, some two-thirds of UK branches have continue to be people, with technology there staff play in the communities they serve. l Is Germany the traditional wealth hub we all know been shuttered with around 14,000 branches to help provide the human touch, not replace “It has been a pleasure to help shape a new or will it become the new FinTech centre? closing in the interim. The UK ends 2018 it. Branches matter to savers, and we want to experience that showcases the society’s warmth l How can robo-advisors present opportunity to with less than 7,500 branches in total. encourage more people to save more for their of service, the care it shows both colleagues traditional wealth managers? Coventry Building Society, the country’s futures by continuing to offer great value over and members, and a design that creates a < l How are FinTech start-ups rivalling the market? second-largest building society group by assets the long term.” welcoming and relaxing environment.” l How can firms remain cyber safe and raise their security profile? l Can collaboration between incumbents and FinTechs be the next big thing? l Discovering Germany’s best kept investment secrets l How can banks leverage technology to strengthen the human relationship? l An insight into the next generation and how they are shaping the industry
Gold Partner Lunch Partner Silver Partners Exhibitor
For more details please contact www.retailbankerinternational.com | 7 Hannah Leigh on [email protected] or call +44 (0) 20 7936 6689
0219Timetric_PBI_Ad.indd 1 07/12/2018 09:37 industry insight | reviews and forecasts
the inside track: 2018 reviewed and forecasts for the new year
Experts from the retail banking sector look back at the major talking points of 2018 and look ahead to 2019 to discuss with Douglas Blakey and Patrick Brusnahan the industry’s key priorities for the new year
Aiming for the perfect banking experience Angelo D’Alessandro, founder, buddybank 2018 has been a rollercoaster ride for buddybank, the brand-new market. It is a small segment, but it means we can focus all our conversational bank exclusively designed for iPhone with a 24/7 energy on a niche market. messaging concierge. Nine months after launch, I can say that the learning curve is And we have exciting plans for 2019. We will roll out a trading amazing. iPhone users have their own community: they love the platform and investments and personal loan products next device and will pay $1,400 for a new handset even if Samsung year. Buddybank will offer a full banking suite, but what is or another manufacturer brings out a great device. different about it is the 24/7 concierge service. A tough mission Our customers are loving the fact that we are a conversational bank and they can message us 24 Our mission – and it is a tough one – is to design the hours a day, 365 days a year and speak to a real perfect banking experience, and we are doing that human being, not a bot. Contacting buddybank is together with Apple. The first results are amazing, like being a client of a five-star hotel: we will try with 85% of buddybank customers joining the new to help with any lifestyle questions or problems brand, new customers to the UniCredit group. clients might have. Our customers are acting as fantastic ambassadors. Customers can ask anything they want such as advice They love chatting with us in the same way that they about restaurants or help if someone has lost their chat with their friends. On our Instagram account you passport. And buddybank premium customers, paying only will see customers wearing buddybank hoodies, T-shirts €9.90 per month, have access to 850 airport lounges around the and sweatshirts. This is not common in banking, but what is world. The premium service also features a MasterCard world elite happening with buddybank is crazy. credit card. The new breed of customers does tend to be spoiled – many think One unusual feature is that we remain only on the Apple platform: they can have everything in real time and for free. We are trying to it is not available to Android users. It is a little different, and might make a modest amount of money without promising people that seem a crazy strategy, but we are only targeting 25% of the Italian everything can be free. <
8 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 8 17/12/2018 15:08:11 industry insight | reviews and forecasts
Customers take control Alex Weber, Head – International Markets, N26 In 2019, more and more apps will start to blur the borders between example, WeChat’s built-in taxi app functionality. Before we reach banking and lifestyle. this point, however, there will be a more immediate move towards As financial services providers work hard to make finance easier customers wanting to view their ‘financial world’ in one place. and more enjoyable to engage with, it is a natural extension of this This will be powered by Open Banking data, with services that make to try and capture the consumer’s broader attention with relevant it as easy for users to think about, engage with and take control of lifestyle offerings. Europe and the US have not yet seen this offering their finances as it is to ping a message to a friend or check in on come through, though we are seeing signs of this trend in Asia – for social media. < Bunq: the bank of the free and excited about 2019 Bianca Zwart, spokesperson, Bunq At bunq, it is our mission to free our users from We also introduced freedom in the form of borders and barriers in traditional banking. In 2018 transparency in an industry where hidden fees are we have done just that. commonplace. Joining forces withTransferWise has We successfully expanded to there new European been a valuable addition to solidify our mission. countries: the people of Spain, Italy and France can Another pillar this year has been the introduction now enjoy the advantages of bunq as well, as we of bunq ZeroFX. Where other financial institutions met these countries’ growing demand for a bank charge foreign exchange fees on purchases outside that does things differently. the eurozone, bunq only charges the final exchange There are many other barriers in traditional rate to its users. Traditional banks charge you extra banking we have freed our users from this year. We when using your card for other currencies. We do introduced Freedom of Choice, a world first: the not. This way our users save up to 3%! freedom to choose what happens with your money, We are very excited for 2019. We will continue where your deposits are held and how they are used. to remove borders and barriers in the traditional No other bank in the world lets you choose what banking sector and expand Bank of The Free happens with your money. throughout Europe. <
Integration and Agility are key Matt Phillips, Vice-President – Banking Sales for UK&I, Diebold-Nixdorf The financial services industry has continued to experience a state to their digital offerings. Combining the learnings from more flexible of disruption, and consumer demand for convenient and easily start-up organisations with the knowledge, experience, and crucially accessible services has shown no sign of slowing as the boundaries the huge amounts of customer data, of an established high street between industries continues to blur. It no longer matters which brand can be a true recipe for success. industry you are in, all services are compared to perceived leaders of The race is on to boost loyalty and NPS scores frictionless journeys delivered by the likes of Amazon and Uber. Adopting a collaborative mind-set that maintains a constant Encouraged by digital banking, PSD2 and Open Banking, there have curiosity for what is next will also be a key ingredient for success been significant steps forward this year, building the foundation in 2019. Gone are the days when financial service providers could for the ongoing evolution of the customer journey. Whether it is move at their own pace, with the race to maintain customer loyalty accessing all your accounts in one place or using a banking app and positive net promoter scores now truly on. To do this, new to help manage your daily life – for example, blocking a card for a approaches and new technologies must be embraced. For example, limited period to manage spending – the shift in services to deliver a a key change that we can anticipate in the financial services industry more customer-centric approach is clearly evident in the industry. over the coming 12 months is the further integration of AI, which is However, the full effect of these changes is yet to be realised as increasingly being woven into the fabric of our modern lives. consumer adoption for PSD2 varies and the full integration of new The depth of personalisation that AI provides is already forcing offerings from financial institutions into their overall strategies providers to reconsider how they operate. A consistent and is not quite complete. Transformation of services should be personalised experience across all channels is a necessity, and can all-encompassing to remove friction from the customer journey - be achieved through AI to better understand banking preferences enabling seamless interactions that integrate into our everyday lives. and habits – informing conversations and customer offerings based Starting with pockets of innovation is a step in the right direction, on specific wants and needs. If providers properly implement this, but a truly integrated and agile approach is the only way to remain and avoid it becoming a gimmick, consumers can look forward to relevant and competitive long in the term. a connected experience and tailored banking journeys based on Fintechs and digital-only banks can be a good source of inspiration preference history. Banks have years of customer data at their as the industry embraces a more mobile approach to the future. fingertips; now it just needs to be leveraged in the right way and If they have not already, traditional providers should look to new across multiple channels to provide the next level of customer challenger banks that were born online for inspiration when it comes experience that consumers not only expect, but fully demand. <
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RBI 757 January 2019.indd 9 17/12/2018 15:08:11 industry insight | reviews and forecasts
2019: Real innovations will emerge Luke Ryder, Director – External Engagement for Open Banking, Barclays 2018 saw the UK’s financial digital revolution take a big step over their finances, and better-value and quality services and forward with the launch of Open Banking. propositions. The initiative – part of the CMA’s retail banking remedies But – and it is a big but – this will only happen if, alongside supported by the UK’s nine largest banks – gives the technical innovations, all those participating in consumers the ability to let third parties securely the Open Banking ecosystem ensure that they take ‘plug into’ their bank and access their financial consumers with them on the journey. data, paving the way for a world of opportunities. Sharing data is – although potentially very Importantly, it allows this to be done safely and beneficial – also a big step for many. So we as securely through the use of APIs, negating the an industry need to ensure we build consumers’ need for ‘screen-scraping’ – or, in other words, trust in this new approach to their data, and that handing over your username and password. they feel confident and in control of picking which This year we are already seeing emergent use opportunities they want to engage with. cases. In September, we enabled our customers to It is all well and good unlocking the vault to this rich safely and securely bring their accounts from other source of transformative information. But people need banks into their Barclays Mobile Banking app. to know that they, and they alone, hold the key. More control So we must focus on building our customers’ trust – offering them experiences that meet with their current appetite and putting them I expect that 2019 will be the year when we will start to see real in control every step of the way. Then, and then alone, will Open innovations emerging, providing customers with more control Banking really take flight. < 2019 will sort the wheat from the chaff Oliver Hughes, CEO, Tinkoff Bank Tinkoff has had an excellent 2018. an important driver of growth. The rising stars in terms of our non- I believe powerful ecosystems are the way forward in banking, and credit operating income are Tinkoff Business, serving the needs you need scale, interface and data analytics to build one. This all of SMEs, and Tinkoff Investments, a brokerage platform, allowing requires IT, so if you cannot attract the right tech talent or cannot users to invest in over 1,000 securities – sucxh as equities, bonds develop your own systems with rapid time to market, you will and ETFs – around the world. We are disrupting a whole range of increasingly be in trouble. financial segments. In addition to its core financial services, Tinkoff has been growing With an eye towards the younger generation, we have also rolled its ecosystem by expanding the number of lifestyle services, which out Tinkoff Junior to help kids and teenagers learn about personal now encompass cinema, theatre and concert tickets, travel services, finance, while giving their parents appropriate controls, like setting restaurant booking, taxi services and machine learning-driven spending limits. content. And customers can do all of this without leaving our award- Most of our business lines are doing very well and we remain highly winning mobile app. profitable – ROE grew to 72.9% in the first nine months of 2018, versus 48.8% for the same period in 2017. Coupled with a tighter The target is 20 million customers cost regime and very good risk metrics, we are in great shape and This in turn has driven our DAU/MAU [daily/monthly active users] have recently revised our net income guidance upwards for this year – which are almost doubling each year – and we have seen that the to at least RUB26bn. average mobile app session time has risen to four minutes. We believe 2019 will be the year that sorts the wheat from the This means more engagement and loyalty from our 8 million chaff, and reveals which financial services players are really able to customers. Our medium-term ambition is to grow our customer implement AI solutions – as opposed to just talking about them at base to 20 million accounts. Tinkoff Black, our current account every opportunity. This powerful suite of technology, in the right product, is the feeder for much of the cross-sell that is becoming hands, will drive user experience and efficiency. Watch this space. < API development will focus on micro-services Hans Tesselaar, Executive Director, BIAN At the start of 2018, lots of noise was made around the possible use the industry and nation has now had a taste of what is possible cases of APIs in retail banks, ignited in the UK by the government- when APIs are implemented in the traditional banking space. backed Open Banking initiative. The next phase of API development will focus on micro-services Fast-forward to today, and APIs have become a well-known – API-first banking capabilities that run independently from core phenomenon, as the traditional financial services industry grows banking systems. Micro-services will set banks up to facilitate a more aware of how they can allow for the modernisation of the ‘pick-and-mix’ approach to their offerings, allowing them to be more legacy banking processes that have been preventing innovation, in a aligned to their customer base. In time, such a model could renew the more effective way. With the rise of HSBC’s Connected application, core banking system and change the banking IT function forever. <
10 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 10 17/12/2018 15:08:12 industry insight | reviews and forecasts
A new frontier for the industry Lee Rubin, Senior Associate, Pillsbury Winthrop Shaw Pittman 2018 has brought a massive change in the banking and financial The growth in demand for continuous innovation in 2019 will paint sector, due to the ever-increasing consumer expectations driven a fairly optimistic outlook for banking and financial services firms by technology and nimble fintechs. Together with an uncertain in particular, as they look to increase outsourcing of back-end geopolitical environment and ongoing historically low interest rates, functions. We will see financial services firms overhaul back-end this new context has brought new challenges to the sector, but also processes in an effort to reduce costs in servicing customers. New brings new opportunities for transformation. operating models will be sought to improve end-user experience and Transformation technologies are more readily accessible, economical efficiency, ultimately focusing on replacing legacy operations. and powerful than they have ever been before. While cost reduction Firms will look to the digitisation of operations using the latest will remain an imperative for the sector as always, 2019 will see technological developments, with AI and machine learning financial services operators seek out partners to deliver continuous becoming mainstream as firms seek increased efficiencies and more innovation in order to attain new sources of profitability, reinvent personalised services. While 2018 saw fintech development effect the ways in which they service their clients, and strengthen their extensive advancement in the banking and financial sector, 2019 competitive positions in the market. looks to consolidate and extend these changes into a new frontier. < 2018: the year cash lost its crown Nick Kerigan, MD – Future Payments, Barclaycard This year we saw two major milestones signalling a shift away from turnstiles. Barclaycard previously trialled a similar innovation, cash as the dominant payment method in favour of more digital Grab+Go, at our staff canteen in London. technologies; in June we saw debit card transactions overtake cash for the first time, and then in October in-store contactless payments Welcoming new technologies overtook chip and PIN. In many ways, 2018 was the year invisible payments went Today’s consumers are looking for fast, simple and – above mainstream. In 2019, we expect to see several other all – convenient ways to pay, and the latest technology technologies come to the fore of payments to ride that wave is invisible payments, which are experimentation and innovation. increasingly becoming part of our everyday lives. With IoT and smart appliances becoming more The way forward for this technology was paved by mainstream, retailers are marketing everything popular transport apps like Uber and Lyft, allowing from connected fridges to smartwatches – customers to pay for journeys simply by getting opening up opportunities for many different out the taxi and walking away, with payment payment touchpoints. In 2019, we expect to see taken seamlessly in the background via an app. more companies explore how they can combine payment capabilities with IoT devices. Invisible payments accelerate However, given that consumers typically replace While these early examples emanated from the their white goods gradually over time, it will be a while transport industry, in 2018 invisible payments were before we are living in a world where IoT is embedded increasingly adopted by other sectors, especially retail and into every device in our home. Having said that, it is vital catering. that IoT hardware providers are already placing data security and This year, for example, Barclaycard trialled Dine & Dash in privacy at the heart of every product, otherwise these devices could partnership with high street restaurant chain Prezzo, allowing diners become the weakest link in the chain for fraudsters. to pay simply by walking out of the restaurant at the end of the The other trend we expect to see take off in 2019 is wider use and meal, avoiding the sometimes painful process of waiting and paying availability of AI by all businesses. The rapid growth in the volume for the bill. of data available, coupled with the fact that the tools required to Supermarkets and retail stores also adopted invisible payments. analyse that data are becoming cheaper and easier to use, mean Take the widely publicised Amazon Go stores, where customers 2019 will be the year more businesses use AI to inform business simply walk into the store – and out with their shopping, with decisions, create innovative payment experiences, and power new payment taken invisibly by passing through sensor-equipped digital finance products. <
www.retailbankerinternational.com | 11
RBI 757 January 2019.indd 11 17/12/2018 15:08:13 industry insight | reviews and forecasts
Agile partnerships key to customer experience Szymon Wałach, head – Retail Customer Division, PKO Bank Polski 2018 has been another year of rapid growth in cashless transactions to PKO Bank Polski: half of mandatory legal communication in Poland; however, the speed of growth rose even more. All POS to customers was delivered using blockchain as a secure and terminals in Poland are contactless already: a programme set unalterable method, bringing a big cost saving. PSD2 seemed up by a coalition of Polish banks to grow the acceptance to be just thread for banks and was seen as a high risk of network was launched with a goal to double the revenue loss. However, incumbent-though-innovative number of points of sale accepting cards and mobile banks decided to heavily invest in solutions to bring payments in three years. new value to consumers, taking advantage of opportunities given by PSD2 and Open Banking BLIK takes off philosophy to not only defend their positions but BLIK, a local mobile payment system, doubled grow market shares. the transaction count in digital commerce based As far as implementation and delivery are on the popularity of one-time passwords almost concerned, banks stopped developing everything catching up with cards in internet payments. At the themselves. Many launched their fintech acceleration same time, Apple Pay and Garmin Pay launched – and programs, and some – including PKO – decided to found with Google Pay already present on the market, all this is corporate investment funds just for fintechs. shifting consumer behavior to mobile payments, both in digital It is inevitable that banks will work with more agile partners that and physical stores. Mobile banking application is the centre of the are bringing best-in-class user experience solutions to enrich banking experience for consumers, and has already become the banking products and services if banks still want to be the winning most important communication channel. It will become the most proposition for consumers. 2019 is the year when the race on PSD2 important sales channel very soon. grounds starts. We see leading Polish banks investing in biometric Two new themes that started making traction in 2018 were and digital KYC processes as part of their transition into a fully digital blockchain and PSD2. Blockchain technology has already delivered state, as well as an opportunity to provide authentication services for its first real implementations bringing substantial monetary value other partners. < Use of Artificial Intelligence to explode Flavia Alzetta, CEO, Contis Fintech innovation is showing no signs of decelerating; 2018 has information from myriad sources to make much more accurate been an exciting and fast-paced year, and we expect no less from predictions and support customers in their fight for security and 2019. One of the trends that is likely to explode is the use of access to finance. artificial intelligence for financial services, especially when applied Innovators continue to build, connecting AI and machine learning to help organisations across the world fight fraud. technology to advanced APIs to improve automated reaction to McAfee predicts that fraud is costing the global economy $600bn, fraudulent activity. What we believe is to come from this technology and companies across the globe are doing their utmost to try and is a wide roll-out across the financial services industry as it becomes combat this ever-increasing and complex tech-enabled threat. accessible to the mass market. Advances in AI technology have led to the prevention of fraud in One aspect holding organisations back from AI has been difficulty real time, as it is now capable of tracking patterns and behaviour of implementation. However as more providers add this fraud- imperceptible by humans. AI can even analyse photos, videos and detection technology, more financial institutions can benefit from audio files to aid in the fight against fraud detection, drawing in real-time fraud detection in a safer financial ecosystem. < Regulation set to become even tougher Phil Rolfe, Head – Financial Services, P2 Consulting 2018 has been a big year for banks. On the regulatory front, we have Regime will increase again as the FCA seeks to leverage personal seen an increasing number of fines, for everything from violating accountability in its push for improvements in conduct. anti-money laundering legislation and breaches in cybersecurity, • Challenger banks will seek to either tie up with the big canks and to errant employees and insider dealing. And the regulatory consultancies or will become acquisition targets as the big names environment is set to get even tougher in 2019. seek to leapfrog technology investments and leverage their scale With regards to competition, it is a difficult one – should banks fear in a bid to maintain their dominance. the challengers, or the tech companies making forays into financial • US regulators will continue to target European banks for historic services? Whatever happens, as ever, banks have to be on the front infringements around sanctions compliance - we have recently foot. Here are some of the trends we think will be big in 2019: seen BNP and SocGen hit; others will follow as the net widens. • Fines for data breaches at UK finiancial service institutions will • The FAANGS – Facebook, Amazon, Alphabet, Netflix and Google continue to rise, as the detection of GDPR breaches proliferates – will start to sink their teeth into banking and financial services, and the Information Commissioner’s Office comes down hard on leveraging their customer bases, analytics capabilities and big data errors and a lack of investment in cybersecurity. to offer competitive products backed by funky tech that bypass • Banning orders under the Senior Managers and Compliance the high street banks. <
12 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 12 17/12/2018 15:08:14 industry insight | reviews and forecasts
2019 is going to be pivotal Chad West, Head – marketing and communications, revolut In true Revolut fashion, we do not numbers – making sure the targets just focus on one thing: we always we have set ourselves for the first six strive to do several things – and do months are being met, and that we them really well. are always growing. One of the biggest highlights has The other thing that I think will be been customer acquisition. At the huge next year will be demonstrating end of last year Revolut had about that Revolut is living up to its ideals 1.5 million customers and already we of giving you everything finance in are 3 million strong. The growth has one app. We will also be launching been way beyond our expectations to our commission-free stock trading; the extent that we grew from 3,500 basically, what Robinhood is doing users per day to 8,000 users per day. in the US, we will be launching Customer acquisition in Europe that in Europe. That will equally has been a key focus, and we have bring more growth, and it is a continued to grow rapidly. There are whole new proposition because it a lot of fintechs who, three years on, is not standardised banking: it is a are still not generating much revenue. completely different industry that What was encouraging for us last year is we increased our revenue has not been disrupted in this part of the world. It aims towards our five-fold. We are on track this year to also increase it another five goal, and that is getting more people to use Revolut every day. times. This means that as we are growing we are making money, and User numbers skyrocket it shows that our model is viable. This is getting much better, and we are seeing weekly active users Our most difficult year to date skyrocketing. Obviously there are people out there who are using Next year will probably be our most difficult. Expansion is a huge their Revolut account exclusively for travel; we want to encourage challenge: it is upscaling everything. We have already secured all the them to use it every day, and it is working. My job is to make sure it licences, so now we are just waiting on technical stuff and making works even more. sure we are upscaling all our team. We are covering a lot of countries We recent ran a really up-front campaign asking our customers to in 2019, so it is about finding talent – and finding it fast. We already refer friends and family. Those who signed up got their card for have big waiting lists in the markets where we are set to launch. free and delivered in a few days. It worked: we signed up 17,000 Looking to 2019 I want to see Revolut successfully launch in all customers in one day – one every five seconds until 8pm that day. these markets, and make sure that when we do launch there is a lot Next year is going to be pivotal – between the banking licence, of noise. It is not only about getting media coverage, but running commission-free trading and international expansion we have a lot our local community events, adapting our marketing strategies to of work on our hands. One of the best things about Revolut is that it be more local and central to those markets and, of course, hitting always reinvests profit back into the product. < Obsolete technology continues to plague banking Jim Tomaney, cOO, Renovite Technologies 2018 has been a bumpy ride in the financial services sector, perhaps connect with legacy systems embedded in outdated systems and no more so than in banking specifically. Plagued by the ills protocols, and vice-versa. of legacy technology, both banks and those service The reputational damage of these failures is immense providers attached to them – including the likes of and long-lasting. There is the obvious and immediate Visa and the UKFPS – have been dealt major high- impact of the negative media reports. There is the profile blows by IT failures, resulting in extensive social media unrest the organisation will have to service outages and some less-than-pleased absorb and manage. Lastly, there is the fact it is customers. now easier than ever before for consumers to Reports about major banks, including the likes of change where and how they bank. RBS, TSB, Lloyds, Nationwide and Barclays, as well The City watchdog has said banks have a maximum as newer players like Monzo, are practically updated of two days following a technology failure to sort weekly, if not daily. The Telegraph recently reported things out, and must officially report any and all service that between July and September alone, there were issues. Put simply, it is an issue the banking sector is over 100 failures in the sector. being asked to address from above and below. 2018: the year of the IT meltdown Doubtless, 2019 will bring more issues, but perhaps it will be the year attitudes to technology change. Things do not have to be this While these IT meltdowns are all somewhat different in their own way. The monopoly that mainstream banks once had is diminishing. rights, they are not mutually exclusive. Loitering behind many of Fintech has democratised financial services in a very short space of these unfortunate blunders sits a consistent theme: old technology time, and the window for complacency is shrinking. And when the trying to operate in a new world. house is full, it is up to the decision makers to decide if they want Core banking systems implemented using modern technologies to remain on the front benches or watch from somewhere near the and often deployed in a public or private cloud find it very hard to door on their way out. <
www.retailbankerinternational.com | 13
RBI 757 January 2019.indd 13 17/12/2018 15:08:14 industry insight | reviews and forecasts
Open Banking: What started with a whimper... Jerry Norton, Head – Strategy, UK financial services, CGI 2018 saw PSD 2 and the UK Open Banking directives and specification and procurement in 2018; it is a long journey, though, programmes come into force. 2019, should, in theory, see the end of and production operation is even further away. For other countries the beginning of that process and herald the start of the real impact and regions, including Australia and the eurozone, it will be about and all its consequences – more third parties, large B2C corporates, growing volume, exploiting the investments with new services, and more banks taking advantage in one way or the other, and maybe improving reach following 2018 go-lives. even a fintech or two entering the market? Next year should see the further maturing of new technologies, Meanwhile the Australians will have gone from zero to something particularly DLT. Native cloud – applications repurposed for the in this period, and there are rumblings in other key geographies, cloud rather than shifted to it – will reach the geometric expansion including Canada. point. ‘No one got sacked for buying cloud’ will be the mantra. Open Banking is, of course, a key enabler in the journey to digital. Open-source and agile methodologies are at a similar point. We Unlike 2018, 2019 will see more existing players respond to the have however seen peak offshoring in its classic model; DLT will threat posed by neo and challenger banks. Adjacent banks and banks continue to confuse matters. 2018 dubbed previously as ‘the year of within banks will proliferate. The elephant in the room – the digital production’, did not quite materialise. However, there was a rise in drag of the core-banking legacy – will begin to be addressed directly serious initiatives and the technology has bedded down, so expect too, but do not assume it is the traditional core-banking vendors steady progress rather than a rapid expansion throughout 2019. that will be the beneficiaries. The battle over data will escalate. Who owns it, who keeps it and As technology removes barriers in distribution, scale, automation who manages to keep secure will be the issues. More data breaches and data analysis, banks – especially larger ones – need to find new – unfortunately – and GDPR fines will occur in 2019, but also differentiators, new competitive spaces in which to do business, European-style privacy will reach the shores of the US, Canada and and new places to protect their franchise. Parochially, regulation can Australia. Data is a political issue now. help with the latter. Who wants to be a bank, really? Finally, banks will have to invest more time and money in protection from external and internal threats, scanning for money laundering A once-in-a-lifetime change and preventing fraud. Real-time payments exacerbate the risks, Payments infrastructure too is in the throes of a once-in-a-lifetime which regulators regard as systemically critical; for banks it is about change. The UK, Northern Europe and Canada will all be in reputation and ensuring that trust, a core attribute in the digital payments infrastructure implementation in 2019, following a year of world, is maintained at all costs. Lose that and one loses the bank. < Legacy systems will get a new lease on life Ross Mason, Founder and Vice-President – Product Strategy, MuleSoft In many established organisations, legacy systems continue In 2019, we will see more organisations breath a new lease to underpin critical operations but hold the business of life into their legacy systems to innovate faster. Rather back from keeping up with new generations of legacy- than trying to rip and replace or connect legacy systems free competitors. MuleSoft’s Connectivity Benchmark to modern services with rigid integrations, we will Report 2018 revealed that 42% of organisations cite see businesses plug legacy systems into their overall legacy infrastructure and systems among the top three application network with APIs. challenges to digital transformation. As a result of this, organisations will look to establish Nowhere is this felt more strongly than in financial integration layers between their legacy systems and services, where 92 of the world’s top 100 banks still new-age applications and devices, which will enable data rely on the mainframe. Meanwhile, more agile fintech firms to securely flow across the business and be reused to speed continue to emerge, vying for market share. up development times. < A new level of interconnectivity Andrew Beatty, Head – GFS Banking Strategy, FIS In the UK, the introduction of Open Banking to the market has We are already seeing the evolution of platform banking, as introduced a new level of interconnectivity between brands and challenger banks and incumbents partner to develop new AI- platforms, and created opportunities for a new, more holistic enabled tools and services, for which customers are often willing to approach to banking. pay a premium; for example Amazon Echo and Google Home skills So far, we have seen some tactical examples of this, but there has that allow customers to ‘talk’ to their banks through apps. not been the huge rush to market that we were expecting. We For 2019, it is more important than ever that banks are ready to are likely to see things ramp up in 2019, with more emphasis on a embrace and support Open Banking, and to ensure that they are strategic approach along the lines of direct banks such as Starling. regulatory compliant. In 2018 our Performance Against Customer Expectations report, we On top of this is the threat of cybercrime and the need for consent found that digital-first direct banks outperformed the world’s top management. Businesses need to take extra time and extra 50 banks on nearly all customer service metrics, including privacy, precautions to ensure security, and select the right partners to security, problem solving and real-time payments. protect their customers and business. <
14 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 14 17/12/2018 15:08:16 industry insight | reviews and forecasts
We are entering the world of the ‘Silent Payment’ Ralf Gladis, CEO, Computop In 2018 we have seen innovations – but perhaps not as many as US, and German fashion company s.Oliver, with click-and-collect and we hoped for. The PSD2 directive kicked off in January, and while ship-from-store solutions and many other advanced services. Instant Payments were a key part of this, they still had a tough start. In 2019, 2FA will start with PSD2 retail technical standards stepping Banks introduced Instant Payments only for online banking, but the into power in September. Merchants should start to find ways now European retail industry is still waiting on APIs for retail payments and to convince customers to put them on the 2FA whitelists in order to two-factor authentication (2FA). avoid repeated authentication every time customers pay for an order. For the first time in the UK, debit card transactions overtook cash as the most popular form of payment. According to research, when Avoiding 2FA friction it comes to cashless payments both Canada and Sweden are ahead One solution to avoid 2FA friction is SEPA direct debit in Germany, of the pack, but this change in the UK is a significant indicator of the Austria and Switzerland. Given the friction involved with 2FA, we will general trend towards electronic payments and away from cash. see a huge takeup of biometrics by consumers, banks and merchants So, it was no surprise that Google took another step at getting not only for payments but also for all other use cases where involved with the launch of Google Pay – formerly known as Android biometrics can replace passwords. Pay and Pay with Google – or that Apple Pay announced its release The rise of NFC payments with biometric authentication is the in the largest EU market, Germany. NFC payments rule! Of course, beginning of the demise of POS terminals. As the Internet of Things this activity in the mobile payments sphere prompts interest in other gains momentum, NFC allows ‘things’ to be transactional and run areas, and this year we have seen European banks responding with payments. An NFC signal will be good enough to process payments proprietary apps to try and take their piece of NFC action. with Google Pay, Apple Pay or other banking apps. POS terminals will However, at Computop, we have not seen many new and relevant no longer be needed; sales for terminals will peak in three years and payment methods emerging. Instead, our merchants are focusing slowly decline afterwards. on implementing the infrastructure that will allow omnichannel However, payment is a serious subject and consumers do not jump payments on an international scale. on new trends. Adoption will be slow, so do not expect rapid change, A good example of this is international car rental firm Sixt, which now but we will gradually see payments become more invisible. We are has highly encrypted P2PE terminals in its locations in Europe and the entering the world of the ‘silent payment’ and NFC payments. < five trends to watch in Retail Banking for 2019 Mitesh Soni, Senior Director – Innovation and Fintech, Finastra As 2018 draws to a close, collaboration and co-creation have 3: The rise of AI and the intelligent bank become part and parcel of the financial industry. We will see more of AI is already everywhere, and this will continue. As banks improve that next year, but what else can we look forward to in 2019? core digital capabilities, the future rests with understanding 1: Open Banking, APIs and marketplaces the customer better and personalising products and services more precisely to match lifestyle patterns. If The PSD2 European directive comes into force in Bank 1.0 was the physical branch, Bank 2.0 is the September 2019. Expect a new wave of experiences mobile-first, omnichannel digital bank, and Bank 3.0 for customers who allow data to be shared with will be the AI-first intelligent bank. trusted third parties. Imagine rethinking a taxi Decisions will be driven by smart AI in the bank, journey. Forget about paying with a credit card – front to back, across all channels. Banks that Uber, or similar, will be able to initiate payments on drive intelligent insights will dominate as the race the customer’s behalf, providing they have consent. to customer-centricity continues. Expect more And, by the way, during the journey they might also chatbots, recommendation engines and predictive make recommendations for you based on insights services and, with Open Banking, even more such from your customer data. As competition rises, growing services being supplied by non-traditional firms. numbers of platforms, marketplaces, microservices and APIs will build greater connectivity across the financial ecosystem to 4: 5G and IoT enable experiences like this, with data used in more creative ways to We are fast converging to a connected future where the consumer reshape customer journeys. can access high-speed 5G networks. These networks will drive the 2: Two-speed innovation with cloud and digital core adoption of IoT, which together will create compelling new user experiences seamlessly and intelligently. Think about automated Cloud technologies provide impressive benefits of cost, scale and payments at the pump, payments through Alexa, facial detection in speed. More and more banks will accelerate their cloud offerings to branches to improve customer record retrieval. New innovations are capitalize on faster time to market and shorter delivery cycles. Both already in labs waiting for the launch of 5G, and this is predicted to established players and new challengers will accelerate adoption. hit towards the end of 2019, so watch for some early trials. Established banks will improve automation in their core infrastructures using RPA while inventing new customer journeys 5: Wearables directly in the cloud, with a two-speed innovation approach. New Wearables and location-sensitive trackers are poised to become the digital challenger banks, meanwhile, can become operational within future of retail banking. Bluetooth beacons can interact with your months, capturing market share quickly – all enabled through cloud. smartwatch or other wearables to create frictionless experiences. Most cloud providers will offer a full suite of devOps, appOpps and Mobile payments have well and truly become a hygiene factor and AI services integrated into their capabilities as a service. consumers will be looking for added-value experiences. <
www.retailbankerinternational.com | 15
RBI 757 January 2019.indd 15 17/12/2018 15:08:17 industry insight | reviews and forecasts
Unprecedented demand for PCI P2PE solutions tony Hammond, Managing Director, FreedomPay Europe Payment card data is deemed to be personal data, and the Intelligent payment solutions introduction of the new GDPR regulations and potentially associated I predict significant growth in demand for intelligent payment fines in the event of a data compromise has spawned solutions that drive consumer loyalty while incorporating unprecedented demand for PCI P2PE-compliant revenue-generating services for merchants. Technology solutions to help reduce associayed business risks and is getting smarter, and merchants and consumers are operating costs. more savvy when it comes to payment experience. Contactless payment acceptance continued to see Also, many payment terminals that fail to comply exponential growth across many sectors in 2018, with modern data-security standards will reach end spurred on by the benefits of faster, convenient of life in 2019. Card brand mandates will also come service and the opportunity to pay using a variety into effect, demanding upgrade or replacement of of payment instruments. non-contactless enabled legacy devices. In the hospitality sector in particular there is a I expect to see sustained demand for validated PCI noticeable trend in self-service, with demand for P2PE, giving merchants the opportunity to upgrade to either semi-attended and unattended payment solutions. higher-security and functionally rich terminals that meet Consistent with the wider expansion in e-commerce generally, industry mandates. Strong Customer Authentication – an there is also a corresponding growth in internet payment acceptance, integral requirement of Europe’s PSD2 regulation – also comes into as well as in technologies that facilitate payment through consumer- force in 2019, and will change the way in which internet transactions owned devices. must be performed. < 2019 will bring mainstream adoption of biometrics Howard Berg, Gemalto The payment landscape is changing fast. We now live in a world and cannot be replicated – no more risk of someone stealing where consumers demand more convenience and a seamless your PIN. Next year we are expecting to see the first commercial payment experience that is completely non-intrusive to their day- roll-out of biometric payments in the UK and Europe, followed by to-day activities and is secure. This is evidenced by the growing the mainstream adoption of these types of payment in developed adoption of ‘tap and go’ payments which have surpassed chip-and- markets. PIN transactions for the first time in the UK. The next stage in the evolution of card payments will be biometric The end of the PIN? cards. The biometric payment card is built around using your In the longer term, biometrics will take over PINs for cards, and will fingerprint, rather than your memory, to process and validate also become commonly used in new areas such as authenticating transactions. The card has an in-built fingerprint scanner on which wearables and other devices. consumers simply place their finger in order to pay for goods. As digital IDs and biometrics become fully embedded into It works exactly the same as existing contactless cards, but since the consumer-purchasing journey, they will become more of your fingerprint cannot be easily replicated, the card does not an identification step at the stage of check-in rather than an require a transaction limit, so consumers will now be able to spend authentication step at checkout. This means that our digital identity as much as they want. Moreover, these cards are more secure as will become our payment token, and will be fully embedded in consumers’ biometric details are stored only on the chip device payment cards. < 2019: the year ‘alternative’ becomes mainstream Nick White, vice-president – product and marketing, EMEA, Fiserv Open Banking has been seen by many as the start of an ongoing also occur in banking, whether through service-based chatbots or revolution, and one we expect to drive substantial change in 2019. virtual assistants powered by AI. In both cases, we can expect to Firstly, we expect a new environment of collaboration. Historically, see a significant uptake in this type of technology, being driven by fintechs and banks have worked in competition, but that will consumer expectations for speed, ease and convenience. change as initiatives driving an enhanced user experience and those Technology transfer will also be key in back-office technologies as enabling significant new innovation are delivered by those working AI and machine learning become prevalent in fraud detection. While in true collaboration. human intervention will always have a role, more efficient, accurate The rise of fintechs has also opened up a requirement for even more and actionable insights will be driven by the integration of these customer-centricity. In 2019, open APIs will facilitate trusted third technologies in the fight against financial crime. parties to integrate banking into consumers’ everyday lives beyond Finally, we expect the shift towards consumption-based services to typical bank channels. be reflected in decisions made by CIOs for IT services. As the need Contextual banking will become a watchword for those devoted for supply-chain elasticity advances, ‘as a service’ will become the to integration at every logical touchpoint. In a similar vein, as voice model of choice, and providers will need to follow suit. All in all, we interfaces become increasingly popular in everyday use, this will expect 2019 to be the year ‘alternative’ becomes mainstream. <
16 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 16 17/12/2018 15:08:18 industry insight | reviews and forecasts
Transforming payments with innovation Cristina Astore, International Division Director, SIA 2018 saw a number of significant developments in the financial solutions in that direction, but they will have to co-operate with services industry, which are likely to bring very attractive – and banks to make them interoperable and reach critical mass. Service sometimes ground-breaking – new ways to consider how we providers that cover the whole value chain, from the point of make payments and manage our accounts. sale to the current account, will be in the best position to Firstly, the deployment of Instant Payments by benefit from this move. an increasing number of banks in the SEPA area Secondly, the most disruptive change introduced by proved to be a success, passing the 5 million the revised Payment Service Directives, the ability transactions mark in October. In 2019, we foresee for third-party payment service providers to access an acceleration of the move towards them, with any bank account, will also boost adoption of more financial institutions joining EBA Clearing’s Instant Payments for retail when PSD2 really goes instant payment system, RT1, and also the into force in 2019. Furthermore, the convergence European Central Bank’s TIPS platform. between cards and digital payment actors – which With more account holders able to send and receive started in Italy in 2018 with the agreement between Instant Payments, we are likely to see this new method Italian domestic card scheme Bancomat and SIA to use of payment increasingly adopted alongside the more its mobile real-time payment service Jiffy, to be branded traditional cards. Bancomat Pay – will not remain isolated, with other domestic schemes teaming up with electronic payment initiatives. However, Instant Payments have to be integrated in the retail environment to be more successful. To adopt it, consumers should Finally, the multiplication of blockchain implementations, such as be able to pay seamlessly and securely with their smartphone in the SIAChain private infrastructure, promises to provide innovative shops or on the internet. Many fintechs are experimenting with applications in many areas of the industry and beyond. < Using AI To Revitalise Legacy Information Systems David Jones, VP – Product Marketing, Nuxeo Many large financial service institutions have struggled with the The difference is that old-school enterprise content management task of managing increasing volumes of information plus locating systems adopted a fixed set of metatags for each document, and important information that lives in multiple customer systems changing these classifications requires a lot of development work, and transaction repositories, and many will continue to find this along with mass updates to all content related to that metadata. In a challenging in 2019. CSP, if you want to add a new metadata field, you can. But AI-empowered classification of content with a content services Plus, much richer metadata can be stored and used than ever before platform (CSP) approach – as introduced by Gartner – offers – think image resolutions, language of a document, geophysical financial services CIOs a promising new way of searching for useful data and more, giving context, intelligence and insight into your information, allowing banks to at last identify what is useful and get information management ecosystem – allowing you to make those rid of content that is past its sell-by date. disconnected systems truly useful once again. <
AI and machine learning will not change the world Sankar Krishnan, Executive Vice-President – Banking and Capital Markets, Capgemini The banking sector and financial markets are in the midst of a major Another driving force for collaboration across the industry is turning point, and 2018 has represented a setting of foundations. emerging technology. Advanced expectations for AI, blockchain and Fintechs and tech firms are flipping the dynamics, both intentionally machine-learning technology are still years away. These technologies and as a result of other industries evolving, which has led to did not change the world in 2018, and will not in the next year. increased competition in both. However, we are starting to see greater use and reliance on them Fast-paced innovation and pioneering products and services as they continue to develop. In 2019 we should expect to see use introduced to customers by fintechs and bigtech firms have increased cases of people using blockchain for payments in a regular capacity. expectations. Customers now demand a similar digital experience Consequentially, data storage across all technology media will from their banks. become a key issue as more people have affordable access. While traditional banks are not always perceived to be particularly As banks adopt emerging technology to transform themselves, we innovative or agile when compared to incumbents, digital can expect investment in data security and compliance to go up. In transformation is a huge business priority for banks across the sector. 2018, cybersecurity remained the top strategic priority for banks. Faced by the threat of tech firms with the scale and resources, With increased adoption of cloud, API-led Open Banking and new as well as digital-only challenger banks homing in on a few key business models, this trend is likely to continue. offers, the traditional banks are having to broaden their plans and With new technology and more collaboration, 2019 will test the consider partnerships and collaborations. With overreaching – and finance industry’s ability to adapt and evolve. The priority for firms overcrowding – not all will survive, but this process will ultimately of all shapes and sizes will be to accelerate developments to create lead to better options for customers in 2019. impact and invigorate new customers. <
www.retailbankerinternational.com | 17
RBI 757 January 2019.indd 17 17/12/2018 15:08:19 industry insight | reviews and forecasts
A second wave of fintechs emerges Christer Holloman, CEO and co-founder, Divido 2018 was another significant year for banking and payments. Driven The rise and rise of the neobanks by e-commerce and end-consumer demand for convenient, digital Additionally, as the banking space becomes more and more and personalised payment experiences, the ‘second wave’ of fintechs competitive, we will also continue to see the rapid rise of digital-only have emerged from the shadows of their predecessors and challenger banks such as Monzo as viable alternatives to the begun to stamp their authority on the marketplace. traditional banking powerhouses of the world. These fintechs, unlike the first wave, are not looking Over the past 12 months, Divido has continued to go to compete with banks, but instead collaborate and from strength to strength. The biggest highlight for ultimately share success; a example of this can be us as a business was securing official backing from seen in Tandem Bank’s recent partnership with both Mastercard and American Express Ventures Stripe. Aided by the Open Banking legislation and in our $15m Series A funding round – this will see the opening of APIs, these partnerships are starting us supercharge our international roll-out over the to appear, and this trend is set to continue in a big next 12 months. Alongside this, 2018 also saw us way as we head into 2019. announce the appointment of our new chair: Renier In 2019, we will continue to see more fintechs and Lemmens, former CEO of PayPal EMEA. banks collaborating together to achieve a common goal. As a business, Divido has its sights set on international Alongside this, we will see younger generations, such as expansion and growth over the next 12 months. By 2019, millennials and Gen Z, begin to move away from traditional credit Divido will be live in 10-plus countries, including the US, the card transactions and, instead, look to alternative payment options Nordics region and Australia, among others. Along with this, Divido such as point-of-purchase finance as they search for cost-effective is on track to process $1bn of point-of-sale credit applications in the solutions to better manage their finances. next 12 months. < Better use of AI key to combating criminal threat Mark Gazit, CEO, ThetaRay The complexity of attacks will continue to grow as criminals laundering and more. Perhaps worst of all, AI-enabled money increasingly use AI to conduct their schemes. Banks will receive more laundering will create a greater flow of money to criminal fines for money laundering because they will have a decreased ability organisations to finance narcotrafficking, human trafficking and terror to protect themselves. attacks. Rogue regimes will also use AI to achieve their cybercrime goals, On the bright side, new advances and AI technologies will help including election fraud, social media manipulation, money financial organisations, critical infrastructure and enterprises. < 2019: a challenging year ahead Russell Robinson, MD – Customer Communications Services, EMEA, FICO 2019 will be a challenging year for payments and compliance. My prediction is many banks will implement point solutions to With less than 12 months to go until EU banks implement their achieve compliance, and the programme managers that executed Strong Customer Authentication (SCA) solutions, project teams this will move on. Due to these point solutions not meeting are facing tough decisions about the most important aspect consumer acceptance, lack of up-to-date contact details, of the business – customers making payments. I meet meeting regulations and many other issues, there will be many banks that are in the process of compiling their a significant number of complaints, unacceptable fraud requirements and vendor selection, and know some false-positive rates and consumer payments not of these final designs are either non-compliant or completed to a level we have not seen before. will create an unacceptable customer experience. If this happens, the people who inherit the SCA Some banks believe they can achieve SCA programs of 2019 are going to have their work cut compliance by relying on one-time passcodes. out unpicking this stuff and looking to replace them While this will suit many consumers, based on with a platform approach to SCA. They will need to consumer research across the EU (October 2018), enable SCA extensibility and rapid integration to new 60% of consumers do not want a one-time passcode authentication use cases and channels as consumer by SMS, while 30% of consumers said in a recent survey demands require or novel fraud attacks appear in the new that they would complain if they are unable to select their environment. preferred channel to enable SCA — e.g., not with an SMS. Many banks understand that phone device profiling and SIM-swap The industry is making moves to prepare customers for SCA with or call-forwarding solutions are essential. However, many are requests for current contact details. However we are seeing signs expecting SIM-swap services offered by MNOs to evolve before that prescriptive demands to enable future user access are not SCA implementation. I believe this will be true for some MNOs, but being well received. That is evident by the John Lewis article in The suspect alignment will not be in place across all UK MNOs in 2019. Guardian and comments from readers. It is well worth reading some Therefore, banks need to plan how they secure the SMS channel, and of these comments if you are in any way involved with SCA. deal with the higher false-positive ratio, using traditional methods. <
18 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 18 17/12/2018 15:08:19 industry insight | reviews and forecasts
Loyalty programmes are back on the agenda David Porter, MD – Strategy, Customer Value Proposition and Distribution, Ten Group 2018 has been a much healthier-looking year for the financial fresh look at their product and service portfolios to meet the services sector. Interest rates have continued to rise around the ever-changing demands of their affluent and HNW segments in globe, helping to drive substantial increases in profitability, and particular, as markets are returning to pre-financial crisis confidence. regulatory stability has allowed more resources to be devoted back In 2019, we expect this trend of personalisation and tech innovation to product, marketing and sales. to continue as banks look to set themselves apart from competitors As a result, loyalty programmes have been back on the agenda and work on building customer relationships based on trust and for many banks. Some have expanded theirs, while others have emotional connection rather than a race to the bottom with the completely re-engineered their programmes to help them move best interest rates. According to Mintel’s The Role of Trust in Financial away from a one-size-fits-all approach towards a personalised one, Services – October 2018 report, half of respondents believe friendly to demonstrate they understand the uniqueness of each one of their customer service is important for building trust. customers and help them make use of benefits that work for them. We also expect continued innovation in mobile banking, including According to Mintel’s Credit Cards – US – July 2018 report, almost a integrating payments, banking and wealth, as well as personal third of respondents aged 18-44 would be encouraged to apply for a financial management apps, native messenger app payments, and credit card that offered them rewards outside of airline miles. biometric security as consumers become more trusting of mobile security. Investments in blockchain and AI also look set to increase Affluent and HNW segments offer huge potential as banks want to make the technologies work for them. Technology has played a major role in building loyalty in the sector All in all, we see financial services providers looking to improve in 2018. Platforms with integrated product bundles are increasingly their existing customer relationships through a more personalised commonplace as banks are looking at ways to seamlessly fit their approach and an emphasis on attracting younger generations with products into the lives of their clients. Banks are also taking a the help of tech innovation. < icos a massive highlight of 2018 Hartej Sawhney, Blockchain, CyberSecurity Entrepreneur and Co-Founder, Hosho Despite the recent negativity around initial coin offerings (ICOs), it is licensed broker dealers in multiple jurisdictions that also have the still a massive highlight of 2018 for the global economy. The ability to market make. world witnessed nearly 1,000 companies raise $22bn in A lack of legal framework for securities tokenisation in 2018 by leveraging the ICO fundraising mechanism, jurisdictions around the world has largely hampered according to CoinSchedule.com. ICOs raised more in the ability of companies to tokenise assets. the first quarter 2018 than all of 2017. Nevertheless, jurisdictions such as Gibraltar, Malta At the same time, in 2018 around 10% of all of and Bermuda are leading the way in providing the money within the ICO ecosystem was either regulatory clarity for security tokens. lost or stolen. For example, $500m worth of Looking ahead to 2019, we will continue to see cryptocurrency was stolen from CoinCheck in large-scale data breaches such as the recent Tokyo. hack at Marriott Hotels/Starwood Properties. 2019 is the year of tokenised assets via security token Companies need to make sure that they are getting offerings (STOs). Most ICOs will convert into STOs, as regular penetration testing and hosting bug bounties. they were never utilities to begin with. The world will see Cryptographic techniques such as zero-knowledge proofs its first securities token exchanges go live in 2019. Liquidity is will enable customers to truly own their own data – once the the name of the game; companies raising STOs will use the help of asset is tokenised. < In 2019 personal finance really has to get personal Ed Maslaveckas, co-founder, Bud Research we have conducted has uncovered that many bank customers feel a real sense of anxiety linked to ‘the desire to do more’ versus the realities of their finances. This is propagated by constant peer comparison and assessment: the endless cycle of triumphs and achievements viewed through the unforgiving lens of social media. Banks can cement their relevance in this context by looking to create new value in transactional data – building new experiences by cleverly linking data from the products and services that make up customers’ financial worlds. We expect this trend to really take off in 2019, as banks take advantage of Open Banking to power products that will help them stand out from the crowd in their customers’ eyes – next year, personal finance will have to get really personal. <
www.retailbankerinternational.com | 19
RBI 757 January 2019.indd 19 17/12/2018 15:08:19 industry insight | reviews and forecasts
Digital spinoffs speed ahead Eugene Danilkis, CEO, Mambu Forced to evolve, banks have launched their own fintechs or digital Collaboration in technology banks. The trend we saw over the past 18 months is just getting Potential lies in a combination of technologies as part of a wider started. Spinoffs like Goldman Sachs’s Marcus and ABN Amro’s value chain. Institutions are beginning to design their operating New10 are helping to fight fintech with fintech. They are launching model and technology for change which involves an API-driven greenfield tech-enabled businesses to tap opportunities and composable architecture. This allows them to adapt quickly and embark on a lower-risk technological evolution. Spinoffs mix the right technologies for the biggest impact. draw on the resources and experience of parent institutions while operating independently, embracing Acceptance of platformification the fintech technology and culture. They deliver big Platformification in the form of Open Banking and results in a short time, free of the organisational composable architecture will enable continuous and technological legacy that holds back traditional and fast innovation for years. Instead of building in- organisations. house and propagating silos, institutions will connect cloud-based services together, accessing more digital Transition not transformation channels and services. If managed like a product, core Digital spinoffs spurred a rethink of how to solve assets can be reused, shared and monetised, extending specific market, technological or regulatory issues. the reach of services or providing new revenue streams. Spinoffs highlight another trend: strategic and surgical transition projects instead of long, expensive and risky enterprise- Easing of regulation wide transformations. There is a movement to centralise control More regulators are embracing cloud-driven services, noticeably in of the balance sheet but decentralise deployment of services. countries that may not have previously had a public cloud footprint. Flexibility of technology enables decentralised deployment by Following the UK, France, Australia and Germany, regulators in individual businesses instead of the whole organisation. With a Africa and Southeast Asia will continue to ease public cloud usage. modular or componentised approach, the business unit has more Supported by banks and cloud vendors, more software and services agility to innovate and deploy myriad services to address specific will be cloud-based and cloud-agnostic, which negates the perceived needs at lower risk and cost. risk of cloud providers. < Cryptocurrencies and blockchain disrupt the status quo Rahul Singh, President – Financial Services, HCL technologies Looking back at what 2018 has brought to financial services, you do As 2019 looms, the need for banks to innovate their use of not need to search for long to see examples of fintechs offering more technology is more pressing than ever. A common issue that all banks to consumers and businesses alike. face is the constraint placed on their agility and nimbleness by legacy Cryptocurrencies and blockchain in particular have taken off this platforms. In such a scenario, banks will need to evaluate the value of year: take Robinhood’s offer of crypto trading without charging a their assets and the investments for up to date platforms. commission, and we.trade launching its digital blockchain platform to The options are threefold: leaving things as they are without connect every party in trade transactions. spending; ripping and replacing them; or, best of all, integrating new In its relatively short lifespan, cryptocurrency has really shaken up technology. While platform modernisation is a priority, the target how we think about banking, and from the looks of 2018, it is here is to increase efficiency or have more agile business processes; that to stay. Going into 2019, banks must seriously consider how they can is why banks need to consider the trifecta of applications, business harness this new form of currency. Put simply, if they do not capitalise processes and infrastructure services for effective and enduring on this digital opportunity, traditional banks will lose out to the change. emerging breed of fintechs dominating the banking space. Banks will realise PSD2 is not a threat Banks will learn to cut dependency on legacy systems It will not all be doom and gloom for banks in 2019, however. The When it comes to banking products, looking forward into 2019 EU’s introduction of the PSD2 and the UK’s implementation of the reveals a serious need for banks to address their dependency on Open Banking initiative are regulations that were initially viewed as legacy applications. They are one of the biggest barriers to agility threats to traditional firms. and innovation, and restrict the adoption of newer, more efficient Over the next year it will become increasingly apparent that this is not technologies. Recently founded fintechs, by contrast, do not depend the case, however. In fact, such initiatives are actually opening doors so heavily on these outdated systems, so are better positioned to for banks to forge creative partnerships and adopt platforms that maximise the potential of emerging technological advancements. deliver a wealth of new digital solutions. Take, for example, Cobol, the 60-year-old computer language that As the scope of new products and services widens, banks will still powers 95% of ATMs and 80% of in-person transactions. One be given the opportunity to innovate and experiment with new recent estimate suggests that there are 220 billion lines of Cobol technologies, allowing for greater collaboration and partnerships with code running across banks today. Worryingly, however, young smaller firms. programmers in the next generation are attracted by the prospect of Among the many challenges of the new digital era lie some exciting using systems like Python, Java, Erlang and Scala. opportunities to break traditional siloes and take advantage of Failing to implement such applications means traditional firms not emerging technologies. Only by taking these opportunities can banks only fall behind their newer competitors financially, but risk missing succeed in the mission to enhance customer experience, promote out on attracting the best new talent. stickiness and keep up with competition from fintechs in 2019. <
20 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 20 17/12/2018 15:08:22 industry insight | reviews and forecasts
Exciting new business models Mark Gazit, CEO, ThetaRay With little surprise, our retail bank clients are on continued mission Next year, this trend will continue: banks will dial up the search for to establish and implement use cases for new technology such as AI, more ways to use technology to meet business goals in smarter, more cloud computing and APIs, across the spectrum of banking functions. intelligent ways. Innovation will primarily take place internally within The main difference this year from what we have seen previously is banks; however, there is a large chance we will see an increase in that technology adoption is being driven more by a requirement to banks’ appetite to partner with third-party service providers that can create new business models than to fulfil regulatory demands. deliver faster upgrades to existing offerings and processes. <
How has the crypto market developed in 2018? James Mawhinney, md, Mayfair 101 It comes as no surprise that the value of the cryptocurrency market participate in asset-backed investments, which may include tangible has declined sharply. This is due to a large proportion of companies or intangible assets and income streams. offering digital currencies having flawed business models coupled The term ‘cryptocurrency’ is likely to be redefined to focus on those with minimal or non-existent underlying assets and inexperienced, currencies that are being formulated as true mediums of exchange or technology-focused management teams. ‘legal tender’. Companies such as Mynt are developing data-backed That said, the impetus the cryptocurrency market has provided for currencies that have the potential to create a real competitive blockchain as a technology platform to create efficiency, security and threat to other fiat currencies as, unlike Bitcoin, they are asset- transparency is evidenced by the large number of companies now backed with a corporate structure driving their mass-adoption for dedicating resources to implementing it. The investment world is offline and online merchants at scale. Security tokens are already also waking up to the fact that blockchain is providing a platform for being touted as a more sensible investment option, as they provide securities to be issued on a more specific or ‘fractional’ basis, which true ownership of an underlying asset in a company rather than a further devalues the utility-based coin offerings which in reality speculative investment in future utility. offered little or no utility to their token holders. Perhaps one of the most exciting developments will be the launch of 2019 forecasts security exchanges on which security tokens can be traded, just like Blockchain technology is here to stay, and may be likened to the shares can be bought and sold on stock exchanges around the world. advent of the internet and the corresponding bubble in the late Over time, this will lead to consolidation among the exchanges until 1990s. The blockchain industry will develop a level of sophistication only a couple of large ones remain, much like the search engine and, rather than being supported by cryptocurrencies, it will be industry consolidated with Google, Yahoo and Bing accounting for supported by security tokens, which offer investors the ability to over 90% of worldwide searches (excluding China). < Optimising the digital customer experience Mark Gunning, Global Business Solutions Director, Temenos The banking industry is undergoing a structural transformation Open Banking is becoming mainstream in Europe and Asia-Pacific, as Open Banking, digitisation and cloud technologies transform and will soon touch other parts of the world. Banks are looking into the business, presenting both opportunities and challenges. aggregation business models as well as forging partnerships with Changing customer behaviours – and demands for new services and technology, financial and non-financial players to offer customers capabilities – will remain the primary drivers of banks’ priorities. This more innovative products and services. Banks hold trusted global phenomenon applies equally urgently to both emerging and relationships and should use their core advantages to spin off new developed technologies. business models that successfully compete with the new entrants. Competition will continue to intensify, with challenger banks, Artificial intelligence technology giants and payments players all aiming for the most valuable parts of the chain. For players of all stripes, the imperative Banks will continue with their AI journey as they strive to create the will be to differentiate and own the customer experience. Banking intelligent, personalised bank of the future. We see two strong use service providers that deliver nimble and frictionless digital journeys, cases where banks will be increasingly using more AI applications: the such as those of Amazon or Uber, will emerge triumphant. first is to deliver compelling and individualised customer experiences and engagement on investment advices, spending patterns and Cloud automated actions. This holds the promise of both cost savings and The ongoing shift to cloud-native software will gain momentum new revenue streams for banks. in 2019. Banks of all sizes around the globe – whether challenger/ The second use case is augmenting users’ decisions with data-driven neo banks or incumbents – are migrating more applications to the machine intelligence, and maximising straight-through-processing cloud and benefiting from significant speed, agility and performance rates for financial transactions at reduced cost with limited or no improvements. New banks are launching faster, and incumbents will human intervention. An example would be using AI in handling benefit from lower TCO and the cloud agility. We expect more banks payment exemptions faster with no human errors. Banks will need to to adopt the software-as-a-service model to free resources tied up in work to overcome challenges around data quality and availability, as running applications and focus them on core business needs. well as lack of regulatory framework. <
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RBI 757 January 2019.indd 21 17/12/2018 15:08:22 News | Digest
january news
86 400 beta testing begins ahead of 2019 launch Australian digital challenger bank 86 400 has got work to do to make sure we deliver on commenced beta testing on its app ahead of what we’ve promised and make a real impact its official launch in 2019, offering an alterna- and drive genuine change in the Australian tive to the country’s big four banks. banking industry. In early 2019, we’ll have Prior to the beta testing, 86 400 said it had our bank in market and will begin showing been investing heavily in proprietary technol- Australians a different banking experience.” ogy in order to successfully build an efficient While awaiting its licence, 86 400 has also digital bank. 86 400 also announced that it been developing and fine-tuning its debit has been developing its core banking platform card and app. The bank’s Visa debit card has and customer experience engine. The core is a simple yet sophisticated design that features seamlessly integrated with the customer expe- Apple Pay, Google Pay and Samsung Pay rience engine, and uses data and cloud-based functionality. technologies to allow users to view financial 86 400’s core banking platform includes all transactions on a single platform. payment rails and real-time payment func- In anticipation of the launch, 86 400 also tionality, with the bank stating that it already announced that a fully functional debit card is has money flowing through the system. live in testing. The banking startup is awaiting The 86 400 mobile app promises to offer a full banking licence from the regulator be- an “unparalleled banking experience” for fore it can officially launch any products, and consumers. Through the use of customer aims to launch in early 2019. data, the app aims to provide a seamless and 86 400 CEO Robert Bell stated: “Since secure platform that will improve customers’ coming out of stealth, we’ve made incredible financial well-being.” up towards the launch of our product offering progress in building our bank. We’ve pro- 86 400 chair Anthony Thomson, comment- to the public, and speaking to future investors gressed our business and continue to build the ed: “2019 is going to be an incredible year for that want to be on this journey with us. base technology that’s going to deliver value 86 400, and the Australian banking industry “By the end of next year, 86 400 will have for our customers and for our shareholders. as a whole. a number of new investors and shareholders “It’s an exciting time to be at 86 400, but “I’m looking forward to spending more engaging with our mission to give Australians we can’t rest on 2018’s successes. We’ve still time here, working with the board as we ramp the bank that they deserve.” < EU reaches deal to reduce risks in banking sector The European Parliament and the Council Representatives Committee of the Council of the European Union have drawn up a of Ministers and the European Parliament. provisional political agreement on a set of Building on existing rules, the new new banking reforms to reduce risk in the banking reforms address challenges to industry. financial stability. They also implement The new set of reforms aims to increase international standards and devise a post- the resilience of EU banks by introducing crisis regulatory agenda. new capital requirements. It will ensure The reforms amend the Capital stable capital buffers among banks, and Requirements Regulation and the Capital reduce risks associated with lending. Requirements Directive. Adopted in 2013, European Commission vice-president these regulations encompass rules on Valdis Dombrovskis said: “I am delighted progress on strengthening the Banking governance and supervision over banks. that the European Parliament and the Union.” The Bank Recovery and Resolution Council found a political agreement on The European Commission proposed Directive (BRRD) and the Single Resolution the banking package, after months of very the banking reforms in 2016, and an Mechanism Regulation (SRMR), adopted in complex and technical discussions. agreement was reached after two years 2014, were also revised while formulating “This very important risk-reducing of deliberation. The technical details the new reforms. The BRRD and SRMR package complements the progress of the agreement will now be finalised, include rules on recovery of failing that has already been achieved over the and the final agreement will be signed institutions and forming a single resolution past years, and lays the basis for further after the consent from the Permanent mechanism. <
22 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 22 17/12/2018 15:08:23 News | digest
Scotiabank Women Initiative launches Scotiabank is launching the Scotiabank Women Initiative, a comprehensive pro- gramme that aims to empower women to take their businesses to the next level. The initiative also aims to advance wom- en-led businesses through access to capital, education and mentorship. Academic research and Scotiabank’s own exploration has shown that women busi- ness leaders face significant challenges in achieving growth. Scotiabank is confronting the issue by offering meaningful support to female entrepreneurs in order to help them take their businesses further. The Scotiabank Women Initiative com- prises three key pillars: • Access to Capital. Scotiabank is de- ries of sessions that “unteach” tradition- is significantly lower than for men. ploying finance to support the growth ally held ideas about how to succeed. “We will better understand and serve of women-led small and mid-market The sessions explore business-focused women business leaders, and be a valued businesses. In addition, Scotiabank will issues like governance, adopting tech- partner in their success.” ensure equal access to its full suite of nology, and recruiting and retaining To celebrate the launch of The Scotia- financing solutions. Female business employees with Scotiabank executives bank Women Initiative, Scotiabank hosted owners/leaders can leverage a financial and other experts. In addition, they will a panel discussion at the Scotiabank Cen- partner to help support their growth.; hear from other successful women and tre. The event featured a panel of female • An advisory board, made up of men advisory board members. business executives who discussed chal- and women with deep experience in lenges in owning and leading businesses. financial services has been created. This “To help shape this programme, Scotia- Keynote speakers included Riley, and will help women grow their business bank consulted with customers, research- Sarah Kaplan, professor and director of the through facilitated small group mem- ers and industry leaders to understand Institute for Gender and the Economy at bership sessions. These sessions will more fully the challenges women business the University of Toronto. cover pre-identified topics and complex leaders face,” said Scotiabank executive “The Scotiabank Women Initiative is business problems. Clients will have the vice-president Gillian Riley. being piloted in Canada with Commercial opportunity to interact with senior lead- “Specifically, we learned about un- Banking clients, with an eye to future ex- ers as well as other like-minded women conscious bias and its effects on wom- pansion,” added Riley. “However, we don’t in business. en business owners and their ability to see this just as a business opportunity, • Through Un-Mentorship Boot Camps, access financing. For example, the ratio of but also as our way of helping address an Scotiabank will provide access to a se- requested versus approved debt for women important social challenge.” < Airtel plans payment service bank in Nigeria Telecommunications services provider Airtel Airtel has more than 40 million subscribers has announced plans to launch a Nigerian and a presence in the country’s key regions. payment service bank (PSB) in the country. The business plans to use this reach to im- The business plans to apply for a licence prove access to financial services for Nigeria’s from the Central Bank of Nigeria (CBN) to large unbanked population. operate the PSB through a subsidiary. The move comes shortly after telecoms Airtel Nigeria MD Segun Ogunsanya said: provider MTN Group’s announcement that “We welcome the development and we express it had also applied for a PSB licence. Airtel profound appreciation to the CBN for its Payments Bank, Paytm Payments Bank and commitment to driving financial inclusion Fino Payments Bank have already launched through technology. operations in India. “In line with the guidelines shared by the mobile banking services to the doorsteps of Payment banks are permitted to take depos- CBN, we have commenced the process of the financially excluded. Folks will no longer its, offer remittance services, sell insurance and applying for a licence, as we believe that we need to keep their money inside cooking pots mutual funds, offer internet banking and issue are at a vantage position to empower and or under their beds, because we will securely debit cards, but are restricted from lending connect more Nigerians, as well as deliver connect them to the financial system.” and issuing credit cards. <
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RBI 757 January 2019.indd 23 17/12/2018 15:08:25 News | Digest
Monzo hits £20m fundraising target At the time, the Monzo blog stated: “Through our last two rounds of crowdfunding, 7,395 people invested their money in Monzo. It’s incredible that so many people have been able to invest, but we also know lots of you missed out. “So, we’re excited to say that we’re doing a much bigger round of crowdfunding, to give as many people as possible the chance to invest.” Launched in 2015, Monzo has more than 1 million customers, and is said to sign up around 20,000 new customers every week. In addition, this year saw the bank reach ‘unicorn’ status after raising £85m in a UK-based neobank Monzo has raised £20m A total of 2,457 investors returned from fundraising round. ($25.5m), reaching its goal in its latest previous funding rounds, but Monzo also One of the fastest-growing UK startups, fundraising round. gained over 33,000 new investors. Monzo is now worth £1bn, just three years In a blog, the bank stated that the £20m The blog stated: “We’re happy that so after launch. The latest funding round was raised in two days, two hours and 45 many of you have been able to get involved was led by General Catalyst and Accel. minutes, and came from 36,000 investors. and take a stake in the bank that you’re Passion Capital, Goodwater, Thrive Capital, Key statistics from the round included: helping us build. Orange Digital Ventures and Stripe also • £2,038,459 was raised from existing “Our community has played an essential participated. investors; part in making Monzo what it is today, and There are currently over 250 ‘unicorn’ • £17,961,551 was raised in just two your support and feedback are becoming firms around the world, including Uber, hours 45 minutes; even more crucial as we grow.” Klarna and Stripe. The term is used in • £6,881,389 was raised in the first five To date, Monzo has carried out two the venture capital industry to refer to a minutes, and crowdfunding rounds and has secured technology startup that reaches a $1bn • £2,940,760 was raised in 60 seconds, more than £4m. This includes raising £1m market value through private or public during the fastest minute. in just 96 seconds in 2016. investment. < Zopa digital bank set for 2019 launch as FCA grants licence The Financial Conduct Authority (FCA) has granted a banking licence to Zopa, making it the world’s first combined P2P lender and digital bank, and clearing the business for launch in 2019. The Zopa digital bank arm plans to launching Financial Services Compensation Scheme-protected savings accounts and credit cards in the new year. All products, including its existing P2P offerings, will be continue to grow our P2P business based Zopa’s risk strategy is based on targeting brought together in the Zopa app. on the same great P2P products. We’re still low-risk UK borrowers. It said it expects “This is a huge milestone for Zopa,” said the same Zopa, we’ll just have a lot more to loan loss rates in the UK consumer credit Zopa CEO Jaidev Janardana. “Thirteen offer our customers.” market to rise back towards more normal years ago, we built the first ever P2P In November Zopa raised £60m, its historical levels. lending company, giving people access largest funding round to date, to fund the In the 2017 fiscal year, Zopa posted to simpler, better-value loans and launch of its digital bank. An earlier funding profits after tax of £1.5m for its P2P investments. Since then, we’ve lent nearly round this year raised an initial £44m. business. Revenue increased by 40% year £4bn to consumers in the UK. Being able Janardana concluded: “Having served on year to £46.5m. to show this success has been essential to 0.5 million customers to date, Zopa is In 2017, Zopa became the first us getting our bank licence.” set to redefine the finance industry once major P2P lender to receive full FCA Janardana explained that the launch of again. Our next-generation bank will meet authorisation. This made possible the Zopa’s digital bank would not affect its a broader set of UK customers’ financial launch of Zopa’s Innovative Finance ISA in P2P products line-up, adding: “We aim to needs.” June this year. <
24 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 24 17/12/2018 15:08:28 News | digest
Green light for Revolut to expand into Singapore and Japan Digital challenger bank Revolut’s global ex- pansion plans are progressing rapidly, having been granted a Remittance License by the Monetary Authority of Singapore. It has also secured Stored Value Facility approval, allow it to operate in Singapore. In Japan, the bank has been fully authorised by the Financial Services Agency of Japan under the Fund Transfer License to operate throughout the country. It is one of only a small group of international companies that have succeeded in obtaining a licence in Japan. It will launch its services in these countries in In Japan, Revolut has already secured partners of the country. They believe and trust in our the first quarter of 2019. including, Rakuten, Sompo, Japan Insurance business model and vision, and would like to Revolut allows users to use an app to spend (SJNK) and Toppan. see our European success replicated in Singa- abroad in over 150 currencies with no fees. The challenger stated that the opportunity pore and across Asia-Pacific. This means customers can travel without fears to disrupt the Asia-Pacific markets was “at- “Meanwhile, our partnerships with of hidden fees. Furthermore, it holds and tractive and strategic”, with customers voicing Rakuten, SJNK and Toppan underline our exchanges 24 currencies in-app. Customers frustrations with the high fees levied by major strong support in Japan, and we’re confident can also send free domestic and international retail banks in the area. that we’ll disrupt the way banks traditionally money transfers with the real exchange rate. Furthermore, according to a recent report function across Asia-Pacific through our use of Revolut said it will announce news on its by Oracle, 7 out of 10 of Singaporeans are technology and innovation.” US and Canada launches in coming weeks. open to digital banking alternatives; this is Storonsky continued: “We also have confi- Revolut said that over 50,000 Asia-Pacific ahead of the global average of 67%. Japan has dence that Revolut will continue to be a driv- customers are already on its waiting list, with been slower to adopt to alternatives, with only ing force as we expand globally, developing a “more signing up by the day”. Singapore is 50% open to switching, but this is an area range of exciting new services for increasingly thought to be the most likely location for that Revolut feels is changing rapidly. connected consumers in Asia-Pacific . It’s its Asia-Pacific headquarters. The office will Revolut CEO Nik Storonsky stated: “We’ve a huge market, and we’re already seeing an include key personnel in charge of business been working closely with Singapore regulator incredible amount of people demanding our development, public relations and compliance. to shape the future regulatory environment product.”< Mastercard-Microsoft partnership to advance digital id innovation driver’s licence or user credentials. This cornerstone of how people live, work places a huge burden on individuals, with and play. We believe people should be in consumers having to remember hundreds control of their digital identity and data.” of passwords for various identities, The Mastercard-Microsoft partnership and being increasingly subject to more aims to improve convenience for people complexity in proving their identity and as they interact with businesses, service managing data. providers and online communities, Mastercard said it is aiming to enable including: individuals to enter, control and share • Financial services: Improve and speed identity data on devices they use every up applications for new bank accounts, day. Ajay Bhalla, president – cyber and loan or payment service accounts; intelligence solutions at Mastercard, said: • Commerce: Provide more personalised “Today’s digital identity landscape is patchy and efficient shopping online and in and inconsistent, and what works in one stores, regardless of payment type, A partnership between Mastercard and country often won’t work in another. We device or service provider; Microsoft aims to improve how people have an opportunity to establish a system • Government services: Simplify manage and use their digital identity. The that puts people first. interactions with government agencies objective is to give people a secure, instant “Working with Microsoft brings us and services – such as filing taxes, way to verify their digital identity with one step closer to making a globally applying for passports or securing whomever, whenever they want. interoperable digital identity service a support payments, and Currently, verifying identity online is reality. We look forward to sharing more • Digital services: Streamline and provide still dependent on physical or digital proof very soon.” easier use of email, social media, movie/ managed by a central party. Examples Joy Chik, corporate VP, Identity, music streaming services, and ride-share include passport number, proof of address, Microsoft, added: “Digital identity is a platforms. <
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RBI 757 January 2019.indd 25 17/12/2018 15:08:30 rbi awards | categories
honouring the elite: nominations open for the 2019 rbi global awards These prestigious awards are well regarded in the industry as a mark of quality, and represent immense achievement and success. Awards are for outstanding and high-achieving retail banks, as well as the individual award for Retail Banker of the Year. Nominations are open for all categories (see below) and will stay open until 14 February 2019. Find out more at www.verdict. co.uk/retail-banker-international/events/retail-banking-conference-awards-2019/#awards
award categories Regional Awards: • African Retail Bank of the Year • North American Retail Bank of the Year • European Retail Bank of the Year • Middle East Retail Bank of the Year • Latin American Retail Bank of the Year • Asia-Pacfic Retail Bank of the Year global Awards: • Best Branch Strategy • Best Mobile Banking Strategy • Best Overall Digital Strategy • Best Self-Service Strategy • Best Open Banking Strategy • Best use of Digital Marketing and Social Media • Best Use of Data Analytics • Best IT Transformation/Innovation • IT Innovation of the Year • Product Innovation of the Year • Best Banking Launch • Security Innovation of the Year • Excellence in Customer-centricity • Diversity and Inclusion • Retail Banker of the Year • Best Bank-Fintech Partnership • Regtech Innovation of the Year • Best Loyalty/Rewards Strategy editor’s Awards: • Global Retail Bank of the Year
26 | January 2019 | Retail Banker International
RBI 757 January 2019.indd 26 17/12/2018 15:08:34 Artificial Intelligence
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RBI 757 January 2019.indd 27 17/12/2018 15:08:34 Retail Banking London 2019 24th April 2019 l London SHAPE THE FUTURE OF RETAIL BANKING
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Key Issues l Open Banking and the main results of the first stage implementation l How Millennials are shaping the future of payments l Artificial intelligence and machine learning, Innovation in branch transformation l Digital security and cyber crime l RegTech - Leveraging technology innovation to comply with regulation l Optimising customer experience in today’s competitive environment l Technophiles v Technophobes - meeting the needs of different customers
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1118Timetric_RBI_Ad.inddRBI 757 January 2019.indd 28 1 17/12/201826/11/2018 15:08:35 10:17